By Zuraimi Abdullah From Business Times

FULL CONTROL: Investments to be made in appropriate energy projects and real estate

1MALAYSIA Development Bhd (1MDB) says substantial portions of its overseas funds have gradually made their way back to Malaysia to be reinvested in energy projects and real estate, and meet financial obligations.

The funds had been earmarked for the development and acquisition of specific assets, 1MDB said yesterday in response to allegations it had been involved in questionable deals, and amid calls that it should bring home RM18.1 billion parked overseas, as claimed by certain news reports.

The sovereign wealth fund said the monies invested abroad is an interim measure, such as the funds in Cayman Islands that is regulated by the Cayman Monetary Authority.

“1MDB’s board has full control over its funds managed in the Cayman Islands. These funds are managed under the mandate given by 1MDB and can be withdrawn as it so determines.”

As stated in its press release dated April 15 last year, 1MDB noted that the US$3 billion (RM9.8 billion) proceeds raised for the Abu Dhabi Malaysia Investment Co joint venture company is to be used for investments in high-impact projects like energy and strategic real estate.

The funds raised were captured in its accounts for the period ended March 31 2013 filed recently.

Subsequently, some of the funds were brought back and used for appropriate energy projects and real estate, while the rest is held locally and in overseas accounts for cash management, reserves and upcoming projects.

1MDB said its annual finance cost of RM1.6 billion in the FYE12/13 accounts is out of total borrowings of RM36.2 billion. This amounts to a rate of roughly 4.42 per cent.

In comparison, this is only slightly higher than Bank Negara Malaysia’s 10-year Malaysian Government Securities, which carries a coupon rate of 4.181 per cent, it noted.

1MDB funding exercises have included projected capital necessary to secure future opportunities, it said.

For example, for its energy business, 1MDB had competed for the Prai, 3A and 3B power plant tenders. It was unsuccessful in its bids for Prai, despite offering the lowest bid price, and 3A, but managed to secure the 2,000MW coal-fired 3B project.

“1MDB expects to use its funds to finance its equity investment in the RM11 billion 3B project,” it said, adding that it will continue to bid for projects in Malaysia and overseas.

1MDB expects its energy subsidiaries to continue bringing in strong cash flows.

During the financial year ended March 31 2014, 1MDB bought a 75 per cent stake in Jimah Energy Ventures, whose main asset is the 1,400MW Jimah power plant in Negri Sembilan.

1MDB said it is set to capture higher growth value in the energy sector by attracting local and international investors when it moves towards a listing of its energy assets.

On issues relating to its foreign partner, 1MDB said it had offered Aabar the opportunity to take up a stake in some of its energy assets for guaranteeing its financing.

On the Tun Razak Exchange project, 1MDB said it was finalising new investments for Phase 1 of the development.

For more on this story go to: 1MDB funds back home – Today’s Paper – New Straits Times http://www.nst.com.my/business/todayspaper/1mdb-funds-back-home-1.583026#ixzz30OI5J3bB

See also iNews Cayman story published March 2 2014 “2-Power project win for Malaysia’s 1MDB bolsters IPO prospects” at: http://www.ieyenews.com/wordpress/2-power-project-win-for-malaysias-1mdb-bolsters-ipo-prospects/