1MDB may make loss on power assets sale

While the embattled 1MDB is banking on the sale of its power assets as the bids close tomorrow, The Wall Street Journal (WSJ) reported that the fund may not make a profit on the sale.

“People with knowledge of the pending sale said it is increasingly unlikely 1MDB would get back what it paid for the power assets.

“One of the people said Tenaga Nasional Bhd (TNB) is likely to proceed with the deal only if it made strategic sense.

“Given that Tenaga is already listed, the company wouldn’t want to be seen as bailing out another state fund,” reported WSJ today citing a source.

The financial daily reported few potential buyers remain for the power plants, including TNB and Qatari government-backed power-plant operator Nebras Power QSC, “as other possible buyers stepped back from the deal or weren't invited to bid in the final round, people familiar with the matter said”.

“A smaller number of bidders could mean a lower price for the power plants,” wrote WSJ.

“Other foreign and domestic firms had earlier looked at Edra but were either not invited to make final-round bids or dropped out.

“It isn’t clear yet if Tenaga or Nebras Power, controlled by state-owned Qatar Electricity and Water Co, have submitted their final bids,” it added.

The financial daily said 1MDB, Tenaga and Nebras Power did not respond to their requests for comment.

WSJ pointed out that 1MDB appears to have overpaid to acquire the power assets in 2012 at RM12 billion.

Further, Association of Water and Energy Research Malaysia’s S Piarapakaran was reported on Tuesday commenting that 1MDB's intention to retain its 30 percent stake will make the bid less attractive.

“We also don’t know which assets are bundled within Edra. 1MDB initially wanted to bundle its brownfield Project 3B in an IPO listing that was later shelved and sold directly to TNB,” Piarapakaran was quoted saying in Malaysian Reserve.