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Prai and Tanjung offer outsiders hope in Malaysian power
18 July 2012
The Malaysian government has made moves to open up the bidding on IPPs to foreign competition. But domestic debt still enjoys home advantage. By Sarah Rundell.
In recognition of its looming power shortage, Malaysia is looking at more innovative ways to finance the sector’s investment requirements. Local bond issues, frequently placed with government-linked pension funds, funded investment by government-linked developers, off the back of power purchase agreements with government-controlled state power company Tenaga Nasional Berhad.
As competition heats up, falling margins on power purchase agreements, and in turn rates of return, are forcing developers to hunt for more creative funding, lower margins and longer tenors. A newly-formed state-owned bond insurer is giving lower-rated credits a boost and allowing them to reach longer maturities. For the first time a handful of foreign banks have started lending to power projects.
Prai points forward
Market attention in the sector is focused on the 1,000-1,400MW combined-cycle gas-fired plant project at Prai. The Malaysian Energy Commission has short-listed nine bidders on Prai. These bidders are set to submit proposals by mid-July and the preferred...
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