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Thread: Finance: IMDB, a potential time bomb in the making

  1. #1
    Join Date
    Oct 2008

    Finance: IMDB, a potential time bomb in the making

    Wednesday, 13 April 2011 17:39
    Anwar: Najib using1MDB as slush fund to prop up Taib and his cronies

    Written by Anwar Ibrahim

    As you may recall, I raised my concerns about 1MDB in September 2010 when Pakatan Rakyat exposed how the fund, which was already allocated RM5 billion in 2009 via government bonds, was planning to raise another RM10 billion. That would have raised the fund’s liabilities to RM15 billion by 2013, which is four times the value of bonds issued for PKFZ that amounted to RM3.68 billion.

    To hoodwink the Rakyat, Dato’ Seri Najib said that 1MDB had in fact declared a profit of RM425 million in the first year of operation. He never told us how.

    We have today 1MDB’s financial statements that expose BN’s blatant abuse of government funds and how it continues to mismanage the country.

    1MDB was able to declare a profit for 31 Mac 2010 because it entered into a very suspicious transaction tantamount to a blatant attempt to deceive the Rakyat. The profit declared was nothing more than an accounting entry to hide a trail of arrangement to create slush funds for BN.

    Hardly five months after paying RM3.5 billion in cash for an investment in a joint venture with PetroSaudi of Saudi Arabia, 1MDB sold the investment back to the owners of the Saudi concern for RM4.1 billion.

    On the surface this looks like a stunning financial return; a roughly RM615 million gain that helped 1MDB show profit.

    But careful reviews of the 1MDB’s financial statements show a different picture. PetroSaudi, which received cash when 1MDB bought the stake, is now paying for the transaction through an 11-year loan scheme that will only be fully repaid in 31 March 2021.

    Why such a sweetheart financial arrangement?

    Nearly 70% of 1MDB’S original capital is now tied-up in a loan, which there is no certainty it will be paid.

    PetroSaudi and many of its associates are companies incorporated in tax havens, such as Cayman Islands and the British Virgin Islands. Therefore, there will not be any transparency of the transactions between 1MDB and PetroSaudi and the latter’s associates which will remain to be shrouded in secrecy.

    What is even more astonishing is that the deal to sell the investment was done on 31 March 2010, which is the last day of the financial year. This sleight of hand accounting is a blatant attempt to show the dubious profit that Dato’ Seri Najib declared.

    What is also as explosive is the Taib Mahmud’s connection to 1MDB and the dubious transactions it recorded.

    Last year PetroSaudi paid over RM1.5 billion to takeover UBG Bhd, the financial arm of the business empire owned by Taib Mahmud’s family that was facing difficulties.

    Where did that money come from?

    The financial statements strongly suggest that 1MDB’s financial merry-go-round is clearly a political slush created by the BN and Najib to enrich cronies and bail them out.

    Therefore, in light of the massive and unprecedented spending and political bribery seen in this Sarawak election, Pakatan Rakyat demands the following:

    An appointment of a special audit to probe into the transactions involving 1MDB, PetroSaudi and UBG to ascertain whether or not government money has been used for a slush political fund;

    The immediate halt of the company’s efforts to raise more funds from the banks until such probe is completed;

    A freeze on any attempt by BN to transfer any government property into 1MDB, such as the plan to award the company the prime piece of real estate in Jalan Cochrane; and

    A full disclosure on who is behind PetroSaudi and 1MDB to convince the Rakyat that the company is financially sound to meet all its obligations to repay the loan.
    Anwar Ibrahim is the Opposition Leader and the MP for Permatang Pauh. He is also the former deputy prime minister and finance minister of Malaysia.

  2. #2
    Join Date
    Oct 2008

    Finance: IMDB, a potential time bomb in the making

    HOW Sg Besi Air Force Land Was Fixed!

    By Zakri Ali Rangkuti
    1 photo

    23th June 2011

    Urges the Public Accounts Committee to conduct an inquiry into the National Fund Balance Purchase and Sales Transactions in 1MDB PetroSaudi Investments Limited by 1MDB with PetroSaudi International Limited.

    In the debate on the Supplementary Supply Bill 2011 on June 20, 2011, I have called, among others that the Public Accounts Committee to investigate the transactions of purchase and sale of investments in 1MDB PetroSaudi Limited by 1MDB with PetroSaudi International Limited. The call was made ​​because based on the report of auditors, investment purchases and sales transactions are suspicious.

    It involves the announcement of profits of RM425 million for the first year of operations ending March 31, 2010 by the Prime Minister as Chairman of the Advisory Board on October 8, 2010 1MDB and Chief Executive Officer Sharol 1MDB Halmi on October 12, 2010. Gains derived among others included the sale of investments in 1MDB PetroSaudi Limited joint venture company between 1MDB and PetroSaudi International Limited.

    In this transaction 1MDB invested RM3.5 billion in PetroSaudi 1MDB Limited ​​in cash. In less than five months, 1MDB resold these investments to their partners, that is, PetroSaudi International Limited at a price of RM4.1 billion and gained profits of RM615 million.

