Malaysian power utility Tenaga has announced plan to acquire the state-owned 1Malaysia Development Berhad’s (1MDB) entire 70% stake in a 2GW coal-fired power project, 3B.
The remaining 30% stake in the project is owned by Mitsui, which is a Japan based company.
Estimated construction cost for the power project is $3.6bn.
The transaction is the first sale of an energy asset by 1MDB. It will be able to help it in getting rid of its debt obligations.
1MDB presently owes almost MYR42bn ($11.3bn) as debt which consequently had been affecting Malaysia’s currency and credit rating, reports Reuters.
The deal has been approved by the Malaysian Government, which was confirmed by Energy, Green Technology and Water Minister Datuk Seri Maximus Ongkili.
The payable tariff for power supply to Tenaga has also not been finalised, Ongkili said.
Mitsui and 1MDB had won the rights to build the power project 3B in February 2014.
1MDB has around 15 power and desalination plants in five countries under its portfolio.
Tenaga president Datuk Seri Ir Azman Mohd said that the acquisition will enhance its shareholder’s value and bring positive value in the long term. He said: "It is a greenfield power plant with good prospect and with the increased generation capacity of 2,000 MW upon completion of the project, the acquisition will bring about positive value to TNB in the long run."
"Based on financial analysis, the project is expected to have a positive impact on the earnings of TNB. It is not a bailout of 1MDB."