Friday, March 10, 2017

3 QUESTIONS THAT ABANG JO MUST ANSWER BEFORE THE ACQUISITION OF SARAWAK HIDRO

Abang Jo’s claim that the acquisition price for the whole of Sarawak Hidro Sdn Bhd’s equity share is only RM2.5 billion is most misleading.

This figure is not the actual costs involved in the acquisition of ownership of the Bakun dam. The actual costs of the acquisition should be RM8.6 billion and could even be more.

As at 31-12-2015, the total liability of Sarawak Hidro is RM6.15 billion. When Sarawak Government acquires the shares of Sarawak Hidro, it also takes over the responsibility for the repayment of this RM6.15 billion debt.

Based on the financial report, therefore, the total costs for the ownership of the Bakun dam would be the purchase price of RM2.5 billion, the RM6.15 billion debt and the annual operating costs of the dam which, for the year of 2015, was RM600 million.

On the face of Sarawak Hidro’s 2015 financial statement, the net asset of Sarawak Hidro is only RM1.526 billion. Given that Sarawak Hidro has only ONE customer who is Sarawak Energy Berhad (SEB), it has no intangible asset such as business goodwill.

Why is the State Government using RM2.5 billion to purchase a company which only has a net asset of RM1.526 billion? What was the additional RM1 billion payment for?

As ultimately the general public of Sarawak will be made to foot the bill for the costs of acquisition of Bakun dam, Abang Jo must provide detailed answers to the following 3 questions before the Sarawak Government proceeds with the acquisition of Sarawak Hidro:

1. Why did the Government purchase the shares of Sarawak Hidro at the price of RM2.5 billion when the net asset of the company is only RM1.5 billion? What was the extra RM1 billion price for?

2. Given the debt of RM6.15 billion and the purchase price of RM2.5 billion, what would be the interest payable by the State Government on the debt and the loan taken to purchase the equity? Beside the interest payment, what is the estimated costs of forex loss of the debt?

3. Given at present, the price per KWH electricity sold to Syarikat Sesco Berhad is only RM0.067 sen per KWH, what would be the costs of generation of electricity per KWH (inclusive of the financial costs), if the State Government were to take over the Sarawak Hidro Sdn Bhd?

At present, SESCO needs only to pay RM0.067 sen for every KWH of electricity sold by Sarawak Hidro Sdn Bhd to SESCO. After the State Government acquired the equity in Sarawak Hidro, all the financial costs, operation costs, maintenance costs and other contingent costs will be factored into the costs of electricity of SESCO.

The State Government must tell all Sarawakians whether the costs per KWH of electricity will be lower or higher with the acquisition of Sarawak Hidro. If it were higher, then there is no justification for the acquisition. If it were lower, by how much is the costs reduction.

Short of clear answers to all these questions prior to the acquisition of Sarawak Hidro’s equity, the whole exercise will be seen as a bail-out by the State Government of the Federal Government who is now short of fund to repay its debts.

10-3-2017
Chong Chieng Jen
DAP Sarawak Chairman
MP for Bandar Kuching/ADUN for Kota Sentosa