By Ng Baoying, Channel NewsAsia | Posted: 18 October 2007 1858 hrs
SINGAPORE: has Temasek Holdings kicked off the sale of its three power generation companies or gencos.
The first to be sold will be Tuas Power, which had a 26.1 percent share of Singapore's electricity market last year.
Temasek did not name an asking price, but market watchers have estimated that Tuas Power could fetch up to S$3 billion.
Tuas Power is first on the auction block because it has seen the most investor interest. It has a book value of S$1 billion, but the bidding is expected to be fierce.
Wong Kim Yin, Temasek Holdings' managing director of investment, said: "Many of them are regional players. Many of them are actually power sector players. There are also folks from the financial community. There are people who are strategic players as well.
"So, without naming names, we are quite sure that based on the feedback we have so far, we see sufficient interest that can allow us to get the outcome that we'd like to see."
The sale of the three gencos is in line with efforts to diversify and stabilise Singapore's energy sources. After several delays, the government earlier this year gave a time frame of 12-18 months for the divestment.
Several Singapore names - including SembCorp Industries - are said to be interested in buying over the gencos. Reports also named global players such as General Electric, Babcock & Brown, and Tokyo Electric Power as those planning to enter the fray.
Daphne Roth from the ABN AMRO Bank said: "Market sentiment is still very bullish on any infrastructure deal because there's a shortage of brownfield, greenfield infrastructure around in Asia.
"There is a glut there, but most of the people look at Singapore and the scale of our economic growth at present, which is very good. Also, the stability of our economy and the fact that these utilities normally generate very good cash flow - that's why they like it."
Temasek expects to receive indicative offers for Tuas by the end of the year, and binding offers by March next year. It has not set any reserve price.
Rather, Temasek will assess bidders from an all-rounded perspective, which includes factors like having a clean sale with minimal liabilities.
It will also look at how the sale of one will affect the sales of the other gencos. Temasek plans to sell each power company to a different buyer.
Successful bidders can have the option of expanding their plant.
Temasek's Mr Wong said: "Each of these businesses has a generation licence generated by the regulator. So to increase the size of the plant, they would have to get approval from the regulator.
"Having said all that, each of these businesses is very well positioned. Singapore is only that big. There's only so much of land. Each one of these power plants has the expansion capabilities built into their sites, built into their businesses.
"So, from that perspective they are very well positioned to do it and they would need regulatory approval to expand their business."
Temasek plans to sell the remaining two gencos - Power Seraya and Power Senoko - by the first half of 2009. - CNA/ir
