Resistance grows within BN against AES profits

By Leslie Lau and Md Izwan

Malaysian Insider, November 06, 2012

KUALA LUMPUR, Nov 6 — A whopping 2.72 million speeding tickets will have to be issued in each of the next five years for the two concession holders of the controversial Automatic Enforcement System (AES) cameras to just recoup their reported RM700 million investments.

And considering the authorities had only collected an average of about 25 per cent of all traffic summonses a year — which increased to 65 per cent only after a general discount was offered last year — the two companies will have to issue far more summonses to account for the poor collection.

Such calculations have led to apprehension on the part of a growing number of Barisan Nasional (BN) politicians who are concerned about the profit motive that is built into the concession agreements.

“The privatisation of the AES could be seen as attempting to make profits because some (cameras) are placed in inappropriate places,” Umno’s Seri Gading MP Datuk Mohamad Aziz told The Malaysian Insider.

The two firms awarded the contract to implement the enforcement system — ATES Sdn Bhd and Beta Tegap — will spend between RM300 million and RM400 million each to set up traffic cameras at 831 “black spots” nationwide.

Both ATES and Beta Tegap are entitled to RM16 per valid summons for the first five million issued. They will then split the remaining revenue evenly with the government up to a cap of RM270 million each.

The firms will each receive 7.5 per cent from the remaining revenue and the government will keep the rest.

Based on the business model, both companies will collect RM80 million each for the first five million summonses issued by each company. This works out to a total collection of RM160 million.

Under the second tier of the agreement, the companies will get a total of RM540 million, bringing the total amount due to the two companies to RM700 million.

Based on the even split in revenue with the government, the RM540 million figure represents 3.6 million summonses of RM300 each.

To hit the RM700 million break-even mark, a total of 13.6 million summonses of RM300 each for speeding and other major offences will have to be issued via the AES cameras.

The two companies will have five years to get to the 13.6 million summonses break-even point before the entire system reverts to the government.

To ensure the companies profit from the deal with the government, they will almost certainly have to issue more than 13.6 million summonses a year.

All such additional summonses will see the two firms each receive a 7.5 per cent cut.

Assuming the two companies were targeting a total profit of RM100 million after five years, it would be 7.5 per cent of RM1.4 billion in summonses of RM300 each.

This works out to another 4.6 million summonses, bringing the total number to 18.2 million summonses for speeding and other serious offences for the two companies to pocket RM50 million each in profits after five years.

According to federal estimates for Budget 2013, the government expects to see an additional RM1.02 billion in revenue from its share of AES enforcement, but it has not stated how much will be paid out to the two companies.

While defenders of AES enforcement have attacked critics for being irresponsible over road safety issues, some BN politicians like Mohamad remain concerned about the possibility of voters being made to pay for the profits of the two companies.

“We have to suspend (the AES) so that the public is not pressured,” he said.

“We have to fine-tune the system before we introduce it.”

Gerakan’s deputy president Datuk Chang Ko Youn said he accepted that the private sector has to make a profit from any contract.

“But the terms have to be fair to the government and taxpayers,” he told The Malaysian Insider.

BN politicians are understandably concerned about the introduction of AES just months before elections are due.

Pakatan Rakyat (PR) politicians have already started using the controversial AES system as campaign fodder, and yesterday’s announcement that police speed traps would be maintained alongside the speed cameras could make things more difficult for BN as it seeks to maintain its hold on Putrajaya.

States controlled by PR parties have already given notice that they will block the installation of AES cameras as permits are required from local councils, in a populist move targeted at taking advantage of public unhappiness.

BN politicians and supporters have accused PR of being irresponsible and have argued that the AES was meant to ensure better road safety.

But opponents of the AES system have pointed out that opposition to the new speed cameras was a result of suspicions over the fact that enforcement has been privatised to companies that take a cut from summonses issued to motorists.

There is also growing concern among BN politicians that insisting on the AES could prove costly to BN in the next elections which must be called in the next six months.

Last week, Umno MP Datuk Bung Mokhtar Radin crossed the political divide and backed the opposition PR pact in calling for Putrajaya to suspend enforcing the AES, saying it could be used as campaign fodder against the ruling BN.

Bung Mokhtar, a seasoned Umno lawmaker, is the most senior member of the ruling coalition after Umno Youth leader Khairy Jamaluddin to urge the federal government to delay the newly-introduced traffic enforcement system.

Kedah, Penang, Kelantan and Selangor ― all governed by PR ― have decided to suspend approval for the AES that detects speeding motorists and issues fines.

Several influential non-government organisations including the umbrella body representing civil servants, Cuepacs, have also opposed the enforcement, saying the system was not currently suitable. They also want the government to review the locations where the AES would operate.