    However, payment for the sale of this investment is made ​​either by installment or deferred payment for 11 years. This means that the turnover of RM4.1 billion can only be fully realised by March 31, 2023 based on sales transactions being made ​​on the last day of closing the accounts 1MDB March 31, 2010.

    1MDB's ability to obtain repayment of RM4.1 billion is undoubtedly based on a special note made ​​by the Auditor KPMG report on the audit report of the accounts of 1MDB ended March 31, 2010.

    Note this special read as follows: -

    "The Group and the Company held notes receivable amounting to RM4, 139,125,000 as at 31 March 2010. A valuation was performed by an independent financial advisory firm to support the assessment of the appropriateness of the carrying value of the notes receivable as at 31 March 2010. This valuation was carried out based on Certain sets of assumptions. Should it be TLP that these assumptions are critical to the result of the assessment. The notes receivable are backed by a corporate guarantee by the ultimate Issued holding company of 1MDB PetroSaudi Limited, PetroSaudi International Limited PSI). Management believes that PSI is in good financial standing and has the Ability to meet all Obligations required as documented in the Corporate Guarantee Agreement. "

    This note explains the KPMG Auditor is solely dependent on the management acknowledgement of 1MDB that PetroSaudi International Limited has a good financial position and able to meet all financial claims as contained in its Corporate Guarantee Agreement documents. Auditor KPMG did not provide assurance whether the outstanding debts of RM4.1 billion can be paid by PetroSaudi International Limited because it is not a guarantee of the Bank or the Government.

    Following the call when debating the Supplementary Supply Bill 2011 Act, I wrote a letter dated 22 June 2011, requesting for a Public Accounts Committee's inquiry into this matter in accordance with the provisions of the Meeting Procedure 77 (1) (d):

    1) Assess the financial position, shareholders, nominees, and the management of either PetroSaudi International Limited has the ability to pay debts of RM4.1 billion to 1MDB as claimed by the management.

    2) To investigate the source 1MDB get to pay for investments in 1MDB PetroSaudi Limited RM3.5 billion in cash. Is it the proceeds of a bond guaranteed by the Government?

    3) Investigate the assessment made ​​by management on 1MDB PertroSaudi Limited 1MDB when deciding to invest RM3.5 billion in this joint venture.

    4) Investigate the business activities 1MDB PetroSaudi Limited for 1MDB to be able to sell its investment in such a short period of less than 5 months with a profit of RM615 million from the investment of RM3.5 billion. This means a return of 17.6% or 42% based on the annual rate of return (Annualized rate of return). This investigation should be upon 1MDB as a government investment agency that is not involved in the activities of international financial syndicates that are suspicious and possibly criminal.

    5) Investigate the place or location PetroSaudi International Limited and its group of companies, including 1MDB PetroSaudi Limited was incorporated. Is it true that PetroSaudi International Limited, is incorporated in the Cayman Islands or British Virgin Islands and is not directly related to the petroleum industry and individuals or organizations from Saudi Arabia?

    6) To investigate whether the government is exposed to the investment or loan guarantees made ​​by 1MDB?

    I urge the National Public Accounts Committee to investigate this case because it involved the Prime Minister and Minister of Finance cum Chairman of the 1MDB Advisory Board and the issuance of bonds RM5 billion guaranteed by the Government. It is understood up to RM15 billion of bonds to be issued to finance 1MDB. In the first 6 months of observation accounts 2011 to 1 September 2010, I found 1MDB made a loss of RM158.3 million.

    1MDB concession awarded the most valuable land in Kuala Lumpur at the RMAF base in Sungai Besi area of 196.6 hectares, while the Air Force Base will be transferred to Sendayang, Negeri Sembilan. Development at the Sungai Besi RMAF Base involves collaboration between 1MDB (30%), Armed Forces Fund Board (30%) and Desmond Lim of Malton Berhad (40%).

    In statements issued, this property will be developed as a Malaysia City to strengthen Kuala Lumpur's competitiveness to attract local and foreign investors. This announced development involves only the large returns to investors. Not directly referred to or provided for in the master plan of housing development for low-income citizens and housing for ex-soldiers in dire need of housing in the city.


    Posted by Switch Tubes

    Artikel asal.


    By Zakri Ali Rangkuti (Albums) · Updated 4 hours ago

    23hb Jun 2011

    Menggesa Jawatankuasa Kira Kira Wang Negara Menyiasat Transaksi Pembelian Dan Penjualan Pelaburan dalam 1MDB PetroSaudi Limited oleh 1MDB dengan PetroSaudi International Limited

    Dalam perbahasan Rang Undang-undang Perbekalan Tambahan 2011 pada 20 Jun 2011, saya telah menggesa antara lain agar Jawatankuasa Kira-kira Wang Negara menyiasat transaksi pembelian dan penjualan pelaburan dalam 1MDB PetroSaudi Limited oleh 1MDB dengan PetroSaudi International Limited. Gesaan ini dibuat kerana berdasarkan laporan juruodit, transaksi pembelian dan penjualan pelaburan tersebut yang mencurigakan.

