‘AAA’ Ratings On Temasek Holdings Affirmed

Standard & Poor’s Ratings Services affirmed its ‘AAA’ long-term corporate credit rating on Singapore’s Temasek Holdings Pte. Ltd. The outlook is stable. At the same time, Standard & Poor’s affirmed the ‘AAA’ issue rating on the US$1.75 billion debt maturing 2015 under the US$5 billion guaranteed global medium-term note (MTN) program.

“The rating on Temasek continues to reflect its leading market positions in most business segments, its high degree of investment diversity and liquidity, its above-average consolidated financial profile, and its exceptionally strong flexibility as a holding company,” said Standard & Poor’s credit analyst Greg Pau. The rating also benefits from its strong shareholder, the Ministry of Finance of the government of Singapore (AAA/Stable/A-1+).

Market position and cash flow generating ability of the prominent Temasek-linked companies remain very strong in the telecommunication, banking, transportation, infrastructure, and engineering segments, despite intensifying competition and high fuel prices. These companies together account for two-thirds of Temasek’s investment portfolio. Temasek’s investment portfolio is highly diversified, with over 20 listed companies and the three largest assets contributing to 31% of total investment value of Singapore dollar (S$) 129 billion (US$81.7 billion).

Temasek made S$21 billion of new investments and monetized S$13 billion of its portfolio in the fiscal year ended March 31, 2006. Despite net spending for acquisitions in the fiscal year, Temasek continues to demonstrate a relatively prudent investment approach. The new investments are assets located predominantly in emerging Asia and mainly in the banking and telecommunication sectors. As a result, the group’s exposure in emerging Asia has increased to 34%, in line with its long-term target of one-third of its portfolio.

“These investments continue to focus on revenue-generating assets with leading positions in their respective markets and strong cost efficiency,” said Mr. Pau. “They also are among companies with better credit quality in emerging Asia.”

The increasing investments in emerging Asia are consistent with the company’s long-term target of having one-third of its investment value in each of emerging Asia, Singapore, and developed OECD countries. With Temasek intending to maintain its long-term target, Standard & Poor’s believes that its portfolio should remain above average in quality and highly diversified.

Temasek has maintained an exceptionally strong flexibility as a holding company with a net-cash position and strong liquidity. “Its investments were largely financed by strong dividend flows from Temasek-linked companies and proceeds from disposal of its investments,” noted Mr. Pau. Temasek’s consolidated financial profile is also strong with FFO to net debt of 60% and net debt to capitalization of 20% in the year ended March 31, 2006.

While Temasek is expected to operate independently and on a commercial basis and the government does not guarantee its financial obligations, the strength of its shareholder and the constitutional arrangements that protect the company’s reserves provide some comfort.

The stable outlook on the ratings on Temasek reflects the low likelihood of significant deterioration in the group and company level financial profiles. It also factors in its stable ownership, considered expansion program focusing on revenue-accretive assets and guided by its investment themes and long-term portfolio target.