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NEWS UPDATES Asean Affairs     7 November  2011

Costs of alternative fuels drain utility

The situation confronting Malaysia’s power sector is becoming more convoluted by the day.

Tenaga Nasional Bhd (TNB) is concerned over its cash running out as it struggles to pay for the high cost of alternative fuels.

This follows another gas supply shortage occurring this time on a larger scale.

There were suggestions of cost-sharing, based on the previous experience in 2002, on a ratio of 40:30:30, to be borne by the gas supplier Petroliam Nasional Bhd (Petronas), TNB itself and the independent power producers (IPPs). But that seems to have fallen on deaf ears.

While TNB says it is no longer able to pay, the IPPs are saying there is obligation to pay. Meanwhile, Petronas says that up to August this year, it has already paid RM143.4bil in price differential, out of which RM103.2bil was for gas supplied to the power sector.

Back in 2002, the country also experienced a gas supply shortage albeit on a smaller scale. The IPPs were forced to pay back based on the ratio of payment.

“In those days, the perception was that IPPs made a lot of money at the expense of TNB,'' an analyst said, adding that the current situation was looking worse than before. “Now, the first generation IPPs are about to expire in 2015, so there is no need to squeeze them further.''

TNB is said to be paying RM400mil per month on the price differential between using distillates and gas as fuel.

Research houses like Maybank Investment Bank (IB) Research are projecting that TNB's cash will run out in three to four quarters.

“The IPPs are just offtakers of gas from TNB,'' said an analyst with a bank-backed brokerage. “The negotiations on gas prices are between TNB, Petronas and the Energy Commission. The shortage is so acute, with supply of less than 1,000 million std cu ft per day (mmscfd), this time. Due to the usage of distillates and oil, there is faster wear and tear. So the IPPs are also unhappy.''

The analyst suggested that TNB and Petronas each foot half of the bill as it was within its (TNB) right to ask Petronas to bear the cost.
“The Economic Planning Unit had given the undertaking that TNB gets a certain amount of gas (1,250 mmscfd) from 2009 to 2011, and the power structure was based on that understanding.

“By right, the government has to pay the difference and TNB should be able to claim from Petronas,'' said the analyst.


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This year in Thailand-what next?

AseanAffairs   04 January 2011
By David Swartzentruber      

It is commonplace in journalism to write two types of articles at the transition point between the year that has passed and the New Year. As this writer qualifies as an “old hand” in observing Thailand with a track record dating back 14 years, it is time take a shot at what may unfold in Thailand in 2011.

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