Should Bakun have beckoned? The costly price of power
By Anita Gabriel, The Star
SHALL we play a game?
I spy with my little eye a mega project beginning with B, which costs whopping billions, with a resilience akin to a cat’s nine lives, whose commercial sense has long been usurped by politics.
Give up? It’s Bakun dam project!
You would have easily spotted it in the business sheets over the week when it was reported that the Federal Government (Bakun is owned by Sarawak Hidro Sdn Bhd, which is wholly owned by Minister of Finance Inc) plans to sell Bakun to the Sarawak government.
Essentially, the Federal Government is telling the state: “Look, if you want the power from Bakun all to yourself, here, take it – lock, stock and barrel.” Everything has a price right? Sadly, not necessarily so if the price tag bandied about at this point is anything to go by.
Bakun’s official cost is RM7.3bil. An analyst deems the final cost to be higher, at least RM8bil, if you toss in the cost overrun, compensation for delays and interests incurred by the project. A bulk or RM5.75bil of the funding, it has been reported, comes from our retirement savings through the Employees Provident Fund (EPF).
Now, Sarawak Chief Minister Tan Sri Abdul Taib Mahmud reportedly said that the state government has put in a bid of over RM6bil and may raise it to RM7bil, provided it is granted some payment flexibility. Starbiz reported that the proposed funding for the acquisition could partly involve debt papers guaranteed by the Federal Government.
“It is normal for people to make a lower offer when they want to buy something … the deal will be finalised at a reasonable price agreed to by both parties,” said Deputy Prime Minister Tan Sri Muhyiddin Yassin. He had also said: “This is a commercial business deal and will be closed with a suitable selling price.”
Finance Minister II Datuk Seri Ahmad Husni Muhamad Hanadzlah said the decision to sell Bakun was not profit-oriented but was meant for Sarawak to meet its energy requirement.
Still, it’s hard to fathom how a “commercial business deal” can be not profit-oriented.
If you strip away the diplomatic rhetoric, could the Federal Government’s bargaining power be less than it cares to admit?
It has spent billions on the 2,400MW Bakun dam which is expected to start churning out power not too long from now. To ensure a decent internal rate of return, Bakun’s owner would need to work out a fairly reasonable power purchase agreement with the state-owned energy provider Sarawak Energy Bhd. Seated at the opposing end of this equation are energy guzzlers like aluminium smelters, steel and glass industries which strive on cheap electricity, whose presence in Sarawak is crucial, or so the state deems, to drive its economic agenda called SCORE.
Understandably, Sarawak Energy was not keen to buy high (from Bakun) and sell low (to industries) as that would defy commercial logic. Something had to give. It did. The talks between both parties collapsed.
Also, the Federal Government could have found itself in a Catch 22. Given that the Bakun project will no longer involve an undersea cable to cater to the peninsula’s needs, it is extremely crucial for Bakun to sell its power to Sarawak Energy. Otherwise, the long-planned and fought for mega project, which was mooted four decades ago, would turn into a mega mistake. Herein lies the state’s leverage.
Enter Plan B – a much more feasible and in the long term, practical plan, to sell Bakun dam to the state. And this time, the power play is somewhat altered.
The big question: How much does the state really need Bakun? Apart from Bakun, there are two other dams that have been proposed in Sarawak. They are the 944MW Murun dam to be commissioned in 2013 and the proposed 1,000MW Baram dam.
A chunk of the new energy-intensive industries is expected to set up shop in Sarawak in 2013, which means by then, the state will need a lot more power, over 3,000MW by analysts’ estimates, than what’s on the grid even with Murun pumping up. So, the answer to my earlier question – yes, Sarawak needs Bakun, this time, a whole lot more than it would care to admit.
That and the possibility that there may be other suitors for Bakun, indeed, shifts the bargaining equilibrium in favour of the Federal Government. As such, it’ll be hard to stomach the possibility that the Federal Government could incur a financial loss from the Bakun sale.
If that happens, the punch line would be bitter. That billions of taxpayer money and the people’s retirement savings have been poured into a commercially wobbly, vanity project at a high socio-ecological cost, only to be told years later, that it was not going to change their lives but would subsidise Sarawak’s economic agenda, and even worse, the deep pockets of giant corporations setting up aluminium smelters in the state.
