German and French companies are bidding for a RM6 billion (US$1.6 billion) contract to build a coal power plant in Malaysia, industry sources said today.

The competition is between Japan's Mitsubishi and Sumitomo, Germany's Siemens and France's Alstom, the sources said.

"All these four companies are bidding for the project. All of them are in a good position to win the contract," an industry official familiar with the project told AFP o­n condition of anonymity.

Good track record

Malaysia's SKS Power, which plans to develop a 2,100 megawatt coal-fired power plant in Johor to supply electricity to state utility Tenaga Nasional, is expected to announce the winner by the end of the month.

The Tanjung Bin power station will comprise three plants of 700 megawatts (MW) each. The first plant is expected to be operational in August 2006 and the other two plants should be completed in the following year.

A Mitsubishi official in charge of power projects confirmed his company was bidding for the project and said it had 25 years of experience in power plant projects in Malaysia.

"We have a good track record for such projects," he said.

Covering future needs

Sumitomo also confirmed it had submitted a bid, a local newspaper reported yesterday. Alstom declined comment while a Siemens spokesman could not be reached immediately for comment.

Analysts said the competition for the project would be tough since all four were established players.

Pankaj Kumar, assistant senior manager with OSK Research, said the power plant was important for Malaysia's future needs.

"Not o­nly it will provide energy for future needs, it will help diversify the country's dependence o­n gas-fired plants," another power analyst with a ratings agency told AFP .

Other power sources in Malaysia include diesel and mini-hydro projects.

At present there are o­nly two coal-fired power plants in Malaysia while there are over a dozen gas-fired plants. Three-quarters of Malaysia's electricity is generated from gas while coal provides o­nly 12 percent.

"We can't just rely o­n gas. Last year there was a gas shortage," the analyst said.

Higher power useage

Malaysia's dominant generator and distributor of electricity, Tenaga's sales rose 6.9 percent last year.

Analysts said if the economy grew five to six percent in 2003, electricity demand growth should be about eight percent next year.

Power consumption in Malaysia grew rapidly due to strong economic growth in the 1990s, forcing the government to liberalise the industry in 1993 and end Tenaga's monopoly o­n power generation and distribution.

This brought about the emergence of numerous independent power producers, including YTL Power Generation, Powertek Group and Genting Sanyen Power Group. AFP