Huaneng Group makes its largest overseas purchase

Singapore state investor Temasek Holdings TEM.UL on Friday reported China's Huaneng Group will pay S$4.2 billion ($3.04 billion) for Tuas Power, the largest overseas purchase by a Chinese power firm.

Huaneng Power International Inc. or Huaneng, was established in 1994 administrated by the State Council of the People's Republic of China. It is one of the five largest power producers in China. It engages in the development, construction and operation of large power plants.

Temasek Holdings is an investment company owned by the government of Singapore. With a multinational staff of more than 300 people, it manages a portfolio of over S$160 billion, or more than US$110 billion, focused primarily in Asia. It is an active shareholder and investor in such sectors as banking & financial services, real estate, transportation & logistics, infrastructure, telecommunications & media, bioscience & healthcare, education, consumer & lifestyle, engineering & technology, as well as energy & resources.

Temasek said in a statement Huaneng will complete the purchase by March 24 of Tuas Power, the first of three generating companies that the city-state hopes to sell by mid-2009.

"This transaction represents a major step for China Huaneng in its goal to diversify its assets across geographies and technologies," the Chinese company's vice president Huang Long said in the statement.

Huaneng's winning bid works out to about 24 times the S$177 million net profit Tuas reported for the 12 months to March 2007.

Huaneng Power, the group's Hong Kong-listed unit, trades at a price-earnings multiple of 9, while Hong Kong's largest power utility CLP Holdings trades at a P/E of 14.

The Chinese company beat at least two other firms including Bahrain's Arcapita and India's GMR Infrastructure.

Several other companies such as Malaysia's Tanjong and Li Ka-shing's Hongkong Electric withdrew from the bidding after being involved in the earlier stages.

Several of the withdrawals were linked to European banks scaling back their financing commitments, a banker said.

Tuas is the newest, but smallest, of the three generating companies being divested by Temasek, with 2,670 megawatts (MW) of electricity generating capacity.

Its assets include oil-fired plants with a capacity of 1,200 MW as well as 1,470 MW in gas-fired electricity plants, and the company generates about a quarter of Singapore's electricity.

With the competition of the Tuas sale, Temasek is expected to proceed with the divestment of the larger 3,100 MW PowerSeraya and the 3,300 MW Senoko Power.