ACQUISITION OF 70% EQUITY INTEREST IN JIMAH EAST POWER SDN. BHD. ( JEP )

Transcription

1 TENAGA NASIONAL BERHAD ACQUISITION OF 70% EQUITY INTEREST IN JIMAH EAST POWER SDN. BHD. ( JEP ) 1. INTRODUCTION Tenaga Nasional Berhad ( TNB ) wishes to announce that it has today submitted the Letter of Acceptance to the Energy Commission s Addendum to the Letter of Award which was issued to TNB on 29 June Subsequent to the above, TNB also wishes to announce that it has entered into a Share Sale and Purchase Agreement ( SSPA ) with 1Malaysia Development Berhad ( 1MDB ) for the acquisition of a 70% shareholding in JEP ( the Acquisition ) for a total consideration of circa RM46.98 million. ( Acquisition Consideration ). The 70% shareholding in JEP comprises of 3,500,000 ordinary shares of RM1.00 each and 259 redeemable preference shares of RM1.00 each and premium of RM99,999 each. As background, 1MDB and Mitsui & Co., Ltd. ( Mitsui ) incorporated JEP on 5 July 2013 as the special purpose vehicle company for the development of 2x1000MW coal fired power plant in Mukim Jimah ( the Project ). 1MDB owned 70% equity in JEP while Mitsui, via 3B Power Sdn. Bhd., owned the remaining 30% equity in JEP. Upon completion of the Acquisition, JEP will become a subsidiary of TNB. The Project is expected to achieve its Scheduled Commercial Operation Date for Unit No. 1 and Unit No. 2 no later than 15 June 2019 and 15 December 2019 respectively. The Project will enhance TNB s generation capacity, makes clear commercial sense, will have a positive impact on TNB s earnings, and will add long-term value for TNB s shareholders. 1

2 2. DETAILS OF THE ACQUISITION Basis of Determining the Acquisition Consideration and Mode of Satisfaction The Acquisition Consideration was derived upon: (i) (ii) (iii) completion of detailed due diligence conducted by TNB and its appointed consultants on all technical, legal and financial aspects; a verification by TNB s external advisor of JEP s accounts and the costs incurred and paid by 1MDB; and the agreed reduction on the cost incurred and paid by 1MDB and verified by the external advisor. The actual project development cost incurred by 1MDB is circa RM83.68 million as at 17 April TNB will utilise its internal funds to pay the Acquisition Consideration. Salient Terms and Conditions of the SSPA The salient terms and conditions of the SSPA inter-alia include the following: (i) (ii) (iii) (iv) (v) TNB acquires 70% of the entire shareholding in JEP from 1MDB for the Acquisition Consideration of circa RM46.98 million. The Acquisition Consideration shall be paid by TNB to 1MDB upon satisfaction of all conditions precedents to the SSPA ( Completion ). Completion is expected to occur within five (5) days upon fulfillment of conditions precedents. A retention sum equivalent to 15% of the Acquisition Consideration will be held as security for compliance by 1MDB of its warranties and undertakings pursuant to the SSPA. The retention sum will be held for a period of two (2) years in an escrow account in accordance with terms and conditions of Escrow Agreement between TNB, 1MDB and CIMB Commerce Trustee Berhad acting as the escrow agent. 1MDB has provided customary representations and warranties in relation to financial and business affairs of JEP. Claims for fraud and active concealment, breach of title guarantee and breach of tax warranties are not subject to limitations as specified in the SSPA. 2

3 (vi) Pending Completion all key decisions relating to the business and operations of JEP must be conducted with the consent of TNB. 3. RATIONALE AND PROSPECTS FOR THE ACQUISITION (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) The Government approved for TNB to acquire the Project at a higher levelised tariff as compared to the previous award to 1MDB-Mitsui. The higher levelised tariff is justified to offset the increase in construction cost and foreign exchange rates. The Project is expected to have a positive impact on the earnings of TNB over the life of the Project and will generate returns over and above TNB s hurdle rate and thus is value creating. TNB s Acquisition of the Project is the best alternative over the long term in order to ensure the reliability and security of power supply in Peninsula Malaysia. The Project will add another 2,000MW of generating capacity and will increase its generation market share from the current 53.3% to 57.7% by year The Project will add another ultra-supercritical coal plant to TNB s generation portfolio which strengthens TNB s domestic and international operational track record and experience. The collaboration with Mitsui, a leading Japanese Multinational Corporation and an owner of power assets globally, provides opportunities in strategic ventures in the energy sector. The Project is strategically located to reinforce the security of supply in Peninsula Malaysia, particularly to the central region. The Acquisition represents maximisation of value for TNB s shareholders. 4. RISK IN RELATION TO THE ACQUISITION TNB together with appointed advisors have carried out a comprehensive due diligence and risk assessment on the Acquisition of the Project. The identified risks associated to the Project have been assessed and mitigated. 3

