Chong Chieng Jen asks five questions for SEB to answer

Press Statement of YB Chong Chieng Jen the Member of Parliament for Bandar Kuching and Ahli Dewan Undangan Negeri for Kota Sentosa on 26^th July, 2012

Sarawak Energy Berhad (SEB) and SESCO are accountable to the people of Sarawak on the following 5 questions:

1.         What is the purpose for which SEB establishes the Sukuk Musyarakah facility up to RM15 billion / RM30 billion?  In particular, what are the projected “capital expenditure requirements” which require such large sum?

2.         What are the detail terms for the said Sukuk Musyarakah facility, including period of repayment, interest etc.?

3.         As for the RM5.5 billion loan/bond raised/issued so far, what is the term of repayment and interest payable therefor?

4.         How is the raising/issuance of the RM5.5 billion loan/bond affecting SEB's financial position sepecially the profit and loss after June, 2011?

5.         Is it true that because of such indebtedness and the obligation to repay the loan, SESCO is now going on a rampage to change the electricity meters of its customers and thereafter charging them exorbitant charges?

From a search that I conducted with the Companies Commission of Malaysia, it is revealed that SEB  has created two charges on 13-6-2011, namely

1.         Charge No.18 which is an Assignment of Finance Service Reserve Account dated 13-6-2011 to secure the payment by the Sarawak Energy Berhad (SEB) under the Islamic medium term notes (“Sukuk”) issued under Sukuk Musyarakah Programme of up to RM15 billion in nominal value based on the Shariah Principle of Musyarakah; and

2.         Charge No.19 which is an Assignment of Principal Service Reserve Account dated 13-6-2011 to secure the payment by the Sarawak Energy Berhad (SEB) under the Islamic medium term notes (“Sukuk”) issued under Sukuk Musyarakah Programme of up to RM15 billion in nominal value based on the Shariah Principle of Musyarakah.

On the face of the search result, there seems to be a creation of liability of RM30 billion.  However, in the recent press statement issued by SEB on 18-7-2012, it is stated that SEB has

   “        established a ‘Sukuk Musyarakah’ programme in June 2011 of up to RM15 billion to finance its capital expenditure requirements”

which in other words, has entered into an arrangement to raise a loan facility of up to RM15 billion.

The question at hand now is, whether the two Assignments are to secure ONE Sukuk Musyarakah facility of up to RM15 billion or TWO separate Sukuk Musyarakah facilities of up to a total amount of RM30 billion.

Accepting SEB's press statement as true, ie. both the Assignments are to secure ONE Sukuk Musyarakah facility of up to RM15 billion, it is nevertheless, an extraordinarily large loan facility.

The enormity of the facility amount can be better appreciated when one compares the figure with the Sarawak's State Ordinary Expenditure (both Operating and Development Expenditure) for year 2011 which was only RM3.946 billion and the budgeted Sarawak's State Ordinary Expenditure (both Operating and Development Expenditure) for year 2012 which was only RM3.964 billion. 

The annual expenditures of the Government of Sarawak for the whole state of Sarawak was only approximately RM4 billion.  The total facility raised by SEB is more than 3 times the annual expenditure of the Government of Sarawak.  Any mismanagement of the fund will not only bankrupt SEB but will also put the State of Sarawak under tremendous financial strain and predicament.

As such, it is incumbent upon me to seek the detail of the two Assignments and the facilities for which these two Assignments serve as security.

In compliance with Clause 11 of the Form 34, today, I visited the new Headquarter of SEB at The Isthmus and pay a sum of RM4.00 as the prescribed fee for inspection of the two Assignments.

I have also requested for a copy of all the document executed for the arrangement of the Sukuk Musyarakah facility.

In SEB's earlier press statement on the issue, it was disclosed that out of the RM15 billion Sukuk Musyarakah facility arranged,

“ To date, SEB has issued and raised a total of RM5.5 billion from the programme in two issuances, the first being in June 2011 and the latest in January 2012 ”

which means, SEB has now actually indebted in the sum of RM5.5 billion.

From the record, SEB's annual profit was in the range of RM200 – RM300 million for the years 2008, 2009 and 2010.  These net profits were obtained before the loan of RM5.5 billion was incurred.  These net profits can hardly pay the interest on the RM5.5 billion facility, a fortiori, the principal repayment.  The situation will be much worse if the full RM15 billion facility were utilised or drawndown.

As a company wholly-owned by the Sarawak State Government, SEB has an obligation to answer to the queries of Sarawakians on its operation, especially when the raising of such astronomical debt which may undermine the whole financial position of SEB and implicate the State. 

Afterall, we Sarawakians are financing SEB through the payment of our monthly electricity bills.  Any failings or extravagances on the part of SEB will translate into higher tariffs and charges on us Sarawakians.

Chong Chieng Jen