Ananda strikes gold with 1MDB: Harks back at Dr M's old bailout of son Mirzan

Tycoon Ananda Krishnan got RM2.5 billion more than the RM6 billion market value expected for his power assets when he sold them to a very generous 1MDB for RM8.5 billion. Well, actually the business-savvy Ananda may have made much more than that.

The Ananda power plants are located in Malaysia, Bangladesh, Pakistan, Sri Lanka, Egypt and United Arab Emirates. These are owned by Tanjung Energy Holdings which in turn is owned by Tanjung Plc, which also includes gaming, property and leisure assets. Tanjung Pls is now wholly owned by Ananda, who took the firm private in 2010, paying a total of RM 8.8 billion for all shares of the company.

Now, 1MDB is paying RM8.5billion just for the energy assets alone. The gaming unit was sold to a private consortium for RM2 billion in 2011 and after selling the energy assets to 1MDB, Ananda still keeps the property and leisure assets. He is obviously richer thanks to the sweetheart deal from Prime Minister Najib Razak, while the Malaysian people are poorer for it.

Ananda gets richer, people get poorer

Yes, the people's money is once again involved because 1MDB is wholly owned by the Malaysia government. According to its promotional profile,1MDB has a unique concept in driving economic growth. It says it creates 'high-impact business opportunities' by forging international partnerships through equal-capital joint ventures in game-changing projects. It also claims it leverages on its partners’ expertise to build capacity and translate this capital into foreign direct investment. Now, that sounds like a really ambitious mouthful.

In order for 1MDB to make into a reality its mission and vision, it should maximize its profit like what Ananda Krishnan has done for himself and his companies. 1MDB should start by looking at some small business entity that controls a huge conglomerate, build up these business to a certain level, and then sell the conglomerate to the highest bidder. Instead 1MDB has obediently taken over the huge conglomerate and worse still, that conglomerate may be facing several risks. As the global economy slows, so too will demand for energy and this is inevitable.

Then, most of the Ananda power plants have already passed their prime condition as they are nearing the end of their profitable life span. As the plants age, there will be more wear and tear resulting in higher maintenance and breakdown-repair costs. The efficiency will also be much lower and the fuel cost of operation will keep increasing due to the ageing effect.

Now it cannot be denied that Ananda is a close crony of former premier Mahathir Mohamad. Take the example of Chinese oil companies being chased out of South Sudan when the newly created nation took over the running of its own country. Now in Malaysia, with the 13th general election poised to be held this year, there is a more than even chance of a regime change - the first in 55 years. Opposition Leader Anwar Ibrahim os expected to snatch the federal government from Najib's BN coalition.

Maybe this is why there have been a spate of asset divestment as the Umno elite cash out in case they really do lose the federal government to Anwar and his Pakatan Rakyat. Old deals that have disadvantaged everyday Malaysians - whether from the power or the toll road sector - are bound to be scrutinized and reviewed. The Umno gravy train will surely grind to a halt. Before that happens,Umno leaders and their friends are rushing to cash out, and not only that, they are cashing out at enormous and over-bloated profits.

The Ananda plants are basically operated under a leash in that they are heavily dependent on medium-term state-awarded concessions and horrible skewed power purchase agreements. Any change in government would surely jeopardize Ananda's power assets - another reason to get out while the going is good.

If indeed these power plants are making money - some say they generate RM1 billion in earnings annually - why would Ananda sell them? What is the breakdown of the earnings? What is the net profit after and how long will this be sustainable? Yet, when all is said and down, Ananda and his powerful politician friends know the time is ripe to sell.

1MDB not focused

1MDB further states on its website that “The company focuses on investments with strategic value and high multiplier effects on the economy, particularly in energy, real estate, tourism and agribusiness. Every investment undergoes a rigorous process of best global practices, supported by local and international experts as well as state-of-the-art infrastructure”

How could the 1MDB investment in Ananda's power units have a “high multiplier effects on the economy” when what 1MDB has bought is an already established business entity. Tanjong's entire business network has long been set up, with everything in place? Frankly, 1MDB cannot even guarantee the immediate future of its latest purchase, let alone target “high multiplier effects on the economy”? Such grandiose ambition but never accompanies by real work.

Imagine, if the M8.5 billion had been spent on other investments, how great the potential to positively impact the economy for Malaysians. RM8.5 billion is no small amount and with such money, the world is one's oyster. There are good deals and bargains galore waiting to be snapped up. Why did 1MDB not look farther and deeper than Ananda's old socks.

The fact is 1MDB is not really serious in its own purpose and mission. It is not surprising that 1MDB has been used to make Ananda Krishnan and friends much richer. Critics have pointed out the advisors, directors and even managers of IMDB are of questionable backgrounds.

