Sime Darby, the world's largest listed palm oil producer, today said it will not take an equity stake in the controversial Bakun hydro-electric dam project, a report said.

The decision comes after the government in November announced it would allow the company to buy a 60 percent stake in the firm that will run the dam.

"Our board is of the view that the project economics do not fit in with our business strategy," group chief executive Ahmad Zubir Murshid was quoted as saying by Bernama news agency.

"We are withdrawing our proposal to take up an equity interest in the project but will continue in our role as a contractor to complete the construction of the dam," he added.

Ahmad also said Sime Darby will not participate in the costly plan to supply energy from the Bakun dam through undersea cables to peninsular Malaysia.

bakun dam electrical cable lines from sarawak to semenanjung malaysia

Sime Darby will lead a consortium in the construction of the RM6 billion project in the eastern Sarawak state on Borneo island. The 2,400 megawatt dam was approved in 1993 and is expected to be completed in 2010.

The government has proposed a 700-kilometre undersea cable link to transmit power generated by the dam to southern Johor state on the mainland.

The dam, which involves flooding an area the size of Singapore, has attracted fierce criticism because of its harmful impact on the environment.

Some 10,000 residents have had to evacuate the project site.

Environmentalists have also said the undersea cable would be unsafe because it lies across an earthquake-prone region.

- AFP