TENAGA Nasional Bhd (TNB) is seriously considering disposing its stake in Sabah Electricity Sdn Bhd (SESB), said Energy, Green Technology and Water Minister Dr Maximus Ongkili.

“The discussion between us, the Finance Ministry and TNB is already at an advance stage, but we have yet to arrive at a conclusion.

“Although SESB is on the verge of being insolvent, it still has a lot of assets, and the firm is worth about RM8 billion. It’s just that it is not able to meet expenses, such making loan repayments.

“In our discussion, the TNB chairman mooted that it disposes of its shares in SESB, and they (TNB) are now seriously analysing the possibility,” he said today, after announcing that there would be no electricty tariff hike for Sabah and Labuan.

TNB holds an 82.76% stake in SESB, with the remaining 17.24% belonging to the state government.

Ongkili said the cost of supplying power in Sabah was much higher than in Peninsular Malaysia due to the state’s rugged terrain.

He said it was not cost-effective for SESB to build power lines in hard-to-reach places in Sabah, where there were only a few consumers.

“We have to be fair to the providers. They ought to get a proper return on investment (ROI), and I can tell you right now, SESB is making returns of less than 2%, therefore, supply in Sabah is heavily subsidised.”

He said it was getting tougher for SESB to cover its expenses due to fluctuations in fuel and other costs when the power tariff had been revised only twice over the past 22 years.

Responding to criticism from opposition leaders over his failure to save SESB from bankruptcy, he said the ministry planned to implement the Incentive-Based Regulation (IBR) after June next year, or a dual tariff system, for rural and urban areas, to ensure fair pricing.

He said only then would TNB see a fair ROI through SESB, and at the same time, Sabah consumers would not be hurt financially.

“For example, the dual tariff system. Urban areas can bear part of the cost of implementation for rural power supply, which is higher.”

IBR is currently implemented only in the peninsula.

On whether SESB should be returned to the state, Ongkili said the ongoing discussion had yet to touch on the matter, adding that considerations had to be made as to whether the state government was willing to buy SESB from TNB.

“But, it is possible. I met Chief Minister Musa Aman yesterday. As long as the Sabah government’s shares are not reduced.” – December 26, 2017.