Cost Overruns? ( We Are Damned II)
By Hakim Joe
Read Part I at: We are damned!
Will the final cost of the construction of the Bakun Dam be revealed to the public once operations start in 2011, OSA aside? Will the moon on the night preceding that day turn blue?
One thing’s for certain is that Datuk Peter Chin would not likely be looking forward to the next Parliamentary sitting after the grand opening ceremony of the Bakun Hydroelectric Dam in Sarawak whereas YB Lim Kit Siang and YB Gobind Singh Deo would be rubbing their hands in glee as they intend to taruh the Energy Minister kau-kau.
The Bakun Dam is a public project using public funds and henceforth must be subjected to the public’s scrutinisation. How it was ever covered under the Official Secrets Act (OSA) remains a farce in public accountability. There are bound to be cost overruns and that is normal considering the fact that the project had been stopped and restarted twice. Inflation and the fluctuation of material prices and workmanship costs are unpredictable and will add to this cost overrun, that’s normal as well. Additionally, work stoppages owing to unfavourable weather conditions or parts unavailability are normal conditions that will add up the cost of construction, especially in such a massive project. Even the World Bank bluntly states that these overruns are unavoidable as the builders are bound to hit some unseen geological snags on such projects. So, why the secretive manner in handling it? Are there things that are done illegally and should not be revealed? If not, why the OSA?
The building of dams has always ended up in cost overruns. There was never an occasion when these mammoth engineering feats have come in on budget unless the developers have set aside a large contingency fund to cover unexpected costs. According to a 1996 World Bank technical paper (No. 325) titled “Estimating Construction Costs and Schedules: Experience with Power Generation Projects in Developing Countries”, all World-Bank funded (and monitored) construction of large dams were averagely 27% above the initial projected cost. It goes on to say that hydro projects showed a tendency to be above this average figure while coal and other thermal power stations were below this average figure.
So, if this technical paper is to be believed (the World Bank has funded and monitored the financing and construction of over 500 large dams in the world), then the final cost of building Bakun Dam should also follow such conventions and be 27% above the projected cost. What is the projected cost anyway? Ekran Berhad estimated it at RM6 billion, so did TNB. The Malaysia-China Hydro JV (MCH) website states that the final cost will be RM5.8 billion. That is the cost of building the dam alone and not the cabling process (which is estimated by TNB to be RM9 billion). So, 27% of let’s say RM6 billion is RM1.6 billion and that will bring the total cost to something like RM7.6 billion. Take note that the 27% is a figure where the World Bank is actively monitoring the spending(s) and construction of the dam. What if there were no authorities monitoring them? Will it be a case of “cost-overruns” or “cost-super-overruns” then?
For example, Brazil’s 3,000MW Xingó dam which took seven years to build at a cost of US$3.2 billion was twice its original budget of US$1.6 billion. The 14,000MW Itaipu dam (also in Brazil) went 488% over the original budget. Both were built by Companhia Brasileira de Projetos e Obras (CBPO) of Brazil. Trivia question: “Which other company did Ekran Berhad hire to build the Bakun dam other than ABB?”
Building mega-dams are risky business. One, the expected cost overruns in the construction stage is not a small sum. Then, the owners better pray that there are no man-made accidents occurring in the dam’s lifetime or natural calamities like landslides, earthquakes or super heavy rains that can jeopardise the structure of the dam. Three, weather pattern changes and the output capacity of a dam depends on the volume of water flowing through it. Insufficient water flow owing to a drought will decrease the electrical output of the dam. Less energy sold means less income. Too much water flow would mean a higher maintenance bill and over production of electricity does not generate income as there are no ready buyers for it. Spillages over the top from an unaccountable accident would mean reparation costs to those affected (plus the legal bills as well), and finally, who will bear the cost of decommissioning a dam if the structure is no longer sustainable?
In the case of the Bakun dam, the additional energy from this site will hopefully help generate a host of other businesses, assuming that the dam works. Such heavy investments will take a long period of time before its funders can start to recoup their initial investments; in this case it is the state and federal governments. If something goes wrong and the dam becomes yet another white elephant, the government will be the one to financially support it and guess where the money will be obtained from? If this happens, the Sarawakians will be the first to feel the impact. State budgets for other purposes (like medical, education and social services) will be cut to prop up the dam. This would mean a general lowering of the standard of living for all Sarawakians.
Is this what the Sarawakians want?
