Sumitomo Offered $1.5 Billion Deal by Malaysia



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Jun 28 2007
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Kyodo News reported that Malaysia has offered Japan’s Sumitomo Corp. (TYO: 8053) a $1.5 billion deal to lay a 700-kilometer long submarine cable which will transmit electricity from the Bakun hydroelectric dam in Malaysia’s Sarawak State on Borneo to Peninsular Malaysia.

It was reported that Energy, Water and Communications Minister Lim Keng Yaik together with delegation comprise representatives of Malaysian conglomerate Sime Darby Berhad (SIME: stock-code 4197) and state-owned utility company Tenaga Nasional Berhad (KLSE: TENAGA, stock-code 5347) met Sumitomo and made the offer during his recent visit to Japan.

The cable will run from Bakun in the interior of Sarawak, cross the South China Sea to Tanjung Lemang in southern Johor State that borders Singapore and link up with the Tenaga power grid on the peninsular. The plan for the undersea cable which has a capacity to generate 2,400 megawatts electricity had earlier been scrapped following the 1997 Asian financial crisis only to be revived again in 2003 by then Prime Minister Mahathir Mohamad.

The entire construction of the dam plus submarine cable project was estimated to cost 13.5 billion ringgit ($3.9 billion) in 1997 but recent local news reports have put the total cost now at between MYR16 billion and MYR17 billion. The question remains – does Malaysia really need to have such a huge electricity capacity considering the usage is only at 60% with excess un-used capacity of 40%? Obviously it’s another mega project to enrich certain political-linked companies shamelessly wasting public money again.

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