Power Tariffs Raised, 75 Per Cent Of Rakyat Not Affected

May 30, 2011 18:06 PM

PUTRAJAYA, May 30 (Bernama) -- As part of its ongoing subsidy rationalisation exercise, the government Monday announced that average electricity tariffs will be raised by 2.23 sen kilowatt per hour (kWh) or 7.12 per cent to 33.54 sen kWh, from 31.31 sen kWh, effective Wednesday, June 1.

However, the move will not affect about 75 per cent of the population who mainly consume less than 300 kWh per month.

The announcement was made at a joint press conference by Minister in the Prime Minister's Department Tan Sri Nor Mohamed Yakcop and Minister of Energy, Green Technology and Water Datuk Seri Peter Chin Fah Kui.

They said the 7.12 per cent hike was due to the increase in natural gas price to the power sector.

As a result, Tenaga Nasional's average tariff had to be reviewed upwards by two per cent or 0.63 sen kWh.

"The review will enable the utility company to increase its investment in better electricity infrastructure including supply and distribution," he said, adding that it would invest about RM4.5 billion, annually.

Chin also said in line with the government's effort to rationalise energy prices in accordance with global market mechanism, the government has agreed to use the fuel-cost-pass formula to determine future tariff prices.

To encourage the use of electricity generated from renewable energy, the government has also decided to impose an additional one per cent feed-in-tariff portion which will be channeled, to the RE Fund, to promote the purchase.

-- BERNAMA

Khazanah MD ‘frustrated’ by political handicap

By Yow Hong Chieh

Malaysian Insider, May 30, 2011

KUALA LUMPUR, May 30 — Khazanah Nasional Bhd managing director Tan Sri Azman Mokhtar has admitted to being disappointed by his inability to trim fat from the portfolio he inherited in 2004 due to political interference, the Financial Times reported yesterday.

“We have had our frustrations, and there have been areas, mostly in the regulated sectors such as electricity, automobiles and aviation, where value has stagnated or even declined,” Azman (picture) told the international financial daily.

The Financial Times said that despite scoring a “crushing victory” in a US$3.6 billion (RM10.8 billion) takeover battle with India’s Fortis for Singapore healthcare group Parkway Holdings, Khazanah was still struggling to turn around companies in its legacy portfolio, which includes national carmaker Proton and Malaysia Airlines.

“Big questions remain about Khazanah’s ability to deal equally decisively with the rest of its portfolio, not least because of government opposition to radical surgery on any of its significant companies,” the report said.
“Khazanah’s ability to turn round the biggest legacy companies is tightly bound by government limitations on its freedom of manoeuvre.”

It added that the impact of this “political framework” was evident in the detailed financial information released by Khazanah this year, which showed that the value of newer investments grew by an average of over 20 per cent while older investments only grew by five per cent.

The agency, burdened by a complex and potentially conflicting mandate to grow the portfolio, earn significant returns, lead GLC transformation and help Malaysia become a developed country by 2020, had “significantly less firepower” than other wealth funds, the Financial Times pointed out.

The net portfolio value of Singapore’s sovereign wealth fund Temasek at the end of December was US$149 billion compared to Khazanah’s US$24.6 billion.

Tan Teng Boo, chief executive of Kuala Lumpur-based investment adviser Capital Dynamics, told the daily that while there were many “very capable and committed people” in Khazanah, there were just as many political obstacles to real reform.

Although the investment fund’s portfolio showed “some growth”, he faulted politicians who refused to let Khazanah “do what is necessary” for its failure to transform lacklustre GLCs as mandated.

Azman, however, argued that the agency was fulfilling its mandate for the most part, citing a 39 per cent increase in portfolio value last year, with compounded annual growth of 13 per cent from its level of RM33.3 billion when he took over in 2004.

At the same time, the group has sold its 32 per cent stake in Pos Malaysia, reduced holdings in successful companies such as Malaysia Airports Holdings Bhd and strongly encouraged regional expansion by successful portfolio companies like Axiata and CIMB.

“We are in the seventh year of a major transformation programme, and we have achieved a lot in terms of making the GLCs more efficient while also growing the value of our portfolio and playing our part in helping Malaysia to develop,” said Azman, a former UBS and Salomon Smith Barney banker.

