Energy Boost

Johnson Choo
johnsonchoo@mediacorp.com.sg
Aug 23 2007 (TODAY)

PowerSeraya aims to be a full-fledged integrated energy company

PowerSeraya is transforming itself from a pure electricity generator into
a full-fledged integrated energy company.

The company announced yesterday that as the Singapore energy market opens
up, it is moving from its core business in electricity, to include other
commodities such as steam, water, oil and gas.

As part of this move, the company which supplies about 28 per cent of
Singapore's energy needs, will be investing $800 million to build a new
800-megawatt natural-gas-fired power plant on Jurong Island. Scheduled to
be completed as early as 2009, the highly efficient twin-unit
Co-Generation Combined Cycle Plant (Co-Gen CCP) will replace three
oil-fired steam units that have a combined output of 250 megawatts, to
produce both electricity and steam simultaneously.

"More importantly, this new plant, designed for higher thermal efficiency,
is expected to reduce the PowerSeraya's carbon footprint by a further 10
per cent, on top of the 30 per cent reduction we were able to achieve over
the last 10 years," said PowerSeraya Chairman, Mr Tan Yam Pin, at a
signing ceremony.

"With this development, it is our intention to seek carbon credits for
this project and to enlarge in carbon trading in the future."

A second leg of the transformation plan involves an agreement to supply
ultra-high-pressure steam from the new plant to Petrochemical Corporation
of Singapore for 15 years starting third quarter of 2009.

In April, PowerSeraya has invested $20 million to set up PetroSeraya, a
new physical oil-trading company that will hedge and trade in petroleum
products, representing the third part of its diversification strategy.

"PetroSeraya will serve to strengthen PowerSeraya's fuel security while
addressing market volatility associated with oil price fluctuation," said
Mr Neil McGregor, Managing Director of PowerSeraya. "In addition,
PetroSeraya will achieve greater economies of scale for the company
through bulk purchase and resale of excess oil."

PowerSeraya typically uses about 2 million metric tons of fuel for its
existing 9 power generation units. The company buys between 60 and 80 per
cent of its needs on term contracts, and hedges "no more than 50 per cent"
of its purchases with derivative contracts. PowerSeraya can store up to 1
million tonnes of fuel at its facilities.

The price of 380-centistoke oil in Singapore - a fuel that PowerSeraya
uses - climbed 20 per cent to a record US$404.50 ($617) a metric tonne on
July 20 compared to a year ago.

Temasek Holdings - the sole owner of PowerSeraya - announced in June that
it plans to sell the energy company, together with Senoko Power and Tuas
Power by the end of next year.

Analysts said the expansion plans might boost the estimated $2.5 billion
value of the company.

Several international energy players, including Mitsubishi Electric, Tokyo
Electric Power, Hong Kong's CLP Holdings, Malaysia's YTL Power
International, Australia's Babcock & Brown and General Electric are
believed to be interested in bidding for these three companies.