Malaysiakini reports today the colossal amount of profits made by the Independent Power Providers (IPP) last year. In total, the 13 IPPs made RM3.37 billion of profit before tax (PBT) last year. On average therefore, each of the IPPs makes about RM260 million of PBT last year.
It is public knowledge that some of the IPPs were awarded contracts to produce power and rewarded with power purchasing agreements with TNB since 1994. The contracts run for a period of 21 years, thus expiring in 2015. Just imagine. On the assumption of a RM200 million of PBT every year, each and every IPP would be making RM4200000000.00 of PBT at the end of the concession period! Just count the zeros. That is RM4.2 billion of PBT ladies and gentlemen! And that is on the assumption of just RM200 million of PBT per year.
Just to rub salt in the already very painful wound, as reported in the same Malaysiakini report, it was disclosed in the Parliament that 10 IPPs, within the period of May 1997 to March 2008 enjoyed a total of RM35.7 million worth of gas subsidies from Petronas. (Is this sum correct? Because it sounds suspiciously understated). In trying to justify the colossal amount of discounts given to the already obscene looking IPPs, Deputy Minister in PM’s Department, SK Devamani said that the subsidies did not actually benefit the IPPs but rather, they benefited the end users as electricity rate would be much higher without the discounts.
Sorry. I am feeling stupid today Mr Deputy Minister. If the IPPs are collectively making RM3.37 billion a year, can’t they afford to pay RM35.7 million for the gas in a period of 11 years, which coincidentally would amount to a meagre RM3.245 million a year? And if your contention is correct, why is it that electricity rates are going up instead of coming down?
The statement that the end users, namely, myself and other Malaysians are benefiting from the subsidies and from this obscene privatisation exercise is an insult to all ordinary Malaysians. Reuters reported last year that 40% of the total electricity generation capacity was NOT USED. In fact, as there is no technology as yet available to store electricity, it means that 40% of the total electricity generated in Malaysia is WASTED! And that is not taking into account the power which going to be generated by the Bakun project.
Under the various power purchasing contracts between TNB and the IPPs, TNB has to purchase power from these IPPs at a certain rate. What does that mean? Well, Reuters very succinctly (and very mildly, if I may add) put it as follows:
“Since Malaysia has a glut of power capacity, Tenaga is buying power no one wants.”
The same Reuters report says that as of last year, the IPPs each pay a tax of 1% of the profit. Well, I don’t know whether this is correct but if it is correct, the obvious question would be why are the IPPs paying such low tax? It looks like the IPPs have it all. Firstly, they produce electricity with subsidies given by Petronas. Then they are guaranteed of income by power purchase agreements with TNB at a certain rate. Then, even unused power is also guaranteed of sale by those power purchase agreements. Then they make billions. Then they only pay 1% tax on profit. As reported also, the Government had proposed to increase this tax but the proposal was opposed by the IPPs concerned. Instead, it was also reported, the IPPs concerned had “sought a five-year extension to current pacts, and permanent licences to operate after the agreements expired.” Read that properly. They want permanent licenses to operate! Jeez, the greed of it all! (the IPPs concerned are mentioned at page 2 of the Reuters report).
The privatisation of the power production, as everybody would have known, happened during the (mis)administration of Dr Mahathir. This was his idea of good management of the economy. If all the IPPs could make a total of RM54.2 billion PBT – and it must be remembered that this amount is after deducting costs, including financial costs - (ie RM4.2 billion average PBT per IPP x 13 IPPs) at the end of the concession period of 21 years, why couldn’t TNB itself produce the power? Why must it be privatised? Dr Mahathir did not have to consult a super duper accountant to figure out the numbers. Let’s just say the plant would cost RM30 billion. TNB could incorporate a subsidiary company for the purpose of constructing, commissioning and operating the plant. It can issue bonds with fixed rate certificate for say, 20 years to obtain finance. As TNB is in a monopoly business, namely, the supply and distribution of electricity to all and sundry in the whole Malaysia, I am sure RAM can give an AAA rating to the bonds. Otherwise, the government could even guarantee the bonds. Why so difficult? After all, the business is a monopoly and there are at least 20 million guaranteed end users! I am dead sure TNB would be making money just as the IPPs are now making money (and continuing to make money).
We now talk about sodomy. All of us Malaysians have been sodomised to the hilt!
What do you call this? I call it EcoMahaNomics.