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Sunday, 10 July 2016

Sarawak Report : 'Options' And 'Security Deposits' Or Straight Thefts?




10 Jul 2016

Sarawak Report has now examined the Auditor General’s analysis of the so-called power purchase agreements in 2012, for which 1MDB raised US$3.5 billion through Goldman Sachs. His broad conclusions [see base of article] are contained in Section 5 of his Executive Summary and once again they represent a shocking indictment of the company and its advisors.

If someone had planned from the start to set up an instrument to siphon borrowed public money into a private off-shore fund, they could not have done it more methodically than  1MDB management through their power purchase deals.

Since it has been revealed that the private fund in question, the bogus Aabar Investments PJS Limited, later channelled money directly into Red Granite Productions, owned by Najib Razak’s stepson, the reasons for making the AG’s findings secret are ever more apparent.

Section 5 of the Executive Summary details billions siphoned to fake Aabar from 1MDB's power deals

Section 5 of the Executive Summary details billions siphoned to fake Aabar from 1MDB’s power deals
In keeping with 1MDB’s earlier PetroSaudi deals, the AG highlights a pattern of management acting without the permission of the Board; then belatedly and only partially informing the Board of the actions taken or otherwise, acting in total contravention of decisions by a Board, that seemed willing in the end to let matters pass.

Ex-CEO Shahrol Halmi -  criminal investigations were recommended, but not so far launched
Ex-CEO Shahrol Halmi – criminal investigations were recommended, but not so far launched

He complains once more that his audit team was presented with limited and incomplete documentation by the company, on deals involving billions.

However, once again it can be seen that contracts were signed by management, which were highly disadvantageous to the company, usually involving commitments to pay huge and unnecessary sums of money.

And, as with the earlier PetroSaudi ventures, those sums of money were diverted to a destination other than the ones officially stated.  Formerly, it was Jho Low’s Good Star, which siphoned off the PetroSaudi payments: in the power purchase deals it was the bogus Aabar Investments PJS Limited BVI that got the money.

Goldman Sachs

The Auditor General also refers to the pervasive presence of the bankers Goldman Sachs throughout all stages of these power purchase deals. It was Goldman who provided the original consultancy that validated 1MDB’s decision to invest in the power plants, as well as Goldman which raised the bonds to finance the deal.

Goldman's role under its top Asia banker Tim Leissner has raised further queries about the world's most powerful bank
Goldman’s role under its top Asia banker Tim Leissner has raised further queries about the world’s most powerful bank

Also, from the very start it was Goldman which had presented a proposal (back in February 2012) suggesting that the whole enterprise could subsequently be paid off by an eventual public offering of the companies.  The bank’s representatives gave presentations to the Board to recommend their strategy, the Auditor records.

This means that Goldman Sachs was therefore integral to the series of decisions that were soon to tie the company up in knots, as vastly expensive commitments kicked into play on the basis of plainly flawed and unnecessary agreements, supported by the bank.

Included in the “weaknesses” of these agreements, identified by the AG, was the commitment to pay for IPIC to lend its credit rating to issue bonds, because the power purchase subsidiaries of 1MDB did not hold their own credit rating.

Given that the Ministry of Finance was placed as the ultimate guarantor anyway, a less disadvantageous way of raising money could surely have been identified by Goldman on behalf of its 1MDB clients?

Moreover, the reader is left wondering why the handsomely paid experts at the international bank had seemingly failed to note during the drafting of these agreements that the recipient company for the planned payments (the bogus BVI Aabar Limited) was not actually listed within the IPIC Group of companies?

Decisions that led to disaster

Co-conspirator? Former IPIC CEO Khadem Al Qubaisi was the Director of the false Aabar subsidiary - however the BVI concern had no official connections with the Abu Dhabi fund
Co-conspirator? Former IPIC CEO Khadem Al Qubaisi was the Director of the false Aabar subsidiary – however the BVI concern had no official connections with the Abu Dhabi fund

What the Auditor describes in his summary report is a series of agreements that resulted in 1MDB paying more than the entire sum of money that it had raised through its power purchase bond issues over to a bogus subsidiary of Aabar/IPIC in the BVI.

The two bond issues totalled US$3.5 billion, which had produced only a net receipt of USD3.197 billion, explained the Auditor, after deducting the extremely high transaction costs of USD302.5 million (8.6%) [5.9.h.]

Yet by the end of 2014 US$3.335 billion had been paid over to the fake Aabar Investments PJS Limited BVI, thanks to self-inflicted terms and conditions by 1MDB.

