Published May 1, 2009

Tenaga to tap debt for US$2b project

RM loans to be used to finance undersea cable from Sarawak

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(KUALA LUMPUR) Malaysia's biggest power producer, Tenaga Nasional, plans to raise ringgit-denominated loans to finance a US$2 billion submarine transmission line carrying electricity from Sarawak on Borneo to the peninsula, a senior company official said.

Mr Che Khalib: 'We certainly don't need financing over the next 12 months.'

'We are looking at ringgit financing for the transmission line,' CEO Che Khalib Mohamad Noh told Reuters in an interview late on Wednesday, but said that financing was not expected in the next 12 months.

'We will raise it tranche by tranche because the Bakun project will be spread out over seven years. We certainly don't need financing over the next 12 months,' he said.

The cable project involves laying a 730km high-voltage direct current (HVDC) transmission line and a 670km undersea cable for the 2,400MW Bakun hydroelectric dam.

Tenaga, the Ministry of Finance and Sarawak Energy, a unit of the Sarawak state government, are still working out the shareholding structure of the consortium tasked with the cable project, said Mr Che Khalib. 'We are negotiating but we will definitely not own more than 50 per cent (in the consortium). It will only be at the associate level,' he said.

Tenaga Nasional recently swung back into the black, posting a RM675 million (S$280 million) net profit for its second quarter to end-February despite a 7 per cent quarter-on-quarter decline in revenue to RM6.9 billion.

The result was achieved on an 11 per cent drop in operating expenses and a much smaller foreign exchange translation loss of RM97 million.

In the preceding quarter, the national utility registered a RM944 million loss after taking a RM1.44 billion forex translation hit.

Tenaga anticipates profit for the next two quarters to come in at around RM600 million. -- Reuters