Here are 2 comments which I selected to share with readers. The first comes from a person known as OneMalaysia. The second comment comes from a person, residing I presume in Borneo.
Those robber barons were single-handedly created and succored by Dr Mahathir. I remember arriving at the old Subang airport to discover unpleasantly that a large part of the country was plunged into darkness because of some massive explosion or tripping caused by overload. Lo and behold, within weeks the ex-PM announced that IPPs would henceforth supply electricity to TNB because TNB couldn’t be trusted to do the job of generation alone.
The first off the block was YTL, who until then was just a mid-sized contractor. What distinguished them was Francis Yeoh’s contact with the Apa-Nama PM. He was said to be like a godson. Well, that would be putting it rather kindly. Some people have rather unmentionable terms to describe him, which is beyond the dignity of this blog to publish. FY flouted his connection. That’s the ironclad, tested way to tell one and all, especially little Napoleons, that he had real connections – don’t play, play.
We then have Ananda Khrishnan – Uncle Ananda to the growing Mahathir kids – who came to great wealth through trading Petronas oil. Uncle Ananda of course also got into the KLCC deal and Maxis. But you wonder what experience he had in power generation when he got the sweet deal.
A former rice trader, who also had access to Dr M, also got in. He is now the biggest in terms of total power output, next only to TNB itself. Only days ago, TNB awarded a massive 1000MW coal fired plant to his group, Malakoff, at a juicy 23 sen per kilowatt. Compare this to what TNB can generate at about 13-14 sen.
Now, what make these blood-sucking IPPs so lucrative? First, these IPPs have contracts to supply on take-it-or-leave-it basis. In other words, they will generate at the rated capacity and supply to TNB whether or not TNB wants the electricity. TNB must then throttle back its own plants to give priority to the IPPs. Since TNB can generate at a lower cost than the IPPs, it is forced to buy all that expensive electricity – restricting its own cheaper supply – which is then passed on to us. Second, the IPPs are protected should gas prices go up. They have “pass through” cost clauses, meaning if gas price goes up this is immediately billed to TNB, that is, us. Third, at the time when the first few IPPs were created, they sold electricity at 15-16 sen per KW when at that time TNB could generate its own at 12 sen. The later IPPs got a lower rate but are still obscenely profitable. If one wants to understand what rent-seeking means these IPPs provide a perfect example.
Is there no role for IPPs? They have, but not on those terms. Firstly, as is done overseas, IPPs must buy gas or coal at market prices. Secondly, they must compete on price to supply to TNB, so TNB gets the cheapest deal. This means the inefficient IPPs will make less money or even losses – no guaranteed off-take at high fixed prices, and no pass-through cost clauses. In short, no sweetheart deals, and no ripping off the public. How can they tell all this to the public? We have Dr Mahathir to thank for this rip-off.
First of all, I have never commented any of your writings even though I find them interesting. Not that I agree to some of what has been written. But nonetheless they are interesting.
Ok now, my thoughts…
Remember Asas Serba’s intention to take over the entire toll roads in the country?
Well, I can safely tell you the plan is workable if we only analyse the merits of the proposal. Nothing else… not even who is alleged to be behind the move!
Asas Serba’s proposal:
1) No more toll hikes;
2) No extension of toll period beyond PLUS’ concession agreement;
3) Immediate reduction of toll rates by 20%;
4) No more subsidies;
5) Assume the entire debts of toll roads; and
6) Remove all government guarantees.
If my memory has not failed me the above are the salient features of the proposal.
WELL…? If that is not good, I do not know what is?
Now let us fast forward to the present…
With a little tweaking, the same model works for IPPs…
I know who is behind Asas Sebar for a fact but I shall not dwell into that!
The same core group that was working on the toll road projects were also working on the IPPs… if only the government (read as UMNO/BN) were willing to discard their-know-it-all attitude, the government would not need to subsidize the IPPs…
Without even giving an opportunity to be heard, the government has denied Asas Serba an opportunity to reduce the burden on the rakyat.
