1MDB refutes WSJ article, says acquisitions based on long-term value

1Malaysia Development Bhd (1MDB) has refuted a recent Wall Street Journal (WSJ) article that suggested it had overpaid for its energy assets.

It reiterated that the acquisition was made for its long-term value and not out of political considerations.

“As we have previously stated, we only acquire assets when we are convinced that they represent long-term value, and to suggest that any of our acquisitions were driven by political considerations is simply false,” 1MDB said in a statement.

1MDB said that it takes a long-term view of value when entering into transactions.

“The acquisition price we paid was based on this long-term view, as well as advice received from independent valuation advisers, and the prevailing market conditions at the time.

“On this basis, we believe that the value paid upon asset acquisition – which may have involved a premium in certain instances, as is common when acquiring another business – is commensurate with the existing and future potential of the assets,” he said.

1MDB said that it is important to note that since acquiring the first energy asset in 2012, 1MDB has built a leading international independent power producer (IPP) in South-East Asia.

Edra Global Energy Bhd is the second-largest IPP in Malaysia, and the largest in Egypt and Bangladesh, with additional operations in Pakistan and the United Arab Emirates.

In total, it has a gross installed capacity under management of 6,619MW with an effective capacity of approximately 5,594MW.

Edra, which has some 15 power and desalination plants in five countries, has a book value of between RM16bil and RM18bil, including RM3.3bil in goodwill.

The high goodwill, an indication of the premium paid for the energy assets, is one of the reasons why 1MDB – that has cashflow problems – is under attack from critics, including former Prime Minister Tun Dr Mahathir Mohamad.

1MDB’s financials is among the reasons that is leading to its proposed disposal of a project to build a 2,000MW power plant that it had won based on a competitive tender.

Last week, the Minister of Energy, Green Technology and Water, Datuk Seri Dr Maximus Ongkili, confirmed that Tenaga Nasional Bhd (TNB) would be buying over 1MDB’s 70% stake in its 2,000MW coalfired plant, dubbed Project 3B, held through Edra. The price has not been disclosed yet. The Star has reported that TNB, YTL Power International Bhd and Malakoff Corp Bhd are keen on acquiring Edra and are in discussions with an investment bank on the matter.

Source – The Star 24 June 2015

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