Malaysia

Port Klang Power Station Project (Phase 3 /Phase 3-Stage2)

External Evaluator: Taro Tsubogo (KRI International Corp.)

Tenaga Nasional Berhad 1
Field Survey: March, 2006
1. Project Profile and Japan’s ODA Loan

Location of the project site Port Klang (Kapar Phase 3) power

station

1.1 Background
With the high economic growth, energy demand in the Peninsular Malaysia had
grown significantly over the last years with an annual growth rate of 11.4% to
3,447 MW in 1990. Although the growth pace was expected to slow down in the
future, energy demand was forecasted to reach 10,448 MW in 2000 with an annual
growth rate of 10.6%. Since total installed capacity in 1990 was still 4,576 MW, a
serious energy shortage was expected to occur in the future. To fill this gap,
construction and expansion of power plants was indispensable option. On the other
hand, the Malaysian Government carried out “Four fuel diversification strategy” to
enhance the use of indigenous resources and reduce petroleum dependency. The
Sixth Malaysia Plan (1991-1995) also envisioned to augment gas supply. The
project, to construct 1,000 MW multi-fuel fired power plant, was therefore
expected to contribute to both increment of supply capacity and diversification of
energy source.

1.2 Objectives
The project’s objective was to meet the rapidly increasing demand for energy and
assure stable energy supply in the Peninsular Malaysia through construction of a
thermal power station (known as Kapar Phase 3 Plant) located adjacent to the
existing plants in Port Klang area, and thereby contribute to further economic
growth and reducing oil dependence of the country.

1
“Port Klang Power Station Project (Phase 3/Phase 3-Stage 2)” is jointly evaluated by Taro Tsubogo, the consultant
appointed by Japan Bank for International Cooperation (JBIC) and Tenaga Nasional Berhad (TNB), the executing
agency of the project with facilitation by JBIC and Economic Planning Unit (EPU).

1
1.3 Borrower / Executing Agency
Tenaga Nasional Berhad (TNB)/ Tenaga Nasional Berhad (TNB)

1.4 Outline of Loan Agreement

MXIV-4 (Phase 3) MXV-1 (Phase 3-Stage
2)
Loan Amount 31,966 million yen 39,955 million yen
Disbursed Amount 29,110 million yen 25,684 million yen
Exchange of Notes May, 1992 August, 1993
Loan Agreement May, 1992 September, 1993
Terms and Conditions
- Interest Rate 3.0 % p.a. 3.0 % p.a.
- Repayment Period 25 years 25 years
(Grace Period) (7 years) (7 years)
- Procurement General Untied General Untied
Final Disbursement Date December, 2000 January, 2001
Main Contractors Ishikawajima-Harima Heavy Industries Co., Ltd.
(Japan), General Electric Company / Electric
Technical Service Company. (USA/USA)
Consultant EPDC International Ltd. (Japan)
Project Identification 1981 Turbo-alternators Project Loan Agreement
and Preparation Study, (L/A)
and Feasibility Study 1981 Boilers Project L/A
(F/S) 1984 Phase II L/A
Note: MXVI-4 (Phase 3) only covered the components of boiler and consulting
service. MXV-1 (Phase 3-Stage 2) extended the coverage to include the
components of turbine and sub-station equipment, upon the request from the
Malaysian government.

2. Evaluation Results

2.1 Relevance
2.2.1 Relevance of the project plan at the time of appraisal
At the appraisal, the Sixth Malaysia Plan (1991-1995) regarded the diversification
of energy sources and reduction of oil dependency in preparation for oil
exhaustion as one of the imperative policy directions. National Energy Policy
since 1979 and the subsequent Four-fuel Diversification Strategy since 1980 also
promoted the diversification of fuel source (natural gas, hydro, coal) through
decreasing oil dependency, and placed the importance on increment of power
generation capacity and efficient use of energy. To realize such commitments, the
government decided to implement thermal power plant project, which would use
coal as main fuel, to meet an increasing demand of energy in the Peninsular
Malaysia along with the high economic growth. Accordingly, this project was
deemed as relevant.

2
2.1.2 Relevance of the project plan at the time of ex-post evaluation
The Mid-term Review of the Eighth Malaysia Plan (2001-2005) continuously
regards the diversification of energy source (emphasizing more coal use) and
efficient use of energy as priority issue. New fuel strategy (Five-fuel
Diversification Strategy since 1999) was also prepared to further promote the
efficient use of energy and fuel diversification (adding renewable energy) to lessen
the dependency on any single fuel source in view of securing a balanced fuel mix
for generation and system stability as a whole. Accordingly, this coal-used power
plant project, with the purpose of meeting still growing energy demand, is still
deemed as relevant.

