State-run Thai utility EGAT is launching an IPO to raise up to $1.0 billion. Power distributor Singapore Power and Hong Kong's CKI are listing their Australian operations in Sydney. John Yeap, partner for law firm DLA, said conditions are ripe for Singapore to re-launch the privatisation, although it would not draw bids as aggressive as those put in by Western firms for power assets privatised in Australia in the 1990s. Some assets were overpriced and have since been sold at a loss. "I think the core players have all had the benefit of learning from history. Valuations would therefore, I suspect, be more prudent, based on supportable assumptions on the likely evolution of the market," said Yeap. A major stumbling block for power privatisation by Temasek Holdings, Singapore's state investment agency, is the massive overcapacity in Singapore's electricity market-an estimated 60 percent of Singapore's total installed generating capacity of more than 10,500 megawatts sits idle. "Within next 10 years, there would be no chance of lights going out in Singapore because of capacity shortage," Senoko Power President and CEO Roy Adair told a power conference. Senoko is the largest of the three power generating firms owned by Temasek. Senoko owns 3,300 MWs, PowerSeraya has 3,100 MWs and Tuas Power holds 2,670 MWs. The rest is held by three other firms, including SembCorp Industries. Overcapacity clouds the earnings prospects of the power companies, but a privatisation via outright sale or IPO would still attract investors due to Singapore's solid and transparent regulatory framework that makes power prices and yields predictable, analysts say. Power projects in electricity-thirsty countries such as China, India and Indonesia may deliver higher returns, but they are harder to predict because of regulatory risks. "There is an enormous overcapacity in Singapore. But if you believe the capacity you buy will be dispatched at a stable rate you will bid for it. It is just a matter of pricing," said the executive at the regional power investment company. ............ Reuters
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