By Lim Sian See
“Wall Street Journal reported this was achieved by having 1MDB making overpriced purchases of power assets from Genting Group in 2012, paying RM2.3 billion or five times what was only worth RM400 million, with Genting then making a donation to a foundation controlled by Najib who used the funds for the 13th General Election campaigning,” said Lim Kit Siang.
Genting’s own Financial statements for the year ended 2011 when it still owned the plants showed that this particular Genting Sanyen asset was making RM231million per year. Check under the results for “discontinued operations”.
In 1MDB’s own financial statement for the year ended March 2014, it showed that this very same asset had revenues of RM352m and making RM159m per year – lower probably due to higher financing cost).
(RM159m profit out of revenues of RM352m? IPP seems to have very high margins)
Can Kit Siang tell me where I can buy an asset for RM400m but makes about RM160m-RM230m per year in profits?
Price-to-Earnings of only about 2X.
What a good deal.
The Genting power plants concessions now extend to 2026 and even when 1MDB bought the plants, the bid to extend were already submitted.
Due to its well-maintained equipment, its location being the closest to the main load center of KL (60KMs) and competitive pricing submitted, it was almost a sure bet to be renewed.
Also, 1MDB bought key parcels of land besides the existing plants and if ever an additional power purchase agreement was tendered out by the Electricity Commission, and expansion or additional plant next to the current plant would have meant that 1MDB would be best placed to offer the best price, fastest time to market and best location to win since all the power cabling and infrastructure is there already.
If you had offered RM400m or even RM500m to Genting to buy those plants then, they will laugh at your face and roll you all the way down the Genting hill.