2.2 Efficiency
2.2.1 Outputs
The project was to construct the multi-fuel fired power plant with total output
capacity of 1,000 MW (two power generation units of No. 5 and 6 in Kapar Phase
3 2 plant, 500 MW each) and its related facilities. Beneficiary area spreads over the
Peninsular Malaysia with 132 thousand km2 in Figure 1: Project during
size and has a population of about 17.6 millions construction stage
in total (as of 2000 census). The physical aspect
of the original scope was not modified (see the
Comparison of Original and Actual Scope at the
end of this report).

Fuel choice of the plant had been subject to two

times of alternation. The plant was initially
scheduled to use coal as main fuel (gas as alternative). However, upon the
necessity to enhance use of indigenous natural gas, the Malaysian government
determined to alter the main fuel of the plant to gas (coal as alternative) at the time
of the Loan Agreement of the project (Phase 3-Stage2) in 1992. However, since
the power shortage hit the Peninsular Malaysia during 1993 to 1995, this
necessitated the government to early complete the other on-going power station
projects which were mainly combined-cycle (gas-fired) plants, and to allocate gas
supply to those early completed plants. As a result, the government decided again
that the main fuel of Kapar Phase 3 plant be altered back to coal during its
implementation.

2.2.2 Project period

The project was to be completed in June 1997 upon the take-over (followed by the
start of commercial operation) of generation plants to the executing agency.

2
Port Klang Power Station (also known as Sultan Salahuddin Abdul Aziz Power Station) is now called as Kapar Power
Station by TNB. Kapar Phase 3 plant means the power plant constructed under the phase 3 of this project,
corresponding to the units No. of 5 and 6 in the entire Kapar Power Plant.

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However, the actual completion was made in June 2001 with a large delay by 48
months requiring 1.77 times of the planned implementation period (see the
Comparison of Original and Actual Scope and Reference for the detail at the end
of this report). The delay in completion was partly accounted for by the prolonged
tender of civil work contractor, which resultantly brought about the delay in
commencement of civil works (18 months) and the subsequent installment works
of boiler and turbine.

In addition, after the plant synchronization (the first physical energy supply,
identified as start of the plant commissioning), it took some 35 months to complete
the required commissioning and the subsequent reliability-run periods, compared
to the corresponding planned period of 12 months. This delay was caused by the
frequent and alternating occurrence of machine troubles (such as in boiler, turbine,
cooling water system and etc.) and extended correspondence time required for
such troubles.

2.2.3 Project cost

Actual project cost amounted to 83,977 million Yen, resulting in a large cost
reduction (against the estimated value of 158,396 million Yen), since the
competitive tender for boiler and turbine systems made the contracted prices much
lower than estimated. Devaluation of local currency after the economic crisis also
accounted for the decline of the project cost in Yen term.

2.3 Effectiveness
(1) Performance of power plant
Performance of Kapar Phase 3 plant is analyzed in comparison with the target set
by the executing agency, focusing on the effect and operational indicators relevant
to power plant.

(a) Annual operating hours and availability factor

During the early stage of commercial operation, Kapar Phase 3 plant experienced
the lower operating hours and availability factor. It was mostly because the
planned outage hours were largely extended due to the occurrence of machine
troubles and the longer correspondence time to such troubles than assumed. Such
hours of extended planned outage which accounted for 41% of total annual hour
for the unit No.5 in 2002, and 39% for No.6 in 2003. In recent years, although not
fully achieving the planning target of 80% (the average during the last 4 years for
both units), the plant performance has become stabilized.
Figure 2: Operating hours and availability factor (%)

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 Unit 5 Unit 6
8,000 7,284 7,124 100 8,000 7,347 100
6,615 6,585 6,688
80 83.9 80
6,000 83.2 81.1 6,000
75.5 75.0 76.4
60 60 Operating hours
3,793
4,000 4,000
40 43.3 40 Availability (%)
1,849
2,000 21.1 2,000
20 20

0 0 0 0
2002 2003 2004 2005 2002 2003 2004 2005

Source: TNB
Note: Operating hour = output generating hour (synchronized), availability factor
= total operating hour / annual hour
(b) Energy generation and auxiliary power use
Since the start of commercial operation, the maximum output in both units has
ranged from 468 to 500 MW. Rated maximum output (500 MW) had not been
recorded for the unit No.5 up to the year of 2004 due to its turbine vibration. In
2005, the maximum output was suppressed to 468 MW due to demand and supply
adjustment at the side of the energy distributor, TNB.

