KUALA LUMPUR: TRX and Bandar Malaysia will sell land development rights and/or enter into profit-sharing joint ventures, including with government linked investment companies (GLICs), says One Malaysia Development Bhd (1MDB).
It said on Wednesday that aside from GLICs, TRX and Bandar Malaysia – which would be established as independently managed companies – could team up with Malaysian and international private sector companies, who can contribute not only development expertise but also equity and debt to finance specific projects.
Following the conclusion of its strategic review, 1MD said these were among the proposals for TRX and Bandar Malaysia because of a need for more direct matching of assets and cash-flows.
1MDB said TRX and Bandar Malaysia, as independently managed companies, would have full autonomy and accountability for their operational and financial performance.
TRX, spread over 70 acres of prime freehold land minutes from the Petronas Twin Towers, is a key step towards the goals of the Government's Economic Transformation Programme to turn Malaysia into a high income economy by 2020.
The mixed-use development will encompass a new international financial district underpinned by world-class residential, retail, leisure and cultural offerings. The development, which will be home to the largest MRT station in Kuala Lumpur, has a gross development value of RM40bil.
As for Bandar Malaysia, it is new 495-acre mixed-use urban development that will become a benchmark for sustainable urban communities in the region.
The development will serve as Kuala Lumpur's gateway for the high speed rail-line to Singapore and, with two MRT lines on site, will become a central transport hub in the city. The development has a gross development value of RM150bil.
Below is the statement issued by 1MDB:
On 5 January 2015, the Board of Directors announced that 1MDB will undertake a comprehensive strategic review of its business to explore and determine a course of action that would allow the company to maximize value for its 100% shareholder, the Ministry of Finance and ultimately the rakyat of Malaysia.
Today, the company announces the outcome of this strategic review, which was led by Arul Kanda, President and Group Executive Director. The conclusions of the review, which have been endorsed by the Board of Directors, are:
* 1MDB has fulfilled its objectives of acting as an enabler for new ideas and sources of growth, and serving as a catalyst for the development of assets and projects of strategic importance, that would create value for the economy;
* The company's significant achievements include: consolidating its separate energy assets under Edra Energy with a unified management team and Board; establishing the platform for developing TRX as a financial centre, which has attracted investment interest from major Malaysian and international firms; and successfully positioning the Bandar Malaysia development master-plan to include the Malaysian terminus for the High Speed Rail link to Singapore, along with two MRT lines for seamless intra-city connections;
* The company will now focus on its core businesses, and no new investments or projects will be undertaken. Furthermore, no new debt will be raised except in order to refinance existing debt / meet existing liabilities, and/or on a non-recourse, project finance basis, as needed;
* As with Edra Energy, TRX and Bandar Malaysia will be run as standalone entities, with independent governance structures, and responsibility for their own operations and finances. Both entities will continue to be ultimately owned by the Ministry of Finance, thereby ensuring that their significant future value benefits the rakyat;
* Edra Energy to focus on its core existing projects, and the company to be monetised in 2015, with a portion of the proceeds being invested in the business for future growth and remainder going towards repayment of 1MDB's short term debt;
* Air Itam and Pulau Indah land to be monetised through joint ventures or outright sale;
* Maturing debt to be met via refinancing from best available sources or repaid from sale of land development rights, raising of external equity from joint-ventures and/or outright asset sales;
* The 100% shareholder of 1MDB, the Ministry of Finance, will be involved as relevant and as required in the interests of maximising shareholder value.
Commenting on the strategic review, Arul Kanda stated:
"Following a thorough examination of the business and our operations, I am pleased to confirm that we have now completed the strategic review that was announced by the Board of Directors at the beginning of January.
In conducting the strategic review, we were mindful of 1MDB's vision and mission: to act as a strategic enabler for new ideas and sources of growth, and to drive sustainable economic development in Malaysia. In essence, 1MDB's purpose is to serve as a catalyst, developing assets and projects of strategic importance, with a view to creating maximum value for the economy.
Having achieved this, 1MDB will not undertake any new investments or projects, and we have developed a clear strategy for each of our existing businesses moving forward.
Since its inception, 1MDB has systematically built high quality businesses in the energy and real estate sectors. As has already been achieved with Edra Energy, we believe this is the right time to establish TRX and Bandar Malaysia as independently managed companies, with full autonomy and accountability for their operational and financial performance. We believe this is the best way to realise full value from these investments for all stakeholders.
Whilst options are being pursued with respect to the monetisation of Edra Energy, ownership of our real estate assets must ultimately remain with our 100% shareholder, the Ministry of Finance. These projects are crucial to the socio-economic development of the country in general and Kuala Lumpur in particular, with TRX and Bandar Malaysia expected to generate, over time, gross development values of RM40 billion and RM150 billion respectively. The government's continued ownership will ensure that such value ultimately benefits the rakyat.
Additionally, we recognise that our debt financed capital structure is no longer appropriate for the company, and intend to take measures to ensure that 1MDB and the standalone entities are well positioned to service debt and infrastructure obligations.
In addition, there is a need for more direct matching of assets and cash-flows. TRX and Bandar Malaysia will sell land development rights and/or enter into profit-sharing joint ventures, for example, with government linked investment companies as well as with Malaysian and international private sector companies, who can contribute not only development expertise but also equity and debt to finance specific projects.
We expect to implement these plans over the next 12 months, and will provide periodic updates on our progress."