Sarawak’s Power Play

Two sudden blackouts across Sarawak many weeks ago brought about the realisation of how important it was for the state to have consistent power and electricity supply.

As more commercial and industrial developments blossom all over the state, the need to maintain an undisrupted power supply to alleviate potential loss of business is of top priority in the state’s economic development agenda.

Higher demand arising from organic growth coupled with higher consumption especially from energy intensive multinationals at the Sarawak Corridor of Renewable Energy (SCORE) region will fuel the need for additional capacity for power.

Industry players believed the prospects for the power industry are bright as demand for power is poised to grow exponentially over the next few decades.

Besides, the ability to ensure constant supply of electricity and power will be a key catalyst to attract more foreign direct investment (FDI) into the state.

Additionally, continuous interests shown by investors to invest in Sarawak by setting up their operations in the SCORE region will drive more demand for energy in the future.

Many opportunities coming in

On this matter, Sarawak Energy Bhd’s (SEB) chief executive officer Datuk Torstein Dale Sjotveit said, “The consistent investment and interest showcased by our investors show that there is a strong demand for energy in Sarawak.

“SEB has created an avenue for foreign investors and local players alike to increase their presence through a reliable channel of renewable energy in Sarawak.”

Meanwhile, SEB’s corporate social responsibility (CSR) senior manager II Jiwari Abdullah foresees strong growth ahead for the power industry driven by more economic and business activities.

“In the next two to three decades, power demand in Sarawak is expected to grow rapidly due to growing population, more economic activities and increased scale and pace of industrialisation.

“Sarawak, being endowed with rich hydro and coal resources will have an increasing role and opportunity as an energy provider throughout Sarawak and its surrounding regions.

“The main demand sectors identified to grow rapidly are normal (organic) load in Sarawak and energy-intensive industries in Sarawak especially in SCORE.

“These sectors will bring in an unprecedented amount of investors as well as more employment opportunities to the state.

“The dams being constructed and proposed currently are to ensure that the state can meet future demands which are also major drivers of SEB’s power system development plan,” Jiwari said in an e-mail interview.

Similarly, Sarawak Cable Bhd’s (Sarawak Cable) managing director Aaron Toh said there is huge potential for the power industry in Sarawak to expand further as demand for power is growing exponentially as more and more multinational companies are attracted to Samalaju Industrial Park.

“That will lead to more transmission lines and power substation to be built,” he said.

Pestech International Bhd’s chief executive officer Paul Lim concurred with this view, noting that the power and industry sectors in Sarawak are indeed very promising.

“We are very upbeat on the potential industry growth of the state,” he opined.

He said as outlined in the Economic Transformation Programme (ETP), it is estimated that slightly more than 0.6 per cent of Sarawak’s 20 gigawatts of potential power was being developed.

Lim noted that in comparison, the undeveloped potential for power from industries in the Borneo Island emcompassing Sarawak, Sabah, Brunei Darussalam and West Kalimantan of Indonesia is projected at 25 terawatt hours.

Therefore, he believed that opportunities are abundance for the power industry to be developed further.

CHALLENGES IN GROWING THE POWER SECTOR

While the development of the power industry continues to gain traction, several challenges within the industry are required to be addressed before the industry can achieve its full potential.

These include the construction of hydroelectric power projects (HEP) such as building of more dams, escalation of purportedly misleading information, allegations by certain non-government organisations (NGOs) on the downside of HEPs and lack of skilled workers to handle large scale jobs in Sarawak.

SEB general manager for corporate planning and strategy Alvin Lim said “The main challenges pertaining to the construction of the HEPs arise in the context of a sustained, well-funded and increasing spiteful campaign of vilification and misinformation perpetrated by a network of foreign instigators and local activists with hidden political agenda.

“(Additionally), the escalation of purportedly misleading information and allegations by certain NGOs and anti-dam proponents must be addressed before their fictional commentaries shine negative global spotlight on Sarawak.

“Their action would affect the confidence of foreign investors and risk to impede the state’s ability to deliver sustainable growth and development ot the 2.5 million residents in Sarawak,” he explained.

He observed that Sarawak’s competitive advantages in hydropower development has been identified as the most viable and effective strategy to propel the desired development that reaches the people in the interior who need better infrastructure and facilities to advance the communities’ progress in various aspects.

However, he pointed out that certain NGOs’ demands to halt the hydropower projects would diminish the state’s ability to embark on development plans for deserving Sarawakians and inhibit the development of affected indigenous communities in the interior regions.

He believed the society at large supports the development aspirations envisaged by SCORE to bring growth in Sarawak and for the benefit of the people here.

