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The Australian: Eric Ellis on Francis Yeoh


Tycoon stirs a typhoon
By Eric Ellis

WED 16 OCT 2002

The world's a stage for this flamboyant entrepreneur, writes Eric Ellis

WHEN you are a billionaire, you can do things that ordinary people cannot. You can own a private island. You can fly 200 of the world's most influential people onto it by helicopter for a weekend of power networking.

And you can fly in Luciano Pavarotti, who is naturally your "good friend", and the entire complement of the Orchestra Nazionale d'Italia -- including timpani -- to entertain them.

But there are some things you can't control. Like nature. And the mating calls of a randy Malaysian monkey.

Which is why, on a sultry tropical evening last month, on a beach before this power 200 audience, Pavarotti sang arias from Giacomo Puccini's masterpiece La Boheme, accompanied by a screeching simian in search, perhaps, of his own Mimi.

Headlines are also hard to control as this "power weekend's" host, Malaysian tycoon Francis Yeoh, has discovered in recent months.

What should have been a triumphant arrival on the international business stage for Yeoh, who part-owns South Australian power grid ElectraNet, has been one revelation after another since his $3.5 billion May purchase of British utility Wessex Water.

Yeoh's Kuala Lumpur-based family company YTL Corporation emerged as the surprise successful bidder in a beauty contest for Wessex, which shook loose when its parent Enron Corporation dissolved in a storm of scandal earlier this year.

In its first foray into Europe, YTL saw off better-known rivals such as Hong Kong tyro Li Ka-shing and Italian utility ENEL. It was a shock to the City, which had been expecting a consortium led by the Royal Bank of Scotland (RBS) to take this plum cash cow. London's The Sunday Telegraph newspaper screamed "WHO THE HELL ARE YTL" (Yeoh proudly posted the story on YTL's website).

But a few weeks after YTL was announced as the successful bidder, it emerged that Yeoh's group had paid Wessex's executive chairman Colin Skellet a special fee of almost $3 million.

In the post-September 11 crackdown on big and suspicious international cash transfers, Barclays Bank tipped off the City of London Fraud Squad. Police then arrested Skellet in a dawn raid at his house outside Bath, in England's West Country.

In Malaysia to see his new boss, Skellet denied the payment was a bribe or a fee designed to help YTL win Wessex. After years of "saving the asset from its shareholder" Enron, Skellet insists he wanted the British bidder, RBS, to win it.

"I had no influence in the bidding process whatsoever," Skellet says.

In an interview with The Australian, Yeoh insisted YTL is innocent of any wrongdoing and that the payment was a "golden handcuffs" fee to the well-regarded Skellet to encourage him to stay on.

Skellet has worked at Wessex for 28 years and has seen through its transformation from a struggling government-owned waterworks to one of Britain's most profitable utilities operating in one of its richest regions. Free on bail pending further investigations, Skellet says the police made a "terrible mistake".

But there's little doubt the affair has embarrassed Yeoh, a born-again Christian who prides himself on his squeaky-clean reputation.

"Why would we jeopardise relations with our 10 million customers around the world?" he asks. "That would be very stupid."

Yeoh is famous in Malaysia as one of Prime Minister Mahathir Mohamed's favourite ethnic Chinese businessmen. The colourful 48-year-old never misses an opportunity to praise Mahathir as "the world's greatest leader".

What might appear sycophantic in the West is for Yeoh standard operating procedure. In Malaysia, many in the Chinese minority are still regarded with some suspicion by the ethnic Malay bumiputra as wealthy interlopers, despite the fact that families like Yeoh's have been in Malaysia for generations.

Where Yeoh is also different in mostly Islamic Malaysia is in fervent embrace of his religion, which he wears on his sleeve.

The first Yeoh in 70 generations of Yeohs to embrace Christianity, he famously opens business lunches with grace and closes deals with prayers. He describes Christ as his "wise adviser" (whom an adviser from an Australian investment bank quips "doesn't charge as much as I do"). His home on his resort island of Pangkor, one of Malaysia's more Islamic regions, is a clash of cultural metaphors.

The sumptuous beach villa is designed in Balinese style, albeit on Western lines. His seven ethnic Chinese siblings live there with their ageing father, who likes to take his English tea and Chinese congee overlooking the pool of Japanese koi. His French-built private helicopter, in which he flew The Australian to his weekend, retreat sits nearby.

In the tower above, Yeoh maintains a chapel with rows of antique pews "saved" from English churches that modernised and abandoned the seats. Yeoh gives lay sermons in the chapel, often to his family, whom he claims have embraced Christ.

