KUALA LUMPUR: Khazanah Nasional Bhd expects to reduce its debt level by up to RM12 billion in the next three to five years via asset sales.

Economic Affairs Minister Datuk Seri Mohamed Azmin Ali said the sovereign wealth fund was planning to pare down its debt to between RM35 billion and RM40 billion.

Last week, Khazanah had announced its current debt level stood at RM47 billion from RM55 billion through several assets sales.

He said Khazanah was identifying strategic assets to dispose, adding that the evaluation must be based on market performance and right timing.

Mohamed Azmin said the proceeds generated from the asset disposals would also be reinvestef into other asset classes.

“This (potential divestments) is not something unusual but it needs to get strategic evaluation based on the market condition, which in turn will create value for Khazanah assets.

“We want to make sure it will give a better return to Khazanah and subsequently better dividends to the government,” Azmin told reporters after presenting his keynote address at Khazanah Megatrends Forum 2019 here today.

Managing director Datuk Shahril Ridza Ridzuan said Khazanah’s debt reduction medium-term plan had been approved by the board to reach sustainable level of about RM40 billion.

“We are targeting about 3.5 times for our asset to debt cover as opposed to right now where we are just over 2.0 times. This provides more sustainable balance sheet for Khazanah in the long term,” he said, adding that while ensuring the debt was correctly positioned to support the asset and equities of Khazanah.

However, he said there was no specific sector that Khazanah wanted to divest as the fund has a diversed portfolio across many industries.

“We intend to lean a bit more towards technology and innovation. But we have a diversed investment portfolio for risk-management purposes,” he said.

Mohamed Azmin said the process of selling assets was a normal business deal not only for Khazanah but also the Employees Provident Fund and Permodalan Nasional Bhd.

“We must ensure the assets that we are going to sell will generate money and create a new fund for us (Khazanah) to reinvest into other asset and make more profits,” he added.

He said Khazanah had been selling over 100 assets, amounting to about RM65 billion in the last 10 years.

He said the government had been receiving dividends from Khazanah and certainly in the long run, it would help the government to pare down its debt if Khazanah can give better dividends.

“We must ensure that we create value from those assets. The value of our assetsb currently is about RM130 billion and the net balance sheet of Khazanah is much stronger than before,” he said.

Meanwhile, he said Khazanah is identifying strategic partners for Malaysia Airlines Bhd (MAB) after receiving some proposals from potential parties.

“We are accessing those proposals to identify the right partners for Malaysia Airlines.

“However, I am not in the position to give the details as the process (identifying partners) is still ongoing,” he said.

He said once Khazanah and MAB conclude the whole evaluation exercise, a proper announcement will be made.