Add to that the fees to Goldman, plus the initial discount offered on the bonds and the high interest rates involved, and it is clear that 1MDB paid out ruinously more than it had borrowed, before even investing one ringgit in the intended power projects.

No surprise therefore that far more borrowing was entailed in 1MDB’s power purchase history than was raised by these initial bond issues.

In point 5.8 of the Executive Summary, the AG explains that the RM18.79 billion initially borrowed to purchase RM12.07 worth of assets had by mid-2015 ballooned to a RM31.79 billion debt.

“Weaknesses”

The Auditor lists 1MDB’s key failings over these disastrous deals under the heading of  “weaknesses.. regarding the issuance of the USD Notes by Goldman Sachs” in a table of 15 major points (a-o).  The unfolding list presents an evolving horror story of mismanagement by any standards.

From the partial documentation available (all he was able to acquire from the company), the AG managed to deduce that these notes were primarily supported through an “Interguarantor Agreement” signed by IMDB and Abu Dhabi’s sovereign wealth fund IPIC for each of the US$1.75 billion bonds raised on May 18th and October 17th 2012.

But, he complains that this joint guarantee was of little real worth to the Malaysian side, because the terms of the terms specified that the ultimate responsible party was still the Malaysian Ministry of Finance, the owner of 1MDB.
Although the guarantee was given by IPIC, 1MDB still bears all the risks in the event of a default.” [5.9.c]
Not much use then.  So, what was the point of all this dealing one might ask?  The most obvious conclusion appears to be that the purpose was to tie 1MDB into a series of very expensive commitments that were to be used to justify a series of ludicrous later payments to a bogus subsidiary of Aabar/ IPIC.

Options

Goldman Sachs explained to the Auditor General, he continues, [5.9.d] that in return for this (valueless) guarantee, 1MDB committed to prepare options for Aabar Limited to acquire a 49% equity in the power subsidiaries they were about to purchase  – although the AG complains those documents were never produced for audit.

Significantly, the AG specifically points out at this juncture that those options were signed over specifically to the fake Aabar Limited, which was a bogus company unrelated to the IPIC/Aabar Group in whose name the options were being issued:
“According to Goldman Sachs, in return for IPIC’s guarantee on the two USD Notes, 1MEL and 1MELL [1MDB’s Power Purchase subsidiaries] would prepare options for Aabar Ltd to acquire a 49% equity in 1MESB and 1MELSB at a fixed price. However, the Options Agreement for the issuance of the two USD Notes was not presented for audit.”

Credit Enhancement

Quite separate from this options promise to the bogus entity and also from the original Guarantor Agreement was another form of document, which shortly after floated into the mix, according to the Auditor.

This was a so-called “Collaboration Agreement for Credit Enhancement” attached to each of the bonds, dated May 21, 2012 and Oct 19, 2012, which the Auditor says was agreed to by 1MDB management, but was significantly not signed by the main Abu Dhabi party to the Guarantor Agreement, IPIC [5.9.e].

This Collaboration Agreement provided for a cash payment/’Security Deposit’ to be made once again to Aabar Limited, explains the Auditor (although he complains he never received a proper copy of it). The offered justification was that this was a consideration in return for allowing 1MDB to piggy back IPIC’s credit rating:
“Apart from the option to Aabar Ltd., 1MDB also agreed to provide a “credit enhancement” in the form of a cash payment (security deposit) to Aabar Ltd. The payment would have to be made within three days of the receipt of the USD Note, as stipulated in the Collaboration Agreement for Credit Enhancement dated May 21, 2012 and Oct 19, 2012.
This quid pro quo was necessary because 1MEL and 1MELL did not have the requisite credit rating to issue the USD Note and had used IPIC’s rating.However, the Board was never informed of this “credit enhancement” which was agreed to by the management, who were tasked with finalising all matters concerning the issuance of the USD Notes. Approval from the Board to allow 1MEHL, the parent company of 1MEL and 1MELL, to give a “credit enhancement” in the form of cash payment (security deposit) was not sought. [5.9.d]
So, not only was IPIC kept in the dark about this extra commitment, which had been tagged on after the main agreement, but so was the Board of 1MDB!

Within days of signing the main agreements, the Auditor has thus explained, 1MDB management had encumbered themselves with two lots of secret commitments, which were shortly to evolve into vast financial demands on the company by a bogus third party  entity.
Should one seek to speculate that perhaps this might have been other than a calculated and deliberate self-entrapment on the part of management, then you only have to judge what happened next.