Along with the plant availability, the plant experienced the lower energy
generation during the early stage of commercial operation. In recent years,
however, the generation performance shows the stable records in both units,
although not fully achieving the planning target. The lesser energy generation than
before and planned in 2005 was resulted from the output control under the said
supply coordination by TNB.
Figure 3: Gross energy generation (GWh)
Unit 5 Unit 6
4,000 4,000
3,461
2,984 3,064 3,137 2,990
3,075 2,875
3,000 2,706 2,561 2,515 3,000 2,652
2,403 2,412 2,401
Planned
2,000 2,000
1,256 Actual
1,000 634 1,000

0 0
2002 2003 2004 2005 2002 2003 2004 2005
Source: TNB
Of the gross energy generation, around 7.5% on average for both units has been
consumed as auxiliary power (known as auxiliary power ratio) since the start of
commercial operation. At present, auxiliary power ratio records the well-managed
figures (7.0% for the unit No.5 and 7.5% for No.6 in 2005), being within the
planning target of 7.5%.

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(c) Plant load factor Figure 4: Steam turbine
Following the trend of operating hour and energy installed
generation, the plant load factor also experienced by the project
the relatively lower marks during the early stage
of commercial operation. However, the both units
became stabilized since 2004, reaching the
referable load factor figure of 70%. Load factor in
2005 was however suppressed down to 66%
compared to the year before and planning target
as a result of the demand and supply adjustment.
Executing agency thought that around 80% of load factor would be realized unless
such a restriction was practiced.
Figure 5: Load factor (%)
Unit 5 Unit 6
82 81
78 75 73 76 74
80 80 72 70 72
64 66 66
64
60 60
40 Planned
40 40
Actual
20
20 20

0 0
2002 2003 2004 2005 2002 2003 2004 2005
Source: TNB, calculated by the external evaluator
Note: Load factor is based on maximum output and service hour (total annual hour
- planned outage hour)
(d) Plant outage
There have been no human errors which lead to the plant outage. The plant outage,
except for the planned (scheduled) one, has resulted from the machine troubles
which cause un-planned outage. Un-planned outage hours comprise of extended
planned outage hour (caused by unforeseen machine troubles during overhaul and
preventive maintenance), plant tripping and derating hours. Extended planned
outage accounted for the majority of total outage hour, and most of machine
troubles, encountered especially in the early stage of commercial operation, were
caused by malfunction of electric (plant control) system, turbine system and so on.
According to the executing agency, in the early stage of commercial operation, it
took difficulty and the longer correspondence time for the executing agency to
locate the problems in troubles and their solutions, and the contractor’s
correspondence to such troubles was not satisfactory enough.
Figure 6: Plant outage hours

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 Unit 5 Unit 6
6,000 6,000

2,443
4,000 1,848 4,000
Planned outage
1,001
1,281 Un-planned outage
294 449
2,000 2,000
2,984 3,292 T arget outage
1,626 1,751 576 1,579
604 944 1,624
0 0
2002 2003 2004 2005 2002 2003 2004 2005
Source: TNB
Actual outage hour = Planned outage hour + Un-planned outage hour (equivalent
derated outage hour)
The plant has been stabilized in the recent years, and as is declining trend of
un-planned outage hours. Executing agency still sees that further efforts need to be
made to improve operation of unit No.6 in particular. In this regard, the ratio of
un-planned outage (against total annual hours) improves to 12.5% in 2005 from
22.4% in 2002 on average of both units.
Figure 7: Coal yard at the
(e) Gross thermal efficiency plant
At present, Kapar Phase 3 uses coal as main fuel,
natural gas and oil only for start-up purpose. Gross
thermal efficiency of the plant has recorded the
range of 35 to 38% since the operation, which is
considered as within the standard level (35 to 40%)
in case of coal use.

(2) Recalculation of Financial Internal Rate of

Return
FIRR was recalculated to be 9.9% reflecting the actual project cost, schedule, the
plant performance so far, the present fuel price and tariff indicated by the
executing agency, with other conditions kept constant. Although the project cost
was largely reduced, recalculated FIRR is lowered 3 compared to 16.2% at the
appraisal in case of coal use. It is primarily because that delayed completion and
plant performance at the early stage of commercial operation brought about the
smaller and late realization of revenue.

