Troubled 1MDB pledges no new investments, projects, loans

The refinancing of existing debts “will be to meet existing liabilities and/or on a non-recourse project finance basis as and when needed”.

KUALA LUMPUR: 1Malaysia Development Berhad (1MDB) has announced in a media statement that the company has taken several critical decisions following a comprehensive strategic review begun on 5 January, 2015 “to explore and determine a course of action that would allow it to maximize value for its 100 per cent shareholder, the Ministry of Finance, and ultimately the rakyat of Malaysia”.

For starters, the company will focus on its core businesses, no new investments or projects will be undertaken, no new debts will be raised except in order to refinance existing debt. The refinancing of existing debts, according to the statement, “will be to meet existing liabilities and/or on a non-recourse project finance basis as and when needed”.

The statement does not explain “non-recourse project finance basis”.

“We recognize that our debt financed capital structure is no longer appropriate for the company, and intend to take measures to ensure that 1MDB and the standalone entities are well positioned to service debt and infrastructure obligations,” said 1MDB Chief Arul Kanda in the statement. “Maturing debt will be met via refinancing from best available sources or repaid from sale of land development rights, raising of external equity from joint-ventures and/or outright asset sales.”

Even so, he claimed that “the company has fulfilled its objectives of acting as an enabler for new ideas and sources of growth, and serving as a catalyst for the development of assets and projects of strategic importance that would create value for the economy”.

The statement goes on to list several projects as among its accomplishments but the details are not sourced.

The company’s significant achievements, according to Arul Kanda, include: consolidating its separate energy assets under Edra Energy with a unified management team and Board; establishing the platform for developing TRX as a financial centre, which has attracted investment interest from major Malaysian and international firms; and successfully positioning the Bandar Malaysia development master-plan to include the Malaysian terminus for the High Speed Rail link to Singapore, along with two MRT lines for seamless intra-city connections.

Other details emerge:

As with Edra Energy, TRX and Bandar Malaysia will be run as standalone entities, with independent governance structures, and responsibility for their own operations and finances. Both entities will continue to be ultimately owned by the Ministry of Finance, “thereby ensuring that their significant future value benefits the rakyat”.

Edra Energy will focus on its core existing projects. The company will be “monetized in 2015, with a portion of the proceeds being invested in the business for future growth and the remainder going towards repayment of 1MDB’s short term debt”.

Air Itam and Pulau Indah land will be monetized through joint ventures or outright sale.

The statement adds that Edra Energy is one of South East Asia’s leading international independent power producers with a portfolio of 15 power and desalination plants in five countries. “We maintain a strong focus on our home market of Malaysia, and have a presence in South East Asia, South Asia and the Middle East and North Africa.”

“We are the second largest independent power producer in Malaysia, and the largest in Egypt and Bangladesh, with additional operations in Pakistan and the United Arab Emirates. In total, we have gross installed capacity under management of 6,619MW with an effective capacity of approximately 5,594 MW.”