Malaysia's national power producer Tenaga Nasional plans to build a 300 MW gas fired power plant in Sabah, Chief Executive Officer Che Khalib Mohamad Noh said.
The plan to build a gas based plant comes after Malaysia's federal and Sabah state governments scrapped a plan to build a coal fired power plant, reported Reuters. Noh said Tenaga has received in-principle approval to build the plant.
"It will be a gas fired plant to replace" the coal based one that was being planned. "We are looking to do it either through piped gas of LNG."
The company is currently assessing whether piping in the gas from another part of the Malaysian state or importing it in its chilled form as liquefied natural gas was the best option economically, he added.
Tenaga said he expects to mitigate the impact of rising coal prices on the company's bottom line by securing long-term supply contracts with mines in Australia, Indonesia and South Africa. He ruled out taking ownership in any of them.
"We don't believe in owning mines," Noh said.
Tenaga had in January warned of greater pressure on its margins for the rest of the year on skyrocketing price of coal. In a worst case scenario, Tenaga's 2011 earnings would be 20 per cent lower than 2010, although Che Khalib said he expected coal prices to moderate after February.
About 40 per cent of the company's power supply is coal fired. Despite growing imports of LNG, Noh expects Malaysia to remain a next exporter of the super-cooled gas for the next 20 years, he said.
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