Stop misleading the people Tony Pua, your economic sabotage has failed

Media statement by 1Malaysia Development Berhad

1MDB refers to a press statement issued by YB Tony Pua yesterday, where he has made multiple wrong and misleading statements.

YB Tony claims that 1MDB is currently an “empty shell” holding “RM40 billion” of debt. In his attempt to mislead the rakyat, he conveniently forgets to highlight that it is the Public Accounts Committee (PAC), of which he is a member of, that recommended for the vast majority of 1MDB assets to be transferred from 1MDB, to Minister of Finance (Inc) (MOF Inc.).

In consideration for the transfer of, amongst others, TRX, Bandar Malaysia, Pulau Indah land and Air Itam land, 1MDB will receive payments, over time. Those payments, along with asset monetisation proceeds, will be used to meet the principal and interest on the remaining obligations of 1MDB, which primarily comprise long-term bond and sukuk debt, totalling approximately RM32.5 billion at present exchange rates and not the RM 40 billion figure wrongly quoted by YB Tony.

YB Tony further asked, “How in the world is 1MDB “on track to realise a profit?”. In this regard, we refer YB Tony to page 80 of the PAC Report on 1MDB dated 7 April 2016 (available for download on the Malaysian Parliament website).

The information on page 80 was presented to the PAC (of which YB Tony is a member) and provides details of projected future cash-flows relating to the 1MDB rationalisation program, which shows a surplus of approximately RM 3 billion being generated over time. The underlying and conservative assumptions behind the projected cash-flows are described on page 81. Accordingly, with appropriate stewardship and competent development of the real estate under MOF Inc. and monetisation of other assets, it is highly likely that over time, there will be a surplus generated, whether at the 1MDB level or at the level of its 100% shareholder, MOF Inc.

YB Tony purposely misleads the public by stating 1MDB’s RM12.1 billion investments in the power sector resulted in multi billion ringgit losses when 1MDB disposed of its energy interest to CGN for RM 9.3 billion. Not only are the figures quoted by YB Tony completely wrong, he conveniently fails to mention that, whilst the gross purchase consideration was RM 12.05 billion, the companies acquired had RM1.63 billion of cash on balance sheet, which resulted in a net purchase consideration of approximately RM 10.42 billion.

Furthermore, over the period of ownership, approximately RM2.18 billion was generated in dividends, which were largely used to pay interest on the acquisition debt. Accordingly, when the cash, dividends and other costs/impairments are taken into account, upon the sale to CGN at RM9.83 billion cash (not RM 9.3 billion as wrongly claimed by YB Tony), 1MDB achieved near “break even” on its energy investments (note: the final figures are subject to audit confirmation). This achievement is all the more commendable, given the opposition’s campaign of economic sabotage against 1MDB at that time.

YB Tony claimed that 1MDB did not help to solve the problem of Power Purchase Agreements (PPAs) that were overly generous to Independent Power Producers (IPPs) as he claims there has been no reduction to electricity tariffs. YB Tony Pua however confuses the PPA tariff (which 1MDB helped to reduce) with the electricity tariff.

As YB Tony well knows, the PPA tariff is only one component of the electricity tariff, with other components being fuel costs, transmission and distribution costs etc.  It is a fact that 1MDB generated competition during PPA bidding for new power plants and renewal of PPA contracts for existing power plants.

As a result of 1MDB participation, the new plant and existing plant PPA tariffs were reduced by between 1-2 sen per KW/H and 1MDB was the lowest bidder in all tenders that it won. Based on an 85% capacity factor, a 1 sen tariff per KW/H reduction on a 2000 MW power plant over 20 years can result in up to RM 3 billion of cost savings over the life of a PPA, for one power plant. The savings are multiplied significantly across other PPAs. This in turn lowers the overall PPA tariff cost to TNB, which is the sole buyer under all PPAs, and contributes towards the electricity tariff.

YB Tony should stop misleading the rakyat, and accept that the opposition’s unpatriotic economic sabotage of 1MDB for their own political gain has failed.