Last of Temasek's power units sold for $3.8 billion to Malaysian company

Surprise sale of PowerSeraya to YTL Power unit after 'unsolicited proposal'
Gabriel Chen, Straits Times 3 Dec 08;

TEMASEK Holdings has stunned the market by announcing that it has sold electricity generator Power-Seraya to a unit of Malaysia's YTL Power International for $3.8 billion.

This came just a week after the Singapore investment company said it would shelve tender plans for PowerSeraya, owing to 'market conditions'.

Market talk had suggested that relatively poor investor interest and lower-than-expected indicative bids by investors had led to Temasek's earlier decision.

Temasek said in a statement yesterday, however, that Sabre Energy, a wholly-owned unit of YTL Power, would pay $3.6 billion for PowerSeraya and assume $201 million of its adjusted net debt as at March 31 this year.

The transaction for PowerSeraya - the third and last of the electricity generation companies (gencos) to be sold by Temasek - is expected to be completed early next year.

In June last year, Temasek announced it was selling the three gencos to liberalise the power generation industry. It had targeted to complete the sale by the middle of next year.

Ms Gwendel Tung, Temasek's director of investment, said yesterday that after the company put a stop to the tender process last week, YTL Power submitted an 'unsolicited proposal' that met Temasek's requirements.

Referring to YTL Power, Ms Tung said: 'We are confident that their expertise and experience will add significant value to Singapore's electricity market and PowerSeraya in particular.'

Other factors may have also come into play. One possibility, suggest industry watchers, is that the funds will come in handy in helping cushion losses from other investments that have soured amid the global financial crisis.

They say another possibility concerns Temasek's outlook on market conditions. Temasek might have worried that, with asset prices declining rapidly, it might not have been able to secure such an 'acceptable' price again had it 'procrastinated'.

Temasek's other gencos fetched higher prices. Tuas Power went to Chinese firm Huaneng for $4.23 billion. Senoko Power, meanwhile, was sold to a consortium led by Marubeni Corp for $4 billion.

A third theory concerned the other bidders for PowerSeraya, which were said to be a Hong Kong CLP Holdings-led consortium and Bahrain's Arcapita.

Due to deteriorating market conditions, and with banks taking more precautions on lending, Temasek might have been concerned over whether these bidders would face difficulties in financing the deal.

Temasek declined yesterday to comment on the talk and also declined to provide the names of the shortlisted bidders.

The sale of the three gencos is aimed at liberalising the power generation industry. Private ownership can trigger stronger competition, possibly leading to lower costs and lower electricity prices.

The acquisition of PowerSeraya is not YTL Power's first foray into Singapore-based assets.

Its parent company, YTL Corp, owns majority stakes in two Sentosa Cove projects. In November last year, the group made history here by paying $2,525 per sq ft per plot ratio for Westwood Apartments in Orchard Boulevard - the most expensive site to be sold collectively.

YTL Power managing director Francis Yeoh said the 3,100MW of licensed capacity operated by PowerSeraya would give YTL Power 'significant participation' in the Singapore energy market.

YTL Power believes its participation in Singapore's electricity market will put it in a prime position to contribute towards the liberalisation of the Malaysian electricity market.

The lights are back on
Energy provider goesto Malaysian-listed giant
Marissa Chew, Today Online 3 Dec 08;

JUST a week after saying it was shelving the sale of PowerSeraya, Temasek Holdings said yesterday it was selling the electricity: generation company to Malaysia-listed YTL Power International.

YTL Power agreed to pay $3.8 billion for PowerSeraya, which accounts for about a quarter of Singapore’s generation capacity. YTL Power will pay $3.6 billion in cash and assume net debt of $200 million.

The Malaysian company said DBS Bank is providing $2.25 billion of credit facilities to help finance the purchase.

Temasek launched the sale of :PowerSeraya in early October, despite the spreading gloom in financial markets, saying it had attracted strong interest from potential bidders.

