Temasek goes ahead with sale of PowerSeraya

Strong interest from potential bidders; pre-arranged finance package expected
Ronnie Lim, Business Times 8 Oct 08;

DESPITE the latest shake- up in global financial markets, Temasek Holdings yesterday said it was launching the sale of PowerSeraya following strong interest from potential bidders.

The generating company (genco) is the last of the three big power assets Temasek is divesting, as part of Singapore's move to liberalise the electricity and gas sectors.

Sources said the Singapore investment company is obviously trying to capitalise on the strong investor momentum, as evidenced by its two earlier, successful sales of Tuas Power in March and Senoko Power just last month.

Amid keen competition from both overseas and local bidders, the 2,670 megawatt Tuas Power finally went to China Huaneng Group for $4.235 billion, while the 3,300 MW Senoko was sold to Lion Power, a Japanese/French consortium, for about $4 billion.

'The first two sales have proven that even in such testing financial circumstances, there are a number of keen buyers seeking good quality power assets here,' one industry observer noted.

Besides, Temasek is said to be again offering 'staple financing', or a pre-arranged financing package, if needed, for the 3,100 MW PowerSeraya sale. This will ensure more timely bids by bidders who otherwise might have to scramble for financing amid the credit crunch.

Announcing the sale, Gwendel Tung, Temasek's director of investment, said: 'PowerSeraya is a quality asset. The quality is reflected by its strong cashflow, its strategic location in Singapore and able management.'

'This, in turn, has attracted strong indications of interest from a number of potential bidders. As with the sale of the other two gencos, the sale of PowerSeraya will be subject to acceptable price and commercial terms,' she added.

Foreign bidders who had bid unsuccessfully for the earlier two Singapore gencos are likely to try again for PowerSeraya. They reportedly include groups like India's Tata Power and GMR Infrastructure, Bahrain investment bank Arcapita and Hong Kong's CLP Holdings.

A number of local corporations, including Semb- corp and Keppel Corp as well as CitySpring Infrastructure, are also said to be eyeing the genco.

PowerSeraya, as its managing director Neil McGregor told BT in an interview last month, has exciting plans to grow from just a plain-vanilla genco (with power generation currently accounting for 80 per cent of its net profits) to a fully integrated energy company.

Last month, it reported sterling FY07/08 financials, including a 30 per cent jump in net profit to $218 million on the back of a 6 per cent rise in revenue to $2.8 billion, compared with FY06/07. This gave it a return on equity of 19 per cent.

Under its diversification plans, Mr McGregor said that in five years' time, oil trading, including natural gas and marine bunkers, plus the sale of utilities like steam and water to petrochemical plants on Jurong Island, is expected to account for half the genco's net profit.

PowerSeraya earlier this year opened a 10,000 cu m reverse osmosis desalination plant - giving itself sufficiency in its own water and steam needs, and also enabling it to sell steam to investors on Jurong Island. It is also building an $800 million, 1,550 MW cogeneration plant which when ready in 2010 will allow it to sell even more utilities there.

Last local power company for sale
Temasek seeks buyers for PowerSeraya, in bid to liberalise industry
Robin Chan, Straits Times 8 Oct 08;

THE battle to buy the third and final of the electricity generation companies (gencos) being sold by Temasek Holdings is now under way.

The Singapore investment company announced yesterday that it has begun the sale process for PowerSeraya. The other two gencos were sold earlier this year.

Interest in PowerSeraya is set to be strong as this will be bidders' last chance to get their hands on one of the three largest gencos in Singapore. Together, the three account for over 80 per cent of Singapore's electricity generating capacity.

Industry observers will also be watching to see if local players Sembcorp Industries and Keppel Corporation will be able to keep PowerSeraya in domestic hands.

Temasek is selling off the three gencos to liberalise the power generation industry and has targeted mid next year to complete all divestments. Private ownership can be expected to trigger off stronger competition among the trio.

Ms Gwendel Tung, director of investments at Temasek, said that PowerSeraya 'has attracted strong indications of interest from potential bidders'.

PowerSeraya has a capacity of 3,100MW, rising to 3,900MW by 2010 after the completion of its 800MW natural gas-fired plant, which would make it the largest genco by capacity based on current figures. It currently accounts for about 28 per cent of Singapore's electricity generation. For the year ending March 31, it had revenues of $2.8 billion and earnings before interest, tax, depreciation and amortisation of $355 million.

Tuas Power, the newest but smallest of Temasek's power companies with a 2,670MW capacity, was sold off in March this year to China Huaneng Group for $4.2 billion. The Chinese power group was considered by analysts to have overpaid for the genco.

Japanese-French consortium Lion Power won the bid for Senoko Power, the largest genco of the three, just last month. It paid $3.65 billion and took on $323 million of net debt in a deal for the 3,300MW capacity genco.

Given the current financial crisis, an analyst said Temasek may take a small discount on the deal compared to its previous divestments. However, because gencos are not losing money, and are assets with a steady cashflow, banks would not have a problem financing a purchase.

A source said that the timeframe of the deal is likely to follow that of the Senoko divestment. So a decision can be expected within the next two months.

The Senoko deal was believed to have attracted some half a dozen bidders. Some of the remaining interested players include India's Tata Power and GMR Group, Hong Kong's CLP and Hong Kong Electric and the Bahrain investment bank Arcapita, sources have said.

Whether they outbid the local players will be something to watch for. PowerSeraya's strategic location and cogeneration capabilities offer attractive synergies. Both Sembcorp and Keppel have small cogeneration plants of less than 800MW capacity each.

Spokesmen for both confirmed their respective firm's interest in the remaining power company, but emphasised any deal would have to make sense commercially.