Edra Energy IPO setback

PETALING JAYA: The initial public offering (IPO) application of Edra Energy Bhd, 1Malaysia Development Bhd’s (1MDB) power arm, has been overtaken by events and it will have to re-submit an application to the Securities Commission (SC) if plans for an IPO are still on the cards, sources say.

According to sources, Edra Energy’s IPO documents would be returned to its adviser as 1MDB had submitted its IPO application to the SC over three months ago.

“The IPO application process is an ongoing process. It was incomplete and 1MDB had until end of February to update the application. It did not and so the application is no longer viable. There are times that this process drags on for a longer period than expected and by which period, the financials backing the IPO process would be outdated and therefore needed to be returned,” said bankers.

An indication that Edra Energy’s IPO has hit a snag is that its draft prospectus exposure has yet to be posted on the SC website.

“Draft prospectus is exposed before the regulator’s decision on listing is given. It is posted by the SC if the prospectus is adequate and complete in terms of disclosure,” pointed out a banker.

A company is given a six-month timeframe to list from the time the application gets the nod from the regulator.

Edra Energy’s much-touted listing was earlier scheduled to be in the first quarter of this year. The IPO was a crucial part of the sovereign wealth fund’s plan to raise funds to pare down some short-term liabilities – estimated to be RM2bil – taken to purchase its power assets.

As at March 31, 2014, 1MDB had liabilities amounting to RM49bil and assets of RM51.4bil. Out of this, RM42bil were long-term debts accumulated as it took up large borrowings to build up a portfolio of power plants.

A substantial portion of its assets was in the form of land, namely the Tun Razak Exchange and Bandar Malaysia, that were re-valued several times in the last few years.

So the only source of substantial cashflow was from its power assets that were acquired at a premium from tycoon T. Ananda Krishnan’s Tanjong Plc and Genting Bhd in 2012.

1MDB when contacted gave no indication if the plans for a public offer of Edra Energy shares was still on track, stating that it was prevented from disclosing information due to the SC’s publicity guidelines.

“As outlined in the conclusion of our strategic review, we reiterate that Edra Energy will be monetised in 2015. However, we are unable to comment on specific matters relating to the business due to SC’s publicity guidelines.”

Two weeks ago when releasing the findings of its strategic business review that was initiated in early January, 1MDB stated that there were plans to monetise the power generation division in 2015.

The company, which is wholly-owned by the Finance Ministry, also stated that it would not undertake any new investments or raise new borrowings.

Edra Energy has a portfolio of 15 power and desalination plants in five countries with an effective power generation capacity of about 5,594MW.

Meanwhile, Transparency International Malaysia has also joined in the chorus of calls for an investigation into 1MDB.

The agency in a statement said that a “special high-level task force” was needed to probe the debt-ridden 1MDB, adding that an audit of its accounts by the Auditor-General’s office would not suffice as its financial irregularities had drawn international attention.