“Crony Capitalism” and IPPs
Mahathir’s “Crony Capitalism” via the “you scratch my back, I scratch yours” contract awards is thriving in Putrajaya as evidenced in the privatised power sector
Tony Pua
In February, the Federal Government bailed out 1Malaysia Development Berhad (1MDB) with the award of a RM11 billion 2,000MW coal-fired power plant in February 2014 despite the company not submitting the lowest tariff for the tender exercise which attracted 7 participants.
As highlighted in my previous statements, YTL Power has submitted a qualified and cheaper competing bid at a levelised tariff of 25.23 sen/kWh to supply electricity to TNB. The Edge Malaysia has also reported that the levelised tariff by 1MDB was 25.65 sen/kWh.
Worse, the EC’s own technical evaluation committee had recommended YTL Power as the preferred bidder to the Board, based on documents sighted by The Edge, before the decision was overturned in favour of the more expensive 1MDB.
The question hence arises – were the goalposts shifted midway through the evaluation by the Ministry? Was this in order to ensure that the 1MDB, which is facing financial difficulties and burdened with RM37 billion of debt, will win the concession?
However, as quickly as the concession was awarded to 1MDB, the Government followed up with a surprise award of another RM3 billion 1,000-1,400MW Gas-Turbine Power Plant “Project 4A”.
This time, the award was not only directly negotiated, the terms of the award was vague, unspecific and flimsy, as if it was conducted in an absolute hurry. Neither the size of the plant was not fixed nor was the exact tariffs was finalised – except to say that it must be “comparable to the last tender exercise”.
Worse, even the consortium arrangements between YTL Power, SIPP Energy Sdn Bhd – a company associated with the Sultan of Johor, and Tenaga Nasional Bhd (TNB) were up in the air.
Initially on 3 June, TNB claimed it had received a conditional letter of award from the Energy Commission (EC) and “TNB is currently evaluating the offer as well as TNB’s role in the project.”
Now TNB is going to the extent of disassociating themselves from the project. TNB CEO Dato’ Seri Azman Mohd said yesterday, “TNB would like to reaffirm that we have not had any prior discussions with any parties regarding the matter. As of now, we can confirm that we only received the offer letter and refute claims or assumptions that we are already part of the consortium.”
It is shocking how the Energy Commission has proceeded to make an award for a 20 year concession to a group of companies that didn’t even know that they are going to be working together!
Malaysians can only conclude from this circus that the Federal Government has decided to fastforward the Project 4A award without any form of tender and transparency, in order to placate YTL Power as well as SIPP Energy who were shortchanged by the Project 3B award.
The Federal Government is basically telling these companies that “Don’t worry, as long as you allow us to bail out 1MDB, behave by not being critical of the exercise, we will take good care of you, even at the expense of the rhetoric behind Najib’s ‘New Economic Model’.”
In a gist, as long as you scratch my back, I will continue to scratch yours. This is the epitome example of Mahathir era “crony capitalism” thriving a decade after the former Prime Minister has retired. When the electricity tariffs for consumers are “forced” to be raised in the near future, the Prime Minister Dato’ Seri Najib Razak will just deny all culpability by the Government has “no other option” but to do so.
