I refer to the Malaysiakini report Heat builds over Sabah brown-outs .

The ongoing ‘power rationing' exercise by Sabah Electricity Sdn. Bhd. (SESB) has once again put the spotlight on the perennial power shortages which the people in this state have long suffered from. For many, these disruptions to daily economic and social activities can only be suffered in silence as it seems to be the norm.

The sole power utility in Sabah is the Sabah Electricity Sdn Bhd (SESB), 80% owned by national utility giant Tenaga Nasional Berhad (TNB), with the remaining 20% being owned by the Sabah state government.

The manner in which the Silam IPP project (also known as the 300MW coal-fired power plant project) was awarded in 2007 leaves much to be desired in the way of transparency and fair evaluation on the part of the federal government, and corporate governance on the part of TNB. For the first time, the federal government decided to undertake a tender exercise for an IPP project, with a supposed objective to obtain the best possible technical and commercial proposals.

When this tender closed, sometime in June 2006, a total of 13 bids were received, including one from a TNB subsidiary ie, TNB Remaco. The chronology of events, as shown below, subsequent to the tender closing gives substance to my earlier comments regarding transparency and corporate governance:

• The evaluation committee, though comprising independent technical and financial experts, was headed by TNB, even though a TNB subsidiary was one of the bidders;

• The evaluation committee then proceeded with a detailed evaluation of each of the 13 bids received, such bids being evaluated against their individual and specific merits and demerits;

• The bidders were bidding for only 60% of the project's equity as the bid documents clearly stated that the remaining 40% had been reserved for ‘Sabah bumiputera' interests;

When the federal government finally announced the award of the project almost a year after bids had closed, it awarded 80% of the equity of the project to a consortium comprising three of the original 13 bidders i.e. TNB Remaco, Eden-Nova Nusantara and Maser; and Yayasan Sabah the remaining 20%.

How could evaluation of 13 unique, specific and individual bids lead to an award to a group of three of them? Was this group ever asked to submit a fresh proposal as a consortium? Why weren't other bidders encouraged to team up as consortia and submit fresh proposals on the basis of consortia and not individual bidders? Why was the portion reserved for Sabah bumiputera interests inexplicably reduced from 40% to 20%?

This consortium proceeded to sign an engineering, procurement and construction contract (EPCC) even before its Power Purchase Agreement (PPA) with SESB had been negotiated and signed.

One might see this either as taking a business risk or complete arrogance on the part of TNB, in that TNB felt it would easily be able to pressure its subsidiary, SESB, to put pen to paper. Why complain now that the turbines have already been ordered?

When the Sabah state government scrapped the Silam project on environmental grounds, TNB/SESB cried aloud that the project must be allowed to proceed albeit at another ‘more suitable' location. TNB/SESB's premise is that such a power plant must be constructed in Sabah's East Coast for contingency and system requirements.

Given this requirement then, and apart from relocating the project, shouldn't TNB/SESB also be required to suggest alternative fuels for the power plant, gas perhaps? Sabah, as yet, does not have sufficient volumes of biomass to sustain a 300MW power plant.

The proposed Silam plant was to use imported coal from Kalimantan anyway, so why can't natural gas be ‘imported' from Sabah's West Coast to the East, either via pipeline or as liquefied natural gas (LNG) using sea-going tankers? After all, Tokyo Electric Power Company, Japan's largest power utility, imports LNG from MLNG centre in Bintulu for its power plants.

Perhaps by coincidence, the new Sabah Oil & Gas Terminal (SOGT) at Kimanis is being designed to serve only as a transit point for gas being exploited off shore Sabah with this gas eventually being piped to Bintulu to be converted to LNG for export to Japan and China for use in power plants there.

Such a trans-Sabah gas pipeline could also serve as a catalyst for industrial development along its route especially for energy-intensive industries (eg, cement and steel manufacturing) and gas- related industries like petrochemicals and so on.

At the time the Silam project was being designed, coal was at a market price of around US$50 per tonne. In line with global fuel price increases, average coal price now stand at about US$100 per tonne. In Malaysian PPAs, fuel price is a pass-through cost ie, the power purchaser will pay the IPP whatever price it pays for its fuel.

Bearing in mind that local natural gas for power production is quite heavily subsidised by the federal government, does not it make economic sense to use a fuel for which the price is controlled as compared to one which is subject to the vagaries of market forces?

The party eventually bearing the burden of high fuel costs will be the rakyat, as TNB is 70% owned by the federal government, leading to SESB being 56% owned by the federal government and 20% by the Sabah state government ie, a total of 76% in state ownership.

What will happen to the consortium? Will the same consortium be asked to propose a more environmentally-friendly power project and site? Why wasn't there any coordination between the federal and state governments prior to the implementation of this project?

A recent SESB statement attributes the shortfall in generation capacity to its own faulty generators as well as some of the IPP generators being down. As an ad-hoc solution, SESB has gone on to spend millions to buy a fleet of small-sized (about 1MW) mobile generators running on diesel, to be located at various load centres in the state to mitigate the adverse effects of power rationing.

As for future power plant-ups, the statement says that the IPP projects planned to be located at Kimanis, in the vicinity of the SOGT currently being constructed by Petronas, have suffered some undue delays, but fails to say what these delays are and what actions are being taken to overcome them.

These ‘delays' stated by SESB are in most part attributable to TNB/SESB itself and the federal government. When will the new projects be put on track again, especially now that Energy Minister Peter Chin has confirmed that SESB is low on power reserve margin? The minister also failed to elaborate on the ‘delays' and any remedial actions being put in place to expedite these two projects.

The protracted delays in the new projects will see SESB facing an acute generation adequacy shortfalls in the short and medium-term.

Whilst the lobbyists and Umno/BN cronies play out their own power games within the corridors of Putrajaya, the ordinary, taxpaying, BN-voting rakyat of Sabah will be left facing more dark nights and hot, sweaty days and incalculable economic loss.