The Lord infuses every aspect of Yeoh's conversation; the Lord -- and doing business. In an interview, he asks his interlocutor if he has embraced Christ -- and goes on to explain how YTL managed to emerge mostly unscathed from the Asian financial crisis by not being exposed to volatile currencies.

"I brought the same discipline to our deal in Australia -- buy in Australian dollars, borrow in Australian dollars," he says. YTL bought a 33 per cent stake in ElectraNet from Macquarie Bank in October 2000 for about $55 million. Macquarie had bought in a South Australian Government privatisation.

YTL now operates ElectraNet in joint venture with Swiss-Swedish engineering giant ABB and Queensland's transmission utility Powerlink.

That deal was described by an Australian adviser to YTL as "Francis's international trainer wheels". It was YTL's first big deal offshore and set up YTL with the experience to participate in coming privatisations in Malaysia and Singapore, where Yeoh is strong in building, infrastructure and transport.

In Australia, Yeoh sees ElectraNet as the launching pad for more deals in toll roads and privatised utilities.

"I love regulated industries," he says. "You know where you stand and in Australia, you have governments that generally know what they are doing."

And the man who helps illuminate Adelaide's AAMI Stadium for an AFL final, turns on a griller in Gawler or cranks up a computer on Kangaroo Island doesn't see the Wessex bribery drama as impeding his ambition either.

"It will blow over for the very simple reason that there is nothing in it."

When Francis Yeoh was asked about the article in The Australian, Yeoh said “Eric Ellis seems to think every time I post an article on our web site, I am proud of it, it is not always so!”. On the spiritual aspect of it, Yeoh said, “As I have said before, while I am not ashamed to credit God’s blessings to our company, I shall never use His name in vain.”

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Related Article: Francis Yeoh on investing the spoils of success

"However, in the East, business is dominated by the Chinese enterprises-by definition family businesses. It is a collective effort passed from one generation to another. These businesses are indeed family fortresses and therefore leaves very little room for self-indulgence. This philosophy fits well with my Christian faith as I feel I am just a steward of God’s wealth.

I am flattered to be invited to speak on this panel. It presumes either I am rich or I am responsible or even better I am both. In the West commercial success tends to be more individualistic – personified by Bill Gates and Richard Branson and because of this an air of flamboyance (Richard Branson’s balloon adventures) is often associated with these individuals.

However in the East business is dominated by the Chinese enterprises-by definition family businesses. It is a collective effort passed from one generation to another. These businesses are indeed family fortresses and therefore leaves very little room for self-indulgence. This philosophy fits well with my Christian faith as I feel I am just a steward of God’s wealth.

So when I think of investing wealth it is not about private or personal wealth so the Chinese part of me mandates that I reinvest to expand the business for future generations, it’s a case of noblesse oblige. The Christian part of me mandates that I reinvest the wealth for the betterment of life and also for the preservation of culture, it’s a case of the heart.

My presence here today forces me to reflect on how well I have lived up to this stewardship and I shall run through the various apparently ‘flamboyant’ adventures that I have invested and you are the best judge on how well or badly I have done.

Much has been written about the island I own called Pangkor Laut. Some even accuse me of owning four private islands. Commercially Pangkor Laut has been a success being voted the second best island in the world by discerning travelers who took part in the Condé Nast magazine poll recently. Indeed Luciano Pavarotti officially opened a fabulous new spa at the island just a fortnight ago thus enhancing the long-term commercial viability of this investment.

However Pavarotti was in Pangkor Laut for a nobler reason; he was there as an UN Peace Ambassador. His Concert for Peace was held in conjunction with the Asian Global Peace Forum an event very close to my heart. This event was held in commemoration of the tragedy of September 11th and the powerful messages that touched the hearts of many present were paradise simply cannot exist without peace and the tragedy of September 11th must never be repeated.

When I reflect on our investment in the famous Eastern and Oriental Express train I recall that much has been written about my penchant for trains as toys since I was three. This is a myth. Anybody who has journeyed on this train will agree that this is one of the most beautiful trains in the world. The genesis of this project came from the convergence of the frustration of our prime minister Dr Mahathir who laments constantly about Kuala Lumpur being unknown compared to Singapore and Bangkok, the visionary Jim Sherwood who operates the Venice-Simplon Express train in Europe and a gung-ho investor like me. Since the launch in 1993 this beautiful train has been patronized by glitteratis from around the globe.

Ten years latter, the world now knows that Thailand and Singapore are neighbours to Malaysia. This train however is not a money spinner but I do make a “Chinese” profit while I have not received any dividends, the project does not call for more cash to stem losses. Not many people know my other favourite train is the Express Rail Link that runs from the airport to the city. It promises to be a profitable investment. This other express lives up to its name, it runs at a speedy 160 km per hour and I pray that the returns to our investment will be equally speedy.

