Watts up!
Najib’s administration is leaning towards an arrangement that will call for the national power company, Tenaga Nasional Bhd, to take over 1MDB’s power generation assets
Leslie Lopez, The Edge Review
A deepening financial crisis at 1Malaysia Development Bhd (1MDB), the debt-laden sovereign fund that has been mired in scandal, appears to be pushing Prime Minister Najib Razak’s embattled administration down the road of power-sector reform in the search for a solution.
Faced with a huge build-up in crippling interest payments on the fund’s US$12 billion debt load, the Malaysian government has resolved to push ahead with a full-blown bailout.
Financial executives familiar with the situation say that Najib’s administration is leaning towards an arrangement that will call for the national power company, Tenaga Nasional Bhd, to take over 1MDB’s power generation assets – currently grouped in a private entity called Edra Global Power – in a deal that could be worth as much as RM16 billion (US$4.4 billion).
And to blunt criticism that public money is being used to rescue the state-owned company, the government is considering a plan to wrap the salvage operation around a sweeping overhaul of the national power sector that has long been a source of patronage for the country’s political and business elite.
The buyout will be followed by a proposal calling for the unbundling of Tenaga’s business into three separate entities that will individually house the utility’s power generation, transmission and distribution divisions. The plan is expected to be tabled for discussion by the Cabinet next month.
Proponents of the plan say that the takeover of 1MDB’s power assets, which will add nearly 5.6 gigawatts of generating capacity to Tenaga’s portfolio of power plants, will lay the foundation for a so-called cost-based pool power system, where power producers sell electricity to a central exchange that determines a transparent national pricing structure for electricity tariffs.
“The government needs to come to 1MDB’s rescue, and throwing a power sector review into the mix may make it more palatable,” says a chief executive of a foreign bank, who has tracked Malaysia’s power sector and 1MDB’s troubles.
But getting the plan off the ground won’t be easy.
