Penang Port to invest up to RM150m for green efforts
09 Oct 2024
Despite facing challenges, the port remains dedicated to serving the local community and boosting the regional economy
MMC Corp Bhd’s Penang Port Bhd plans to invest up to RM150 million over the next 24 months in capital expenditures (capex) to improve its infrastructure and purchase environmentally friendly equipment.
CEO Datuk Sashedaran Vasudevan said as part of its green efforts, the company has acquired two batches of Hybrid Rubber-tyred Gantry (RTG).
Each RTG cost about RM4 million to RM5 million, and the company has purchased eight units, with a combined total of RM40 million.
Moreover, the port operator has set aside a capex of about RM15 million for the conventional cargo, to improve its existing substations and other facilities.
Penang Port has recently concluded a project valued at RM20 million, which involves equipping 20 RTGs with battery packs.
In addition, the company has committed about RM40 million to RM50 million for infrastructure upgrading.
Solar and Shore Powers
Currently, it is undertaking a feasibility study for a solar energy project with a proposed capacity of two megawatts, via the self-consumption (Selco) initiative by Tenaga Nasional Bhd (TNB).
Selco is an option to generate electricity from a company’s own solar photovoltaic system, to offset or reduce its electricity bills.
It would allow companies to consume all the electricity generated by its solar system but will not allow any excess to flow into the utility network.
“Capex is not known yet, we are still doing a feasibility study,” Sashedaran said during a recent media visit.
He added that Penang Port is exploring the possibility of setting up solar panels on stilts on shallow water pockets in its premises, “like a solar farm”.
On the other hand, he said the global cruise business is expected to “go fully shore-power” by 2030.
Shore power refers to the practice of supplying electricity from the shore to a docked cruise ship (or other vessels) instead of using the ship’s onboard generators.
This allows the ship to turn off its engines and reduce emissions, noise and fuel consumption while in port.
Sashedaran explained that when a cruise ship ports at a berth, it is equivalent to 10,000 cars switched on, despite it being equipped with the most advanced technology to contain black smoke.
“That is underway. We are 18 to 24 months away from providing shore power, which will give competitive fuel advantage.
“When we were in Miami, Florida, earlier this year, the sea trade business said that by 2030, the cruise ships will only port in ports with shore power, hence that is very crucial to stay in business,” he said.
Sashedaran hoped that the infrastructure could be completed as early as 2026, upon approval from the government.
The power supply could be charged back to the cruise ships that utilise the potential facilities, and the proposed shore power project has received support from relevant ministries.
Furthermore, the port operator has invested up to RM100 million to upgrade the Swettenham Pier Cruise Terminal and aims to be a major cruise hub in South-East Asia.
The company is also hoping to upgrade its homeporting capabilities, referring to the port that a ship returns to after it has finished travelling or transporting goods somewhere.
Providing enhanced capabilities will boost Penang’s local economy as it would attract more vessels and tourists, resulting in more revenue for the businesses in Penang.
The time spent onshore during intervals usually allows tourists ample time to buy souvenirs or source for other supplies from businesses nearby.
“We need a holistic home porting ecosystem, which includes seamless coordination between the airport, port and authorities like customs and immigration,” he said.
Ferry Service
Penang Port is working closely with the Malaysia Cruise Council to promote the state as an international cruise operator.
It aims to achieve 1.2 million passengers for its cruise ship business by year-end, similar to its record set last year.
Sashedaran said it is slightly below track, as the Red Sea Crisis had impacted the segment which resulted in loss of an estimated 280,000 passengers or 24 cancellations.
Post-Covid-19, Indian tourists made up the bulk of its passengers, compared to before the pandemic, when Chinese tourists held the top spot, in terms of customer demographics.
The growth was attributed to the weak ringgit recorded previously as well as the visa-free scheme for Chinese and Indian tourists, announced by the government which commenced from Dec 1, 2023, and will run until Dec 31, 2024.
Sashedaran noted that the port operator incurs annual losses of up to RM14 million Penang Port is working closely with the Malaysia Cruise Council to promote the state as an international cruise operator.
It aims to achieve 1.2 million passengers for its cruise ship business by year-end, similar to its record set last year.
Sashedaran said it is slightly below track, as the Red Sea Crisis had impacted the segment which resulted in loss of an estimated 280,000 passengers or 24 cancellations.
Post-Covid-19, Indian tourists made up the bulk of its passengers, compared to before the pandemic, when Chinese tourists held the top spot, in terms of customer demographics.
The growth was attributed to the weak ringgit recorded previously as well as the visa-free scheme for Chinese and Indian tourists, announced by the government which commenced from Dec 1, 2023, and will run until Dec 31, 2024. Sashedaran noted that the port operator incurs annual losses of up to RM14 million while striving to provide affordable and reliable transport for the bottom 40% (B40) and middle 40% income groups (M40) who are the regular commuters using its service. These losses are largely attributed to the ferry business.
