Bidders emerge for Singapore IPPs

Marubeni, Keppel, Sembcorp to Bid on Temasek Units, Bankers Say
By Denise Kee

July 23 (Bloomberg) -- Marubeni Corp., Keppel Corp. and Sembcorp Industries Ltd. plan to bid for the electric utilities being sold by Temasek Holdings Pte, Singapore's government-owned investment company, three bankers with knowledge of the deal said.

Singapore-based Keppel and Sembcorp, the world's biggest oil-rig builders, this month contacted lenders to provide financing and advice, said the bankers, who declined to be identified because the talks are private. The units, Power Senoko Ltd., Power Seraya Ltd. and Tuas Power Ltd., may be valued about S$2.5 billion ($1.7 billion) each and sold in stages over the next two years, they said.

Temasek, which said June 19 it is selling the businesses, wants to tap rising demand for power assets as economic expansion boosts energy use. The utilities account for 90 percent of Singapore's generation capacity and may attract investors in the Asia-Pacific region, where $53.5 billion of acquisitions involving energy companies have been announced this year.

Temasek ``will benefit from bullish investor sentiment in infrastructure assets,'' said Leslie Phang, who oversees $1 billion at Commonwealth Private Bank in Singapore. ``Buyers would snap it up in a jiff because historical profit growth of the three power companies supports the valuation.''

Seraya's net income rose 11 percent to S$130 million in 2006, according to the company's annual report. Senoko's profit gained about 12 percent to S$133.3 million, while Tuas Power had net income of S$104 million as sales surged 27 percent to S$1.7 billion, annual reports show.

`Natural Fit'
``As a key player in Singapore's energy market, greater involvement in the local generation companies would seem a natural fit with our core business,'' Sembcorp said in an e- mailed response to questions. ``The decision to sell the generation companies has just been announced, and we are evaluating our options.''

Keppel and Sembcorp are seeking commitments from lenders to lock them in exclusive relationships because competition for funding will intensify as the sale progresses, the bankers said.

``We are keen to evaluate the opportunities that Temasek's divestment of power plants present,'' Ong Tiong Guan, managing director of Keppel's infrastructure arm, Keppel Energy Pte, said in an e-mail. ``If it makes commercial sense, we will participate in them.''
Marubeni spokesman Daigo Noguchi declined to comment on whether it will bid.

CLP-Mitsubishi Venture
OneEnergy Ltd., a joint venture between CLP holdings Ltd. and Mitsubishi Corp., plans to request proposals this week to appoint a financial adviser, the three bankers said.

CLP Holdings ``has previously indicated that Singapore is a market CLP is interested in,'' said Carl Kitchen, public affairs manager at the company, which owns half of OneEnergy. ``But regarding the specific assets, it's too early to comment on whether CLP is bidding.''
Temasek plans to release relevant information to potential bidders and the sale process could start in September, said Wong Kim Yin, managing director for investments at the company. Temasek said in its June 19 statement that the sale will be completed by end-2008 or early 2009. Morgan Stanley and Credit Suisse Group are advising Temasek on the sale.

Singapore generates 80 percent of its electricity from natural gas imported from Malaysia and Indonesia. Blackouts in the city-state in November 2003 and June 2004 were caused by disruptions in gas supply from Indonesia, according to Energy Market Authority, the government regulator.

Gas Supply
``The biggest risk is, however, the potential supply disruption of gas from Indonesia and Malaysia,'' Commonwealth Private Bank's Phang said, and ``rising commodity costs may put a dent on profitability.''

Singapore plans to invest S$1 billion in a liquefied natural gas terminal by 2012 to meet one-third of the country's gas demand. The facility will provide an alternative supply source.

Seraya and Tuas were set up in 1995, and have generation capacity of 3,100 megawatts and 2,670 megawatts, respectively. Senoko has a capacity of 3,300 megawatts, according to Temasek's June 19 statement.

Temasek was incorporated in 1974 and manages S$129 billion of assets in various industries including telecommunications, financial services and real estates.