Remember, the Auditor confirms what has already been indicated by the publication of letters from IPIC, which is that the managers of Abu Dhabi’s sovereign wealth fund had no idea whatsoever that there were any “options” or “deposits” added to their ‘Inter-guarantor Agreement’.  Nevertheless:
“IPIC’s guarantee resulted in 1MDB having to provide two things in return or as collateral – options and the security deposit. However, the only document signed by IPIC was the Interguarantor Agreement dated May 21, 2012, which does not contain any clause, terms or conditions stipulating such options and security deposits on the part of 1MDB or its subsidiaries issuing the USD Note.. “[5.9.g.]
In his next paragraph the AG explains exactly how much was paid by 1MDB management to the bogus Aabar Limited for this covertly added “Security Deposit” – no less than US$1.367 billion, which was 39% of the entire capital raised:
“The net receipt of the two USD Notes amounted to USD3.197 billion after deducting the transaction cost of USD302.5 million (8.6%). From this amount, only USD1.83 billion (52.3%) could be used for investments (acquisition of TEHSB and MLSB), operations and working capital. This is because USD1.367 billion (39.1%) was paid to Aabar Ltd as security deposit. [5.9.h.]

How to make a ‘deposit’ into a permanent payment!

It would appear that the last thing 1MDB management were wanting was a situation where that ‘deposit’ might have to be returned by the bogus Aabar Limited.  Otherwise, they would surely not have signed up to such disadvantageous terms as those next identified by the AG.
What they agreed was that if 1MDB failed to launch its projected IPO before a period of 42 months had expired (i.e. by November 2015) then Aabar Limited would be permitted to keep the lot!
“The Security Deposit paid to Aabar Ltd would only be returnable to 1MEHL if the projected IPO had been completed within 42 months from the day of the first USD Note (i.e. End of Nov 2015). The repayment (by Aabar Ltd) was to be made within 60 days of the IPO.” [5.9.i]
As everyone knows the date for the IPO kept slipping back and was eventually was dropped.  According to the above agreement the bogus Aabar Limited BVI is no longer obliged to repay that US$1.367 billion that it was given as security in return for a guarantee from somewhere else!

Cashing in the Options

Meanwhile, the ‘reckless’ 1MDB management was also turning those covert options into cash for very same fake Aabar Limited.  Apparently, Malaysia’s Companies Commission informed these executives that in order for the prized IPO to successfully go ahead it would be wise to terminate the third party interest in the company.

1MDB executives agreed with alacrity, says the AG and proceeded to come to a “Settlement  Agreement”, whereby they would pay an “Assignment Price” of US$300 million up front to the bogus Aabar Limited, in order to release the options – with a commitment to pay a balance of a further amount only after the floatation had taken place. That further amount would be calculated according to the worth of the offering, according to this agreement:
“The management had signed a document titled Relating to Option Agreement (Settlement Agreement) for the purpose of Aabar Ltd’s termination of the option on May 22, 2014. The amount which it required that 1MEHL pay to Aabar Ltd (known as the Assignment Price) for this termination of the option would be valued based on the enterprise value on the day of the listing and the expected growth of the 1MDB Energy Group over eight years. The Assignment Price was to be paid in two stages – USD300 million by Sept 30, 2014 and the balance [to be determined] within 45 days of the IPO.” [5.9.k.]
But, of course, this is not what the management actually did.  Once again, in defiance of an outraged Board, they actually paid the bogus Aabar Limited a staggering US$1.968 billion UP FRONT to terminate those options, IN ADVANCE of any IPO:
“The termination of option payment was not in line with the conditions in the Settlement Agreement. What the management actually paid Aabar Ltd was USD1.968 billion in three payments – May 2014 (USD250 mil), Sept 2014 (USD725 mil) and Dec 2014 (993 mil) – although the only payment which had been agreed before the IPO was USD300 mil.”  [5.9.l]
Perhaps, “If the management had told the Board about the impact of the IPO not taking place, the financial risks could have been minimised”, the AG notes wryly. But, of course, they did not!

Aabar Investments PJS Limited BVI

So, finally to the key nub of this whole problem, which is the bogus off-shore Aabar Limited which was the recipient of all this cash.  For months 1MDB has attempted to argue the toss about this fake third party, which was used to siphon off the cash.

