Singapore Corporate News - 16 Apr 2008

Sembcorp still in the race for remaining Temasek gencos

SEMBCORP Industries - which failed in its bid for the just-sold Tuas Power - is staying the course to try for the two remaining generating companies (gencos) being divested by Temasek Holdings, its president and chief executive Tang Kin Fei said.

This is the first time Semb- corp has disclosed that it had thrown its hat in the ring for the Singapore gencos.

The 2,670 MW Tuas Power was sold for $4.2 billion to China's largest power producer, China Huaneng Group, last month. '$4.2 billion is a big number,' Mr Tang would only say, when asked to comment on that sale.

Up next for grabs is the 3,300 MW Senoko Power, the largest genco here, and the 3,100 MW Power Seraya.

'If we succeed in the second (sale), we stop,' Mr Tang said, when asked which remaining genco Sembcorp was aiming for.

Mr Tang said that it hopes to secure one of the big three Singapore gencos as 'Sembcorp is a small player in the global market and we need to grow our base in our headquarters'.

'We need to have scale and a track record. We also need resources to do more deals overseas,' he stressed.

Currently, Sembcorp operates several cogeneration plants worldwide with a total capacity of 3,382 MW. But its cogen plant on Jurong Island accounts for only 815 MW of this.

It has an 887 MW plant in Fujairah in the United Arab Emirates and also operates cogen units in the UK (267 MW), China (696 MW) and Vietnam (717 MW).

BT earlier reported that because of the credit crunch - which affects the cost and availability of bank loans - Temasek is apparently taking a breather after the Tuas Power sale, before continuing with its genco divestment.

On this, Mr Tang conceded that the margins asked by banks have gone up. Nevertheless, 'we don't have a problem here', he stressed, adding that Sembcorp has already lined up its bankers for the genco sales.

Singapore's demand for electricity has continued to grow in line with GDP growth here, he said.

Taking an average of 5 per cent electricity growth per annum against average electricity demand here of 4,500 MW, it means that 'Singapore needs about 200 MW more generating capacity each year', he said.

'So every three to four years, we will require another power plant,' he added, referring to a typical combined cycle gas turbine or cogeneration plant of around 600-700 MW.

Sembcorp plans cogen plant on Jurong Island

IN what promises to be its first major new project on Jurong Island in a while, Sembcorp Industries is planning to build a second cogeneration plant to supply mainly steam to new petrochemical plants in the Tembusu sector.

Significantly, apart from some gas-firing, the company aims to use innovative, alternative fuels like refuse-derived fuel and heavier fuel oils for the new plant.

It will be unlike its current 815-MW cogen plant in Sakra which is 100 per cent gas-firing.

Sembcorp president and CEO Tang Kin Fei, who disclosed this in an interview, said that it is talking to petrochemical investors there who will need steam and other utilities for their new plants.

Germany's Lanxess, which is building an $845 million synthetic rubber plant, is, for instance, one of the newcomers in Tembusu.

'We will make a decision within six months,' he said of its alternative-fuels, cogen investment through which it hopes to be able to sell cheaper steam to customers there.

The new plant - of an undisclosed capacity - will make use of some of the additional Indonesian natural gas which Sembcorp has just contracted to buy.

Under its latest US$5.5 billion gas deal yesterday, Sembcorp contracted to buy an extra 86 million standard cubic feet of gas daily, with delivery starting in 2010/2011.

Still, as gas prices are pegged to high sulphur fuel oil prices - which have also risen in line with sky-high crude oil prices - Sembcorp's long-term plan is to try to use more alternative fuels instead, Mr Tang stressed.

'From a 50 per cent cost component when we built our first cogen plant, today, about 80 per cent of a cogen plant's cost is fuel. And if you ask an investor whether the price of steam produced by gas-firing plants is competitive, they tell you no,' he said.

That is why Sembcorp, which is currently 100 per cent reliant on gas-firing, hopes to eventually reduce this by half through use of other cheaper, innovative alternative fuels, Mr Tang said.

One way will be to backward-integrate.

As Sembcorp is big in waste-disposal and recovery - 'we collect over 2,000 tonnes of municipal solid waste daily,' Mr Tang said - it is now looking to use refuse-derived fuels to fire its new cogen plant. It could also consider collecting waste fuels, he added.

Another alternative it is considering is heavier fuel oils, including off-specification products from the oil refineries and not unlike the orimulsion - or bitumen mixed with water - used by Power Seraya.

But he declined to give more details of the alternative fuels it is eyeing at this time.

On this, Sembcorp can also tap on its UK experience where it just opened a $193 million wood-fuelled biomass power station - the first such large-scale industrial power plant there to be fuelled entirely by renewable wood.

On liquefied natural gas - with Singapore expected to name the successful LNG aggregator anytime now - Mr Tang said, 'We are a significant gas importer with a 45 per cent share of Singapore's gas imports, so naturally we are interested in LNG.'

