World Economy

Malaysia Fund Calls Off $2.4b Sukuk for Power Project

Malaysia Fund Calls Off $2.4b Sukuk for Power ProjectMalaysia Fund Calls Off $2.4b Sukuk for Power Project

Troubled state-owned investment fund 1Malaysia Development Bhd (1MDB) has called off plans to sell up to 8.4 billion ringgit ($2.4 billion) of Islamic bonds, two people familiar with the issue told Reuters on Saturday.

The Islamic bond or sukuk had been earmarked to raise funds for the construction of a $3.6 billion green field 2,000 megawatt coal-fired power plant, known as 3B, in the state of Negeri Sembilan.

“It (the sukuk issue) has been called off...they are not moving ahead with the exercise anymore,” a banker familiar with the deal said, requesting anonymity because he was not authorized to speak to the media. If the sukuk issue had gone ahead in December, as earlier planned, it would have been the biggest Islamic bond deal of 2014.

The Malaysian fund, which owns 16 power and desalination plants in six countries, has been dogged by controversy over its nearly $12 billion debt pile and criticized for a perceived lack of transparency. 1MDB is also expected to withdraw from the 3B power project, another source familiar with fund’s plans said, adding that an announcement would be made soon.

Malaysian media had reported on Saturday that 1MDB may pull out, thereby allowing Malaysia’s largest power group Tenaga Nasional Bhd to take over the project.

1MDB declined to comment on either its sukuk plans or the power project. A spokesman for Tenaga Nasional said the company was unaware of such reports.