Savings of RM3.5B on IPP if PR Governs Putrajaya

SHAH ALAM, 7 Dec: Pakatan Rakyat (PR) today revealed a plan that would save Tenaga Nasional Berhad (TNB) as much as RM3.5 billion annually should they succeed in taking over Putrajaya after the upcoming 13th General Elections (GE-13).

PKR Chairman of Trade & Investment Bureau, Wong Chen said that savings from funds paid to Independent Power Producers (IPP) can be achieved by implementing a reduction in the power reserves margin and the renegotiation of existing contracts between IPPs and TNB.

“TNB’s financial problems derived from the one-sided terms of the ‘Power Purchasing Agreement’ (PPA) with IPP companies.

“IPP construction costs have also been increased often to conceal the returns of investment of IPPs which are very high.

“In addition, BN’s policy in retaining the power reserve margin which is very high has created opportunities for more IPP cronies to be built,” he said in a media statement.

In relation to this, he explained that PR is committed to renegotiating with IPPs to reduce the average Return On Investment (ROI) from 19% to a rate of 10%.

“By taking into account the power generation sector that involves long-term contracts and small operational risks, we believe that the rate of ROI that is fair and reasonable for IPPs is only 10%.

“The rate is still able to provide good profits for IPPs,” he said, adding that such measures will enable TNB to obtain savings up to RM2.6 billion annually.

He added that PR will also lower the reserve margin to an optimal rate of 20 percent, which is now managed by the Federal Government at a high rate of 38 percent.

The reduction in the reserve margin, according to Wong, will enable TNB to attain savings of RM870 million per year.

With that, TNB will boost annual profits up to RM5.6 billion per year compared to the current annual profits reaped by TNB, totalling RM2.14 billion a year only.

PR is also giving an assurance that TNB’s management will be free from undue political interference by making the management more transparent.

“When financial and operating targets are met, we will consider the sale of 10 percent of TNB shares that is currently held by Khazanah, to all 30,000 employees and management of TNB.

“This is part of the economic policy ‘management buy-out’ to create middle-class managers – owners apart from the aim to reduce government involvement in the private sector,” he said.

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