Selangor suspends AES, says RTD cannot justify speed cameras

Malaysian Insider, November 09, 2012

KUALA LUMPUR, Nov 9 — Selangor has barred the roll out of the controversial Automated Enforcement System (AES) to catch speeding motorists in the Pakatan Rakyat (PR) state, saying the move is unlawful.

Mentri Besar Tan Sri Khalid Ibrahim said his state administration made the decision yesterday after meeting with the Road Transport Department (RTD).

He said the federal government agency had failed to justify the merits of the traffic system to penalise speedsters.

“From the briefing, the state government found that the Transport Ministry failed to get the approval to construct the structure for the AES from the local authorities.He said the federal government agency had failed to justify the merits of the traffic system to penalise speedsters.

“Therefore, the state government will direct all PBT to inform the ministry that the installation of AES has not followed the law and will not be implemented until this matter is amended,” he said in a statement today, using the Malay initials PBT, or pihak berkuasa tempatan, to refer to the local councils.

He added that the state government will appoint an independent body to study the system first to see if the Transport Ministry had considered all necessary procedures before deciding to introduce the AES.

Khalid suggested a review of the concession agreement between the federal government and the two companies contracted to install and run the AES, saying the 17 per cent profit margin was unreasonable. 

He said Selangor had proposed that the money from the fines be kept in a trust to be used to fund road safety awareness programmes instead of being pooled into a consolidated account, which would be doled out to the companies in reasonable amounts and allow them to recoup the cost of installing the speed cameras..

“By doing this, the people who pay summonses would be contributing to the nation and not help enrich businessmen,” he said.

The two firms awarded the contract to implement the enforcement system — ATES Sdn Bhd and Beta Tegap — will spend between RM300 million and RM400 million each to set up traffic cameras at 831 “black spots” nationwide.

Both ATES and Beta Tegap are entitled to RM16 per valid summons for the first five million issued. They will then split the remaining revenue evenly with the government up to a cap of RM270 million each.

The firms will each receive 7.5 per cent from the remaining revenue and the government will keep the rest.

PR parties have suggested that the companies are linked to the MCA and Umno but this has been vehemently denied.

Apart from Selangor, the other PR-led states such as Kedah, Penang and Kelantan have said they will suspend approval for the AES.

Several influential non-government organisations including the umbrella body representing civil servants, Cuepacs, have also opposed the enforcement, saying the system was not currently suitable. 

They also want the government to review the locations where the AES would operate.

The unpopular system that automatically detects speeding motorists and issues fines has also seen growing resistance from Umno grassroots with a blog and Facebook account set up this week to oppose the speed cameras, which could unite voters behind the federal opposition against the ruling Barisan Nasional (BN) at the 13th general election due soon.

A number of BN politicians are also becoming worried about it becoming a major campaign issue in the general election, and want the government to suspend the AES.

Audit reveals direct negotiation option risks public trust

By Lee Wei Lian, Md Izwan and Zurairi Abd Rahman

Malaysian Insider, October 16, 2012

KUALA LUMPUR, Oct 16 — The annual Auditor-General’s Report has revealed several projects that were directly negotiated and were plagued with issues and which could impact the level of trust in government, say analysts.

The most glaring example was the directly negotiated RM12.49 billion Ipoh-Padang Besar double-tracking project which was delayed twice and has incurred an additional RM3.6 billion in costs.

Other examples include 1,000 brochure racks worth RM1.95 million for Visit Malaysia Year 2007 bought through direct negotiation by the Malaysian Tourism Promotion Board without the Finance Ministry’s approval, resulting in a probe by the Malaysian Anti-Corruption Commission (MACC), and the five billboards worth RM3.64 million that it put up in Indonesia via direct negotiation that are also being investigated by anti-graft officials.

In the case of the Ipoh-Padang Besar rail project, the audit report said the implementation was “not satisfactory” apparently because the appointment of the contractor was not done via competitive bidding.

“Appoint contractors through competitive bidding for future projects to get the best value for money and ensure that contract clauses protect government interest,” said the audit team.

Transparency International Malaysia president Datuk Paul Low said the direct negotiation way of awarding contracts could potentially give rise to problems such as corruption and lack of competition.

“Direct negotiation is not a good practice because it only encourages corrupt practices. If we want to avoid corruption, we have to limit this direct negotiation practice,” he told The Malaysian Insider.

“With direct negotiation, there will be no competition and the party given the project in some cases is not effective to finish the project.”

He said that based on past experience, most of the contractors that were given projects through the direct negotiation method were not qualified.

Low said however that for some cases, direct negotiation could be considered such as due to technical considerations and if only there is only one available supplier for the project.