Make no mistake! Asas Serba could and would still make money from the toll roads based on their proposal. The same holds true if similar proposal was implemented for IPPs!
When the government denied Asas Serba (largely, I was told because of personality clashes!), the government:
1) Strained its resources by subsidizing toll roads as well as IPPs;
2) Denies Sarawak and Sabah, the chance to have better infrastructure; and
3) A host of other stuff… (can’t articulate them now… got to work!)
Whether my comments would see the light of day remains to be seen. That Sir is your prerogative that I would not question.
But I know what I am talking about because I have seen the proposal and the complete workings… Unfortunately I do not have a copy of them with me… I suppose I was being too straight when told that I could only read and return them (the proposal) after I finish reading.
Thank you Sir.
Dari Borneo ke Semenanjung Tanah Melayu. (Excerpt from Sakmongkol AK47 , 7 June 2011).
There might be some people who can really fill in the details of these two projects. Nobody could know anything before because of OSA.
We should spill them all off.
It’s the rakyat’s fundamental rights!
It’s the time of the season!
They won’t switch off the power. Hey, they got bizness to run, too! :))
How about our current PM that simply give up KTM land in Singapore and the land was under new Singapore Land Act and supposed to pay around S$2b tax?
Is it PM has so much power at his disposal at the expense of our nation’s interest?
“Banking” on the series of flip flops decisions, policies from never ending issues of corruptions, little napolean, IPPs, high crime rate, human trafficking, drug with so many names l hardly can remember, white elephant projects, bailouts, wrong decisions by government machineries, court with no soul-or-judges with unpredictable if based on books of law, minister ruining our country like their rich dad estates, TUDM land saga, how naza got government land near bukit tunku, pkfz, hiways, public project as government tool to get easy rich-rakyat can witness same project-many time retender because of concessioner can’t tahan the price and they can bid for the same project after that….is it technique or tactic to paralyse country coffer?
Please highlight the KTM land saga and l believe we can do something to save this prized asset rather than gave up to the kiasu SG.
Asas Serba proposal was being rejected because accepting Asas Serba proposal will mean a BIG CASH LOSS TO UMNO AND ITS CRONIES.
All this lop sided IPP agreement is made to benefit the ORANG TUA and his family.
A source of mine told me that even though the old man is longer the PM for so many years,his children is still collecting commissions from the IPP until today.
The objective of Umno today is to lay its hands into the CASH of all GLCs especially CASH COW like PLUS and PETRONAS.Hence giving the toll to HaliM Saad will be a loss to Nor Yakob and UMNO.
This is the reality in Malaysia today.
Today, Tuesday 7 June, Penjanabebas, the association of IPPs issued a statement (read on Malaysia Chronicle) denying that the IPPs have benefited from gas subsidies. Their statement is strictly correct. In fact it makes them look saintly, like an group of do-gooders helping out TNB and we poor Malaysians, as they produce electricity to brighten up our lives.
What I have written earlier about how they make money is valid. What I have neglected to do earlier is to explain the real secret of why these IPPs are insanely profitable. The terms of their PPAs (contracts to produce power) are such that there is no risk at all to them – TNB takes all the capacity; there is cost pass through; and the initial cost per KWh is much higher than what TNB can produce. This simply means a very high margin business at no risk. Anyone who has a rudimentary knowledge of business and investment knows that risk is related to returns – the higher the risk the higher the expected return. In this case of the IPPs, the high returns are not related to risk. There is no market risk, except operational risks, such as if the plant explodes, or their own management screws up.
Now if one has such a sweetheart deal that promises a very high return on capital (shareholders’ capital + borrowings), it is very easy to borrow via long term bonds (10 years) to finance the project. This is what they all did. They had very high borrowings via bonds. This high gearing amplifies the return on equity, i.e. the return to shareholders after paying off the bondholders. So if the return on capital is 12% and the bond interest is 7%, then each unit of equity earns 12% by itself. If the gearing is 300% (3 times equity) then each unit of borrowing contributes another 5% (12% – 7%) to equity. So 3 units of borrowing contributes 3×5%=15%. This 15% is then added to the 1 unit of equity of 12%, so the total return on each unit of equity (shareholder capital) is 27%. (I have ignored taxation for simplicity). This is what these sweetheart deals are all about – one-sided deals in favour of people who knew nothing about power generation but against the public interest.
