IPP levy revised

Nov / Dec 2008

Malaysia has reversed its decision to impose a windfall profit levy on independent power producers (IPPs), which would have eroded their ability to service debt and raise new financing. Instead, IPPs will make a one-time one-off payment equivalent to a year's windfall tax payment. In June, Malaysia had announced that a levy of 30% on return on assets would be charged effective 1 July for IPPs with ROAs in excess of 9% for each financial year.

The negotiations of power purchase agreements have also been suspended, lessening the pressure on IPPs to accept less favourable terms. IPPs had been told that they would be exempted from the levy if they renegotiated their PPAs with national electricity utility Tenaga Nasional Berhad.