Directors with questionable background

Firstly, the 1MDB Chairman is Lodin Wok Kamaruddin, who is also the Chairman of Boustead Heavy Industries Corporation Berhad and Boustead Naval Shipyard Sdn Bhd. Under his tenure, Boustead failed to deliver navy vessels ordered by the government and even needed bailouts. But instead of being punished, Lodin and Boustead are now in charge of constructing even more costly vessels that frankly could be bought much cheaper from the international open market. Lodin has been Najib's trusted lieutenant since the latter's days as Defense minister in the 1990s.

Shahrol Azral Ibrahim Halmi the 1MDB Managing Director and Chief Executive Officer is said to be an expert in creating value for multiple sectors, whatever that really means. He was said to have been instrumental in helping government agencies add value to their services to the people and businesses. But sad to say, most of the government agencies are not performing well and have not been able to deliver their services to expectation. There is no government body or agency that can be taken as a role model for other agencies. Instead, the Auditor-General's report for 2010 has a long list of items showing inefficiency, mismanagement and corruption.

Another director Ismee Ismail was previously the Chief Executive Officer of ECM Libra Securities and Director of ECM Libra Capital Sdn Bhd, the company related to Umno Youth Chief Khairy Jamaluddin, who was implicated in a questionable share deal.

Ong Gim Huat, another director of 1MDB is the Chairman of the Board of Directors of Kwong Wah Yit Poh Press Berhad, the publisher of Kwong Wah Yit Poh, a Chinese daily in the northern region of Malaysia. Ong has no known specific specialty except of having served as chairman of several bodies.

Ashvin J Valiram is also stated as a director of 1MDB. He is the Executive Director of the Valiram Group, a regional leading luxury goods retailer and travel-retail specialist.

Advisors who could never say 'no' to Najib

Then, the head of the 1MDB panel of 'distinguished' advisors is of course Najib himself who has done little to improve the Malaysian economy. His Economic Transformation Program has failed and yet he is the top 1MDB advisor.

The Special Advisor is His Excellency Sheikh Hamad Bin Jassim Bin Jabr Al-Thani, Prime Minister and Minister of Foreign Affairs of the State of Qatar. Obviously, His Excellency's role is merely to pad up 1MDB's resume so to speak and to make it look credible when going after projects in the Middle East.

Nor Mohamed Yakcop, whose political aide was caught with RM2 million cash and convicted of money laundering, is also an adviser.

So too is Mohd Sidek Hassan, the Chief Secretary to the Government of Malaysia, who has done nothing to ensure that the civil servants in the government departments comply with procedures when making procurements. His irresponsible response to the 2010 Auditor General's report is telling. Sidek actually said he was not worried about the weaknesses and corruption pointed out in the report.

The next advisor Wan Abdul Aziz Wan Abdullah, the Secretary-General of the Treasury of Malaysia, who is known for never being able to say "no" to Najib.

The last three advisors will surely not be interested to safeguard our interest. As foreigners, they may be sincere but let's not imagine they would be willing to stand up to Najib and his team to save Malaysians from a truly terrible and corrupt deal. One the trio is Bernard Arnault, the Group Chairman and Chief Executive Officer, LVMH Moët Hennessy Louis Vuitton. Critics suggest his appointment reflects Najib's wife, Rosmah Mansor's, passion for Louis Vuiton high end travel bags.

The next is His Excellency Khaldoon Khalifa Al Mubarak, the Chairman of Abu Dhabi Executive Affairs Authority, Chief Executive Officer and Managing Director of Mubadala Development Company and last is Chang Zhenming, the Chairman and President of CITIC Group of China.

Slush fund and Dr M's rescue of son Mirzan's Konsortium

So, how can Malaysians feel secure that their money will be protected and their economy strengthened when there is  such a group of people running the 1MDB fund, which is licensed to take on any investment' to 'revamp' the economy? Even Anwar has called it Najib's own political slush fund.

It looks like Najib is duplicating Mahathir's exercise of engaging a group of advisors and directors to manage son Mirzan Mahathir’s Konsortium Perkapalan, which sad to say resulted in insolvency. It became the subject of controversy in 1998, and played no small part in getting Anwar thrown into jail for trumped-up sodomy and corruption charges.

Anwar, who was then the finance minister, had refused to bailout Mirzan, who allegedly tried to commit suicide due to the stress, thereby angering Mahathir. Once Anwar was put behind bars, the Malaysia International Shipping Corporation (MISC) bought all of Konsortium's shipping assets for RM696 million, helping Mirzan to pay off his debts. Such talk is well known and has swirled since the Asian Financial  Crisis but Mahathir and Mirzan have denied there was any bailout.

But for sure, the glittering list of 1MDB advisors and directors have their own vested interests to come on board, apart from being invited by Najib and his wife Rosmah Mansor. But they are not really interested in making 1MDB successful.

Nor will they stand up for the Malaysian people when deals as glaring as the Ananda RM8.5 billion acquisition is bulldozed through. Why should they when the chief advisor and prime minister of Malaysia is himself busily helping to gut out his own people.

Malaysia Chronicle