ValueInvestor
Banned
- Joined
- Jul 2, 2015
- Messages
- 5,252
- Reaction score
- 1
Latest News, Corporate
Top Stories
Highlight
Malaysia’s 1MDB sells energy assets to China General Nuclear
By Bloomberg / Bloomberg | November 23, 2015 : 9:24 PM MYT
Printer-friendly versionSend by emailPDF version
Translated by Google Translator:
Select Language*▼
Share on facebook
Share on twitter
KUALA LUMPUR (Nov 23): 1Malaysia Development Bhd. agreed to sell its power assets to China General Nuclear Power Corp. for 9.83 billion ringgit ($3.3 billion) as the state investment company moved one step closer to winding down operations after its mounting debt raised investor concern.
China General Nuclear will assume all gross debt and cash of Edra Global Energy Bhd. and its subsidiaries, according to a joint statement released Monday. The transaction is expected to be completed in February.
1MDB, whose advisory board is headed by Prime Minister Najib Razak, announced plans in February to dismantle its assets after it drew criticism from lawmakers for accumulating about 42 billion ringgit of debt in less than five years of existence. The company came under added scrutiny after it almost defaulted on a loan and clouded the sovereign’s credit rating with its borrowings weighing on the government’s contingent liabilities.
"The sale will alleviate the prevailing concern over 1MDB’s debt,” said Kenny Yee, head of research at Kuala Lumpur-based BIMB Securities Sdn. “It should be viewed positively by the market because this is a foreign direct investment.”
Tenaga Trumped
China General Nuclear won the international tender for Edra, trumping Malaysia’s energy producer Tenaga Nasional Bhd. The ringgit is down about 19% against the US dollar this year, the worst-performing currency in Asia, and has made it cheaper for foreign bidders to buy the 1MDB power plants.
1MDB owns a net generation capacity of 5,594 megawatts and is the largest independent power producer in Bangladesh and Egypt, according to its website. Besides investments in plants in Pakistan and the United Arab Emirates, it has 3,112 megawatts of capacity in Malaysia, making it the nation’s biggest independent power producer after Malakoff Corp.
Tenaga, a Kuala Lumpur-listed utility controlled by the nation’s sovereign fund, is wary of overpaying because it needs to justify any acquisition to shareholders, people with knowledge of the matter said earlier this month.
1MDB has been the subject of overlapping investigations amid allegations of financial irregularities, although an initial Auditor General’s report didn’t reveal any suspicious activity. Najib has resisted calls from ex-premier Mahathir Mohamad to step down over the fund’s performance.
IPO Cancelled
The company faced cash-flow problems after a planned initial public offering of Edra faced delays amid unfavourable market conditions, President Arul Kanda said Oct 31. The listing plan was later cancelled as the company opted for a sale of the assets.
The sale is a "significant milestone of the Edra monetisation process," Kanda said Monday. "The purchase by CGN Group brings a significant foreign direct investment commitment to Malaysia and is a clear vote of confidence in the Malaysian economy."
Foreign investors are normally only allowed to own as much as 49% of Malaysian power producers unless they obtain a waiver as the government provides gas to electricity plants at subsidized prices. While the statement stated the Chinese company is buying all of 1MDB’s ownership in the energy assets, it didn’t say whether the buyer has been given an exemption.
‘Major Commitment’
China General Nuclear will "adhere to the fixed terms of the respective power purchase agreements, for the benefit of the people of Malaysia,” Chairman He Yu said in the joint statement. "This investment represents a major commitment by CGN Group as part of a long-term, global diversification initiative."
The state-owned company would join coal producer China Shenhua Energy Co., which is also a major power generator, in seeking electricity deals in Southeast Asia. Shenhua said Friday a consortium it’s leading ranked first on a shortlist of preferred bidders for the development of a coal-fired project in Indonesia.
Maybank Investment Bank Bhd. advised 1MDB on the transaction, while Rothschild & Co. and HSBC Holdings Plc acted as financial advisers to Edra and China General Nuclear respectively.
