UPDATE 1-Temasek sells power firm to Malaysia YTL for $2.5bln

(Updates with details, quotes)

By Kevin Lim

SINGAPORE, Dec 2 (Reuters) - Singapore state investor Temasek Holdings [TEM.UL] said on Tuesday it had sold electricity generator PowerSeraya to a subsidiary of Malaysia's YTL Power International Bhd (YTLP.KL) for S$3.8 billion ($2.5 billion).

Temasek said Sabre Energy, a wholly-owned subsidiary of YTL, will pay S$3.6 billion and will assume S$201 million of PowerSeraya's adjusted net debt as of March 31, 2008.

YTL said it would fund the acquisition through a combination of cash reserves and a loan, and said the acquisition would add 76 million ringgit ($20 million) to its full year 2010 post-tax profit. It saw the acquisition being completed in the third quarter of 2009.

The deal came despite Temasek saying just a week ago that it had postponed the sale of PowerSeraya, the last of three power firms it is selling to liberalise Singapore's electricity market, amid market turmoil that has dampened deal-making globally.

"After we stopped the tender process last week, YTL Power International put forward an unsolicited bid which met our requirements," said Gwendel Tung, director of investment at Temasek, in a statement.

Temasek also raised S$334.5 million on Tuesday from the sale of its 70 percent stake in Singapore Food Industries SFIL.SI.

Asian sovereign wealth funds such as Temasek may invest their growing cash piles to shore up markets close to home as their risky bets in Western banks show few signs of paying off and as emerging economies look to avoid the damaging effects of the financial crisis, analysts said. [ID:nSIN287928].

Temasek sold the other two power generators earlier this year for a total of S$7.9 billion. For a Factbox on Temasek see [ID:nSP132652].

PowerSeraya's plant has a capacity of 3,100 megawatts (MW) and provides about 28 percent of the city-state's electricity. Its capacity will rise to 3,900 MW by 2010 as it is in the process of building an 800 MW capacity natural gas-fired plant.

"Its attraction lies both in its strong position in the energy market and its complementary multi-utility business -- the acquisition of PowerSeraya will help us grow our utility business in the region," said Francis Yeoh, managing director of YTL Power.

Bahrain's Arcapita and a consortium led by Hong Kong's CLP (0002.HK) had been named as other potential bidders for PowerSeraya, according to media reports.

Analysts had expected the deal to be postponed because of higher borrowing costs for companies and expectations of weaker power demand from Singapore, which slipped into a recession in the third quarter.

Malaysia supplies natural gas to its neighbour Singapore. The two countries briefly merged in the 1960s and have since often bickered over issues from land reclamation to airspace.

Temasek sold generator Senoko Power to a consortium led by Japanese trading house Marubeni Corp (8002.T) for $2.5 billion in early September, while Tuas Power was sold to Chinese power firm Huaneng Group for $3 billion in March. (Additional reporting by Julie Goh in Kuala Lumpur; Writing by Neil Chatterjee; Editing by Mike Nesbit)