Tenaga to go ahead with RI coal mine investment
Tenaga to go ahead with RI coal mine investment
Agence France-Presse, Kuala Lumpur
Malaysia's state-owned power utility giant Tenaga Nasional Bhd on Monday defended its controversial US$85 million investment in a coal mine in Indonesia's Kalimantan province.
Tenaga chairman Awang Adek Hussin said the investment was viable and it was in line with the company's plan to reduce its dependency on gas for power supply.
Tenaga plans to acquire a 70 percent stake in Dynamic Acres Sdn Bhd, which owns the coal mine in Kalimantan, Awang Adek was quoted as saying by Bernama news agency.
Awang Adek said 20 percent of the investment would be financed by Tenaga while the remaining 80 percent would be financed by an international bank.
"One important aspect of this investment is that it is going to be financed largely through a stand alone financing, which means the bank is going to take the risk," he said.
Awang Adek said the bank's payback period is five to six years.
Critics have said that it would make more sense for Tenaga to invest in an oil field and refinery.
"That way, Tenaga will be totally assured of fuel supply," The Edge business newspaper said early December.
"We remain unconvinced that the best way to ensure coal supply is to buy a coal mine," it added.
The paper said buying a major stake in the company prevents Tenaga from shopping around for the best prices and leaves it extremely vulnerable to any situation that may disrupt production at the mine.
Awang Adek said Tenaga found that coal was the best alternative to produce power because it was comparatively cheaper than gas.
Tenaga used about 60 percent of gas as its fuel, he said.
"We are too dependent on gas as fuel, we have to diversify and coal is most economic way because it is cheap and at the same time the present gas supply is not enough," he said.
Awang Adek said with the investment in Kalimantan, Tenaga would be able to lock in a stable supply of coal because Dynamic Acres's reserves exceeded Tenaga's requirement of 27 million metric tons for a 15-20 year period.
"Whatever reserves available, is for us. Moreover, its not a new mine. As such the infrastructure is in place," he said.