Temasek puts PowerSeraya sale on ice

The New Paper 26 Nov 06;

AMID sagging financial markets, Temasek Holdings has put off the sale of its wholly-owned power generation company PowerSeraya.

“We launched the tender process early last month based on indications of interest from investors. In light of the market conditions, we have decided not to proceed further,” Ms Gwendel Tung, Temasek Holdings’ director for investment, said yesterday in a statement.

A person familiar with the situation told Dow Jones Newswires that Temasek was not happy with the prices the bidders were quoting. The firm had divested Senoko Power and Tuas Power earlier this year.

Ms Tung said Temasek was flexible on how and when it would revisit the third divestment, but did not give details.

“In the meantime, PowerSeraya will continue to operate as usual under the supervision of its board of directors and management,” Temasek said.

Many companies are either suspending expansion plans or deferring investment decisions, as the credit crunch is making it difficult to arrange financing.

Yesterday, BHP Billiton abandoned its US$188-billion hostile offer for iron ore producer Rio Tinto, citing adverse market conditions.

The transaction is the largest ever cancelled, according to business research firm Thomson Reuters.

Withdrawn merger-and-acquisition (M&A) deals totalled :US$322 billion so far this quarter, not far from the level of completed M&As, said Thomson Reuters. It added that for 100 M&A deals completed this quarter, seven were scrapped.

PowerSeraya is the last power plant to be put on sale, after Temasek sold Senoko Power and Tuas Power this year. Senoko Power was sold in September to Japan’s Marubeni Corp for $4 billion, while China’s Huaneng Group bought Tuas Power for $4.2 billion in March. AGENCIES

Temasek shelves sale of PowerSeraya
It cites current market conditions as the cause, but sale not off the table
Fiona Chan, Straits Times 26 Nov 08;

TEMASEK Holdings has halted its sale of power generation company PowerSeraya, as deepening pessimism about the global economy thwarts corporate deal-making plans around the world.

The Singapore investment company yesterday said it would shelve tender plans for PowerSeraya, the last of three local generators to be auctioned off this year, owing to 'market conditions'.

The deal, which reports suggested could be valued at up to US$2.5 billion (S$3.82 billion), has been dogged by rumours of delay as the financial turmoil intensified in recent weeks.

Temasek's announcement came hours after another billion-dollar plan was pulled off the table yesterday. BHP Billiton, the world's largest mining company, abandoned its US$66 billion hostile bid for rival Rio Tinto in a surprise decision, citing concerns about the deterioration of global economic conditions.

Temasek's director of investment, Ms Gwendel Tung, said the Singapore investment company launched the tender process for PowerSeraya early last month 'based on indications of interest from investors'. 'In the light of the market conditions, we have decided not to proceed further,' she said in a statement.

But Temasek added that it 'remains committed to divest all its power-generating companies in Singapore'.

In March, Temasek sold Tuas Power for $4.235 billion to China Huaneng Group, while Senoko went to Japanese/ French consortium Lion Power in September for about $4 billion.

The sale of PowerSeraya, along with the other two, is a bid by Temasek to liberalise the domestic energy market.

'We are flexible as to how and when we will revisit the divestment of PowerSeraya,' said Ms Tung. Temasek has said that its deadline for selling the 3,100MW power generation company is the middle of next year.

PowerSeraya, which has a 30 per cent share of Singapore's power market, will continue to operate 'as usual' under its board of directors and management.

The Business Times reported this month that three foreign groups had been shortlisted for the PowerSeraya tender: Malaysia's YTL, Bahrain's Arcapita and a consortium led by Hong Kong's CLP Group. YTL and CLP were said to be among the bidders shortlisted for Senoko Power, Singapore's biggest power generation company, while Arcapita had put in an offer for Tuas Power, the smallest.

PowerSeraya posted a 30 per cent jump in full-year profit to $218 million two months ago, on the back of a 6 per cent increase in revenue to $2.79 billion.

Earlier this year, it opened its own desalination water plant in Jurong Island, making it South-east Asia's first combined heat, water and power supplier. It is also building a $800 million cogeneration plant to be ready in 2010.

Lights go out on PowerSeraya sale

Temasek pulls the plug on genco divestment; market conditions cited
Ronnie Lim, Business Times 26 Nov 08;

(SINGAPORE) The financial turmoil has claimed another casualty: Temasek Holdings yesterday abruptly stopped its sale of the third and remaining generating company, PowerSeraya, 'in the light of market conditions'.

Industry observers said that relatively poor investor interest - marked by the absence of big power players, unlike in the earlier two Singapore genco sales - and lower-than-expected indicative bids by investors in the first round of the Seraya sales process led to the decision.

In a statement yesterday evening, announcing a halt to the PowerSeraya sale, Gwendel Tung, Temasek's director of Investment, said: 'We launched the tender process early last month based on indications of interest from investors. In light of the market conditions, we have decided not to proceed further.'

But the Singapore investment company stressed that it remains committed to sell PowerSeraya - the remaining genco to be divested after Tuas Power and Senoko Power.

BT understands that the PowerSeraya sale was to have closed next week on Dec 2, when the two shortlisted bidders - Malaysia's YTL and a consortium led by Hong Kong's CLP - were to have submitted their final binding offers.

'No one knows what happened, and whether there was a last-minute withdrawal,' an industry observer said. What is clear, though, is that no new timeline has been set for resumption of the sale.

Ms Tung said: 'We are flexible as to how and when we will revisit the divestment of PowerSeraya.'

Sources said that this will clearly 'be dependent on market conditions' improving.

'While Temasek had earlier hoped to complete the divestment of its three gencos (which started in October last year) by mid-2009, it doesn't make sense now to put a deadline for completion,' one source said. The intention to divest was still there and it was a question of if, not when, he said.

Industry observers said that the two shortlisted groups for PowerSeraya will obviously be disappointed, after having gone through their 'road shows' and due diligence processes for the genco.

'I would have expected Temasek to complete the sale rather than leave it dangling,' one said.

It means that China Huaneng's Tuas Power and Japanese/French Lion Group's Senoko Power will meanwhile have to compete with Temasek-owned PowerSeraya in the electricity market here, he added.

Temasek had indicated from the outset that 'as with the sale of the two other gencos, the sale of PowerSeraya will be subject to acceptable price and commercial terms'.

What is an 'acceptable' price is, however, moot, given the current financial crisis.

Tuas Power fetched S$4.23 billion, while Senoko Power got about S$4 billion. But indicative bids in the first round of the sales process for the 3,100 megawatt PowerSeraya - the second largest genco here after the 3,300 MW Senoko Power - were apparently below these earlier benchmarks, sources said.

This clearly signalled to Temasek that it was not likely to obtain those kind of prices. PowerSeraya, with a 30 per cent share of the power market here, has strong cash flow, and has plans to grow to a fully integrated energy company.