Khazanah “loses” RM18.0 billion 'only', TNB “loses” RM1.5 billion 'only'

By Syed Akbar Ali

Well here is more stuff from the GLCs. The Star says today that Khazanah Nasional Berhad has ‘lost’ RM18.0 billion in the value of its investment portfolio.

In 2008, Khazanah’s investment portfolio declined with the overall portfolio realisable asset value (RAV) at RM70.4bil as at Dec 31 against RM88.2bil at May 31.

This is a round about way of saying RM18.0 billion has gone out the window. What got my attention was the way The Star tried glossing things over. Their headline said : ‘Khazanah To Invest RM58.0 billion’.

First off I thought, Wow! Then only when you read the story, you can see the stuff hitting the fan. But what does Khazanah’s boss say?

“. . it was in line with the sharp decline in asset values globally and domestically,” Azman said.

Oh well. Kalau macam tu tak apa lah. What’s the big deal? Its only taxpayers money. After all we have lots more oil in the ground. A few hundred billion Ringgits worth at least.

Then on the same page the headline about TNB says they made an operating profit of RM942 million. Again Wow!

But when I read the story, more stuff hit the fan. It was more spin. TNB had actually made a FOREX loss of RM1.439 billion. This helped wipe out the RM942.0 million Operating Profit, plus other business inefficiencies which negatively impacted poor TNB (one of the largest monopolies in the country), the final outcome was a loss of RM944.0 million for its quarter ended Nov 30^th.

And what did TNB’s CEO say?

“We have been affected not only by our exposure to a basket of foreign currency debt but also the higher cost of settling our coal and equipment purchases denominated in US dollars,’’ said TNB president/CEO Datuk Seri Che Khalib Mohamad Noh after announcing TNB’s financial results yesterday.

Kalau macam tu tak apa lah. In fact this is one of the main reasons for TNB’s huge losses : Forex.

For reasons perhaps not even understood well enough by TNB themselves, they insist on borrowing large amounts of money from foreign banks in foreign currencies. Why not borrow money from Malaysian lenders (banks, EPF, SOCSO, insurance companies) in Malaysian Ringgit?

The IPPs have borrowed tons of money too but none of the IPPs suffer this type of foreign exchange loses because all the IPPs borrowed their billions in Malaysian currency.

According to the Star “TNB has RM24bil in debts, of which RM5.5bil is in yen, RM6.6bil in US dollar, and RM11.9bil in ringgit”

That’s RM12.1 billion in foreign currency debt. If the Ringgit declines 5% against the Yen and Dollar, that is equivalent to an “incremental” debt burden of RM600.0 million already.

Why does a Malaysian company, operating largely in Malaysia, whose earnings are in Ringgit want to borrow so much money in foreign currency? This is called a 'currency mismatch'. More simply put it is a tak masuk akal situation. And these are long term debts. Meaning these losses may recur next year too, and the year after that.

The way to get out of the situation is to refinance the foreign currency loans into Ringgit loans (financial advisors, consultants, middlemen – you can start drooling).

And please note something else : despite their complaints of payments to the IPPs, higher fuel prices etc TNB says they have made Operating Profits of RM942.0 million. This only highlights the fact that the bulk of their losses are forex losses caused by poor borrowing strategies. It has little to do with their operations of power generation and distribution.

Also yesterday oil prices fell to below USD$35 a barrel in New York. With the higher tariffs TNB has imposed on the suffering citizens, the lower oil prices should help TNB make even higher Operating Profits. Unless the foreign currency borrowings are not sorted out.

Buang duit saja. Taxpayer’s money.