Bondholders, Malakoff to meet over impact of windfall tax

  • Business
  • Wednesday, 30 Jul 2008

PETALING JAYA: Bondholders of Malakoff Bhd are seeking a meeting with the company to express their concern on the windfall tax on independent power producers (IPP).

Sources said a meeting between 19 bondholders and Malakoff was being arranged but details had yet to be finalised.

The bondholders of Malakoff, the country's largest IPP, had earlier this month met among themselves to discuss the same issue that had led to a memorandum being submitted to the Government last week.

The bondholders, predominantly investment banks with the country's largest banking groups, are worried about the impact of a windfall tax on the wider market.

There is also industry talk that the windfall tax could come into effect sometime next month, leaving little time for negotiation and exemption.

There is concern among bankers of a negative impact on not just the bond market but the capital markets as a whole, because “the windfall tax is seen as arbitrary and could be imposed on any industry”.

However, the windfall tax on IPPs is widely considered to be a bargaining chip in power purchase agreement (PPA) negotiations between the IPPs and Tenaga Nasional Bhd, which is seeking to reduce its “capacity payments” to the IPPs.

Second Finance Minister Tan Sri Nor Mohamed Yakcop had last Thursday said any IPP that had successfully renegotiated its PPA would be exempted from the windfall profit levy from the date the terms of the negotiated PPA came into force.

A fund manager with some exposure to Malakoff bonds, however, was worried that in the shorter term, infrastructure-related bonds would be completed un-saleable.

“As a bondholder, I will not take any infrastructure-related bonds unless there is a clear exemption from windfall tax,” he said.

Bond prices had already fallen but for the longer term, there was also concern that cash flow could be affected to the extent that there were defaults on bonds, he said.

 MALAKOF :  [Stock Watch]  [News]

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