1MDB says critics wrong; it broke even on Edra sale

Modified 29 Nov 2015, 12:17 pm

The state investment company 1MDB said it had managed to break even on the sale of its stake in Edra Global Energy Bhd, despite suggestions on contrary by former prime minister Dr Mahathir Mohamad.

The company said in Edra's sale to the China state-owned China General Nuclear Power Corp (CGN), 1MDB would receive RM7.43 billion.

In addition, it said, GGN Group will be taking over Edra's debts worth RM7.43 billion.

“Accordingly, through cash receipts and debt transfer, 1MDB will achieve debt reduction of up to RM17 billion, which is well within the anticipated RM16 billion to RM18 billion range per the rationalisation plan,” it said in a statement today.

It said the debt reduction is on top of RM2 billion in dividends that 1MDB has received throughout its ownership of Edra's assets.

“Accordingly, 1MDB has essentially 'broke even' on its investment, through an international tender process, despite having to sell its assets whilst under sustained and misleading attacks from the opposition and Tun Mahathir himself,” it said.

1MDB had bought Edra for RM12 billion about three years ago, and inherited a debt of about RM6 billion in the process.

Dr M's queries

Yesterday, Mahathir had raised questions in his blog on how the sale of the energy assets to CGN announced on Monday last week is supposed to reduce 1MDB's debt.

Mahathir also queried on how 1MDB's US dollar-denominated debts are reduced, since the ringgit has been depreciating against the dollar, from RM3.20 per US$1.00 at the time of the purchase to RM4.20 per US$1.00 at the time of the sale.

"If the money borrowed by 1MDB is in ringgit, the loss would be minimal. But if 1MDB had borrowed in US dollars, it stands to lose RM1 for every dollar borrowed.

"In other words, what 1MDB gets from the sale will not be able to fully pay off the debts in US dollars raised by 1MDB," he said.

However, 1MDB countered that there is more than enough ringgit-denominated debt to be settled with the RM9.83 billion cash proceeds that it will be receiving from Edra's sale.

It said out of 1MDB's RM42 billion debt, RM19.82 billion is denominated in ringgit and RM22 billion is denominated in US dollars.

As for the US dollar denominated debt, 1MDB said it intends to settle is US$3.5 billion bond with International Petroleum Investment Company (Ipic) through an 'asset-for-debt' swap.

“This envisages 1MDB transferring to Ipic, 1MDB assets comprising USD denominated cash deposits and USD denominated fund units, in return for Ipic taking over the USD3.5 billion of bonds that it has guaranteed,” it said.

1MDB also dismissed Mahathir's suggestion that price fixing may see the government pay more for electricity generated from Edra's assets.

“Tun Mahathir has also misled his blog readers by failing to mention that the IPP tariff for the Edra assets is fixed for the life of the PPA (power purchase agreement) period.

“On average across all the Edra power plants, this is for the next 10 years. So, there is no question of the IPP tariff being increased for the life of the PPA, despite the change of ownership,” it said.

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