This article first appeared in The Edge Financial Daily, on September 30, 2015.

PUTRAJAYA: The Energy Commission (EC) has some strings attached to the renewal of YTL Power International Bhd’s power purchase agreements (PPAs) for its electricity generation plants in Paka, Terengganu and Pasir Gudang, Johor.

EC chairman Datuk Abdul Razak Abdul Majid said that the commission had yet to renew YTL Power’s PPAs as the latter needs to fulfil certain conditions before the renewal is granted. 

“We have given them (YTL Power) a conditional offer. They have to come back to the EC first and say that they have met with the conditional offer,” he said.

According to Abdul Razak, one of the conditions is for YTL Power to resolve the land issues with Tenaga Nasional Bhd (TNB) as the independent power producer’s (IPP) plants are built on the latter’s land.

He told The Edge Financial Daily after the launch of the New Enhanced Dispatch Arrangement yesterday.

YTL Power needs to iron out several issues in order to seal a PPA with the EC. But the renewal is unlikely to be left in limbo.

The extension for some existing power plants is a stopgap measure taken by the EC to make up the supply shortage caused by the delay ofthe completion of the new power projects, for instance Project 3B, which has been taken over by TNB from 1Malaysia Development Bhd. New capacity is expected to only come on stream in 2019.

The digitaledge WEEKLY reported earlier that the IPP is having difficulty in securing gas supply from Petroliam Nasional Bhd (Petronas) — one condition that YTL Power has to meet. It is learnt that YTL Power has yet to sign the gas supply agreement with Petronas.

To recap, the two companies are in dispute over an estimated RM700 million that YTL Power is claiming for overpayment of gas supplies for its power plant concessions. YTL Power has won the London arbitration for the lump sum, but the national oil firm is said to have filed an application with the High Court to review the arbitration.

Given the legal tussle, it is hard to imagine the seal of a gas supply agreement between the two parties, said some industry players.

The PPA for the power plant in Paka is going to expire today. However, YTL Power has been granted an extension for two years and 10 months without renewal of the PPA. 

Commenting on Project 4A, a new power plant that was awarded through direct negotiation, Abdul Razak said SIPP Energy Sdn Bhd had requested for more time to submit its plan, including technical details and tariffs. 

“They (SIPP) have not submitted their proposal yet [to the EC] and they are still working it out. They have asked for a little bit more time with the deadline and we are just giving them the opportunity to work out the arrangements,” he said.

Project 4A is to build a new 1000mw to 1400mw combined cycle gas turbine power plant in Johor, which is due to be operational by June 2018.

Abdul Razak also stressed that he does not foresee any issues of an electricity shortage with the setback.

“We will wait for SIPP .... fortunately the demand for power has reduced and we are not worried,” he noted.

Also, he pointed out that the EC’s approval process “won’t take long” once SIPP has come back with the proposal.