    Ia melibatkan pengumuman keuntungan RM425 juta untuk operasi tahun pertama yang berakhir 31 Mac 2010 oleh Perdana Menteri selaku Pengerusi Lembaga Penasihat 1MDB pada 8 Oktober 2010 dan Ketua Pegawai Eksekutif 1MDB Sharol Halmi pada 12 Oktober 2010. Keuntungan diperolehi antara lain hasil penjualan pelaburan dalam 1MDB PetroSaudi Limited iaitu syarikat usahasama diantara 1MDB dengan PetroSaudi International Limited.

    Dalam transaksi ini 1MDB melabur dalam 1MDB PetroSaudi Limited sebanyak RM3.5 billion yang dibuat secara tunai. Tidak sampai 5 bulan kemudian 1MDB menjual semula pelaburan ini kepada rakan usahasama mereka iaitu PetroSaudi International Limited dengan harga RM4.1 billion dan memperolehi keuntungan sebanyak RM615 juta.

    Walaubagaimana pun bayaran untuk penjualan pelaburan ini dibuat samaada secara ansuran atau bayaran tertangguh selama 11 tahun. Ini bermakna perolehan RM4.1 billion ini hanya dapat diperolehi sepenuhnya menjelang 31 Mac 2023 berdasarkan transaksi penjualan ini dibuat pada hari akhir penutupan akaun 1MDB iaitu 31 Mac 2010.

    Keupayaan 1MDB memperolehi balik RM4.1 billion ini amat disangsikan berdasar nota khas yang dibuat oleh Juruodit KPMG dalam laporan oditnya keatas akaun 1MDB yang berakhir 31 Mac 2010.

    Nota khas ini berbunyi seperti berikut:-

    “The Group and the Company held notes receivable amounting to RM4,139,125,000 as at 31 March 2010. A valuation was performed by an independent financial advisory firm to support the assessment of the appropriateness of the carrying value of the notes receivable as at 31 March 2010. This valuation was carried out based on certain sets of assumptions. It should be noted that these assumptions are critical to the result of the assessment. The notes receivable are backed by a corporate guarantee issued by the ultimate holding company of 1MDB PetroSaudi Limited, PetroSaudi International Limited PSI). Management believes that PSI is in good financial standing and has the ability to meet all obligations required as documented in the Corporate Guarantee Agreement”.

    Nota ini menjelaskan Juruodit KPMG semata-mata bersandar kepada perakuan pengurusan 1MDB bahawa PetroSaudi International Limited mempunyai kedudukan kewangan yang baik dan berupaya memenuhi kesemua tuntutan kewangan sepertimana yang terkandong dalam dokumen Perjanjian Jaminan Korporat nya. Juruodit KPMG sendiri tidak memberi kepastian samaada hutang tertunggak RM4.1 billion berupaya dibayar oleh PetroSaudi International Limited kerana ia bukan jaminan Bank atau Kerajaan.

    Susulan dari gesaan tatkala membahaskan Rang Undang Undang Perbekalan Tambahan 2011 itu , saya telah menulis surat bertarikh 22hb Jun 2011, memohon Jawatankuasa Kira-kira Wang Negara menyiasat perkara berikut menurut peruntukan Peraturan Mesyuarat 77 (1)(d) :

    1) Menilai kedudukan kewangan, pemegang saham, nominee, dan pengurusan PetroSaudi International Limited samada mempunyai keupayaan membayar hutang RM4.1 billion kepada 1MDB sepertimana yang didakwa oleh pengurusannya.

    2) Menyiasat sumber 1MDB perolehi untuk membayar pelaburan dalam 1MDB PetroSaudi Limited sebanyak RM3.5 billion secara tunai. Adakah ia hasil penerbitan Bon yang dijamin oleh Kerajaan?

    3) Menyiasat penilaian yang dibuat oleh pengurusan 1MDB keatas 1MDB PertroSaudi Limited apabila membuat keputusan melabur sebanyak RM3.5 billion dalam usahsama ini.

    4) Menyiasat kegiatan perniagaan 1MDB PetroSaudi Limited sehingga 1MDB berupaya menjual pelaburannya dalam masa yang singkat tidak sampai 5 bulan dengan keuntungan RM615 juta daripada pelaburan sebanyak RM3.5 billion. Ini bermakna pulangan sebanyak 17.6% atau 42% berdasarkan kadar pulangan tahunan (annualized rate of return). Siasatan ini perlu agar 1MDB sebagai sebuah agensi pelaburan kerajaan tidak terlibat dalam kegiatan sindiket kewangan antarabangsa yang mencurigakan dan mungkin jenayah.