Related Articles
Top Stories
Highlight
Malaysia’s 1MDB sells energy assets to China General Nuclear
By Bloomberg / Bloomberg | November 23, 2015 : 9:24 PM MYT
Printer-friendly versionSend by emailPDF version
Translated by Google Translator:
Select Language*▼
Share on facebook
Share on twitter
KUALA LUMPUR (Nov 23): 1Malaysia Development Bhd. agreed to sell its power assets to China General Nuclear Power Corp. for 9.83 billion ringgit ($3.3 billion) as the state investment company moved one step closer to winding down operations after its mounting debt raised investor concern.
China General Nuclear will assume all gross debt and cash of Edra Global Energy Bhd. and its subsidiaries, according to a joint statement released Monday. The transaction is expected to be completed in February.
1MDB, whose advisory board is headed by Prime Minister Najib Razak, announced plans in February to dismantle its assets after it drew criticism from lawmakers for accumulating about 42 billion ringgit of debt in less than five years of existence. The company came under added scrutiny after it almost defaulted on a loan and clouded the sovereign’s credit rating with its borrowings weighing on the government’s contingent liabilities.
"The sale will alleviate the prevailing concern over 1MDB’s debt,” said Kenny Yee, head of research at Kuala Lumpur-based BIMB Securities Sdn. “It should be viewed positively by the market because this is a foreign direct investment.”
Tenaga Trumped
China General Nuclear won the international tender for Edra, trumping Malaysia’s energy producer Tenaga Nasional Bhd. The ringgit is down about 19% against the US dollar this year, the worst-performing currency in Asia, and has made it cheaper for foreign bidders to buy the 1MDB power plants.
1MDB owns a net generation capacity of 5,594 megawatts and is the largest independent power producer in Bangladesh and Egypt, according to its website. Besides investments in plants in Pakistan and the United Arab Emirates, it has 3,112 megawatts of capacity in Malaysia, making it the nation’s biggest independent power producer after Malakoff Corp.
Tenaga, a Kuala Lumpur-listed utility controlled by the nation’s sovereign fund, is wary of overpaying because it needs to justify any acquisition to shareholders, people with knowledge of the matter said earlier this month.
1MDB has been the subject of overlapping investigations amid allegations of financial irregularities, although an initial Auditor General’s report didn’t reveal any suspicious activity. Najib has resisted calls from ex-premier Mahathir Mohamad to step down over the fund’s performance.
IPO Cancelled
The company faced cash-flow problems after a planned initial public offering of Edra faced delays amid unfavourable market conditions, President Arul Kanda said Oct 31. The listing plan was later cancelled as the company opted for a sale of the assets.
The sale is a "significant milestone of the Edra monetisation process," Kanda said Monday. "The purchase by CGN Group brings a significant foreign direct investment commitment to Malaysia and is a clear vote of confidence in the Malaysian economy."
Foreign investors are normally only allowed to own as much as 49% of Malaysian power producers unless they obtain a waiver as the government provides gas to electricity plants at subsidized prices. While the statement stated the Chinese company is buying all of 1MDB’s ownership in the energy assets, it didn’t say whether the buyer has been given an exemption.
‘Major Commitment’
China General Nuclear will "adhere to the fixed terms of the respective power purchase agreements, for the benefit of the people of Malaysia,” Chairman He Yu said in the joint statement. "This investment represents a major commitment by CGN Group as part of a long-term, global diversification initiative."
The state-owned company would join coal producer China Shenhua Energy Co., which is also a major power generator, in seeking electricity deals in Southeast Asia. Shenhua said Friday a consortium it’s leading ranked first on a shortlist of preferred bidders for the development of a coal-fired project in Indonesia.
Maybank Investment Bank Bhd. advised 1MDB on the transaction, while Rothschild & Co. and HSBC Holdings Plc acted as financial advisers to Edra and China General Nuclear respectively.
Related Articles
