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Sakmongkol ak 47

Tuesday 1 December 2015

Hydra-like arguments on the sale of Edra.

Dr Mahathir, PM and UMNO president for 22 years, is just a retired former politician. Can UMNO Malays accept this insolent description? They probably can and don’t care because they are just a pliable putty.
Might as well describe Dr Mahathir’s criticisms as senescent musings. Or just say Dr Mahathir is getting senile. See whether these descriptions affect the 3.4 million UMNO members less the 22,000 ketua cawangans, the 48 or more MKT members and the 191 divisional leaders.
UMNO people, those who can read and understand English, must reject this kind of treatment on the greatest UMNO Malay leader. I find it strange as a Malay DAP member, having to defend Dr Mahathir alongside a few other cyber warriors.
I can only justify my stand, because, I am part of the bigger number of Malays who do not subscribe to the values of present day UMNO Malays. Remember, the 3.4 UMNO Malays is just less than 20% of the Malay population of some 18 million.
According to 1MDB, Dr Mahathir just don’t understand- CGN bought edra for RM9.83 billion plus taking over debts totaling RM7.43 billion. Hence CGN bought at EDRA really for RM17.26 billion, breaking even on the RM18 billion price (RM12b plus RM6b), 1MDB bought the IPPs in the first place.
Because of that, Arul Kandasamy is excited. He tells everyone that the sale of Edra Energy for RM9.83 billion at current price, is a vote of confidence for the Malaysian economy. The stock market did rally and the Malaysian Ringgit improved.
It reduces 1MDB debt up almost RM18billion. At the sale price of RM9.83billion, we have broken even.
There are 2 things I find disagreeably troublesome. One, the sale price being a vote of confidence in our economy. Two, broken even means what?
Break even in economics, is the point where total revenue equals total costs. Hence there is no loss or profit. Perhaps, this is what Arul Kandasamy means. If we had not made profits, at least we didn’t make any losses. That’s should be comforting. Shouldn’t it?
That means RM9.83 billion today, is the same as the RM9.83 billion at the time 1MDB bought all the IPPs. That’s one. Two, didn’t we buy the IPPs for RM12 billion. So how can the sale price of RM9.83 billion at today’s price neutralise the RM12 billion?  And we really hope CGN really took over the inherited loan too.
He says Dr Mahathir continues to mislead the public. In other words, Arul Kanda says Dr Mahathir does not understand finance. 1MDB says it gets extra money from the revenue earned while holding the assets for several years. 1MDB says it gets RM2 billion in cash dividends. That would make RM9.83 +2.0= RM11.83 billion. We break even!
CGN also takes over the inherited loan that has become, as stated by 1MDB, RM7.43b. the original inherited loan of RM6b must have accumulated interests. But never mind, CGN has taken over the loan.
 So, with cash of RM9.83b, plus RM2b in cash dividends and RM7.43b debt transfer, we are ok what? So now, let’s find willing buyers for our land and other assets.
There is a flaw in the narration. RM9.83b 4 years ago isn’t the same as RM9.83billion today. 1MDB took financing to purchase the IPPs as well as incur other financial costs. It took loans in both US Dollars and Malaysian Ringgit.
We bought the IPPs at RM12 billion (let’s not talk about inherited debt), and now sell it for RM9.83b. how do we cover the shortfall? We cannot disingenuously add the RM2 billion cash dividends to make up for the shortfall. If we do, than the RM2 billion is just a happenstance winning 1MDB the argument against retired and former politician Dr Mahathir that we recovered our RM12 billion initial purchase price.

