16 theSun | TUESDAY OCTOBER 13 2009

business

briefs
Scrap solicitors remuneration
order, urges Rehda
KUALA LUMPUR: The Real Estate and Housing
Developers’ Association (Rehda) is urging the
government to abolish the current Solicitors Re-
muneration Order.
Rehda president Datuk Ng Seing Liong said the
abolition will enable Malaysia to compete interna-
tionally and grow competitively.
The Singapore government recently liberalised
its fee guidelines for the conveyance of property
titles.
“It is timely that solicitors and clients negotiate
freely on a legal fee that is fair and reasonable with-
out being governed by any regulation and order,” he
said in a statement yesterday.
Ng also said that such a move will help lower
cost of acquisition and will spur greater buying
interests in the market. – Bernama
Low Yat eyes RM55mil rent
from Rivercity project
KUALA LUMPUR: Low Yat Group expects to rake
in RM55 million in rent from its Rivercity project in
Jalan Ipoh, Kuala Lumpur within five years.
Its deputy general manager (property develop-
ment), Leow Sian Hiong, said the 162,000 sq ft
refurbishment project, with a rental price of be-
tween RM4-RM8, was expected to be completed
by year-end.
“The project, which started this year, comprises
seven blocks of mixed development (block A-H) and
a block for the Low Yat headquarters.
Moody’s changes IOI’s outlook
to stable from negative
KUALA LUMPUR: Moody’s Investors
Service has affirmed the ‘BAA1’ issuer
rating of IOI Corp Bhd as well as the
senior unsecured bonds and loans is-
sued by IOI Ventures (L) Bhd which are
guaranteed by IOI.
In a statement, the rating house said it
had changed the outlook for the ratings
to ‘stable’ from ‘negative’ which would
have an effect on its bonds worth about
US$500 million (RM1.7 billion) and
loans of ¥21 billion (RM779.1 million).
IOI is involved in oil palm planta-
tions and resource-based manufactur-
ing, including olechemicals, as well as
specialty oils and fats.
It is also a property development
and investment group.
Moody’s vice-president/senior
credit officer, Peter Choy, said IOI had
improved its management of currency
risk by terminating structural foreign
Heskey
seeks
exchange derivative transactions and
maintaining currency and interest rate
swaps that hedge its borrowings.
He said the group had strength-
ened its management of credit sales
to minimise its bad debt which had
helped support the change in its ratings
outlook.
Choy said with the global economic
downturn appeared to have bottomed,
and the main palm oil-importing mar-
kets – India and China – continued to
post resilient economic growth, IOI
business was expected to stabilise over
the medium term.
He said IOI has maintained a strong
liquidity profile – with debt maturities
well spread out, and supported by
undrawn committed banking facilities
and abundant cash of RM2.4 billion, as
of June 30, 2009 – thereby providing
it with a buffer robust enough to cope
with any challenge to its business in the
next 12 to 18 months.
Choy said while IOI’s ratings were
supported by the favourable long-term
outlook for palm oil demand, these
could be tempered with among others,
by both the commodity and cyclical
pricing character of palm oil.
“The possibility of upward rating pres-
sure on IOI’s ratings in the near term is
limited, given the volatility in the palm oil
and property markets,” he said.
He said, however, upgrade pressure
could emerge over time if IOI were to
further reduce its overall debt.
Meanwhile, the last rating action
with regard to IOI was taken on March
2, 2009, when the company’s issuer
and debt ratings outlook was changed
to negative following its release of its
first-half results for financial year 2009.
– Bernama

Financial crisis and global

“With an investment of RM7 million, the new
look will transform one of Kuala Lumpur’s oldest
Villa exit
and bustling areas into a vibrant landmark,” she pg 31
told a media briefing yesterday.

energy investment
Leow said the company targeted 90% occupancy
rate with a good tenant mix by the first quarter of
2010. – Bernama

