1MDB sheds light, explains RM2bil debt,eyes listing

(The Star) – Government-owned strategic fund 1Malaysia Development Bhd (1MDB) has shed light on its highly-debated RM2bil loan taken by its subsidiary and asserted that it will resubmit its application to list its power arm.

In a short statement issued yesterday, 1MDB implied that the RM2bil loan was an advance to its subsidiary, Powertek Investment Holdings Sdn Bhd.

“In line with the conclusion of 1MDB’s strategic review, certain material developments have occurred in relation to Edra Global Energy Bhd (formerly known as 1MDB Energy Group Bhd).

“These include, among others, the proposed conversion of an advance by 1MDB into RM2bil of equity in Powertek (an operating subsidiary of Edra) and for Edra to focus on its existing projects,” 1MDB president and group executive director Arul Kanda Kandasamy said.

Previously, it was reported that tycoon T. Ananda Krishna had come to the rescue of 1MDB group to settle the RM2bil with local lenders Malayan Banking Bhd and RHB Bank Bhd.

The amount was originally due on Dec 31, 2014, but it was subsequently extended to Jan 31 after 1MDB missed the payment.

The RM2bil loan came about when IMDB acquired Ananda’s power-generation unit for RM8.5bil in 2012.

The RM2bil was a shortfall in the financing and the amount was supposedly guaranteed by Ananda.

1MDB also stated that Edra would focus on its existing power business,

This implies that 1MDB would pursue the controversial 3B power plant project that was awarded to the group last year.

Earlier, there were already signals that things were not going as planned for the project.

These included the reported cancellation of an RM8.4bil Islamic bond issue by 1MDB to finance the project.

Last March, 1MDB it won the bid to build the 2,000MW power plant at a levelised tariff of 25.33sen/kWh for a concession period of 25 years. Its partner was Mitsui Co Ltd.

But with plans to float its power business, Edra, still on the cards, 1MDB said it would resubmit the necessary documents to the capital market regulator to facilitate the exercise.

“Edra has notified the Securities Commission (SC) of its intention to revise, update and re-submit the documentation previously submitted to the regulator in connection with the proposed listing of Edra on the Main Market of Bursa Malaysia Securities Bhd,” Arul said.

The listing of Edra was initially scheduled to take place in the first quarter of this year.

The IPO was a crucial part of 1MDB’s plan to raise funds to pare down some short-term liabilities – estimated to be RM2bil – taken to purchase its power assets.

Edra currently has a portfolio of 15 power and desalination plants in five countries with an effective power generation capacity of about 5,594MW.

As at March 31, 2014, 1MDB had liabilities amounting to RM49bil and assets of RM51.4bil. Out of this, RM42bil were long-term debts accumulated as it took up large borrowings to build up a portfolio of power plants.

A substantial portion of its assets was in the form of land, namely the Tun Razak Exchange and Bandar Malaysia, that were re-valued several times in the last few years.

Two weeks ago when releasing the findings of its strategic business review that was initiated in early January, 1MDB stated that there were plans to monetise the power generation division in 2015.

The company also stated that it would not undertake any new investments or raise new borrowings.