He added that the government has to make sure enforcement is stringent if it wants to continue with direct negotiations.

“The enforcement should be responsive and disciplinary action should be taken against those contractors who have problems,” said Low. “Only with strict enforcement it can create accountability, that’s why we urged all parties to sign the Integrity Pact to avoid corrupt practices.”

Low said that while open tenders were preferable, they would only work well if the award committee was truly independent.

“First we have to make sure the board is free from conflict of interest and most qualified,” he said. “Only this way we can make sure the open tender is really effective.”

RAM Holdings chief economist Yeah Kim Leng said that if large projects were not awarded via open tenders, it could give rise to the perception that the government was not committed to transparency.

He said the Najib administration had started the momentum for greater transparency with the Government Transformation Programme (GTP) and it must accelerate the process to gain greater credibility and trust and convince the public that the transformation programme was gaining traction.

Yeah said that if big projects were not done via competitive bidding it would lead to public scepticism.

Institute of Democracy and Economic Affairs (IDEAS) chief executive Wan Saiful Wan Jan said that direct negotiations would give rise to questions over the transparency of the award.

He also said that penalties for contractors selected via direct negotiations were often too “weak”.

He noted that open tenders on the other hand will ensure qualified vendors and value for money.

“It’s better to eliminate direct negotiations as much as possible rather than having to deal with problems arising from direct negotiations,” he said.

Wan Saiful said however that in some instances, direct negotiations might have to be retained if it involved certain policies such as Bumiputera special privileges.

“But it must be minimised to avoid problems and leakages in government,” he cautioned.

Prime Minister Datuk Seri Najib Razak has pledged his commitment to open tenders, saying at the launch of the Economic Transformation Programme (ETP) in 2010 that competitive tenders for big projects would be the “default” option.

Despite efforts to boost transparency including making corruption one of the National Key Result Areas in the GTP, Malaysia slipped four spots to 60th in Transparency International’s Corruption Perception Index last year.

Malaysia avoids default with EDL takeover

Reuters, 3 September 2012

KUALA LUMPUR, Sept 3 — Creditors facing a potential default on the MRCB Southern Link project bonds have been offered a lifeline after the federal government said last Thursday that it would take over the new Eastern Dispersal Link (EDL) in Johor Baru from the troubled concessionaire.

Fears that MRCB Southern Link was heading for a default in as little as four months prompted the government to step forward. The saviour in this case, however, was also the offender: it was the government’s ban on collecting tolls for the new highway project that caused default concerns in the first place.

The fact that the toll ban is legal under a concession agreement highlights the regulatory risks faced in privatised projects in the country.

The timing is not great for such a lack of regulatory clarity. Malaysia is in the middle of ramping up a massive infrastructure development programme that will need billions of dollars from the bond market. The federal government is on a RM230 billion programme to build a host of infrastructure projects, including power plants, toll roads, railways and property projects.

Some of the projects have already been awarded to private operators and tapped the market this year, including Prasarana’s RM2 billionn dual-tranche deal two weeks ago, Tanjung Bin’s RM3.29 billion funding in March and Tenaga Nasional’s RM4.85 billion financing last year.

Infrastructure projects are expected to drive the ringgit bond market to a record RM100 billion in volume this year, surpassing last year’s gross volume of RM67 billion.

But the government has shown in the past that it is not immune to public sentiments. It has interfered and caused concession agreements to seize up. After the global financial crisis, the government halted toll rate hikes in several projects, forcing some bond issuers to restructure debt.

The latest stumble came in March this year. The federal government banned MRCB from implementing toll charges on a newly completed EDL in Johor Baru. That road opened on April 1 and has since then seen no cashflow.

The concessionaire managed to meet its previous interest payment obligations. But investors were not certain the next payment, due in December, would come through. RAM Ratings suggested as much when it reported that MRCB made an unexpected RM40 million payment to its engineering, procurement and construction contractor, despite private assurances that it would keep aside enough funds to pay the interest in December.

This leaves only RM21 million in the company’s cash reserves, hardly sufficient to meet a RM47 million cumulative interest payment due December 21 on its RM1.04 billion senior and junior sukuk, as well as on a RM220 million syndicated bank loan. The shortfall is a reason RAM Ratings downgraded the long-term ratings on the RM845 million senior bond to BB3 from A2 and the RM199 million junior sukuk to C1 from BBB2.

Earlier last week, there was no sign from MRCB that it planned to fund any shortfall in meeting the debt obligations, the RAM report said. The company has not breached any of the technical covenants in the bonds, and the payment to the EPC contractor has not triggered an event-of-default clause for bondholders.

If MRCB defaulted on its payments, it would be one of the first toll road concessionaires to do so.