AirAsia gets 60% boost in sales Dr Kee-Kuan Foong
from ‘Low Fare Madness’ drive
THE global financial
KUALA LUMPUR: AirAsia’s “Low Fare Madness” crisis has severely
campaign has helped the low-cost airline record a weakened invest-
more than 60% increase in sales. ment on energy
Due to the good response, the promotion period resources. Across
from Oct 5-11 has been extended to Oct 18 for the the world, energy commodities.
travel period of Oct 19 to Nov 19 this year. investment fell because of Energy companies are
It applies to all seats and flights from Malaysia lowered end-demand for drilling less oil and gas wells
but excluding that of AirAsia X. energy, tougher financing, or cutting back expenditures
“Customers have also responded positively to and poor corporate cash on pipelines and refineries.
our GoHoliday packages with guests being offered flow conditions. For instance, Similarly, households and
exclusive last-minute hot deals and fantastic op- statistical evidence from the enterprises are spending
tions on ground tour arrangements including free industrialised countries has less on energy consuming
rooms at over 180 Asia Pacific hotels online at shown sharp falls in demand appliances. While this has
goholiday.airasia.com,” Kathleen Tan, the regional for energy. In turn, this has fostered increasing use of en-
head of commercial for AirAsia Group said in a contributed to sharp decline ergy-efficient appliances, the
statement yesterday. – Bernama in world prices of energy credit crunch has not made
this new form of investment
attractive. As a result, this
has slowed deployment of
more efficient production of
machinery tools. In addition,
equipment manufacturers
will lower investment in
research and development.
Lower international
prices in energy as well as
restricted corporate cash
flow positions have stymied
massive capital outlay and
project cancellations in the
oil and gas market. The In-
ternational Energy Agency
(IEA) estimates that invest-
ment budgets for global
upstream oil and gas sector
have fallen by around 21%
(or around US$100 billion)
in 2009.
In terms of power sec-
KUALA LUMPUR tor investment, the IEA
estimates that global elec-
Saturday - 24 Oct 2009 Saturday - 14 Nov 2009
11am - 1.30pm 11am - 1.30pm tricity consumption will
Venue : Plaza Pantai, KL Venue : Plaza Pantai, KL fall by around 3.5% in 2009.
According to figures avail-
Admission is FREE (KL) able for the first quarter of
but strictly by registration only due to limited space. 2009, electricity demand in
the OECD sagged by 4.9%
year-on-year, while China
shrunk by 4%.
Notably, severe demand
contraction has led to less
new capacity additions on
part of the power generators,
Website: www.welnex.com and less production of more
energy-efficient equipment
by manufacturers. Highly
46-48/52
geared power producers will
also have to confront
higher debt servic-
ing charges due
to ongoing global
financial volatility.
Some of these trou-
bled producers may
face bankruptcy
without financial support
from the relevant national
authorities. There is a prob-
ability that the power sector
will shift towards less-capi-
tal intensive feedstock, such
as coal or gas-fired plants
compare with capital-in-
tensive alternatives, such
as renewable and nuclear.
This is true, especially if
the global financial crisis
prolongs beyond 2010 and
global energy prices remain
depressed.
According to industry ex-
perts, investment in the coal
sector is anticipated to fall by
40% in 2009 due to high base
effects in previous years.
Prior to 2008, coal producers
made huge profits and paid
generous dividends to their
stakeholders. In addition,
high margins producers also
rely less on external finance
for the expansion purposes.
However, smaller and
less profitable ones will face
higher financing terms for
ongoing operations, and will
have to cutback large capital
outlays. This constitutes the
large part of the contraction
witnessed to date.
Similarly, the investment
in renewable power projects
is expected to fall by 38% in
2009. In 2007, investment
in renewable energy as-
sets rose by 85%. However,
due to the global financial
turmoil from 2008 onwards,
investment fell as sources of
finance became tighter.
What are the implica-
tions of falling investment
in major energy products
around the world?
First, investment in
energy infrastructure will
only affect capacity with
a lag of around five to 10
years. Hence, current weak
demand will result in a rise
in spare production capacity.
In contrast, sustained lower
energy investment will lead
to capacity shortages, which
would push up energy
prices in the future. Rapid
economic progress without
adequate investment in
energy infrastructure might
derail the path of global
economic performance.
Supply restriction will lead
to higher cost of production
and inflation expectations
across all economic sectors.
Second, current eco-
nomic slowdown will lead
to less greenhouse gas
emissions in the near term.
However, the ongoing finan-
cial turbulence may curtail
investment in clean energy
technology and thereby lead
to greater emissions in the
medium to longer term
through the use of fossilised
fuel energy commodities.
Concomitantly, risk adverse
investors will divert funding
for clean energy projects to
proven technologies in at-
tractive markets. It is worth
noting that once the global
economy recovers, any
short-term emissions benefit
will be negated.
Third, weakened energy
investment might limit poor-
er people’s access to various
forms of modern energy.
There are nearly 1.6 billion
people around the world
without access to electricity.
Financial difficulties will im-
pede poorer households the
ability to connect to electric-
ity or other forms of energy.
Hence, cutbacks in modern
energy investment will
stymie poverty eradication
efforts around the world.
Dr Kee-Kuan Foong is
Senior Research Fellow with
the Malaysian Institute of
Economic Research