Ho Jinx Lost Billions in Energy and Resource "Investments". How Reckless!

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An honorable member of the Coffee Shop Has Just Posted the Following:

http://www.tremeritus.com/2015/02/09...e-investments/

Temasek may lose billions in energy/resource investments

February 9th, 2015 | Author: Contributions



In an earlier post, I highlighted the possibility of Temasek’s
investment in FTSI being wiped out by the plummeting oil price. Temasek’s other
investments in ‘energy and resources’ seem likely to suffer the same fate as
FTSI.

The investments highlighted are published in the annual Temasek
Review. A lot of information has not been disclosed by Temasek and it appears to
be preventing public scrutiny. Temasek has to bear some responsibility should
there be any factual inaccuracy.

Mosaic Company

In December 2011, Temasek acquired a 6.5% stake in US fertiliser
maker Mosaic company, raising its stake from only 108,026 shares in
September to 17.9 million shares. In February 2012, its increased its stake to
20.05 million before finally owning 21.64 million shares in
March 2014.

In August 2014, Temasek reduced its stakes by 5.8 million shares. As of 31 Dec 2014, Temasek was the third
biggest shareholder with 15.8 million shares valued at US$762 million.



Since 2011, more than US$1 billion was invested in Mosaic yielding only 2% in
annual dividends excluding some capital losses.

Kunlun Energy

In April 2012, Temasek was reported to have bought US$600 million worth of
shares in Kunlun Energy Co Ltd at HK$13.10 with private equity firm
RRJ.



Chart

Kunlun’s chairman abruptly resigned in December 2013 as he was involved in a
graft probe by the Chinese government. Kunlun’s dividend was
22 cents in 2011 and 23 cents in 2012 and 2013. The annual yield on Temasek’s
investment is about 1.8%.

If Temasek has not divested Kunlun, its paper loss is about 40%. Global stock
indices are near record highs.

Turquoise Hill Resources Ltd

Similar to many Temasek investments, it appears to be bottom picking
Turquoise Hill Resources after its shares collapsed by 60%. Bottom picking is a
favourite ‘strategy’ of local punters. However, Temasek, run by
technocrats, should have asked itself why the bigger (real)
professional fund managers are divesting. Temasek has not learnt from all its
failed investments and contiues to take huge investment risks.



Turquoise Hill has not been profitable since 2009, or even earlier. Why did
Temasek speculate such a company would turn around after other investors have
bailed out?



Including the rights issue at $2.40 per share in January 2014, Temasek has
probably invested about US$400 million and it seems to have no exit strategy.

Profitable investments insignificant compared to gargantuan
losses

Temasek has profitable investments but its profits pale in comparison with
its losses. An example – Cheniere Energy.

Temasek invested US$222 million in Cheniere Energy in Q2 2012 and increased
its stake from 15.5 million shares to 18.3 million shares in Q3 when its price
fell. Cheniere shares rallied in Q1 2013 and Temasek quickly divested half its
stake. The balance 9.2 million shares were sold in Q2 2013. Subsequently,
Cheniere shares tripled from $28 to hit a high of $84.



Temasek then re-invested in Cheniere Energy a year after its shares have
tripled. RRJ Capital and Temasek will jointly invest US$1 billion in Cheniere’s 4.875 % unsecured convertible notes
which have a maturity of 6 1/2 years.

The interesting, or dangerous, thing is the notes pay the accrued interest in
kind ie increasing the principal amount of the convertible notes
outstanding. With a conversion price of $93.64 and being unsecured, Temasek
seems to be extremely bullish on the company despite Cheniere shares having
rallied more than 2000% from about $2 to $3 in 2010.

Less than a year ago, SMOS Josephine Teo said “GIC, Temasek won’t take more risks to help fund govt
spending”. If this is not risk, what is?

Sell Singapore, buy foreign?

In March 2008, Temasek sold Tuas Power to China Huaneng Group for
S$4.235 billion.
In September 2008, Temasek sold Senoko Power to Japan’s Lion Power
for S$3.65 billion.
In December 2008, Temasek sold PowerSeraya to Malaysia’s YTL Power
International for S$3.6 billion.

It appears Temasek has exchanged our power gencos for stakes in foreign
energy and resource companies.

Energy/resource sector investments all losers?

A snapshot of its 9 energy/resource major investments confirms:
- 5 were
loss-making
- PATMI all decreased, except Kunlun, despite (some) increased
revenue.

Temasek Review 2013



With commodity/oil prices falling, Temasek is likely to lose billions of our
reserves.

Conclusion

Temasek’s bold move, some say reckless, into the energy/resource sector is
ill-timed. Contrary to what the government claims, Temasek engages in risky
investments. Due to the nature of such ill-timed investments, Temasek is likely
to suffer billions in investment losses.

Phillip
Ang

* The author blogs at likedatosocanmeh.


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