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Asiatic Group responds to open letter from minority shareholder

ASIATIC Group has responded to an open letter from a minority shareholder that questioned the continued operations of its poorly-performing power plants.

Last month, minority shareholder Jerry Low wrote to Asiatic’s board expressing unease over its decision to commit what he felt was a “disproportionately huge exposure” to the loss-making Maju Intan Biomass Energy project in Malaysia, among other things.

Asiatic has a 30 per cent stake in Maju Intan, and has extended it a S$15.2 million interest-free loan. Asiatic also owns S$4.2 million worth of convertible bonds issued by Maju Intan, and has waived the 12 per cent per annum interest on them.To fund Maju Intan, Asiatic in turn raised S$4 million by issuing 10 per cent per annum non-convertible bonds (NCBs) to individuals including Asiatic founder Tan Ah Kan. Last year, auditors raised concerns about Asiatic’s ability to continue as a going concern. Mr Low has called for Asiatic’s independent directors to conduct a strategic review of its businesses and the remuneration of all management staff.In its defence, Asiatic said on Monday that it chose to acquire Maju Intan’s bonds as “it would not be in the group’s best interests if (these bonds were to be sold) to a party that did not share the same sentiments and understanding of the business”.Separately, S$1.8 million in principal amount of the NCBs have been repaid, Asiatic said. The interest rate of the outstanding NCBs has also been reduced to 8 per cent, it added. Asiatic, which also sells fire-fighting equipment, also noted that it chose to diversify into the energy business about a decade ago, when it assessed that there were limited expansion opportunities locally for its fire protection solutions business. “The energy business is, by nature, capital-intensive,” Asiatic said: “Currently, Maju Intan Power Plant is operating at a higher capacity compared to the previous years.”Mr Low told The Business Times on Monday night: “The whole response ignores the elephant in the room. The investment in Maju Intan is bringing the whole company down.”Asiatic shares closed unchanged at S$0.011 on June 1.

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