“The GLCs have conclusively improved their performance as a result of the management and other changes we have made, with aggregate earnings for the 20 biggest rising by 49 per cent in 2010 to RM17.3 billion and total shareholder returns of 16.4 per cent since 2004.”

Fuel Subsidy To Be Reviewed If Oil Prices Reach US$110-US$120 Per Barrel

May 26, 2011

PETALING JAYA, May 26 (Bernama) -- The government will review the fuel subsidy if oil prices reaches between US$110 and US$120 per barrel, says Deputy Finance Minister Datuk Donald Lim Siang Chai.

The government yesterday decided to maintain the prices of RON95 petrol, diesel and liquefied petroleum gas (LPG) for the time-being.

"We know at this juncture, a lot of other things have also increased, including food prices and housing. So the government decided not to increase (fuel prices," he told reporters after opening Standard Financial Planner Sdn Bhd's new office here Thursday.

Besides, the decision was also based on declining oil prices from US$110 per barrel, as of April, to just above US$100 per barrel, at present, Lim said, adding that the government was closely monitoring the crude oil market.

He said if oil prices continued to spiral, the government would have to spend more on subsidies, which in turn, could lead to a higher deficit and affect economic growth.

"When we (the government) planned the budget for this year, we were looking at oil prices hovering between US$85 and US$90 per barrel.

"Of course if it (oil price) drops below US$100 per barrel, then the government is not likely do anything because we can still find ways to overcome it. But if it goes beyond US$110, then we have to consider (some measures) as it could affect economic growth," Lim said.

Although, people can continue enjoying the fuel subsidy, Lim also advised then to be prudent.

Asked whether there could be an increase in electricity tariff rates, Lim said the National Economic Action Council would meet tomorrow to discuss and decide on the issue.

On Malaysia's economic outlook in the second quarter, Lim believed the country would be able to register a better growth of 4.6 per cent amid rising foreign direct investments.

-- BERNAMA

No Price Increase For RON95, Diesel And LPG

May 25, 2011 17:33 PM

PUTRAJAYA, May 25 (Bernama) -- In a move that will please many Malaysians, the government has decided to maintain the prices of RON95 petrol, diesel and liquefied petroleum gas for the time being.

Domestic Trade, Cooperatives and Consumerism Minister Datuk Seri Ismail Sabri Yaakob said the decision was made after an in-depth discussion on subsidy rationalisation at today's weekly cabinet meeting.

"The decision was made taking into consideration the interest of the people," he told a news conference at his ministry, here Wednesday.

The government would however continue to study the need for subsidy rationalisations in view of the increase in the prices of oil and gas in the global market.

Asked whether there was any discussion on the time frame for the prices to remain, Ismail Sabri said there was no discussion about time frame.

The price of RON95 petrol is now RM1.90 per litre and diesel at RM1.80 per litre. LPG is priced at RM1.90 per kg.

The last time the prices for these three items were adjusted was in December last year.

Ismail Sabri said the decision to retain the prices of the three items meant that the government had to bear fuel subsidy totalling RM18 billion.

Last year, the fuel subsidy was RM8.15 billion.

Ismail also called on the public not to listen to rumours being spread by the opposition.

"I saw in blogs, in Facebook postings, in pamphlets distributed by opposition parties, that the government will increase prices. Some say by 20 sen, 30 sen. These are all lies, not the truth," he said, expressing regret "because people seem to believe these lies."

"Believe in the government because the government listens to the views of the people. The government will consider every angle before making any decision.

"The decision today clearly shows that the government cares for the people. Enough of opposition's lies," he said.

Asked whether the decision had anything to do with the likelihood of a general election, Ismail said, "This has nothing to do with election."

"Subsidies have been in place for so long. If this is about the election, then we can increase (prices) only in certain months we want it to increase. No one knows when the election is going to be called," he said.

He also dismissed the notion that the decision was due to the pressure from the opposition.

"We don't listen to the opposition. Umno Youth has also been against (price increases). This is not because of the opposition," he said.

-- BERNAMA

Review Of Heavily Subsidised Gas Price Long Overdue

May 22, 2011 15:01 PM

A News Commentary By Siti Hawa Othman

KUALA LUMPUR, May 22 (Bernama) -- A long-overdue review of the heavily subsidised natural gas price is crucial as demand for cheap gas in Malaysia is far outstripping supply.

