1MDB submits IPO to list energy assets (Update)

KUALA LUMPUR: Malaysian state investor 1 Malaysia Development Bhd (1MDB) took a big step towards a planned US$3bil IPO for its power plant assets, filing a long-awaited application for a flotation that will reduce its huge debt burden, sources said.

The initial public offering (IPO) plans have been delayed several times, bankers have said, as the fund has had to restructure loans and as it bid - ultimately successfully - to build a new domestic coal-fired power plant.

A cross between a sovereign wealth fund and a private investment vehicle, the fund is chaired by Malaysian Prime Minister Datuk Seri Najib Tun Razak. But it has been dogged by controversy over the more than US$11 billion in debt it has racked up with its power plant purchases, its investment decisions as well as high fees paid to Goldman Sachs for handling its bond issues.

1MDB filed an application on Friday with the securities regulator to list its power assets on the local bourse, according to two sources with direct knowledge of the matter.

"The listing would be in the first quarter of 2015, likely March," said one of the sources. The sources said the listing is expected to raise around US$3bil, which will be used mainly to repay debt.

1MDB officials were not immediately available to comment. The sources declined to be named as the matter was not public.

Raising US$3bil could place the IPO as Southeast Asia's fifth-biggest IPO ever, according to Thomson Reuters data.

1MDB has already hired Deutsche Bank and Maybank as joint global coordinators. Goldman Sachs is the main adviser for the IPO while Ambank and Maybank are also advising. Once the regulator clears the IPO application, 1MDB can start marketing it.

After a shopping spree that began in 2012, 1MDB now owns 16 power and desalination plants spread over six countries - Malaysia, Egypt, Sri Lanka, Bangladesh, Pakistan and the United Arab Emirates - with a combined power generation capacity of 5,570 megawatts.

Najib has sought to counter worries that 1MDB's heavy debt load has left the government too exposed, saying the state guarantees only RM5.8bil (US$1.73bil) of the fund's debt.

That claim has been disputed by Tony Pua, a member of an opposition party, who says the government has also provided letters of support for other loans taken out by 1MDB.  - Reuters