THE sale by 1Malaysia Development Bhd (1MDB) of the assets of its power unit, Edra Global Energy Bhd, has received three final, fully funded and binding bids, 1MDB said, without stating the names of the bidders.
It said the bids were from “strategic investors, comprising both domestic and international parties.”
Meanwhile Tenaga Nasional Bhd (TNB) has confirmed that it has put in an offer for the assets, conditional upon a due diligence process and the finalisation of a share sale agreement.
TNB said it believes that Edra’s power generation assets are a strong fit for its growth strategy domestically and internationally.
It was reported earlier that there were three foreign parties alongside TNB, who were shortlisted for the bids.
Recently though, two of the foreign bidders were said to be not participating in the bids, which raised questions about whether the foreign bids were for real.
The two were Saudi Arabia-based ACWA Power International and Hong Kong-listed CGN Meiya Power Holdings Co.
ACWA announced in late-September that it was not invited by 1Malaysia Development Bhd (1MDB) to make any final offer while CGN Meiya, listed on the Hong Kong Stock Exchange, said on Oct 9 it would not proceed with the proposed acquisition as it would not be in the best interest of the company.
Sources say he other two parties bidding are Riyadh-based Aljomaih Holding Co and Nebras Power QSC from Qatar.
It is understood that Aljomaih already has an existing working relationship with Edra. Aljomaih, via its unit Aljomaih Automotive Company Ltd has a 45% stake in Pendekar Energy (L) Ltd while the remaining 55% is owned by Powertek Ventures (L) Ltd.
Aljomaih, an industrial conglomerate, operates in manufacturing, beverages, real estate, investment, automotive services, and heavy plant equipment industries primarily in Saudi Arabia.
On the other hand, Doha-based Nebras Power was established in 2014 and has the backing from Qatar Investment Authority through a 20% stake held by Qatar Holding LLC.
Nebras Power said on its website that it is making targeted acquisitions in South-East Asia, Europe, and MENA region, as well as forming major energy services partnerships.
The interest of the foreign parties are said to be driven by the weak ringgit and the opportunity to raise borrowings for this deal on the strength of the power purchase agreements that the assets have.
The sale of Edra Global power assets, valued at RM18bil in its books, is part of 1MDB’s rationalisation plan to reduce its debts of close to RM42bil.
Edra Global, the power generation unit of 1Malaysia Development Bhd (1MDB) was supposed to have been listed on the local bourse between January and March this year.
1MDB withdrew its submission seeking a listing of Edra Global after failing to meet Securities Commission requirements in the first week of March this year.
Since then, 1MDB has been looking at a sale of Edra Global and is said to have hired Maybank Investment Bank Bhd for the international sale process.
On Sept 7, 1MDB said it shortlisted four parties for the final bidding stage for the sale of Edra Global but did not disclose the names.
Edra Global has five domestic and eight international power plants with total generation capacity of some 5,500MW.
In July, TNB bought Edra Global’s 70% stake in Project 3B or a 2,000MW coal-fired plant in Jimah, Negri Sembilan, for RM46.98mil.
1MDB got its foot into the power sector in a RM8.5bil deal which saw the company acquire Tanjong Energy Holdings Sdn Bhd, now known as Powertek Energy Sdn Bhd, in May 2012.
After acquiring Powertek, 1MDB acquired 75% stake in Kuala Langat Power Plant (previously known as Genting Sanyen) for RM2.3bil. It also acquired a 75% stake in Jimah Power that owns and operates a 1,400MW coal-fired power plant for RM1.2bil. Also, those power plants come with an inherited debt of RM6bil,
Meanwhile TNB’s president and chief executive officer Datuk Seri Azman Mohd said: “As the sole off-taker of all power generated in Malaysia, TNB is the best and most logical buyer for these assets. The acquisition of these power facilities, which will add a significant contribution to our power generation capacity in Malaysia, will be an important addition to our business as it will further enhance TNB’s earnings and cash flows. Broadening our domestic and overseas power generation base gives us more opportunities for revenue growth and for adding significant shareholder value”.
TNB added that if it decided to pursue this acquisition, it would have to have an opinion from an independent adviser stating that the transaction is fair and reasonable and secure the approval of shareholders at an EGM. 1MDB said that the three bids for its power assets marked a significant milestone in its rationalisation plan, first announced by the Finance Ministry on May 29, 2015.
“Over the next few weeks, 1MDB will be conducting an evaluation of the offers received, including reviewing the terms and conditions of the definitive agreements that the parties have proposed, and seek clarification where required.
“As previously highlighted, our board of directors will be guided by, among other things, value maximisation to 1MDB’s shareholder, deal certainty and terms that are fair and reasonable in assessing these offers. We expect to enter into a definitive agreement with the chosen party shortly after the evaluation and negotiation process has been completed, before the end of 2015,” 1MDB said.