TNB keen to buy 1MDB's power assets

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KUALA LUMPUR (July 15): Tenaga Nasional Bhd (TNB) is keen to buy the power assets of debt-ridden strategic investment fund 1Malaysia Development Bhd (1MDB), which are held under its power-generation division Edra Global Energy Bhd.

In a filing today, the national utility said it has submitted an indicative non-binding proposal to acquire five domestic and eight international power assets from Edra.

TNB said Edra’s power assets would be a strong fit for TNB’s growth strategy, as it would help ensure the long-term continuity of steady and competitively priced power to domestic customers and consumers.

The proposed acquisition also allows TNB to establish its international presence in areas where the demand for power is growing.

However, it said it is in the initial stages of its assessment of Edra’s power assets, adding that there can be no assurance that any transaction will be concluded.

“Any potential transaction would need to make strong commercial and financial sense and be value accretive to TNB’s shareholders. Any transaction would also be assessed based on the highest standards of corporate governance,” said TNB.

It added that any transaction will only be completed following TNB’s in-depth due diligence on the assets.

It said that other independent and third-party criteria and requirements would also need to be addressed, which includes the appointment of a principal adviser for the proposed transaction and obtaining an opinion from an independent adviser stating that the proposed transaction is fair and reasonable.

Besides that, TNB will also have to seek approval from non-interested shareholders at a general meeting and procure all relevant approvals, consents, waivers and clearances from governmental, regulatory authorities and third parties.

In a separate statement today, 1MDB said it welcomes TNB’s interest in Edra as it forms part of the former's rationalisation plan with respect to the monetisation of its power assets.

"1MDB has also received indicative, non-binding offers from other local and international parties in relation to our power assets as part of the process to monetise our investment in Edra.

"Our board of directors will review the various proposals received in due course, following which select parties will be invited by 1MDB’s financial advisor to conduct further due diligence on Edra, culminating in the submission of binding offers for our Board’s consideration," said the strategic development company.

"In assessing these offers, the board will be guided by, among other things, value maximisation to 1MDB’s shareholders, deal certainty, and terms that are fair and reasonable," said 1MDB, adding that it will make appropriate disclosures as and when there are further developments.

On July 9, TNB announced the completion of its acquisition of a 70% stake in Jimah East Power Sdn Bhd (JEP) from 1MDB for RM46.98 million.

JEP is a special purpose vehicle set up to develop the 2,000MW coal-fired power plant in Jimah, Negeri Sembilan, known as Project 3B, which is estimated to cost RM11.7 billion. Japan’s Mitsui & Co Ltd owns the remaining 30% equity interest in JEP.

TNB (fundamental: 1.3; valuation: 1.8) shares rose 16 sen to 1.28% to close at RM12.66, translating to a market capitalisation of RM70.55 billion.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)