KUALA LUMPUR (Mar 24): The government does not plan to cancel the concession contract with 1Malaysia Development Bhd-Mitsui Co Ltd (1MDB-Mitsui) and Malakoff Corporation Bhd or impose any penalty on the companies due to the delay in the construction of a power plant.

Energy, Green Technology and Water Minister Datuk Maximus Ongkili said that the government did not cancel the contract because there is no delay in the critical milestone.

"The Power Purchasing Agreement (PPA) was signed between Tenaga Nasional Bhd (TNB) and the developer to build a power plant so that TNB can purchase the power from them and impose a financial penalty on the approved developer should there be any violation of contract.

"Besides, the government can also cancel the awarded project to any developer if the specific critical milestone was not fulfilled or delayed up to a certain period enshrined in the agreement," Ong said in a written reply to Petaling Jaya Utara MP Tony Pua.

Pua had asked whether the ministry would take action against 1MDB and Malakoff which had failed to commence their projects and whether their agreements allow the ministry to impose financial penalty or terminate the contract.

The Jimah East 2,000MW power plant had sought a six-month extension while the Tanjung Bin 1,000MW power plant had asked for a six to 12 months extension.

The Jimah power plant is controlled by 1MDB through its ownership of a 75% stake in Jimah Energy Ventures Holdings Sdn Bhd.

The Tanjung Bin power plant, the largest coal-fired power plant in Southeast Asia, was undertaken by Malakoff Corp Bhd, controlled by tycoon Tan Sri Syed Mokhtar Al-Bukhary’s MMC Corporation Bhd.

Energy think tank Association of Water and Energy Research Malaysia (AWER) has called for stern action against the power plants which have asked for extension and made the companies pay for the cost of delay.

Ongkili said the ministry has always ensured that the companies awarded have financial capability and were formally backed up by financial institutions.

However, he added, there are many challenges on the field such as land ownership, reclamation and other issues that may cause a delay in completing the project and affect the implementability of the project.

"In this case, 1MDB-Mitsui and Malakoff had obtained written support from a financial instution to support the project which suggests the companies are capable of investing and getting support to build the project.

"Furthermore, both developers have shown that they have experience in power plant construction projects," he added.