Temasek Tracking - Nat'l Stock Exchange India Ltd, making peanut returns

1992   Company incorporated
2010   Temasek invested
2016   IPO did not materialise
2019   IPO also has not happened

There are 2 national stock exchanges in India - Bombay Stock Exchange and National Stock Exchange of India. The capitalisation is roughly the same for both. BSE has more companies listed but NSE has the bigger volume.

In May 2010 Temasek bought into NSE via a private sale by NY Stock Exchange which had to divest due to conflict of interest. Temasek paid Rs 669 crore (US$150m) for 24,750,000 shares (4.95%). This puts the valuation of NSE at US$3b.

A planned IPO for 2016 was aborted after the Securities Exchange Board of India initiated a probe against NSE alleging misuse of its co-location facilities. Several investors. including Temasek, had planned to exit after the IPO. After the failed IPO, NSE put the idea on the back burner and several investors were not too happy with the board's lack of motivation to go public which prevents their exit. In 2019 NSE announced possible IPO in the second half of the year. It has not yet come to pass.

What is the current value of Temasek's investment? In Mar 2018, IFCI Ltd made a private sale of 0.22% stake at Rs 873.74 a piece. This puts the NSE valuation at US$6.5b. In August 2018, State Bank of India sold its 3.9% stake for about Rs 1,700 crore. This puts NSE valuation at about US$5.7b. There seems to be a 100% increase in valuation.

A 100% increase in valuation looks impressive off the cuff. However, foreign investors in India have to grapple with two issues, in addition to the various other risks. One is the depreciation of the Indian rupees and two, is the 20% long term capital gains tax which was re-introduced in 2018.

So how does Temasek's investment in NSE looks like?

Date	Rs Crore	Rate	S$	Date	Rate	S$	.
May 2010	669	32.47	206,036,341	Sep 2020	53.75	124,465,116	FX loss S$81,571,225
Sep 2020	1,338			Sep 2020	53.75	248,930,223	Assume 100% growth
						124,465,116	Unrealised gains
						24,893,023	Cap gains tax
						99,572,093	Net book gains

(Ignore dividends which are insignificant)

The Indian Rupee has depreciated against S$ by 65% from 2010 to 2020. The accounts should have booked a S$81m foreign exchange loss to date.

After capital gains tax of 20% the net unrealised gains is S$99m. It looks like a 32% gains over original investment of S$206m. Looks impressive at first sight. So if Temasek can divest now with this hefty gains, how much bonus should the executive team be getting? The reality is the S$99m gains over 10 years actually work out to ROI of 0.1875% p.a. which is below Temasek's cost of funds.

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View an attempt to list Temasek portfolio with links to microblogs of troubled assets such as these. It's a work-in-progress that gets updated as and when they are published. If you wish to be updated on new microblogs, simply submit your email in the box on the top, right. Thank you.

Temasek Tracking - Snapdeal, the Indian online marketplace sees heavy valuation write down

2010   Founded
2014   Temasek joins US$105m funding round
2015   Temasek joins US$500m funding round

Snapdeal started as a daily deals platform in 2010. A few months on, it expanded into an online market place. At the time, online shopping was undeveloped. With its huge population of 1.3b, and rapid expansion of internet services and mobile phone sales, there was high expectation of explosive growth in online sales in India.

eBay came in 2004, Flipkart started 2008, then Snapdeal 2010. Amazon entered India in 2013. In between, there were several smaller startups. Online marketplace is huge, but no one's making any profits. In 2017 eBay sold its Indian unit to Flipkart. Indian online marketplace startups were just Amazon copycats. They don't bring any differentiation features to the market. It's simply competing on structures. The models are all the same. Build inventories, expand by acquisitions up the vertical lines in logistics and payment systems, fight for market shares with huge discounts. 

Founders Kunal Bahl (Snapdeal) and Binny Bansal (Flipkart) became posterboys of India eCommerce tech world. With abundance of private equity headed for India as the next frontier for cheap money, it became a funding race. When Snapdeal got its US$600m from Softbank, Flipkart boasted of its US$1b+ from several funders, Jeff Bezos literally waved his US$2b cheque for Amazon, India. Both Snapdeal and Flipkart were unicorns which have not earned a single rupee in profits. By 2015, Snapdeal had a valuation of US$6b!

It was in this backdrop that Temasek entered the fray. It participated in 2 late funding rounds in 2014 and 2015. Temasek does not mention how much they put into Snapdeal, but it won't be small change for sure. Incidentally, GIC put US$500m into Flipkart. Strangely, the 2 sovereign wealth funds are having a proxy war in India, them being in opposing camps. 

