By Khairie Hisyam
The average interest rates that 1MDB was earning through its nearly RM4 billion deposits with licensed banks only comes to 0.68% per annum. A rough calculation places 1MDB’s gain from interest on its deposits and placements in banks for 2014 at a mere RM2.3 million.
According to 1MDB’s audited annual financial statements, the fund had RM458.2 million in cash with another RM3.38 billion in both restricted and unrestricted deposits and placement with licensed banks. From the RM3.38 billion, some RM15 million are pledged for certain banking facilities and money in various finance service reserve accounts to service the fund’s debts.
In any case overall this comes to a total of RM3.845 billion in cash and bank balances for 1MDB, which is mostly in Ringgit Malaysia.
In comparison 1MDB’s costs and expenses had risen sharply over a 12-month period up to the financial year ended March 2014 (FY14), contributing greatly to its first full-year loss in four years.
For FY14, 1MDB posted 58.2% higher general and administrative expenses at RM1.36 billion compared to RM859.1 million in FY13. Rising in tandem was 1MDB’s borrowing costs which came in at RM2.39 billion in FY14, 48.5% higher than RM1.61 billion recorded in FY13.
While the average financing costs, or interest rates, for 1MDB’s borrowings are not immediately known, they are much higher than the 0.68% and range from around 5% upwards to as as high as 18% a year.
In terms of operating income, 1MDB posted a small 1.2% rise to RM751.5 million in FY14, as well as in terms of the fund’s share of income from joint ventures and associates, which rose 2.3% to RM44.23 million in FY14.
In addition 1MDB also saw less fair value gains compared to last year, clocking in only RM896.7 million paper profits from revaluing its investment properties in FY14.
For FY14, 1MDB posted RM669.5 million in pre-tax losses from RM4.26 billion revenue, though actual losses would come to RM1.56 billion if the paper profits are disregarded.
In comparison FY13 saw a total of RM2.73 billion in fair value gains for 1MDB, which masked its actual losses which came to RM1.85 billion in that financial year to post RM878 million in pre-tax profits.
RM4.5 billion frozen
Notably 1MDB has some RM4.5 billion that is frozen as collateral with the International Petroleum Investment Company PJSC (IPIC) in exchange for the latter guaranteeing 1MDB’s notes issued in 2013.
The notes raised some US$3.5 billion (RM11.67 billion), meaning the collateral comprising deposits and prepayments comes to 38% of the value raised from the notes issuance.
“The refundable deposit is being held aside as collateral for the guarantee as part of the company’s strategy to list its energy assets,” said 1MDB in its audited annual financial statements. “
This guarantee follows two collaboration agreements between 1MDB and IPIC’s subsidiary Aabar in 2013, which led to a 10-year option being granted to Aabar to acquire up to 49% equity interest in Powertek Investment Holdings Sdn Bhd (PIH).
PIH, a wholly owned unit of 1MDB, is a holding company for 1MDB’s power assets acquired from businessman Ananda Krishnan’s Tanjong Energy.
However the options were cancelled in FY14 after 1MDB paid up to US$250 million (RM833 million) to Aabar Investments PJS to do so, according to its audited accounts.
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