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In brief

The Malaysian Ministry of Housing and Local Government had on 27 July 2020 issued an announcement for the request for proposal (“RFP“) for a waste-to-energy project in Bukit Payong, Johor on a public-private partnership basis (“WtE Project“). The WtE¬†Project is one of the 6 expected waste to energy projects that the federal government of Malaysia is planning to develop by 2021.


Contents

RFP Conditions

In order to participate in the WtE Project, bidders are required to meet the following conditions:

  • at least 51% of the equity in the project company is owned by local Malaysian company;
  • experience in solid waste management, including solid waste treatment facilities and landfills;
  • experience in operating solid waste management facilities with a minimum capacity of 800 metric tonnes-per-day;
  • the proposed technology has a track record of at least 3 years; and
  • the proposed technology can operate at least 8,000 hours a year.

The RFP is available for purchase from 18 August 2020 to 7 September 2020 at a price of RM10,000 from the office of the Department of National Solid Waste Management. The RFP submission date is 7 January 2021 but interested bidders are required to attend a mandatory briefing session on 10 August 2020 at the Bukit Payong solid waste disposal site.

Considerations for potential bidders

The following are some key issues that potential bidders should consider and be aware of in participating in the WtE Project:

  • The concession agreement and power purchase agreement to be entered into by the project company with the respective counterparties are likely to be non-negotiable, an approach which is common in Malaysia for projects of such nature. Bidders should scrutinize the interface issues between the concession agreement and the power purchase agreement to assess the risks arising from the gaps between these two key project documents.
  • Further, if this were the case, there may be bankability issues that may concern international financiers, for instance whether direct agreements with lenders are permitted and whether these agreements include or contain adequate termination payments and specific government force majeure relief. That said, local financiers are typically less adverse to such risks and are well placed to finance such projects.
  • Proper site studies and investigations should be conducted as site risk, including underground risks, will likely be assumed by the project company even though the site might be owned by the federal government of Malaysia or relevant State government.
  • There may also be resistance and challenges by various interested parties such as the local community and NGOs in relation to environmental, social and health issues.
Author

Mark Lim heads the Finance & Projects Practice Group of Wong & Partners. He has been hailed for his work in Islamic finance, debt capital markets, loans and regulatory work by established legal directories including Chambers Asia Pacific, IFLR1000 and Asia Pacific Legal 500. Mr. Lim was named a leading lawyer for capital markets, banking and project finance by IFLR1000 from 2011 to 2016. Asia Pacific Legal 500 has ranked him as a Leading Lawyer for banking and finance from 2011 to 2016. According to Chambers Asia Pacific, clients commend him for being "very responsive and commercially minded" and "very sound - someone who you want on your side in negotiations." Mr. Lim is one of the Malaysian External Counsel of Year, as voted by the In House Community of Asian MENA Counsel in 2013 and 2016.

Author

Siaw Wan Lim is a Partner in Baker McKenzie's Kuala Lumpur office.

Author

Martin David is a principal in the Finance and Projects Practice Group at Baker McKenzie Wong & Leow and heads the Projects practice in Asia and Singapore.

Author

Faez Abdul Razak is a Senior Associate in Baker McKenzie's Kuala Lumpur office.

Author

Kim Hock Ang is a principal in Baker McKenzie Wong & Leow's Finance & Projects Team, where he focuses on major infrastructure project development and energy projects development (including LNG), from the inception stage where the consortium is formed and investment structure is designed, to the project documentation, financing and sale of such brownfield asset post commercial operation date. Kim Hock has acted in several award-winning projects such as the Sarulla Geothermal Power Project. It is the largest single-contract geothermal power project in the world, and it won Finance Deal of the Year (Project) at the 2015 American Lawyer Asia Legal Awards, among other accolades.