Pakatan signals power as campaign fodder, says to cut IPP payments

(The Malaysian Insider) – PKR said today it can save consumers paying exorbitant electricity bills monthly by cutting a new deal that will shave RM3.47 billion off Tenaga Nasional Bhd’s (TNB) annual payment to independent power producers (IPPs).

The opposition party believes it can renegotiate to lower the return of investments (ROI) for the IPPs, which average 19 per cent now, by 9 percentage points, to 10 per cent, which it said was typical by global standards.

“This high profit will be able to reduce TNB’s debt… and, most importantly, with this high profit TNB no longer needs to raise electricity tariffs which will burden consumers,” PKR’s investment bureau chief Wong Chen told a news conference at the party’s headquarters here.

He explained that by lowering the ROI to 10 per cent, TNB will enjoy annual savings of RM2.6 billion from its capacity payments to the IPPs.

He said an ROI of 10 per cent would still mean excellent business for the IPPS as it translates to large sums of money over a long-term period in an industry that has little operational risks. 

Bond repayments and finance costs would be included in calculating the ROI and the financial and bond markets were unlikely to be affected by the 10 per cent cut.

Wong said the party will also tighten the reserve margin policy to keep it at 20 per cent instead of at 38 per cent currently.

He said that a sum of RM483 million is lost as unneeded or stranded investment for every 1 per cent of reserve margin, adding that an 18 per cent cut will mean stranded investment savings of RM8.7 billion.

Coupled with RM2.6 billion savings through the 10 per cent cut in the ROI a year and the RM870 million savings in stranded investments, TNB would be able to save a total of RM3.47 billion a year, he said.

Wong also promised that if the Pakatan Rakyat (PR) pact is elected to Putrajaya, it will consider selling off the 10 per cent share in TNB now held by state investment firm Khazanah Nasional to the power company’s 30,000 workers.

“This is part of our ‘management buy-out’ economic policy to create a middle class of manager-owners and also reduce the government’s involvement in the private sector,” he said.

TNB was yesterday forced to deny that energy consumption had been hiked through the replacement of analogue power meters for digital devices to increase the utility’s profits.

The power company said that contracts for the installation of new meters that were given to four vendors followed the utility’s procurement guidelines.

On Tuesday, PKR linked the family of former Prime Minister Tun Abdullah Ahmad Badawi to a company that supplies the controversial digital electricity meters to TNB and alleged that that this had hiked up energy consumption bills and gained the national utility company billions of ringgit in profit.

In its statement yesterday, the national power company did not name the vendors awarded the meter installation contract or deny that any one of them was linked to the former PM’s family.

It said, however, that, figures cited by PKR were inaccurate and misleading.