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Privatisation of Power Generation in Malaysia: Impact on the Entry of Malays into Power Business

Author

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  • Ramasamy Thillainathan

    (IDEAS Policy Research Berhad)

Abstract

This paper reviews Malaysia’s experience in privatisation in power generation from the first half of the 1990s and the role it played in promoting Malay entry into business. In the pre-1949 period, privately-owned independent power producers and distributors (IPPs and Ds) were the dominant players. The government-owned integrated power utility, Tenaga Nasional Berhad (TNB), became a monopoly only since 1976. TNB’s finances were strained during the Asian Financial Crisis (AFC) period, but contracts were honoured despite strong calls for renegotiation of power purchase agreements (PPA). With the open tender era from 2012, the PPA terms have become very competitive. However, as TNB can continue to bid, this has not made for a level playing field. With competition and fall in interest rate, there has been a significant decline in internal rate of returns (IRRs). Guaranteed off-take enabled some concessionaires to still earn a good equity IRR through aggressive gearing. Development of a more active and liquid bond market has played a key role in privatisation.

Suggested Citation

  • Ramasamy Thillainathan, 2022. "Privatisation of Power Generation in Malaysia: Impact on the Entry of Malays into Power Business," Malaysian Journal of Economic Studies, Faculty of Business and Economics, University of Malaya & Malaysian Economic Association, vol. 59(1), pages 71-91, June.
    • Handle: RePEc:mjr:journl:v:59:y:2022:i:1:p:71-91
    DOI: 10.22452/MJES.vol59no1.4
    as

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    More about this item

    Keywords

    Power sector; independent power producers (IPPs); privatisation; promoting Malay entry into business;
    All these keywords.

    JEL classification:

    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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