Big bang revived

By Christie Loh, TODAY
20 June 2007

Within the next two years, the Government will completely loosen its grip on three of Singapore's power companies, in line with a long-delayed liberalisation of the electricity market.

Foreigners will be allowed to hold as much as 100 per cent of the utilities assets — a prospect that has sparked uproars in other countries over national security fears. But industry analysts and insiders here see no cause for concern.

In a statement yesterday, Temasek Holdings said it would kick off the multi-billion-dollar sale of PowerSeraya, Senoko Power and Tuas Power from September, with completion targeted for the end of next year or early 2009.

It was not the first airing of such divestment plans. The liberalisation process for the energy market started in 1995, with the Government saying in 2000 that it was lifting foreign ownership caps to sell the trio of power generation companies (gencos) which account for about 80 per cent of electricity produced here. But weak market sentiment and disputes over gas supplies saw the divestment repeatedly postponed.

This time, "the conditions are conducive", said Temasek's managing director of investments Wong Kim Yin. Singapore's economy is set for continued strong growth, the past year has seen much buying interest, and recent legislative changes set the stage for liberalisation, he said at a media briefing.

Each genco is reportedly worth $2 billion to $3 billion. Mr Wong declined to name the interested parties. But the likes of United States-based Intergen, Tokyo Electric Power Company and Malaysia's YTL Corp have popped up in media reports. Possible local buyers are Keppel Corp and SembCorp Industries, which both run existing gencos, and Temasek-linked CitySpring Infrastructure Trust.

The sale may be by a tender or via initial public offers (IPO), Mr Wong said, with the first genco likely to be offered through a tender process. Temasek's financial advisors are Morgan Stanley and Credit Suisse.

"For the first genco, we are more inclined towards a trade sale. We think that will better meet our objectives than an IPO," Mr Wong told Channel NewsAsia. "At the moment, we are not inclined to retain any residual stake in any of the gencos, so a trade sale would meet that objective better."

But will Singapore's security of supply be compromised should a foreign player pick up the stakes?

This was answered in 2000 by the Ministry of Trade and Industry, which said: "Energy security will not be a problem because foreign owners will not be able to walk away with their power plants. Our workers will still be here to operate them in an emergency."

Also, the sale documents could contain provisions for intervention to resolve any supply problems, said Mr Jason Feer, vice-president of energy intelligence provider Argus Media Limited.

"If you get a company that's politically motivated, then you could end up in a difficult situation. But if you get companies that are in the generating business, then they really have no incentive to play politics with the power supply," Mr Feer told Today.

Other countries' experiences have shown that security fears may be exaggerated. Senoko Power chief executive officer Roy Adair noted that Germans held the bulk of Britain's electricity market. New shareholders could introduce outside expertise and knowledge, he added.

Overall, the sale is "positive", said PowerSeraya.

For consumers, the changes are not expected to alter prices. This is because the three gencos are already in full competition. Mr Wong sees "no reason to believe that the change in ownership itself" would have an impact on SP Services, which buys electricity on behalf of all households, or industrial consumers.

Asked if Temasek would lay down sale conditions such as limits on retrenchments, Mr Wong said the agreements between the unions and the management would remain in place after the sale.

"The rights of the employees will not be changed or diminished in any way. These gencos have undergone restructuring in the past few years so they're operating very efficiently," he said of the trio, which employ a combined total of 900 people.

If they are so efficient, why divest the trio? "Sometimes it's a perception issue," said Tuas Power CEO Lim Kong Puay.

The Union of Power and Gas Employees (Upage) said in a statement last night that the recently-concluded collective agreements signed with the three gencos will be binding on the new owners for the next three years, thus safeguarding worker interests.

If any lay-offs result from the sale of the plants, "Upage will ensure that workers are fairly compensated, and their length of service will be preserved", said union general secretary R K S Nachiappan. - TODAY/sh

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Temasek to sell its power generation companies from September
By Wong Siew Ying, Channel NewsAsia
19 June 2007

SINGAPORE: Investment company Temasek Holdings plans to sell three of its wholly-owned Singapore power generation companies (gencos), starting from September.

These three gencos, PowerSeraya, Senoko Power and Tuas Power, will be divested over the next 12 to 18 months.

The deals are expected to be completed by the end of next year or early 2009.

Together, the three gencos account for 80 percent of Singapore's power generating capacity, producing about 3,000 megawatts of electricity each.

Temasek Holdings said it has received good interest for the three gencos over the past year and would be selling the companies one by one.

The first is likely to be offered through a tender process and Temasek will assess the bids based on commercial merit.

It has hired banking advisors Morgan Stanley and Credit Suisse to facilitate the sales process.

Wong Kim Yin, Managing Director, Investments, Temasek Holdings, said: "In terms of the first genco, we are more inclined towards a trade sale. We think that will better meet our objectives than an IPO (initial public offering). At the moment, we are not inclined to retain any residual stake in any of the gencos, so a trade sale would meet that objective better."

But Temasek is not ruling out other options, such as selling shares through an IPO for the other two gencos.

Temasek has declined to give a dollar value for the gencos, but reports have estimated that each company could fetch between S$2 billion and S$3 billion.

The long-awaited sale is in line with the government's aim to liberalise the electricity market in Singapore.

To increase competition, there will be no restrictions on foreign ownership of the gencos.

Temasek said this change in ownership is unlikely to have an impact on electricity prices.

Mr Wong said: "Changing ownership by itself is not expected to have any impact on consumers because they will continue to be served by SP services, which will continue to buy from the wholesale market and enjoy the benefit of competition among these gencos."

Temasek said it is an optimal time to sell because of favourable market conditions and the huge demand for electricity.

Moreover, there is also a gas regulation framework in place to ensure there is a steady and orderly supply of gas and power.


- CNA/so