Temasek Offers Financing to Bidders for Senoko Power

By Dinakar Sethuraman

Sept. 2 (Bloomberg) -- Temasek Holdings Pte, Singapore's government-owned investment company, is arranging financing for bidders for Senoko Power Ltd., the country's largest utility, after a global credit crisis reduced availability of funds.

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 buyers 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.

``It certainly improves the chance of selling the assets by providing readily available financing, it makes it easier for buyers,'' said John Corrin, the Hong Kong-based chairman of the Asia Pacific Loan Market Association. ``It provides a fallback for those who can't find other alternatives.''

The collapse of the U.S. subprime mortgage market has caused a slump in mergers and acquisitions, making it more difficult for companies such as Temasek to sell assets. Transactions in Asia's power industry have totaled $16.5 billion so far this year, a fifth of those in 2007, according to data compiled by Bloomberg.

Temasek is 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. ``The Philippines government offered various funding arrangements during the recent sale of government assets in generation this year.''

More Competition

Selling the city-state's largest utility will further open the electricity sector to competition after the disposal of Tuas Power earlier this year. The sale of Senoko Power, as well as Temasek's third generator Power Seraya Ltd., will be completed by the end of 2009, the company said in a statement in July.

``The divestment of Senoko Power is progressing as scheduled,'' Temasek said in an e-mail on Aug. 28. Credit Suisse spokeswoman Jennifer Iu declined to comment in an e-mail sent on Aug. 27 while Morgan Stanley spokesman Nick Footitt declined to comment in an e-mail yesterday.

Temasek may get as much as $3 billion for Senoko Power, the Economic Times, India's biggest business paper, said yesterday. The state investment company, 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 extra funds to pick up investments at good value.

Bidders Short-Listed

Temasek has short-listed five bidders including Keppel Corp., Tata Power Co., a venture between GDF Suez SA and Marubeni Corp., a venture between CLP Holdings Ltd. and Mitsubishi Corp., and YTL Corp. Final offers may be submitted by tomorrow, said one of the bidders, who declined to be named citing confidentiality.

Built at a cost of S$2.6 billion ($1.8 billion), Senoko's 3,300 megawatts of capacity supplied 30 percent of the island nation's electricity needs last year.

Senoko Power earned S$245 million before interest, taxes and depreciation on revenue of S$2.49 billion for the year ended March 31, 2008.

In March, Beijing-based China Huaneng agreed to pay S$4.24 billion for Tuas, the smallest of Temasek's three generators.

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 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, the company Web site said.

`Better Economics'

``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.''

Temasek, which manages about $130 billion in assets, last year revived a plan abandoned six years ago to sell the Singapore companies in order 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.

To contact the reporter on this story: Dinakar Sethuraman in Singapore at dinakar@bloomberg.net.