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Malaysia’s 1MDB Fund Taps Banks for $2 Billion Power Asset IPO

1Malaysia Development Bhd., a state investment fund advised by Prime Minister Najib Razak, said it asked investment banks to submit proposals for an initial public offering of its energy assets.

The listing plans are still at an early stage, the sovereign wealth fund, known as 1MDB, said in an emailed statement today. 1MDB could seek to raise as much as $2 billion from the offering, a person with knowledge of the matter said in August 2012.

The IPO could be similar in size to the 6.3 billion ringgit ($1.9 billion) raised by hospitals operator IHH Healthcare Bhd. two years ago through its initial public offering in Malaysia and Singapore, according to data compiled by Bloomberg.

1MDB has obtained a six-month extension on a 6.17 billion ringgit bridge loan to give it more time to sell shares in its power unit to repay debt, two people familiar with the matter said last year. That debt falls due in May this year, according to data compiled by Bloomberg.

The fund, which bought $3.7 billion of power assets in two years, has total bonds and loans outstanding of 31.1 billion ringgit, data compiled by Bloomberg show. Its debt has grown from 7.8 billion ringgit as of the end of March 2012, according to its latest available annual report.

1MDB has built an energy business from scratch in less than two years, acquiring assets from Malaysian billionaire T. Ananda Krishnan and Genting Bhd. The company has 2,030 megawatts of local generating capacity and 2,490MW overseas, according to its website.

Political Scrutiny

The fund, whose advisory board is headed by Najib, is among power generators bidding to build a 2,000MW coal-fired power plant in Malaysia, the Edge Financial Daily reported in October, citing unidentified people in the industry.

1MDB came under scrutiny in parliament in July after hiring Goldman Sachs Inc. to help manage $6.5 billion of bond sales to finance expansion. The New York-based investment bank made about $500 million in commissions and trading gains for managing three sales of dollar notes, a person familiar with the matter said in May.

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