UPDATE 2-Malaysia tycoon near power assets deal with govt firm-sources

Mon Mar 5, 2012 3:53am EST

* Goldman advising buyer, Stanchart advising seller-sources

* Star Newspaper says deal between $3.3-$3.7 bln

* Saudi Arabia's Acwa Power had shown interest (Recasts with new sourcing; adds Goldman role)

By Anuradha Raghu and Saeed Azhar

KUALA LUMPUR/SINGAPORE, March 5 (Reuters) - Malaysian tycoon Ananda Krishnan is nearing a deal to sell his $3 billion worth of power assets to a government company as he seeks to shed risky businesses, sources with knowledge of the deal said on Monday.

The sources did not confirm the sale price, but Malaysia's Star Newspaper reported that the sale to 1Malaysia Development Berhad (1MDB) was indicated at a price range of 9.92 billion ringgit ($3.30 billion) and 11.16 billion ringgit ($3.71 billion).

Goldman Sachs is advising 1MDB, said two sources, who declined to be named because the deal is not public. A spokeswoman for Goldman Sachs in Hong Kong declined to comment. Standard Chartered is advising the seller.

The deal would come as a surprise to potential buyers of the power assets in the Middle East. Saudi Arabian water and power project developer Acwa Power had recently said it was "very keen" to buy the power assets being sold by the Malaysian tycoon. Others had also expressed interest.

"This is an extraordinary price to pay given the location of the assets and the short-term PPAs (power purchase agreements) for many of the assets," said a second source.

Ananda's Tanjong Energy Group owns and operates eight power plants and has investments in five in Bangladesh, Egypt, Malaysia, Pakistan, Sri Lanka and the United Arab Emirates, with a total net generating capacity of 3,951 MW.

The sale had attracted 12 local and international bidders, including the country's No.2 lender CIMB and the Employees Provident Fund.

Another source with knowledge of the auction process said Tanjong Energy Group, through which Ananda holds his power sector assets, had set a high asking price for the assets as it had paid a steep price for them.

"The requested valuation of the assets made it very difficult for a strategic investor to compete. I believe a government-owned entity with a lower cost of equity is a natural buyer," the source, who declined to be named because of the sensitivity of the matter, said.

Analysts said the Malaysian government's move to purchase power assets might be the start of an overhauling of the country's whole power generation industry in the long run.

"It actually comes as a surprise that Ananda Krishnan would want to dispose of his power assets and exit the power business, but it could be because the Power Purchase Agreements (PPAs) are coming to an end," said an analyst in Malaysia, who declined to be named because of the sensitivity of issue.

The Energy Commission has confirmed that a new power generation tender exercise will replace the current power purchase agreements (PPAs) that expire in 2016-2017.

Currently state-run utility Tenaga Nasional Bhd, which posted a third consecutive quarterly loss in January, is the offtaker of the electricity generated by Tanjong's plants in Malaysia.

Under PPAs, which are long-term deals that underpin foreign power investment in southeast Asian countries, generators are able to pass on fuel costs to end users and hence enjoy guaranteed returns.

BIGGEST REGIONAL POWER DEAL

1MDB focuses on investments in the energy, real estate, tourism and agribusiness sectors. In energy, it targets strategic high-value projects in both conventional and renewable energy, according to its web site (www.1mdb.com.my/).

1MDB officials were not available to comment on the report.

The sale by Malaysia's second-richest man would be the country's biggest power asset deal and the largest in Southeast Asia. Ananda also plans to sell satellite operator MEASAT Global Bhd, Singapore's Straits Times newspaper reported last week.

Ananda, reckoned by Forbes to have assets of $9.5 billion, was taking advantage of the higher risk appetite in the market to hive off riskier assets from his empire that runs from telecoms to pay-TV, analysts have said.

The largest regional deal in the sector was struck in 2008 when Temasek Holdings [TEM.UL} sold its Singapore generation firm PowerSeraya to Malaysia's YTL Power for $3.03 billion. ($1 = 3.0045 Malaysian ringgit) (Additional reporting by Dinesh Nair in Dubai and Charlie Zhu in Hong Kong; Editing by Stuart Grudgings and Muralikumar Anantharaman)

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