Shopping in Singapore

The announcement that Singapore’s 2,670 MW Tuas Power is up for sale has electrified Indian power majors. Tuas is the youngest and first of the three power companies Temasek Holdings, the investment arm of the Singapore government, has put on the block.

Temasek hopes to close the Tuas deal by March next year. The sale is part of a Singapore government initiative to liberalise its energy market and capitalise on the boom that the sector has generated.

Generating interest Power assests in Singapore that are up for grabs

Company                          Capacity

Tuas Power                       2670MW

PowerSeraya                     3100MW

Senoko Power                   3300MW

While GMR Energy has qualified for the bid, power sector sources say Tata Power and Reliance Energy may also join the bid. Analysts expect Temasek to earn anywhere between $2 billion and $3 billion from the Tuas deal, but the Indian players see gains only at the lower band of the valuation. At $2 billion (close to Rs 8,000 crore), the cost of acquisition per MW translates into Rs 3 crore, and at the higher band of $3 billion (Rs 12,000 crore), the cost works out to Rs 4.5 crore per MW.

Experts say there are some ongoing power projects in India where cost per MW has outstripped the Rs 4 crore benchmark, owing to the prohibitive cost of land. The average cost per MW, points out L.V. Nagarajan, Managing Director, Karnataka Power Corporation, is around Rs 4 crore for a thermal station in India.

Temasek will put Power Senoko and PowerSeraya on the block after the Tuas deal and expects to sell them by 2009. The three together command a capacity of 9,070 MW and meet 90 per cent of the country’s demand.