Is the YTL Power concession really innovative?

I read with great interest of the statements made by Francis Yeoh during the Pemandu event, as reported by the press. Two things stuck in my mind from the article. The first is his anti-cronyism stance and secondly (almost as a preemptive measure) his statement that YTL Power and its concession from the government is a result of innovation rather than cronyism.

His holier than thou attitude did irk me a bit, especially when he berated us about how he is anti cronyism and that the government should not be practicing it . I find the statement, in my opinion, hypocritical.

Firstly, the statement came at the heels of the recent IPP project and secondly, to say that there was no form of cronyism at play during the award of YTL IPP power concession was a bit of a stretch.

Cronyism is favoritism and favoritism does not necessarily have to be race-biased. I believe that any reference to cronyism is almost automatically alluded / insinuated to awards of tenders to Bumi companies. Newsflash, cronies are not all Bumis.

Before I go on I want to make it clear that I categorically object corrupt practices of awarding contracts, whether to cronies or non-cronies. Being a favored person should not preclude you from any contract so long as you get it in a non-corrupt manner. Being a non-favored person (non-crony) should also not automatically makes you better than the cronies and you should not be able to eliminate competition on that basis. That is just low. Okay, back to the issue at hand.

I find it hard to believe that  YTL won the first IPP project on 'innovation' alone. There must be a sense of favoritism in play, at the very least favored over foreign players. YTL must have at least be 'liked' by the government of the day and TNB too. It just takes a simple test to find out: If YTL is as vocal about this so called non-cronyism during the negotiation of the first YTL IPP concession, would it have gotten the project anyway on "innovation" alone?

Next is the label 'innovation' which has been self-proclaimed/labelled by YTL Power. I have a different perspective on this and the term that came to my mind was "opportunistic". Why do I say this?

YTL saw that the government and TNB was desperate for a quick solution. YTL then came with a proposal that will result in them building a power plant with mostly borrowed money (from banks through the bond market) and securing the payment for the borrowings (and payments of profits to itself) with a guaranteed payment from TNB in take or pay scheme.

Nothing spectacular here but for the premium return that YTL Power commanded with the guaranteed revenue/payment from TNB. In some circle, it is said that the project's IRR was 30% per annum, and if that is true then the initial investment by would double every three years. This scheme, in my eyes, is akin to taking advantage of the desperation of your own country.

If the scheme was indeed innovative, this 30% IRR over take-or pay scheme would continue to be applied in all new IPPs. But it is not. The government realized that they were taken advantage of and has amended the expected terms for the new IPPs significantly. Getting abnormal return (well above equity return) for a guaranteed payment (very low risk) is almost like an arbitrage, an advantage taken over a desperate and unknowing government.

And YTL must readily admit that its ability to now compete in the IPP scene is in major part due to the opportunity granted by the government to create its first one, the profit of which maybe "tak habis makan lagi".