Amazon has the major share of the market, followed by Flipkart and a distant third is Snapdeal. Amazon is a matured player with far greater capacity to go for market share and no profits for many years. Flipkart and Snapdeal burnt easy private equity funds to expand by giving crazy discounts and acquisitions, often at wild valuations.

After obtaining funding from Softbank in 2015, Kunal Bahl boasted Snapdeal will overtake Flipkart within a year. In 2016, things began unravelling at Snapdeal. What went wrong? Their mobile apps were not getting downloaded as much as Amazon and Flipkart. Opinions differ but there was much talk that Snapdeal focused too much on gross merchandize value (GMV). That means too much effort and resources into the one-day delivery capabilities, the logistics and inventory side of things. Its something that technology and AI can easily take care of. Sellers complained management was not sympathetic to their problems. For an online marketplace operation, sellers are key. No sellers, no customers. Snapdeal's headcount had exploded. It did'nt help that tribal employment practices resulted in manpower quality issues. The company had a burn rate of US$20m a month.

Softbank, the second biggest shareholder, wanted Snapdeal to be sold to Flipkart. Founders and investor Nexus objected and negotiations with Flipkart failed. The deal valued Snapdeal at US$800-US$900m. 

With the sale aborted in 2017/2018, Snapdeal was in survival mode as cash was running out. It cut manpower drastically, disposed of many subsidiaries, including Freecharge the payment systems which it purchased for US$450m, now disposed at fire sale price of US$80m. The company has managed to drastically reduced the cash burn rate. Founders and Nexus propped up the company with further injection of funds. Kunal Bahl now talks of Snapdeal 2.0 and IPO possibly in 2019, which has'nt happened. Interestingly, the pandemic has been good to online sales. Snapdeal picked up millions of new customers. Data indicates Amazon is still number one in tier 1 cities, Flipkart is strong in tier 2 and 3 cities, and Snapdeal is picking up growth in the smaller towns.     

What are the prospects of Snapdeal? Not very bright. Snapdeal is still a very distant 3rd in the e-Commerce war. With the sale of 77% of  Flipkart to Walmart for US$16b in 2018, eBay divested their interest in the company and decided to return to India.  New competition coming. Even as Snapdeal watch their expenditure, it is still spending heavily on advertising. This is unavoidable for online marketplace because unlike a physical store, their customers have no location loyalty. If they don't advertise heavily, they die. There is also still much infrastructure needed. Unlike Amazon and Flipkart, Snapdeal has not yet employed AI technology to monetise the vast amount of customer data, spending habits, etc. Amazon uses its Amazon AWS cloud whilst Flipkart uses Microsoft Azure. Given all this, Snapdeal's future is not assured and it is likely to face another cash crunch round the corner.

What is the impairment to Temasek's investment? We do not know how much Temasek put up. But a little guess work is possible. Snapdeal has received a total of  about US$2b funding and Temasek's share has been mentioned at 2.65%. Thus most likely Temasek put up US$53m. Using Flipkart's offer of about US$850m as a basis of valuation, the investment has lost at least 60% in value. On top of that, Rupee has depreciated against SGD by 10% since 2013. An unrealised loss of about US$34m for Temasek's books is a fair assessment.

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Temasek Tracking - Turquoise Hills, possibly US$1.1b lost in mining gamble

1993   Ivanhoe Mines Limited founded
2001   Ivanhoe discovered copper & gold deposits in Oyu Tolgoi, Mongolia
2012   Temasek invested about US$850,000,000.
2013   Rio Tinto took over 51% of company.
2012   Name changed to Turquoise Hills Resources Ltd
2013   Rights issue. Temasek put up another US$604,000,000

Ivanhoe Mines is a Canadian mining company with some operations in Asia Pacific region. In Mongolia, its subsidiary, SouthGobi, operated the Ovoot Tolgoi coal mine. It also has interest in the Oyu Tolgoi copper-gold-silver mine development project. 

The coal mine started operation in 2008. By 2012 the operation was curtailed due to adverse market conditions. In 2013 the company revised its annual reports for 2010, 2011 & 2012 due to change in accounting statements at its subsidiary SouthGobi. It's share price tanked. This led to a class suit action against the company for inflating its earnings and misleading investors. The case was dismissed in Dec 2014 by District Court.

Ivanhoe found the copper and gold deposits in Oyu Tolgoi in 2001. It is considered the worlds largest copper and gold deposits. In 2010 the reserves were placed at 81.3 billion pounds for copper and 46.4 million ounces for gold. Negotiations with the Mongolian government took an arduous journey with issues of corruption, social, political, environmental impacts, power supply and the huge financing required (US$6b for phase I). A final sharing agreement was reached with government taking 34% and the company 66% in equity.