2.4 Impact
(1) Contribution to the infrastructure development for economic growth
(a) Improvement of supply and demand balance of energy
In general, energy supply capacity in the Peninsular Malaysia has been sufficient
enough to accommodate the growth of energy demand, showing a good range of

3
If compared to 5.4% of the latest weighted average cost of funds (Annual Report of TNB 2005) of TNB, investment to
the project is still deemed as viable use of fund from TNB’s standpoint.

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reserve margin 4 during the last ten years. Although the reserve margin declined to
23.2% in 2000 due to stagnated power-related investment after economic crisis
after once recovery to 32.0% in 1998 as a result of risk aversion for power
shortage cautioned to occur in the mid-1990s, continuous government commitment
to incrementing supply capacity to accommodate the still growing demand has
again recovered the reserve margin up to 32.6% in 2003. Kapar Phase 3 plant with
installed capacity of 1,000 MW contributed to such a recovery of the margin, and
therefore to further improvement of supply and demand balance of energy without
an occurrence of power shortage in the recent years.
Figure 8: Maximum demand and reserve capacity (MW) in the Peninsular
Malaysia
20,000

15,000 5,972
5,553
2,933 2,620
10,000 3,870
3,083
12,493
5,000 1,129 8,470 9,712 10,060 11,462
6,572 Reserve
3,447
0 Max. demand
1990 1995 1998 2000 2001 2003 2005
Source: TNB, Economic Planning Unit (EPU)
Delay in the project completion had a possibility to cause a tight supply and
demand balance of energy during such a delayed period (from 1998 to 2001 in
case of this project). During the delayed period, however, construction of other
thermal power plants were expedited in response to the pre-cautioned power
shortage, and the actual growth of energy demand (7.4% per annum) fell below the
projection (10.6% per annum). Accordingly, installed capacity of energy had
outreached the maximum demand of energy during the period with a minimum
reserve margin of around 20%, causing no critical energy balance situation.

(b) Contribution to energy consumption growth

Energy consumption in the Peninsular Malaysia has increased at the annual growth
rate of 6.0% since 2001. Energy consumption in the Selangor state and Kuala
Lumpur has recorded a higher growth rate of 7.7% per annum during the last three
years. Contribution of energy supply from Kapar Phase 3 plant has accounted for 6
to 7% of total consumption in the Peninsular and 16 to 19% in the Selangor state
and Kuala Lumpur since the commercial operation.
Figure 9: Energy consumption and energy supply from the project (GWh)

4
Reserve margin = installed capacity of supply - maximum demand

8
 80,000 73,062
68,964
65,496
61,409
60,000
Peninsular
40,000 Selangor/KL
27,087 28,971
24,970 Kapar III supply

20,000
3,420 3,936 5,136 4,562

0
2002 2003 2004 2005
Source: TNB, Department of Statistics
Note: Energy consumption in the Selangor state and Kuala Lumpur in
2002 is not available.
In parallel, the number of customer in every category (household, commercial,
industrial) shows the steady growth during the last five years (e.g., 4.4% per
annum for household customer, and 5.2 millions of household customer are
connected as of 2005). Annual energy consumption per household customer
increases to 2,590 kWh in 2005 from 2,100 kWh in 1995, indicating that each
household is able to enjoy more energy use compared to before despite the
increase of household customer number.

Kapar Phase 3 plant is considered to contribute to realizing the overall growth of

energy consumption. It is also noted that rural electrification ratio in the
Peninsular is also improved to more than 98% in 2005 from 91% in 1999.

(c) Contribution to industrial growth

Gross Domestic Product (GDP) by manufacturing sector in Malaysia has grown at
annual rate of 6.0% during the last six years (in real base), while the energy
consumption by industrial customer has increased at the rate of 5.5% per annum
during the same period. This may support the assumption that stable supply of
energy to industrial sector is one of essential basis of its growth.
Figure 10: Industrial energy use (GWh) and GDP by manufacturing sector (RM
mil.)
40,000 35,786 37,122 100,000
33,497

27,001 80,000
30,000 81,882
78,558
71,544
60,000
20,000 57,761 Energy Use
40,000 GDP Manufacturing

10,000
20,000

0 -
1999 2003 2004 2005
Source: TNB, Department of Statistics
Therefore, the project’s contribution to meeting incremental energy use of
industrial sector, though partially, is considered to support the growth of

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Malaysian industry.

