Temasek, the Singapore state investment company, on Tuesday announced the sale of the city state’s three power generation companies in what will be the biggest divestment of local assets in the past several years.
The disposal is part of the liberalisation of Singapore’s electricity market and follows the recent passage of legislation to promote the competitive wholesale supply of gas and power.
Temasek plans to sell its wholly owned power companies – PowerSeraya, Senoko Power and Tuas Power – within the next 12 to 18 months. Analysts expect that the power companies could be sold for a total of S$4.5bn (US$2.9bn).
“We have seen a lot of interest from potential buyers since last year. At the same time, the Singapore economy is poised to grow strongly over the next few years. The conditions are conducive for the divestment,” said Wong Kim Yin, Temasek managing director of investments.
The three power companies operate independently, with their power facilities located in different parts of Singapore. They each produce about 3,000 megawatts of electricity and account for 90 per cent of the local market. The power is distributed by SingPower, a Temasek-owned state monopoly.
Morgan Stanley and Credit Suisse have been appointed by Temasek to conduct the sale. Both declined to comment Tuesday.
One person familiar with the sale said it had not been decided whether to sell the companies individually or as one unit.
Malaysia’s YTL and Hong Kong's CLP have been mentioned as possible buyers of the Singapore plants, while SembCorp, a Singapore conglomerate owned by Temasek, has expressed interest in buying one of the power companies.
In addition, the sale is expected to attract the interest of private equity groups, such as Macquarie Bank and Babcock & Brown, which have bought utility assets in Australia and overseas.
The divestment comes as Singapore's electricity market could face increased competition. Big consumers of power, such as ExxonMobil and Shell, which operate big refining plants in the city state, are lobbying the government for permission to allow new independent companies to provide dedicated electricity supplies to their facilities.
The move is opposed by Singapore’s state power companies. The Energy Market Authority, the regulator, has also expressed concerns about “inefficient investment decisions” if Exxon-Mobil and Shell switch to independent power facilities.
Temasek has been gradually selling Singapore assets as it readjusts its portfolio to increase its international exposure. It has set a goal of cutting the Singapore share of total assets to a third, down from nearly half.
The biggest recent Singapore-related divestment by Temasek has been the sale of S$5bn in Singapore Telecommunications shares, which has been conducted in several tranches. Temasek has also reduced its stake in CapitaLand, the property developer.