Singapore: 1 Malaysia Development Berhad (1MDB), a large Malaysian government fund, is paving the way for a $3 billion stock market listing of its power assets on the Kuala Lumpur exchange early next year, according to people familiar with the matter.

The planned IPO comes amid ongoing scrutiny by opposition politicians in Malaysia of 1MDB, a vast wealth fund formed only five years ago in partnership with interests in Abu Dhabi and Saudi Arabia.

Some have questioned the need for 1MDB when Malaysia already has Khazanah, the country’s $100bn sovereign wealth fund. One of Khazanah’s biggest projects is the restructuring of the country’s stricken national carrier, Malaysia Airlines.

1MDB plans to sell shares in its 1MDB Energy power business, largely accumulated in the past two years by buying the power assets of Ananda Krishnan, one of Malaysia’s richest men. The power producer, with plants in six countries, has a net power generation capacity of 5,570MW and is Malaysia’s second biggest.

Half of the funds raised in an initial public offering would be used to pay down debt, with the rest for expansion. “There is a fair pipeline of projects and the money is needed for expansion,” said a person close to the matter.

Bank of America Merrill Lynch this year highlighted “high” debts at 1MDB, which amounted to M$42bn ($13bn) as at March 31. This had “raised concerns that 1MDB could emerge as a serious contingent liability for the government”, the bank said.

However Prime Minister Najib Razak said this week that the government would not be liable for all of 1MDB’s debts if it went bankrupt, and only guaranteed Rm5.8bn of total estimated debts now of Rm38bn ($11.5bn). 1MDB says it has assets valued at over Rm44.6bn.

“Like other companies governed by the Companies Act, 1MDB has limited liability, and apart from loans or bonds that had government guarantees, 1MDB financial matters are not included in the government’s contingent liabilities. The financial situation of 1MDB rests in the hands of the company,” he was reported as saying by Bernama, the state run news agency, as saying.

The listing was originally planned to take place earlier this year but was delayed by technical issues and is now expected to be in the first quarter of 2015. It would be the biggest IPO on Bursa Malaysia since the listing in 2012 of Felda Global Ventures, one of the world’s largest palm oil companies.

1MDB Energy is being advised by Deutsche Bank and Maybank, Malaysia’s largest bank by assets.

— Financial Times