What the holding costs? If indeed Edra made RM2.17billion cash dividends, didn’t it need to service the loans it took? They took loans in US Dollars and Malaysian Ringgit , we need to ask, what was the cost incurred in getting the cash dividends? They also paid brokerage fees to Goldman Sachs.t These costs may well overshadow the RM2b cash dividends.
1MDB borrowed both in US Dollars and Malaysian Ringgit. It has to account for the interest payments. What is the net returns then? Add the net value amount( cash dividends minus cost of loan to the sale value. Do they add up to reduction of loans up to RM18 billion?
Who is misleading the public now?
Going back to the beginning, we still cannot cancel out the possibilities of incompetence, recklessness or pure intention of profiteering when we paid RM18 billion for the assets including assuming an inherited loan obligation of RM6 billion.
Why did we do that? Who authorised the purchase of companies with existing loan obligations? The purchase price of RM12 billion (not including the inherited loan) was regarded as an inflated price. Why buy at inflated price when market valuation placed the assets at RM10 billion tops.
We must remember, if we allowed the IPPs to reach shelf life, we could have bought these IPPs at a much lower price. Was it done to help certain people in these IPPS? Or was it done to reap regulatory capture at a future date?
Reports about donations into charitable foundations by some of these IPPS must be viewed with suspicions.
Vote of confidence on our economy? It looks more like an opportunity to buy assets from a desperate seller.
How is that so? That increases our USD Dollar reserves? The sale immediately unlock hitherto unheard of economies? Create jobs, reduces inflation, bring the cost of living down?
Will edra energy be given more quota to supply electricity? Will they be allowed to sell back to TNB at a higher price to recoup this initial investment?
RM9.83 billion in current prices isn’t the same as RM9.83 billion when Edra bought those IPPs then. Part of the loan taken to finance the purchase as pointed out by many was in US Dollars. It was trading at around RM3.2 at that time and now it’s RM4.2. For every USD Dollar we lost RM1.
When 1MDB bought out these IPPs from Genting, Ananda, Jimah Power and so forth, the Malay supremacists from within and outside UMNO were hailing the move as a step of Malay-nising the ownership of these strategic assets. These strategic assets must be in Malay hands.
They are now quiet a church mouse but will respond in caveman-like manner when challenged. Or make police reports asking the police to investigate what has not been established as a crime yet.
Number one- if these assets are strategic, we don’t sell them. It’s like giving up our advantage and that will make us susceptible. Number two, in order to allow Edra to purchase 100% equity, we had to forfeit our legal requirements on foreign ownership. We abandon our legal limitation of 49% foreign ownership.
Number three- the Malay supremacists have to swallow their saliva- the UMNO leadership is selling these assets to the Chinese, Communists and Godless people.
So in the end- it does not matter whether he cat is black or white, as long as it catches mice.


Anonymous,  1 December 2015 at 13:07  

Furthermore, and if I am not mistaken, for the 1MDB to acquire all those that come under Edra (the three IPPs plus overseas ones) the total amount of borrowing it incurred was much more than what it spent!

All in all, can one imagine the kind of people that we are largely to befit this kind of treatment from the so called our political and business leaders? We must have been totally rotten people to deserve such terrible treatment…

And to think that this kind of thing taking place as far as the 1MDB is concerned is par for the course as far as the government's operations is concerned involving the GLCs, government departments, etc.: just about every single time one way or another the rakyat is the ultimate party faced with the horrendous burden while the leaders and their associates continue to make tonnes of money as if there is no tomorrow!

We have been taken for a ride - for far too long. Is the end not too long into the future? Or, is it the case that worse deals are coming our way? After all, they have so far gone scot free! What say you Umno grass roots, Pas, Felda inhabitants, kampong folks, Sarawakians, Sabahans, nonregistered voters, non voting registered voters (just to name some…)?

1KangKongLand 1 December 2015 at 13:29  

If you keep 9.83 billion in fix deposit at 4% per annum for 4 years, the interest/dividend you receive is 1.5782billion!
This Nasi kandar thamby is pusing pusing thinking everyone is an idiot like him.

Anonymous,  1 December 2015 at 13:50  

Makin lama makin orang lupa bahawa soal 1MDB soal moral, integrity, good governance, enlightened management dan matlamat memajukan negara melalui pelaburan yang strategik dari segi teknologi tinggi atu apa sahaja yang luar dari biasa. Itu gambaran yang telah diberi diawal penjelasan mengenai penubuhan 1MDB. Sekarang ceritanya lain. Orang UMNO sudah lupa atau sengaja lupa tentang perkara salah laku pengurusan dan kakitangan syarikat yang meletakkan negara pada kedudukan risiko besar. Urusan kewangan yang diluar amalan biasa adalah perkara yang menyebabkan rakyat marah. Sekarang yang tim bul ialah akaun yang kononnya dapat dipertahankan. Perkara akaun yang membuat mereka yang selesa dengan 1 MDB puashati. 1MDB tidak rugi. Itu cerita baru. Cerita yang menyebabkan rakyat marah ialah kecelaruan pengurusan bisnes sehingga sampai hari ini pihak yang dituduh bersalah dalam urusan anak syarikat 1MDB tidak berani muncul.

