PAS and Amanah question sale of Edra to CGN
Published:  Nov 25, 2015 8:35 AM
Updated: 8:48 AM

PAS today questioned whether the takeover of 1MDB's Edra Global Energy Bhd by China General Nuclear Power Corporation (CGN) was truly a success, as 1MDB had invested RM12 billion for the purchase of the independent power producers, and the sale of CGN was at only RM9.83 billion .

PAS deputy president Tuan Ibrahim Tuan Man said the price 1MDB's paid for Edra did not include the RM6 billion in bad debts it had to incur from the IPPs.

“Where is the profitability of such a transaction. According to information given by 1MDB to the public on June 3, 2015, it invested close to RM12 billion to purchase assets of the IPPs (RM8.5 billion for Powertek, RM2.3 billion for KLPP and RM1.2 billion for Jimah). This does not include the RM6 billion bad debts it had to absorb.

“The sale to CGN is at RM9.83 billion. Isn't the difference of RM2.17 billion a loss?” he asked in a statement issued today.

If so, why is it hailed a success, Tuan Ibrahim asked, adding that it was a profit only if 1MDB managed to reduce its debts from the profit of the sale, or that it received a profit from the sale.

Here, the PAS deputy president said, it's akin to selling a house below the market price to try and reduce debt.

He asked further what other assets would 1MDB sell to reduce its debt, besides the land bank which it had obtained at a low price at the Tun Razak Exchange in Kuala Lumpur and the air force base at Sungai Besi.

“What is obtained by the country through 1MDB is only to bear with its debt. What is 1MDB's business dealings besides accumulating debt, and paying debts from the sales of its assets,” queried Tuan Ibrahim.

'Clever account method?'

Parti Amanah Negara strategic director, Dr Dzulkefly Ahmad also questioned the sale asking whether it was merely “a clever accounting method” of writing off the difference between purchase and resale as investment losses.

This, he said is thus is akin to cleaning up 1MDB's account books.

“It maybe that 1MDB president and chief executive officer, Arul Kanda would have to explain this, but might it not be a case of the original perpetrators, some might say, "could have gotten away with this 'sin'?” he asked.

“Last, but not least – and I surely would have to be presumptuous at this - but I wish to ask whether the CGN Group has been promised any future nuclear projects as a "quid pro quo" for "salvaging" or bailing out 1MDB,” he posed further, in a statement questioning the sale.

Dzulkefly said whether the transaction was termed rationalisation or monetisation, the fact remains that no one doubts that the sale of Edra to CGN, was meant to cut 1MDB's heavy debt burden.

1MDB's "distress sale" of 100 percent of its ownership in energy assets to a foreign party, after a failed IPO, also made him wonder about its motives.

“Waiving the 49 percent limit on foreign ownership of strategic assets underscores it all. The failed initial public offering of Edra did not speak well of its financial state.

“So the foreigner was ostensibly willing to pay 20 percent more than our national utility company, Tenaga Nasional Berhad. Tenaga was sure of not wanting to pay anything more than what it was worth.”

An analyst at Hong Leong Investment, according to the former Kuala Selangor MP, said TNB did not want to be accused of bailing out 1MDB, hence it was not willing to contest CGN's offer.

Dzulkefly said what was more puzzling was why CGN was willing to do it.

“Given the huge cost of borrowing, how could one ever talk of making any profit on the sale of these power assets anymore,” he said.

Goldman Sachs was initially pulled in for the IPO for Edra set at RM11 billion but it did not materialise.

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