By Khairie Hisyam
China General Nuclear Power Corporation (CGN) may divest some equity in the power assets it is buying from 1Malaysia Development Berhad (1MDB) down the road, it said this evening, one day after signing a deal to buy the assets for RM9.83 billion in cash.
In a statement issued to the media late this evening, CGN said it intends to further inject capital into the power assets, held under Edra Global Energy, so that the company can successfully deliver its upcoming power plant projects in Malacca and Kedah.
“CGN welcomes Malaysian investors into Edra at the opportune time and does not rule out a possible listing of Edra in the medium term,” said CGN chairman He Yu, adding the total transacted value of the assets comes to RM17 billion.
On Nov 23 1MDB announced that it had signed a share sale agreement with CGN to sell its power assets for RM9.83 billion in cash, more than a month after receiving final bids from three entities for the assets.
The other two bidders were Tenaga Nasional Berhad and Qatari outfit Nebras Power. The sale to CGN is expected to be completed 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.
Apart from the cash payment of RM9.83 billion, CGN will also take over Edra’s associated debt of roughly RM8 billion, said 1MDB previously.
1MDB had originally intended to list the power assets in an initial public offering (IPO) exercise but called off the plans earlier this year, citing a negative perception towards the company as among factors involved.
Management continuity
Despite the change in ownership, the current management team and staff of Edra will remain, according to CGN, saying it is a standard group practice with similar acquisitions.
“As a strategic key investor, CGN strongly believes that a company is its people and that they know how to run the business best in the countries in which they operate,” said CGN.
The group also stated it will comply with all local regulations and guidelines. In its statement, CGN stated it will support all government initiatives including Bumiputera entrepreneurial participation and development in the power sector.
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.
Assuming the cash payment will be channelled towards debt repayment, the sale of Edra will lighten its borrowing by more than RM17 billion, taking into account associated debts of RM8 billion being taken over by CGN post-sale.
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 on Nov 23. “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.”
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