Chinese nuclear group scoops up 1MDB energy unit

CGN will pay $2.3bn for Edra Global Energy, short of the Malaysian fund's $3bn target but enough to make it this year's largest M&A deal in the country.

1Malaysia Development Berhad (1MDB), a Malaysian sovereign wealth fund, has agreed to sell its energy unit China General Nuclear Power Corporation (CGN Power) for MYR9.83 billion (€2.19 billion; $2.33 billion) in cash.

CGN Power will pay and will assume all the relevant gross debt and cash of business, which comprise Edra Solar, Edra Energy, Powertek Energy, Jimah Teknik, Jimah O&M, Mastika Lagenda, and Tiara Tanah.

The transaction was sealed on the operating companies’ valuation as at 31 March 2015. It is expected to complete in February 2016.

“CGN Power was a clear winner in this international tender, based on the objectives announced by 1MDB previously, namely value maximisation, acceptable commercial terms and certainty of transaction execution,” said Arul Kanda, 1MDB’s president and group executive director.

“This investment represents a major commitment by CGN Power as part of a long-term, global diversification initiative,” said He Yu, CGN Group’s board chairman. “We will work closely with Edra and together take it to the next level.”

Expected to offset some of 1MDB’s $11 billion debt pile, the transaction marks the first step in the fund’s rationalisation plan, as presented to the Cabinet of Malaysia on 29 May 2015.

Last month, 1MDB said it had received three offers for its energy unit. It stated then that these were close to its MYR16 billion target, which included the debt assumption.

Tenaga Nasional, Malaysia’s state-owned energy company reportedly made a conditional offer for the assets, while two other international bidders remained unidentified.

CGN Meiya, a renewable arm of CGN Power, aborted its bid, saying the acquisition would not be in the “best interest” of the company. Shenzhen-based CGN Power, the largest nuclear power operator in China, was said to deploy a non-public listed vehicle for the assets.

Owning a net generation capacity of 5,594 megawatts, 1MDB is the largest independent power producer in Bangladesh and Egypt and the second-biggest in Malaysia after Malakoff Corporation. It also holds assets in the United Arab Emirates and Pakistan through joint ventures.