KUALA LUMPUR, Nov 28 ― Tun Dr Mahathir Mohamad cast doubt today on the assertion that the sale of Edra Global Energy to a Chinese firm would help 1Malaysia Development Berhad (1MDB) cut its debts.

The former prime minister said taking into account the depreciation of the ringgit, he does not know how the purchase would save the state-owned 1MDB billions.

“I am trying to work out how the savings are achieved,” he said in a blog post today.

Dr Mahathir noted that 1MDB had purchased its power plants with debts of RM6 billion for RM18 billion, while reports earlier this week said China's General Nuclear Power Corporation (CGN) would pay RM9.83 billion to take over these energy assets in full.

But, he said, at the time when 1MDB purchased the plants, the ringgit was at a much higher value at 3.2 to the US dollar.

As such, he said the RM9.83 billion paid by the Chinese firm to buy Edra Energy is worth much less than the RM9.83 paid by 1MDB previously.

If 1MDB had borrowed in ringgit at the time, he said, the loss would have been minimal.

“But if 1MDB had borrowed in USD, it stands to lose one ringgit for every dollar borrowed. In other words, what 1MDB gets from the sale would not be able to pay fully the debts in USD raised by 1MDB,” he pointed out.

Dr Mahathir also asked if CGN's purchase of Edra also meant that the China firm had taken over the RM6 billion debt that 1MDB had assumed when it bought the power plants.

Other questions raised by the former prime minister include whether Petronas would be selling gas to the power plants, and if so, at what price.

He also asked if the Edra purchase by CGN was considered as a form of foreign direct investment although the money would be used to pay off 1MDB's debts.

“And the amount going out would be far more than the inflow. Does not sound like FDI to me,” Dr Mahathir said.

On Monday, 1MDB said it has agreed to sell its Edra Global Energy arm for RM9.83 billion (US$2.3 billion) to CGN as it seeks to cut its debt and restore investor confidence.

International newswire Reuters reported that CGN will assume all of the debts of Edra Global Energy, which is the second-biggest independent power producer in Malaysia, and the deal is scheduled for completion in February.

In an immediate reaction, PKR lawmaker Rafizi Ramli criticised the sale, saying that it went against government rules that cap foreign equity of select industries to no more than 49 per cent.