KINIBIZ On Nov 23, 1MDB finally made an unsurprising announcement: China General Nuclear (CGN) has won the bidding for its power assets, offering nearly 25 percent higher than local power player Tenaga Nasional Berhad.
The sale is understandable - 1MDB is desperate for cash. It has RM42 billion in borrowings that it is finding very hard to service. However, the sale of its only cash cow reeks of desperation and raises questions on just how deep is the hole 1MDB is in right now.
According to 1MDB, CGN is paying RM9.83 billion for its power assets held under Edra Global Energy. Payment is cash, which is music to the ears of those tracking 1MDB’s long trail of questionable deals over the years where it got into convoluted deals that often involve payments that are not cash.
As an aside, the sale brings full circle what was a contentious and questionable generosity - recall that 1MDB overpaid by several billion ringgit for the power assets which cost a total of RM12 billion, excluding the upcoming Track 4B 2,000MW power plant in Malacca.
It bears repeating here that immediately after the purchases, 1MDB impaired RM1.2 billion in its accounts as recognition of goodwill for the energy assets. 1MDB had already incurred that amount of loss from the purchase of one of the power assets. And now it will have to incur a further RM1 billion plus in losses from the sale to CGN too.
What was so strategic about acquiring power assets from established Malaysian independent power producers at a ridiculous premium, reselling it for a loss, and in the process putting power assets and expertise into foreign hands?
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This article was written by Khairie Hisyam.