Privatisation better than Petronas takeover: experts on Sapura Energy

KUALA LUMPUR – Economists have poured cold water on Datuk Seri Najib Razak’s proposal for Petronas to take over Sapura Energy Bhd, suggesting instead that the embattled firm enter a privatisation deal.

The former prime minister made the proposal during his debate with opposition leader Datuk Seri Anwar Ibrahim on Thursday night, saying the national oil and gas company has the expertise to pull Sapura Energy out of troubled waters.

Najib had also claimed that a takeover by Petronas would not involve a single sen of public funds, a notion that was immediately pooh-poohed by his political rival on stage.

Speaking to The Vibes, Sunway University economics professor Yeah Kim Leng said by allowing competitive bidding, the government can ensure that Sapura Energy is acquired by the most capable hands.

Such a move will also mean that the risk capital of taking over a financially troubled company is borne fully by the private sector, instead of transferring that burden to government entities, he said.

Yeah is not convinced Petronas is truly capable of leading the takeover by itself, pointing out that many of its operations are also currently outsourced to downstream industry players.

“The most effective way is to allow the private sector to step in. They will ensure that any deal is value for money.

“If Petronas or the government acquires Sapura Energy, there will always be that ‘social premium’ that they have to pay that may not be recovered even in the future. This burden of risk will be on the taxpayers.

“Unless and until a privatisation bid fails, then the government can step in. But that doesn’t mean it has to be a full bailout. It can be partial, with the other portion held by the private sector.”

Prudent to avoid govt guarantee, forensic audit should be priority

Sapura Energy has been in troubled waters since oil prices crashed in 2014, leading to its market capitalisation shrinking to RM639 million today from a whopping RM28 billion in early 2014.

It posted a net loss of RM8.9 billion for the financial year ending January 31, 2022, compared with RM160.87 million the year before.

Its financial woes came under the spotlight after suggestions arose that it may require further financial aid from Perbadanan Nasional Bhd (PNB), the state-owned entity that holds a 40% stake in Sapura Energy.

Previously in March, Najib claimed that Sapura Energy had been a fully private firm up until 2019, when it was converted to a government-linked company (GLC) during the Pakatan Harapan government.

Commenting on Najib’s secondary suggestion for banks to offer government guaranteed loans to the cash-strapped public-listed company, Yeah said it is only prudent if such a move can be avoided, considering the country’s financial situation.

“The government is already facing fiscal constraints because of high debt levels and deficits, and government guarantee is one of the larger components of government liabilities.”

At the moment, Yeah said the best measure would be to perform a forensic audit to identify the underlying issues within Sapura Energy as suggested by Anwar, before proceeding with the next stage of weighing the different options.

There should be willing buyer, willing seller

Universiti Tun Abdul Razak academician Prof Barjoyai Bardai echoed Yeah’s sentiment that a private takeover bid should be adopted instead, but said this would ultimately depend on PNB’s willingness to dispose of its shares.

“I definitely agree to a privatisation and welcome any willing white knight. But the problem is whether PNB is willing to cooperate. Unless somebody is willing to pay close to the share price, then I don’t see them considering it.”

If the government insists on a takeover by a GLC, Barjoyai said Khazanah Nasional Bhd should instead be considered at the top of the list over Petronas, describing the former as a more “neutral” alternative.

Any proposal to transfer the ownership to Petronas should only come after Sapura Energy enjoys a successful turnaround, he added.

“Sapura is a contractor to Petronas. During the oil crisis a few years back, Petronas had slashed payments, but when the oil price re-stabilised, they didn’t fix the pricing. It’s rather unfair.

“As for Khazanah, they have the experience of a takeover, like in the case with IHH Healthcare Bhd. If they can inject some funds to settle the debts and implement cost cutting measures, Sapura Energy will be up and running within a few months.” – The Vibes, May 15, 2022