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NEWS UPDATES 15 December 2009

Chinese power firm to invest $8 bn in Malaysia

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Power utility giant State Grid Corp of China (SGCC) plans to invest some $6 billion–$8 billion to set up one of the world’s largest aluminium smelter plants (estimated to involve $3 billion) and three hydro-electric dams in Sarawak through a joint cooperation with 1Malaysia Development Bhd (1MDB), StarBiz daily reported.

The “package deal” for the joint cooperation agreement was privately signed recently between the two parties while a formal signing ceremony was scheduled for early next year, a source said.

1MDB, a strategic development company wholly owned by Minister of Finance Inc, will co-invest in the project via cash or “assets” or both.

“The Chinese partner has the technical expertise and considerable capital. As for 1MDB, it can help facilitate the investment from the standpoint of the state and federal governments and power through all the bureaucracy,” the source said.

The massive investment by the Chinese state-owned enterprise, ranked third in China’s Top 10 Enterprises by Fortune magazine (it had sales of US$164bil in 2008), will no doubt give a major boost to the Sarawak Corridor of Renewable Energy (Score), a development initiative aimed at accelerating the state’s growth through its energy resources.

The corridor project, which up until now has yet to draw a major milestone investment, lists the aluminium industry as one of nine priority industries with the highest economic impact.

According to sources, the cooperation was initially discussed during Prime Minister Najib Razak’s visit to Beijing in June. The plan was cemented in November during Chinese President Hu Jintao’s state visit to Malaysia. Then, Najib had mentioned that Malaysia would work with Chinese companies to build an aluminium smelter, and pulp and paper mill in Sarawak.

“When the Bakun dam comes up, there will be a need to find businesses that can off-take the electricity it generates. Details such as the power purchase price and so forth are being worked out now.

“Sarawak’s hydro power is also significantly under-tapped. So, there is a lot of opportunity for the Chinese company to come in and spearhead these future developments under the Score banner,” the source said.

According to sources, SGCC will be the main off-taker for the entire production capacity of the smelter plant in Sarawak. As it stands, there is already a plan to build an aluminium smelter with an initial capacity of 720,000 tonnes by construction group Cahya Mata Sarawak Bhd and Rio Tinto Aluminium Ltd.

The joint-venture company, Sarawak Alumium Co, has had protracted talks with Sarawak Energy Bhd on the power purchase agreement but to date, nothing has yet been finalised. Tan Sri Syed Mokhtar Albukhary also has a licence to build an aluminium smelter plant in the state.

The tie-up with SGCC comes two months after 1MDB’s partnership with Saudi Arabia’s PetroSaudi International Ltd in a $2.5 billion joint-venture company.

1MDB, which started out as Terengganu Investment Authority Bhd in February, describes itself as a value investor in strategic projects with high multipliers. One of its key objectives is to catalyse long-term sustainable economic development in the country by wooing foreign direct investments.


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