The bigger subsidy addicts

By Sakmongkol AK47
June 07, 2011 | The Malaysian Insider

JUNE 7 — The favourite excuse of CEOs and politicians is always to attribute external factors as the cause of our inconvenience. Consider for example, the increase in electricity tariffs. Its unavoidable says the government because cost elements are increasing. What cost elements — workers’ wages and cost of fuels? What about subsidies going to IPPs? These are the bigger subsidy addicts who deserve the mandatory death sentence.

Many years ago, our country suffered the worse outage in our nation’s history. We were without electricity for many days. Manufacturers lost a lot of money. Industrialists were screaming their heads off and their voices reached Sri Perdana, the abode of the 4th PM then.

He came up with the solution. We have this problem because TNB has a monopoly. Monopoly is not good. Dependency on one supplier isn’t strategic. It can be outright dangerous not to mention can cause untold economic damages if the system breaks down.

Let’s deregulate the electricity industry he proclaims. So Ananda, YTL, Genting and others came rushing in. we can supply electricity sir. But we need to have iron clad agreements so that our investments are well covered. We must have a guaranteed purchase from TNB at secure prices.

But sir in order to generate our current, we need cheap fuels. Otherwise we bungkus or consumers will have to pay more. Never mind says sir, I control PETRONAS. I will ask them to sell you natural gas at subsidised rates. And so government pays subsidies up to RM 19 billion a year.

As many people now know, the electricity we consumed passes through 4 stages. Generation, transmission, distribution and retailing.

But boss, we will only generate electricity. We won’t go into transmission, distribution and retailing. These are costly. Tarak untung. Kadang kadang untung.

In other words, TNB which has to invest in all 4 stages can offer us cheaper tariffs, but the IPPs awarded license which offer only generation of electricity cannot. How can this be? Apa nama? Macam mana?

Deregulation created an opposite effect in Malaysia. We ended up having to pay higher electricity tariffs because TENAGA was forced to buy electricity from IPPs who charged more for the electricity than if Tenaga produced it itself!

We come now to the stupid remark by the minister who says the government is powerless to reveal details of the PPA. Wasn’t it the government that ‘negotiated’ the deals with the IPPs? So why can’t we have access to the details?

Who were the first entrants to the IPP business? Genting Sanyen, YTL Power, Malakoff, SEV, Prai Power,Powertek, GB3, Tanjung Bin Power and Kapar Energy are among the two dozen or so IPPs in Malaysia. All of the above are owned by the Genting Lims, Francis Yeoh, Syed Mokhtar and Ananda Krishnan. These were the usual suspects consisting of the connected businessmen who get most of the big deals.

YTL Power’s profit for 2010 was more than RM1.6 billion on revenues of RM13 billion. Malakoff in 2009 had a profit of RM380 million on revenues of RM5.6 billion. Powertek had revenues of RM1.34 billion and a profit of RM450 million.

So Francis Yeoh makes RM1.6 billion and Ananda Krishnan makes RM450 million from his IPP while collecting subsidies from public money.

It is essentially a transfer of funds from the people’s pockets to the IPP’s vaults, through TNB, aided and abetted by the government. But the imbecilic minister says we can’t reveal. Of course we can’t reveal because that would expose the scandalous amount of profits these business luminaries make.

Why should we continue selling fuel at subsidized rates totaling RM 19 billion allowing these people to make huge profits? And the only solution offered and supported by the CEO who’s is paid handsomely is to raise tariffs further.

Let us illustrate the absurdity of this business arrangement. Look at the Thai power producers. They do not get subsidies and have to buy fuel at market prices. Fuels cost more in Thailand. Yet, despite the higher cost of fuels, Thai power producers sell electricity at a lower price than Malaysian IPPs sell to TNB. Apa nama punya economics ini?

So who really are the rapacious businessmen who are our own version of medieval German Robber Barons? Our robber barons get to keep their subsidies, and their unnatural, undeserved profits.

Peter Chin, the minister in charge of TNB must be mentally deranged. He claims that he cannot release the IPP contracts because it is between two private entities. Tiuniama punya minister. TNB is not a private entity; it is mostly government-owned. And the subsidies given to the IPPs are not private monies, they are public funds!

The reality is TNB is a very inefficient entity especially its operating cost. In 2005, the company’s 40.5% operating costs were spent in purchasing electricity from IPP.

For the financial year 2010, TNBs energy cost grew by 2.4% to RM17,379.0 million from RM16,974.4 million recorded in 2009 mainly due to higher payment to Independent Power Producers (IPP), totalling RM12,528.0 million, an increase of 5.9% compared to the previous (RM11,827.0 million) financial year.

* Sakmongkol AK47 is the nom de plume of Datuk Mohd Ariff Sabri Abdul Aziz. He was Pulau Manis assemblyman (2004-2008).