PNB, EPF dismiss 'bailout' concerns in RM8.3b Battersea Power Station deal, says report

KUALA LUMPUR (Dec 22): Battersea Phase 2 Holding Co Ltd (Battersea Phase 2 Holdco) and PNB-Kwasa International 2 Ltd inked a sale and purchase agreement to acquire Phase 2 of the Battersea Power Station (BPS)’s (pictured) commercial assets for a base consideration of £1.58 billion (about RM8.35 billion) on Dec 14.

The commercial components include: Battersea Project Phase 2 Company Ltd, Battersea Project Phase 2 Office GP Ltd, Battersea Project Phase 2 Office LP Ltd, Battersea Project Phase 2 Office Nominee Ltd, Battersea Project Phase 2 Retail, Leisure, F&B GP Ltd, Battersea Project Phase 2 Retail, Leisure, F&B LP Ltd, and Battersea Project Phase 2 Retail, Leisure, F&B Nominee Ltd.

Reported as the UK’s most expensive property deal yet, it has, however, been labelled as a bailout, with stories about the project being plagued by financial strain and cost overruns.

“It is an arm’s length transaction and we went through very rigorous processes to make sure that the project is viable and meets our stringent investment criteria,” Permodalan Nasional Bhd (PNB) group CEO Datuk Abdul Rahman Ahmad told The Edge in a report. PNB is partnering the Employees Provident Fund (EPF) on the acquisition

“So, we do not feel (the bailout perception) is correct because to us, the investment itself is attractive… everyone recognises that there had been cost overruns, (the project’s) value had increased significantly too,” he added.

Meanwhile, EPF CEO Tunku Alizakri Alias said “the fund had conducted thorough due diligence” before inking the deal.

“This is the ‘crown jewel’ of the greater Battersea development, which will generate healthy rental income for the owners and has very strong potential for capital appreciation in the future,” he told the business weekly.

Battersea Phase 2 Holdco is a wholly-owned subsidiary of Battersea Project Holding Company Ltd, which is owned by Sime Darby Property Bhd and S P Setia Bhd who each holds a 40% stake while  EPF holds the remaining 20%.

PNB-Kwasa International 2 is a joint venture company set up by PNB and EPF.

Abdul Rahman said the deal is “important” for the continuity of the project.

“We are aware that because of the relationships, this transaction will always be scrutinised. But I think we have taken our time to ... make sure that the transaction is truly at arm’s length, truly fair and beneficial to both sides,” he added.

Abdul Rahman explained to the business weekly “that PNB-Kwasa’s interests are safeguarded by a 5% yield guarantee on the base price during the construction period and for five years following completion”.

There is also a price-adjustment mechanism, which means that “by the end of the fifth year, the base price will be adjusted downwards if the returns are less than the guaranteed 5%”.