    5) Menyiasat tempat atau lokasi PetroSaudi International Limited dan kumpulan syarikatnya termasuk 1MDB PetroSaudi Limited diperbadankan. Benarkah PetroSaudi International Limited di perbadankan di Cayman Islands atau British Virgin Islands dan tidak mempunyai kaitan langsung dengan perusahaan petroleum dan individu atau organisasi dari Arab Saudi?

    6) Menyiasat adakah kerajaan terdedah kepada jaminan atau pinjaman dalam pelaburan yang dibuat 1MDB?

    Saya menggesa Jawatankuasa Kira-kira Wang Negara menyiasat kes ini kerana ia melibatkan Perdana Menteri yang juga Menteri Kewangan selaku Pengerusi Lembaga Penasihat 1MDB dan penerbitan bon sebanyak RM5 billion yang dijamin kerajaan. Difahamkan bon sehingga RM15 billion akan diterbitkan untuk membiayai pelaburan 1MDB. Dalam pengamatan akaun 6 bulan pertama 2011 hingga 1 September 2010, saya dapati 1MDB mengalami kerugian sebanyak RM158.3 juta.

    1MDB dianugerahkan konsesi tanah paling berharga di Kuala Lumpur iaitu pengkalan TUDM di Sungai Besi seluas 196.6 hektar sementara Pengkalan TUDM akan dipindahkan ke Sendayan, Negeri Sembilan. Pembangunan Pengakalan TUDM di Sungai Besi ini melibatkan usahasama diantara 1MDB (30%), Lembaga Tabung Angkatan Tentera (30%) dan Desmond Lim dari Malton Berhad (40%).

    Dalam kenyataan-kenyataan yang dikeluarkan hartanah ini akan dibangunkan sebagai Bandar Malaysia untuk memperkukuh daya saing Kuala Lumpur bagi menarik pelabur tempatan dan asing. Pembangunan yang diumumkan hanya melibatkan yang memberi pulangan besar kepada pelabur. Langsung tidak disebut atau disediakan dalam pelan induk pembangunan perumahan untuk warga kota yang berpendapatan rendah dan penyediaan perumahan untuk bekas tentera yang amat memerlukan perumahan di ibukota ini.


    Dicatat oleh Tukar Tiub

  3. #3
    Join Date
    Oct 2008
    The net profit reported is to enable IMDB to go to the money market to raise funds to be sapu'ed. The bonds will then be guaranteed by the Govt so that eventually the tax-payers pay! This tactic has been used over and over again since the 80's.

    PAC told to probe suspicious 1MDB profits

    Jun 22, 11 5:00pm

    Opposition Leader Anwar Ibrahim has urged the parliamentary Public Accounts Committee (PAC) to probe 1Malaysia Development Bhd's (1MDB) “suspicious” earnings.

    Anwar said he had conveyed his request to the PAC in writing today, explaining that the suspicion was raised in the audit report by international firm KPMG.

    Among others, he said PAC must probe if 1MDB had issued government-backed bonds to finance its RM3.5 billion investment in 1MDB PetroSaudi Ltd.

    He said PAC should also probe 1MDB's decision to divest its shares in 1MDB PetroSaudi Ltd in just five months for RM4.1 billion, which brought in profits of RM615 million.

    “This means there was a 17.6 percent return or 42 percent based on annualised rate of return,” said Anwar, explaining that the RM4.1 billion would be paid in stages until 2023.

    Anwar said the PAC probe is crucial because Prime Minister Najib Abdul Razak (left) is the 1MDB advisor and also the finance minister.

    He added that PAC's scrutiny is necessary as 1MDB will issue more bonds in the future and it is also managing the Sungai Besi air base project, one of the most valuable piece of real estate in the country.

    During the debate on the Supplementary Supply Bill 2011 on Monday, Anwar had told the Dewan Rakyat that 1MDB is expected to issue up to RM15 billion worth of government-guaranteed bonds by 2013.

    He said that this was worrying as the company had posted a suspicious RM425 million net profit on March 31, 2010 after its first year of operations.

    “The announcement ... is highly questionable because, upon closer inspection, its financial statement shows that its profits were not from its actual investments or business operations but through paper shuffling,” he added.

  4. #4
    Join Date
    Oct 2008

    Finance: IMDB, a potential time bomb in the making

    Sg Besi airbase deal: DAP queries discount for 1MDB

    Petaling Jaya Utara MP Tony Pua has demanded an explanation from the government over what he sees as a huge discount for the sale of a parcel of land to 1Malaysia Development Bhd.

    At the price the 495 acres of land in Sungai Besi was sold, he said, the government has effectively gave an astounding RM3 billion in subsidy to the company.

    "At RM240 per square foot, the Sungai Besi land should be already worth a whopping RM5.2 billion. Despite its high potential valuation, the government has chosen to transfer the land to 1MDB for only RM1.6 billion or RM3.6 billion less," Pua (left in photo) said in the Parliament lobby today.

    “We call upon the government to disclose in full the terms of the agreement on all land sales to 1MDB and explain why 1MDB has been given such preferential treatment.”

    The site sold in June 2011 is where the RMAF Sungai Besi airfield is located and will be the location of the Kuala Lumpur International Financial District.

