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Monday, September 21, 2020

Tony Pua should ask YTL to give him their expired power plant for FREE!

As a person who is supposedly a graduate of a famous UK university and as a responsible Member of Parliament, this must rank as Tony Pua’s post today is his most irresponsible posting to date.
 tony-pua-ipp
Tony Pua wrote:

“Question is why did 1MDB overpay (for the IPP) when they could almost get some of the assets for free? 

They paid RM2.3bn for Genting Sanyen when it’s worth only RM400m in Genting’s books as there was less then 3 years left to the concession. Why didn’t 1MDB just wait for the concession to expire and get it at scrap value?”

Before I begin to expose how Tony Pua is exploiting his supporter’s lack of business sense, I have some good news for YB Tony!

YTL’s concession for their two power plants in Malaysia expired just two months ago on 30th September 2015. While the plant in Paka was extended on a short-term basis for less than 3 years, YTL’s 400MW plant in Pasir Gudang was not renewed.

Thus Tony Pua should immediately call YTL and ask them to give him the power plant for FREE!

You slowly wait… I am sure YTL will give you their power plant for FREE!.Man-man wait ah…
Okay, back on topic.
Firstly, did you even know that the Genting plants that 1MDB bought were relatively well-maintained and that Genting had put in a bid for an extension in the 2012 round of Power Purchase Agreement tender from the Electricity Commissions?
Yes, Genting already put in a bid for renewal even before 1MDB bought it. Did you even check with 1MDB whether there was a Conditions Subsequent in the agreement between 1MDB and Genting that the final price to be paid was on condition that the plants were renewed?
You are in the PAC, you can easily ask.
Yes, the plants was then renewed for another 10 years ending in the year 2026 and 1MDB bid the lowest rates of all renewals – hence reducing the price of electricity to Tenaga and to Rakyat.
So much for Free and scrap metal.
Secondly, as a person supposedly able to understand business and read financial statements, surely Tony Pua understand that book value and actual sales price would differ?
For example, the book value of Apple Inc – even with their formidable assets – would be much less than their actual market valuation. You are not buying assets but you are buying an actual business of an operating entity.
Another example is if a Company buys anew car, depreciated it over 5 years until the book value is zero, then Tony gives away the car for free is it?
I am confident that Tony Pua understands this difference between book value and actual market valuation of a business – which would then mean that Tony Pua had meant to mislead his supporters lack of knowledge in such manner,
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”.

Genting Group FY 2012 Financial Report – discontinued operations means business sold to 1MDB

In 1MDB’s own financial statement for the year ended Mar 2014, it showed that this very same asset had revenues of RM352m and making RM159m per year – lower probably due to higher financing cost).
Page 137 of 1MDB Audited Financial Statement 2014 shows the Genting plants contributed RM159m to 1MDB profits

(RM159m profit out of revenues  of RM352m? IPP seems to have very high margins – thanks to Tun Mahathir’s overly generous IPP projects in the past)

Can YB Tony Pua 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 in your face and roll you all the way down the Genting hill.


This post took me about 10 mins to write only coz it is based on quite an old post of mine from June 2015.

These people like to recycle the same things over and over again even though they have been answered umpteen times. 

UBAH! I am thinking that their rocket logo should be changed to a recycle logo. 

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