JV between 1MDB-PSI a ‘failure’

ex-Ceo admits move involving Us$1bil capital fell through

KUALA LUMPUR: The joint venture between 1Malaysia Development Bhd (1MDB) and Petro-Saudi International Ltd (PSI) which was set up a decade ago with more than US$1bil capital injection was a failure, the High Court heard.

The failure was admitted by former 1MDB CEO Datuk Shahrol Azral Ibrahim Halmi when he was questioned during cross-examination by lead counsel Tan Sri Muhammad Shafee Abdullah yesterday.

The key witness was testifying at the corruption trial of Datuk Seri Najib Razak involving RM2.28bil in 1MDB funds.

Shahrol, 49, was referred to a document relating to a 1MDB board of directors meeting on July 5, 2010.

Shafee: Do you agree that the 1MDB-PSI JV with the ratio of 40:60% was a failure? Shahrol: Agreed. According to the strategic investment agreement in the joint venture signed on Sept 28, 2009, PSI held 60% of the shares, while the remaining 40% was held by 1MDB.

1MDB had injected US$1bil for its 40% stake, while PSI pumped in only US$108mil despite its 60% stake.

The court later heard that 1MDB had loaned US$500mil to PSI through a syndicated term loan facility and the document was signed by Shahrol.

The witness said the agreement was between 1MDB, Standard Chartered Bank and AmInvestment Bank of up RM5bil.

Shahrol said the US$500mil was the first tranche of the loan to PSI, who committed to an 8.25% rate per annum.

Shafee asked if 1MDB was empowered to loan money, to which the witness replied: “We are empowered to do investment.”

The lawyer then probed whether 1MDB held a licence to lend money from Bank Negara and Shahrol answered in the negative.

After the loan was disbursed, the witness said PSI only paid the first profit payment back to 1MDB, amounting to about RM129mil in cash, and subsequently never paid a single cent back to 1MDB for the second year onwards.

“We didn’t receive any payment from second year onwards,” Shahrol said.

Asked about the total indebtedness of PSI to 1MDB, he said it was about US$2.2bil as of 2015.

He also agreed when Shafee suggested that 1MDB had incurred a total loss of US$2.2bil from the failed venture with PSI and PSI borrowings from 1MDB.

Najib, 66, faces 25 charges in total – four for abuse of power that allegedly brought him financial benefit to the tune of RM2.3bil; and 21 for money laundering involving the same amount of money.

He faces imprisonment of up to 20 years and a fine of up to five times the sum or value of the gratification if found guilty.

The hearing before Justice Collin Lawrence Sequerah continues today.