(2) Energy source diversification

Major source of fuel for energy generation used to be oil in 1990, but replaced by
indigenous natural gas in the late 1990’s driven by Four-fuel Diversification
Strategy. However, a concentration on gas use for generation has been eased in the
recent years with an increasing share of coal, following the present policy to
reduce dependency on any single source and to emphasize coal use. The project
which uses coal as main fuel follows this policy direction, and is deemed to
contribute to realizing its objective.
Figure 11: Change of energy source by generation
(1990) (2000) (2005)
0.3% 9.4% 2.3% 8.7%
5.4% 0.9% 0.6%
27.1% 41.5% Oil 28.2%
Coal
Natural gas
Hydro

15.9% Others
64.9%
79.6%
15.2%

Source: Department of Statistics

Figure 12: Airborne

(3) Environmental aspects pollutant monitoring
(a) Airborne pollutant emission station
Kapar Phase 3 plant was to be designed to ensure
that cumulative maximum ground level of SO2, NO2,
and Total Suspended Particulates (TSP) 5
concentrations (as a result of the entire Kapar plant
operation) be below the level set under the
Malaysian Air Quality Guideline. The latest record
on these airborne pollutants concentration at the
ground level shows the lower value than the guideline, although Kapar Phase 3
plant chooses coal 6 . This indicates that fuel combustion and emission system of
the plant was properly designed to comply with the guideline.
Table 1: Maximum ground level of airborne pollutant concentrations (ug/m3 - 24
hours average)
Aug. Sep. Nov. Dec. Guideline
‘05 ‘05 ‘05 ‘05 value
SO2 7.2 58.0 33.3 84.7 105
NO2 15.5 81.5 36.3 93.2 94
TSP 135.0 45.0 28.5 38.4 260
5
SO 2 = sulfur dioxide, NO 2 = nitrogen dioxide, TSP = suspended particulates such as dust in the air
6
Kapar Phase 3 plant uses the Australian quality coal with sulfur content of less than 1.0%.

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 Source: TNB
Note: Above figures are of the highest marks among all measuring
points (located within 10 to 30 km from the plant) in each month.
Kapar plants favorably operate during the above period.
The level of stack emission of the said airborne pollutants is continuously
monitored, and is managed to be within the projected limit at the appraisal
(average value during one month). Although the emission data on dust (TSP) was
not available, it is deemed that the emission level is not issue considering the
concentration level at the ground and in the ambient air.
Table 2: Level of stack emission (ppm)
Average during Feb. Highest mark
‘06 during Feb. ‘06 Projected limit
Unit 5 Unit 6 Unit 5 Unit 6
SO2 14 420 44 595 601
NO2 6 185 33 310 400
Source: TNB
Note: Boiler system of the unit No. 5 outperforms No. 6 in emission efficiency,
according to the executing agency.
The level of ambient air quality is also monitored once per every week for 24
hours. Standard or guideline value relevant to this is not set except for dust, but it
is deemed that the emission level is not issue considering the concentration level at
the ground.
Table 3: Level of airborne emission in the ambient air
Aug. ‘05 Sep. ‘05 Nov. ‘05 Dec. ‘05 Guideline
Unit Unit Unit Unit Unit Unit Unit Unit value
5 6 5 6 5 6 5 6
SO2 71.6 271.0 161.1 434.1 44.7 312.9 18.9 403.0 None
(ppm)
NO2 65.1 110.0 103.1 234.0 40.3 286.8 11.9 227.2 None
(ppm)
TSP n.a n.a 260 50 n.a n.a n.a n.a 400
(ug/m3)
Source: TNB
Note: Monitoring record on dust (TSP) is not available, since the equipment is
under maintenance.
(b) Effluent discharge
Executing agency properly monitors the level of effluent discharge from the plant
related facilities. The level of effluent discharge (BOD, COD, TSS) 7 from the
waste water treatment plant is monitored twice per every month by sample
analysis, and is managed to be below the standard applicable for the plant under
Environment (sewage and industrial effluents) Quality Regulations. Executing
agency also reports that the capacity of the waste treatment plant is sufficient at
present to cover all the influents.
Table 4: Level of effluent discharge from waste water treatment plant (mg/l)
7
Both BOD (Biochemical Oxygen Demand) and COD (Chemical Oxygen Demand) are major indicators to measure the
level of water pollution. Their decline means reduction of organic effluent mass in the water. TSS stands for Total
Suspended Solid.

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 Aug. ‘05 Sep. ‘05 Standard
Sample Sample Sample Sample value
1 2 1 2
BOD 5 11 10 < 5 50
COD 15 36 32 12 100
TSS 11 11 13 7 100
Source: TNB
The level of discharge from ash pond is also monitored once per every three month,
and managed to be below the same standard, except for one case of COD in
December 2005, which was judged as temporary case by the executing agency.

