KHAZANAH Nasional Bhd said it has exited its investment in Malaysian Shoaiba Consortium Sdn Bhd with a healthy profit based on future value of project cash flow, following the divestment of its 40% stake to Malakoff Corp Bhd. 

The national sovereign wealth fund had on Thursday inked an agreement with Malakoff’s indirect subsidiary Malakoff Gulf Ltd to dispose of its equity interest in the Consortium held via Desaru Investments (Cayman Island) Ltd (DIL) for US$70 million (RM288 million).

The consortium is involved in water and power projects in Saudi Arabia. 

Khazanah said in a statement today that the Consortium was formed in 2005 as a result of a joint investment between Khazanah, Malakoff and Tenaga Nasional Bhd (TNB).

This was to support Malaysia’s entry into Saudi Arabia’s independent water and power producer market.

“As the project is completed and fully operational, Khazanah has achieved the commercial objectives of its investment in the Consortium.”

“In accordance with the Consortium’s shareholders agreement, our 40% stake was offered to the existing partners. Malakoff subsequently took the offer, which allowed Khazanah to exit with a healthy profit at a value based on future cash flows of the project,” the fund said in a statement today.

Khazanah also said it will assess all opportunities for divestments against set financial and strategic targets.

“Assets may be considered for divestment once the intended investment objectives and targeted returns have been achieved, as is the case with the divestment of our stake in the Consortium. Divestments may also depend on the strength of the market, as well as the availability, quality and credibility of buyers.

“Under Khazanah’s refreshed mandate, we operate on a two-fund model – a commercial fund and a strategic fund. In general, our commercial fund is focused on creating a global portfolio that diversifies our assets and income for the country’s benefit. Our strategic fund focuses on strategic domestic investments, particularly in infrastructure.

The proceeds from the divestment, like all other disposals by the national sovereign wealth fund, will either be reinvested based on the objectives of its two fund models or will be used to repay existing debts. 

Khazanah’s committed investments from year to date amounts to RM1.4billion while it has reduced overall debt by RM6.4 billion based on existing strategies.

It added that it will step up investments in the second half of the year based on the opportunities it is exploring. – July 15, 2019.