    According to Pua, the RM240 per square foot estimation is based on a sale of a tract of land by the Penang government.

    Pua said that an open tender sale for 101 acres of land, of which 65 percent needs to be reclaimed, had netted a sale price of RM1.6 billion or RM240 per square foot.

    “There can be no doubt that the land in Sg Besi, surrounded by developed infrastructure, will be worth well in excess of the market price of land in Penang, given its unbeatable location in Kuala Lumpur,” he said.

    Further, he said, other pieces of land in Kuala Lumpur are valued “in excess of RM500 per square foot”.

    He added that giving preferential treatment to an company without an open tender also “crowds out investment from the private sector”, while big corporate discounts only hurt the government's ability to expand its welfare programmes.

    ‘Why has cost of KLIA2 doubled?’

    On a separate matter, Pua asked Transport Minister Kong Cho Ha to explain how the cost of construction of the KLIA2 is expected to more than double, going beyond the RM4 billion mark.

    If the minister does not explain to Parliament, Pua - as a member of the Public Accounts Committee (PAC) - will “formally request the PAC and auditor- general's office investigate the project” to find the root cause of the overrun.

    The ministry should also explain why the deadline for project completion has been shifted from June 2011 to April 2012, as announced by Malaysia Airports Bhd managing director Bashir Ahmad.

    Cost overruns, he said, will need to recouped through higher airport taxes and charges, “ultimately (hurting) our tourism industry”.

    Or else, he said, the government will have to absorb the losses through “unnecessary subsidies...via soft loans, grants or drastically reduced financial returns from the project owner, MAB”.

    “It is worthwhile to note that in early 2009, Sime Darby in partnership with AirAsia had proposed to build a new KLIA low-cost airport in Labu at a cost of only RM1.6 billion without costing the government a single sen.

    “However, the plan was scrapped by the government partly because Malaysia Airports Bhd had promised to build a new terminal at KLIA for less than RM2 billion by June 2011.”


  5. #5
    Join Date
    Oct 2008
    Reprieve for Sungai Besi Airport

    Posted on 2 February 2012 - 05:21am
    Last updated on 2 February 2012 - 02:27pm

    Marhalim Abas and Pauline Wong

    PETALING JAYA (Feb 1, 2012):The Sungai Besi Airport will not be closed so soon after all, as its two main users, the Royal Malaysian Air Force (RMAF) and the police Air Wing, have won a reprieve.

    Industry sources told theSun that 1Malaysia Development Bhd (1MDB) – the government-owned master developer of Bandar Malaysia – has agreed that the airport could continue to be operational for "all government aircraft and VVIP helicopters" for the foreseeable future.

    The closure of the airport had been imminent and fixed wing operations at the 70-year-old airport, the country's first international airport, were supposed to have ended on Dec 1 last year.

    However, both the RMAF and police Air Wing sought a reprieve as they could not find other bases to relocate to, and construction of replacement bases would take at least three years.

    Federal Territories and Urban Wellbeing Minister Datuk Raja Nong Chik Raja Zainal told theSun that the airport, which is also known as Simpang, would be operational until replacement bases for RMAF units and the air wing, are completed. He declined further comment.

    In August last year, RMAF chief Tan Sri Rodzali Daud told reporters the air force will conclude an agreement with 1MDb for its replacement site in Sendayan, Negri Sembilan, by February.

    He said some of the units based at Sungai Besi will be relocated to the Subang Air Base, but the RMAF Museum which houses various historical aircraft, will remain at the Sungai Besi site as part of the attractions of Bandar Malaysia.

    1MDB, which is also the joint developer of the RM25 billion Kuala Lumpur International Financial District, plans to turn the 196.6-hectare site into a mixed development city that will include affordable housing, parks and a library as well as public facilities.

    However, theSun learnt that the sole civilian outfit operating from the airport, the Royal Selangor Flying Club, had been barred from operating from the airport due to the ruling allowing only "government aircraft and VVIP helicopters".

    A club official, who declined to be named, told theSun that the club, which operates three Cessna 172 light planes and a Robinson R44 helicopter, mostly for training and leisure flights had sent out two of its aircraft to the Subang Airport following the ruling.

    "We are trying to get permission to fly from Sungai Besi as soon as possible as we are unable to resume our normal operations at Subang.

    "It is difficult for us to arrange training and leisure flights at Subang as the airport is much busier compared to Sungai Besi. We are losing money for the last four months as we are not able to fly as much as before," he said.

    He said the club is negotiating with 1MDB on the compensation for vacating its site at Sungai Besi, which it had owned since the 1930s.

    The club was supposed to move to a site near Subang airport but the experience so far might force it to look at other alternative sites.

    An airstrip in the 1930s before it was turned into an airport after World War II, Sungai Besi Airport served as the nation's main air link from 1952 to 1965, before Subang Airport was opened.

    Two RMAF operational command headquarters – the First Air Division and the Air Logistics headquarters – are based there.

