1MDB sells power assets to China's CGN Group for RM9.83 billion

PETALING JAYA: 1Malaysia Development Bhd (1MDB) yesterday announced that it will dispose of its entire stake in all its energy assets held under Edra Global Energy Bhd to China General Nuclear Power Corp (CGN Group) for RM9.83 billion cash, despite the government recently stating that it is undecided on whether it will lift a cap on foreign holdings of power assets to make way for such a deal.
The announcement puts paid to Tenaga Nasional Bhd's (TNB) ambitions of securing the energy assets. TNB reportedly submitted the lowest bid for the assets. Its stock rose 30 sen or 2.29% to RM13.42 yesterday on some 15.02 million shares done.
In a statement yesterday, 1MDB said it, together with Edra and its subsidiaries, had executed a share sale and purchase agreement with CGN for the 100% sale of 1MDB's ultimate ownership in all its energy assets, namely Edra Solar Sdn Bhd, Edra Energy Sdn Bhd, Powertek Energy Sdn Bhd, Jimah Teknik Sdn Bhd, Jimah O&M Sdn Bhd, Mastika Lagenda Sdn Bhd and Tiara Tanah Sdn Bhd.
CGN Group will pay an equity value of RM9.83 billion and will assume all the relevant gross debt and cash of the Edra operating companies, based on a valuation date as at March 31, 2015. The transaction is expected to be completed in February 2016.

The emergence of CGN Group as the winner suggests that the 49% cap for foreign ownership in local power assets has been lifted.
1MDB said the sale is the largest announced merger and acquisition (M&A) transaction in Malaysia and one of the largest in the Asian power sector year-to-date.
More importantly, the strategic investment fund noted that this transaction marks the achievement of the first major milestone in its rationalisation plan, as presented to the cabinet on May 29, 2015.
1MDB president and group executive director Arul Kanda Kandasamy said CGN Group was a "clear winner" in this international tender based on the objectives announced by 1MDB previously, namely value maximisation, acceptable commercial terms and certainty of transaction execution.
"The purchase by CGN Group brings a significant foreign direct investment commitment to Malaysia and is a clear vote of confidence in the Malaysian economy," he added.
"Edra has successfully integrated what was originally 13 power plants across five countries, into one cohesive and strong platform, that practises the highest of international standards," said Edra president and executive director Datuk Mark Ling, noting that Edra senior management and staff are committed to continue performing the role as a key independent power producer in Malaysia, Egypt, Bangladesh, Pakistan and the UAE.
Meanwhile, CGN Group chairman He Yu said this investment represents a major commitment by the group as part of a long-term, global diversification initiative.
"We are extremely impressed by the highly regulated, stable and transparent independent power producer framework in Malaysia, which has given us the confidence to make a long-term investment to the country," he stressed.
"Most important of all, we will ensure uninterrupted power supply, using environmentally friendly technologies and adhere to the fixed terms of the respective power purchase agreements, for the benefit of the people of Malaysia," he added.