IPPs Pays First Installment of Windfall Tax

Recently published by The Edge Daily.com, the article highlights MMC Bhd. who owns Malakoff Bhd which is the biggest IPP in Malaysia paid a RM20 mil Windfall Tax which was the biggest payment yet for an IPP to the controversial Windfall Tax.

The article also listed the list of other IPPs and how much the paid in Windfall Taxes to the government. YTLPOWER has also paid but the amount is not made public yet. A few day ago, TNB which also owned subsidiaries which are IPPs paid about RM5.65 mil in taxes.

Since the Windfall Tax has to be paid monthly, the IPPs are pressured to go back to the negotiating table as soon as possible to re-negotiate the PPA with the government. Every month passed is money out of their coffers. Malakoff with it's first installment of RM20 mil could be looking at a yearly windfall tax of RM240 mil. While YTLPOWER is expected to pay at least RM90-100 mil a year as windfall tax.

Funnily enough, the article also states that the IPPs are now very eager to set a timetable to negotiate but the government doesn't seem to bother about it much with no replies to the request of the IPPs clarification of the tax as well as the timetable for negotiating.

RAM rating services also recently downgraded 9 out of 25 IPP related bonds to negative outlook. The article can be found also in The Edge Daily.


Possible Acquisition

In other news, Singapore's Temasek divestment of their 'gencos' to foreign companies have attracted numerous bidders from around the world to run their power generation facilities. Their first sale was Tuas Power to China Huaneng Group for SGD4.235 billion. The current 'genco' to be sold is Senoko Power and recently Temasek has shortlisted 5 bidders which will have a chance to go through the financial aspects and also questions and answers with Senoko Power to determined how much they are willing to bid. Among the 5 was Malaysia's YTLPOWER, India's TATA Power, Japan's Marubeni and Mitsubishi Corp, France's GDF Suez and One Energy - CLP Holdings.

Senoko Power generates up to 3300MW of power and supplies 30% of Singapore's electricity needs. It is expected Senoko would be sold to the tune of SGD4 billion or about RM9.4 billion. Something special I read in one of the articles was that Senoko Power is only 1 of 2 companies in Singapore that uses natural gas from Malaysia to run their power stations unlike others which uses natural gas from Indonesia. There is also a backup with a power plant in Johor for whoever who has a shutdown, the other will help supply electricity across the causeway. The natural gas supply agreement was extended for another 10 years in May this year.

Now I don't know much about the other companies but looking at YTLPOWER's cash in hand, they might have some advantage here. On top of that, Senoko uses natural gas from Malaysia. It's still difficult to say who has the upper hand here, seeing that the world's best companies are trying to grab a piece of the pie. I do hope however that YTLPOWER gets it so it can finally make use of it's cash hoard.