Anonymous,  1 December 2015 at 14:38  

When Onn left UMNO, its leaders beginning with Tunku Abdul Rahman (who succeeded Onn) and Datuk Razak Hussein right down to the lowly branch committee member as well as ordinary members, did not demonize Onn. They respected his decision to leave and left it at that.

The UMNO of today is a far different party. When former Prime Minister Mahathir retired after leading the party for over two decades, those small characters he left behind took every opportunity to snipe at him. Malay culture has not changed; only UMNO - Dr Bakri Musa

Anonymous,  1 December 2015 at 19:53  

UMNO = Uncle Mohd Najib's Organisation

BN = Bohong untuk Najib

Phua Kai Lit

Anonymous,  1 December 2015 at 20:28  

all your questions are valid and the PAC head Hasan and the PAC team must question Arul why the figures don't match. Who's bluffing who, who's lying to the rakyat?
Arul has a lot on his bald pate.

Donplaypuks® 2 December 2015 at 09:52  

I think Arul Kaunda Kundi and BUMNO/SCUMNO Ministers forgot that after acquiring the crony IPPs at a grossly inflated illegal valuation of RM18 billion, 1MDB immediately wrote off over RM2 billion in goodwill, 3 years ago.

Basically, this means the current value of IPPs in 1MDB's balance sheet will be about RM16 billion.

So, if we add everything up, I bet my bottom ringgit that there's, taking into account interest on RM18 billion, no way 1MDB "broke even" on the Edra investment.

Even if by some miracle they did, and taking into account the opportunity cost of absolutely risk free interest of about 4%, the Advisor, Chairman and Board of Directors of 1MDB should all be sacked forthwith. This is the same performance standard to which we hold Chairmen and CEOs of Plcs accountable to. We don't employ these people at fancy remuneration packages to turn in "break even" shambolic results when they borrow RM18 billion against a paid up capital of RM1 million!

Arul Kaunda Kundi, while not responsible for the IPP fiasco, should nevertheless be sacked, because he doesn't seem to know how to add up 2 + 2!!

Anonymous,  3 December 2015 at 23:01  

Just to aid understanding, Figures plucked from Spin Kings Blog. not sure if appropriate - just delete if not.

All in RM millions
1 MDB Purchase 3 IPP(Edra)
Equity Debt Sub total Cash Total
Powertek IPP 8,500 3,448 11,948 -1,582 10,366

Genting IPP 2,500 0 2,500 -1 2,499

Jimah IPP 1,225 5,732 6,957 -565 6,392
total 12,225 9,180 21,405 -2,148 19,257

Original Restructured Debts taken on
USD Bond - USD1750 5.99% 5,250 5,250 New Debts
USD Bond - disc adj -420 -420 USD Bond 4,830
Syndicated Loan 5.47% 6,170 3,500 Syndicated Loan 1 3,500
Anada Krishnan 2,000 Ananda Krishnan 2,000
1 MDB cash 670 Term Loan 600
Term Loan 5% 600 600 Sub total 10,930
IMDB cash 625 625 Existing debt
Powertek 3,448
Jimah 5,732
Total 20,110
Total Finance 12,225 12,225

CGN(inherits debt and cash) buys Edra - USD2.27b

Equity Debt Subtotal Cash Total
Edra $2270 9,830 9,830 9,830
Powertek 3,448 3,448 -1,582 1,866
Genting 0 0 -1 -1
Jimah 5,732 5,732 -565 5,167

Total 9,830 9,180 19,010 -2,148 16,862


Sumpitan Emas,  3 December 2015 at 23:23  

9.83 billion in f/d at 4% per annum for 4 years, compounded would be 1.6697 billion, and this is pointedly clear according to DPP, “opportunity cost of absolutely risk free interest,” and therefor the biggies involved, “should all be sacked forthwith.”