Analysts said that if this market-distorting situation is not corrected by the government soon, then Malaysia will run out of gas reserves which will jeopardise future generations.

As it is now, the government continues to subsidise gas by as much as 71-77 per cent, which means lost opportunities for the country and the economy not being cost efficient.

This is because the billions of ringgit used to heavily subsidise gas could have been used for socio-economic development projects such as public amenities, roads, schools and other services.

For gas alone, Petronas paid out a massive amount of subsidies amounting to RM131.3 billion between 1997 and 2010.

This being the case, there is a need to gradually move gas prices to reflect international market prices as gas prices in Malaysia are among the cheapest in the region and cheaper compared with alternative fuels.

As a result, a large number of consumers have shifted their consumption of energy from other fuels such as diesel, liquefied petroleum gas and fuel oil to natural gas.

This has resulted in an imbalance with demand outstripping supply at a rapid pace.

There is also a misconception among the people that Malaysia has lots of gas reserves to be used for power when the actual situation is that there is real concern over gas reserves as they are finite.

Malaysia is now getting 36 per cent of its natural gas supply outside Malaysia at a higher price which continues to increase, but sold to the power and non-power sectors and industries at highly reduced prices.

These price distortions to the economy which are taking a toll on the country's finances needs to be rectified soon by rationalising and reducing subsidies as the situation is increasingly untenable.

The local supply of natural gas is insufficient as demand has escalated 400 per cent over the past 10 years from 2000 for customers using less than 2.0 million standard cubic feet per day (mmscfd) and about 160 per cent for customers using more than 2.0 mmscfd while the country's gas reserves are fast depleting at an annual rate of 12 per cent.

The last gas price revision by the government was in March 2009, at a discount of 50 per cent, the prices ranged from RM15.35 per million British thermal units (mmBtu) to RM10.70 per mmBtu, with the obligation to review every six months but that did not happen.

Since the last revision, the price of medium fuel oil (MFO), a reference index from which gas is priced on, had risen over 100 per cent.

This has led the government to bear the cost of heavier subsidies as the price of energy continues to increase in global markets.

On the local scene, the power sector which has been subsidised since 1997, consumes about 55 per cent of the gas needs and a large part of the balance by the industry which had been subsidised since 2002.

The government has subsidised the price of gas to the power sector by as much as 77 per cent or RM10.70 per mmBtu and that to the industries at an average 73 per cent or between RM15.35 to RM11.05.

Based on a simple calculation, for every RM10, the government will have to subsidise between RM7.70 to RM7.30, which is already a burden, bearing in mind the fact that imported gas is bought at international market prices.

The Malaysian public and industries have been enjoying the benefits of subsidies for so long but the world scenario has changed and the days of cheap energy are gone.

From another perspective, Malaysia was subsidising the cost of products of other countries manufactured by their multinational companies based here.

The government will now have to adapt to strategies it knows best to sustain the economy and Malaysians must learn to accept changes and ride the global economic storm to be at the forefront of the competition.

Like it or not, oil and gas prices have increased and the subsidies which have become a burden to the government are very much due for a relook.

Industries have benefitted immensely enjoying double subsidies in the form of cheap gas and subsidised electricity, while receiving other government incentives.

Having relied on cheap gas for their production, there is no incentive for companies to adopt and adapt to new technologies and find new ways to become efficient.

But a gradual removal of subsidies is expected to induce industries to seek more efficient technologies for their processes.

It is understood that some of the industry players do not mind the market rates but expect any move towards that end to be undertaken in a gradual manner.

Since 1997, the government had spent RM131 billion in oil and gas subsidies and the amount is increasing since the gas usage gets bigger while higher MFO prices had caused the situation to be not sustainable in the long run.

As of now, Malaysia is getting supply of natural gas from the Natuna field in Indonesia, the Malaysia-Thailand Joint Development Area (JDA) and also from Vietnam.

Malaysia's share of gas supply from Vietnam is almost exhausted, which means an additional burden on the government to look for new sources.

It is understood that Petronas would also be importing liquefied petroleum gas (LPG) by 2012 to cater to increasing demand, which is rather costly at about RM40 per mmBtu.

The people have to dispel the misconception that gas is always there and readily available.

In reality, Malaysia is a small player and the country's oil and gas reserves are small.

