TNB top contender to take over 1MDB power assets

Utility heavyweight Tenaga Nasional is most likely to end up the new owners of power assets which debt-ridden 1MDB is trying to dispose of. – The Malaysian Insider file pic, October 14, 2015.

Utility heavyweight Tenaga Nasional Bhd (TNB) is inching towards a multi-billion ringgit purchase of energy assets from 1Malaysia Development Bhd after a rival bidder dropped out, a deal that would bring welcome financial relief to the scandal-hit state fund.

Hong Kong-listed CGN Meiya Power Holidings Co, the only firm beyond Tenaga to have openly expressed an interest for some 1MDB assets, said in regulatory filings on Friday it was no longer considering the transaction.

Other companies that had been initially shortlisted for the asset sale are not expected to bid before an end of week deadline, leaving the field open for the Malaysian suitor, bankers and sources close to the situation said.

Tenaga, 30% owned by sovereign wealth fund Khazanah, has a strong chance to clinch a purchase by mid-November ahead of a final agreement in December, the sources said.

1MDB, currently at the centre of a political and financial scandal that is also embroiling Prime Minister Datuk Seri Najib Razak, urgently needs to shed assets to pare back RM42 billion of debt.

The negative headwinds from the scandal and the fund’s perilous financial position may make it difficult for 1MDB to extract the RM16 billion to RM18 billion it has earmarked for the sale.

“The negative sentiment around 1MDB hasn’t fully abated as yet so to get market value for their power assets might be a challenge,” said Weiwen Ng, an economist with ANZ.

1MDB, CGN Meiya and Tenaga declined to comment.

Backtracking

The 1MDB assets had drawn initial interest from at least half a dozen suitors, including several from the Gulf.

But bankers say all these suitors appear to have quietly backtracked amid multiple investigations into 1MDB and allegations of financial mismanagement and graft – a major political challenge for Najib, who chairs the fund’s advisory board.

The state fund will be likely dismantled after the sale of its power assets and real estate holdings.

Malaysian ownership laws state that foreign investors can only own up to 49% of domestic assets. This works in Tenaga's favour, the only local bidder, and may have discouraged foreign buyers who would be left without management control. – Reuters