Monday June 1, 2009
KUALA LUMPUR: Tenaga Nasional Bhd (TNB) sees electricity demand returning to positive growth next year with the implementation of infrastructure projects under the Government’s stimulus packages, said chief financial officer Datuk Izzaddin Idris.
“The main consumption of electricity is from the steel and cement sectors, for which demand is skewed towards infrastructure and construction projects. By July, we’ll have a better indication of the demand trend,” he told StarBiz in an interview.
(Shortly after this interview was conducted, it was reported that Izzaddin was leaving TNB at the end of June to become UEM Group Bhd managing director effective July 7.)
Earlier this year, TNB, in the notes accompanying its second-quarter results, pointed out that demand from the industrial sector fell 9.4% while the overall demand in Peninsular Malaysia was down 3.5%.
Due to falling demand, excess capacity has increased to 50% and is expected to reach 56% when Jimah Energy Ventures Sdn Bhd’s coal-fuelled power plant comes onstream on July 1.
“There’s little that we can do with the excess electricity. At one stage, demand from Thailand was strong but has since weakened due to the global recession,” Izzaddin said.
Nonetheless, demand from the domestic steel and cement sectors is anticipated to recover on further development in the Northern Corridor Economic Region and Iskandar Malaysia.
“We expect the impact of rising economic activities to kick in next year. Currently, peak demand is also rising nicely due to the weather conditions,” he said.
With stronger demand, reserve margin would also come off from the present high levels, he said, adding that excess capacity was likely to drop to the optimum level of 25% by 2015.
Izzaddin said Jimah was the last independent power producer and TNB did not expect any new plant in the next five to six years.
By 2015, the Bakun hydro-electric dam would be ready. “It’s a blessing in disguise for us, as we would have ample cashflow given the reduced capital expenditure,” Izzaddin said.
TNB’s capital expenditure this year amounted to RM3.75bil to RM4bil, lower than RM4.5bil previously.
Meanwhile, TNB does not profit from the lower coal prices seen so far. “We do not benefit from the fluctuations in coal prices as it’s a pass-through mechanism. Any savings go back to the consumers,” he said, adding that the average cost of coal for the year was estimated at US$85 per tonne.
TNB has submitted to the Government its proposal for the annual tariff review and expects negotiations to start soon.
Izzaddin said the authorities’ recommendation for a fuel pass-through mechanism would benefit both the consumers and TNB.
More importantly, the formula for the pass-through should be as transparent as possible, he added.
– The Star
