Singapore/Hong Kong: Singapore’s state investor Temasek Holdings has shortlisted up to nine companies as potential bidders for the sale of Tuas Power, which may fetch $2 billion, banking sources told Reuters on Monday.
The sale of Tuas will be the first of three power-generating companies that the city-state hopes to sell by June 2009, which analysts say could offer potential investors a low-risk route to steady profits.
Two sources with direct knowledge of the deal named six bidders: Japan’s Marubeni; Li Ka-shing’s Hongkong Electric; India’s Reliance Energy; a joint venture between Macquarie and India’s GMR Infrastructure; Malaysia’s Tanjong Plc; and Huaneng Power.
A third banking source advising one of the bidders said that there could be nine shortlisted companies in total, including the One Energy joint venture owned by Hong Kong’s CLP Holdings Ltd and Japan’s Mitsubishi Corp, Bahrain-based investment bank Arcapita and Spain’s Union Fenosa.
Temasek declined to confirm the information and none of the companies cited as bidders confirmed that they were on the shortlist.
Analysts said that Singapore may not be as lucrative for power firms as fast-growing China, but companies should expect steady profits.
“Singapore is a mature market with electricity demand growth of about 5-6%. By comparison China is growing at about 15%,” said Nomura utilities analyst Donovan Huang.
“But it offers very stable returns because you have a very transparent regulatory environment in Singapore.”
The Singapore state investor had previously said it hoped to announce the winning bidder by the first quarter of 2008.
Investment banking sources have told Reuters that as many as 30 companies and funds have expressed interest in Singapore power firms.
Singapore’s state-linked conglomerates, Keppel Corp and Sembcorp Industries, were expected to be bidders but were not named by bankers as being on the Tuas shortlist.
Tuas Power’s assets include oil-fired plants with a capacity of 1,200 megawatts (MW) as well as 1,470 MW in gas-fired electricity plants, according to Temasek.
It reported net profit of S$177 million for the year to March 2007 on sales of S$2.28 billion.
The other two power firms that Temasek hopes to divest are PowerSeraya and Senoko. They have capacities of 3,100 MW and 3,300 MW respectively, but their plants are older and less efficient.
Temasek has said the sales of the two older plants will follow the disposal of Tuas, wrapping up a privatisation that has been repeatedly delayed for about six years.
Analysts say the three plants are likely to go to different bidders since they account for almost all of Singapore’s power generation.
China is a harder power market for foreign firms to enter, making Temasek’s assets an attractive way for an Asian utility to diversify its business.