Blowing hot and cold.

THE GOVERNMENT'S DECISION to drop the controversial windfall tax on independent power producers (IPPs) has tossed up two pertinent questions: Why did the government do it, and why did it suspend the power purchase agreement (PPA) negotiations between Tenaga Nasional Bhd (TNB) and the IPPs? As to the first question, there is strong consensus among analysts that the government wants to protect the bond market. Some say the investment banks were the ones who actually lobbied hard for the cancellation of the levy. According to RAM Ratings, nine out of 25 private debt issues related to the IPPs would be hit by the windfall tax. It explains that subordinated bonds and those issued by the IPPs' parent companies will be severely affected and will result in losses for the bondholders.

In mid-August, RAM placed the debt issues of Malakoff Corp Bhd, Special Power Vehicle Bhd and Magna Segmen Sdn Bhd on a 'Rating Watch' with a negative outlook. Analysts …