Malaysia's Tenaga Submits Offer for 1MDB's Edra Power Assets

Tenaga Nasional Bhd is Malaysia's biggest listed energy company.
Tenaga Nasional Bhd is Malaysia's biggest listed energy company.PHOTO: BLOOMBERG

KUALA LUMPUR (BLOOMBERG) - Tenaga Nasional Bhd, Malaysia's biggest listed energy company, said it has submitted a conditional offer to buy the energy assets of 1Malaysia Development Bhd, the debt-ridden state investment company.

Edra's power generation assets will be a "strong fit" for Tenaga's domestic and international growth, the state-owned utility said in filing to the Kuala Lumpur Stock Exchange late on Friday (Oct 16).

"As the sole off-taker of all power generated in Malaysia, Tenaga is the best and most logical buyer for these assets," Tenaga President and Chief Executive Officer Azman bin Mohd said in the statement.

1MDB, the Malaysian entity whose advisory board is headed by Prime Minister Najib Razak, said on Sept 7 that it has shortlisted four parties in the final bidding stage of its energy asset sale. It didn't identify the companies.

The sale is part of 1MDB's plan to wind down its operations after it drew criticism from lawmakers for rising borrowings that totalled 41.9 billion ringgit (S$13.9 billion) as of March 2014.

The Kuala Lumpur-based firm owns a net generation capacity of 5,594 megawatts and is the largest independent power producer in Bangladesh and Egypt, according to its website. It has 3,112 megawatts of capacity in Malaysia, making it the nation's second-biggest independent power producer after Malakoff Corp., and has also invested in plants in Pakistan and the United Arab Emirates.

These assets are held by unit Edra Global Energy Bhd, which have an equity value of 8 billion ringgit, people familiar with the matter said last month.

1MDB will reduce its debt by 16 billion ringgit after Abu Dhabi-based International Petroleum Investment Co. agreed to assume obligation for US$3.5 billion of its dollar bonds through an exchange of assets, according to an Oct 9 statement.

Tenaga said Edra's asset would enhance earnings and cash flow by boosting its power generation capacity in Malaysia and helping it establish a footprint in international markets where power demand is growing.

The company said its ownership would also ensure "continuing Malaysian control" of Edra's "strategic power assets".