Chinese firm buys Singapore Tuas Power for $4.2b

Chinese firm buys Singapore Tuas Power for $4.2b

Temasek gets well above $3b valuation for sale of the first of three energy firms

By Michelle Tay

HUGE DIVESTMENT: The sale of Tuas Power marks Temasek’s largest divestment in dollar terms and the biggest acquisition of a Singapore company since 2001. — PHOTO: TUAS

POWER TEMASEK Holdings has sold Tuas Power to a Chinese company for $4.24 billion - well above its initial valuation of $3 billion five months ago.

The deal with SinoSing Power, the wholly owned subsidiary of Chinese power company China Huaneng Group, is expected to be completed by March 24, said Temasek in a statement yesterday.

It will mark the end of the bidding process that began last October, when Temasek announced its plan for the sale of the first of its three wholly owned power generation companies (gencos).

Mr Wong Kim Yin, Temasek’s managing director of investments, said yesterday: ‘China Huaneng is an established player with a strong track record in the power business. Its proposal through
SinoSing was the most attractive.

‘It emerged as the winner based on clear considerations of price and acceptable commercial terms.’

WINNING BID
‘China Huaneng is an established player with a strong track record in the power business…It emerged as the winner based on clear considerations of price and acceptable commercial terms.’MR WONG, on why Temasek picked China Huaneng Analysts said the sale marks Temasek’s largest-ever divestment in dollar terms and the biggest acquisition of a Singapore company since 2001.

Sources close to the deal told The Straits Times that the $4.24 billion price tag is testament to the strength and stability of the Singapore economy and an endorsement of the growth potential of electricity demand in the Republic.

Tuas Power has a capacity of 2,670 megawatts (MW) and accounts for over a quarter of Singapore’s electricity generation. This means it is worth $1.6 million per MW it generates.

Temasek plans to sell off the two remaining power plants by the first half of next year.

Analysts speculate that Power- Seraya, which has a licensed capacity of 3,100 MW, may be worth $4.96 billion, while Senoko Power, with 3,300 MW, may be worth $5.28 billion.

The state-owned investment company has not indicated which will be sold next.

The plants were transferred from the state to Temasek between 1995 and 2001, on the understanding that it would eventually sell all three companies.

Selling the three gencos is a key step in freeing up the domestic energy market and has been in the pipeline for six years.

Power generation is considered to be a part of the energy market; competition is viewed as healthy for this sector and should be introduced. Private ownership of the gencos should ensure a competitive market and more players can be expected to enter the market as Singapore’s power needs grow.

For the moment, market watchers say that a change in ownership will not affect electricity prices because the three gencos have been operating independently, competing against each other.

Beijing-based China Huaneng is the largest power generation company in China and also owns a 50 per cent stake in Australian power generation joint-venture firm OzGen. It has an installed capacity of 71,000 MW and total assets for the group exceed US$45 billion.

China Huaneng vice-president Huang Long said the transaction was a major step for his company ‘in its goal to diversify its assets across geographies and technologies’.
Source : Straits Times - 15 March 2008

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