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Kuala Lumpur. The multibillion-dollar Bakun dam, deemed a catastrophe for the environment and tribal people, may be too costly to operate.

The dam, located in Sarawak state, is finally nearing completion after a series of setbacks since its approval in 1993.

But there are still delays in getting the government’s permission to begin the flooding process and there is no deal yet to purchase its 2,400 megawatt output.

With scrapped plans for an undersea cable to feed electricity to the Malaysian peninsula, the Sarawak government is the only feasible buyer — leaving it with a very strong hand.

Negotiations with the dam’s developer, Sarawak Hidro, a subsidiary of the Finance Ministry, have reportedly been tough.

“It’s a case where the owner of the project is naming an asking price that is very different from what the buyer would want,” said Wong Chew Hann, an analyst at Maybank, Malaysia’s top lender.

“I understand there’s quite a huge mismatch,” she said. “I’m not sure what they’ve incorporated into the pricing, but the cost of the project has gone up so much since it started.”

Aside from shouldering construction costs, developers need to compensate tribal people forced from their ancestral lands and suppliers affected by delays.

“So the question is, are you going to incorporate all the compensation costs in the tariff price?” Wong said.

With indigenous people from the Bakun catchment area resettled and valuable timber resources felled, the dam has been ready to be flooded since April.

But the state government has not given the go signal, saying it is still evaluating river levels and the impact on boat transport.

Last week, a Sarawak minister reportedly said the necessary permit had been granted, denying that it had been used as a bargaining chip to lower the tariff and that Sarawak was facing an energy glut.

Meanwhile, Zulkiflie Osman, Sarawak Hidro’s managing director, played down reports that he was being held to ransom by the government.

“Both groups are working together and want it to be settled amicably, with a tariff acceptable to both parties,” he said, adding that he expected to strike a tariff deal before December.

The next of Sarawak’s mega-dams, the Murum, which is being developed by the state government, is scheduled to be up and running by 2013.

But Osman said he was convinced that authorities would not bypass the Bakun in favor of its own project.

Alongside power purchase negotiations, the federal government was also said to be discussing selling the entire Bakun facility to the state government, but this was stalled due to pricing and finance problems.

The Bakun dam project reportedly cost 7.3 billion ringgit ($2.4 billion) to build.

It was reported in July that the federal government was seeking 8 billion ringgit, while the state government’s offer was only 6 billion ringgit.

The Bakun’s output far exceeds existing energy needs in Sarawak, a relatively undeveloped Malaysian state, and is destined for industrial users such as aluminium smelters, but these are still on the drawing board.

“The main problem is that there is currently no demand for such a big capacity yet, and in order for Sarawak Energy to purchase the dam, they would need adequate funding,” an analyst with a major research house said.

“The banks would ask for some kind of feasibility study. As there is no real demand yet, this project risks becoming a white elephant,” the analyst said.

Newspaper reports have questioned how the federal government could recover the huge amount of money it had sunk into the project.

“Marred by too many disagreements, the 7.3 billion ringgit project could very well turn out to be a non-starter,” reports said, adding that, with both the Bakun and Murum dams functional, there would be a “very real possibility” of a power glut.

Transparency International has labeled Bakun a “monument of corruption” in Sarawak, which has been ruled for three decades by the formidable chief minister Taib Mahmud.

Baru Bian, chairman of the Sarawak opposition party Keadilan, said the Bakun dam project was designed purely to profit cronies, and not to serve the public’s interests.

“The dam is a waste of public funds. It’s not necessary. And what is paramount is that it is disturbing and disrupting the lives of the natives and the environment,” Bian said.


Agence France-Presse