    The RMAF 10th Squadron, which flies Nuri and Blackhawk helicopters for utility and VVIP purposes, as well as the Aerospace Medical Institute are also based there.

  6. #6
    Join Date
    Oct 2008

    Finance: 1MDB's RM2.3b power plant purchase raises eyebrows

    3 years license remaining and yet they pay a premium for it. This is adding insult to injury!

    1MDB’s RM2.3b power plant purchase raises eyebrows

    Thursday, 16 August 2012 11:33 Anuja Ravendran

    State-funded 1Malaysia Development Bhd’s (1MDB) proposed RM2.3 billion purchase of Genting Bhd’s 17-year-old power asset is raising questions as the amount is said to be enough to construct a spanking new power plant.

    “It's too high a premium to pay for an old plant,” an industry executive told The Malaysian Reserve, an opinion echoed by a number of other industry executives and consultants contacted.

    However, a source familiar with the company defended the proposed sale price of Genting Sanyen Power Sdn Bhd’s (GSP) 720MW power plant in view of its supposed “high upside potential” of the acquisition.

    On Monday, Genting told the stock exchange that its unit Genting Power (M) Ltd will dispose its 97.7% stake in Mastika Lagenda Sdn Bhd, the investment holding company for Genting’s power assets, to 1MDB for RM2.3 billion in cash to focus on developing power ventures overseas.

    Mastika Lagenda owns 75% of GSP.

    It also wholly owns Mastika Utilities & Services Sdn Bhd, which is involved in the provision and sale of utilities consisting of treatment and supply of water, and the preoperating Mastika Water Management Sdn Bhd.

    In the same exchange filing, Genting added that the disposal would enable the company to realise immediate and attractive returns at a good price, resulting in a RM1.9 billion net gain for the company.

    When comparing the deal to one of the largest power deals struck in the region, a regional investment banker said Mirant Corp in 2006 booked a net gain of about US$1 billion (RM3.13 billion) from the sales of it power assets in the Phillipines, involving 2,150MW in capacity with 17 years of its power purchase agreement (PPA) still left. In GSP’s case, its PPA is set to expire in February 2016.

    An industry executive said 1MDB is paying a premium for a plant that is 17 years old when building a new power plant of the same capacity would cost about the same, and would be more efficient.

    “It's overpriced by a mile,” he said.

    The rule of thumb for the costing of a new power plant is calculated at US$1 million per MW. Hence, a 720MW would cost in the region of RM2.2 billion, close to the price tag for the GSP deal.

    In a research note on Tuesday, Hong Leong Investment Bank Bhd (HLIB) said the sale pricing was 1.4 times higher than its ascribed value for the asset based on US$0.94 enterprise value per MW.

    MIDF Research Sdn Bhd, on the other hand, said the deal was in line with the power generation capacity of GSP and may bode well for the company as it seeks more lucrative power projects overseas in light of heightened competition in the local power sector as the government implements more competitive measures.

    Genting's desire to exit the local power sector "had been well documented", said one industry executive.

    When contacted, 1MDB declined to comment on the issue of the pricing.

    In defence of the deal, the source familiar with the company said the plant would be expanded once the PPA extension is granted to generate attractive returns for the company.

    He denied that there was a high premium for the deal stating that the valuation was based on the fact that the deal shows attractive returns of capital and was "within trading comparable to precedent transactions".

    The purchase consideration was arrived at using operational and financial projections in which traditional valuation methodologies using discounted cashflow and precedent transaction and trading analysis were used, he said.

    “1MDB also conducted the internal rate of return and operational scenario analysis which indicated attractive returns of capital,” he said, adding that there is a lot of future upside for GSP especially since there is a PPA extension on the cards.

    “A platform to expand the power generation capacity is also there,” he said, adding that starting a new plant takes a lot more time and investment.

    “This is a faster way for 1MDB to become a competitive independent power producer player,” he said, stating that the company aims to become a key player in the sector and become a benchmark setter for the industry.

    In March, it acquired tycoon Tan Sri T Ananda Krishan’s Tanjong Energy Holdings Sdn Bhd for RM8.5 billion in a move it said was in line with its strategic intent towards fulfilling the country’s long-term energy security.

    1MBD is also the master developer of the recently unveiled Tun Razak Exchange.


  7. #7

    Cool :) klia

    wow that's a great news, after double the klia size it will too good, But finances should use on the correct side.

  8. #8
    Join Date
    Oct 2008

    Finance: IMDB, a potential time bomb in the making

    There's nothing potential about it. It's a time bomb, period!

    It is probably a front used to borrow money on behalf of the Govt so that our politicians can keep on throwing $ at their supporters.

    1MDB a potential time bomb, magazine reports

    First Published:2:51pm, Jul 23, 2013
    Last Updated:2:51pm, Jul 23, 2013



    • In four short years 1MDB has accumulated debts of RM38b making it a potential financial time bomb for the Malaysian government, The Edge Review reports.

