Sarawak govt bids for Bakun

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KUALA LUMPUR: The Sarawak state government’s utility firm Sarawak Energy Bhd has emerged as one of three bidders vying to buy the Bakun hydroelectric project from the federal government, offering about RM6.3 billion.

The Edge Financial Daily understands that Sarawak Energy has submitted its proposal to the Bakun project’s owner Sarawak Hidro Sdn Bhd, a wholly owned subsidiary of the Minister of Finance Inc.

Sarawak Energy has also appointed consultants to undertake technical due diligence on the 2,400-megawatt (MW) capacity Bakun hydroelectric dam. The due diligence is expected to begin next month.

Sarawak Energy’s wholly owned subsidiary Syarikat SESCO Bhd has the right to generate, transmit, distribute and supply electricity throughout the vast state of Sarawak.

Sarawak Energy is also constructing the 940MW Murum hydroelectric dam in Belaga, Sarawak, which is expected to be completed by 2013.

However, Sarawak Energy’s offer price of RM6.3 billion is understood to be significantly lower than the other two bids on the table.

Sources said the government’s strategic investment unit, 1Malaysia Development Bhd (1MDB), has offered RM8 billion for the Bakun project.The highest offer, however, stands at RM8.8 billion and is said to be from a partnership between the Qatar Investment Authority (QIA), Malton Bhd’s Datuk Desmond Lim and a China company.

Sarawak Energy is proposing to settle the purchase price in six to seven years while 1MDB and QIA are looking at a payment period of 15 years and 20 years, respectively.

The 1MDB and QIA bids are believed to be under consideration by the Ministry of Finance.

Sarawak Energy’s RM6.3 billion bid is also lower than the estimated RM7.3 billion cost of the project. There are also fears that the total cost of the dam could balloon with more cost overruns.

The Bakun project, which was initially targeted for completion by December 2007, is currently about 98% completed.

The project is now facing costly delays as Sarawak Hidro is reportedly still awaiting the green light from Sarawak’s Ministry of Public Utility to begin impounding the dam.

The Bakun project, Malaysia’s largest hydroelectric dam, is located on the Balui River in the upper Rejang River basin, some 37km upstream from Belaga. Civil works on the Bakun project are slated for completion at year-end.

To recap, the hydroelectricity project was first mooted in the early 1980s by the federal government to diversify the country’s power sources. It was awarded to Ekran Bhd, a company controlled by Tan Sri Ting Pek Khing, and physical work started in 1994.

Sarawak Hidro was established to take over the project’s development and management in 2000 after the Asian financial crisis of 1997-98 crippled the project.

At end-2002, a Sime Darby-led consortium won a competitive tender to undertake the civil works for the dam for less than RM1.8 billion.

This article appeared in The Edge Financial Daily, September 24, 2010.