Comments on big money and big time money managers: [extracted from ‘After The Music Stopped’ [ATMS] by Alan S Blinder (2013), and ‘Why I left Goldman Sachs’ [WILGS] by Greg Smith (2012)]

1. . . . , you will see that the bank [imaginary bank,BBSB] funded itself exclusively by deposits and equity. That’s quite unrealistic for big money-center banks, which have multiple and complex source of funds. Nonetheless, commercial banks do have deposits—that’s why we call them banks. Investment banks do not. They fund themselves almost entirely by borrowing. [p52 ATMS]

2. You might have thought that this near-death experience would have led to some regulation of both hedge funds and the exploding markets for derivatives. But you would be wrong. In a famous incident earlier in 1998, Brooksley Born, then head of the CFTC [Commodity Futures Trading Commission], was sternly rebuked when she suggested that maybe OTC [over the counter] derivatives should be brought under the CFTC’s regulatory umbrella. Her efforts were blocked, to put it politely by the government’s financial heavyweights at the time: Fed Chairman Alan Greenspan, Treasury Secretary Robert Rubin, Deputy Secretary Lawrence Summers, and SEC Chairman Arthur Levitt. Turf was involved, to be sure. The little CFTC apparently wanted to jump into the driver’s seat without taking too many other passengers along. . .The quartet criticized Born publicly warning that regulating derivatives would create legal uncertainties, stifle valuable innovations, and sending derivative trading offshore—maybe even capitalism as we know it. She was also on the receiving end of a verbal tongue-lashing from Summers. ¶ As the new Treasury secretary, Summers helped pushed the Commodity Futures Modernization Act of 2000 through Congress. The law explicitly removed any threat of CFTC regulation of derivatives contract among ‘sophisticated parties.’ ‘Sophisticated?’ The very word sounds ludicrous given the foolishness that followed. Maybe the operational word was parties, which broke out with reckless abandon once the regulatory DO NOT ENTER sign went up. According to ISDA [International Swaps and Derivatives Association], total notional volume soared from $70 trillion in 2001 to $445 trillion in 2007. [p63-ATMS]

3. One other important footnote to history: On Sunday, March 16 [2008], the same day that JP Morgan Chase announced its purchase of Bear Stearns and the Fed announced its approval of the deal, the Fed’s Board of Governors created the Primary Dealer Credit Facility. The PDCF made it much easier to lend money to securities firms by, for example, broadening the range of eligible collateral. Bear executives maintained that they could have averted bankruptcy without requiring assistance, if they had been given access to the PDCF. Jimmy Cayne told FCIC [Financial Crisis Inquiry Commission] that the PDCF came ‘just about 45 minutes’ too late to save his firm. No one will ever know. [p114-ATMS]

Sumpitan Emas,  3 December 2015 at 23:23  

4. . . .when confidence goes, it goes. And it was going fast. Morgan Stanley lost cash to collateral calls, to withdrawal of funds, and to cutoffs of normal credit flows. Its liquidity pool dropped from $130 billion to $55 billion in a single week. ¶ Similar problems were plaguing Goldman Sachs—although, as befits its status as the fastest antelope, things weren’t quite as bad. . . Goldman, of course, was also borrowing from the PDCF and elsewhere. Bernanke later told the FCIC that, ‘We thought there was a real chance they would go under.’ ¶ Once again, the Fed looked for and found a creative emergency solution. On Sunday, September 21 [2008], both Morgan Stanley and Goldman Sachs applied to the Fed to become banks (technically, bank holding companies)—something that had been anathema to both of them before. After all, being regulated like a bank would crimp their styles in many ways—not to mention bringing in a lot of prying eyes. But as the panic of 2008 gathered force, the onerous burden of Federal Reserve regulation didn’t look quite so onerous anymore—especially when stacked up against the shelter from the storm that the Fed would provide. The Fed and the Justice Department approved their applications with a wink, a nod, and blazing speed, thereby pulling the beleaguered companies inside the Fed’s safety net. That stopped the runs . . . . When Wall Street opened for business on Monday, September 22, just a week after the Lehmann Brothers bankruptcy, there were no big, independent investment banks left. . . Prior to the crisis, the big investment banks had been the top dogs of finance. Theirs were the gold-plated names most of the sharpest MBAs and financial engineers wanted on their business cards. They were home to the Masters of the Universe. Then they were gone. [p153-154 ATMS]

5. The bill that ultimately passed Congress, the Emergency Economic Stabilization Act of 2008, ran to 451 pages, of which 261 dealt with TARP [Troubled Assets Relief Program], making that part of the Act (Title I) 87 times Paulson’s original length. But nowhere in those 261 pages is there a single word about using TARP money to inject capital into banks. Nowhere. [p192-ATMS]

6. If nothing else, Paulson was a man of action. The TARP passed on October 3; he changed its purpose completely on October 12; he was already force-feeding capital down the throats of the nation’s biggest banks on October 13. [p200-ATMS] [n.b: Secretary of the Treasury 2006-2009, ex-CEO of Goldman Sachs]