If gas continues to be subsidised, then Malaysia is not optimising its resources when the reserves should be kept for future generations.

Ideally, the price of gas should be at market rates which would then attract other potential companies to import gas and liberalise the market.

By spurring the gas trade, players could import cheaper gas from abroad compared to the current situation, where players are not willing to come onboard as they would not be making any money competing against subsidised gas.

It is understood that Petronas will have its regasification plant ready by 2012 whereby other companies could import LNG and regasify to sell to the industries.

Malaysia, eventually, will attract investors who can add higher value to the gas industry and generate greater income and spur the economy in the process.

-- BERNAMA

RM6.5b offer for Selangor water bonds?

Kuala Lumpur: The federal government is poised to make a RM6.5 billion offer today to buy over the Selangor water debts from bondholders.
 
It is understood that the offer will be made through the federal government and Pengurusan Aset Air Bhd (PAAB), the government's water asset management company.

The offer is a RM200 million discount to the value of the outstanding water bonds of RM6.7 billion.

"The federal government is stepping in to buy over the bonds with a slight discount to what the lenders want. The lenders will have to mark the losses in their book," an industry sources told Business Times.

Lenders include Maybank Investment Bank and CIMB Group, which hold about RM1 billion of the outstanding water bonds. Insurance firms and pension funds hold about RM2 billion each while the rest is held by fund managers such as AmInvestment, CIMB Principal, RHB Asset Management and Public Mutual.

A source said the government is dealing directly with the lenders and has been in heavy discussions following the recent approval from the Minister of Finance Inc to take over the bonds.

"The ultimate aim is for the government to own the assets and debts of the water companies in Selangor in an effort to consolidate the water industry," the source said.

This is the first phase of the consolidation as by June 2, the government is expected to make an offer to buy the water assets in Penang for more than RM3 billion.

The Selangor asset owners are Puncak Niaga (M) Sdn Bhd and Syarikat Bekalan Air Selangor Sdn Bhd (Syabas) - both controlled by Puncak Niaga Holdings Bhd - as well as Syarikat Pengeluar Air Sungai Selangor Bhd (Splash) and Konsortium Abass Sdn Bhd.

The source said there is a possibility the debt could be converted into shares at a later stage.

"This is one of the options being discussed," he said.

The national water restructuring plan is meant to relieve the states and concessionaires of the heavy burden of funding future water infrastructure development.

After the restructuring, the responsibility falls under the purview of the federal government and PAAB, which is entrusted to buy over the states' water assets, making them asset-light and allowing them to focus on operations and maintenance.

Putrajaya to take over Selangor’s water debt for RM6.5b

Malaysian Insider, 20 May 2011

KUALA LUMPUR, May 20 — The federal government is slated to pay RM6.5 billion to bond holders for the water debts in the country’s most industrialised state of Selangor, the Business Times said today.

“The ultimate aim is for the government to own the assets and debts of the water companies in Selangor in an effort to consolidate the water industry,” the Business Times quoted an industry source as saying.
The major owners of water assets in the central state of Selangor include subsidiaries controlled by Puncak Niaga and Gamuda .

Officials in those companies and the government could not be immediately reached for comment.
The newspaper said the Selangor offer was the first phase of water industry consolidation and the government was expected to buy the assets in the northern state of Penang for RM3 billion.

The government wants to restructure water assets and relieve the burden of funding water infrastructure development that has been usually taken up by water companies and the state governments.
The Selangor offer, which is likely to be made today by the government’s water asset management firm PAAB, is at a RM200 million discount to the value of the outstanding water bonds at RM6.7 billion, the newspaper said.

“The federal government is stepping in to buy over the bonds with a slight discount to what the lenders want. The lenders will have to mark the losses in their book,” the newspaper cited the industry source as saying.
Lenders such as investment banking arm of Maybank and CIMB Group hold about RM1 billion of the outstanding debt. Insurance firms and pension funds hold about RM2 billion each while local fund managers hold the rest. — Reuters 

Time to review water tariff, says group

New Straits Times, 23 April 2011

The Malaysian Water Association (MWA) has proposed that water utility companies in the country review the current water tariff structure in their respective states as a sustainable measure to face an impending water crisis.

MWA president Ahmad Zahdi Jamil said this was because the current tariff does not promote water sustainability and besides being too cheap, it was also not punitive towards excessive use of water.

