Bakun Dam may begin to supply power in 2010

Wednesday September 9, 2009
Bakun dam may begin to supply power in 2010

First commissioning seen August next year with 300MW electricity.

The Bakun dam project in Sarawak has been steeped in controversy since the day it was first awarded to Tan Sri Ting Pek Khiing’s company Ekran Bhd, which was badly affected by the 1997 Asian financial crisis. The baton was then passed to the Finance Ministry (MOF) while the transmission cable portion was to be handled by Sime Darby Bhd, which pulled out after finding the escalating costs untenable.

A consortium, comprising Tenaga Nasional Bhd (TNB), Sarawak Energy Bhd (SEB) and MOF, then stepped in and over the last few months, the job momentum has been building up, potentially leading to tenders being called early next year and financing to be arranged middle of next year.

It now looks like the role of hydropower will be more prominent, post-2010. By end-2011, the Bakun dam will be South-East Asia’s largest power project, capable of generating 2,400MW electricity for supply to Peninsular Malaysia, Sabah and Sarawak, Brunei and Kalimantan

Analysts said the electricity from the 2,400-megawatt (MW) Bakun dam would be ready for use much earlier as “the first commissioning was expected in August 2010,” with the first generator producing 300MW of electricity. After that, the second and subsequent turbines would be able to commence operations at two-month intervals. By end-2011, the Bakun dam will be South-East Asia’s largest power project, capable of generating 2,400MW electricity for supply to Peninsular Malaysia, Sabah and Sarawak, Brunei and Kalimantan.

However, the Bakun hydropower project, which is expected to be completed by 2011, will still require the laying of undersea cables to transmit electricity to the peninsula. The cable project, for which the first line is to be completed in 2015, involves the construction of a 1,000km high-voltage direct-current transmission line and a 680km undersea cable. The submarine cable, when completed, will be the longest in the world.

An industry player expects the Government to open the tender process in the first quarter of next year and, subsequently, award the tender in the second half or end of the same year.
While he was not sure which company would be bidding for the projects, he expects five global submarine cable suppliers – ABB Ltd, Sumitomo Corp, Prysmian Cables & Systems, Siemens group and Nexant Inc – to do so. “Siemens may not be a submarine cable provider but it has expressed interest. I am not sure if these companies will form a consortium to bid for the project or on a stand-alone basis,” he added.

Industry players also pointed out that the construction of the undersea cable could present a geopolitical situation as it would “cross Indonesian waters”.
A “bilateral agreement” would be achieved by the time work on the sub-sea cables commenced, one of the players said.

Although the eight turbines would be ready by 2012 (while the first undersea line would be ready only three years later), not all eight will be utilised, given that Sarawak currently consumes less than 1,500MW. “There will be excess capacity if all the turbines were to be utilised and Sarawak will not be able to transmit the electricity produced to the peninsula as the sub-sea cable would not be ready yet,” an industry player said, adding that the authorities were in the midst of building transmission towers in Sarawak.

An analyst said the cost of Bakun dam alone, excluding the undersea cable, was estimated at RM6bil. “Assuming Bakun supplies 1,700MW, it would generate some RM1.6bil in revenue per year. This is based on it selling the power at 11 sen per unit at its gates to the transmission company,” he added. The generation cost for hydropower is cheaper basically because water from the river basins is free compared with the higher cost in procuring coal or gas to fire up a power plant. “The downside is that the cost of building a hydro dam is much more expensive than that for a normal coal or gas power plant.

“In Peninsular Malaysia, where demand for electricity is higher, it would be good if there could be more hydro dams. “Unfortunately, this is constrained by the number of rivers that are large enough to support a dam. Sarawak has a better potential,” the analyst said. “The electricity cost could be lower by one-third to half of the current tariff if it is produced and consumed in Sarawak,” an industry player said, adding that in the long run, hydropower costs were more stable.

In contrast, gas and coal prices may not be cheap in the future. “Ultimately, we’ll have to pay the market prices for gas, which is heavily subsidised by Petronas. It (the electricity cost) may be 50% higher.” The Bakun dam was first mooted more than three decades ago but was shelved just two years after it got off the ground in 1995. Sarawak Hidro Sdn Bhd, a wholly-owned unit of the MOF, was made project manager when the project was revived in 2000. The job to supply and install the turbines was awarded to Alstom Malaysia and IMPSA (M) Sdn Bhd in 2003. Sime Darby, meanwhile, received the Government’s approval in principle to become a major shareholder in Sarawak Hidro and the company to be set up to lay the transmission link to the peninsula, with a 60% stake in each entity. However, last June, Sime Darby decided not to proceed with this equity stake acquisition.

Earlier this year, the Federal Government approved the proposal for TNB and SEB to jointly take over the operation of the Bakun dam project from Sarawak Hidro. The takeover will be done through a leasing agreement and the joint partners will develop the transmission system from Sarawak to Peninsular Malaysia.

Analysts point out that transmitting hydropower from Sarawak does not mean that TNB will stop building more plants.“While the electricity for Sarawak helps, TNB would still need alternative sources as a diversification strategy. “There are some old power plants while (the power purchase) agreements with some of the first-generation independent power producers are set to expire in mid-2010,” an analyst said.

The demand for power is also expected to increase in tandem with the growth in gross domestic product. It is estimated that by 2014, the reserve margin may drop to 20% while new and secure sources of power should be obtained. As a long-term option, TNB is also looking at nuclear power.

The plan is for 10,000MW to be transmitted in stages to Peninsular Malaysia. Under the head of agreements signed last year between TNB and SEB, the latter would supply 3,000MW to TNB from 2017 to 2020 and 5,000MW from 2021 to 2030, based on a schedule to be mutually agreed by both parties. SEB estimated there could be 50 possible sites in Sarawak that could provide about 20,000MW of hydropower. It has indicated that the speed of its planting programme would depend on demand and whether there is a firm off-taker.

“Rio Tinto Alcan is still in negotiations with SEB while supply to Press Metal Bhd is supposed to start this month or next,” an analyst said. Rio Tinto Alcan is undertaking an RM8bil aluminium smelter that is expected to require 900MW while Press Metal’s aluminium smelter would require about 90MW although demand could rise to 600MW by 2011.
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