    THE secretive Malaysian government guaranteed fund 1MDB, which has in a short four-years accumulated debts of RM38 billion, is a potential financial time bomb for the Malaysian government.

    Regional news weekly,The Edge Review, in its latest issue has a cover story on 1MDB that traces its roots to an investment fund originally proposed by well-connected 30-something businessman Low Taek Jho to the Terengganu government.

    The article argues that the fund has poor cash flow and is emerging as a rising contingent liability on a government that is already heavily burdened with debts.

    A banker who follows 1MDB was quoted as saying: "1MDB doesn’t have strong cash flow and, at the rate it is borrowing, sooner or later the government has to step in to take responsibility."

    The Edge Reviewalso touched on the controversial dealings between 1MDB and privately owned PetroSaudi International and the special ties with Goldman Sachs which saw the US investment bank handling much of the debt papers issued.

    Reference was made to the large premiums 1MDB paid to acquire a few power stations and whether they were linked to political contributions.

    The Edge Reviewis a digital only weekly magazine. The full article can be viewed through a standalone subscription or through The Edge Collection bundle subscription available on both Apple and Android App Stores. For details go

    This article first appeared inThe Edge Financial Daily, on July 22, 2013.

    Read more:

  9. #9
    Join Date
    Oct 2008

    'Finance Ministry must come clean on 1MDB borrowings'

    4:14PM Sep 2, 2013

    Penang Chief Minister Lim Guan Eng has urged the Finance Ministry to come clean on the economic benefits and growth that Malaysians have derived from the RM38.4 billion borrowings by 1Malaysia Development Bhd (1MDB).

    This, he noted, has only helped to increase the federal government debt to “70 percent” of Gross Domestic Product (GDP).

    "Such huge unexplained loan guarantees by the federal government have caused Fitch Ratings to revise Malaysia’s credit outlook from stable to negative," Lim said in a statement.

    In the national interest and to uphold principles of public accountability and transparency, he said premier Najib Abdul Razak - as finance minister - should issue a statement on the current status of 1MDB.

    Fitch has questioned the use of ‘off-balance-sheet funding’ through guaranteed government debt of almost RM150 billion, from RM502 billion to RM650 billion at the end of last year.

    Lim said Fitch’s ‘negative’ credit outlook may impact negatively on Malaysia in the form of higher costs of borrowing and cause a higher inflationary effect.

    He also said the government has understated its total debt obligations by not officially counting the “off-balance-sheet funding” as federal debt.

    "If both official government debt and guaranteed debt are added, our federal total debt to GDP ratio would be 70 percent and not (the) claimed debt of 54 percent. (This) is illegal as it is above the statutory limit of 55 percent," Lim pointed out.

    "Most of the guaranteed government debt is incurred by financial instruments such as 1MDB (which has borrowed) US$12 billion or RM39 billion through bond issues.”

    He said Malaysians have been left in the dark as to the management and status of the RM39 billion, and “especially whether 1MDB has made book profits which can be quickly realised into cash".

    "Rumours of 1MDB being connected with young cronies of the BN leadership require a full accounting for such a huge public fund of RM39.5 billion, equivalent to nearly RM1,500 for every Malaysian man, woman and child,” he added.

  10. #10
    Join Date
    Oct 2008
    The government still thinks it knows best


    In 2009, when the Malaysian Prime Minister first launched the New Economic Model (NEM), the policy was deemed a paradigm shift from a Government-dominated economy to one which will be led and spearheaded by the private sector. Dato’ Seri Najib Razak famously quoted that “the era where the Government knows best is over.”

    In fact, it was difficult to argue against the thrusts of the NEM. Key initiatives included plans to “re-energise” the private sector as it “will stimulate a jump in investment in high value added products and services, generating sustained growth and high income”.

    The NEM called for the creation of a “competitive domestic economy” where “a myriad of distortion-creating incentives will be phased out”.

    More impressively, the NEM proposed a “transparent market-friendly affirmative action,” an arguably revolutionary concept in a country where race-based preferences are institutionalized.

    Even the language used in the document was inspiring. “The time for change is now, Malaysia deserves no less,” the NEM thundered. And the Government will “break [the] logjam of vested interests through political will and leadership.”

    After nearly 5 years however, much is left to be desired. Instead of empowering and trusting the private sector to lead the charge, the Government appears to be floundering over a ever deepening vicious cycle of state-driven control and investment.

    The clearest example of how “the Government still knows best” is the creation of a new sovereign wealth investment fund, 1Malaysia Development Berhad (1MDB) with a RM5 billion government-guaranteed loan as its start-up capital. While its initial objectives were laudable – “a strategic enabler for new ideas and sources of growth”, the reality was however far from its vision.

    After a failed joint-venture with little-known Petrosaudi International Ltd to invest in oil-exploration exercises in Central Asia, 1MDB has essentially re-focused its entire strategy inwards within Malaysia.
    There are essentially 2 key-sectors which drives 1MDB today – real estate and energy, neither of which are “strategic enablers” to help Malaysia “break new ground”.

