Amidst intense nationwide controversy and negative connotation for YTL Power International Bhd.’s participation in the Project 4A Pasir Gudang combine cycle 1,000-1,400MW power station which was seen as self-contradicting MD Tan Sri Francis Yeoh’s faux pas of “Capital Cronyism”, the Group announced withdrawal from the project.
The Star story:
Published: Wednesday June 18, 2014 MYT 1:43:00 PM
Updated: Wednesday June 18, 2014 MYT 2:34:32 PM
YTL withdraws from Project 4A
KUALA LUMPUR: YTL Power International Bhd is withdrawing from a consortium which was given the go-ahead to develop a 1,000MW to 1,400MW combined cycle power plant in Johor.
It said on Wednesday it had pulled out of the power plant development, called Project 4A, because of “misconception” over the way the contract was awarded. The consortium includes SIPP Sdn Bhd and Tenaga Nasional.
“We are thankful to the government for having confidence in YTL Power, as part of the consortium, to deliver the project on a fast track basis.
“However, in view of the misconception over the project, YTL Power has decided not to participate in the project under the present arrangement to dispel any misgivings over the government’s commitment to transparency and good governance,” the company said.
To recap, YTL Power received a letter of award from the Energy Commission dated May 27, 2014 addressed to SIPP Energy, where YTL Power and Tenaga Nasional would be part of the consortium to develop the plan in Johor.
On May 31, the Energy Commission announced the conditional award was required to fast track the construction of the project to meet system requirements and that the terms of the award stipulated that the tariff must be comparable to the Prai CCGT tender exercise concluded in 2012 that was awarded to TNB.
YTL Power said the Energy Commission was transparent over the terms of the award which had been announced.
“Notwithstanding the Energy Commission’s clarification, there has, in recent weeks, been much misunderstanding and public debate over the award of the project,” said YTL Power.
It added that due to the misconception over the project, YTL Power decided to pull out of the project under the present arrangement to dispel any misgivings over the government’s commitment to transparency and good governance.
YTL Power also said it welcomed any opportunity to participate in the project or other new capacity requirements on a competitive basis and is prepared to do so on an accelerated timeline.
“We are confident that we will be able to offer competitive rates as demonstrated in recently concluded tender exercises,” it added.
Shamefully, Francis Yeoh who had his ego on a pedestal when he had wagged the dog unequivocally had to swallow his pride. A really face-in-the-mud experience for getting his Group’s business empire actually owing to a series of opportunities of brushing shoulders with the high and mighty.
All and well. A really expensive lesson for the Yeoh family.
However, the lesson shouldn’t end here. The award of Project 4A from Energy Commission (EC) to SIPP Energy Sdn. Bhd. on a letter dated 27 May 2014 should be quickly withdrawn. So many members of the public expressed their displeasure on how EC awarded the project to a totally unknown company.
The justification is very simple. All awards from Energy Commission should be based on merits and competency, which something EC already decided for new power plant awards as far back as 2012.
On that note, one of the capital market firms believe that YTL Power might try to bid for the Project 4A and 4B if and when EC open it for tender.
YTL Power withdraws from Johor job
19 JUNE 2014 @ 12:45 AM
THE Energy Commission (EC) has accepted the surprise decision by YTL Power International Bhd to pull out from a consortium that was awarded the job to build a power plant in Johor through direct negotiation.
However, the regulator, in a brief statement yesterday, has left open the prospect of awarding the lucrative Track 4A project to build a 1,000MW to 1,400MW combined-cycle gas turbine power plant in Pasir Gudang, Johor, to a new recipient via competitive bidding.
Late last month, the EC issued a letter of award to SIPP Energy Sdn Bhd, provided it includes YTL Power and Tenaga Nasional Bhd (TNB) as consortium members for the development of Track 4A.
TNB has yet to decide on its participation and has until July 25 to do so.
Subsequent to the direct award, there has been much public debate over the offer, composition of consortium and specified terms.
In response to the negative public sentiment, the EC said YTL Power’s parent, YTL Corp Bhd, had submitted a letter to the government on Tuesday declining the invitation to participate in the project.
“In view of the current situation, having conferred with all parties concerned, and in the interest of the project, we accept YTL’s decision to decline the invitation,” the EC added.
YTL Power, in its statement yesterday, said it had withdrawn to “dispel any misgivings over the government’s commitment to transparency and good governance”.
The management, however, maintained that it remains keen to participate in Track 4A through a competitive bidding environment, RHB Research said.
Analysts, meanwhile, are still placing their bets on YTL Power to drive its power business locally.
“I believe YTL Power’s decision to pull out was made based on public and shareholders’ interest. At the end of the day, I think only (the group’s chief) Tan Sri Francis Yeoh knows the real reason and intention,” Mercury Research head Edmund Tham told Business Times.
Another analyst believes that if a tender is called for Track 4A and Track 4B, YTL Power will not hesitate to bid.
RHB Research said YTL Power’s decision to pull out from the project will help ensure that TNB’s long-term interest is taken care of.
“This should encourage a competitive operating environment, which can ensure efficiency in power generation costs among the existing independent power producers,” said RHB Research analyst Kong Heng Siong.
The firm has revised downwards its fair value for YTL Power to RM1.54 from RM1.71 following the announcement.
It, however, kept its “neutral” rating with a target price of RM1.54.
YTL Power closed 1 sen lower yesterday at RM1.47 a share, with 5.88 million shares traded.
YTL Power’s withdrawal at this stage is probably a tactical retreat.
We are not sure who within the key personalities within SIPP Energy Sdn. Bhd., a company which was formed in 2012, have the necessary qualifications, experience and exposure in the energy and power generation business and operation. That would be the fundamental factor on why SIPP Energy shouldn’t be awarded the project to begin with.
Fourth Prime Minister Tun Dr. Mahathir Mohamad urged EC to re-tender the project, and offer them on a ‘beauty contest’ to a selected pre-qualified power generators which have proven in their operations and business to bid for Project 4A, applying the best business practices.
On the same note, EC should also review all power purchase agreements between independent power producers (IPP) and TNB. Especially, YTL Power’s Paka power plant, which was the nation’s first IPP deal.
This is to ensure EC getting the best deal for the supply of power to TNB, which eventually would affect the rakyat.
If HRH Sultan Ibrahim Ibni Sultan Iskandar wants to be actively in business, as proven in this case, then best business practices should apply. Otherwise, the impression would be that any companies or businesses with HRH Sultan Johor’s direct or indirect interests are obtained from clout and influence of the sovereignty position as a Ruler.
The Federal Constitution provided a special role and position for a Ruler under the separation of power principle in the Constitutional Monarchy democratic system where the government is formed by the control of the Parliament. That, which is the fundamental element when this nation was found and given birth to as a sovereign state, should be preserved in principle and practices.