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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 today showed.
The improvement came despite 1MDB paying more than RM10 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 RM778 million for the year through March 2013, up from RM44.7 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 RM2.7 billion, without which 1MDB would have posted a loss of RM1.85 billion.
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 RM3.15 million in 2012-13 from 184,000 the previous year.
The fund has re-valued its property assets sharply higher for three straight years, leaving its real estate portfolio worth a total of RM6.2 billion 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 byNajib’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 finalised.
Proceeds of US$3 billion (RM9.8 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 US$1.6 billion of that amount.
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 US$2 billion this year.
Its revenue for 2012-13 amounted to RM2.59 billion, generated from energy payments, capacity charges and finance lease income, the accounts showed.
1MDB has RM7.2 billion 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 US$133.4 million and would make a capital distribution of US$65.4 million.
The Cayman Island funds are from the disposal in 2012 of 1MDB’s stake in 1MDB International Holdings Ltd, which held 49 per cent 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 US$3.6 billion coal-fired power plant in Malaysia.
The firm cited the win to justify an impairment loss of RM1.9 billion on its balance sheet, the price premium it paid on acquiring several energy assets to “build further value”. — Reuters