On the other hand, Toh noted the lack of local skilled workers in Sarawak to meet the demand for mega or large-scaled projects in the future needs to be addressed quickly.  This, he believed will enable industry players to have better preparations in complementing further development of the power industry in Sarawak. “Being a local contractor, some of the challenges which we are facing for instance are the foreseeable wayleave issues that hinder the project progress; shortage of local experienced engineers in the market which renders higher manpower cost.”  He added, “These also include the availability of quality and experienced local sub-contractor and personnel to perform the job efficiently”.

Despite so, Toh said while getting their existing project team full-force in the field, the company continues to invest in enlarging the team by training new engineers, to be better equipped for their future and forthcoming projects requirements.

Addressing these issues

Despite all these concerns, market players have in place well-defined approaches to address them.

SEB, for instance, has its own CSR team which engage with the local community to provide support to the residents affected by the construction of HEP.

These include on-going resettlement, literacy, education and training programmes to assist and guide the local people on their livelihood.

Furthermore, SEB has also identified four areas which are education, environmental management and conservation, culture and heritage and community development and entrepreneurship to meet the needs of the local community.

Therefore, with some of the measures outlined, it is hoped that the issues and challenges faced by the industry will not hamper its growth, being one of the key drivers of the state’s economic development.

With SEB continuous research and development to discover new sources of power, renewable energy to generate sustainable demand for power through HEP has been touted as the next catalyst of growth for the power sector.

SUSTAINING GROWING DEMAND FOR POWER

With increasing demand for power, the need to create sustainable supply of energy through renewable energy sources such as from hydro, solar and waste energy have been spearheaded by SEB.

According to information from SEB’s website, the state has identified a total of 155 potential hydropower sites of which 51 were shortlisted to explore for renewable hydropower energy to generate up to 20,000 megawatts (MW) of electricity with a total energy output of 87,000 gigawatts per hour (GWh) per year.

SEB itself has identified a further nine sites as being highly prospective for the construction of dams.

In the meantime, the company stressed that the construction work for HEP would only begin once feasibility studies and comprehensive Social and Environmental Impact Assessment (SEIA) reports have been conducted by the company and approvals have been obtained from the state government and the Natural Resources and Environment Board (NREB).

SEB estimated that the nine dams being studied would produce just over 4,000MW of electricity.

The company said adding to the 2,400MW capacity of Bakun and the 944MW from upcoming Murum hydroelectric dam, Sarawak will have the potential to generate close to 7,400MW by 2025.

It noted that at present, only Bakun dam owned by the federal government has been built while Murum dam is expected to be operational by the second half of this year.

Apart from that, it was reported that Baleh HEP dam which is expected to produce 1,295 MW of power capacity will be constructed simultaneously with Murum HEP dam.

The supply of electricity will be channeled towards companies from Japan, South Korea and other countries in the Far East which are keen to invest in SCORE, stretching from Samalaju in Bintulu to Tanjung Manis in Sarikei.

In addition, SEB said it currently operate a 210MW coal-fired steam-turbine power plant located at Kampung Geobilt, Kuching as well as a 330MW gas-fired open cycle power plant at Tanjung Kidurong, Bintulu.

Furthermore, the power utility company also operates a coal-fired power station in Matadeng, Mukah with a total capacity of 270MW.

Its upcoming Baram HEP dam is projected to generate 1,200MW of electricity. The company said the proposed Baram dam is likely to be built on the stretch of the Baram River between Long Naha’a and Long Kaseh, subject to confirmation of the site investigations and the SEIA study which are being carried out.

SEB said projections has indicate residential, retail and commercial customers in Sarawak will require 2,000 MW of power while customers in SCORE region will need 6,000 MW by 2030.

The company added the energy generated by coal, diesel and gas as well as hydro will be sufficient to meet the demand in Sarawak beyond 2030 and allow for international export to surrounding regions.

EXPORT GROWTH AND COMPANIES STRATEGIES

While demand is growing, the additional capacity generated by the upcoming HEP dams could be exported to meet the needs in the surrounding region and neighbouring countries.

Jiwari of SEB noted that the company has signed an agreement with Indonesian power utility company, PT PLN (Persero) in July 2011 to supply power to West Kalimantan effective 2015.

The power purchase agreement between the two parties will be for 25 years which is divided into two stages.

Apart from that, the agreement outlined the transmission of electricity connecting through a 122 kilometre cross country interconnected grid from Mambong in Sarawak to Bengkayang in West Kalimantan.

Going forward, Jiwari believed there could be possibilities for SEB to export power to Peninsular Malaysia and other Southeast Asia countries such as Brunei, Indonesia, Malaysia and the Philippines which are deemed as East Asian Growth Area countries (BIMP-EAGA).