    In the real estate sector, the Government sold land to 1MDB at dirt-cheap prices which provided the opportunity for 1MDB to do quick revaluations to secure multi-billion ringgit bank loans to finance its projects. The land for the much-touted Tun Razak Exchange (TRX) for example, was acquired for RM194 million from the Government in 2010 but was revalued twice to RM1.1 billion and RM1.59 billion all within 2 years. In fact, based on its recently completed financial report for the year ending March 2013, the Group’s properties that were acquired at bargain basement prices from the Government were further revalued by RM2.7 billion.

    To give 1MDB a further leg up, and to ensure that 1MDB is able to repay its loans, the Government legislated incentives for financial institutions to locate and relocate its offices within TRX to enjoy 100% tax exemptions. On top of that, developers undertaking projects with 1MDB in TRX will enjoy 70% tax exemption and other benefits. Private sector real estate developers are unsurprisingly up in arms because 1MDB not only enjoys access to cheap land and easy access to funds due to its Government ownership, 1MDB gets highly preferential treatments to ensure that its property projects will succeed at other’s expense.

    More importantly, Malaysia already have one of the most efficient and matured property development private sector in the world. The entry of 1MDB into this space adds little or no value to the industry.
    The story is similar for the power-generation sector where energy production has been privatized and matured over the past 20 years. Instead of encouraging greater competition between these independent power producers (IPPs) to increase efficiency and lower tariffs, the largest IPPs were inexplicably acquired under the 1MDB umbrella.

    1MDB is now the single largest power producer in the country, after the national power company, Tenaga National Berhad (TNB). 1MDB spent RM12.05 billion acquiring three major IPPs with expiring concessions. It funded these acquisitions entirely by debt. The sovereign wealth fund was understandably heavily criticized for overpaying for these assets which generates sufficient cash flow only to pay a little more than the interest cost.

    As a result, under pressure to enable 1MDB to generate sufficient profits to repay these debts, the Federal Government has recently awarded a 2,000MW coal-powered power plant contract to 1MDB despite its proposed tariffs being higher than the competition in February 2014. In April, 1MDB was awarded another directly negotiated contract for a 50MW solar-power plant.

    Hence instead of witnessing a welcome “era where the Government knows best is over”, we are seeing the complete opposite where the very vehicle created by the Prime Minister himself, 1MDB, entering the fray where the private sector has been vibrant and competitive.

    In fact the actions of 1MDB have created a vicious cycle of Government investment and intervention, which becomes increasingly difficult to reverse without causing immediate and substantial financial pain. Since its inception 5 years ago, 1MDB has accumulated RM42 billion in debt, to become the single largest corporate debtor in the country.

    It’s 100% ownership by the Malaysian Government has resulted in regulatory capture. Its debt acquired at relatively high cost will only pressure the Government to grant 1MDB projects with more and more incentives, or to award more lucrative projects for 1MDB to recover from the astronomical debt levels.
    The outcome is not only just about the entry of a new government-owned player in the real estate and power generation sector. The real negative impact is the “crowding out” of the private sector in the country.
    Instead of phasing out “distortion-creating incentives”, more have been created. Instead of “re-energising” the private sector, the Government is doing the exact reverse, causing a decline in private sector investments necessary to achieve “sustained growth and high income”.

    While 1MDB will prove to be a blatant example of increased Government intervention, it certainly is not the only guilty government-linked company (GLC). The recent years have been littered with many examples of the Government awarding lucrative projects to government-linked entities – such as the lucrative Sungai Buloh Rubber Research Institute prime land granted to the Employees Provident Fund (EPF), or GLCs taking out the private competition such as UEM’s acquisition of Sunrise Bhd and Permodalan Nasional Bhd’s acquisition of Malaysia’s largest publicly listed developer, SP Setia Bhd.

    In a telling study by the Asia Development Bank in 2013, the analysts observed that of the “33 GLCs up for divestment by the Government, only 15 had been completed as of February 2013”. The case of 1MDB strengthen the study which found that the “limited divestment has been offset by new investments, with a spate of acquisitions by GLCs in private sector finance and property development for instance, making it more of a diversification than a divestment program.”

    Finally, the report concluded “it is clear that a stronger GLC presence generally has a discernible negative impact on private investment.” It added that “when GLCs account for a dominant share of revenues in an industry, investment by private firms in that industry is significantly negatively impacted. Conversely, when GLCs do not dominate an industry, the impact on private investment is not significant.”

    Therefore, it cannot be more obvious that the much-touted “New Economic Model” is essentially a pretty document with no substantive implementation in place. The time for change is certainly now, Malaysia definitely deserves no less. Unfortunately, the Government is unable to “break [the] logjam of vested interests through political will and leadership.”

    Tony Pua is a second term member of parliament from the Democratic Action Party (DAP) and a member of the Federal Parliament’s Public Accounts Committee. He is in Canberra for a forum to discuss “Race, Religion and Royalty“ in Malaysian politics.

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