Bakun: Project is commercially viable
Taken from: The Star, Tuesday, 27 November 2007.
KUALA LUMPUR: The Bakun hydroelectric dam is a commercially viable project, said Synergy Drive Bhd president and group chief executive Dato' Seri Ahmad Zubir Murshid.
This was especially true with the high price of crude oil, he added. Crude oil per barrel has almost touched US$100 per barrel on the Nymex for January delivery.
"Gas prices follow crude oil prices closely and half the country's power is generated by gas, about 40% by coal and less than 10% by hydroelectric sources," Zubir said.
He also said power generated by hydroelectric means was proven to be cost efficient and stable. Unlike coal, it was a sustainable and renewable form of energy source.
Besides consolidation in the company's plantations and property development divisions, energy would play an important role to Synergy Drive's growth strategy in enabling it to develop recurrent cash flows in the medium to long term.
"With Bakun operational, revenue stream from the division would increase substantially from what we've derived so far from our Port Dickson power plant and another power plant in Thailand," Zubir said.
On the cost-efficiency of Bakun, he said the company had approached consultants and at the same time was talking to Tenaga Nasional Bhd (TNB) on the power purchase agreement (PPA).
Zubir cautioned that the rates would be competitive at 2012 prices, without compromising on major stakeholders' expectations as well as the company's internal hurdle rates. Two of the major stakeholders in Synergy Drive are Permodalan Nasional Bhd and the Employees Provident Fund.
"Our foray into the power sector is for the long term, therefore our agreement with TNB must be balanced out based on a long-term relationship," he said, adding that each PPA generally lasted 30 years.
Zubir said the company was committed to delivering the first 800MW from Bakun by 2013.
On financing the undersea cable component of the Bakun project, he said Synergy Drive as a group was in an enviable financial position not to incur high borrowings due to sufficient cash reserves and the high crude palm oil prices.
"But we're not resting on our laurels, we're developing Bakun because palm oil may be the flavour of the month so we need to derive other earnings stream to maintain our revenue targets and Bakun fits perfectly," Zubir.
He said while the company was known as an established plantation player, the energy division would play a significant role in boosting and diversifying its earnings as it had been identified as one of the group's core businesses.
"We're a local-based conglomerate with a global reach," Zubir said, adding that 50% of its revenue was derived from overseas.