A default would impinge on an otherwise booming bond market. MRCB had been in talks since March with the federal government about plans for compensation in lieu of the toll revenues. But the discussions had dragged on without any conclusive details until last Thursday.

Officials from the Prime Minister’s Office said the government would take over the project but it was short on details. Final details of the takeover are expected only before the end of December. But the market will expect the government to take on the debt and possibly impose a smaller toll than the proposed RM6.20 under the original concession.

The government’s move was not completely unexpected. It has resolved troubled concessionaires in the past by extending the concession, reducing the toll or water rate, or buying bonds.

In June, the government established Pengurusaan Air, which sold a RM5.8 billion sukuk in June 11 to buy various debt facilities from several water concessionaires.

“Regulatory risks have increased compared with the past, but the government has in general shown that it would treat equitably those concessionaires hurt by its edicts,” said one credit analyst.

But detailed negotiations for MRCB may be impeded by an impending general election that could make decision-makers wary of undertaking any unpopular actions. Elections were expected to take place after September. But preparations for the Haj in October and the annual Umno assembly in the last quarter of the year may further push back the elections to next year.

In the meantime, the company is thought to be seeking creditors’ consent to amend terms on its sukuk, particularly to waive certain covenants such as the finance service reserve account bank guarantees to allow drawdowns for the toll road operations to continue. — Reuters

Putrajaya to take over EDL, as BN mounts defence of Johor

Malaysian Insider, 30 August 2012

KUALA LUMPUR, Aug 30 — The federal government will buy out the controversial Eastern Dispersal Link (EDL) in Johor Baru from concession holder Malaysian Resources Corporation Berhad (MRCB), in what appears to be a move to prevent the proposed toll for the Causeway that would have made it six times as expensive for roundtrips to Singapore and becoming fodder for Pakatan Rakyat (PR) in the Umno bastion.

Minister in the Prime Minister's Department Tan Sri Nor Mohamed Yakcop said today that details of the takeover will only be discussed later after talks between both parties.

MRCB had proposed a RM9.10 toll in each direction for passenger vehicles using its RM1 billion EDL highway from the Causeway to the immigration post.

However, the Umno-linked company is using an open toll system that charges the full fare at the new Custom, Immigration and Quarantine (CIQ) checkpoint regardless of where motorists exit or enter the highway — the latest facility for the ambitious Iskandar zone that celebrates its five-year anniversary this weekend.

The rest of the 8.1km stretch leading to the Pandan interchange of the North-South Highway will be free to local motorists.

Local business leaders had express concerns that, with the new CIQ already taking Singaporean tourists away from downturn Johor Baru, the EDL will see them skip the more inland Tebrau area as well.

Taxi drivers also called for an exemption as it would otherwise be unfeasible to ferry passengers across the Causeway.

The EDL opened on April 1 without any toll collection after being delayed from a scheduled first quarter launch.

In a visit to Johor in March, Prime Minister Datuk Seri Najib Razak had promised a solution to the controversy.

Over 50,000 vehicles cross the bridge daily, mostly Malaysians living in and around the state capital who commute to the island republic to work.

Johor Baru’s economy is also heavily reliant on Singaporeans who cross the Straits of Johor to enjoy cheaper prices there. 

Putrajaya set up the Iskandar zone five years ago to turn Johor Baru and its surrounding region into an economic growth area catering to the spillover from Singapore.

Cars and lorries exiting Singapore and heading into Johor now pay RM2.90 and RM5.50 respectively to use the bridge while motorcycles, which make up more than half of traffic across the Causeway, are exempt from the toll.

Singapore’s Straits Times reported in 2008 that rates will be raised every three years of the 30-year concession and will peak at RM14.60 for passenger vehicles and RM29.20 for lorries. 

Selangor may restructure water supply, says committee

STAR, 8 August 2012

KUALA LUMPUR, Aug 8 — The Selangor government can implement a water supply restructuring scheme as long as it adheres to the Water Services Industry Act 2006, as well as all water concession agreements and laws in force.

The matter was finalised by the Special Cabinet Committee on Selangor Water Issues in its meeting chaired by Deputy Prime Minister Tan Sri Muhyiddin Yassin on August 2.

According to the committee’s secretariat, the decision was in line with the Federal government’s stand not to get in the state government’s way of implementing its desired holistic restructuring model.

However, the secretariat said the implementation of the holistic model would require the state government to take over water concession companies in Selangor.

“Yet, the committee has no plan to interfere with the state government’s efforts to take over equity in the concession companies since it is a commercial transaction between the two parties that should be implemented on willing buyer-willing seller basis,” the secretariat said in a statement here today.

