KUALA LUMPUR: The Ministry of Finance (MoF) has scrapped the sale of 1Malaysia Development Bhd’s (1MDB) power assets under Edra Global Energy Bhd as it plans to proceed with the listing of the business on Bursa Malaysia.

In a statement yesterday, the MoF said Edra remains focused on and is proceeding with its plans to submit an application for a listing on Bursa.

“This (listing) remains the preferred course of action for the monetisation of these assets, and all relevant stakeholders are committed to ensuring its success. In light of the above, the MoF has advised CIMB Group Holdings Bhd that its services are no longer required,” the Treasury added.

Deutsche Bank AG and Malayan Banking Bhd are advising Edra on this transaction.

In a separate statement, CIMB (fundamental: 1.05; valuation: 1.5) said it had been informed by the MoF that the ministry had decided not to consider a sale of Edra to strategic investors.

“As such, CIMB’s services as adviser to the potential sale are no longer required,” it added.

The change of plans comes only a week after the country’s second largest lender by assets announced on March 26 that it had received a letter of appointment to act as adviser to the MoF for the potential sale of Edra to strategic investors.

“CIMB’s role will include identifying potential buyers and running a competitive process for Edra to derive an optimal outcome for the MoF. This appointment does not extend to any other area relating to 1MDB,” it said then.

Following the earlier announcement on CIMB’s appointment, opposition lawmakers had come out to say that selling off 1MDB’s power assets would not be sufficient to rescue the debt-ridden strategic investment fund from its cash flow problems.

“1MDB’s energy assets, although overpriced, are, unfortunately, the only assets which generate revenue and are profit-making. Once disposed of, there will be nothing left which generates revenue and profit to repay the balance of the RM30 billion besides its RM7.1 billion of real estate,” DAP national publicity director Tony Pua said on March 28, adding that the move would only partially reduce 1MDB’s RM42 billion debt burden.

On March 12, Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah told Parliament that the government was hoping that the initial public offering (IPO) of 1MDB’s energy arm would be able to pay for the company’s growing debts amounting to RM13 billion debt in the energy sector.

“Once the IPO is carried out, expected to be done by September as part of the consolidation efforts undertaken by 1MDB, the cash flow problem is expected to be addressed. This is on top of the other options including monetisation through the selling of its assets (land). The other option includes joint-venture initiatives,” Ahmad Husni said.

The proposed IPO of Edra has been delayed several times due to a longer-than-expected due diligence process and debt refinancing negotiations.

According to documents viewed by The Edge weekly, the original plan was that Edra’s parent 1MDB, would offer for sale 1.1 billion shares in the energy outfit at RM1.83 apiece, which would garner the strategic investment fund some RM2 billion. Meanwhile, Edra itself would issue in excess of three billion new shares, raising close to RM5.5 billion for the company.

In total, some 4.81 billion shares were expected to be sold in the IPO, which at RM1.83 apiece, works out to RM8.81 billion, The Edge weekly reported in December last year.

Initial indications were that 1MDB would retain only 20% of Edra, with the bulk of the funds it obtained from the IPO to be used to repay its borrowings.

CIMB shares closed two sen higher at RM6.24 yesterday, with a market capitalisation of RM52.6 billion. 

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This article first appeared in The Edge Financial Daily, on April 2, 2015.