4 5. EFFECTS OF THE ACQUISITION (i) Issued and Paid Up Share Capital The Acquisition will not have any effect on the issued and paid up share capital of TNB. (ii) Substantial Shareholders Shareholdings The Acquisition will not have any effect on the Substantial Shareholders shareholdings of TNB. (iii) Earnings and earnings per share ( EPS ), Net assets per share and gearing The Acquisition will have a positive impact on the earnings of TNB over the life of the Project and will generate returns over and above TNB s hurdle rate. The effects of the Acquisition on the consolidated earnings and consolidated EPS of TNB at the point of transaction are not expected to be material. However, the actual future effects will depend on, amongst others, the effective financing cost of the Project and the foreign exchange costs affecting the Project, both of which cannot be determined at this stage. This transaction will not have any material effect on TNB s consolidated net assets per share. Estimated Project costs are approximately RM11.7 billion and will be financed through a combination of project finance and equity. Any debt raised will not have an adverse impact on TNB s credit profile and consolidated gearing will remain within appropriate levels. The effects on TNB s future earnings and EPS will only be determined upon completion of the project. Any debt to be raised will increase TNB s consolidated gearing, the quantum of which is dependent on the amount borrowed. For illustrative purposes, based on TNB s consolidated balance sheet ended 28 February 2015, and debt amount of RM9 billion, TNB s consolidated gearing would increase from 35% to 42%. The increased gearing is within the appropriate level of gearing for TNB. 4

5 6. LIABILITIES TO BE ASSUMED BY TNB TNB does not assume any guarantee of 1MDB. TNB s financial obligations will only be in respect of equity funding of JEP. Any project liabilities incurred to date by JEP will be assumed by TNB and Mitsui proportionately and will be met by shareholders advances. These shareholders advances will be reimbursed to TNB and Mitsui when JEP reaches financial close. 7. APPROVALS REQUIRED The Acquisition has received the approval of the Energy Commission and the Government of Malaysia. This transaction does not require approval by TNB s shareholders, as stipulated in Paragraph 11 of this announcement. 8. INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS AND PERSONS CONNECTED TO THEM The Acquisition constitutes a related party transaction as JEP is a 70% owned subsidiary of 1MDB, which in turn a wholly owned subsidiary of Minister of Finance Incorporated ( MOF Inc. ) while Khazanah Nasional Berhad ( Khazanah ), a wholly owned subsidiary of MOF Inc. is a major shareholder of TNB. Tan Sri Leo Moggie, Datuk Nozirah binti Bahari, Datuk Seri Ir. Azman bin Mohd and Ahmad Farouk bin Mohamed ( Interested Directors ) being the Non-Independent Directors of TNB are deemed interested in the Acquisition by virtue of being the nominees of MOF Inc. and Khazanah respectively. The Interested Directors have abstained and will continue to abstain from all deliberation and voting at TNB Board Meetings in respect of the Acquisition. Save as disclosed above, none of the Directors and/or Major Shareholders of TNB and/or persons connected to them has any interest, direct or indirect, in relation to the Acquisition. 5

