KUALA LUMPUR, Aug 12, 2015:
1Malaysia Development Bhd (1MDB) president and group executive director Arul Kanda admits there has been a funding mismatch between the original plans for 1MDB and actual implementation.
Speaking on the Soal Jawab programme broadcast over TV3 tonight, he explained that one of these was the big challenge in bringing together all the power plants acquired and parked in Edra Global Energy Sdn Bhd so that there could be efficiencies that could be shared among all.
Such a grouping of former fierce competitors, using different power generation systems, is a complex process akin to a merger of major firms and this resulted in the delay in the initial public offer (IPO) plan originally slated for late 2013.
Arul insisted the IPO delay wasn’t due to the power assets being problematic. “They are producing around RM5 billion in cash flow and that makes them a very attractive proposition.”
Since the IPO plan has been shelved, due to external economic turmoil and also political considerations, Arul said the focus is now to attract strategic investors who share a common vision with 1MDB for its assets.
“These are assets strategic for the nation’s development and growth. With Tenaga Nasional Bhd being among the possible investors in Edra, we feel this is a direction that makes sense of what we at 1MDB have tried to do.”
He also noted that Edra’s overseas plants generate income in US dollars and “this gives us a natural hedge” in paying off debts that are also in US dollars.
All these factors make a lot of sense for long term investors to view 1MDB objectively and the interest remains strong, Arul insisted. “These investors aren’t in a rush for short term gains.”
As an example, Arul also noted that the Bandar Malaysia project represents the single largest plot of land still available for development within the vicinity of KL city centre.
“The long term potential is clear. When Mid Valley, KL Sentral and KLCC were being planned and built, the confidence level in these projects were low. But long term investors kept faith and we too can see why after they had been completed.”
Arul said all of 1MDB’s assets are solid, which all long term investors acknowledge. “We don’t need to have a fire sale. We can choose to sell the assets one by one or bunched together. It has to make commercial sense and also strategic sense.
“The future is clear. That’s why I am here at 1MDB.”