Malaysia - SEB To Build Another Plant For SCORE

11 Aug 2011 • by Natalie Aster

State-owned power plant developer Sarawak Energy Berhad (SEB) is expected to make a final decision soon on its plans to build a new 600 megawatt coal-fired power plant in Balingian, Mukah Division, Sarawak. Investment inflows in 2011 look set to outperform 2010, however, we wonder if there is sufficient near-term investment into Sarawak to justify the large public spending on power plant construction.

According to local media reports, citing unknown sources, the feasibility studies for the MYR2.5bn (US$831mn) plant have been completed and are already in the design phase. Should SEB decide to go ahead with the project, the plant is expected to be completed by 2015 and will be the company's second largest power plant investment after the 944MW Murum hydropower plant. The Murum plant is expected to commence operations in late 2013 and both plants are part of the Sarawak Corridor of Renewable Energy (Score), a major initiative to drive economic development in selected parts of Sarawak by 2020.

Hydro-powering Heavy Industries

Current, Planned And Projected Power Generating Capacity In Sarawak, MW

Source: Sarawak Corridor of Renewable Energy


Electricity generation capacity is being developed on a massive scale in Sarawak and the Balingian coal-fueled power plant is another sign of this investment. The Score initiative calls for the development of 28,000MW of generation capacity to meet the needs of its energy-intensive industries, with hydropower (20000MW) and coal (5000MW) the main energy resources to be developed by 2020. SEB will be an integral part in meeting this generation target, where in June 2011, Sarawak Public Utilities Minister Datuk Awang Tengah Ali Hassan stated that SEB needs to build up an additional generation capacity of 6,200MW from the present 1,250MW by 2020.

The Sarawak government believes that this massive boost in power generation is necessary because it expects electricity demand to grow rapidly on the back of robust investment inflows to the state. We have seen some signs of this investment potential in 2011, where proposed capital investment into Sarawak between January and April 2011 reached MYR2.9bn and is well placed to eclipse full-year investment inflows in 2010. Indeed, SEB has signed separate power purchase agreements (PPA) with the first batch of Score investors - Press Metal Bhd, OM Materials, Asia Minerals and Tokuyama Corp - in May 2011. Press Metal and Tokoyama are already constructing their respective projects, a MYR5bn (US$1.7bn) aluminium smelter and a MYR3bn (US$997mn) polycrystalline silicon factory. OM Materials has also started work on a manganese and ferro silicon smelter project, while Asia Minerals is also developing a manganese smelter.

 
Sarawak To Outperform 2010, but 2009?

Malaysia Total Proposed Capital Investment, Top Five States in 2011 YTD, MYRmn

Source: Malaysian Industrial Development Authority, BMI

However, there still is a long way to go before investment inflows surpass levels reached in 2009 and that is giving us cause for caution. With many governments in the Asia-Pacific region also aggressively courting foreign investors, and with many states in Malaysia launching massive development plans, we believe that Sarawak could still face stiff competition for investment over the coming years, thus heightening the demand risk for SEB and its power plant projects. 

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