Semcorpse In Need of CASH Woh!

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<TABLE cellSpacing=0 cellPadding=0 width=452 border=0><TBODY><TR><TD vAlign=top width=452 colSpan=2>Published April 30, 2009

</TD></TR><TR><TD vAlign=top width=452 colSpan=2>Sembcorp presses on with finance quest
Preferred bidder for $1b Oman project acting on 3 fronts

By RONNIE LIM
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PREFERRED bidder Sembcorp Industries is pressing on with efforts to obtain finance for its US$1 billion-plus Salalah independent water and power project (IWPP) in Oman, sources said yesterday.

Middle East reports have suggested that the authorities there are preparing to reopen talks with the second and third-ranked bidders because Sembcorp has got bogged down.
But a source said yesterday that because of the amount of paperwork involved, Sembcorp has 'only recently put in its application to China Exim Bank'. The Singapore group is looking to the Chinese bank to provide one of three finance tranches.
The second tranche would be a syndicated loan led by Standard Chartered. Stanchart last year lined up an underwriting agreement for US$800 million for Sembcorp, but this has expired due to delays with the IWPP project.
Sembcorp was named preferred bidder for the Salalah IWPP in January this year after a process that started in early 2008, in which the Omani government whittled down eight pre-qualified international groups to three last July.
With the economic downturn, Sembcorp has had to review the project costings. 'It's more difficult now to get finance as fewer banks are willing to lend for the long-term, and those that are willing are charging higher margins, which changes the project economics and pricing,' a source explained.
That is why Sembcorp is now tackling the finance question on three fronts, including raising funds from equity.
Sembcorp's partner for the project is Oman Investment Corp, a private equity company whose shareholders include Gulf Investment Corporation (50 per cent), the Oman Government (10 per cent), National Investment Funds Company (35 per cent) and BankMuscat (5 per cent).
'China Exim is expected to provide quite a sizeable chunk,' the source said, implying that each of the three tranches could contribute about a third of the required finance.
Specialist Middle East business intelligence publication MEED has cited sources as saying that the Oman Power and Water Procurement Company is preparing to reopen talks with the second and third-ranked bidders.
The two parties are a Mitsui/Saudi Oger/WJ Towell consortium and UK's International Power/Mubadala, the latter being the state-owned investment fund of the United Arab Emirates.
The rival groups are reportedly trying to get finance ready should Sembcorp fail to.
The Salalah IWPP comprises a 400-megawatt power station and a desalination plant to produce 15 million gallons of water a day. If Sembcorp obtains finance, it will be the Singapore group's second IWPP win in the Gulf, after its US$1.7 billion Fujairah IWPP in the UAE.

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<TABLE cellSpacing=0 cellPadding=0 width=452 border=0><TBODY><TR><TD vAlign=top width=452 colSpan=2>Published April 30, 2009

</TD></TR><TR><TD vAlign=top width=452 colSpan=2>AGM WATCH
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>Not out of the woods yet: UOB chairman
Local banks are in better shape but bad loans will increase, he says

By SIOW LI SEN
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VETERAN banker Wee Cho Yaw yesterday said that he remained pessimistic over the banking industry and that recovery may take another one to two years. But he also ruled out a rights issue for United Overseas Bank (UOB) as the bank is well capitalised.

<TABLE class=picBoxL cellSpacing=2 width=100 align=left><TBODY><TR><TD> </TD></TR><TR class=caption><TD>Mr Wee: Ruled out a rights issue for United Overseas Bank as it is well capitalised </TD></TR></TBODY></TABLE>While the local banks are in better shape than foreign banks and should be able to enlarge their market share, he warned that their bad loans will increase.
Mr Wee, UOB chairman, was answering questions at the bank's 67th annual meeting with shareholders.
Vincent Chen asked Mr Wee for his views on the prospects for the banking industry given that he was very pessimistic at last year's annual shareholders' meeting.
'Even up to now, I am still pessimistic. We are not out of the woods yet, maybe another one to two years,' said Mr Wee.
He felt that banks in the US and the developed Organisation for Economic Cooperation & Development (OECD) countries will continue to have more bad loans and will have to set aside more provisions. Foreign banks operating here will be constrained in extending loans, he said.
He noted that the government has put in place measures to help the small and medium-sized enterprises (SMEs). 'You help SMEs, you help local banks,' said Mr Wee.
UOB and its local rivals DBS Group Holdings and OCBC Bank have the bulk of their loans to SMEs.
One Mr Lim pointed out that UOB in 2006 said that it wanted to have 40 per cent of its income from outside Singapore and wondered what has happened to that target.
'I really have my doubts, we still depend very much on Singapore,' said Mr Wee.
Chief executive Wee Ee Cheong said it is a target that the bank still wants to achieve. He also said that of UOB's non-performing loan (NPL) ratio of 2 per cent, the NPL for its Singapore loans is one per cent.
Another shareholder complained about the higher NPL at UOB and cutting its final 2008 dividend and wanted to know if the bank was planning a rights issue.
UOB ended 2008 with NPL at 2 per cent, versus 1.5 per cent at DBS and OCBC. Unlike its rivals, UOB cut its final dividend to 40 cents from 45 cents.
'Yes, UOB NPL is higher. More important is profitability,' Mr Wee said, explaining that if the bank can make more money, that can cover NPLs. He also said there will be more bad loans.
As for a rights issue, Mr Wee said that the bank does not need a rights issue as it is comfortable with its current capital and it is being careful with loan growth. 'If the economy recovers, if we decide to raise capital to acquire business, we may have a rights issue, but not at the moment.'
When one shareholder complained that UOB was giving zero per cent for US dollar deposits, and another said that other banks too do the same, Mr Wee was indignant. 'Zero interest . . . something wrong,' he said to much laughter from shareholders. 'Not necessarily other banks do it, we have to follow,' he said. 'I think management should look into it,' he added.
UOB's chief financial officer Lee Wai Fai said that the bank, when pricing the interest rates for the deposits, follows the market and that short-term US dollar interest rates are very low.
Mr Wee assured shareholders that he is chairman of the bank's executive committee and monitors the situation closely. As for the lower dividend, he noted that the bank's profit had fallen to $1.9 billion from $2.1 billion.
'Second, I see the economy is getting worse. We must preserve our capital - as Vincent said - I'm pessimistic. I may be wrong, but we must take a view,' he said. He also said that UOB takes a long-term view, unlike foreign banks. 'I've been here 51 years.'
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