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 Table 5: Level of effluent discharge from ash pond (mg/l)
Jul. Aug. Sep. Dec. Standard
‘05 ‘05 ‘05 ‘05 value
COD 25 23 29 104 100
TSS 82 90 81 91 100
Source: TNB
Judging from the above performances, it is considered that the executing agency
has been well performing environmental management so as to comply with the
guideline and standard.

(c) Others
Before the project implementation, executing agency has made Environmental
Impact Assessment Report approved by Department of Environment in November
1992. The plant and related facilities were built within the property of the
executing agency (adjacent to the existing plants), not necessitating land
acquisition.

At appraisal, preparation of the third ash pond was an issue, since the existing
capacity was to be fully filled upon the operation of Figure 13: Ash trapper
Kapar Phase 3. At present, the second ash pond is installed by the project
still able to accommodate coal ash (by-product of
coal-firing process), and third one has not been
constructed yet 8 . The executing agency is studying
whether to construct the third ash pond or to re-use
the first one, requiring proper conduct of
environmental impact assessment. Around 20% of
coal ash (fine ash) is being sold to cement
manufactures for re-use. Mangrove replanting in the affected area is continued.
Desulphurizer plant is not deemed as necessary, since the airborne pollutant
emission has been well managed so far.

2.5 Sustainability
2.5.1 Executing Agency
TNB, executing agency of the project, divested the entire assets of Kapar power
plants including Kapar Phase 3 in June 2004 to enhance operational efficiency to
the newly established subsidiary, Kapar Energy Ventures (KEV) that is the present
O&M organization for the project facility 9 . TNB presently holds 60% of total
shares of KEV.

8
The first ash pond became a widely known flying destination of migratory water birds after its utilization, and
recognized as an important habitat of birds in Malaysia, therefore, the executing agency practices considerate pond
management.
9
TNB holds the liability related to the construction of Kapar Phase 3 plant, although the plant was sold to KEV.

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2.5.1.1 Technical Capacity
(1) Technical capacity related to O&M
During the project implementation period, some 20 training and lecture programs
were rendered by the contractors and consultant to equip O&M staffs of the plant
with the updated skill and knowledge concerning the new boiler, turbine and
control system, both at the manufacture’s workshops and at the plant (as-built
condition). During the early stage of commercial operation, however, rather
frequent visit of the contractor for the problem location and corrective action was
required depending on the nature of troubles. Through such experiences of trouble
shooting during the period as well as trainings, KEV and the executing agency
consider that necessary skill and knowledge have been transferred to O&M staff.
At present, most of technical troubles are properly and promptly corresponded by
themselves.

(2) Continuity of training

Training program for O&M staff is continuously conducted by the human
resources section of KEV through On-the-Job training and lecture, and mainly
targeted to the newly recruited and middle-classed technicians and engineers. No
major issue in technical capability is observed.

2.5.1.2 Operation and Maintenance System

Although O&M entity was changed from TNB to KEV, the existing staffs which
had experienced O&M for the plant have been seconded to KEV. Although KEV
has also recruited its own staff, On-the-Job training to them by the existing staff is
adequately conducted. The ratio between the seconded staff from TNB and KEV’s
own staff is nine to one. KEV at present employs 463 staffs in total, comprising of
91 executives, managers and engineers (university graduates), around 50
administrative staff, 10 to 15 procurement staff, and the rest of technicians and
operators (non-university graduates). Present organizational set-up of KEV is
shown below.
Figure 14: Organizational set-up of KEV (Kapar Power Plant)
Board of Directors

Secretary

Chief Executive Officer

Production Maintenance Engineering Commercial Fuel Services Human Finance

& Reliability & Regulation Resources

It is also noted that Kapar power plant was certified with quality management

14
system of ISO9002 for the entire plant operation before the divestment in May
2000 (KEV takes over the certification), and KEV further proceeds to
documenting, standardizing and improving the plant O&M procedures 10 .

2.5.1.3 Financial Status 11

KEV made the Long-term (25 years) Power Purchase Agreement with the off-taker
TNB and energy sale to TNB is the main revenue of KEV. Delivery price of energy,
which comprises of capacity (fixed) and energy (variable) portions, is to be
annually reviewed and agreed by the both parties at a certain amount of target,
except for a portion of fuel charge. Fuel charge, which faces considerable risk of
price fluctuation, shall be all transferred to TNB.

