Qatar's Nebras-CGN tie-up said vying with TNB for 1MDB power arm


  • Business
  • Thursday, 05 Nov 2015

The overseas bidders had expressed willingness to pay a higher price for the state investment company

KUALA LUMPUR: Qatar’s Nebras Power QSC is in talks to partner with China General Nuclear Power Corp (CGN) in the bidding for 1Malaysia Development Bhd’s power business, people with knowledge of the matter said, potentially pitting a foreign consortium against Malaysia’s biggest listed energy producer.

The overseas bidders had expressed willingness to pay a higher price for the state investment company’s Edra Global Energy Bhd unit than Tenaga Nasional Bhd (TNB), the people said, asking not to be identified as the negotiations were private. State-controlled TNB is wary of overpaying because it needed to justify any acquisition to shareholders, one person said.

1MDB, the debt-ridden state investment company that almost defaulted earlier this year, expects RM16bil to RM18bil for the power plants and has received bids close to that figure, president Arul Kanda said Oct 31. The sale is part of 1MDB’s plan to wind down its operations after it drew criticism from lawmakers for rising borrowings that totalled RM41.9bil as of March 2014.

Foreign investors are normally only allowed to own as much as 49% of Malaysian power producers unless they obtain a waiver as the Government provides gas to electricity plants at subsidised prices. It’s not yet clear whether foreign bidders for 1MDB’s power plants will be able to obtain an exemption, according to the people.

State-owned CGN entered the bidding after its Hong Kong-based clean-energy arm CGN Meiya Power Holdings Co decided not to pursue an offer, according to the people. A preferred bidder was expected to be chosen this month, two of the people said.

1MDB, whose advisory board is headed by Prime Minister Datuk Seri Najib Tun Razak, has said it expected to enter into a definitive agreement with the winning bidder before year-end. It said “value maximisation” and “deal certainty” would be among the factors that would guide its decision.

1MDB “is bound by confidentiality” and can’t comment further at this time, it said in an e-mailed statement. The Energy, Green Technology and Water Ministry didn’t immediately respond to an e-mail seeking comment. A spokesman for China General Nuclear declined to comment, while a representative for its main listed unit, CGN Power Co, didn’t immediately respond to a request for comment. Representatives for Nebras and its controlling shareholder, Qatar Electricity & Water Co, didn’t respond to requests for comment.

TNB, which last month reported that its fourth-quarter profit fell almost 40%, has said its ownership of the 1MDB power plants would ensure “continuing Malaysian control” of those “strategic” assets. It said 1MDB’s assets would enhance its earnings and cash flow by boosting its domestic power generation capacity and broadening its global presence.

1MDB owns a net generation capacity of 5,594 MW and is the largest independent power producer in Bangladesh and Egypt, according to its website. Besides investments in plants in Pakistan and the United Arab Emirates, it has 3,112 MW of capacity in Malaysia, making it the nation’s biggest independent power producer after Malakoff Corp. – Bloomberg

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