Sarawak smelters raise uncertainty on Bakun cable project

Thestar: Thursday February 11, 2010

By ANITA GABRIEL

anita@thestar.com.my
PETALING JAYA: The number of power-hungry aluminium smelters that are being planned in Sarawak has raised uncertainty on the fate of the multi-billion ringgit submarine cable project meant to transmit power from Bakun hydroelectric dam in the state to the peninsula.

This is clearly causing some unease, not least for national utility Tenaga Nasional Bhd, which needs to plan the plant-ups to cater for future electricity demand in Peninsular Malaysia.

“Yes, it is a concern to us. We are seeking Government direction on this matter,” said TNB president and chief executive Datuk Seri Che Khalib Mohamad Noh.

Under the proposed plan, the cable project involving the construction of a 1,000km high-voltage direct-current transmission line and a 680-km undersea cable, was expected to be completed in 2015 with an open tender process to be launched in the first quarter of this year. Each cable would be able to transmit 800MW.

“There is lack of clarity. Will the electricity generated by Bakun be consumed by the state or will some of it be sold to the peninsula? There has to be a guaranteed supply of electricity at a certain amount to the peninsula. Otherwise, it will be difficult to make the financial case for the cables,” said an analyst.

The Bakun dam project is expected to generate some 300MW by August.

The Bakun dam project, with an installed capacity of 2,400MW, is expected to turn up some 300MW of juice by August this year and to be fully commissioned by October 2011. The spate of mega projects being proposed (more specifically aluminium smelters, which are major energy guzzlers) under the state’s development agenda Sarawak Corridor of Renewable Energy (Score) has raised the question on whether there will be enough power to be shared from Bakun with the peninsula.
It was announced on Tuesday that Tan Sri Syed Mokhtar Al-Bukhary’s controlled GIIG Holdings Sdn Bhd had tied up with Aluminium Corp of China Ltd (Chalco) to develop a US$1bil smelter plant with an initial capacity of 330,000 tonnes per year in Samalaju Industrial Park in Bintulu; the plant will need some 600MW of electricity.
GIIG director Shahrir Shariff was reported to have said (after the signing ceremony on Tuesday) that the project was mooted back in 2002 but was “stalled because the Government decided that power was supposed to come to the peninsula via the submarine cable. We’ve resumed (the smelter plan) because we’ve been made to understand from the state government that the Bakun power is now meant for Score.”
There is also another multi-billion ringgit aluminium smelter that is being planned in the same industrial area, this time by a 60:40 joint venture between Rio Tinto Alcan and Cahya Mata Sarawak Bhd with an initial capacity of 550,000 tonnes a year. A memorandum of understanding was signed back in 2008 for Sarawak Energy Bhd (SEB) to supply between 900MW and 1,200MW of power to this smelter, presumably also from Bakun.
Furthermore, a month ago, 1Malaysia Development Bhd signed a “cooperation framework agreement” with state-owned State Grid Corp of China (SGCC) to jointly undertake projects in Score which could create as much as US$11bil worth of economic value. Part of this plan, it is believed, also involves a massive aluminium smelter and hydro dam projects.

“With all these projects in the pipeline, it looks like it’s no longer the case of Bakun having too much excess capacity which it can transmit to the peninsula. The cost of transmitting electricity or building the cables have to be justified by the amount of capacity transmitted to the peninsula. You can’t build such costly cables if you don’t know how much will be transmitted across. The line only works if there’s substantial power coming across,” said a peeved observer.

The motivation for Sarawak to tap the power capacity to generate economic activity is clear. “If the state can generate a certain amount of economic activity by using its own resources, in this instance, hydro, why not? The multiplier impact for the state outweighs what it could get by selling the power to the peninsula,” said an analyst.
On the other hand, the industry observer said: “The state would rather sell cheap power to energy-hungry industries that pollute the environment at the cost of stirring economic activity nationwide.”
Herein lies the crux of this Bakun dilemma for the peninsula – could this be a play between East and West Malaysia?