6 9. STATEMENT BY THE BOARD AUDIT COMMITTEE ( BAC ) The BAC of TNB after having considered all aspects of the Acquisition is of the opinion that the Acquisition is in the best interest of TNB. It is fair, reasonable and on normal commercial terms and not detrimental to the interest of the minority shareholders of TNB. 10. DIRECTORS STATEMENT After having considered all aspects of the Acquisition, the Board of Directors of TNB (save for the Interested Directors) is of the opinion that the Acquisition is in the best interest of TNB, fair, reasonable and on normal commercial terms and not detrimental to the interest of the minority shareholders. 11. HIGHEST PERCENTAGE RATIO PURSUANT TO PARAGRAPH 10.02(G) OF THE MAIN MARKET LISTING REQUIREMENTS OF BMSB (MMLR) The highest percentage ratio applicable for the Acquisition pursuant to paragraph 10.02(g) of the MMLR is 4.48% based on the latest audited consolidated financial statements of TNB for the Financial Year ended 31 August RELATED PARTY TRANSACTION FOR THE PRECEDING 12 MONTHS Save for the PPA entered between TNB and JEP on 22 July 2014, TNB has not entered into any other related party transaction for the preceding 12 months. 13. ESTIMATED TIMEFRAME FOR COMPLETION OF THE ACQUISITION Subject to the completion of all conditions precedents being obtained, the Acquisition is expected to be completed by 8 July

7 14. INFORMATION ON THE ENTITIES TNB TNB was incorporated in Malaysia on 12 July 1990 as a public company under the name of Tenaga Nasional Berhad, of which was listed on the Main Board (now known as the Main Market) of Bursa Malaysia Securities Berhad on 28 May The authorised share capital of TNB is RM10,000,001,501 divided into 10,000,000,000 ordinary shares of RM1.00 each, One (1) Special Rights Redeemable Preference Share of RM1.00, 1,000 Class A Redeemable Preference Shares of RM1.00 each and 500 Class B Redeemable Preference Shares of RM1.00 each, of which RM5,643,611,172 divided into 5,643,611,171 ordinary shares of RM1.00 each and One (1) Special Rights Redeemable Preference Share of RM1.00 have been issued and fully paid up. TNB is primarily involved in the business of generation, transmission, distribution and sale of electricity. Through its subsidiaries, TNB is involved, among others, in the manufacture of transformers; high voltage switchgears and cables; the provision of consultancy services; the provision of education and training services; the provision of repair and maintenance services and research and development. 1MDB 1MDB is a public limited company incorporated in Malaysia on 27 February 2009 under the Companies Act, The authorised share capital of 1MDB is RM1,001,000,000 divided into 1,000,999,998 ordinary shares of RM1.00 each and Two (2) preference shares of RM1.00 each, of which RM1,000,000,001 divided into 1,000,000,000 ordinary shares of RM1.00 each and One (1) preference share of RM1.00 have been issued and fully paid up. 1MDB is an Investment Holding Company. JEP JEP is a private limited company incorporated in Malaysia on 5 July 2013 under the Companies Act, The authorised share capital of JEP is RM10,000,000 divided into 5,000,000 ordinary shares of RM1.00 each and 5,000,000 preference shares of RM1.00 each, of which RM5,000,370 divided into 5,000,000 ordinary shares of RM1.00 each and 370 preference shares of RM1.00 each and premium RM99, each, which have been issued and fully paid up. JEP is involved in power generation. 7

8 Mitsui Mitsui is established on 25 July 1947 in Japan. Its issued share capital comprises of 1,796,514,127 common stock shares including 3,745,706 treasury shares. Among the major shareholders of Mitsui is the Master Trust Bank of Japan. Mitsui specialises in the sale, distribution, purchase, marketing and supply of a wide variety of products related to energy and other business areas. It also participates in other activities such as arranging finance for customers and suppliers in connection with its trading activities. Mitsui operates through a network of 140 offices with operations across 65 countries and has installed a strong and diversified power generation capacities across the globe. Mitsui s total power generation capacity stood at 9.6GW (net) as of 31 March B Power Sdn. Bhd. 3B Power Sdn. Bhd. is a private limited company incorporated in Malaysia on 28 January 2014 under the Companies Act, The authorised share capital of 3B Power Sdn. Bhd. is RM450,000,000 divided into 450,000,000 ordinary shares of RM1.00 each, of which RM4,500,000 divided into 4,500,000 ordinary shares of RM1.00 each have been issued and fully paid up. 3B Power Sdn. Bhd. is an Investment Holding Company. 15. DOCUMENTS FOR INSPECTION The SSPA is available for inspection at the registered office of TNB at Pejabat Setiausaha Syarikat, Tingkat 2, Ibu Pejabat Tenaga Nasional Berhad, No. 129, Jalan Bangsar, Kuala Lumpur during normal working hours from Mondays to Fridays (except public holidays) for a period of three (3) months from the date of this announcement. This announcement is dated 3 July