Nevertheless, the secretariat said the federal government, through the Pengurusan Aset Air Berhad (PAAB), would always be prepared to take over the liability and assets of the water concession companies at any time, an offer that had also been extended to other states.

“The committee is also of the opinion that the Selangor government and water concession companies should continue their discussions to finalise the restructuring scheme because the delay has had a big impact on the water services industry in the state,” the secretariat said.

On the implementation of the Langat 2 water treatment plant project, the committee agreed that the tender for the project be offered without waiting for the development from the relevant local authorities.

Until today, the Selangor government had prevented local authorities from issuing the development order for the project. — Bernama

Syabas underperforming, daily production could be 463m litres, says Selangor

Malaysian Insider, July 25, 2012

Khalid pointed out that recent findings were proof that Syabas had failed to adhere to their responsibilities as agreed upon in the Water Privatisation Agreement 2004. — file pic

SHAH ALAM, July 25 — Water utility Syarikat Bekalan Air Selangor (Syabas) is underperforming as its treatment plants can produce an additional 463 million litres daily, Selangor Mentri Besar Tan Sri Khalid Ibrahim said today.

He also said the true output capacity reserves were actually 11 per cent and will increase to 18 per cent after March 2013 when mitigation work is completed, adding the water reserves reported by Syabas to be at two per cent was inaccurate.

“The total production capacity for treated water, for all 34 water treatment plants is 4,807 million litres daily (MLD) in comparison to Syabas’ ability to distribute 4,371 MLD, which shows 436 MLD buffer.

“This shows that it is Syabas that is underperforming,” Khalid told reporters here today after chairing the state executive council meeting.

The mentri besar said the Mitigation Project I to be completed March 2013 will increase treated water production to 5,139 MLD, allowing an increase of 332 MLD or 768 MLD depending on Syabas’ distribution capabilities.

Khalid pointed out that these findings were proof that Syabas had failed to adhere to their responsibilities to supply treated water to consumers as agreed upon in the Water Privatisation Agreement 2004.

“This failure strengthens our argument and plans of the state government to step in and manage Syabas with the intent to fix all weaknesses, which includes a recommendation to sack both the Executive Chairman and Chief Executive Officer of Syabas.

“I ask that the local councils along with a few executive councillors meet with the people to find a solution to their water problems, including bringing water tanks to these areas which have been facing water supply disruptions for years,” he said.

Khalid added that the Selangor government was consistent in its stance that the water issue can be solved holistically if the state takes over the water industry from all concession firms in order to offer a more efficient water supply at reasonable prices as hoped for through the Water Service Industry Act (WSIA) 2006.

He announced last week that he would use clause 32 of the concession agreement between the state, federal government and Syabas to step in and take over water distribution operations.

State Secretary Datuk Khusrin Munawi also said only a few locations were experiencing a water supply shortage, particularly in Cheras, as supply comes from the Sungai Langat water treatment plant.

“After four meetings with former employees of PUAS and also the state economic planning unit with Syabas, we have come to find that the water crisis depicted by Syabas is not as critical as they portray,” Khusrin told reporters here today, referring to Perbadanan Urus Air Selangor (PUAS) which has been taken over by Syabas.

Khusrin, who leads the state water monitoring committee which has been observing Syabas daily operations since July 18, was briefing the state executive council at its weekly meeting today.

“Other areas are not experiencing any difficulties as portrayed by Syabas in the media. And there is no such shortage in water supply,” he added.

SEDA: Six solar power deals at risk

By Clara Chooi

Malaysian Insider, July 25, 2012

Pua said checks with CCM revealed that some firms have not met the required equity level stipulated in the contracts. — File pic

PUTRAJAYA, July 25 ― Six solar power contracts are in danger of being revoked, the Sustainable Energy Development Authority (SEDA) revealed today, saying the firms had failed to meet some of the “milestones” set to allow their operations to proceed.

But the authority would not confirm if these firms include those owned by Tan Sri Mohd Sidek Hassan’s daughter, which federal lawmakers previously revealed had not complied with a requirement stipulating that their bank accounts must have at least 20 per cent of the total capital cost of the project.

“We have checked and we know. But because of confidentiality, certain information cannot be divulged here.

“But we have checked and we realised that some (firms) have not improved their equity, some missed the milestones so some ‘letters of intent to revoke’ have [been sent] out,” SEDA chief executive officer Badriyah Abdul Malek told a public briefing today.

DAP MP Tony Pua and his PKR ally, Nurul Izzah Anwar, had recently highlighted that Mohd Sidek’s daughter, Suzi Suliana, and three others controlled 12 out of the 32 firms that had collectively won the “lion’s share” or 32.4 per cent of the country’s solar energy quota.

