Published October 8, 2008

Temasek goes ahead with sale of PowerSeraya

Strong interest from potential bidders; pre-arranged finance package expected

By RONNIE LIM
Email this article
Print article
Feedback

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.

Mr McGregor: PowerSeraya has plans to grow from just a plain-vanilla generating company to a fully integrated energy company

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.