"Major states in Malaysia will be facing severe water shortage in 2014 if measures are not taken to curb excessive wastage and high non-revenue water (NRW) levels," he told reporters after the MWA's 23rd Annual General Meeting held today.

Citing Johor and Penang as examples, he said domestic water tariff in Johor was the highest among states in Peninsula Malaysia with RM0.61 per cubic meter compared with Penang which is the cheapest at RM0.20 per cubic meter.

Difference in tariff also affected the level of water consumed, with consumers in Johor consuming 205 litre per capita per day in 2009 compared with 286 litre per capita per day by consumers in Penang, he said.

Ahmad Zahdi said according to the Water Sustainability Index (WSI) the availability and usage of water in Malaysia had shown a drop from 64 per cent in 1992 to 33 per cent in 2002, a reflection that the country's water resources are rapidly depleting and have been managed unsustainably.

He said the timely review must take into consideration the affordability for the poor consumers and its ability to increase water conservation among the people.

"Increase in water tariff must modeled in such a way as not to burden the poor and it should not be done drastically. In the long run, the increase must reflect the recoverable cost," he stressed.

Malaysia recorded the highest water usage and has the
cheapest tariff among countries in Asean.

On average, Malaysians consumed 280 litres of water daily, higher than Singapore (155 litre), the Philippines (175 litres), and Indonesia (130 litres). -- Bernama

Selangor invites Putrajaya back to table over water

By Asrul Hadi Abdullah Sani

Malaysian Insider, May 18, 2011

The Selangor mentri besar said the construction of water treatment plants on Sungai Langat, or Langat 2, will be discussed at the meeting. — file pic

KUALA LUMPUR, May 18 — Selangor Mentri Besar Tan Sri Khalid Ibrahim said today that the state government has agreed to hold another round of talks over the stalled water restructuring issue with the federal government.


Both the state and federal governments have been locked in a struggle over water assets in Selangor since Pakatan Rakyat (PR) took control of the state in 2008, with neither side wanting to give the other control over the critical industry.

Khalid said that a letter would be sent to the Ministry of Energy, Green Technology, and Water regarding the special meeting due to take place in the first week of June.


“The state executive council agreed today to hold a special meeting to discuss restructuring the water industry with the federal government.
“This special meeting will be held during the first week of June and the agenda includes the construction of water treatment plants on Sungai Langat or Langat 2 where the state government will decide whether it should issue a directive on its construction,” he told reporters during a press conference.

In January, Energy, Green Technology and Water Minister Datuk Seri Peter Chin announced that the Selangor government had promised in December last year to allow the federal government to build Langat 2, which is part of the Pahang-Selangor water transfer project.

Chin had said his ministry would put the project out to tender by February at the very latest despite the absence of written approval from the state.

The Selangor government immediately denied giving Putrajaya the go-ahead for the Langat 2 water treatment plant.

State government sources revealed that Selangor, in its December 8 meeting with the ministry, had only agreed to study the “critical path” for both the Langat 2 and Pahang-Selangor water transfer projects before making a decision this month.

The Critical Path Method, developed in the 1950s, is an important tool in project management for scheduling project activities.

The Energy Minister has said that the RM8.65 billion water-transfer project must be completed by 2014 to ensure adequate water supply for residents in Selangor, Kuala Lumpur and Putrajaya.

Khalid, however, has argued that there is no rush to complete the Pahang-Selangor transfer as the state has enough water to fulfil residents’ needs until 2019.

Today, Khalid reiterated that priority should be given to consolidating Selangor’s water players and not to the Langat 2 project, calling for both issues to be discussed jointly.

“The Selangor government will continue to cooperate with all parties and does not object to the construction of Langat 2, but believe that this project should be done after the restructuring of the water industry is resolved,” he added.

Chin warned the Selangor government last year it risked legal action by delaying construction of the water treatment plant, which had been scheduled to begin in August last year.

Metramac Highway Toll Abolished

May 16, 2011 00:02 AM

KUALA LUMPUR, May 16 (Bernama) -- The government has abolished toll collection at the toll plazas in the direction of Cheras and Petaling Jaya on the Metramac Highway with immediate effect.

Works Minister Datuk Shaziman Abu Mansor said the toll collection was being abolished seven years before the concession period for the highway was due to end, which is May 31, 2018.

