Singapore Temasek puts Tuas Power up for sale
Bid may go up to $3b; sale draws eyes of SembCorp, Keppel and Tokyo Electric
By Bryan Lee
POWER DEAL: Temasek’s three genco assets - Tuas Power, PowerSeraya and Senoko Power - could fetch $9 billion in all. — PHOTO: TUAS POWER
TEMASEK Holdings yesterday launched the first sale of Singapore’s three major power generation companies (gencos), putting Tuas Power on the block.
The long-awaited deal could be valued at as much as $3 billion and will set the pace for later sales of Temasek’s two other gencos: PowerSeraya and Senoko Power.
Already, potential buyers - both local and foreign - have begun talking to bankers to raise funds for the deal, according to newswire reports.
But they are keeping their cards close to their chests.
SembCorp Industries, Keppel Corp, CitySpring Infrastructure Trust and Tokyo Electric Power said they were interested in the gencos, but stopped short of confirming that they would take part in the tender.
The sale of the three gencos is a key step in the liberalisation of the domestic energy market and has been in the pipeline for six years.
‘We feel that this is an optimal time to divest, primarily because there’s a favourable merger and acquisition environment out there,’ said Temasek assistant director Chuah Kee Heng at a press conference.
‘The Singapore economy continues to show strong results and should do so in the near future as well,’ he added.
The launch of the Tuas tender comes four months after Temasek announced plans to sell off the gencos within 12 to 18 months.
The utility assets had been transferred from the state to the investment company between 1995 and 2001 on the understanding that it would eventually sell all three companies.
Power generation is considered to be a ‘contestable’ part of the energy market. In other words, competition is healthy and should be introduced.
Private ownership of the gencos should ensure a competitive market, and more players can be expected as Singapore’s power needs grow.
But for now, market watchers say a change in ownership will not affect electricity prices as the three gencos have been operating independently, competing against each other.
Temasek is seeking indicative offers by the end of the year and intends to complete the Tuas deal by next March.
Tuas was chosen for the first sale as it has drawn the strongest investor interest.
‘This would help us bring more investors into the process and help us educate them upfront,’ said investment managing director Wong Kim Yin. ‘Hopefully, they will get interested in the second and third one.’
He said the next genco sale will be launched, possibly in March, once the company is confident that the first transaction will go through. He declined to reveal which genco would be up for sale next.
Price aside, Mr Wong said the bids will be judged on how they could affect the later genco sales. For example, an investor that can complete the deal earlier would get extra points as Temasek would be able to start selling the other gencos earlier.
‘We don’t want to finish one and be left with the other two,’ he said.
He dismissed notions that Temasek-linked entities would be favoured. ‘If we wanted to do such a sale, we could have gone direct and cut a bilateral deal.’
Tuas produced about 26.1 per cent of Singapore’s electricity last year, behind Seraya at 28.3 per cent and Senoko at 32.2 per cent.
It generated profits of $177 million in the year ended March 31 from revenues of $2.28 billion.
Based on the average price-earnings ratio of all Singapore-listed companies of 17.21, the genco could be valued at $3 billion, three times the $1 billion that its assets are worth on its books. Analysts quoted by Reuters valued the three gencos at a combined $9 billion.
Source : Straits Times - 19 Oct 2007
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