Pua had said that the 12 companies had jointly secured 45.9MW of the quota, which would require investments of RM367 million, based on his calculations using estimations from industry sources that each MW would require at least an RM8 million investment.

Pressing SEDA for answers during today’s briefing, Pua pointed out that information from the Companies Commission of Malaysia (CCM) had shown that at least nine of the 12 firms in question only had a paid-up capital of RM100, more than six months after the contracts were awarded.

“It can be an RM2 company when you apply. Fair enough, you set up a special purpose vehicle (SPV)... but post-application, when they are successful, they (the applicants) are supposed to top up paid-up capital to a minimum of RM200,000.

“But as of last week, it was only RM100. So why have they (the concessions) not been revoked yet?” he asked.

Responding, Badriyah confirmed the existence of the requirements, saying that applicants that did not meet the required equity levels would be running afoul of the authority’s rules.

SEDA chief operating officer Ali Askar Mohd Sher agreed and reiterated that the authority is already “in the process of revoking” some of the feed-in approvals (FiA).

“[We] have already revoked and are in the process of revoking (more). Do I need to make myself more clear than that?” he said.

SEDA’s legal adviser Toh Beng Suan added that there were legal processes that the authority has to abide by and this includes the “obligation of secrecy” for all its employees.

But she said that in its annual report, SEDA would be required to list the contracts awarded and those revoked.

When pushed further by Pua to disclose if the companies in question had met the required paid-up capital of 20 per cent of the project cost, Toh said that the information is classified.

“I’m afraid we can’t explain to you in detail. I know which company you are specifically mentioning,” she said, to which Pua demanded to know which legal provision labels the information as classified.

Pua pointed out that SEDA’s own application procedures state that the “applicant” must have sufficient credit balance in their accounts to allow for the contracts to be awarded.

“Did they comply?” he asked again.

When SEDA’s top management could not venture a specific answer, the Petaling Jaya Utara MP surmised out loud that SEDA’s failure to comply with its own regulation had resulted in the need for several contracts to be revoked.

Nurul Izzah had earlier also suggested that SEDA include a search with the Companies Commission of Malaysia (SSM) during its verification process in the FiT system, pointing out that this would help identify who is getting the chunk of its contracts.

SEDA says powerless to stop monopoly of solar deals

By Clara Chooi

Malaysian Insider, July 25, 2012

Fong said SEDA could not stop the companies from taking advantage of the tender system. — File pic

PUTRAJAYA, July 25 ― The Sustainable Energy Development Authority (SEDA) today admitted that it had known about the potential for the alleged “monopoly” of its solar power contracts by Tan Sri Mohd Sidek Hassan’s daughter, but said it had no legal power to refuse the awards.

The renewable energy authority pointed out at a public briefing here that its online feed-in tariff (e-FiT) approval system was on a “first come, first serve” basis and applicants that  fulfilled all requirements could not be rejected.

This is a first come, first serve basis and these are the consequences of the system so what the hell can I do."

But it acknowledged that bidders, noting a loophole in the system, had then applied repeatedly through various companies with the aim of snapping up a larger quota than the 5MW limit set for each application.

According to SEDA’s conditions, a single shareholder is limited to a maximum quota of 30MW.

“We are unhappy... but our legal adviser kept on telling us ‘cannot do, cannot do (reject the application)’. This is a ‘first come, first serve’ basis and these are the consequences of the system so what the hell can I do?” SEDA chairman Tan Sri Dr Fong Chan Onn said.

DAP lawmaker Tony Pua with his PKR ally and fellow MP, Nurul Izzah Anwar, recently highlighted that Suzi Suliana Mohd Sidek and three other business partners own 12 out of 32 companies that they said won the “lion’s share” or 32.4 per cent of the nation’s solar energy quota.

Suzi’s father, Mohd Sidek, had retired as the Chief Secretary to the Government last month and is the new chairman of Petronas.

SEDA chief executive officer Badriyah Abdul Malek told the briefing the authority had discovered that “certain personnel” had snapped up a large chunk of the quota, but could not do anything to stop the award.

“It’s not that we did not know... the next day, we knew it but we checked with the lawyers and the lawyers said ‘no, you can’t refuse (the award) because then they (the applicant) will sue you (SEDA) and there would be a litigation case’.

“We are only one-month-old... we cannot be embroiled in a litigation case so we are very, very careful,” she said.

She stressed, however, that an applicant’s success in securing a quota did not automatically mean that contract is theirs to execute as the firm would still have to comply with several “milestones” set by SEDA.

These milestones include a licence from the Energy Commission, the registration of its REPPA Renewable Energy Power Purchasing Agreement (REPPA) with SEDA, the presentation of the company’s banking documents showing that its finances are in order, and others.

