KUALA LUMPUR, Oct 26 – 1Malaysia Development Bhd (1MDB) today called on Petaling Jaya Utara Member of Parliament, Tony Pua, to stop misleading the people with his statements on the company and accept that the opposition’s unpatriotic economic sabotage of 1MDB for their own political gain has failed.
1MDB said in Pua’s attempt to deceive the people, he conveniently forgot to highlight that it was the Public Accounts Committee (PAC), in which he is a member, that recommended for the vast majority of 1MDB assets to be transferred from 1MDB to Minister of Finance Incorporated (MoF Inc).
1MDB was referring to a press statement issued by Pua yesterday in which he had “made multiple wrong and misleading statements”, claiming that 1MDB is currently an “empty shell” holding “RM40 billion” of debt. In consideration for the transfer of, among others, Tun Razak Exchange, Bandar Malaysia, Pulau Indah land and Air Itam land, 1MDB would receive payments over time.
Those payments, along with asset monetisation proceeds, will be used to meet the principal and interest on the remaining obligations of 1MDB, which primarily comprise long-term bond and sukuk debt totalling approximately RM32.5 billion at present exchange rates and not the RM40 billion figure wrongly quoted by Pua.
Pua also raised the question on “How in the world is 1MDB on track to realise a profit?”.
In this regard, 1MDB said the PAC Report on 1MDB dated April 7, 2016, provided details of projected future cash flows relating to the 1MDB rationalisation programme, which showed a surplus of approximately RM3.0 billion being generated over time. The information was presented to the PAC.
Accordingly, with appropriate stewardship and competent development of the real estate under MoF Inc. and monetisation of other assets, it is highly likely that over time, there will be a surplus generated, whether at the 1MDB level or at the level of its 100% shareholder, MoF Inc.
1MDB said Pua had purposely deluded the public by stating 1MDB’s RM12.1 billion investments in the power sector resulted in the multi-billion ringgit losses when the company disposed of its energy interest to General Nuclear Power Corp (CGN) for RM9.3 billion.
“Not only are the figures quoted by Pua completely wrong, he conveniently fails to mention that, whilst the gross purchase consideration was RM12.05 billion, the companies acquired had RM1.63 billion of cash on balance sheet, which resulted in a net purchase consideration of approximately RM10.42 billion,” it said.
Furthermore, over the period of ownership, about RM2.18 billion was generated in dividends, which were largely used to pay interest on the acquisition debt. Accordingly, when the cash, dividends and other costs/impairments were taken into account upon the sale to CGN at RM9.83 billion in cash, 1MDB achieved near “breakeven” on its energy investments.
This achievement was all the more commendable, given the opposition’s campaign of economic sabotage against 1MDB at that time, the company said. Meanwhile, Pua also claimed that 1MDB did not help to solve the problem of power purchase agreements (PPAs) that were overly generous to independent power producers (IPPs) as there had been no reduction in electricity tariffs.
In this regard, 1MDB said Pua confused the PPA tariff, which 1MDB helped to reduce, with the electricity tariff. In the meanwhile, the PPA tariff is only one component of the electricity tariff, with other components being fuel costs, transmission, distribution costs and others.
It is a fact that 1MDB generated competition during the PPA bidding for new power plants and renewal of PPA contracts for existing power plants. As a result of 1MDB participation, the new plant and existing plant PPA tariffs were reduced by between one and two sen per kilowatt hour (kWh) and 1MDB was the lowest bidder in all tenders that it won.
“Based on an 85% capacity factor, a one sen tariff per kWh reduction on a 2,000-megawatt power plant over 20 years can result in up to RM3 billion in cost savings over the life of a PPA, for one power plant. The savings are multiplied significantly across other PPAs. This, in turn, lowers the overall PPA tariff cost to TNB (Tenaga Nasional Bhd), which is the sole buyer under all PPAs, and contributes towards the electricity tariff,” 1MDB said. — Bernama