However, if there is one over-riding reason why this report has been made a secret, then surely it would be the Auditor General’s own official confirmation that this was a third party company outside the of the power purchase deals.  From his detailed account it can be seen that this outsider was acting exactly in the same way that Good Star Limited had operated in siphoning the cash from the 1MDB PetroSaudi Joint Venture:
“There are three parties involved in the issuance of the two USD Note – IPIC, Aabar Investment PJS (Aabar) and Aabar Investments PJS Limited (Aabar Ltd). Aabar is a subsidiary of IPIC, which was incorporated in Abu Dhabi. Aabar Ltd is incorporated in the British Virgin Islands with a BVI corporate address. However, IPIC Group’s financial statements for the year ending Dec 31, 2013 and Dec 31, 2014 only lists Aabar as its subsidiary. 1MDB had presented the Incumbency Certificate for Aabar Ltd but JAN was unable to verify it with the relevant authorities.” [5.9.o]

Failed IPO

There had been a plan for burying this enormous heist, as the Auditor General goes on to consider.  Goldman Sachs had proposed a glorious IPO (Initial Public Offering on the Malaysian Stock Market) for all these purchased power plants right from the very start.  The government company would buy them with this inflated loan and would then launch the whole offering onto an unsuspecting public, whose eager investment would pour in the necessary cash to ….. well, cover any shortfalls.

It didn’t work, because by the time that IPO was planning to be launched (early 2014) public trust had evaporated in 1MDB and the credibility of this debt-ridden company was at rock bottom.  The man in charge, Najib Razak, is blaming ‘critics’ and ‘journalists’ for this failure of crucial confidence….. we leave our readers to judge the factual evidence provided by Malaysia’s top auditor.

TRANSLATED EXCERPT OF SECTION 5 BELOW
Executive Summary
  1. Investments in Energy Sector by 1MDB Group [pg xix – xxv]
5.1.      In the early stages in 2009, 1MDB began investing in the energy sector by establishing joint ventures with China and Qatar in the aluminium smelting field in Sarawak by using energy from the Bakun Hydroelectric Project, equity investments in GDF Suez SA and the proposed construction of a regasification plant and gas-based power plant. However, this investment could not be implemented because of energy source constraints and the government policy of prohibiting anyone other than Petronas in supplying natural gas to independent power producers (IPP).

5.2.      Between 2012 and 2014, the 1MDB Group had invested RM12.07 billion in three IPPs – Tanjong Energy Holdings Sdn Bhd (RM8.5 billion), Mastika Lagenda Sdn Bhd (RM2.342 billion) and Jimah Energy Ventures Sdn Bhd (Rm1.225 billion). The acquisition of equity was financed through three loans (RM7.47 billion), two USD Notes (RM10.69 billion) and advance/downpayment (RM625 million), all amounting to RM18.79 billion. The amount loaned was more than the value of the equity because the monies were also used for working capital and general purposes.

5.3.      The Board had discussed and heard briefings from Goldman Sachs and 1MDB management on the acquisition of Tanjong Energy Holdings Sdn Bhd (TEHSB) and Jimah Energy Ventures Sdn Bhd (Jimah) before approving the acquisition. However, for the acquisition of Mastika Lagenda Sdn Bhd (MLSB), the acquisition proposal was not discussed or explained in detail during meetings because it was presented through written resolution. The terms and conditions and method of finance described in the written resolution was very similar to the first method of finance and acquisition that was approved five months earlier. The proposal for the acquisition of MLSB was on a written resolution dated Aug 10, 2012 and was incomplete. The report by an independent consultant to conduct due diligence for the MLSB acquisition was not presented during the Board meeting before an approval was given.

5.4.      The enterprise value of the equity of all three IPP was performed by Goldman Sachs as the Financial Consultant through the use of the discounted cash flow (DCF) method. Enterprise value was determined based on the assumption the long-term cash receivable during the remainder of the concession. In the case of MLSB, the valuation also includes the five-year concession extension. […]
5.5.
5.6.
5.7.
5.8.      The value of the loans which were employed in the early stages – between May 2012 and Jan 2014 – to acquire the IPPs amounted to RM18.79 billion. However, by June 2015, the loans relating to the investments in the IPPs had increased to RM31.79 billion of which RM13.34 billion had been repaid as of Oct 31, 2015. This increase was because the three initial loans, out of the five total taken for the acquisition, could not be repaid by the maturity date. The loans were short term loans due to mature between 10 to 48 months. According to the original plan by the management, the loans were to be repaid through the IPO [Initital Public Offering]. When the IPO was suspended, 1MDB did not have the funds to repay the loans. Because the Tanjong commitment could not be honoured, 1MDB was forced to refinance the loan and take out three further loans, of which a large portion of the amount received was used to repay the original loans raised to acquire the IPPs to avoid default.

