Sime Darby Bhd (KLSE : SIME, stock-code 4197) take ownership of the 2,400-MW Bakun hydroelectric project on the island of Borneo, reported The Edge financial news on 16-Dec-2006.
Sime was leading the consortium which built the half-finished dam, which is one of Asia’s largest hydro-electric projects outside China and has suffered problems such as construction falling behind schedule and hefty cost overruns.
Sources also mentioned that the government has also agreed for a 650 kilometers RM 9.0 billion undersea cable project, with Sime leading the consortium undertaking the project. The Bakun dam will flood an area the size of Singapore when it is completed about four years from now, but its owner, the federal government, has yet to find a major buyer for its power.
Among the justifications the government had considered for the construction were:
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a possible aluminium smelter in Sarawak.
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redirect the power to the country’s more industrialized peninsular via submarine cables.
It was reported the foreign partner for the cable project was likely to be Asea Brown Boveri (a Swiss power and automation firm), which was involved with the Bakun project in the mid-1990s initially.
Besides main power supplier Tenaga Nasional Bhd (KLSE : TENAGA, stock-code 5347) who will act as the sole customer for the supply, other companies that could be roped in for this project are expected to have relationship with UMNO, the key party in Malaysia’s ruling coalition which include:
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Realmild Sdn Bhd (the investment arm of UMNO, the key party in Malaysia’s ruling coalition)
Previously, foreign companies which have expressed interest in setting up a smelter in Sarawak include Rio Tinto (NYSE : RTP, quote), Alcoa (NYSE : AA, quote), BHP Billiton (NYSE, ASX : BHP, quote), Smelter Asia-China Aluminium International Engineering and Cahya Mata Sarawak Berhad (KLSE : CMS, stock-code 2852) and Press Metal.
Smelter Asia is owned by tycoon Syed Mokhtar Al-Bukhary, who has warm ties with former premier Mahathir while CMS, on the other hand, is a well-connected group with diversified interests in Sarawak led by Sulaiman Abdul Taib, the son of powerful Sarawak Chief Minister Taib Mahmud.
The dam was criticized due to the environmental impact of building such a massive project in Sarawak’s rainforest. More than 10,000 people have already been resettled to make way for the construction. Smelters emit perfluorocarbon (PFC), which is detrimental to humans, animals and vegetation and has global-warming potential. The government is estimated to have already sunk RM 1 billion into the project, of which RM 500 million went to Ting Pek Khing’s Ekran Berhad (KLSE : EKRAN, stock-code 3085) as compensation for it being scrapped.
“It’s utterly unnecessary,” said one Sarawak-based political analyst of the dam, declining to be identified for fear of repercussions. “The only people who need the dam are the Sarawak politicians and their cronies.” Mo
reover, he added, Sarawak has a wealth of alternative energy resources such as natural gas. So, does the government really practice the prudent spending as promised before the last election? Or will this government put the previous government led by Mahathir to shame in terms of mega-projects that this country is so obsessed?
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December 16th, 2006 by financetwitter
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