He said the move would benefit some 100,000 users of the highway especially residents of Bandar Permaisuri, Bandar Tun Razak and the surrounding areas.

"With the abolition of this toll, it is estimated that RM180 million in toll collection will have to be foregone while the government also will not need to pay any compensation as per the agreement to close this toll collection early," he said at a ceremony to mark the toll abolition at the Cheras toll plaza of the highway Monday night.

The toll rates at the highway (both directions) were RM0.50 (Class 1 vehicles), RM1 (Class 2 and 3), RM0.30 (Class 4) and RM0.50 (Class 5).

On Jan 28, Prime Minister Datuk Seri Najib Tun Razak had announced that toll collection on the highway would be discontinued before the concession period ended in 2018.

-- BERNAMA

IPP subsidies under review

By Lee Wei Lian

Malaysian Insider, May 19, 2011

 

 

KUALA LUMPUR, May 19 — The controversial gas subsidies for independent power producers (IPPs) are under review but no decision has been made yet, said Second Finance Minister Datuk Seri Ahmad Husni Mohamad Hanadzlah today.
“We have done a discussion and study under the Ministry of Energy, Green Technology and Water, EPU (Economic Planning Unit) and myself,” Husni told reporters at the sidelines of the 15th Malaysia Banking Summit today when asked if the subsidies will be relooked at. “We have to wait for the decision.”

The issue of gas subsidies is also a controversial one as the prime beneficiaries are seen to be the IPPs, many of which are highly profitable and perceived to be controlled by politically-favoured parties.
DAP recently urged the Najib administration to first cut billion-ringgit subsidies for IPPs rather than burden the people with subsidy cuts on essential items

“Remove the big opium of gas subsidies that can save tens of billions of ringgit annually before dealing with the opiate for the masses that only save hundreds of millions of ringgit,” said DAP secretary general Lim Guan Eng in a statement recently.

“Why should the masses and the ordinary 27 million Malaysians be made to bear these price rises when the few big corporate giants in the IPPs do not suffer a single cent in gas subsidies cuts?”

DAP publicity chief Tony Pua added that the government must take action against “fat crony companies” like IPPs if it wished to reduce subsidy burden, as last year’s five-in-one subsidy cut would only save RM750 million while a 20 per cent cut in subsidies to IPPs would save RM3.6 billion.

The Petaling Jaya MP said while there was no doubt that the cost would be passed on to consumers, unfair contracts signed between the government the IPPs meant that electricity tariffs should be at least 26 per cent cheaper based on comparison to international rates

He said that based on Petronas annual reports, gas subsidies granted to IPPs amounted to RM8.1 billion in 2008.

Firms Flouting Competition Act Can Be Fined Up To 10 Per Cent Turnover

Bernama, May 03, 2011

PUTRAJAYA, May 3 (Bernama) -- Companies that are found breaching the main provisions of the Competition Act 2010 can be fined up to 10 per cent of their worldwide turnover.

Because the penalty was high, advocacy programmes would be enhanced to ensure all parties including industry players, traders and the public understand the Act before it came into force in January next year, Domestic Trade, Cooperative and Consumerism Minister Datuk Seri Ismail Sabri Yaakob said today.

"We don't want the traders to say they don't know the Act because the implication is big if they flout the law.

"If we don't give them room to understand and so on surely problems will arise," he told reporters after the presentation of appointment letters to the chairman and members of the Malaysian Competition Commission here.

The commission was formed on April.

Its chairman is former Chief Judge of Malaya Tan Sri Siti Norma Yaakob.

Four members representing the government are Attorney-General Tan Sri Abdul Gani Patail; Domestic Trade, Cooperative and Consumerism Minister Secretary-General Datuk Mohd Zain Mohd Dom; International Trade and Industry Ministry Secretary-General Datuk Dr Rebecca Fatima Sta Maria; and Economic Planning Unit Director-General Datuk Noriyah Ahmad.

Five members representing the private sector are Asian Strategy & Leadership Institute chief executive Datuk Dr Michael Yeoh, Nilai International College vice president Datuk Dr Sothi Rachagan, Universiti Sains Malaysia Graduate School of Business Dean Prof Datin Dr Hasnah Haron, former Bar Council president Ragunath Kesavan and businessman Abd Malek Ahmad.