Power Player At Home And Beyond

Power Player At Home And Beyond
News Strait Times 
Biz Focus - Saturday, 31 October 2007

Way back, on September 29 1992, when Peninsular Malaysia was plunged into a nine-hour blackout, two civil engineers and a marketing man saw the light in power plant construction.

Tan Cheng Huat, Lam Kar Keong and Albert Chang were then building workers' quarters for Tenaga Nasional Bhd (TNB) at the Kapar power station near Port Klang.

The humiliating blackout jolted the government into fast-tracking the appointment of independent power producers (IPPs) and, consequently, the construction of more power plants.

When the government announced plans to build power plants, Zelan seized the opportunity.

"In those days of building the workers' quarters for TNB, we also got to know the power plant equipment suppliers and learn about the civil engineering works for power plants.

"We started off sub-contracting for small jobs with Asea Brown Boveri, the leader in making gas turbines," Lam said.

He recalled that within a year of the major outage, three power plants were built in Connaught Bridge (Klang), Paka (Terengganu) and Pasir Gudang (Johor). From there, Lam said, he and his friends earned the trust of TNB.

"We also worked very closely with power generating equipment suppliers. They needed a local partner to stabilise project risks and we knew the ground very well. Therefore, we matched each other," he said.

Looking back, Lam summed up the first defining moment for the business as "being at the right place at the right time".

While it seemed that good luck played a role in the beginning, it was undoubtedly good planning that earned Zelan its reputation as a reliable power plant contractor.

"We strive to do things right the first time round. That way, the greater the probability of us delivering the job on time and within budget," Lam told Business Times during a visit to the Tanjung Bin power plant in Johor.

He said the recently completed project has been a launching pad for Zelan in gaining international recognition as a full-fledged engineering, procurement, construction and commissioning (EPCC) specialist.

Among the company's ongoing projects are two 300MW coal-fired power plants in Chhattisgarh, India. It is halfway through completing the RM320 million project.

In Saudi Arabia, Zelan is undertaking two power and water desalination projects worth RM1.03 billion in Shoaiba and Shuqaiq.

Zelan is also busy with two projects in the United Arab Emirates (UAE). In Dubai, it is building a 45-storey office and service apartment block for RM308 million. In the capital city of Abu Dhabi, Zelan is teaming up with IJM Corp Bhd, Sunway Builders Sdn Bhd and LFE Engineering Bhd to carry out construction works worth RM1.4 billion in the Al-Reem development.

"We started to get big jobs in Indonesia and Saudi Arabia when potential clients saw our progress with the RM5.7 billion Tanjung Bin power plant. This project actually put us on the global map as an EPCC specialist," Lam said.

Of the RM5.7 billion, Zelan did the civil works amounting to RM1.4 billion while its Japanese partner Sumitomo Corp supplied the generator, turbine and boiler.

"It took us almost 10 years to build a job bank of RM1 billion, but with the Tanjung Bin project, prospective clients see that we have the technical expertise and financial muscle to take on big jobs."

Zelan completed the Tanjung Bin job in 38 months, ahead of the average construction time-frame of 48 months, and was rewarded with a performance bonus.

To date, Zelan has built 16 power plants, but does not own any concession to operate either a power or water supply plant.

However, things are about to change. Zelan is tendering to build and operate power generation and water desalination plants in emerging economies outside Malaysia.

"We're ready to take on the role of an independent power producer or an independent power and water producer," said Lam, the managing director of Zelan Construction Sdn Bhd.

The group has earmarked up to RM2 billion to buy shares in electricity producers, possibly in Indonesia, Vietnam, India or the UAE.

"We can easily finance half of the RM2 billion with our own funds. The other half could be funded via share placements or bonds.

"Although we're looking into greenfield concessions, we're not averse to brownfield ones. If there are existing concessions that have a lot more years to go and the price is right, why not," Lam said.

Greenfield concessions are upcoming power plants which have yet to yield any earnings, while brownfield units are existing ones receiving money as they sell electricity to clients.

Asked if Zelan is eyeing any brownfield concessions in Malaysia, Lam replied: "It is almost impossible because everyone wants to sell high."

Currently, Zelan's outstanding construction jobs amount to RM5 billion.

"We've had to turn away some job offers because it is more important to deliver what we promise. What we have in hand now will keep us busy for another three years," Lam said.

Lately, Malaysia's construction sector has started to grow again, after shrinking in 2004, 2005 and 2006. The industry, which had retrenched staff during that period, began experiencing a "brain drain" as a result of the aggressive hiring by companies which had secured major contracts, especially for their overseas projects.

"The job market has changed for the better. Sometimes, we cannot avoid a 'brain drain', but we believe in empowering deserving staff with the right opportunities. It is not about giving higher salary; it is also about keeping key staff in the loop of the group's decision-making," Lam said.

"I can confidently say that we've groomed our second-tier leaders. They are a committed team. Zelan is ready to be an integrated player in the global market of power and water supply," he added.

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