It is most surprising to note that recently 1Malaysia Development Berhad(1MDB) had been used as main vehicle by the government to buy out Independent Power Producer(IPP) in our country and the total amount involved in the three(3) major acquisitions within the past one(1) year had amounted to a whopping sum of RM12 billion!
As stated in 1MDB’s official website, 1MDB is the government arm set up to be a strategic enabler for new ideas and new source of growth for the country and it’s mission is to drive long term sustainable economic development by forging strategic global partnerships and promoting foreign direct investment.
However, to our surprise, instead of promoting FDIs, 1MDB is now the major vehicle used in acquiring IPPs which is clearly against it’s mission and vision.
In March, 2012, 1MDB had been reported to acquire power assets of Tanjong Energy Holdings Sdn Bhd for RM8.5 billion. 1MDB made a second acquisition on August, 2012 from Genting Sanyen for RM2.3 billion, that transaction saw Genting booked an extraordinary profit of RM1.9 billion and on 5th July, i.e last Friday, 1MDB announced their third acquisition, that they will buy 75% of Jimah Energy at NS for a price of RM1.2 billion. In a period of one year, 1MDB suddenly appeared to be the major power producer in the country which clearly contradicted to its vision to be a new source of growth for the country.
One will question :
a. Why a sudden 1MDB is in a hurry to acquire major IPPs despite knowing some of the IPPs contract is under review by the government and is towards expiry of it’s concession soon.
b. It is also doubtful whether 1MDB, being a fully owned Government’s corporation, have the skill, technologies and/or experiences in running power plants? Electricity supply is pivotal to the country economic development and the people’s well being, no one can take for granted for any possibility of black out should 1MDB fail to discharge its duty as power supplier.
c. As it involved RM12 billion of public fund, the government must explain why 1MDB offered such a whopping amount to acquire these 3 companies and what is the real reason behind?
d. On the latest acquisition, 1MDB is said to offer RM1.2 billion to buy Jimah Teknik and Jimah O & M. However, for year end 2012, Jimah Teknik has a negative RM367 million reserves, which means their total liability is more than total assets. The company’s profit after tax is only RM11.8 million. The low profit and negative reserve shown that the companies are highly leveraged and have problem generating profit in the near future which is in contrary to 1 MDB’s statement that Jimah had strong cash flows. Furthermore, Jimah power plant is unique in financing, the entire project is 85% debt and 15% equity, as a result equity portion fork out is RM200 million for a 6 billion power plant which is undoubtedly highly leveraged.
Judging by the RM1.2 billion price tag and based on the company’s current profit, it will take more than 100 years for 1MDB to fully recover it’s investment. So, is it another bail out by the BN Government using public money?
As member of parliament, I believe it is of paramount importance that the government is duty bound to make such major acquisition in an open and transparent manner especially when the government is seeking approval from the house for another supplementary bill amounting to RM12.17 billion. Every single cent spent by the government must be counted for, failure to show accountability and transparency in public spending will render transformation agenda another sandiwara or mere political gimmicks.
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