PETALING JAYA: 1Malaysia Development Bhd (1MDB) has plans to enhance the capacity of Tanjong Energy Holdings Sdn Bhd as a leading emerging market independent power producer (IPP) after it paid RM8.5bil to tycoon T. Ananda Krishnan for the power assets.
The definitive agreement was signed on Friday and the deal is subject to customary financing and regulatory proposals, IMDB said in a statement issued yesterday. This confirms a StarBiz report on Monday that Ananda Krishnan's power assets had been sold to 1MDB.
“Energy is one of the core focus areas for 1MDB, and Tanjong Energy is a prized acquisition. We are attracted to the strong operating track record of Tanjong Energy, its well-diversified portfolio of quality assets, its strong in-house capabilities and the potential for new growth both here and abroad,” 1MDB chief executive officer Shahrol Halmi said.
He added that given its unique private-public sector dynamics, 1MDB and Tanjong Energy were in a strong position to create new synergies, establish global strategic partnerships and promote innovations in green and sustainable technologies.
“The acquisition signals the first step towards fulfilling 1MDB's strategic intent towards fulfilling the country's long-term energy security,” he said.
OSK Investment Research in its note said 1MDB's venture into the power sector would also see it bidding for other power assets including the new Prai power plant licence.
Shahrol said the company was led by an experienced Malaysia-based management team and the company maintained strong key relationships and deep understanding of local cultures and business practices in its various markets.
“The entry of 1MDB may make the power purchase agreement re-negotiations easier for its Malaysian power assets and, therefore, also change the landscape for the first generation IPPs. However, the presence of Egyptian power plants comprising 44% of the capacity of Tanjong Energy does raise risks of future uncertainty given the fluid conditions in that country,” OSK said. Other analysts also want to know how 1MDB is going to fund the purchase.
Ananda Krishnan had put his power assets for sale for some time now and the bidding process saw 12 international and local companies vying for the assets, including Saudi Arabia & Electricity Co, which was said to have put in the highest bid of US$3.6bil.
Tanjong Energy owns and operates eight power plants with investments in five power plants in Malaysia, Egypt, Bangladesh, Pakistan, Sri Lanka and the United Arab Emirates. Together, they have a total net generating capacity of 3,951MW. 1MDB said Goldman Sachs (Malaysia) Sdn Bhd was its financial advisor for the transaction.
Now that Ananda Krishnan has disposed of his power assets, the next deal that is being talked about in the sector is the sale of the 1,400MW Jimmah power plant in Port Dickson which StarBiz said was being considered by Sime Darby Bhd.