7. Over the weekend of September 13 and 14 [2008], Merrill Lynch and Lehman Brothers . . . toppled. On Sunday, Merrill Lynch was acquired by Bank of America, and in the early hours of Monday morning, Lehman Brothers filed for Chapter 11 bankruptcy. It was then (and still is) the largest bankruptcy in U.S. history. [p134-WILGS]

Sumpitan Emas,  3 December 2015 at 23:24  

8. Several of us went in to the office on Sunday evening, September 21 [2008], because a lot of news had been breaking over the weekends . . . . It was the strangest thing to happen at 9:15 P.M. on a Sunday, when only a few people had been on the trading floor. The doors closed. Gary [Cohn] looked very tired and scruffy … ‘Crazy world we live in,’ I said in the blandest, most neutral tone I could find. It was a touchy time, and I was just trying to be friendly. ¶ ‘Tell me about it. I’ve been here the whole weekend, and I haven’t gone home much,’ Gary said. He looked as if he could have slept on his office couch the previous night. ¶ . . . even if there wasn’t a specific reason for Gary to be there, he’d probably just been strategizing. We would very soon learn the truth. ¶ As I got into a cab . . . checked my Blackberry. A fresh e-mail caught my eye. ‘The Federal Reserve Board approved the applications of Goldman Sachs and Morgan Stanley to become bank holding companies.’ Holy shit! So that was why Gary Cohn had been working around the clock in the office all weekend. This was huge. [p135-136-WILGS]

9. In a single weekend, the institution of the investment bank, as it had once been constructed, had vanished forever. The Goldman Sachs of Sidney Weinberg, Gus Levy, and John Whitehead had vaporized—cleverly converted, through the eleventh-hour labors of desperate men (Lloyd Blankfein, Gary Cohn, and Morgan Stanley’s then-CEO, John Mack, among them), into an institution that could borrow money from the government at zero interest and then invest it at government bond rates, in essence making free money. Goldman Sachs and Morgan Stanley were now effectively getting paid by the government just to stay in business. [p137-WILGS]

All emphases in bold, mine.

And how much has 1MDB paid Goldman Sachs in fees and charges for arranging the bond sales? $300 million, $500 million, or $600 million?

From,, “The scale of Goldman’s fees on the deal, which came to nearly $300 million, was controversial even within the bank, people familiar with the matter said. Goldman took the unusual and uncomfortable step of alerting the fund to its expected payday ahead of time to head off any recriminations down the road, the people said.”

All said and done, the 1MDB saga confirms that money, indeed, is fungible.

Sumpitan Emas,  4 December 2015 at 08:06  

Correction: # 2, 1/3

. . . - maybe even end capitalism as we know it. . .

Anonymous,  4 December 2015 at 21:22  

maaf Dato and all, Table of cost and finance wasnt meant to be gibberish. JC

Anonymous,  4 December 2015 at 22:35  

Dato - this time not formatted, again figures are plucked from Spin Kings blog

1MDB purchase the 3 IPP(Edra) -
Powertek (8.5b), Genting (2.5b) and Jimah (1.225b) – total 12.225b.

This is financed by USD Bond(5.99%) 4.830b, Syndicated Loan(5.47%) 3.5b, Ananda Krishnan 2b, Term Loan(5%) 0.6b and IMDB cash 1.295b

1 MDB will assume the debts of the 3 IPP @ Powertek(3.448b), Genting (0) and Jimah (5.732b).
1MDB would also inherit the cash @ Powertek (1.582b), Genting(0.001b) and Jimah (0.565b)

CGN buys Edra
CGN pays Edra 9.83b
CGN assumes debt Powertek - 3.448b, Genting – 0 and Jimah - 5.732b
CGN inherits cash Powertek 1.582b, Genting – 0.001b and Jimah - 0.565b

further to take into ac:
exchange rate losses
initial bank loan fees - quite sizeable
loan/bond interest


Anonymous,  6 December 2015 at 11:29  

The best ludicrous part is that UMNO will spew its rotten lies to the uneducated Malays that the Malays have successfully finally bought over the energy plants from local Chinese owned companies like YTL and Genting. Unfortunately they don't have the balls to tell the truth again that all of them ended up with China's companies. What a stupid lies.

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