By Khairie Hisyam
Utility player Tenaga Nasional Bhd has submitted a non-binding proposal to buy ailing 1Malaysia Development Berhad (1MDB)’s power assets both local and abroad.
In a regulatory filing, Tenaga said the proposal is for the prospective purchase of five domestic power assets and eight overseas held through 1MDB power unit Edra Global Energy Berhad.
“Tenaga Nasional would like to emphasise that it remains in the initial stages of its assessment of Edra’s power assets,” it said to Bursa Malaysia. “Therefore, there can be no assurance that any transaction will be concluded.”
“Any potential transaction would need to make strong commercial and financial sense and be value accretive to TNB’s shareholders. Any transaction would also be assessed based on the highest standards of corporate governance,” the company added.
The proposal came after a controversial takeover of 1MDB’s majority stake in Track 3B power plant project by Tenaga Nasional recently. For this purpose Tenaga had appointed three banks to raise up to RM9.5 billion through an Islamic bond issuance which would be the largest sukuk globally this year, according to Reuters today.
Malaysia’s Tenaga Nasional Bhd has hired three banks to help raise up to RM9.5 billion through an Islamic bond issue, or sukuk, to develop a greenfield power plant it has taken over from debt-laden state fund 1MDB, IFR reported on Wednesday.
Edra Global Energy had previously been slated for a listing exercise but that was called off abruptly by the Ministry of Finance in early April, one week after appointing CIMB Group to act as advisor for the exercise. According to a previous statement by 1MDB, its stable of power assets under Edra Global is worth some RM13 billion.
Fit to strategy
Edra Global’s power assets would be a “strong fit” to Tenaga’s growth strategy going forward and boost its international expansion efforts, the latter said.
“A combination would help ensure the long-term continuity of steady and competitively priced power to domestic customers and consumers,” said Tenaga Nasional. “The combination would also enable Tenaga Nasional to pursue its strategy of establishing an international footprint in areas where growth in power demand is increasing.”
However a transaction would only happen after Tenaga Nasional completes an in-depth due-diligence on the power assets, it added.
In addition any transaction would also require, among others, fair-and-reasonable clearance from independent advisors on the terms and conditions as well as relevant approvals from authorities, regulators and non-interested shareholders, it said.
Tenaga Nasional is the sole electricity distributor in Peninsular Malaysia and Sabah and is also the single largest power generator in Malaysia. In turn 1MDB’s power holdings make up the second largest independent power producer (IPP) in Malaysia after businessman Syed Mokhtar Albukhary’s Malakoff Corporation, which recently made a comeback to Bursa Malaysia after a previous privatisation.
‘Interest welcome’
In a separate statement, 1MDB said it welcomed Tenaga Nasional’s interest in its power assets and said the proposal is one among several indicative proposals it has received.
“Our Board of Directors will review the various proposals received in due course, following which select parties will be invited by 1MDB’s financial advisor to conduct further due diligence on Edra, culminating in the submission of binding offers for our Board’s consideration,” stated 1MDB.
“In assessing these offers, the Board will be guided by, among other things, value maximisation to 1MDB’s shareholders, deal certainty, and terms that are fair and reasonable,” 1MDB added.
The company had come under fire for a RM42 billion borrowing pile on its books, which it apparently had trouble servicing despite claiming RM51 billion in assets. Among others it had earlier this year received a credit line of RM950 million from the Ministry of Finance, its sole shareholder.
Recent months had seen much controversy over hasty deals for cash including a rushed sale of land in its Tun Razak Exchange development to pilgrimage fund Lembaga Tabung Haji and other investors. More recently 1MDB was named in an expose by the Wall Street Journal as a source of over RM2 billion in money that allegedly found its way to personal bank accounts belonging to prime minister Najib Abdul Razak in early 2013.
The prime minister had since sent a legal letter to the newspaper seeking clarification of the article as a prelude to potential legal action and has insisted he did not take any funds for “personal gain”.
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