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UPDATE 1-Malaysia's Malakoff says open to acquiring 1MDB power assets
May 15, 2015 / 9:37 AM / in 2 years

UPDATE 1-Malaysia's Malakoff says open to acquiring 1MDB power assets

* Malakoff interested in power assets but not in talks with 1MDB

* 1MDB’s power assets are mostly old

* Tenaga in talks to buy a stake in 1MDB’s new power project

* Malakoff makes flat debut (Add CEO and analyst comments)

By Yantoultra Ngui

KUALA LUMPUR, May 15 (Reuters) - Malaysian power firm Malakoff Corporation Bhd said it was open to buying assets from troubled state fund 1MDB, which has delayed a planned IPO of its energy unit several times amid controversy over its huge debt burden.

Malakoff, which made its market debut on Friday, is Malaysia’s largest independent power firm, while 1MDB is the second-biggest although it has run up $11.8 billion in debt to build up its portfolio of power plants.

1MDB, whose advisory board is chaired by Prime Minister Najib Razak, aims to raise $3 billion by listing unit Edra Global Energy Bhd. But it has come under fire as the fund’s debt woes have begun to weigh on Malaysia’s sovereign credit rating and the ringgit, leading to delays for the IPO.

Asked if Malakoff was interested in 1MDB assets, CEO Syed Faisal Albar told reporters: “Yes, we are interested to grow the business whichever way it is as long it fits our profile and desires. Good return - we will look at it.”

But he added his firm was not in talks with 1MDB and that more clarity was needed as to what was happening with 1MDB’s IPO and its assets.

1MDB has some 15 power and desalination plants in five countries but many are near the end of their concession agreements. Its crown jewel is a $3 billion coal-fired plant called Project 3B that it and Japanese trading firm Mitsui & Co won the rights to build last year, though the fund’s liquidity issues have put its ability to build the plant in question.

Rival power group Tenaga Nasional Bhd is in talks to buy a majority stake in 3B, Malaysian Energy Minister Maximus Ongkili has said.

Some analysts were sceptical about the value of Malakoff looking at 1MDB assets.

“Malakoff’s gearing is not low at 290 percent, so sizable acquisitions would require equity,” said Cheryl Kaur Pola, deputy head of equity at Affin Hwang Asset Management.

“In the current environment, any association with 1MDB would be negative. In addition, 1MDB paid fairly rich valuations for its assets so a favourable transaction is not likely.”

Malakoff made a flat debut, due in part to high valuations attained in its 2.74 billion ringgit ($770 million) IPO - the country’s biggest in nearly three years. Its price to earnings ratio is 14.8 times compared to 12.4 times for Tenaga, Kaur Pola said.

$1 = 3.5645 ringgit Reporting by Yantoultra Ngui; Editing by Edwina Gibbs

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