TNB wants IPPs to review power pacts

By Zuraimi Abdullah, BTimes
Published: 2008/10/15

If TNB's finances collapse, the independent power producers will also collapse and bring with them another RM22 billion of (TNB) debts, says TNB CEO

TENAGA Nasional Bhd (TNB) wants independent power producers (IPPs) to renegotiate and revise downwards their power pacts with the utility company, stressing that they will be dragged down too if its finances collapse.Chief executive officer Datuk Seri Che Khalib Mohamad Noh said TNB has RM22 billion of loans versus less than RM10 billion debts owed by the IPPs in the country."If TNB collapses, the IPPs will also collapse and bring with them another RM22 billion of (TNB) debts," he told reporters at a National Utilities Summit in Kuala Lumpur yesterday.TNB has long complained that the power purchase agreements (PPAs) it has with the IPPs were lopsided and a financial burden. That burden is being passed on to consumers in quantum never seen before.

Che Khalib stressed that it was not about "TNB versus IPPs".Rather, the latter - some of which had proclaimed that they were efficient - should pass on some of the efficiency gains to consumers to ensure equality or level-playing field, he said.Industry observers said TNB's financial viability depends on its ability to pass on the PPA burden, but there will be a limit to how much can be passed on to the consumers.Eventually, TNB's financial viability will be adversely affected to a greater degree than it is now, they said.Meanwhile, Che Khalib refuted industry estimates putting TNB's planned two hydro-electric plants at a combined cost of RM4 billion."It is a lot less than that," he said, referring to the two projects in Pahang and Terengganu.He said TNB has enough money for now to fund the projects and that they were on track to be completed in 2012.

TNB is to build a 212-megawatt (MW) plant in Hulu Terengganu and a 372MW Ulu Jelai hydro-electric plant in Pahang.Che Khalib said TNB will discuss more with the government on the Bakun project in Sarawak, although it had already started preliminary works on the dam.