PF Archive

Asia Report: Reformation

01 12 2001

The Singapore electricity (and gas) industry is in the midst of the most radical reform in its history, albeit in a form not dissimilar to that seen in other markets. Singapore Power has transferred its two generation plants (Senoko Power and PowerSeraya) to Temasek Holdings in preparation for their sale (together with Tuas Power) by the first quarter of 2002. In short, a wholesale electricity market is being introduced which will result in contestability for the generation and retail markets. It is expected that all retail electricity customers will be contestable by 2003. Consequently, lenders to Singapore's electricity sector will need to start afresh when assessing the risks facing individual companies. As is the case with other restructured energy markets, the risks are now more exposed. In particular, lenders will need to assess the risks in a newly competitive generation and retail sector and calculate which companies are most exposed to, and best placed to deal with, such risks. This will not be an easy process. Moody's experience from other similarly restructured markets indicates that it is difficult to perfectly predict all the risks ? and those likely to have the most exposure to them. Nevertheless, lessons from around the world can provide some guidance. Moody's expects the credit of Singapore Power (unrated) to remain the strongest in the sector over the medium term. Its regulated network business (both electricity and gas) will have much lower business risk and therefore much more predictable revenue streams than those operating in the more...