1MDB Says Bids for Energy Unit Close to $3.7 Billion It Targets

  • Company said it faced cash flow issues after delay in IPO plan
  • Fund's six-year existence has been dogged by controversy

1Malaysia Development Bhd., the debt-ridden state investment company that nearly defaulted earlier this year, said the offers it received for its energy unit are close to the amount it desires.

1MDB expects 16 billion ringgit ($3.7 billion) to 18 billion ringgit for Edra Global Energy and has received bids close to that figure, 1MDB President Arul Kanda told reporters in Kuala Lumpur Saturday. The amount includes the assumption of the unit’s debt.

Tenaga Nasional Bhd., Malaysia’s biggest listed utility, said this month it has made a conditional offer for the energy assets of 1MDB, joining at least two other bids that the state investment firm has received. The assets held by Edra may fetch an equity value of 8 billion ringgit, people familiar with the matter have said. 

1MDB owns a net generation capacity of 5,594 megawatts and is the largest independent power producer in Bangladesh and Egypt, according to its website. It is Malaysia’s second-biggest independent power producer.

The company has been the subject of overlapping investigations amid allegations of financial irregularities, although an initial Auditor General’s report didn’t reveal any suspicious activity. Prime Minister Najib Razak chairs its advisory board and has resisted calls from ex-premier Mahathir Mohamad to step down over the fund’s performance. 

1MDB faced cash flow problems after a planned initial public offering of its energy assets faced delays amid unfavorable market conditions, Kanda said. The listing plan was later canceled as the company opted for a sale of the assets.

Foreign bidders may be restricted to owning no more than 49 percent of the plants unless they seek an exemption, people familiar with the situation have said. Still, it will be up to the Malaysian government to decide, Kanda said on Saturday and he sees nothing wrong with 100 percent overseas ownership of the power unit.

1MDB’s six-year existence has been dogged by controversy, resulting in a decision to wind it down even before multiple investigations were started into its finances. Designed as a catalyst for infrastructure projects, 1MDB amassed about 42 billion ringgit of debt in less than five years, in part to fund the purchase of energy assets and for the development of a new financial district in Kuala Lumpur named after Najib’s father.

1MDB has said that the value of its assets exceeds its debt and it has "consistently met, with no default, its interest service and principal repayment obligations, to both foreign and domestic lenders." Kanda reiterated that on Saturday.

Malaysia’s central bank said in October it proposed criminal proceedings against 1MDB after its probe found inaccurate disclosures, a recommendation the Attorney General dismissed as it concluded there was no wrongdoing.

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