'We are keen to work with the LNG buyer,' he added, saying Sembcorp was open to all options, including taking a stake in the LNG aggregator to give it additional flexibility in its gas business.

Sembcorp inks major Natuna gas deal

Singapore has just struck a third deal to buy natural gas from Indonesia - this time worth US$5.5 billion.

Sembcorp Gas, a unit of Sembcorp Industries, yesterday inked a gas sales agreement (GSA) in Jakarta for supply of an additional 86 million standard cubic feet daily (mscfd) of natural gas for 7-10 years.

The gas from Natuna will start arriving sometime between 2010 and 2011 and will mainly cater to the needs of the petrochemical plants on Jurong Island.

The latest GSA - which cements Sembcorp's position as the largest gas importer here - will add about 26 per cent to the 325-340 mscfd of Indonesian gas it currently imports via a 700 km-plus Natuna-Singapore pipeline. This is under its first US$7-8 billion GSA struck in 1998.

The additional supply will ramp up Sembcorp's share of total Singapore gas imports - from both Indonesia and Malaysia - to close to 45 per cent. Another importer, Gas Supply Pte Ltd, currently brings in 350 mscfd of Indonesian gas from Sumatra, while Keppel Corp and Senoko Power imports 115 mscfd each from Malaysia.

Sembcorp first began discussions for the latest Indonesian deal back in 2004, before the run-up in crude oil prices over the last couple of years.

Despite the higher prices it paid for the gas - which is contractually pegged to high sulphur fuel oil prices - Sembcorp president and CEO Tang Kin Fei told BT that the latest GSA 'is more competitive' than its earlier 1998 deal.

'Given that all the necessary infrastructure, like the 700-plus km pipeline and pumping stations from Natuna to Singapore, is already in place, both sides enjoyed economies,' he explained.

Sembcorp's additional gas supply is coming from the Natuna Sea Block A field owned by a group led by Premier Oil Indonesia, with which it signed the conditional GSA in Jakarta yesterday.

The GSA is expected to be effective by the third quarter of this year when the necessary agreements to transport the additional gas through the Indonesian portion of the Natuna-Singapore are concluded.

Some of the gas from the field will be for domestic Indonesian use. Concurrently with the Sembcorp GSA, the Premier-led group, comprising Kufpec, Hess and Petronas, also sealed a separate deal with Batam power parties to supply about 40 mscfd of the Natuna gas for power generation on the Indonesian island.

Mr Tang said: 'The additional Indonesian gas coming to Singapore is not meant for power generation but to support petrochemical industries on Jurong Island.'

It is primarily meant for the production of additional steam for industries there.

This explains why it has been allowed to import the gas, given the recent moratorium set by the Energy Market Authority on further piped gas imports ahead of Singapore's plan to import liquefied natural gas around 2012.

'We need to find ways to produce cheaper steam for the petrochemical plants,' Mr Tang said, with gas being more cost and energy-efficient than fuel oil.

A big chunk of the additional Indonesian gas is also expected to be sold directly to the industries on Jurong Island, especially the new upcoming giant petrochemical complexes of ExxonMobil and Shell and new downstream plants there, he added.

Keppel Corp, for instance, recently sold S$3 billion worth of Malaysian gas to ExxonMobil to fuel the oil giant's own cogeneration plants. And Mr Tang reckons that the big petrochemical investors there would need even more gas for their operations.

Hyflux clinches four deals in China

MAINBOARD-LISTED Hyflux said yesterday it has bagged four water treatment contracts in China worth 377 million yuan (S$73.2 million) in all.

Three of the deals are for potable water plants - in Anhui, Liaoning and Shandong provinces. The fourth is for a waste-water treatment plant in Anhui.

The largest contract is for a 130 million yuan expansion of a potable water plant in Shandong. Hyflux said approval has been obtained from the authorities to expand its capacity from 50,000 tonnes to 100,000 tonnes a day.

The company also said it has an 87 million yuan concession agreement to build, own and operate a 35,000 cubic metres per day potable water plant in Anhui for 30 years. The plant will start operating in the second half of 2009.

Its other contract in Anhui is to refurbish and operate a 30,000 cubic metres per day waste-water treatment plant in Mingguang city. The investment value, including finance costs, is 53 million yuan. The project should be completed and transferred to Hyflux by the second half of the year.

Hyflux's last project is for a potable water plant in Liaoning province's Gongchangling district. It said it has obtained the exclusive right to own and operate the plant for 30 years. The project investment value is estimated at 107 million yuan, and commercial operations should begin in the second half of the year.

Hyflux said that with all four deals it has first right to negotiate an extension upon expiry of the concession terms.

It said that with the new projects, it now has 42 water treatment plants under construction or in operation in China.

The four new deals will be funded from existing resources and are expected to have a material impact in the current financial year, Hyflux said.

