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Call to explain ‘higher than normal’ cost of Edra Global…’original perpetrators’ scot free again?..’writing-off’ investment losses!

November 27, 2015

Published Today 1:39 pm  MKini    Updated Today 3:48 pm

1MDB and Minister in the Prime Minister’s Department Mah Siew Keong have been asked to explain the “higher than normal” cost of purchasing Edra Global Energy Bhd.

Is it because the high cost is the result of the exorbitant fees it paid to Goldman Sachs and to International Petroleum Investment Company (IPIC), Parti Amanah Negara’s strategy director Dr Dzulkefly Ahmad is asking.

Dzulkefly said 1MDB paid Goldman Sachs RM1.3 billion and another RM4.35 billion to IPIC, which acted as co-guarantor for the bonds raised by Goldman Sachs and other ‘”toxic financial instruments”, despite being a “sovereign entity, entitled to a sovereign rating” in borrowing excercises.

He added that while he commended Mah for denying the possibility of China General Nuclear Power Corp (CGN) being roped in to build a nuclear power plant following its purchase of Edra for RM9.83 billion, the minister still needed to explain the cost of the purchases by Edra Global.

“The higher cost of acquisition of such assets would not have allowed 1MDB’s Edra Global to profit in this sale and in fact, it would definitely suffer massive losses. As I am not privy to the latest report, I am therefore not able to determine, with any precision, all these numbers.

“1MDB or Arul Kanda Kandasamy should not be too elated about the sale after a failed IPO earlier, calling the sale as a ‘vote of confidence’ in the Malaysian economy,” Dzulkefly (photo) said in a statement today, adding that while he applauds Mah’s assurance on the nuclear plant, “let us wait and see on this”.

The former Kuala Selangor MP also noted that the bid for Edra Global by Tenaga National Bhd was 20 percent lower than the price offered by the CGN, or by about RM2 billion, and that an analyst from Hong Leong Investment opined that any price higher than what it deserves would tantamount to TNB “bailing out” Edra.

Govt bailing out 1MDB with sale?

Dzulkefly said it would also not be too presumptuous for discerning Malaysians to allude that a foreign party “bailing out” 1MDB in this way must surely have more “upsides” to this venture and investment in Edra.

This comes as the government is willing to waive the 49 percent limit on equity ownership of strategic assets, which include power plants, by foreign bodies. In fact, he noted, allowing 100 percent foreign ownership of the Edra assets underscores that perception of getting them to purchase a “distressed sale”.

“So asking the question on any further promise, especially on nuclear power projects, was a natural extension and quite guided by many precedents before.

“Be that as it may, could Mah equally be prompt, and kind enough, to offer his comment on my equally ‘presumptuous’ inquiries regarding all the ‘higher than normal’ cost of the purchasing of this asset?” he asked Mah.

Dzulkefly also asked how 1MDB would handle all the accounting, whether the sovereign fund company would conveniently commit it as a method of “writing off” its investment losses through the difference between the purchase and resale values, and hence cleaning up 1MDB’s books.

“We have yet to wait and see. Would it be also the case that the ‘original perpetrators’ as some may say, “could have got away with this ‘crime’ again”,” he asked in requesting Mah to explain this matter as well.

Mah was quoted in several media reports as saying that no decision has been made on having a nuclear power project in the country, despite CGN getting the right to purchase Edra.

Dzulkefly had suggested two days ago the possibility of a trade-off with CGN purchasing Edra with the prospective of CGN being offered to run a nuclear project.

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