Pua had earlier pointed out to SEDA’s officials that the spirit of the Renewable Energy Act 2011, which outlines the establishment of the online feed-in tariff system, was to ensure that no party would monopolise a chunk of the country’s solar energy quota.

“Under the law, distribution should be fair, transparent and across the board, and under the ministry’s guidelines, it should be non-monopolistic,” he said.

Responding, SEDA’s legal adviser Toh Beng Suan clarified that the 30MW limit applied to the size of the power plants, but was not a restriction on the individual applying for the contract.

“We tried as much as possible not to allow a monopolisation. But it did occur to us that even if you break your application down to 5MW, 5MW, 5MW... someone would just apply a lot.

“So if you look at the FiA (feed-in approval) rules, every time you get one FiA, it is treated as a separate plant and the law requires you to spend additional money to lay down separate cables and meters,” she said.

Toh revealed that SEDA had consulted her when it realised that it had a few cases of one shareholder applying for a collectively larger chunk of the quota

“But under the law, we do not have any legal basis to reject the applications based on that,” she said.

Seda admits to screw-up in solar power applications

Kuek Ser Kuang Keng Malaysiakini, Jul 25, 2012

The Sustainable Energy Development Authority (Seda) has admitted to a weakness in the Feed-in Tariff (FiT) online application process, leading to former chief secretary Mohd Sidek Hassan’s daughter Suzi Suliana obtaining a large chunk of the solar energy quota.

Worse still, Seda chairperson Fong Chan Onn admitted that the body has no legal basis to either disqualify any of the 12 companies linked to Suzi and her associates or to redistribute the energy quotas.
This is depite the online application system intended to ensure a fair distribution of the renewable energy quota among all players.

“When we first started this system, we were worried about this issue (of monopoly). We want a big number of players in the system...
“So we set a limit of 5MW per application... and the queuing process (in the application system)... (so) we could distribute it among a big number of players,” Fong said.
"At the end of the day, the result is what it is... We are not happy (with the result of the application). Frankly speaking, we are not happy. We want to distribute fairly but we are advised (that) once the rules are there, we have to follow them.

“We can (refine the rules), but even those steps would not ensure, would not 100 percent ensure that there is no monopoly or 100 percent ensure that a company would not occupy more than 30MW, because how many layers (of company structure) can we check? But we have tried.”

Fong said this during a public briefing on the FiT system this morning at the Seda office in Putrajaya.

He was responding to an expose by opposition MPs Tony Pua (right in photo) and Nurul Izzah Anwar (on the left) that the 12 companies linked to Suzi Suliana have obtained 32.4 percent or 45.9 MW of the quota set for solar energy under the FiT scheme.

This was achieved through a complex layer of holding companies and joint venture partnerships.
Both Pua and Nurul were present at the briefing and they grilled Fong, together with Seda chief executive officer Badriyah Abd Malek, chief operating officer Ali Askar Sher Mohamad and legal advisor Toh Beng Suan, with tough questions.

Energy from renewable energy

FiT was introduced to spearhead the development of energy generation from renewable energy, such as biogas, biomass, small hydro plants and solar photovoltaics.
It is funded by the people, through a one percent increase in electricity tariffs of consumers since last year for those using more than 300kWh.

Under the programme, private companies can apply to be renewable energy producers, and they can then sell renewable energy to power distributors such as Tenaga Nasional Bhd.

The online application system, which Seda claimed is completely free of human intervention to prevent bias and preferential treatment, works on a first-come first-served basis.

Although each applicant can only apply for a maximum of 5MW in solar power production to ensure fair distribution, Suzi managed to circumvent the system by applying through different companies.

Fong said Seda would plug the loophole when a new quota is opened for applications in the future, but warned that no system could be rig-proof.

“If people create companies of six layers, what can we do? We have tried our best within the system,” Fong added.

His view was echoed by Badriyah, who said she would not be able to perform her other duties if she were to try and trace the ultimate owner behind those companies.

One of the 50-odd people at the briefing jokingly told the floor that half of those in the hall, comprising mostly industry players, would after the briefing be finding ways to rig the system.
'It will take two hours to trace the owners'

Pua argued that even if the owner had created a company structure with 10 layers, it would not take more than two hours to trace the owner through a search with the Companies Commission of Malaysia.

He suggested that Seda should require all applicants to declare, in their applications, the ultimate shareholders of their companies.
This was because the current system only required applicants to state the shareholders of the company that submitted the application.

Fong also clarified that the issue of Suzi monopolising the quota does not arise because it is an ongoing process and a new quota will be opened up every year for application.

Badriyah (right in photo, with Toh) said securing the quota did not guarantee approval to be a renewable energy producer.
This was because successful applicants would have to meet certain milestones, such as installation of the equipment, securing financial support and also getting the relevant licences from the other authorities.

