Japan's Sumitomo beat three other giants - Mitsubishi, German's Siemens and France's Alstom - to win a RM6 billion contract to build a coal power plant in Malaysia, a senior official said today.

"Sumitomo Zelan Consortium will ink the engineering, procurement and construction agreement for the commissioning of the power plant late Friday," the senior official, familiar with the the deal, told AFP on condition of anonymity.

The agreement will be signed with Malaysia's SKS Power, which plans to develop a 2,100 megawatt coal-fired power plant in southern Johor state to supply electricity to state utility Tenaga Nasional.

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

"Competition between the (firms) was tough but in the final round Sumitomo edged out the other three players," the official said.

Asia's biggest power contract

Analysts said the Tanjung Bin project could be the biggest power contract awarded this year in Asia.

"Malaysia needs to plan its power needs. The power plant is relevant to our needs as it will help diversify our energy dependence," said Pankaj Kumar, assistant senior manager with OSK Research.

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," another analyst said.

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.

RM30bil needed to upgrade facilities

Energy, Communications and Multimedia Minister Leo Moggie recently said Malaysia's power sector was expected to spend some RM30 billion to upgrade facilities and increase capacity over the next five to 10 years.

Out of that, about RM18 billion would be spent on power generation, he said.

Moggie said the transmission and distribution businesses would each require some RM6 billion to expand.

Tenaga Nasional chairman Awang Adek Hussin said the national utilities company sees an 8.0 percent expansion in the power industry and 6.0-7.0 percent growth in the broader energy sector for 2003.

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 purducers, including YTL Power Generation, Powertek Group and Genting Sanyen Power. - AFP