1MDB sells power assets to China's CGN Group to reduce debt

PETALING JAYA - 1Malaysia Development Bhd (1MDB) is exiting the power business after agreeing to sell its entire energy assets to China General Nuclear Power Corp (CGN Group) for RM9.83bil cash.

CGN Group will also assume Edra Global Energy Bhd’s relevant gross debt and cash based on a valuation date as at March 31, 2015.

The deal is expected to be completed in February, the companies said in a joint statement yesterday.

IMDB president and group executive director Arul Kanda Kandasamy described the sale yesterday as a “significant milestone” of the Edra monetisation process.

“CGN Group was a clear winner in this international tender, based on the objectives announced by 1MDB previously, namely value maximisation, acceptable commercial terms and certainty of transaction execution,” he said.

He was quoted as saying earlier this month that the sale of Edra would reduce between RM16bil and RM18bil in debt on 1MDB’s books.

1MDB’s total debts had amounted to RM42bil.

The sale of Edra is the largest announced M&A transaction in Malaysia and one of the largest in the Asian power sector, year to date.

1MDB owns a net generation capacity of 5,594 MW and is the largest independent power producer in Bangladesh and Egypt, according to its website.

Besides investments in plants in Pakistan and the United Arab Emirates, it has 3,112 MW of capacity in Malaysia, making it the nation’s biggest independent power producer after Malakoff Corp Bhd.

Normally, foreign parties are only allowed to own up to 49% share in independent power plants in Malaysia. This is the first time foreigners are allowed to own 100%.

1MDB power assets that were sold to CGN Group are Edra Solar Sdn Bhd, Edra Energy Sdn Bhd, Powertek Energy Sdn Bhd, Jimah Teknik Sdn Bhd, Jimah O&M Sdn Bhd, Mastika Lagenda Sdn Bhd and Tiara Tanah Sdn Bhd.

The sale of its energy business is the first major milestone in the 1MDB rationalisation plan which was presented to the Cabinet on May 29.

1MDB had previously tried to list Edra on the local stock market, but the plan did not go through due to weak investor sentiment.

The initial public offer was cancelled and 1MDB sought to sell off its power assets.

Indicative offers for Edra’s assets were first received in June via an international tender process run by 1MDB’s financial adviser Maybank Investment Bank Bhd.

Rothschild acted as financial adviser to Edra.

“The purchase by CGN Group brings a significant foreign direct investment commitment to Malaysia and is a clear vote of confidence in the Malaysian economy,” Arul Kanda said.

CGN chairman He Yu, in the same statement yesterday, said the investment represented a major commitment by CGN Group as part of a long-term, global diversification initiative.

“We are extremely impressed by the highly regulated, stable and transparent independent power producer framework in Malaysia, which has given us the confidence to make a long-term investment in the country.

“Most important of all, we will ensure uninterrupted power supply, using environmentally friendly technologies and adhere to the fixed terms of the respective power purchase agreements, for the benefit of the people of Malaysia,” he said.