1MDB in response to the latest criticism by former prime minister Tun Dr Mahathir Mohamad said that it has broken even on its investment with the help of the sale of its power assets.
The claim of 1MDB is ridiculous. Does Arul Kanda or 1MDB know how to count? Do they think Malaysians are idiots who failed their elementary mathematics in school?
The break-even in economics, business, and specifically cost accounting, is the point at which total cost and total revenue are equal: meaning there is no net loss or gain.
1MDB bought the power companies for RM12.1 billion. The energy assets are now sold for RM9.83 billion. How is that breaking even? If Arul Kanda regards that as breaking even, no wonder he can claim 1MDB to be profitable! The losses of RM2.27 billion is nearly a 20% loss for 1MDB.
In terms of debt, it is even worse. Yes, the sale of Edra to CGN Group represents a reduction in 1MDB debt by RM17 billion. However, the total debts incurred and assumed by 1MDB when acquiring these power companies was approximately RM30 billion. The RM30 billion comprises of US$3.5 billion (RM15 billion) bonds, RM7.4 billion of short-term loans and RM8 billion of inherited debts. Hence even after reducing the debt pile by RM17 billion, there is still another RM13 billion outstanding without any asset-backing in 1MDB.
Even if the state investor has received RM2 billion cash dividends over time throughout its ownership of the power assets, there is still a debt of RM11 billon! So, how is the sale of Edra Global Energy Bhd and its subsidiaries a “breakeven” in 1MDB’s books? Can Arul Kanda please enlighten us?