Prime Minister Abdullah Ahmad Badawi today said that an agreement to sell the huge Bakun hydroelectric dam project to a politically well-connected tycoon has lapsed but the project will still proceed.

The government initially planned to sell 60 percent of Sarawak Hidro, the operator of the 2,400 megawatt Bakun scheme in Sarawak state on Borneo island, to GIIG Capital, which is controlled by tycoon Syed Mokhtar Albukhary.

Abdullah, who is also finance minister, told Bernama news agency that an agreement signed on Aug 30 between the finance ministry, Sarawak Hidro and GIIG Capital has lapsed because some conditions under the pact were not met within the stipulated timeframe.

The finance ministry would return a deposit of RM94.5 to GIIG Capital immediately, he said.

The government is open to new proposals regarding Sarawak Hidro, he added.

The move is a second blow for Syed Mokhtar, a close ally of former premier Dr Mahathir Mohamad, since Abdullah took over as prime minister on Oct 31.

The goverment last month shelved a RM14.50 billion rail project awarded to a consortium led by his flagship company Malaysia Mining Corp.

Asked today whether the cabinet had discussed the sale of Sarawak Hidro at their weekly meeting, the premier said: "We did discuss it.

"The decision was that the Bakun project must proceed. We have done a lot already. We have constructed many aspects of the dam. It must go ahead and we cannot delay any more."

New proposals

The government took over the controversial Bakun project and revived it in 2001 after it was shelved during the 1997-1998 Asian financial crisis when the main operator fell into debt.

GIIG, which is jointly owned by Syed Mokhtar and Dubai-based Mohamed Ali Alabbar, wanted to gain control of the project to ensure power supply for a two-billion-dollar aluminium smelter it wants to develop by 2007.

The Edge said other companies had submitted new project proposals to the government. These include a joint-venture between Malaysian Resources Corp. and Sweden's Asea Brown Boveri.

The dam, which involves flooding an area the size of Singapore, has attracted fierce criticism because of its effect on the environment and some 10,000 locals who have already been moved out of their homes. Environmentalists say the dam's capacity far exceeds future power needs in Sarawak. - AFP