By G. Sharmila
Middle eastern interests under Aabar Investment PJS and Ananda Krishnan-linked Tanjong Public Limited Company (Tanjong) have the option to take significant stakes in Powertek Investment Holdings (PIH), the power holding company belonging to 1Malaysia Development Bhd (1MDB).
Aabar can subscribe to up to 49% of the equity of PIH on an agreed basis within 10 years at any time. Aabar is a subsidiary of International Petroleum Investment Company PJSC or IPIC which has many dealings with 1MDB.
Tanjong has the option to purchase up to RM2 billion worth of equity in PIH but it is not clear what stake it translates to.
According to the notes to 1MDB’s delayed accounts for the year to Mar 13, 2013, PIH had entered into a subscription agreement with Tanjong on May 17 2012 for Tanjong to subscribe for equity in PIH “on the occurrence of certain events as set out in the agreement”.
On the same day, PIH issued 214.3 million warrants to Tanjong convertible into new ordinary shares of 10 sen each in PIH at a conversion ratio of 1:1 and at an exercise price of RM5.00 for each new ordinary share, at any time from the date of the issuance of the warrants and expiring five years thereof.
According to the notes, the exercise price was determined based on the post-equity valuation of PIH which includes liabilities assumed in PIH at the date of the issuance of the warrants.
The Powertek acquisition was financed by a RM6.17 billion syndicated term loan guaranteed by 1MDB and US$1.75 billion 10-year notes issued by 1MDB Energy Limited (the holding company of PIH), for which 1MDB and International Petroleum Investment Company (IPIC), an investment company of the Abu Dhabi government, have respectively provided a corporate guarantee.
In return for the corporate guarantee from IPIC, an option was granted to Aabar Investment PJS to subscribe to up to 49% of the equity of PIH at an agreed basis within 10 years at any time. Aabar is a subsidiary of IPIC.
According to the notes accompanying the accounts, the RM6.17 billion term loan is due next month. The loan was repayable in 18 months, which meant it was due in November last year. However, according to the notes 1MDB has the option to extend the repayment to another six months, which means the loans will be due next month.
The notes also highlighted that 1MDB had entered into a total of two collaborative agreements with Aabar (one of which was for the acquisition of Powertek Energy). Pursuant to the agreements, IPIC had agreed to guarantee the US$3.5 billion notes (RM11.6 billion at current exchange rates) issued by 1MDB during the year in exchange for a 10-year option to acquire up to 49% equity interest in PIH and 1MDB Energy (Langat) Sdn Bhd.
“The refundable deposit held aside as collateral for the guarantee is part of the company’s strategy to list its energy assets”, the notes said.
The notes to the accounts also said that Tenaga Nasional Bhd, being the sole trade debtor of KLPP has disputed RM113.6 million in debts due to KLPP as at the reporting date. These debts were withheld by TNB “due to KLPP’s alleged failure to make available to TNB the declared dependable capacity of KLPP’s power plant from 2005 to 2012.”
The notes said that legal advice indicates that Tenaga’s claims are not valid under the power purchase agreement. Nevertheless, in view of the long-standing dispute, KLPP has made an allowance during the previous financial year amounting to 40% of the present value of the debts.
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