5.9.      From the (new loans), two USD Notes amounting to USD3.5 billion were issued to finance the energy sector investments, working capital and general matters. The issuance of the two USD1.75 billion note was approved without government guarantee. Among the weaknesses and observations regarding the issuance of the USD Notes by Goldman Sachs, involving 1MDB, IPIC and Aabar Ltd. are as follows:

a) IPIC and 1MDB had guaranteed the issuance of the two USD Notes – dated May 2012 and Oct 2012. However, the Deed of Guarantee from both companies were not given to JAN for inspection.

b) The guarantee by IPIC for the first USD Note on May 2012 was a “back to back guarantee” through an “Interguarantor Agreement” that was signed between 1MDB and IPIC. According to the agreement, 1MDB is required to obtain the support and sufficient funds from Ministry of Finance Inc (MKD) to repay IPIC should 1MDB fail to pay for all cost, expenditure and all obligations regarding this Note. Although the guarantee was given by IPIC, 1MDB still bears all the risks in the event of a default.

c) The Interguarantor Agreement was not listed as a document which was approved by the Board for the issuance of the second USD Note (Oct 2012), unlike the approval for the first USD Note (May 2012. JAN also was unable to verify if the Interguarantor Agreement was prepared for the issuance of the USD1.75 billion second Note on Oct 17, 2012.

d) According to Goldman Sachs, in return for IPIC’s guarantee on the two USD Notes, 1MEL and 1MELL would prepare options for Aabar Ltd to acquire a 49% equity in 1MESB and 1MELSB at a fixed price. However, the Options Agreement for the issuance of the two USD Notes was not presented for audit.

e) Apart from the option to Aabar Ltd., 1MDB also agreed to provide a “credit enhancement” in the form of cash payment (security deposit) to Aabar Ltd. The payment would have to be made within three days of the receipt of the USD Note, as stipulated in the Collaboration Agreement for Credit Enhancement dated May 21, 2012 and Oct 19, This quid pro quo was necessary because 1MEL and 1MELL did not have the requisite credit rating to issue the USD Note and had used IPIC’s rating. However, the Board was never informed of this “credit enhancement” which was agreed to by the management, who were tasked with finalising all matters concerning the issuance of the USD Notes. Approval from the Board to allow 1MEHL, the parent company of 1MEL and 1MELL, to give a “credit enhancement” in the form of cash payment (security deposit) was not sought.

f) The Collaboration Agreement for Credit Enhancement, dated May 21, 2012 and Oct 19, 2012, which was presented to JAN was incomplete.

g) IPIC’s guarantee resulted in 1MDB having to provide two things in return or as collateral – options and the security deposit. However, the only document signed by IPIC was the Interguarantor Agreement dated May 21, 2012, which does not contain any clause, terms or conditions stipulating such options and security deposits on the part of 1MDB or its subsidiaries issuing the USD Note, in contrast to the actions of the management.

h) The net receipt of the two USD Notes amounted to USD3.197 billion after deducting the transaction cost of USD302.5 million (8.6%). From this amount, only USD1.83 billion (52.3%) could be used for investments (acquisition of TEHSB and MLSB), oeprations and working capital. This is because USD1.367 billion (39.1%) was paid to Aabar Ltd as security deposit.

i) The Security Deposit paid to Aabar Ltd would only be returnable to 1MEHL if the projected IPO had been completed within 42 months from the day of the first USD Note (i.e. End of Nov 2015). The repayment (by Aabar Ltd) was to be made within 60 days of the IPO.

j) 1MDB was advised by the Companies Commission during the preparatory stage of the IPO to not place any encumbrances on the company’s shares. In compliance with this, the Board on May 22, 2014 had approved the termination of option to Aabar Ltd on grounds that it would reduce the value of the IPO.

k) The management had signed a document titled Relating to Option Agreement (Settlement Agreement) for the purpose of Aabar Ltd’s termination of the option on May 22, 2014. The amount which it required that 1MEHL pay to Aabar Ltd (known as the Assignment Price) for this termination of the option would be valued based on the enterprise value on the day of the listing and the expected growth of the 1MDB Energy Group over eight years. The Assignment Price was to be paid in two stages – USD300 million by Sept 30, 2014 and the balance [to be determined] within 45 days of the IPO.