What about my investments in art? I believe art and music are alternative powerful mediums of expression so we encourage developments in both. I have a small art gallery in my even smaller house. Among the paintings I collect are paintings of my two favourite virgins, Virgin Mary and Virgin Theresa. The former is the Mother of Christ and latter is the Catholic Mother Theresa. While I love art, I love the artists even more. My favourite project is the Art Colony in the swanky Starhill Shopping Centre. Many of the local and immensely talented artists get to display and sell their paintings at their own price to their collectors. I charge them no rent but share a nominal percentage of their sales, this has worked well for both the collectors and the artists and also for me.

What about my investments in wine? Now this is an easy investment. My faith tells me that turning water to wine was Jesus’s very first miracle and we were reminded He made the greatest of wines on that occasion. I have a small cellar again in my even smaller house and I collect mostly Mouton Rothschilds because of my love of paintings on their labels. Also I have kept a few bottles as presents for my children’s wedding day. They will be vintages by then. My favourite year is of course 1982, the year of my marriage. I understand the 1982 Mouton Rothschilds is now a very valuable vintage and my wife tells me our marriage also promises to be so.

But seriously our most valuable wine collection is housed in our restaurant called Shook! It houses the uninterrupted collection of Mouton Rothschilds from 1945 to 2000. Shook was voted the best restaurant in the city and this wine collection has appreciated in value so much in the last three years that it is keeping pace with the operational profits of the restaurant.

Finally we invested in two helicopters. They are mostly used for corporate purposes to visit our power plants, cement plants and our other infrastructure assets. Sometimes they are used as capitalist tools to impress some important clients and to showcase some of our capabilities. But I have a confession to make, I am a helicopter pilot so whether this investment is a necessity or an indulgence, I completely leave it to you to judge. Due to the devaluation of the Ringgit against the US Dollar since 1997, these investments even look great, so maybe indulgence sometimes pays!

God bless you and thank you for listening to me.

Speech delivered by Tan Sri Francis Yeoh, Group MD of YTL Corporation
Forbes Global CEO Conference
25 September 2002
Hong Kong

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Yeoh flies his own helicopters and owns Pangkor Laut, a private island.
Related Article: God's good work
30 September 2002

Last month YTL Corp. reported net profits of $98 million on revenues of $681 million for the year ended June 30, up 13% from the previous year, while YTL Power (60% owned by YTL Corp.) said its profits rose 11%, to $127 million, on revenues of $395 million. "That's God's good work," Yeoh says, "and a lot of our hard work." – Fortune Magazine

Eric Ellis in the latest Fortune magazine quoted Francis Yeoh reckons he does business with a huge advantage. "Christ is my wise advisor," the 48-year-old Malaysian tycoon says. Not only does his advisor not charge like an investment banker, but, as Yeoh puts it, he also has helped grow Yeoh's YTL group tenfold over the past decade into a property, infrastructure, and technology giant with assets of $6 billion. Earlier this month, Yeoh says, a miracle brought Luciano Pavarotti to Yeoh's private island south of Penang to perform La Boheme arias on the beach before an audience of 200 business and political leaders. [Pavarotti’s Concert for Peace]

Fortune quoted Francis as the first Yeoh in a long line of Buddhists to embrace Christianity and opens business lunches by saying grace and closes deals with prayers. Yeoh credits being "born again" in 1971 with keeping him from succumbing to "third-generation syndrome"--the Chinese saying that the third heir of a family fortune will squander it. Eric Ellis observed, YTL sputtered after Yeoh took the helm in 1978. It wasn't until 1986, when anxious younger siblings groused that he spent more time with the Bible than with company books, that Yeoh focused on his job.

Riding Malaysia's booming economy, YTL expanded from construction into hotels and power generation. Last month YTL Corp. reported profits of $98 million on revenues of $681 million for the year ended June 30, up 13% from the previous year, while YTL Power (60% owned by YTL Corp.) said its profits rose 11%, to $127 million, on revenues of $395 million. "That's God's good work," Yeoh says, "and a lot of our hard work."

It helps that Yeoh is known as Malaysian Prime Minister Mahathir Mohamad's favorite ethnic-Chinese businessman. But he also times his deals well and keeps borrowing and costs under control. For example, YTL's airport railway in Kuala Lumpur, a copy of London's Heathrow Express, was built for a fifth of the cost, travels twice the distance, and charges half the ticket price. "The market likes him because he delivers ahead of budget and schedule," says advisor Michael Carapiet of Sydney's Macquarie Bank.

When Francis Yeoh was asked about the Fortune article especially pertaining to Yeoh’s Christian faith, Yeoh said, ”While I am not ashamed to credit God’s blessings to our company, I shall never use His name in vain.”

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