He added the ‘organic’ demand of traditional customers paying domestic and commercial tariffs is presently around 1,000 megawatt (MW) and will grow at around five to six per cent every year.

He foresees the majority of demand growth for power will come from energy intensive SCORE customers.

He pointed out that most of the demand for energy has been committed through power purchase agreements (PPA).

To recap, from October 2013 to January 2014, SEB has signed several PPAs namely with Sakura Ferroalloys Sdn Bhd, Comtec Solar International (M) Sdn Bhd and Malaysian Phosphate Additives (Sarawak) Sdn Bhd for the supply of power.

Moreover, SEB has also in December last year inked an agreement with Toshiba Transmission & Distribution System Asia Sdn Bhd (TTDA) and China Xian Electric Engineering Co Ltd to deliver the 500 kiloVolt (kV) transmission backbone.

The company said the 500kV project will provide a strong high voltage transmission line extending over 500 kilometres from Similajau in Bintulu to Tondong in Kuching.

As more multinational companies is envisaged to make inroads by setting up their manufacturing facilities in the SCORE region, more PPAs could be inked in the near future.

Meanwhile, SCB’s Toh revealed that the company will be expanding into other power related segments to enhance the company’s earnings.

“We plan to set up or expand the accessories plant by producing transformers and switch gears in Sarawak. “We might also look into the opportunity to explore (the construction of) mini hydro power plant as we started our first mini hydro power plant in Indonesia back in 2012.

“Other plans which are in the pipeline include for instance to activate renewable energy accessories especially solar with reputable arm system provider,” Toh pointed out.

He said the company’s current outstanding orderbook stood at RM800 million with a target to achieve over RM1 billion by the end of this year.

He cited that the company is bidding for contracts worth more than RM2 billion this year and hoped to secure a significant amount of them in the near future.

“This year is going to be an exciting year for us as we foresee the potential to be awarded with significant projects.

“Some of the jobs that we have bade for are the construction of transmission lines and also power sub-station.

“(Besides that), we also act as local partner for other power related projects in Sarawak. “The total amount is about RM2 billion,” he said.

He added that the company is currently undertaking the construction work for eight tranmission lines in West Malaysia and one in Sabah for Tenaga Nasional Bhd (TNB) through its wholly owned subsidiary Trenergy Infrastructure Sdn Bhd worth RM145 million.

Locally in Sarawak, he noted that Sarawak Cable is working on the 132kV transmission line from Miri Airport to Tudan worth RM32.8 million and the 500kV backbone transmission line (Mapai-Lachau and Lachau to Tondong) strectching from Bintulu to Kuching worth RM619 million.

Toh observed that those jobs are expected to keep the company busy for the next two to three years.

He believed that there are opportunities to build more than 100 power substations in Sarawak given the vast usage of power and energy by heavy industries in the years to come.

He also foresees the company to venture into inspection and maintenance services for power lines which could provide stable income for Sarawak Cable in the future without giving a definite timeline.

Lim of Pestech International said “A number of foreign investors have chosen Sarawak as a base for major operations.

“Pestech has been a beneficiary of the spillover effects of this inflow of FDI as can be seen from the projects we now hold in Sarawak. Currently, Pestech has six contracts in Sarawak.

“In addition to the five on-going power substation jobs, we have also been given the mandate to undertake a third project with Sarawak Energy for instance the extension works to the Mambong and Entinggan 275/33kV substations worth RM85 million,” Lim revealed.

He said as at January 15 this year, the company’s orderbook stood at RM425 million with a target to achieve new orders of RM350 million in 2014.

“We will continue to look up for value contract in Sarawak in both the substations and transmission lines build up to play our part in serving the people of Sarawak and the nation.

“We are very excited to be able to participate in the current power grid infrastructure construction in Sarawak, granted the opportunity, we will not hesitate to serve more,” he said.

He said as Pestech is a local Malaysian company with the know-how to build electrical substations and transmission line,Sarawak Energy can rest assured that the company will have both the social and civic responsibility to deliver apart from its commercial consideration.

He noted that at present, SEB’s order contributed about 45 per cent to its orderbook and positively to its earnings.

Lim pointed out that the percentage might not be increased further as the company is looking to expand its operations regionally in the Southeast Asia, Sri Lanka and Papua New Guinea.

He said “The demand in the electricity infrastructure in those growing region is enough to maintain our growth.

“Besides that, Pestech is working in the region in particular in The Philippines, Laos, Myanmar and Indonesia.

“We have also bid in Thailand but have now put it on watch list pending (political) developments in the country,” he said.

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