June 24, 2008

Genting in No Hurry to Dispose of Power Assets

By Sharen Kaur

GAMING and power group Genting Bhd aims to extract higher value from the sale of its power assets and is in no hurry to dispose them, said a top official.

The Genting group, founded by the late Tan Sri Lim Goh Tong, has been seeking buyers for its power generation business in the last two quarters.

It plans to exit the power business to concentrate on its integrated casino resort business in Singapore, via Genting International plc.

However, it is still weighing its options for the sale of the assets, an official who declined to be named, told reporters after Resorts World Bhd's annual general meeting in Kuala Lumpur yesterday.

"Genting has received valuable offers from local and foreign buyers for its power assets. The group is holding discussions with them and it would take a while longer to conclude as it wants to reap the highest value," added the official.

Operating in Malaysia, India and China, its power division, which is valued at more than RM3 billion, is a considerable force in the industry with a net attributable capacity of 1,450 megawatts (MW).

Its two key assets are the 720MW Kuala Langat gas-fired plant in Malaysia and the 724MW Meizhou Wan coal-fired plant in Fujian, China.

It also operates the 109MW Suzhou gas-fired combined-cycle power plant, 76MW Nanjin diesel-fired open cycle plant and 42MW Wuxi gas- fired open cycle plant in China, and the 368MW Lanco Kondapalli plant in Andhra Pradesh and 113MW Aban Power in Tamil Nadu, India.

The official also said Genting is expected to face challenging times ahead due to rising fuel and raw material prices and inflationary pressures.

It will monitor closely the situation to see how best it can mitigate higher operational costs, especially for its Singapore casino project, Resorts World of Sentosa.

Genting International was awarded the S$5.2 billion (RM12.16 billion) project in December 2007. The cost has since escalated to S$6 billion (RM14 billion) which is about S$800 million (RM1.8 billion) or 15 per cent above its initial budget, due mainly to higher construction expenses.

"The cost may exceed S$6 billion (RM14 billion) as the project will take another two years to complete. The group is planning on ways to mitigate the higher cost, mainly through prudent management so there will be no cost overruns," the official said.

The casino project, which is being developed on a 49ha site at Sentosa Island, is scheduled to start operations in 2010.

The official said the Genting group expects its revenue to hit another record high this year, after factoring in the recent developments.

For the financial year ended December 31 2007, the group posted a record revenue of RM8.48 billion, up 32 per cent from 2006. Net profit was also higher by 14 per cent to RM2.6 billion.

The leisure and hospitality division contributed RM5.89 billion to the group's revenue, while RM1.49 billion came from its power generation operation.

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