In addition, KEV takes a risk of being penalized in case of the markedly lower
availability of the plant, and bears the cost of unplanned repairing work.
Accordingly, financial performance of KEV depends on how it minimizes
un-planned outage and repairing cost, and controls variable O&M expenses (keep
them below the target). KEV does not find much difficulty in financial
management, and states that operating profit is generated so far as planned. TNB,
an energy off-taker from Kapar Phase 3 plant, has also generated profits on a
stable manner 12 .

The recent trend of major fuel prices is shown below. The price of coal, which is
the main fuel for Kapar Phase 3 plant 13 , shows an increasing trend during the last
five years, reflecting the higher demand in the international market. As explained,
however, the higher price is not the direct issue to KEV, since its fluctuation is all
borne by the energy off-taker, TNB.
Table 7: Fuel price trend (RM)
Major origin 1999/2000 2005
Heavy fuel Malaysia 450 per MT 1,110 per MT
oil
Natural gas Malaysia 6.4 per 6.4 per
MMBTU MMBTU
Coal Australia, Indonesia,
(average) China, Malaysia 110 per MT 202 per MT
(Sarawak)

Source: TNB
10
The executing agency (KEV at present) has been also certified with ISO14000 since July 2002 to strengthen
environmental management aspect of the plant operation.
11
Financial report of KEV is not available, since KEV feels it difficult to provide financial report to outside, taking into
account the competitive environment with other Independent Power Producers.
12
Profit (before tax) in the last three years is 1,601 million RM in 2005, 1,959 million in 2004 to 1,947 million in 2003.
13
At present, 80% of total coal use by Kapar Phase 3 plant is imported from Australia. The rest comes from Indonesia.
KEV is not at the position to determine the type of fuel and control the price of procurement. Fuel for energy is
procured in bulk by TNB Fuel Services (TNBF) and TNB Coal International (TNBCI) which hold the purchase
contract with fuel suppliers. TNBF and TNBCI then supply fuel to generation plants based on the purchase price in
accordance to fuel type allocation made by TNB.

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2.5.2 Operation and Maintenance Status
Although minor technical troubles (electric / control system in particular) still
occur sporadically, facility maintenance including corrective action to technical
troubles is properly conducted. Maintenance activity comprises of routine,
periodic ones and overhaul. Routine maintenance mainly looks at bearing
vibration, motors, electrical equipment, greasing and so on. Periodic maintenance
is done every 15 months to look at integrity of pressure vessel, calibration of
sensing equipment, servicing of rotating machinery and such. Overhaul is done
every 5 years for turbine system and every 2 years for boiler system. No major
issue is observed including availability of spare-parts.

3. Feedback

3.1 Lessons Learned

None

3.2 Recommendations
None

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 Comparison of Original and Actual Scope
Items Plan Actual
(1) Scope Major sub-items
Civil engineering works - Power house building - Same as planned
- Chimney (175 m)
- Ash pond
Boiler & auxiliaries - 2 units of boiler (3,000 - Same as planned, but
rpm reheat, tandem for fuel type: coal as
compound, regenerative main, gas as
feed heating, with coal alternative (and
as main fuel, gas and start-up), oil as
oil as alternative) stand-by (and start-up)
- Electro-static at present
precipitator (ESP)
Turbine and auxiliaries - 2 units of steam turbine - Same as planned
(500 MW for each unit)
- Cooling water system
- Water treatment plant
- Electro chlorination
plant (ECP)
Sub-station equipment - Inter-bus / generator / - Same as planned
distribution
transformers
- EHV switchgears
Off-shore pump house - Cooling water pump - Same as planned
house
On-shore piling - On-shore piling - Same as planned
Consultancy and - Conceptual design - Same as planned
engineering services - Engineering work /
supervision
- O&M manual and staff Total 1,386.5
training M/M
Total 1,169.5
M/M
(2) Implementation
Schedule
Loan Agreement May 1992 (MXIV-4) May 1992 (MXIV-4)
Sep. 1993 (MXV-1) Sep. 1993 (MXV-1)
Tender and contract
- Boiler & turbine Jan. 1993 - Oct. 1993 Apr. 1993 - Nov. 1994
generator Mar. 1993 - Sep. 1993 Jun. 1993 - Mar. 1995
- Main civil work Apr. 1993 - Jun. 1993 Apr. 1993 - Aug. 1994
- Piling work
Implementation Sep. 1993 - Jun. 1997 Feb. 1995 - Jun. 2001
- Piling commencement Sep. 1993 Feb. 1995
- Civil work Jan. 1994 Jul. 1995
commencement n.a Jul. 1996
- Completion of Aug. 1994 Jul. 1996
foundation work Apr. 1996 May 1998 / Sep. 1998

