I refer to your report IPPs - yet another Dr M mistake

IPPs have profited handsomely from lop-sided power purchase agreements but these unfair contracts cannot be undone or renegotiated easily. Lowering the tariffs in exchange for an extension in the concession would have to be neutral on the net present value of future income stream, or else the management of the IPPs could be accused of not acting in the interest of shareholders.

I think the best way forward is for the government to impose a windfall profit tax on the industry. A marginal rate of 80%, for profits above say 12% IRR (internal rate of return) would achieve the objective neatly. Whether the trigger point should be 12% or some other rate can be fine tuned by the experts.

Windfall profit taxes are nothing new. During the Asian financial crisis, palm oil prices shot up to around RM2,200 a tonne due to the depreciation of the ringgit against the US dollar. The government imposed a windfall profit tax, which kicked in when prices were above RM2,000, to help shore up its coffers during those dark days.