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KUALA LUMPUR (June 8): A Malaysian consortium co-headed by Sime Darby Bhd and S P Setia Bhd has emerged as the preferred bidder for the prestigious Battersea power station project in London that could cost as much as £600 million (RM2.95 billion).
In a joint statement to Bursa Malaysia, the two companies said they have signed an exclusivity agreement with the joint administrators and receivers of the property — Alan Bloom and Alan Hudson of Ernst & Young LLP — to acquire Battersea Power Station's assets which include its 15.8ha freehold tract.
The Malaysian consortium defeated two other interested parties — Russian tycoon Roman Abramovich, who owns Chelsea Football Club, and British property investor Godfrey Bradman. Abramovich intends to construct a 60,000-seat stadium on the site.
If successful, the purchase of the potential lucrative piece of real estate will boost Malaysia's corporate standing in the UK. Sime Darby and S P Setia will join the ranks of other Malaysian groups, such a YTL Power International Bhd and Genting Bhd, which control Wessex Water Services Ltd, UK's premier water supply and sewerage utility firm, and the UK's largest casino chain respectively.
Under the agreement, S P Setia and Sime Darby unit, Sime Darby Property Bhd, have 28 days before concluding the purchase. Under the aggrement, the joint administrators and receivers can only negotiate with the Malaysian consortium during the 28-day period. Should both parties fail to reach an agreement, the joint administrators and receivers can embark on negotiations with alternative bidders for the piece of real estate.
Sime Darby and S P Setia each hold a 40% equity interest in the consortium, and the Employees Provident Fund (EPF) owns the remaining 20%.
S P Setia president and CEO Tan Sri Liew Kee Sin said the total gross development value for the project is estimated at £8 billion. "Very excited with the development, [we are] committed to make it work and to make it an iconic project with the main power plant structure maintained as an important symbol of its history," Liew said.
He noted that the redevelopment of Battersea power station would be key to the so-called regentrification programme of the area, which includes extension of the northern line for the London underground railway system.
According to Liew, the consortium will contribute £200 million towards the extension of the underground transit, bringing the total cost of the project to £600 million.
"S P Setia is very excited to work with Sime Darby as an equal partner, with [the] sharing of expertise and different customer base to complement the project," he said.
With a large captive customer base from S P Setia and Sime Darby, and coupled with interest from Southeast Asia buyers, Liew added that the consortium hopes to secure 50% of sales for initial phases from Asia.
Real estate consultants said the Battersea Power Station assets would enable the developers to gain access to the lucrative prime central London property market where there is a shortage of sizable development tracts, and residential projects.
VPC Alliance (M) Sdn Bhd managing director James Wong told The Edge Financial Daily that prices of properties in the prime central area tend to outperform their nationwide peers by virtue of London's status as a global financial and education hub.
"The attractive London property market has good demand," said Wong the immediate past president of the Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector of Malaysia.
RHB Research Institute Sdn Bhd senior analyst Loong Kok Wen said while the Battersea deal is deemed "overall positive" for S P Setia as prime central London properties tend to outperform their nationwide peers against a backdrop of global economic volatility, she is also mindful of foreign exchange risks to the developer.
"This is because S P Setia's overseas portfolio will increase if it succeeds in acquiring the Battersea land," Loong said.
She also warned of limitations to the developer's profit margins as the development involves the construction of an underground train station while preserving the iconic historical power plant within the enclave.
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