After losing RM5 billion cash in their first business venture with that dodgy Petrosaudi company in 2009 and gaining nothing in return except for some worthless units, 1MDB needed to raise money fast by venturing into the energy sector. That initial RM5 billion was obtained through shariah bond guaranteed by the Government but by they year 2011, they did not get any cash returns for it, only units. Hence they were unable to reuse that investment to buy other assets.
So how did they buy the IPPs? By getting another USD3.5 billion loan! This time it was guaranteed by an arab company called IPIC. Consequently, they then have the cash (new debt) to spend freely again.
But they bought 3 old IPPs above market prices and thought that they could raise enough cash to cover the first hole (PetroSaudi failed investment)and the second hole they just created (that USD3.5 billion loan) through the IPO listing of their IPPs.
Right from the beginning, as soon as they had purchased those IPPs in 2012, they had announced that an IPO will take place in 2013. This was their own target and presumably, it was made after a diligent business plan and financial model been deliberated. For a multi billion company making plans without being cognisant of their own capabilities and future direction is surely not an efficient way to run it. They might end up like a failed business model! (which they are)
Hello everyone! I am here to make a fool of myself! But I don’t care since my salary is huge!!
The Malaysian taxpayers was swindled about USD1.83 billion by that joint venture with PetroSaudi and surely 1MDB will not make the same mistakes again. But stupidity has no limit.
The real reason why they failed to list Edra Energy was because they had failed to sign and submit their 2013 audited accounts on time.
The real fact is, their auditor (KPMG) had refused to sign off the financial statements because of the USD1.83 billion fiasco made for the PetroSaudi joint venture.
1MDB’s financial year ends every 31st March and financial statements must be signed off within the next 6 months (30th September is the deadline).
KPMG could not determine and confirm the value of those mythical units and their audit partners were not comfortable enough to proceed in giving the audit report an unqualified opinion. Having a qualified audit report would have been a disaster for a multi billion debt laden company like 1MDB.
1MDB failed to submit their accounts on time, the draft prospectus for the IPO could not be lodged on time and the November 2013 deadline for the IPO listing was not met.
Note that in June 2015, the Finance Minister II claimed that the termination of KPMG was a normal process of audit rotation. We had claimed that he was lying on national TV, and the new revelation from investigative documents have revealed that indeed they were sacked.
This was just another bogus attempt to fool the public and we are amazed how the media did not even question him further on this ridiculous statement. Having RM18 billion worth of IPP assets is not enough for it to be listed? If 1MDB had wanted to buy more IPP assets before it could be listed, then at what point should they stop buying assets? At RM20 billion? RM40 billion?
If you had planned to buy more assets before listing them, then why did you announced to list it in November 2013 initially?
The real reason why they failed to have an IPO in November 2014 is because they have failed to meet the deadline in submitting their audited financial statements again! They had to lodge prospectus in September 2014 but failed to do so.
Deloitte wanted evidence from 1MDB about the value of those units which 1MDB could not provide. As a solution, 1MDB and Deloitte met halfway by getting a third party – IPIC to guarantee those units that was borne from the PetroSaudi joint venture fiasco.
This is akin to putting your RM1,000 into an ASB unit trust account but after some time, you can’t be sure if RM1,000 is still there, you simply had to get a third party to guarantee it!
On top of that, those units were classified as third class assets. In other words, assets where their market value cannot be absolutely determined.
Note that in both occasion, the delays were not caused by brickbats or the opposition or even by Tun Dr Mahathir.
It was entirely due to the stupidity and inefficiency of 1MDB top management which precipitated in the failure of their IPO plans.
The fact that they tried to blame everyone else for their inability to repay debts, the loss of USD1.83 billion and the potential decrease of RM52 billion in assets to RM12 billion is shocking.
Arul Kanda even gave an absurd answer as to why 1MDB amassed so much debts just to buy assets. He said:
“it creates a certain discipline in the company, and allowed the government to use its funds for other purposes, such as development for the people.”
Pray tell what kind of discipline has 1MDB shown since 2009? From evidence, we can safely say that 1MDB has no discipline at all. They lost and bungled their first investment venture, but learned no lessons out of it, took another huge loan and then failed to recoup any returns for it.
Below is what Tony Pua (of all people) had written about 1MDB back in 2012:
What is of greater concern however, is the manner which 1MDB is financing its business and operations, which is funded entirely by debt guaranteed by the Federal Government.
The last time it took a RM5 billion debt, it invested RM4.2 billion in a speculative PetroSaudi Joint Venture with PetroSaudi International company for an oil exploration project. However, within 6 months, 1MDB converted its 40% investment in the joint venture into an 11-year loan to a company whose “track record” stretched back only to 2005.
The PetroSaudi stunt left 1MDB with very little cash for its new projects awarded without tender, by the Federal Government – the 160ha Bandar Malaysia in Sg Besi and the RM26 billion Kuala Lumpur International Financial District. Hence as it stands, 1MDB is already in need to secure further financing to develop these 2 mega projects.
Now, with the new RM8.5 billion investment in Tanjong Energy, there is absolutely no question that 1MDB will be the most leveraged company in Malaysia, with the risk entirely bourne by the tax-payers. With absolutely not expertise or experience in oil and gas, property development and now, the power generation sector, 1MDB is setting itself up to become Malaysia’s mother of all bail-outs. If it happens, it will be a disaster of epic proportions to our financial sector which will trigger possibly the worst economic crisis the country has ever faced.
The Prime Minister and Finance Minister, Datuk Seri Najib Razak must present an official ministerial paper to Parliament when it sits in the session commencing next week.Brakes and risk management measures must be put in place to prevent the country from falling headlong into financial disaster.