By Khairie Hisyam
Tony Pua
Ailing 1Malaysia Development Bhd (1MDB) may be taking undue profit from its proposed divestment in Bandar Malaysia development project as it already received full payment in respect of costs that it is now trying to recover, claims a member of parliament (MP).
In a statement issued over the weekend, Petaling Jaya Utara MP Tony Pua said 1MDB should return any recouped costs associated with the relocation of Sungai Besi air base which currently sits on the development project as the full amount was already advanced to 1MDB in 2012.
“The federal government has already paid 1MDB the RM2.7 billion relocation costs in full when 1MDB acquired the land in 2012,” claimed the MP. “In fact, 1MDB not only received payment for the relocation costs (but they also) took on an additional RM2.4 billion sukuk bond to fund the same exercise.”
It would therefore be a “major travesty” if 1MDB keeps any recouped costs as it would mean Malaysian taxpayers ultimately bear the relocation costs, said Pua further.
“If 1MDB were to receive payments from (the consortium) for the relocation cost, such receipts must be returned to the federal government and not retained as undeserved income for 1MDB,” said Pua.
The relocation of the air base was a condition attached to the sale of the 486-acre development land by the federal government to 1MDB in 2012. In a previous statement, 1MDB said the relocation costs total RM2.7 billion, of which RM1.9 billion remains outstanding.
In turn the outstanding costs as well as the sukuk in question are the subjects of ongoing negotiations involved in 1MDB’s proposed 60% interest divestment in the Bandar Malaysia development project to a consortium comprising Iskandar Waterfront Holdings (IWH) and Hong Kong-listed China Railway Group.
To recap, 1MDB is selling 60% interest in the project to the consortium for RM7.41 billion in total, although only RM5.28 billion of this amount is for equity interest in a special purpose vehicle (SPV) to be formed to reflect the new shareholding structure.
The remaining amount is intended to reflect any assumed liabilities on the consortium’s part, said 1MDB, and remains fluid due to ongoing discussions. The liabilities being discussed are a sukuk worth RM2.4 billion in notional value at maturity and the remaining relocation costs of roughly RM1.9 billion.
The new SPV would in turn acquire all 16 land parcels that make up the 486-acre site. According to 1MDB, the transaction is slated for completion by end-June 2016.
The divestment is slated to reduce 1MDB’s debts by RM7.41 billion. This in turn forms part of a total debt reduction of RM40.4 billion across three major deals done throughout 2015, said Prime Minister Najib Abdul Razak to Bloomberg on Dec 31, 2015.
The prime minister chairs 1MDB’s advisory board and is also finance minister. The Finance Ministry in turn is the sole shareholder of 1MDB via Minister of Finance Inc.
1MDB had been grappling with RM42 billion in borrowings that it is struggling to service, based on 2014 annual accounts for its financial year ended March 31, 2014. The FY15 accounts are not yet available.
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