Logo of Phnom Penh Post newspaper Phnom Penh Post - Power bids proving a headache

Power bids proving a headache

Power bids proving a headache

T HE Ministry of Industry is negotiating three contracts with foreign investors to

build new power plants in Cambodia, but the negotiations on the proposed power plant

for the sound and light show at Angkor Wat have stalled over price.

Two sources close to the negotiatons said that YTL Corp., the Malaysian contractor

hoping to build the $20 million sound and light show at the 12th century temple,

is taking a very tough stance in the negotiations for a five megawat power plant

in Siem Reap. YTL has plenty of leverage in the matter because without a new power

plant there can be no sound and light show.

"It's at a standoff," said one source.

Kuon Kreal, an official involved in the negotiations for the Ministry of Industry,

confirmed that the negotiations have been difficult with YTL but that in fact negotiations

were tough with all the companies. He said the YTL deal was "still alive."

"The price is very sensitive. We are trying to keep the costs under control.

With all of the IPPs we try to keep the costs down. We're negotiating. We're not

sure what kind of price can be achieved," he said.

First Prime Minister Prince Ranariddh raised the cost question in November when he

said that YTL wanted to charge a very high price for the electicity that would be

generated at the Siem Reap power plant. The company proposed a cost structure that

would supply power to Electicité du Cambodge at 14 cents to 15 cents a kilowatt

hour, saying they needed that much to recoup their investment and fuel costs.

The average in Asia is about eight cents a kilowatt hour to produce electricity.

The pricing proposed by YTL could well mean that customers would wind up paying 20

cents a kilowatt hour for electricity in Siem Reap. In Phnom Penh, consumers now

pay about 14 cents. With the new power plants, EdC wants to bring the price down.

Kuon Kreal said the ministry wants the production price down below eight cents on

all the contracts.

The Siem Reap power plant,as well as a proposed five megawat power plant in Sihanoukville

and a large plant proposed for Phnom Penh are all part of the next stage of Cambodia's

power growth. The plants are planned to come on line in 1987 and 1988. In addition

a small plant is proposed for Battambang.

Peter Rutledge, chief technical advisor to Electricite du Cambodge, said that the

government has committed its future power generation needs to these IPP contractors

but that it is difficult right now for Cambodia to interest investors in building

these small plants. "That's the trouble we are in at this stage. They're so

small it's hard to interest a contractor in an IPP."

He said that in the future it will become much easier because the power plants that

will be built as demand for electricity soars will be larger, and as security in

the country improves, "the financing costs are going to come down."

But critics say that another reason the ministry is having problems negotiating is

that none of the three power plant deals under negotiation were put out for competitive

bidding.

In the Siem Reap case the power plant franchise was awarded by the two Prime Ministers

and the Minstry of Tourism. The power plant was included as part of memorandums of

understanding for the hotel zone and the sound and light show at Angkor Wat.

The same is true for Sihanoukville, where the power plant project went to the Malaysian

company Ariston as part of its casino development project. Ariston however has subcontracted

the power plant to Tenaga Nasional, the Malaysian national power utility.

The power plant contract with Ariston is expected to be signed soon.

The biggest IPP deal under negotiation is with a company called Beacon Hill Associates

Inc., an investment company from Medford, Mass. The plant's size isn't finalized.

It could be anywhere from 20 to 60 megawats, said Rutledge.

Bill Garrett, president of Beacon Hill, said he first proposed the deal to the ministry

a year ago. Several weeks ago, he met with Hun Sen and last month, he said, Hun Sen

signed an order telling the ministry to "work with him now."

Garrett's company initially proposed a 60 megawat plant. The size has since come

down. Garrett said he thinks they could provide electricity at a cost that the ministry

would agree to, in the range of eight cents per kilowatt hour. "We're in negotiations

to produce a contract. If it's not a viable contract we won't go forward," he

said.

He said that if a contract is reached, he expects it to be insured by OPIC, the Overseas

Private Investment Corp.

He said his company is an investment group engaged in lining up deals to do infrastructure

projects in Vietnam and Cambodia. Beacon Hill wouldn't build the plant. That job

would be contracted to Black and Veatch Construction and Solar Turbines, which are

engaged in the power plant business.

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