A QUESTION OF BUSINESS | The signing of the power purchase agreement (PPA) last week between national power utility Tenaga Nasional Bhd and Edra Energy Sdn Bhd, formerly owned by Malaysia’s infamous 1MDB and now owned by China company CGN Group, puts Edra under public scrutiny yet again.

This is a good time to note the enormous, potentially adverse implications that Edra has on our energy industry.

First, ever since independent power producers (IPPs) were introduced in the 90s, this is the first time that Tenaga is signing a deal with a 100 percent foreign-owned entity - all previous PPAs were signed with locally owned companies which have at least 30 percent bumiputera participation.

Second, the deal clearly shows that future development of IPPs were included in the sale price of RM9.83 billion paid by CGN to 1MDB, as pointed out by an article in The Sun newspaper.

This has major implications and may indicate that not sufficient account was taken of this in the sale price.

According to the article, at the time of the announcement of the sale in 2015, 1MDB held two project awards that were yet to the developed, a 2,000MW combined cycle gas turbine venture and a 10x50MW utility scale solar power plant, which are also in the list of assets sold. At the time, no confirmation was made on whether the rights had been transferred to CGN.

1MDB agreed to sell Edra Global Energy to CGN Group for RM9.83 billion cash in November 2015 with the sale completed March 2016.

1MDB had paid a total of just over RM12 billion for the power assets earlier, all owned by Malaysian entities - RM8.5 billion from Ananda Krishnan’s Tanjong Energy Ventures renamed Powertek Energy Group, RM2.3 billion from the Genting group and RM1.23 billion for Jimah Energy Ventures.

Even so, analysts felt that CGN overpaid for the assets by about RM1 billion. However, with future power development ventures included, it looks like overpayment, if any, may have been a lot smaller.

But consider the implications of this - prime power assets, not just in Malaysia but in other countries as well, were sold off to a foreign company from China, basically switching ownership of these assets out of the country. 1MDB is fond of saying that it is a strategic development company owned by the government - how strategic is that?

Despite the overpayment, 1MDB’s only earning assets within its rather dubious acquisitions were the power assets under Edra.

It is telling that despite loans at one stage of RM42 billion in its books and few assets to show, it had to sell Edra to quash bank debts which were becoming fast due - clear evidence of major problems at 1MDB.

Some of the bond issues were taken to buy the energy assets but were diverted elsewhere.

There is legitimate concern that this rescue of 1MDB by CGN is a quid pro quo for other China deals such as the RM55 billion East Coast Rail Line project and the RM40-80 billion KL-Singapore high-speed rail...