* Accounts show property revaluation drives profit rise
* Fund last week reported FY net 778 mln ringgit vs 44.7 mln
* Accounts show property revaluation gains totalling 2.7 bln
* Without revaluation 1MDB would have made 1.85 bln loss
By Yantoultra Ngui and Al-Zaquan Amer Hamzah
KUALA LUMPUR, April 22 Malaysian state
investment fund 1Malaysia Development Bhd (1MDB)
relied on a sharp revaluation of its property assets to drive
profit growth in its last financial year, accounts released on
The improvement came despite 1MDB paying more than 10
billion ringgit ($3.1 billion) to buy power businesses in the
past two years.
1MDB, whose board of advisers is chaired by Prime Minister
Najib Razak and which has been criticised for a lack of
transparency, last week reported a net profit of 778 million
ringgit for the year through March 2013, up from 44.7 million
the previous year.
The detailed accounts released by the country's Companies
Commission show the earnings rise was driven by property
revaluation gains totalling 2.7 billion ringgit, without which
1MDB would have posted a loss of 1.85 billion ringgit.
The fund has been dogged by negative publicity over massive
fees paid to investment bank Goldman Sachs for bond
sales, a near one-year delay in publishing its 2012-13 financial
accounts and, most recently, changing auditors for the second
time since 2009, as Deloitte replaced KPMG.
Its audit fees jumped to 3.15 million ringgit in 2012-13
from 184,000 the previous year.
The fund has revalued its property assets sharply higher for
three straight years, leaving its real estate portfolio worth a
total of 6.2 billion ringgit by the end of the 2012-13 year.
Some critics say the lack of other major profit drivers
raises doubts over the fund's success and value for taxpayers
five years after it was set up by Najib's government.
1MDB officials could not immediately be reached for comment,
but the fund said in its accounts that the revaluation was due
to a classification of some of property assets as investments
after it adopted new Malaysian financial reporting standards.
Land for Bandar Malaysia and Tun Razak Exchange (TRX) - two
major developments planned for the capital Kuala Lumpur - were
among those reclassified, while their blueprints are being
Proceeds of $3 billion raised for TRX were placed under the
management of an unnamed financial institution, according to the
accounts. Because the blueprints for the TRX project have not
been finalised, 1MBD said it had re-invested $1.6 billion of
The long-delayed accounts were released as 1MDB is expected
to bundle some 15 power plants in Malaysia, the Middle East and
south Asia together for a stock market listing that could raise
up to $2 billion this year.
Its revenue for 2012-13 amounted to 2.59 billion ringgit,
generated from energy payments, capacity charges and finance
lease income, the accounts showed.
1MDB has 7.2 billion ringgit parked in the Cayman Islands
tax haven, under a "segregated portfolio company" that is marked
"for sale" in its balance sheet, the accounts also showed. The
unit said last September it would pay a cash dividend of $133.4
million and a would make a capital distribution of $65.4
The Cayman Island funds are from the disposal in 2012 of
1MDB's stake in 1MDB International Holdings Ltd, which held 49
percent of PetroSaudi Oil Services Ltd and held the option for
the remaining equity portion.
Prospects for the listing of 1MDB's power assets were lifted
in February when the sovereign wealth fund won a closely
contested government tender to build a $3.6 billion coal-fired
power plant in Malaysia.
The firm cited the win to justify an impairment loss of 1.9
billion ringgit on its balance sheet, the price premium it paid
on acquiring several energy assets to "build further value".
$1 = 3.2505 Malaysian Ringgit)
(Editing by Stuart Grudgings and David Holmes)