Increasing energy flow
Upcoming privatization spawns exciting prospects

Opportunities in Malaysia’s utilities sectors abound for interested investors. Massive reform and overhauling will be performed on the nation’s water supply, its waste water systems, and its electrical supply throughout the next years, requiring an estimated total investment of over $23 billion. Furthermore, the government will continue with privatization plans throughout the sectors. In the electricity sector, the government plans to reduce the nation’s dependence on natural gas and increase the use of coal-fired generation to 30% of the nation’s total generation.

Indah Water is successfully facing the challenges of a demanding sector by focusing on technical wealth, process optimization, and organizational excellence

Far-reaching reforms, including full government divestment, are under consideration to increase the sector’s efficiency and lower costs. Experts predict a 6% - 7% yearly growth in electricity demand in Malaysia throughout the next decade and the nation is preparing itself to meet this growing demand. Prime Minister Badawi’s administration is also promoting the development of renewable energy sources as a fifth fuel source beyond oil, gas, coal and hydro, and various incentives are in place to stimulate development in the field. Minister of Water, Energy and Communications Lim Keng Yaik comments, “Under the Five Fuel policy we have set a target of 5% of electricity generation from renewable energy sources, mainly biomass, solar, and mini-hydro, and a key program that has been put in place is the Small and Renewable Energy Program (SREP), which aims to promote the development of electricity generation facilities below 10MW using renewable energy sources.” Dr. Yaik says that more than 60 projects have been approved under SREP to date.

LIM KENG YAIK Minister of Water, Energy, and Communications

Perhaps one of the most exciting opportunities on hand for investors in Malaysia’s infrastructure at the moment lies in the upcoming privatization of its water utility and the corresponding big ticket reforms that the government has committed to carrying out in the sector. Prime Minister Badawi’s administration has pledged to invest nearly $15 billion in the sector over the next five years, and the announcement has attracted significant interest among both domestic and foreign players in the field. Due to population growth and rapid industrialization, water consumption in the nation grew by 8% per year between 1981 and 2001. This is expected to continue to rise by 4% throughout the next five years. In an attempt to meet this demand and improve efficiency in the sector, the government is considering a much greater role for the private sector. Dr. Yaik states, “The Malaysian government is considering a holistic approach in the privatization of the water industry. Instead of focusing merely on treatment, it should also cover sourcing, distribution, and the management of sewerage sources.”

The partially state-owned company, Indah Water, currently manages sewerage throughout Peninsular Malaysia. CEO Suhaimi Kamaralzaman says the company has been positioning itself to benefit from the upcoming privatizations and has stressed to the government that investment is sewerage is equally as important as water supply. He says there is ample opportunity for U.S. investors in the privatization process. “There are substantial sewerage-related investment opportunities in Malaysia, both from the government and the private sector. For U.S. investors here, it would be a good platform to branch out into the region.”

Strong technological knowledge and environmental protection

Expertise and technological know-how are at the base of Indah Water’s service provision

Indah Water Korsortium is Malaysia’s national sewerage company and prides itself on its commitment to developing a modern and efficient sewerage system for all Malaysians while maintaining environmentally friendly standards. Established in 1994 following the privatization of the nation’s sewerage services, Indah Water has since been providing all the nation’s services, except in the areas of Sabah, Sarawak, Kelantan, and Johor Bahru.

In addition, as of April 2002, Indah Water had assumed management of 7,198 sewage treatment plants and pump stations nationwide connected by nearly 6,500 miles of underground sewer pipes. Under the 8th Malaysia plan that covers the period from 2001-2005, the government allocated nearly $400 million for upgrading of the country’s sewerage systems, and Indah Water has been responsible for providing the technical expertise and project management support to oversee this investment to its successful conclusion, a trend that CEO Suhaimi Kamaralzaman hopes will continue after the sector’s upcoming liberalization process.

SUHAIMI KAMARALZMAN CEO of Indah Water

He comments, “Indah has the database and the people with expertise in the Malaysian sewerage sector. As such, we are the most capable of planning future infrastructure and of advising the government on its investments throughout the next twenty years.”

Indah Water’s trained team of professional includes engineers, chemists and qualified technicians with a strong knowledge of treatment technology and process optimization. Hence, Mr. Kamaralzaman says that one of the company’s challenges is to ensure that this technical wealth and commitment to excellence is present throughout the future of the country’s wastewater sector. He states, “Our challenge is to make sure that once the company is liberalized the R&D and training that we have built up in Indah Water is not lost. We want to ensure that excellence in the sewerage sector continues to be a priority.”

Switched on to renewable energy
Alternative Energy sources are a path to future global success that TNB is already actively exploring

TNB is playing a leading role in Malaysia’s pursuit of new and efficient renewable energy sources

In line with Tenaga Nasional Berhad’s (TNB) vision of becoming a global leader in energy supply, the company has been active in exploring new types of alternative energy sources that will guide the world into the next century and beyond. TNB’s investigation also supports the Malaysian government’s policy of pursuing new and efficient renewable energy sources, following a long series of fuel adjustment processes in the country throughout the last thirty years. After the global oil crisis of the 1970s, the Malaysian government made the decision to reduce the country’s dependence on oil, which at that time provided for nearly 50% of Malaysia’s energy needs, and began to diversify the country’s energy supply from oil and hydro to include gas and coal. Malaysia’s first gas power plant, which was the first combined central plant in the South East Asian region, was inaugurated in 1984. This was followed shortly by an increase in coal-fired generation. Due to a shortage in gas supply in 2003 arising from a delay in the construction of a new gas pipeline from the South China Sea, the decision was made to reduce gas-fired generation to under 60% of the country’s total and to continue to increase coal-fired production to 30% by 2006. The recent commission of a new coal-fired station by TNB Janamanjung Sdn Bhd, TNB’s subsidiary, is a case in point. Simultaneously, the Malaysian government began promoting the development of a fifth fuel – a renewable and cleaner energy source that would continue to provide power for the country in the future and reduce the pollution levels caused by the other fuels.

The Five-Fuel Policy was introduced in the government’s Eighth Malaysia Plan, which covers the period 2001-2005. The Plan documented the fifth fuel as renewable energy comprising biomass, biogas, municipal waste, solar and mini hydro, and set a target of 5% (700MW) of renewable energy generation by the year 2005. Also in 2001, the government launched the Small Renewable Energy Power Program (SREP) as part of its efforts to create new renewable energy developers. Since then, TNB has lent its full support to the SREP program by helping developers identify suitable points of interconnection with the TNB distribution network and by entering into Renewable Energy Power Purchase Agreements (REPPA) with them. TNB has signed five REPPAs totalling 26.2MW to date.
TNB is also involved in the research and development of renewable energy power generation projects through its subsidiary, TNB Energy Services Sdn Bhd (TNB-ES), which has already approved more than 300MW in applications from renewable energy power developers. Furthermore, Jana Landfill Sdn Bhd, a wholly owned subsidiary of TNB-ES, last year constructed a 2.0MW landfill gas power plant at Air Hitam Puchong.