SINGAPORE TO DIVEST POWER COMPANIES BY EARLY 2009

UNCLAS SINGAPORE 001583 SIPDIS STATE PASS USTR FOR AUSTR WEISEL AND DAUSTR BELL COMMERCE FOR JBAKER SIPDIS E.O. 12958: N/A TAGS: ENRG EPET EINV ETRD EFIN ECON SN SUBJECT: SINGAPORE TO DIVEST POWER COMPANIES BY EARLY 2009 REF: SINGAPORE 1167 ¶1. (U) The Government of Singapore recently announced plans to sell all three of its wholly owned power generation companies (gencos) by ¶2009. Temasek Holdings, the government's investment arm, cited a favorable market as the driving force behind the move. Temasek has been planning to divest the gencos - Tuas Power, Senoko Power, and PowerSeraya - for nearly a decade. However, sub-optimal local conditions as well as the 2001 Enron debacle delayed its plan. ¶2. (U) The three gencos together supply approximately 80 percent of Singapore's energy. Two other government-linked companies (GLC), SembCorp Cogen and Keppel Merlimau Cogen, supply the remainder. The five firms currently provide capacity that far exceeds Singapore's current demand. However, construction of new petrochemical refineries and multi-billion dollar casinos, coupled with predictions of steady economic growth in Singapore, are fueling interest in the power generation business. A U.S. genco, Intergen, is also trying to enter the market by building a new gas-fired power plant (reftel). That project has been delayed for several years due to a dispute with two other GLCs, Power Gas and Gas Supply, over gas pipeline access. ¶3. (U) According to press reports, a number of foreign companies from Japan, China, Malaysia, and the United States have expressed interest in the gencos, each of which is worth about S$2 billion (US$1.3 billion). Local players, including the two other gencos, are also likely to join the bidding. The sale of the state-owned gencos represents another step forward for Singapore's energy liberalization process, which has included lifting caps on foreign ownership (2000), breaking up the country's former monopoly, Singapore Power, to form the three gencos now up for sale (2001),and passing the Amended Gas Act (2007). HERBOLD