:However, the Singapore investment company last week unexpectedly halted the sale of PowerSeraya, citing market conditions.

Observers at that time said the relatively poor investor interest and low indicative bids led to the decision. :YTL Power is understood to have been one of the contenders for PowerSeraya in the first round of the sales process, along with Hong Kong’s CLP.

Yesterday, Temasek’s director, investment, Ms Gwendel Tung said: “After we stopped the tender process last week, YTL Power International put forward an unsolicited proposal which met our requirements.”

:With the latest sale, Temasek completes the divestment of its three power generation assets, which it announced in July 2007. All three were sold to foreign interests this year, with Tuas Power going to China Huaneng Group for $4.2 billion, and Senoko Power picked up by a consortium of Japanese and French companies for $4 billion.

If YTL Power shareholders approve, the deal will be completed on Feb 28.

“The 3,100 megawatts of licensed capacity operated by PowerSeraya will give us significant participation in the Singapore energy market,” said YTL Power managing director Dr Francis Yeoh.

For YTL Corp, the parent of YTL Power, PowerSeraya is the second major acquisition in Singapore in just over a month. YTL Corp on Oct 28 bought the Macquarie Group’s stake in Singapore-listed Macquarie Prime Reit, which owns stakes in the Wisma Atria and Ngee Ann City malls, for $285 million.

Apart from power generation, Power-Seraya :also operates oil trading and multi-utility businesses, and offers retail energy services. The company had revenue of:$2.79 billion and earnings before interest, tax, depreciation and amortisation of $355 million for the year ended March 31, 2008.

YTL ups the ante to clinch PowerSeraya
Deal comes just a week after Temasek stopped tender for the genco
Conrad Tan, Business Times 3 Dec 08;

(SINGAPORE) In a stunning about-turn, Temasek Holdings has sold electricity generating firm PowerSeraya to Malaysia's YTL Power International for $3.8 billion just a week after it postponed the sale indefinitely due to poor market conditions.

YTL Power will pay Singapore investment company Temasek $3.6 billion and assume $201 million of PowerSeraya's net debt.

'After we stopped the tender process last week, YTL Power put forward an unsolicited proposal which met our requirements. We are pleased with the successful outcome of the PowerSeraya divestment,' Gwendel Tung, director of investment at Temasek, said in a statement.

Francis Yeoh, managing director of YTL Power as well as its parent company YTL Corp - both listed on Bursa Malaysia - said that he was 'delighted' to acquire PowerSeraya, which will give YTL Power 'significant participation in the Singapore energy market'.

Sources told BT that Mr Yeoh flew to Singapore with other senior YTL Power executives to meet Temasek representatives. Over the past two days, they rapidly hammered out a deal.

Just last week, on Nov 25, Temasek said that it had stopped the tender process for the sale of PowerSeraya that it had started on Oct 7.

'In light of the market conditions, we have decided not to proceed further,' Ms Tung said in a statement at the time.

YTL Power had been one of two shortlisted bidders; the other was a consortium led by Hong Kong's CLP Group.

DBS Bank is providing $2.25 billion of credit facilities to YTL Power to fund part of the purchase.

PowerSeraya is the last of three power generating companies that Temasek put up for sale under its planned divestment of the gencos, first announced in July last year.

The first, Tuas Power, was sold to China Huaneng Group for $4.24 billion in March, while Senoko Power was bought by a consortium led by Japan's Marubeni Corp for $3.97 billion in September.

With a registered generating capacity of 2,940 megawatts (MW) and a licensed capacity of 3,100MW, PowerSeraya is the second largest genco here after the 3,300MW Senoko Power, providing about 27 per cent of Singapore's electricity needs.

The deal is subject to the approval of YTL Power's shareholders. If approved, the acquisition is expected to be completed by the end of February next year.

For the financial year ended March 31, 2008, PowerSeraya reported revenues of $2.79 billion and net income of $218 million.

