Bakun Hydroelectric Dam Project

Ministry of Finance should explain whether it has to give a "Letter of Comfort" to EKRAN because of lack of international confidence in the Bakun dam project

Asian Wall Street Journal reported on Monday that Ekran Bhd. is considering scrapping a plan to offer 10 per cent of the initial public offering of the shares in the project to foreign investors because of the lukewarm response foreign investors have shown the project.

Under the original listing proposal announced by Ekran in early February, 10 per cent of the Bakun Hydro-Electric Corp. Sdn. Bhd. - the project’s main operating company - amounting to 150 million shares, would be allocated to foreign investors in the IPO in June.

Ekran however is now worried that the 10 per cent allocation for foreign investors might not be fully taken up and might be undersubscribed, as many foreign fund managers and brokerage houses have long taken a dim view of the Bakun project.

Recent market talks about financial problems in connection with the RM13.6 billion Bakun hydroelectric dam project have also been reinforced by an earlier Asian Wall Street Journal report that the Deputy Prime Minister and Finance Minister Minister, Datuk Seri Anwar Ibrahim, had rejected a request by Ekran’s controlling shareholder, Tan Sri Ting Pek Khiing, that the government guarantee a one-billion-ringgit interim credit facility to Bakun’s promoters. The April 4-5 report of Asian Wall Street Journal reports:

"Senior government officials say Finance Minister Datuk Seri Anwar Ibrahim rejected a request this week by Ekran’s controlling shareholder, Tan Sri Ting Pek Khiing, that Kuala Lumpur guarantee a one-billion-ringgit interim credit facility to Bakun’s promoters. The money would go to meet payments to the builders of the dam, a consortium led by Swiss-Swedish construction company Asea Brown Boveri Ltd. The funds are aimed at tiding Ekran and its partners over until June, when they expect to raise financing for the project through the public listing of Bakun Hydro-Electric Corp. Sdn. Bhd. or BHEC, the main operating company for the project.

"Instead, government officials say that Datuk Anwar has agreed to provide only a ‘letter of comfort’ to the bankers of Bakun’s promoters, which will enable Ekran and its partners to raise 500 million ringgit in bank loans. A letter of comfort confirms the government’s support for a project, but doesn’t commit the state to repay debts.

"The government officials also say that the letter of comfort will expire immediately after BHEC is listed. Ekran had requested that the government backing run for the entire 30-year concession period under which BHEC is to supply electricity generated by the dam to the national power company, Tenaga Nasional Bhd."

The Finance Minister should explain the financial problems of the Bakun dam project, why the Government had to issue a Letter of Comfort when Bakun is a privatised project, and whether these events, including the proposal to scrap 10 per cent r of the shares in BHEC in the IPO to foreign investors, indicate that there is a lack of public confidence in the future of the Bakun dam project.

The government must give full accounting as the Bakun dam project had been the subject of controversy, not only about its environmental impact and technical feasibility, but also its financial viability.

A parliamentary accounting has become even more pressing with the threat by Ting Pek Khiing to sue freelance correspondent, MGG Pillai, for damages for posting on the Internet newsgroups under the heading "Is there a problem over the Bakun dam", which had alleged among other things: