PowerSeraya Unveils Plan to Transform Business and Power Growth

  • Multi-million dollar Investment in 800MW Co-Generation Plant
  • Groundbreaking Steam Sales Agreement with Petrochemical Corporation of Singapore
  • Establishment of Physical Oil Trading Company

Singapore, 22 August 2007 – PowerSeraya Ltd today unveiled a series of market announcements outlining the company’s strategic plans which will transform its business into a full-fledged integrated energy company; primary being an investment in a 800MW natural gas-fired Co-Generation Plant at Jurong Island; a 15-year steam sales contract with Petrochemical Corporation of Singapore (Private) Limited, and the establishment of physical oil trading subsidiary PetroSeraya Pte Ltd.

During a press conference held today in Singapore, Mr Neil McGregor, Managing Director of PowerSeraya Ltd shared details of the company’s plans to expand into a full-fledged energy company moving from its core commodity business centred on electricity, to multiple commodities such as steam, water, oil and gas, as markets open up in Singapore. “Today’s announcements are part of our long term strategy that will position our company for growth. We have moved from being a power company to an integrated energy company. We are now well on our way to building a balanced portfolio with diversified risks in both regulated and non-regulated markets. The PowerSeraya Group is focussed on building a strong integrated energy company and we will achieve this by delivering value through employing the best talents, implementing new systems and executing the best strategies so that we can continue to be the leading energy services provider.”

“The company is coming of age and is pursuing a growth path that will offer wider choice and better value to its customers by strengthening its Energy Hub position on Jurong Island. Together, these plans will improve and define the company’s competitive positioning, through a business diversification plan that aligns with the key growth areas of Singapore economy,” said Mr McGregor.

Multi-Million Dollar Investment in 800MW Co-Generation Plant

The 800MW natural gas-fired Co-Generation Plant will replace three oil-fired steam units located at its PowerSeraya Energy Hub with a highly efficient Co-Generation Combined Cycle Plant (Co-Gen CCP) producing electricity and steam simultaneously, using state-of-the-art technology. Siemens together with its consortium partner Samsung Corporation will build this twin-unit Co-Gen CCP to be completed by 2009/2010. With the construction of these two units and conversion of PowerSeraya’s two existing combined cycle plants at an approximate cost of S$800 million, PowerSeraya will have four Co-Gen CCPs from Siemens at its Pulau Seraya Power Station.

The project will be financed from the company’s balance sheet and through a commercial loan of S$450 million from a group of local and international banks. A 10-year service and maintenance (S&M) contract will be finalised with Siemens in the next six months. The value of this S&M contract is estimated to be in the region of S$250 million.

The new Co-Gen CCP facility is designed for increased thermal efficiency and will deliver greater environmental benefits by decreasing the company’s overall carbon footprint by a further 10%; beyond the 30% reduction achieved over the past 10 years. In another first, for the power industry, this large scale project will be eligible to apply for carbon credits. PowerSeraya has notified the National Environment Agency of its intent to submit an application under the Clean Development Mechanism or CDM of the United Nations Kyoto Protocol and seek carbon credits for this project in the near future.

Commenting on the deal, PowerSeraya’s Chairman Mr Tan Yam Pin said; “The company has set the right foundations to grow the PowerSeraya Group; of which this latest investment is a major component. The company has now broadened, from its beginnings as a power company to that of an energy company, which will enable us to extend our reach higher up the supply chain and expand our product and service offerings. This new investment will provide a solid basis for our future, enabling PowerSeraya to be a full-fledged integrated energy company. I am proud to have worked with PowerSeraya’s management team to enable this transformation. Now PowerSeraya can also sell steam, water and other utilities to the Petrochemical hub of Jurong Island as the market develops.”

PowerSeraya Seals Steam Sales Agreement with Petrochemical Corporation of Singapore Pte Ltd

The new Co-Gen CCP will supply ultra high pressure steam to Petrochemical Corporation of Singapore (Private) Limited (PCS); a key development that propels the company’s business into the multi-utilities arena so businesses can now have more choice with PowerSeraya’s subsidiary, Seraya Energy Pte Ltd, offering bundled utilities including electricity, steam, and water. The contract is for a 15-year period and will commence from 3rd Quarter 2009.

In addition, the Co-Generation CCP will be the leading facility that delivers steam to PCS’ operations; driving critical processes at their plant. According to Mr McGregor, “The anchor Steam Sales Agreement we are signing with PCS today marks a significant milestone that positions us as an Integrated Energy Company on the Petrochemical hub on Jurong Island.”

New Physical Oil Trading Subsidiary to Further Diversify Earnings

As part of the company’s diversification strategy, Mr McGregor announced that in January 2007, the company aligned its business into four operating groups: Utilities, Energy Markets, Physical Oil Trading and Retail, in order to provide for more flexibility to seize market opportunities and improve utilisation of existing assets. A new physical oil trading company, PetroSeraya Pte Ltd, was established on 2 April 2007, a key move into non-regulated businesses.

“PetroSeraya Pte Ltd has been established to take advantage of changing market conditions, and diversify the company’s earnings base and operating model. The extension into trading is part of PowerSeraya’s value accretion strategy that extends the company’s reach up the fuel supply chain and improves business options for expansion into new sources of revenue,” elaborated Mr McGregor.

Commenting on the decision to enter physical oil trading, Mr McGregor said, “Oil has always been part of PowerSeraya’s business. The setting up of PetroSeraya marks the completion of our value chain – from sourcing fuel, to trading and providing services to our customers. It will improve the value of the company over time.”

“PetroSeraya will serve to strengthen PowerSeraya’s fuel security while addressing market volatility associated with oil price fluctuation. In addition, PetroSeraya will achieve greater economies of scale for the company through bulk purchase and resale of excess oil. Finally, the newly-formed company is strategically well positioned to trade oil (from Jurong Island) as a regional and local hub as well as make inroads into bunkering, water supply or cargo trading,” Mr McGregor commented.

PetroSeraya Pte Ltd will be headed by Executive Director Mr Chan Swee Huat who has over 25 years of experience in business development, planning, and management of power plant assets.