Senoko Energy clarifies that it does not need more Government funding in ‘foreseeable future’
SINGAPORE: Power generation firm Senoko Energy has clarified that it does not need more funding from the Singapore Government in the “foreseeable future”, after a media report last week said it has sought a rescue package from local authorities.
In responses to CNA, it also said that its outlook for the local power industry remains “positive” and saw “no reason” to exit the Singapore market.
The Nikkei Asian Review had on Sep 15 reported that Senoko Energy is seeking a loan of about S$100 million to S$200 million and other support measures amid a supply glut in the local power market.
"With the severe business outlook for the next year or two creating the risk of a shortage of operating capital, the utility is battening down the hatches,” the article cited an official at Japanese trading house Marubeni as saying.
Marubeni is part of the consortium that acquired Senoko Energy in 2008. Others in the consortium include Kansai Electric Power, Kyushu Electric Power, Japan Bank for International Cooperation and French utility firm ENGIE.
Operating since 1977, Senoko Energy has three subsidiaries, namely Senoko Energy Supply, Senoko Services and Senoko Gas Supply. As the largest power generation company (genco) here, it supplies about 20 per cent of Singapore’s electricity needs.
Replying to queries on the Nikkei report, a company spokesperson said: “Senoko’s current financial situation does not require additional funding from the government in the foreseeable future.”
This can be seen from how it achieved positive cash flow in the 2018 financial year.
The company had also recently refinanced, the spokesperson added, on top of securing additional working capital facilities from shareholders and new working capital facility lenders.
“All of this puts us in a very strong operating position,” the emailed reply noted.
Senoko Energy also clarified that it is “one of the gencos” that have explored with the local regulator – the Energy Market Authority (EMA) – on the possibility of loan facilities to help the sustainability and growth of the power generation industry.
However, it is “unlikely” that the company will have to drawdown on such a loan given the completion of its recent refinancing.
Said its spokesperson: “As a prudent operator, we are continuously reviewing how we can optimize our capital structure and tap on additional sources of funds even if there is no immediate need.”
Apart from loans, the Nikkei report also said that Senoko Energy is lobbying for the Government to create a system that guarantees an assured revenue stream under long-term contracts, regardless of power plant utilisation.
To that, the company replied: “All industry stakeholders, including Senoko, are working closely with EMA to review ways to incentivise the generation companies to maintain their generation capacity reliably, and ensure the security of supply in Singapore.”
This includes looking at initiatives such as a forward capacity market, which has been implemented in other countries like the United States, the United Kingdom and France.
“We are actively working with the regulator and other gencos to resolve the root cause of the depressed market, which has been driven by overcapacity and excess gas,” the spokesperson added.
The local power market has been mired in massive overcapacity for years now, as energy supply outstripped demand.
This overproduction has pushed down wholesale electricity prices and ramped up financial pressure for the local power generation sector.
Hyflux, for instance, was a casualty. The water treatment firm had blamed “prolonged weakness” in the local market for its failed entry into the power-generating business, which contributed to its current financial woes.
READ: From making waves to drowning in red ink: Hyflux, Tuaspring and how a business giant came undone
Still, Senoko Energy said its outlook on the local industry remains “positive”.
“Through prudent management of our business, we have put ourselves in a strong operating position so that we can continue serving our customers as one of Singapore’s largest market leading power generators.
“We see no reason to exit the Singapore market as a generator and retailer in the Open Electricity Market,” it added.