Thursday 28 Mar 2024
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KUALA LUMPUR: The Employees Provident Fund (EPF) chief executive officer Datuk Shahril Ridza Ridzuan said he doesn’t see the pension fund’s bond holdings in 1Malaysia Development Bhd (1MDB) as a risk.

Finance Minister Datuk Seri Najib Razak, in his written parliamentary reply to PKR Member of Parliament Rafizi Ramli yesterday, said the EPF had subscribed to bonds issued by 1MDB totalling RM200 million in 2009. The prime minister also noted that the EPF has exposure to investments in 1MDB’s subsidiaries — Panglima Power Sdn Bhd (PPSB) and Jimah Energy Ventures Sdn Bhd (JEV) — totalling RM1.52 billion.

Shahril explained that the bond investment was made in 2009, when the newly-formed Terengganu Investment Authority (before it was renamed 1MDB) undertook a fundraising exercise which saw RM5 billion bonds being sold to insurance companies, financial institutions and global investors.

“Those bonds are fully government guaranteed. We don’t see those bonds as a risk. (It’s) just like other institutions holding those bonds. They will be paid over time by 1MDB or through the government guarantee mechanism,” Shahril told reporters after the opening of the International Social Security Conference 2015 yesterday. He said the EPF has always funded and invested in infrastructure projects including power plants and ports.

“PPSB and JEV are power plants that were built in the early 2003 and 2005 (respectively). We funded the development of PPSB and JEV before 1MDB existed. It just so happened that in 2012 and 2014, 1MDB bought them from the previous owners. It does not matter who owns it as long as we get the first money that comes from power sale and essentially the bonds have been fully serviced till this point of time,” he said.

He also said the bonds were straight-forward infrastructure bonds which were secured against power plant assets and cash flow from the sale of energy.

“We don’t see any issue in that. It is not exposed to the credit of the shareholders,” said Shahril, adding that the cash flow generated from the power plants goes toward settling debts first before paying any kind of dividends to shareholders.

Shahril also reiterated that the EPF has not been approached by 1MDB to purchase any of the latter’s assets, but he would not discount that possibility.

“From our point of view, we are always on the lookout for good assets at good prices and can provide long-term returns for our members. That is how we managed to sustain and generate good returns all this while,” he said.

Meanwhile, Shahril said he is unaware of reports that Bank Negara Malaysia is seeking to pull out its sole representative from the fund’s investment panel.

 

This article first appeared in The Edge Financial Daily, on May 20, 2015.

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