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- Boiler steelwork Jun. 1996 Aug. 1998 / Apr. 1999
erection n.a Aug. 1998 / May 1999
- Initial firing (unit 5 / 6) Aug. 1996 Jan. 2001 / Jun. 2000
- Steam admission (unit Nov. 1996 / Jun. 1997 Apr. 2001 / Jun. 2001
5 / 6)
- Synchronization (unit 5
/ 6)
- Commissioning end
(unit 5 / 6)
- Taking-over (unit 5 / 6)
Consulting services
- Selection of consultant Dec. 1992 Nov. 1992
- Engineering work / Apr. 1993 - Jul. 1997 Apr. 1993 - Jun. 2001
supervision
Completion Jun. 1997 Jun. 2001
(3) Project Cost
Foreign currency 72,680 million 45,257 million Yen
Yen
Local currency 85,716 million 38,720 million Yen
Yen
(1,742 million (1,100 million RM)
RM)
158,396 million 83,977 million Yen
Yen
- ODA loan portion - 71,921 million 54,794 million
Yen Yen
(31,966 million Yen : (29,110 million Yen :
MXIV-4) MXIV-4)
(39,955 million Yen : (25,684 million Yen :
MXV-1) MXV-1)
Exchange rate 1 RM =49.2 Yen 1 RM =35.2 Yen
(as of Nov. 1992) (Average year 1995-200
1)

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Reference: detailed comparison between original and actual implementation schedule of the project
Comparis on between orginal and actual s chedule of the project implementaion
Items / Year 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Loan Agreement MXIV-4 MXV-1
Tender and Contract
Boiler & turbine
Main civil work
Piling work
Implementation
Piling start
Civil work start
Completion of foundation work
Boiler steelwork erection
Site acces s for boiler/turbine (U5)
Site acces s for boiler/turbine (U6)
Initial firing (U5) Bot h unit s
Initial firing (U6)
Steam admis s ion (U5) Bot h unit s
Steam admis s ion (U6)
Synchronization (U5) Bot h unit s
St art of commissioning Actual
Synchronization (U6) Original
Commis s ioning (U5)
Commis s ioning (U6)
Completion of commis sioning (U5) Bot h unit s Boiler T urbine
Completion of commis sioning (U6) Boiler T urbine
Reliability -run (U5)
Reliability -run (U6)
Taking-over (U5) Boiler T urbine
Taking-over (U6) Boiler T urbine
Consulting s ervices
Selection
Concept des ign
Engineering work / s upervis ion
Completion
Original (appraisal) Actual Original es timate by the turbine / boiler contractors (when contracted)
Synchronizat ion Complet ion of Commissioning T aking-over
P lan : Jul. 1996 P lan : Aug. 1996 P lan : U5: Nov. 96
Act ual: U5: Aug. 98 Act ual: U5: Jul. 00 (Boiler) / Jan. 01 (T urbine) U6: Jun. 97
U6: May 99 U6: Mar. 00 (Boiler) / Jun. 00 (T urbine) Act ual: U5: Apr. 01
U6: Jun. 01
Commercial operat ion (aft er t aking-over)

* No human errors causing out age occured. Ot her t han planned

Commissioning Reliabilit y-run (RR) out age, t he followings caused t he plant out age (during t he early st age
Unit 5 (Aug. 99 - Jul. 00: Boiler / Jan. 01: T urbine) Unit 5: Boiler (Jul. 00 - Mar. 01) of commercial operat ion);
Unit 6 (May 99 - Mar. 00: Boiler / Jun. 00: T urbine) T urbine (Jan. 01 - Apr. 01) - unexpect ed machine t roubles during t he planned out age, and
* Boiler and t urbine machine t roubles occured one aft er t he ot her, Unit 6: Boiler (Mar. 00 - May. 00) correspondence t o t he t roubles t ook longer period t han assumed,
ident ificat ion of problems and solut ions, and t heir act ions t ook longer T urbine (Jun. 00 - Jun. 01) bringing about ext ended planned out age.
t ime. * Boiler and t urbine machine t roubles occured one aft er t he ot her wit h - machine t roubles causing t ripping / derat ing
ot her t roubles such as cooling wat er syst em , ident ificat ion of Machine t roubles include elect ric (plant cont rol) syst em, t urbine
problems and solut ions, and t heir act ions t ook longer t ime. syst em, insulat or, boiler wat er wall, condenser t ube, and so on.

19