Despite operating at a loss, it was understood at the time of the government concession to operate the Penang ferry service, that the service would require significant subsidies from the company.
The ferry service is an important staple in the state, which connects the city of Georgetown on the island and Butterworth on the mainland.
The cross-strait transit has been in operation since 1894, making it the longest-running ferry service in Malaysia.
The ferry service is heavily utilised and relied upon by the B40 and M40 commuters of the community. Furthermore, it helps to minimise the traffic congestion between both parts of Penang.
The company had voiced its concerns, to which the government in response while striving to provide affordable and reliable transport for the bottom 40% (B40) and middle 40% income groups (M40) who are the regular commuters using its service. These losses are largely attributed to the ferry business.
Despite operating at a loss, it was understood at the time of the government concession to operate the Penang ferry service, that the service would require significant subsidies from the company.
The ferry service is an important staple in the state, which connects the city of Georgetown on the island and Butterworth on the mainland.
The cross-strait transit has been in operation since 1894, making it the longest-running ferry service in Malaysia.
The ferry service is heavily utilised and relied upon by the B40 and M40 commuters of the community. Furthermore, it helps
to minimise the traffic congestion between both parts of Penang.
The company had voiced its concerns, to which the government in response implemented a higher tariff to RM2 per way. Previously the price was RM1.20 two-way.
Despite the higher tariff, the company continues to register a loss, albeit at an improved figure.
“It used to be a RM20 million loss, because of the tariff increase, it has decreased to RM14 million.
“To alleviate that situation, we also rent out our ferries for private functions. That helps to lighten the burden, but not entirely,” he said.
Fuel Subsidy
Sashedaran hoped the rental service provided will gain more traction among the public and private businesses in order to supplement and sustain the company’s operations.
Its ferry chartering service is currently priced at RM1,500 per hour and is usually booked by private corporations, for company functions, or even for wedding events by individuals.
At the same time, the company has requested additional support from the government in the form of subsidies to help lower its operational costs, specifically for fuel.
Fuel subsidies are provided to transport companies, such as bus operators, with government approval.
Sashedaran said there are no plans to increase the ferries’ capacity at the moment, as ridership is sporadic throughout the day.
“Ferry ridership is very unique. The ferry is highly utilised from 6.30am until about 9am, then there are not a lot of people on it, with sometimes only about 10 people (on board). But it still has to run according to schedule,” he said.
Each ferry has the capacity to carry up to 150 passengers and 50 two-wheeled vehicles, such as motorcycles and rickshaws, operating at speeds between nine and 11 knots (20.37kph).
Based on its schedule, it makes 70 trips per day at 30-minute intervals.
As part of Penang Port’s commitment to the government and the public, Sashedaran stressed that operations need to be continued as per its schedule, regardless of uncontrollable factors such as weather.
Sashedaran said, for example, even during a storm that occurred recently, the company did not cancel any of the trips but rather delayed it out of necessity.
Going above and beyond the call of duty, it added extra ferries to cope with the situation in order to clear the crowd at its terminals.
Regarding maintenance, he said the existing ferries are new and that they have received a waiver from the government for two years, after which they will be docked.
The first docking activity is scheduled to be completed by next year, during which the vessel will be taken out of the water for cleaning and routine maintenance, which is a costly endeavour.
Budget 2025 Wishlist
For the upcoming Budget 2025, Penang Port hoped to receive additional assistance from the government, through incentives on areas of concern such as port tariffs, taxes, as well as human capital development.
Sashedaran disclosed that the company hopes that the budget will include incentives for employee upskilling.
“When you talk about expansion, ports are still a labour-intensive business. So, when you expand the port, you also need to expand the number of manpower,” he said.
Currently, Penang Port has a total workforce of about 1,470 employees.
Sashedaran pointed out that the port tariffs set by the government generates revenue for the company, which in turn will be used to reinvest and expand its ports.
Thus far, the government has been supportive and the ministries listen to the company, and take ideas from it.
“We have a government that listens to the operators and the users, which is a good thing. Let us see how the Budget 2025 turns out,” he said.
Penang Port expects to hit 1.5 million twenty-equivalent units (TEUs) by year-end. The target is set slightly higher compared to its record of 1.44 million TEUs handled in 2023.
However, the forecast is set lower from its initial target of 1.55 million TEUs earlier in the year, due to the geopolitical crisis and shortage of containers.
“The Red Sea crisis came to light only post-April. That is when it made a huge impact on us,” he added, mentioning that the port had lost up to 70,000 TEUs due to the Red Sea crisis.
To increase its TEUs, Sashedaran said the company is shifting its focus towards the Bay of Bengals transhipment market.
“If you put together all these four nations, (Bangladesh, Indonesia, India and Myanmar) there are about eight million containers sitting in the Bay of Bengal,” he said.
Source: The Malaysian Reserve