Two or three years ago there was a big clamour, initiated by TNB, to review the PPAs but the IPPs squealed, and Nasir Razak defended them saying that the government cannot do this because this will cause foreign bondholders to lose confidence in the government. The sanctity of contracts, even lopsided and against the public interest, must be honoured. What else can be done? How about a super tax on the profits of the IPPs AFTER they have paid interest on the bonds? No, they all screamed. Unfair! So the poor people of Malaysia are still being screwed.
And where have all the IPP profits gone to? YTL has invested massively overseas in the UK and Singapore to diversify “political” risks. Ditto with Ananda Krishnan. Their political lord and benefactor is no more on the throne. Shrewd business people know how to protect their interests. Malakoff has all its assets here – it has Teflon-coated Bumi status.
Why there is much truth about AsabSerba’s proposal.
The only catch is their funding. They claimed that their have the fund, ready & standby.
Then, only EFP/Khazanah came out with the stipulated deposit about the PLUS tendering.
Talk is cheap?
There is also the most proper fund raising exercise of using public bond. They r game to it, bcoz at the end of the day teh M’sian govt is going to bear the cost, with interest thrown in if they failed. & failed they would!
Remember about nazir’s cry of the possible IPP’s bond default? Similar issue was raised by the Syabas/PUSPEL/Puncak niaga’s water bond.
So who’s the final suckers – joe M’sians of course!
Despite all the alleged mismanagement by the government, they still give out some ‘gula-gula’ to the people, which makes most malaysian content with life. So why the need for change? Most simple minded individuals are afraid of change.
Are you aware of the prices of new developed properties in Selangor? I believe because of the mismanagement by the previous state govt, the current in power is under pressure to show their worth to the people & make profit. Should a govt be managed like a business unit? ie. KPI based on profit.
In Sarawak, despite the alleged plundering by Taib n Co., they still won by a comfortable margin. So why would the Sarawakian vote for a change?
The basics of governing is easy. Use a portion of the rakyat’s money for the rakyat and anything beyond that is a blind-sight. As long as they’re doing this, I just don’t see them being kicked out of Putrajaya.
So my dear Dato’ what u r doing now is adding fuel to fire. Without ignition source, fuel is just a liquid. U must look for the spark!!
ini semua mamak kutty punya keleje.
You missed out Anon’s at 7/6/2011 17:41
“…Now. .back to reality.Lets stop the monster thats about to hatch.Its the Gamuda MRT windfall.After,direct nego dams,smart tunnels,double tracking (worth 20 bil?) their hunger still unabated.Now they want to rip us off further thru MRT PDP n swiss challenge tunnels.Thats potential lip smacking 8 billion in d pocket?
Of cos it wld be racism to stop this cos they r the marginalised n oppressed ppl too.Don’t worry abt the bumi partners cos they r just riders in the sandstorm n googled to see pink when blood is order of the day.”….
We are only now finding the lowdowns on the IPP issues? They are all but nasi sudah jadi bubuh. We feel greatly pained but still can only scream out profanities!
FRIM and Sungei Besi land deals, MRT and the 100-storey Menara will be VERY BAD. All that the rakyat cannot know yet because of the OSA/ISA/Anti-Sedition Act, dumb & mute MSMs, greedy UMNO warlords, misguided MACC, power drunk AG, etc
Please guys, turn your guns on this!…. And then this government will know the rakyat’s anger when they lose their fear!
Profanities will be nothing!
Are you implying that in order to tell the truth you need to be in the opposition?
to dato Sak
Now i understand why u need to swim or sink with UMNO.If you have the anon 18.34 kinda people around then by all means please do stay and help them.Do they really hate the truth?
Now where is the money going? Be my guest to guess.