The government may scale back plans to build Southeast Asia's largest hydroelectric dam in Sarawak state on Borneo island due to insufficient demand for energy, a weekly newspaper said yesterday.

The Bakun scheme is designed to have eight turbines generating 300 megawatts each but it may be reduced to only four turbines, effectively cutting capacity by half to only 1,200 megawatt, the Edge weekly quoted sources as saying.

Dam operator Sarawak Hidro, which is wholly-owned by the Finance Ministry, is weighing an original plan to build up capacity gradually in phases as and when demand picks up, the sources said.

"That is one of the considerations being looked into. The main problem now is that Bakun is being built to generate a maximum of 2,400 megawatts but except for the aluminium smelter which is willing to take 1,000 megawatts, there are no firm takers for the remaining power," said a source.

The smelter refers to a RM7.6 billion project in Sarawak state by GIIG Capital, which is controlled by tycoon Syed Mokhtar Albukhary, but the fate of this project itself is in question after its Dubai-based partner pulled out last month.

GIIG was dealt another blow last week when the government scrapped plans to sell 60 percent of Sarawak Hidro to GIIG, saying an agreement signed in August has lapsed because certain conditions were not met within a stipulated timeframe.

Prime Minister Abdullah Ahmad Badawi, who is also finance minister, has said the government was open to new proposals and stressed the Bakun project must proceed because a lot of infrastructure work have been done.

The government took over the controversial Bakun project and revived it in 2001 after it was shelved during the 1997-1998 Asian financial crisis when the main operator fell into debt.

Increase in cost

The Edge said Sarawak Hidro has awarded a RM440 million contract to Alstom Power Generation to install four turbines and another RM470 million pact to Industrias Metalurgicas Pescarmona SA (Impsa) for another four turbines.

The contract to Impsa may be affected if the government decides to cut back power generation, sources said. They warned however, that scaling back the project may affect cash flow and increase the overall cost.

Sarawak Hidro has so far spent about RM1.5 billion in Bakun and the project is expected to eventually cost RM4.5 billion, the report said.

Sources also said the government may review award of tenders as some two billion ringgit worth of work were believed to have been approved without any funding plans. Newly appointed Second Finance Minister Nor Mohamed Yakcop is tipped to oversee the completion of the dam project, they said.

The dam, which involves flooding an area the size of Singapore, has attracted fierce criticism because of its effect on the environment and some 10,000 residents who have already been moved out. - AFP