Its net debt at the end of March was $201 million, after adjusting for a $100 million dividend paid to Temasek in September this year.

Wong Kim Yin, managing director of investment at Temasek, said that, with the sale of PowerSeraya, 'Temasek would have fulfilled its commitment to help develop a competitive power generation market in Singapore'.

Mr Yeoh, 54, one of the most powerful businessmen in Malaysia, has been busy deploying the YTL group's war chest of more than RM11 billion (S$4.6 billion) in cash to buy overseas assets on the cheap.

In October, the group bought Macquarie Group's entire interest in Singapore-listed Macquarie Prime Reit at a sharp discount to the property trust's net asset value, in an all-cash deal worth $285 million.

Temasek sells power firm to Malaysia YTL for $2.5bln
Kevin Lim, Reuters 2 Dec 08;

SINGAPORE, Dec 2 (Reuters) - Singapore state investor Temasek Holdings [TEM.UL] said on Tuesday it had sold electricity generator PowerSeraya to a subsidiary of Malaysia's YTL Power International Bhd (YTLP.KL: Quote, Profile, Research, Stock Buzz) for S$3.8 billion ($2.5 billion).

Temasek said Sabre Energy, a wholly-owned subsidiary of YTL, will pay S$3.6 billion and will assume S$201 million of PowerSeraya's adjusted net debt as of March 31, 2008.

YTL said it would fund the acquisition through a combination of cash reserves and a loan, and said the acquisition would add 76 million ringgit ($20 million) to its full year 2010 post-tax profit. It saw the acquisition being completed in the third quarter of 2009.

The deal came despite Temasek saying just a week ago that it had postponed the sale of PowerSeraya, the last of three power firms it is selling to liberalise Singapore's electricity market, amid market turmoil that has dampened deal-making globally.

"After we stopped the tender process last week, YTL Power International put forward an unsolicited bid which met our requirements," said Gwendel Tung, director of investment at Temasek, in a statement.

Temasek also raised S$334.5 million on Tuesday from the sale of its 70 percent stake in Singapore Food Industries (SFIL.SI: Quote, Profile, Research, Stock Buzz).

Asian sovereign wealth funds such as Temasek may invest their growing cash piles to shore up markets close to home as their risky bets in Western banks show few signs of paying off and as emerging economies look to avoid the damaging effects of the financial crisis, analysts said. [ID:nSIN287928].

Temasek sold the other two power generators earlier this year for a total of S$7.9 billion. For a Factbox on Temasek see [ID:nSP132652].

PowerSeraya's plant has a capacity of 3,100 megawatts (MW) and provides about 28 percent of the city-state's electricity. Its capacity will rise to 3,900 MW by 2010 as it is in the process of building an 800 MW capacity natural gas-fired plant.

"Its attraction lies both in its strong position in the energy market and its complementary multi-utility business -- the acquisition of PowerSeraya will help us grow our utility business in the region," said Francis Yeoh, managing director of YTL Power.

Bahrain's Arcapita and a consortium led by Hong Kong's CLP (0002.HK: Quote, Profile, Research, Stock Buzz) had been named as other potential bidders for PowerSeraya, according to media reports.

Analysts had expected the deal to be postponed because of higher borrowing costs for companies and expectations of weaker power demand from Singapore, which slipped into a recession in the third quarter.

Malaysia supplies natural gas to its neighbour Singapore. The two countries briefly merged in the 1960s and have since often bickered over issues from land reclamation to airspace.

Temasek sold generator Senoko Power to a consortium led by Japanese trading house Marubeni Corp (8002.T: Quote, Profile, Research, Stock Buzz) for $2.5 billion in early September, while Tuas Power was sold to Chinese power firm Huaneng Group for $3 billion in March. (Additional reporting by Julie Goh in Kuala Lumpur; Writing by Neil Chatterjee; Editing by Mike Nesbit)