1MDB overpaid for power plants to reduce tariffs, says Arul Kanda
(The Malaysian Insider) – 1Malaysia Development Berhad (1MDB) overpaid for power plants it bought from three major power producers to reduce tariffs, its president, Arul Kanda Kandasamy, said today.
Arul Kanda said there was a “goodwill” difference between the real value of the power plants purchased from Genting, Tanjong and Jimah, and the price 1MDB paid for them.
“This is because when we bid for power projects, we offer lower tariff than other companies. A tariff difference by even a single sen makes a huge difference over a 20-year concession period, for one station a single sen difference can reduce tariff costs by RM2.9 billion,” he told an Umno-organised public briefing at the Putra World Trade Centre in Kuala Lumpur today.
“For four stations, we can reduce tariff costs by RM12 billion. End of the day, the people will benefit.”
1MDB had been accused of overpaying for the energy assets, but Arul Kanda said any prospective buyers of its energy arm, Edra Energy, also would have to follow the low tariff rates set by 1MDB in its initial bid.
1MDB is trying to sell off Edra Energy as part of its rationalisation plan as it attempts to reduce its RM42 billion debts.
“Any prospective buyers of Edra Energy will also have to adhere to these tariffs.” Arul Kanda said power concessionaires have profited from concessions awarded under the previous administration.
“It is so profitable for them, so when we bid with lower tariffs, the rest of the industry have to bid with lower tariffs as well,” he said.
“That is why, we had a goodwill difference of about RM2 billion.”