Marubeni Group to Pay $2.5 Billion for Senoko Power

By Dinakar Sethuraman and Tara Patel

Sept. 5 (Bloomberg) -- A Marubeni Corp.-led group agreed to pay S$3.65 billion ($2.5 billion) in cash for Senoko Power Ltd., Singapore's biggest utility, to expand into Southeast Asia's power and gas markets.

The group, including GDF Suez SA, Kansai Electric Power Co. and Kyushu Electric Power Co., won an auction to buy the utility from Temasek Holdings Pte, the Singapore government-owned investment company said in an e-mailed statement today.

The Marubeni venture will gain a 30 percent share in Singapore's electricity market as the government sells its generators to further open the industry to competition after the disposal of Tuas Power Ltd. earlier this year. The sale of a third generator Power Seraya Ltd. will be completed by the end of 2009, Temasek said in July.

``The winning bid represents faith in Singapore's relatively open power and gas markets,'' said Ian Angell, vice president of gas and power at Wood Mackenzie Consultants Ltd. ``We have to see how they integrate the power operations with their global gas positions including GDF's stake in the Singapore LNG terminal.''

The Marubeni group is paying S$1.1 million per megawatt of generating capacity, while China Huaneng Group in March agreed to pay S$4.24 billion, or S$1.58 million per megawatt, for Tuas Power, the smallest of the three generators.

The Marubeni venture, also known as Lion Power Holdings Ltd., will also take up S$323 million of Senoko's debt as of March 31, 2008, as part of the acquisition, Temasek said. Senoko's 3,300 megawatts of capacity is generated by burning fossil fuels including natural gas.

GDF, Temasek

GDF Suez, the world's second-biggest utility, will benefit from Singapore's demand for gas-fired power generation after buying in June a 30% stake in the island's first liquefied natural gas terminal.

``Singapore represents a significant development potential for GDF Suez and will enable the group to strengthen its foothold in Southeast Asia,'' Dirk Beeuwsaert, head of the GDF Suez Energy International, said in an e-mailed statement today.

Temasek, which bought stakes in companies such as Merrill Lynch & Co. after banks wrote down $500 billion of investments tied to the U.S. subprime mortgages, may use the funds to pick up assets at good value.

Financing Arrangement

To speed up the sale of Senoko Power, Temasek had arranged financing for the five short-listed bidders, comprising a venture between CLP Holdings Ltd. and Mitsubishi Corp., Keppel Corp., Tata Power Co., YTL Corp. and the Marubeni group.

Credit Suisse Group AG and Morgan Stanley & Co., advising Temasek on the sale, will organize a bridge loan for two years at a cost of about 2.5 percentage points over the London Interbank Offered Rate, according to a document sent to bidders last month, a copy of which was obtained by Bloomberg News. The funds may be lent by banks including DBS Group Holdings Ltd. and United Overseas Bank Ltd.

The pool of funds for mergers and acquisitions has shrunk after the collapse of the U.S. subprime mortgage market. Transactions in Asia's power industry totaled $16.5 billion so far this year, a fifth of 2007, according to data compiled by Bloomberg News.

Temasek was trying to ``sweeten the deal as we are in the middle of a credit crisis,'' said Simon Powell, head of power research at CLSA Ltd. in Hong Kong.

Sarah Seah, spokeswoman for Keppel, declined to comment. Shalini Singh, spokeswoman for Tata Power, did not answer calls to her mobile phone, while Ho Say Keng, a company secretary at YTL, could not be reached.

Selling Power Assets

Temasek, manager of about $130 billion in assets, last year revived a plan abandoned six years ago to sell the Singapore utilities to tap rising demand for power assets.

Senoko Power and Power Seraya were transferred in 2001 to Temasek from Singapore Power Ltd., the main electricity supplier, after the government separated ownership of generators from transmission and distribution. Temasek had owned Tuas Power since 1995.

Tuas is the best asset because the units are bigger and the turbines more advanced, making it more efficient and competitive than Senoko Power and Power Seraya, CLSA's Powell said.

``Tuas is one of the lowest-cost generators in Singapore and has better economics from a short-run marginal cost of generation perspective,'' Powell said. ``The Senoko plant is older and the units are smaller.''

The Tuas Power station consists of four blocks of natural gas-fired combined cycle plants and two units of steam plants with a total generating capacity of 2,670 megawatts.

To contact the reporter on this story: Dinakar Sethuraman in Singapore at dinakar@bloomberg.net; Tara Patel in Paris at Tpatel2@bloomberg.net.