l) The termination of option payment was not in line with the conditions in the Settlement Agreement. What the management actually paid Aabar Ltd was USD1.968 billion in three payments – May 2014 (USD250 mil), Sept 2014 (USD725 mil) and Dec 2014 (993 mil) – although the only payment which had been agreed before the IPO was USD300 mil. The Board also voiced criticisms when told on Dec 20, 2014 that the payments for the termination of the option was made using funds redeemed from the SPC, which was used as collateral to Deutsche Bank on grounds that it would be repaid during the IPO. The management did not explain to the Board that the two loans from Deutsche Bank AG, Singapore amounting to USD250 million (May 2014) and USD975 million (Sept 2014) were used for the termination of option.

m) When taking into consideration the security deposit (USD1.367 billion) and the payment for the Aabar Ltd termination of option (USD1.968 billion), the cost of financing the USD Note by 1MDB is much higher than the interest rate of 5.99% (first note) and 5.75% (second note).

n) Despite this, 1MDB had agreed with the terms which were favourable to IPIC and Aabar because of the desire to invest in the energy sector with no choice of other source of funding. If the management had told the Board about the impact of the IPO not taking place, the financial risks could have been minimised.

o) There are three parties involved in the issuance of the two USD Note – IPIC, Aabar Investment PJS (Aabar) and Aabar Investments PJS Limited (Aabar Ltd). Aabar is a subsidiary of IPIC, which was incorporated in Abu Dhabi. Aabar Ltd is incorporated in the British Virgin Islands with a BVI corporate address. However, IPIC Group’s financial statements for the year ending Dec 31, 2013 and Dec 31, 2014 only lists Aabar as its subsidiary. 1MDB had presented the Incumbency Certificate for Aabar Ltd but JAN was unable to verify it with the relevant authorities.

5.10.    For the financial year 2013 until 2015, the profit after tax of RM2.38 billion for the operational companies – Powertek, Mastika Lagenda and Jimah – was not able to finance the lending cost amounting to RM3.36 billion incurred on 1MDB subsidiaries which borrowed to finance the acquisition of the companies.

5.11.    After acquiring the three IPPs, 1MDB attempted to increase the value in the three companies through investments in a new power plant. The three projects offered to the 1MDB Group are: Projek 3B involving the construction of a 2,000MW coal power plant (Feb 2014), 500MW solar plant (Mar 2014) and the conditional offer for the 2,000MW gas power plant aka Alor Gajah Project (Aug 2014). However, 1MDB couldn’t finance the project and sole Projek 3B to TNB in July 2015 at RM46.98 million, or 56.1% of the RM83.68 million of the development cost. The Alor Gajah and solar projects are being implemented and developed.
5.12.    The early proposal to list 1MDB through IPO was presented by Goldman Sachs beginning in Feb 2012 as a means of repaying the loans that will be taken to finance the acquisition of the IPPs. The condition to implement the IPO was included in several documents: Agreemnt with Maybank Bhd, Tanjong agreement document, options agreement to Aabar Ltd. and Collaboration Agreement for Credit Enhancement and Relating to Option Agreement (Settlement Agreement). However, the 1MDB management had postponed the IPO plan which was originally scheduled for the first quarter of 2013. There were two further postponements – End-2013 and in 2014 – in order to complete the acquisition of another IPP and the bid for Projek 3B. Both (IPP and Projek 3B) had the potential to increase the value of the company and its reception during the IPO. An application for the IPO was finally submitted to the Companies Commission on Nov 2014 after 1MDB Energy Group Sdn Bhd and Edra Energy Global Bhd was established. However, the application was withdrawn by 1MDB on Feb 27, 2015.

5.13.    As of Oct 31 2015, 1MDB Group had spent more than RM18.25 billion for the acquisition of power plants, land, financing cost and other costs involving their energy sector investments, including the cost of borrowing for the security deposit and the transaction cost for the issuance of USD Notes. Based on the rationalisation plan, the sale of Edra Group to CGN Group on Nov 23, 2015 was priced at RM9.83 billion based on the valuation on Mar 31, 2015. The calculation for the net returns on the sale of Edra’s should take into account […] the entire cost of 1MDB Group’s investment in the energy sector.

5.14.    By disposing of Edra Group, 1MDB Group will lose a portion of income and it will negatively affect 1MDB Group’s ability to repay its financial commitments – the two USD1.75 billion Notes and three loans amounting to RM7.47 billion – which were not disposed as part of Edra Group’s assets. This is because the obligation for the loan still falls on 1MDB Group.