Pua asked - since Suzi's majority share of the quota has gone against the spirit of the Renewable Energy Act 2011 that upholds fair distribution - whether the law allowed Seda to overwrite this flaw in the application system.
The answer was in the negative.
“To be honest with you, you talk about the majority of certain personalities and companies owning the big quota. It is not that we do not know.
“The next day (after applications were opened) we knew it already, but we checked with our lawyers and the lawyers said, 'No you can’t, they will sue you',” replied Badriyah.

Toh, the Seda legal adviser, concurred, adding that Seda has completely no legal basis to reject successful applications.

Pua tried to point out that in most of the contracts between the government and private sector, the government has the final say.
However, the Seda management said this did not exist in the FiT approval grounds.

“I’m going to be very happy (if you can find the legal rectification)... I’m with you,” chipped in Fong.

'Ex-chief sec's kin has lion's share of energy scheme'

S Pathmawathy Malaysiakini, Jul 10, 2012

Pakatan Rakyat claimed today that the daughter of the recently-retired chief secretary to the government, Mohd Sidek Hassan, has the “lion’s share” in the newly-introduced renewable alternative energy scheme. 

DAP national publicity secretary Tony Pua demanded that government explains why a large chunk of the allocation for solar energy via the Feed-in Tariff (FiT) mechanism went to companies without “a proven track record” in the energy field and owned by Mohd Sidek’s (right) daughter Suzi Suliana.

Pua said research showed that Suzi controlls 32.4 percent or 45.9 megawatt out of the quota set for solar energy through FiT, far above the limit of 1MW to 5MW for companies.
He noted that the information was derived from a search on the 12  companies owned by Suzi on the Companies Commission Malaysia (CCM) website.

FiT was introduced to spearhead the development of energy generation from renewable energy, such as biogas, biomass, small hydro plants and the sun. 

It is funded by the public via the consumers through a one percent increase in electricity tariffs last year for those using more than 300kWh.

Under the programme, companies in the renewable energy sector are entitled to apply to the Sustainable Energy Development Authority (Seda) to become an FiT approval holder, which can then resell the generated power from renewable energy sources to Tenaga Nasional Bhd, as provided under Seda Act 2011.

The initiative is overseen by the Energy, Green Technology and Water Ministry, which promised to prevent “monopolisation” to any FiT applicant.
“No preferential treatment will be given to any FiT application. All FiT applications will be treated fairly and equally through a transparent application process,” said Pua, quoting a past statement from the ministry.

According to Pua, Suzi secured the contracts together with her husband and business partner Todd Michael Morath, but their ownership is hidden via a complex layer of “holding companies and joint-ventures”.

“Suzi and Morath together own 100 percent of Sun Energy Ventures Sdn Bhd, which owns 98 percent of three companies - Hundrad Tech Sdn Bhd, Indo Eagle Sdn Bhd and Sharp Crest Sdn Bhd - which hold 51 percent stake in nine companies that secured 32.6MW of the total quota allocated to companies given allocations of between 1MW and 5MW.

“Suzi’s business partners and shareholders of Sharp Crest and Indo Eagle, Lim  Boon Huay and Yap Kian Mun, separately own 100 percent of Semangat Sarjana Sdn Bhd, Kenari Pasik Sdn Bhd and Tiara Insight Sdn Bhd, which own 99.99 percent of three companies - Ambang Fiesta Sdn Bhd, Gaya Dunia Sdn Bhd and Rentak Raya Sdn Bhd - which secured 13.3MW of the solar power quota,” Pua said.

‘Companies set up only on Nov 11, 2011'

“What is more shocking is the fact that all of these companies except for Sun Ventures (May 2010) and Uptown Sdn Bhd (September 2011), were set up only on Nov 11, 2011 or less than one month before applications for the permits were supposed to have been given out on Dec 2,” Pua said.

At a press conference today, he added that these companies secured quotas far above those allocated for established power players such as Cypark Resources Bhd and Petronas Power Sdn Bhd, which received 9.2 percent and 7.1 percent respectively.

“It only proves that none of these companies have any track record or experience with solar power generation but they were still given the lion’s share of the lucrative power quota,” he said.

Pua urged Energy, Green Technology and Water Minister Peter Chin and Seda chairperson Fong Chan Onn to explain the FiT application process and to douse doubts on the “integrity and competency” of Seda.

“The award has also created a lot of disquiet and unhappiness in the renewable energy industry, with many players claiming foul play and favouritism in the award of the quota,” he added.

When contacted for clarification, Chin told Malaysiakini that he would check on the allegations with the relevant officials and issue a statement on the matter.