The selection of type of energy source for any power generation project is generally guided by the following criteria:-

- The energy or fuel source is readily available OR can be made available at reasonably competitive price throughout the duration of the plant operation- (security of energy source supply) - The product of the plant i.e. electricity can be produced at a competitive tariff price affordable to the industry – off-taker or purchaser (SESB) and consumer- (price competitiveness) - Through suitable selection of site or use of technology-based mitigating measures, the process of producing the energy product i.e. electricity will not result in adverse effect to the environment.

Coal is the most economically viable fuel option for the East Coast of Sabah, against other alternatives. Abundance supply of coal from nearby huge Kalimantan coal are serve will provide secured supply of coal, at competitive price thus ensuring continuous operation of the plant and optimum cost of supply/tariff.

Coal-fired power plant is a proven and improving (environmentally acceptable) technology. The plant in Sabah will be designed and built to meet the World Bank emission standards. Coal is an established energy source widely used world wide, accounting for more than 48% of world electricity generation. In Malaysia, there are currently four (4) coal fired power plants in operation with total capacity of more than 4,500MW and two (2) new plants under construction :-

• 300MW power plant in Kapar Selangor • 2,100MW power plant in Manjung Perak • 2,100MW Tanjung Bin in Johor • 1,400MW Jimah Plant in Negeri Sembilan (under construction) • 210MW Sejingkat Power Plan in Kuching • 300MW Mukah Power Plant in Sarawak (Under construction)

Every possible fuel option was considered including gas fired power plant as this is presently one of the established technologies readily implement able for the purpose intended. However, natural gas is NOT available in the East Coast, and option to transport gas through pipeline or barge was found to be too costly and will inevitably affect the viability and commissioning date of the power plant project.

We have to acknowledge that any plan by Petronas to make gas available in East Coast have to be based on willing buyer and willing seller basis, guided by sound commercial and economic considerations.

Coal offers the most viable fuel option especially in the context of fulfilling the need for a sizeable (300MW) power station, capable of providing a reliable and dependable base-load electricity source, a crucial factor for establishment of a secure power supply system in the East Coast of Sabah.

The government Five-Fuel Policy calls for diversifying of fuel mix to ensure reliability and security of supply. The strategy was designed to reduce the country’s dependence on oil as the energy source and aimed for an optimum mix of oil, hydro, coal and renewable energy in the supply of electricity.

Sabah needs to diversify its fuel mix as current over dependence on oil ( 66% of generation ) will expose it to the vulnerability of supply and price fluctuations. Having a cal plant of 300MW is not only in line with the objectives of the Five-Fuel Policy, but also serves to ensure that the country’s limited gas resources are utilized in the most optimum ways.

Alternative technologies such as diesel, wind, solar and biomass were thoroughly explored. However, current technologies available for these alternative options are either still much too expensive to implement or the unit capacity to cater for the base load requirement (300MW) is too small.

SESB is currently the leading off-taker in the country in Renewable Energy (RE) initiatives, with contracts of more than 25MW capacity representing about 3% of Sabah Generation share, against national average of less than 0.5%. We will continue to play major role in encouraging such RE initiatives, in line with the national Five-Fuel Policy which also aim to minimize the impact of power generation on environment.

The proposed coal-fired power plant is to be located on the East Coast of Sabah. Currently almost 40% of East coast power requirement is imported from West Coast Grid System with daily average of 100MW. The daily West _ East power transfer is forecasted to deteriorate further to 70% by 2010. Such huge power imbalance will render the power supply extremely unreliable and unsecure. In the event of interruption of East-West link, a not unlikely possible considering its long 270km line, it will be exposed to risk of total blackout due to insufficient generation capacity within the East Coast Grid.

There are still concern on the emission and discharges from the operation of a coal-fired plant. The following table illustrates the technologies and mitigating measures available to comply with the limit set by national and international authorities.

Experience of TNB through its Coal-Fired power plants in Kapar, Manjung and Tanjung Bin in Peninsular Malaysia had not indicated any adverse effect to date. On the contrary, migratory birds had actually made frequent stop over at the ash pond near Kapar indicating sources of foods are bountiful. In addition, it was also noticed that the mangroves had actually grew rapidly near the Manjung site which incidentally still have a prawn breeding farm nearby.

Periodic sampling of emissions/discharge levels reporting purpose to the Department of Environment Malaysia had also shown that values are well below the limit set by the international bodies such as the World Bank. A clean coal power plant can actually co-exist with nature.

By proposing the coal-fired Plant, SESB had taken all the necessary precaution as not to destroy existing environment by choosing a brown field as opposed to a green field. The plant is designed to use the ESP, FGD, Low NOx burner and using a low sulphur content coal as fuel. All these had somewhat increased the overall coast of the project which SESB is prepared to bear for the benefit of the human health and environment. The proposal Coal-Fired Plant process as shown below:-

SESB had also assured that detailed Environmental Impact Assessment (EIA) will be diligently and responsibly carried out for the project and all mitigation measures will be sufficiently met and adhered to.