By Khairie Hisyam
Ailing 1Malaysia Development Bhd (1MDB) has executed a deal to sell its power assets to China General Nuclear Power Corp (CGN Group) for RM9.83 billion, more than a month after receiving final bids from three interested parties.
In a statement today, 1MDB said it is selling its entire equity in all its power assets held under Edra Global Energy to CGN Group for cash. CGN will also assume all associated debt and cash in Edra via the sale, slated for completion by February 2016.
“CGN Group was a clear winner in this international tender, based on the objectives announced by 1MDB previously, namely value maximisation, acceptable commercial terms and certainty of transaction execution,” said 1MDB president and group executive director Arul Kanda. “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.”
Earlier on Oct 16, 1MDB announced that it had received final, binding and fully funded bids from three parties for the power assets, though it did not specify bidders’ identities at the time. Tenaga Nasional, the only local bidder, issued a separate statement announcing its bid.
Sources told KINIBIZ that the other two parties were CGN Group and Qatari outfit Nebras Power. Tenaga Nasional’s bid was believed to be in the region of RM8 billion, meaning the winning bid was almost 25% higher.
Following the sale Edra Global’s staff are committed to ensuring continuity, said Mark Ling, Edra Global’s president and executive director. “Edra has successfully integrated what was originally 13 power plants across five countries, into one cohesive and strong platform, that practises the highest of international standards.”
The sale concludes 1MDB’s attempts to monetise its power assets following its rationalisation plan announced in February, which also involves the intended sale of other assets as 1MDB grapples with some RM42 billion in borrowings that it is finding difficult to service.
According to 1MDB, indicative offers for the power assets were first received in June 2015 via an international tender process managed by Maybank Investment Bank.
“The sale is the largest announced mergers and acquisitions transaction in Malaysia and one of the largest in the Asian power sector, year to date,” said 1MDB. “More importantly, this transaction marks the achievement of the first major milestone in the 1MDB rationalisation plan, as presented to the cabinet of Malaysia on May 29, 2015.”
CGN Group chairman He Yu said that the investment represents a major commitment by the group as part of a long-term, global diversification drive. “We are extremely impressed by the highly regulated, stable and transparent independent power producer framework in Malaysia, which has given us the confidence to make a long-term investment to the country.”
The CGN chairman further promised to ensure uninterrupted power supply following the takeover of the Edra Global energy assets.
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