KUALA LUMPUR: Tycoon Ananda Krishnan has sold his international power generation assets for RM8.5 billion (S$3.5 billion) to Malaysia’s sovereign wealth fund 1Malaysia Development (1MDB), a deal that financial executives said will presage a fresh round of restructuring in his business empire.
In an agreement signed late last Friday, 1MDB beat a cast of international bidders, including Saudi Arabia’s Saudi Water & Electric Co, to take control of Tanjong Energy Holdings, financial executives involved in the deal told The Straits Times.
The sale of Tanjong Energy is part of a corporate overhaul, which will include selling Mr Ananda’s satellite business in the coming weeks, to finance a push into gas exploration in South-east Asia, according to the executives, who are close to the industrialist.
Rather than own power assets, which are heavily dependent on medium-term state-awarded concessions and power purchase agreements, Mr Ananda is betting that there is more money to be made in the supply of gas required to fire up power plants, the executives said.
Over the last five decades, Mr Ananda has established himself as one of the few Asian tycoons with a serious global reach.
Making a fortune in the late 1960s and 1970s as a resource trader, the entrepreneur built an eclectic stable of investments in Europe and the United States ranging from oil fields, real estate interests and sporting manufacturers to stud farms.
In the mid-1980s he returned to Malaysia to lay the foundation of what would later become the region’s most integrated multimedia and telecommunications group.
The cornerstone of Mr Ananda’s success has been his shrewd melding of established Western-style business practices with the Asian way of doing business based on guanxi, or relationship building.
But in recent years, Mr Ananda, who graduated from Harvard in the mid-1960s, has discovered that the clash of cultures he successfully surfed in Asia is becoming more hazardous.
A grand alliance with Indonesia’s Lippo Group to build a pay-TV business and develop property in Singapore ended in acrimony three years ago.
In recent months, Mr Ananda has stumbled in India, where he faces the spectre of a formal criminal investigation over a soured business alliance. This could undermine his investments in the telecommunications and pay-TV sectors in the subcontinent.
Close associates dismiss speculation that the setbacks faced by Mr Ananda’s business interests are the main reasons for the proposed divestments.
They note that the tycoon has been quietly building his portfolio in the oil and gas business in Indonesia and is eyeing more gas exploration acreage in the region.
For state-owned 1MDB, the purchase of Tanjong Energy will give it control of 13 power plants in six countries with a total generating capacity of just under 4,000MW.
It will also provide much-needed cash flow for the debt-heavy sovereign fund.
Tanjong’s power assets generate about RM1 billion in earnings annually, with roughly 50 per cent coming from its Malaysian power plants, the financial executives said.
The executives added that 1MDB has also emerged as the most serious bidder for Mr Ananda’s satellite business, which is grouped under Measat and is valued at around RM3.9 billion.