Watching 1MDB (part 2) : Its loan structure and its venture into Energy Business

Lack of Transparency

1MDB financial accounts are reported to be audited by KPMG. However, as it is still privately held company, its annual audited accounts are not available to general public. Thus we can only guess its profit and loss figure through all publicized news.

1MDB Loans

1MDB had at least place three placement of loans,

The first, RM 5 billion , 30 years bond issued at coupon rate of 5.75% around May 2009.

Annual coupon payment = RM287.5 million (Source)(source 2)

The second, USD 1.75 billion, 10 years notes issued at yield of 6%,(source) around June 2012

I am guessing its coupon rate to be somewhat 5% - 5.5% (for different in coupon rate and yield rate, please see my other post if i got time to write about).

This amount to annual coupon payment = 87.5 million to 96.3 million USD or RM 288.3 to 317.1 million.

The third, USD 3 billion , 10 years notes issued at yield of 4.4% (source) around March 2013.

It is not clear whether the 4.4% stated in the news is yield or coupon rate,

I am guessing its coupon rate to be some what 4.5% to 5%.

This amount to annual coupon payment = USD 135 million to 150 million or RM 444.8 to 494.2 million.

This mean, 1MDB need to generate at least RM 1.02 to 1.10 billion just to service its debt, under the circumstance that ringgit do not fall further against USD.

1MDB Energy Business

In total 1MDB had three important power assets

The first, Powertek formally owned by Ananda Krishnan,

1 MDB reportedly paying RM 8.5 billion for the deal (source) which has net asset with face value at RM 3.5 billion (source)

The latest profit after tax and minority interest for Powertek at 2012 amount to RM 456 million.

However, we will be more interesting in cash flow ( please see my other post if i got time to write about regarding different in cash flow and net profit).

With total asset at RM 9.04 billion, i am guessing the annual depreciation charge for Powertek is 452 million (assuming 20 years remaining life).

This brings total cash flow to  RM 908 million.

The second, Genting Sanyen (mainly Kuala Langat Power Station)

1 MDB reportedly paying RM 2.3 billion for the deal. Where the asset is debt free.

Guessing the annual cash flow from the asset could be tricky, i am guessing the figure to be around RM 400 million (from the difference of EBITDA figure between year 2012 and year 2011 for Genting Bhd Power segment).

The third, Jimah Power Plant,

1 MDB reportedly paying RM 1.2 billion for the deal, where the amount is small as the project is actually highly leveraged that, the owner may not see any dividend in the first half of the PPA period (until 2020 perhaps). Source.

Thus, i am guessing, the annual cash flow from all power plant assets to be around RM 1.3 billion at best, this left  RM 200 to 280 million to for repayment of the loan thus far.Not to mention the liabilities originally bear by Power Tek and Jimah (estimate to be RM 10 billion perhaps).

In Summary

If 1MDB do get Track 3B project as speculated, its debt could well be ballooned to over RM 40 billion or remain at RM 30 billion if they go IPO.

The only two major revenue sources for them , would be

i. Tun Razak Financial District Project

ii. 1MDB Power.

Which currently estimated by me can generate enough cash flow to repay 1 % of  1MDB total debt annually.