Pacific Healthcare in India medspa deal

PACIFIC Healthcare Holdings has tied up with India's Yash Birla Group to form a joint venture that will invest $10 million in India's healthcare sector over the next three years.

Birla-Pacific MedSpa will be 50 per cent owned by Yash Birla unit Birla Wellness and Healthcare, with the remainder to be held by Pacific Healthcare (42.5 per cent) and Abhijit Desai (7.5 per cent), a dermatologist based in India.

The JV plans to set up four medical spa centres and a wellness resort, focusing on cosmetic treatment and dental services. Two of the centres, with total floor space of 12,500 sq ft, will be in Mumbai and open this year. The wellness resort, featuring about 20 villas, will be in southern Goa. The locations for the two other centres are yet to be decided.

'Health care is a sunrise industry in India, where excellence is now the keyword,' said Yash Birla Group chairman Yash Birla. 'We are confident this collaboration will meet the growing needs of Indian customers by blending traditional medical services with total wellness programmes.'

The centres and resort will target the middle to upper-class affluent in India, as well as international patients from the Middle East. Pacific Healthcare chief executive officer William Chong said that it is unlikely to cannibalise Pacific's incoming foreign business from India, which accounts for only 7 per cent of its patients.

'It's a very different market,' said Dr Chong. 'India itself will have domestic tourism. If you can even capture the domestic tourism market, it's more than enough.'

The announcement marks an expansion of Pacific's presence in India. It currently operates a one-stop specialist cosmetic and dental centre with Dr Desai in Mumbai.

Last year, the mainboard-listed group signed a consultancy contract with India's Advanced Medicare & Research Institute to help train and develop manpower, as well as set up dental implant, sleep apnea and in-vitro fertilisation programmes in Kolkata. In 2004, it formed a joint venture in Hyderabad to set up a specialist centre and cord blood bank. But it divested its interest in the project last year.

The new JV will be funded through a combination of internal resources and debt. In January last year, Pacific raised more than $12 million through a private placement, part of which has been earmarked for expansion in India.

The company's shares closed unchanged yesterday at 35 cents.

Ezra-linked EOC completes Galoc job

OFFSHORE specialist EOC, which is 48.9 per cent-owned by Ezra Holdings, said yesterday that its wholly owned subsidiary Emas Offshore Construction and Production (EOCP) has completed a contract in the Galoc Field off Palawan Island in the Philippines.

EOCP was awarded the contract by field operator Galoc Production Company (GPC) in August 2007 to install more than 1,200 tonnes of sub-sea facilities and floating production mooring equipment on the sea bed at a depth of 290 m.

Commenting on the completion of the project, EOC chief executive Lim Kwee Keong said: 'This adds to our track record in offshore projects that require a high level of technical and project management capability. We completed the project within schedule and without a single lost-time incident.'

Mr Lim expected the project to contribute positively to EOC's FY2008 earnings. He was upbeat on the company's prospects, citing strong demand for its services from offshore oilfields entering the production phase.

'Our vessels will be kept well deployed in the medium to long term,' he said.

The Galoc Field contract was carried out by the Lewek Champion, one of EOC's heavy-lift accommodation and crane barges. Purpose-built for deep-water construction, pipe-laying and accommodation support, the vessel has an 800 tonne crane and a Class DP2 dynamic positioning system.

Earlier this year, the Lewek Champion installed jackets, top-sides, pipelines and floating production and storage moorings for a platform in the Bualuang Field in the Gulf of Thailand.

The vessel's current projects include the US$148 million transport and installation contract in the Malaysia-Thailand Joint Development Area off the eastern coast of Thailand and Malaysia.

Shares of Ezra closed two cents higher at $2.16 yesterday.

Wilmar gets US$400m loan for expansion

WILMAR International, the biggest vegetable oil supplier to China, said it received a US$400 million loan from four banks to fund its expansion. It got the three-year unsecured loan from Bank of America, ING Groep, Oversea-Chinese Banking Corp and Rabobank Nederland. -- Bloomberg

SIA filled 69.9% of space in March

SINGAPORE Airlines said yesterday it filled 69.9 per cent of the space available on its planes for passengers and cargo in March, down from 70.4 per cent a year earlier. -- Reuters

SingTel eyes markets in Middle-East

SINGAPORE Telecommunications may enter markets in the Middle-East, where mobile-phone penetration is relatively low. 'We like emerging markets with large populations and low penetration,' chief executive officer Chua Sock Koong said in a speech in Dubai yesterday. SingTel is looking at strategic investments in the 'entire Middle-East', and they will not be limited to telecom projects, she said.

Waiver for Teambuild shareholders

THE Securities Industry Council has exempted shareholders of Teambuild Corporation, the subject of a reverse takeover by 1st Software, from making a general offer for the company.

This is subject to shareholders of 1st Software approving a whitewash resolution waiving their rights to a general offer.