EPF sees no risk investing in 1MDB bonds

EPF chief executive officer Datuk Shahril Ridza Ridzuan reiterates that 1MDB has not made any approach to the provident fund to purchase any of the governtment investment firm's assets, but he would not discount the possibility. – The Malaysian Insider pic, May 19, 2015.


Finance Minister Datuk Seri Najib Razak, in his written parliamentary reply to PKR MP Rafizi Ramli today, said EPF had subscribed to bonds issued by 1MDB totalling RM200 million in 2009. The prime minister also noted that the EPF has exposure to investments in 1MDB’s subsidiaries, namely Panglima Power Sdn Bhd (PPSB) and Jimah Energy Ventures Sdn Bhd (JEV), totalling RM1.52 billion.

Shahril explained that the bond investment was made in 2009, when newly-formed Terengganu Investment Authority (before it was renamed 1MDB) undertook a fundraising exercise which saw RM5 billion bonds being sold to insurance companies, financial institutions and global investors.

“Those bonds are fully government guaranteed. We don’t see those bonds as a risk. (It’s) just like other institutions holding those bonds. They will be paid over time by 1MDB or through the government guarantee mechanism,” Shahril told reporters after the opening of the International Social Security Conference 2015 today.
He added that the EPF has always funded and invested in infrastructure projects, including power plants and ports.

“PPSB and JEV are power plants that were built in the early 2003 and 2005 (respectively). We funded the development of PPSB and JEV, before 1MDB existed.

“It just so happened that in 2012 and 2014, 1MDB bought them from the previous owners,” said Shahril.

“It does not matter who owns it, as long as we get the first money that comes from power sale and essentially the bonds have been fully serviced till this point of time,” he added.

He also said the bonds were straight-forward infrastructure bonds, which were secured against power plant assets and cash flow from the sale of energy.

“We don’t see any issue in that. It is not exposed to the credit of the shareholders,” said Shahril, adding that the cash flow generated from the power plants goes toward settling the debts first, before paying any kind of dividends to shareholders.

Shahril also reiterated that the EPF has not been approached by 1MDB to purchase any of the latter’s assets; however, he would not discount that possibility.

“From our point of view, we are always on the lookout for good assets at good prices and can provide long-term returns for our members. That is how we managed to sustain and generate a good return all this while,” he said.

Meanwhile, Shahril said he is unaware of reports that Bank Negara Malaysia is seeking to pull out its sole representative from the fund’s investment panel.

“As far as we are concerned, we are not aware of any changes on our side. It is best [for] you [to] ask Bank Negara and the Finance Ministry,” he added.

Yesterday, Deputy Finance Minister Datuk Chua Tee Yong was reported as saying the central bank had asked for its representatives to be pull out from the investment panels of the EPF and the Social Security Organisation (Socso). – The Edge Markets, May 19, 2015.





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