Let market forces decide Sapura Energy Bhd’s fate; this is the view of some economists over the possible use of public funds or government loans to rescue the debt-laden oil and gas company, noting that any effort to save Sapura Energy must not involve public funds because these funds should not be used to protect the elites.
Sociopolitical analyst Prof Dr Awang Azman Awang Pawi said it was not necessary for the government to spend billions of people’s money for the benefit of a small group of corporates. “These are parts of the questions that many people complain about. I think the government should let the market forces decide the company’s fate,” he told the New Straits Times.
Public funds were more apt to be used for programmes that benefited the public, especially the working-class community, he added.
Awang Azman, nevertheless, suggested that the government consider letting Sapura Energy’s strategic investments or assets to be taken over by Petronas to have better efficiency, accountability, integrity and reliability.
In a Facebook posting on 20 March, former prime minister Datuk Seri Najib Razak suggested that the government should protect Sapura Energy from bankruptcy by providing loans or getting Petronas or Khazanah Nasional Bhd to take over the group from Permodalan Nasional Bhd (PNB).
He argued that the people would face big losses if Sapura Energy was not saved, citing RM4 billion in losses to holders of PNB-owned Amanah Saham Bumiputera and RM10 billion in losses to Malayan Banking Bhd, as well as the 10,000 employees that would lose their jobs.
Sapura Energy is currently undertaking a massive debt restructuring involving banks, vendors and contractors.
Putra Business School business development manager Associate Professor Dr Ahmed Razman Abdul Latiff agreed that rescuing Sapura Energy should not involve public funds or government loans.
However, Razman said the government might consider letting Petronas take over Sapura Energy for strategic reasons, given that the national oil company still required the latter’s services for its projects.
“Petronas should bail out Sapura only if they have performed the due diligence and the takeover will give net positive value added (to Petronas). Otherwise, they should not bail it out as Petronas’ directors have duties and responsibilities to act in the best interest of the company and act in good faith.”
Meanwhile, he said there should be little concern on PNB’s exposure in Sapura Energy as it was minimal and would not influence the fund’s dividend rate much.
The investment in Sapura Energy represented less than one percent of PNB’s total asset under management.
At the stock’s current share price of four sen, PNB’s 40 percent stake has been reduced to RM223.71 million, less than 10 per cent of the RM2.67 billion it injected in 2018, not including prior investments.
He said it was important to note that PNB paid dividends to its unitholders based on dividends and capital gains realised from its overall investments.
“As for the Employees Provident Fund (EPF), its 2.9 percent stake now carries the value of RM18.5 million only, which is very little compared to its RM1 trillion of assets under management. So, the negative impact to PNB and EPF caused by the current situation of Sapura Energy will not be materially significant,” said Razman.