1MDB: JV with PetroSaudi decided hastily

ASEAN+ May 17, 2018 01:00


1MALAYSIA DEVELOPMENT BHD (1MDB) investment decisions in joint-venture companies involving PetroSaudi were made within eight days, without a detailed assessment process and before the issues or conditions raised by the 1MDB Board are resolved, the declassified auditor-general’s report on 1MDB released on Tuesday stated.

Joint-venture investments by controversial 1MDB with companies abroad began in 2009 with the intention of exploring investment opportunities overseas.

The first joint venture was signed between 1MDB, PetroSaudi Holdings (Cayman) Ltd and 1MDB PetroSaudi Ltd on September 28, 2009. 

1MDB holds a 40 per cent equity interest with an investment contribution of US$1bil in cash while PetroSaudi Holdings (Cayman) Ltd holds 60 per cent equity stake in the form of assets worth at least US$1.5 billion.

In the report, it was noted that there were four different companies registered under the name of PetroSaudi but the proposed investment paper submitted to the Board of Directors of 1MDB did not include such information.

The asset valuation report prepared by Edward L. Morse was submitted on Sept 29, 2009, which was the same date of confirmation of his appointment by 1MDB Chief Executive Officer, and received one day after the JV agreement was signed. 

The assessment report takes into account assets on oil exploration and production rights in Turkmenistan and Argentina.”

An assessment was implemented on PetroSaudi International Ltd’s assets despite the JV agreement clearly stating that the company owning all the rights and interests of the agreed assets for the joint venture project is PetroSaudi International Cayman, the report said. 

Besides that, the JV agreement contained clauses that lacked in guarding the interests of the company. 

Among them was an advance received by 1MDB PetroSaudi Ltd amounting to US$700 million from its parent company, PetroSaudi Holdings (Cayman) Ltd on Sept 25, 2009, to be fully repayable on or before Sept 30, 2009. 

As of September 30, 2009, a total of US$1 billion (3.487 billion ringgit) was transferred by 1MDB into two separate accounts, with US$300 million into the joint venture account and US$700 million into another company’s account with the aim of repaying the advance taken by the joint venture company. 

Board approval of 1MDB was also not obtained before making the US$700 million payment into the account of the other company, the report stated.