TNB said in a Bursa Malaysia announcement yesterday that it has entered into a Share Sale and Purchase Agreement (“SSPA”) with 1Malaysia Development Berhad (“1MDB”) for the acquisition of a 70% shareholding in Jimah East Power Sdn Bhd for a total consideration of circa RM46.98 million.
Jimah East Power was incorporated by 1MDB and Mitsui and Co Ltd on July 5, 2013, as the special-purpose vehicle company for the development of two 1000MW coal fired power plants in Mukim Jimah. The Project is expected to achieve its Scheduled Commercial Operation Date for Unit No. 1 and Unit No. 2 no later than 15 June 2019 and 15 December 2019 respectively. The Project will enhance TNB’s generation will increase its generation market share from the current 53.3% to 57.7% by 2020.
While TNB might claim the acquisition is making clear commercial sense, the grass is not so green for 1MDB. It was stated in the same announcement that the actual project development cost incurred by 1MDB is circa RM83.68 million as at 17 April 2015. In other words, 1MDB suffers a loss of RM36.7 million from the share sale. A loss of 43.8% in its investment in Project 3B in less than 2 years.
1MDB is not the only loser in this transaction. TNB’s tariff for Project 3B is at 26.67 cent per kWh, which is 1.5 cent higher than when the project was first awarded to 1MDB-Mitsui early last year. In other words, Malaysians will be forced to pay higher electricity rates in the future.
Energy Commission must now explain why it approved the deal between TNB and 1MDB. 1MDB won the concession as the lowest bidder after another consortium led by YTL Power was disqualified last minute on controversial technical grounds despite submitting the lowest price. By allowing TNB to rise the tariff after acquiring 1MDB shares in JEP, EC completely defeats the purpose of open tender exercise.
Not only that, EC should penalize 1MDB for failure to fulfil its obligations in the concession contract and jeopardising Malaysia’s energy cost and security. Otherwise, it is unfair to all Malaysians who have to pay for a higher electricity bills simply because of 1MDB’s incompetence in managing its fund.