Energy giants seek loans for Temasek assets
Tim LeeMaster and Nevin Nie
Mainland firms may bid for stakes
Huaneng Power International and China Resources Power Holdings are among mainland power producers in talks with banks to arrange financing of as much as US$2 billion each to support bids to acquire power assets from Singapore, market sources said.
Bids are due by year-end to be followed by a short list and a second round of bidding next year, sources said. China Resources and Huaneng could not be reached for comment.
Besides the two, other mainland power producers, including Datang International Power Generation and China Power International Development, were said to have been considering bids for power generating assets the Singapore government owns that are worth between US$2 billion and US$3 billion each.
Any loan would represent about 75 to 80 per cent of the total bid, sources said. Banks including Calyon Corporate and Investment Bank and Citi were among potential lenders, sources said.
The borrowing is expected to be structured as a non-recourse loan, meaning that in the event of a default, creditors are limited to assets secured under the terms of the loan and not other assets the borrower may own. Nonrecourse debt is typically arranged when the proceeds go towards greenfield projects without a proven revenue stream as well as for larger or long-term loans.
A spokesman at China Power International said the company had not decided whether it would place a bid. Datang couldn't be reached for comment.
Some of the interested parties are likely to want more than one of the three assets up for sale but are unlikely to get more than one as the objective of the Singapore government is to spark more competition domestically, sources said.
Unlike mainly coal-fired power plants on the mainland, the three Singapore power plants up for sale with a total production capacity of 9,000 megawatts are powered by natural gas and oil.
With Beijing pushing for cleaner sources of fuel, the acquisition of such assets may help mainland power companies develop expertise in running natural gas-fired plants, power industry analysts said.
'The mainland wants its power producers to gain international exposure, improve corporate governance and management,' said Nomura Securities analyst Donovan Huang. 'Singapore is a mature market with electricity growth of 5 to 6 per cent so from a business perspective, as long as the assets are not too expensive, you will earn a decent return in a stable and transparent regulatory environment, which is not bad.'
Coal-fired power accounted for 86 per cent of the mainland's electricity output in the first half, up from 83 per cent last year, China Electricity Council figures show.
Temasek Holdings, Singapore's investment arm, in June said that it planned to sell Senoko Power, PowerSeraya and Tuas Power. Senoko Power is the largest of the three companies with 3,300 megawatts of capacity followed by PowerSeraya with 3,100MW. Tuas can produce 2,670MW.
The mainland's generation capacity surpassed 650 gigawatts as of June, with new plants adding 38.75 GWs in just six months. The sector commissioned 105 GW last year.