KUALA LUMPUR: The government has yet to decide whether to let Tenaga Nasional Bhd (TNB) take over the Project 3B power plant despite 1Malaysia Development Bhd (1MDB) informing the government that it is facing financial constraints.

Energy, Green Technology and Water Minister Datuk Seri Maximus Ongkili said 1MDB and Mitsui Co Ltd, under a 70:30 consortium Jimah East Power Sdn Bhd (JEP), had informed the ministry that it is facing problems and financial constraints in carrying out Project 3B on Feb 23.

Project 3B is the 2,000mw coal-fired power plant project that was awarded to 1MDB in February last year. 1MDB has until mid-April to finalise the financial close for the project.  

Ongkili said the problems include negotiations between 1MDB and the Negeri Sembilan state government on the issue of sand mining for reclamation taking longer than expected; and uncertainties over the foreign exchange and interest rates have caused the expected returns from the project to decline significantly.

“Besides, 1MDB also informed that the RM8.4 billion Sukuk Murabahah programme is currently in a weak situation and it is a challenge for JEP to get funding for Project 3B and affect the implementability of the project to achieve financial close,” Ongkili told Serdang MP Ong Kian Ming in a written parliamentary reply dated March 19.

Ong showed the written reply to reporters at the Parliament lobby yesterday.

Ong asked the minister whether TNB will take over Project 3B given the incapability of 1MDB to fund the project.

Ongkili added that due to the constraints, 1MDB is unable to meet the scheduled commercial operation date set by the Energy Commission when 1MDB was awarded the project.

“In this case, 1MDB is still in talks with the relevant parties to play its role as lead player in the JEP consortium so that the project can be implemented and fix a scheduled commercial operation date as planned.

“With regard to this, there is no final decision on whether the project will be given to TNB,” Ongkili said.

In February, The Edge weekly reported that TNB might step up to take over the delayed Project 3B, which is scheduled to be completed in October 2018 (Unit 1) and April 2019 (Unit 2).

It is worth noting that if TNB gets Project 3B, it would mean 1MDB’s initial public offering size of its energy unit Edra Global Energy Bhd would become smaller.

This article first appeared in The Edge Financial Daily, on March 26, 2015.