BANGI, Nov 29 — The sale of 1Malaysia Development Bhd (1MDB) energy arm Edra Global Energy Bhd took into account the company’s debts, said Deputy Finance Minister Datuk Johari Abdul Ghani.
He said China General Nuclear Power Corp and its units (CGN Group), which bought all of Edra’s assets for RM9.83 billion, also agreed to asssume the firm’s debts of nearly RM8 billion.
“CGN offered RM9.83 billion and took over debts of nearly RM8 billion, so we must look at the combined value (almost RM18 billion).
“The debts were also a liability that was taken into account in the sale, and nobody would would pay so much and absorb the debts if the company had no value,” he told reporters after opening the ministry’s sports carnival at Institut Penilaian Negara (Inspen) here Sunday.
He was asked to comment on former Prime Minister Tun Dr Mahathir Mohamad’s blog questioning the sale of Edra for RM9.83 billion to reduce 1MDB’s debts whereas the company was bought for RM18 billion.
Johari said alll quarters should understand that the sale of Edra was necessary as part of efforts to reduce 1MDB’s debts and restructure the strategic investment firm.
“Otherwise it wouldn’t be able to repay its debts and the government would be forced to take it over, which would expand the fiscal deficit.
“This is what we are trying to avoid.
“Personally, this is a situation where 1MDB had no choice: no response to the proposed IPO, a selling price to local investors that is too low and not enough to repay the debts, so in the end the bidding was open to foreigners,” he explained.
On Nov 23, 1MDB, Edra and its subsidiaries signed share sale and purchase agreements with CGN Group for the sale of 100 per cent of 1MDB’s ultimate ownership in all its energy assets: Edra Solar Sdn Bhd, Edra Energy Sdn Bhd, Powertek Energy Sdn Bhd, Jimah Teknik Sdn Bhd, Jimah O&M Sdn Bhd, Mastika Lagenda Sdn Bhd and Tiara Tanah Sdn Bhd (Edra operating companies).
CGN Group will pay, in cash, an equity value of RM9.83 billion and assume all the relevant gross debt and cash of the Edra operating companies, based on a valuation date as at March 31, 2015.
The transaction, which is expected to be completed in February 2016, is also a major milestone in the 1MDB rationalisation plan, as presented to the Malaysian Cabinet on May 29.
Johari said the involvement of foreign companies in the country’s power generation industry is nothing new.
“The people should understand that the power generation industry involves a lot of foreign firms, sometimes we call in companies like Mitsui and Sumitomo, and CGN has wide experience in this field,” he said.
He said Malaysians should not be worried, because as an independent power producer (IPP), Edra is only involved in power generation while distribution is still fully handled by Tenaga Nasional Bhd (TNB).
“In this industry, there are three components — generation, transmission and distribution — and transmission and distribution remain exclusive to TNB, nobody can take those away,” he said.