KUALA LUMPUR: Malaysia said on Thursday national utility Tenaga is taking over debt-laden

state fund 1MDB's entire 70 percent stake in a planned 2,000 MW coal-fired power project, sparking a slump in Tenaga's shares.

The move marks the first sale of a power asset by 1Malaysia Development Bhd (1MDB) and comes as the fund plans to pare down its debt of nearly 42 billion ringgit ($11.31 billion) that has weighed on the ringgit and Malaysia's credit rating.

The government has approved the takeover of 1MDB's stake in the project, 3B, energy minister Maximus Ongkili told reporters, but declined to disclose the value of the deal, saying the matter is between 1MDB and Tenaga. He also said the tariff payable to Tenaga on the power to be supplied was yet to be finalized.

In a statement to the stock exchange, Tenaga said it has yet to receive any official notification from the government on the stake takeover. 1MDB declined to comment.

Tenaga stock investors, however, were spooked by the lack of clarity on the deal, pushing its shares down as much as 6.5 percent to an eight-month low, before helping it erase some of the losses and close 4.3 percent lower.

The fall in Tenaga, which counts state investor Khazanah Nasional Bhd as major shareholder, helped drag down the benchmark stock index 0.5 percent. Japan's Mitsui & Co. owns the balance 30 percent

stake in the project, that has been estimated to cost $3.6 billion to build.

1MDB, whose board of advisers is chaired by Malaysian Prime Minister Najib Razak, has some 15 power and desalination plants in five countries. Its crown jewel is project 3B that it and Mitsui won the rights to build in February 2014, though 1MDB's liquidity problems have put its ability to build the plant in question.

Last week, 1MDB said it will start seeking suitors to invest in Bandar Malaysia, one of its two major property projects in the capital city.

Sources told Reuters in early June that 1MDB's $3 billion IPO plan of its other power assets is likely to be aborted in favor of outright sales.