KUALA LUMPUR: 1Malaysia Development Bhd (1MDB), which last week won the coveted 2,000mw coal-fired power plant known as Project 3B, may move the proposed project site to Pulau Indah, Selangor, from its original location in Jimah, Negeri Sembilan.
There has been rampant market speculation, with confirmation from several industry sources, that the state-owned investment company is in discussion with the Energy Commission (EC) to explore the relocation of the RM11 billion project to the 310-acre (125.45ha) piece of land in Pulau Indah which 1MDB recently purchased from Tadmax Resources Bhd for RM317.3 million.
The Pulau Indah land was acquired barely a week before Project 3B was awarded. 1MDB originally proposed to undertake Project 3B at the recently acquired 1,400mw Jimah Power Station.
It is understood, however, that a change of location would directly contravene the tender rules. The EC is under pressure to explain why it awarded Project 3B to 1MDB when YTL Power International Bhd had put in the lowest bid.
Both 1MDB and the EC could not be reached for comment.
Given that 1MDB now won the project, the change of location to Pulau Indah stands to benefit all the stakeholders — 1MDB, Tenaga Nasional Bhd as the sole off-taker, and the public as end-users, according to industry players. They believe Pulau Indah would be a better site for the power plant due to the size and location of the land.
Tadmax, one of the seven original contenders for Project 3B, had proposed the Pulau Indah site in its bid but the company did not make it to the next round after failing to meet the technical and financial requirements.
“Building two 1,000mw blocks on the Jimah site would be no mean feat. There simply isn’t enough room. Just use Google maps and see how much space the 1,400mw Jimah plant currently occupies. Then compare this with the vacant land [next to the existing Jimah plant] and imagine building a new 2,000mw plant there,” an industry player told The Edge Financial Daily.
Therefore, 1MDB is expected to undertake land reclamation if the Jimah site is to accommodate the huge 2,000mw plant. But land reclamation is not only expensive, it is also time-consuming. The scale of the earthworks would also make it challenging to meet the October 2018 deadline to hand over the first phase of Project 3B.
Also, the bigger site at Pulau Indah means that there would be room for future expansion, a bonus for 1MDB. When the tender for Project 3B was originally opened it was supposed to be a greenfield project.
Most of the existing brownfield coal-fired plants are already heavily planted up and lack room for expansion, said another industry player, adding that a new greenfield site would broaden the coal-fired planting-up options for the EC in the future.
Industry players also noted that it would be easier for 1MDB to build the transmission line from Pulau Indah to the Olak Lempit injection node than to build the line from Jimah to Olak Lempit. Both transmission lines would be about 30km long.
“The northern alignment [Pulau Indah to Olak Lempit] for the transmission lines would mainly run through plantation land, which is easy to acquire. In comparison, the southern alignment from Jimah runs through some land that might be difficult to acquire,” said an industry player.
However, the northern alignment would require the cooperation of the Selangor government.
It remains to be seen if 1MDB and the EC will be able to relocate Project 3B. On the one hand it would reflect poorly on the tender process if bidders were allowed to make material changes to their proposals even after the tender was awarded. If the EC allows the project to be relocated, it is likely the other bidders will call for a re-tender.
However, the relocation could be justified if 1MDB can offer lower tariffs to Tenaga.
This article first appeared in The Edge Financial Daily, on March 05, 2014.