Temasek plans to divest three of the largest gencos in Singapore

These entities will be operating in unregulated environment, subject to market competition. Another Temasek scam baiting Middle Eastern monies?

Singapore Revives Sale of Three Biggest Generators (Update1)
By Michele Batchelor

June 19 (Bloomberg) -- Singapore revived the sale of its three biggest generators after a six-year delay, aiming to benefit from record-high stock values and demand for Asian utility assets.

Power Senoko, Power Seraya and Tuas Power will be sold by early 2009, Temasek Holdings Pte, a government-owned investment company, said in a statement today, without estimating the value. The mandate to sell was granted in 2001. The companies may fetch $4 billion, the Financial Times said Oct. 7, 2005, citing unidentified people close to the talks.

The island-state's benchmark stock index rose to a third- straight record today and the economy is forecast by the government to grow as much as 7 percent this year in the longest expansion since 2000. Rising demand prompted an 8 percent increase in announced energy mergers and acquisitions in Asia to $44.7 billion this year, according to data compiled by Bloomberg.

``We have seen a lot of interest from potential buyers since last year,'' Wong Kim Yin, managing director of investments at Temasek, said in the statement. ``The Singapore economy is poised to grow strongly over the next few years. The conditions are conducive for the divestment.''

Senoko and Seraya, spun off from distributor Singapore Power Ltd. in 2001, and Tuas produce 80 percent of Singapore's electricity. The three generators are barred from holding each others' shares.

Mergers, Acquisitions
Last year, announced mergers and acquisitions of utility companies quadrupled to $83 billion from $19.4 billion in 2005, according to Bloomberg data. Singapore's benchmark Straits Times Index rose 0.1 percent to 3627.41 at the midday break.

``The timing is perfect, the stock market has been running up, valuations are at a premium compared to historical value, so they can sell at decent prices and the economy is on a roll,'' said Chua Hak Bin, an economist at Citigroup Inc. ``At the same time, there's demand for yields and being power generators they can offer steady dividends. There's quite a bit of market appetite for that.''

Singapore Power and partner Babcock & Brown Ltd. on May 11 agreed to buy Perth-based Alinta Ltd., Australia's biggest energy transmission company, for about A$8 billion ($6.7 billion) and carve up the assets.

Gradual Liberalization
The Singapore government has been gradually liberalizing major parts of the economy, such as banking, telecommunications, and power, to enhance competition. Deregulation of the electricity industry started in 1995, and the gas industry in 2000, with the separation of producers from the transmission and distribution networks.

``Temasek will divest all three generation companies,'' the Ministry of Trade and Industry said in March 2000. ``There will be no foreign ownership limit.''

After the completion of second phase of the liberalization in 2006, 75 percent of the total electricity demand was open to retail competition and the total number of contestable consumers rose to 10,000, according to the Energy Market Authority's annual report. Contestable consumers can select a retailer to supply electricity to them.

Singapore buys its natural gas from neighboring Indonesia and Malaysia via pipelines.

Higher Profit
Seraya, which was formed in 1995 and has generating capacity of 3,100 megawatts, reported an 11 percent increase in net income to S$130 million ($85 million) in 2006, according to its annual report on the Web site. Sales rose 38 percent to S$2.1 billion.

Senoko, which spent S$2.55 billion to build its power plants with a capacity of 3,300 megawatts, boosted profit to S$133.3 million from S$119.5 million after sales increased 19 percent to S$1.8 billion, according to the latest annual report on its Web site.

Tuas, which was set up in 1995, has a capacity of 2,670 megawatts built at a cost of S$2 billion. It had net income of S$104 million in 2006 while sales surged 27 percent to S$1.7 billion, according to its latest annual report.

Morgan Stanley and Credit Suisse Group are advising Temasek on the sale.