Tuesday, August 12, 2008

Malaysia sweetens deal for independent power firms

KUALA LUMPUR, July 24 (Reuters) - Malaysia will allow exemption from windfall tax for independent power producers (IPPs) which agree to alter electricity sales terms with power utility Tenaga Nasional (TENA.KL: Quote, Profile, Research), the finance ministry said on Thursday.

The government last month proposed a windfall tax on the IPPs and other industries least affected by inflation to help curb price pressures.

But IPPs such as YTL Power (YTLP.KL: Quote, Profile, Research), Sime Darby (SIME.KL: Quote, Profile, Research), Tanjong Plc (TJPL.KL: Quote, Profile, Research) and MRCB (MYRS.KL: Quote, Profile, Research) strongly objected to the plan.

The Finance Ministry said the IPPs have instead told the government they were willing to renegotiate existing power purchase agreements as a long-term solution to ensure a more sustainable power industry.

It said the Cabinet, at its meeting on Wednesday, decided that IPPs which successfully renegotiate their power pacts would be exemp from the windfall tax, effective from the date of the renegotiated agreement.

"The government is confident that renegotiations of PPAs will be successfully concluded within a year, taking into account the interests of all stakeholders, including IPP bondholders," Second Finance Minister Nor Mohamed Yakcop said in a statement.

Tenaga Nasional said it was hopeful of successful talks with the IPPs.

"We believe the mood for the discussion with IPPs has improved, we are quite confident there will be successful negotiations that were taking place," Tenaga's Chairman Amar Leo Moggie told reporters.

"We are also conscious that the government is very anxious on this, and we understand that they will make sure they monitor the progress. We obviously have a very positive take on coming up with some sort of agreement," he said. (Reporting by Jalil Hamid and Soo Ai Peng; Editing by Faisal Aziz/Rory Channing)

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