In 2012 Rio Tinto increased their holdings in Ivanhoe to 51% in order to drive the development of Oyu Tolgoi and arrange financing. Rio Tinto's involvement saw name change from Ivanhoe to Turquoise Hills and the divestment of the Ovoot Tolgoi coal mine. Turquoise is left with Oyu Tolgoi mines as its primary operation.

(Note the Ivanhoe Mines currently listed on the stock exchange is another metal company which later took over this name. Confusing.)

This was the background when Temasek invested into Turquoise Hills in 2012. It is a company with tremendous wealth still locked underground. The operations were initially open pit mining. It is going for phase II which is undergroung mining. But it is beset with huge cost overruns and high sovereign risks. Rio Tinto had to write off about US$1b impairment on their investment under the circumstances. Rio Tinto faces investor revolt in the handling of the Oyu Tolgoi project and Turquoise Hills faces investor investigation that it lied about the development cost of the mine. 

Meanwhile, Turquoise Hills' inability to move forward and produce results bear heavily on its share price. Currently, it is at risk of being delisted as its price has fallen below US$1.00. 

Temasek's investment and divestment:

Date	Shares	High	US$	Low	US$
Apr 2012	5,213,970	US$9.68	50,471,230	US$9.68	50,471,230	Bought (*)
2012 Q3	80,548,227	US$8.48	683,048,965	US$8.48	683,048,965	Bought (*)
2013 Q4	85,762,197	US$7.04	603,765,867	US$7.04	603,765,867	Rights issue
2018 Q4	-64,029,206	US$3.43	-219,620,177	US$3.25	-208,094,920	Sold
14 Jan 2019	-7,240,756	US$3.57	-25,849,676	US$3.57	-25,489,676	Sold

(*) Price based on valuation shown in SEC filing.

As at 31 Dec 2013 Temasek was holding 172m shares costing more than US$1.3b. It seems by Jan 2014, 71m shares have been sold which booked a realised lost of between US$392m - US$401m. 

SEC filing show as at 14 Jan 2019 balance of share was 100,254,432. It is not clear if this balance has been divested.

Turquoise Hills' SEC 2020 filing does not show Temasek as a major shareholder. It is possible the balance shares have already been disposed. It that's the case, it should have realised additional loss in the US$700m ballpark figure. This makes the total realised loss of the investment at about US$1.1b. 

If the balance of 100,254,432 shares are still in Temasek's books, the unrealised loss as of todate is about US$697m.

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Temasek's investments in oil companies has'nt been rosy. Check out other companies I have covered :    FTS International, Chesapeake, Cheniere,   Kunlun Energy,   Orchard Energy,  Seven Energy,   Venari Resources

Check out Portfolio Compilation

View an attempt to list Temasek portfolio with links to microblogs of troubled assets such as these. It's a work-in-progress that gets updated as and when they are published. If you wish to be updated on new microblogs, simply submit your email in the box on the top, right. Thank you.

Temasek Tracking - Venari Resources, yet another failed investment in oil company

 

2011   Founded
2012  1st funding round US$1.1b.
2013  2nd funding round US$1.3b
2019  Assets sold to Talos Energy
2020  Ceased operation

Brian Reinsborough is a 17 year E&P (exploration & production) vet with Nexen Energy. He set up Venari Resources in 2011 whose mission was basically to search for oil in the oil-prone subsalt region in the Gulf of Mexico's deep waters. His model was not a full-fledged E&P company which is a very capital-intensive part of the business. Venari merely hunts for the oil and will partner the big boys Chevron. Marathon etc. for development and production.

2010 was the year of the Deepwater Horizon disaster that caused a moratorium on further oil exploration in the gulf of Mexico. Reinsborough went against market sentiments to start his company at a time when E&P was dead in the Gulf. He felt the moratorium gave time to study the area and new seismic scan technology is allowing better data collection. Equipment and data are levelers. All companies have that. The difference is the men interpreting the data. He assembled an expert team, the ones with instincts in the mold of wildcatters of the past, many from his old firm Nexen. Reinsborough wanted a small team that is nimble so that decision making will be quick. Lastly, he needed a grand slam initial funding so that he has the attention of the big boys when he build development and production partnerships.

Reinsborough started in a tiny office, somewhat like an incubator, of Warburg Pincus, a notable private equity firm. With no money, no assets, and no company, but just a business plan on paper, and going against the industry wisdom of the time, Reinsborough convinced Warburg Pincus, Kelso & Company, Temasek and The Jordan Company to put in US$1.1B in 2012. The following year, Venari was able to attract additional funding of US$1.3B from new investors which included Blackrock Group and GIC.

By 2014, oil prices collapsed. The price of oil did not affect Venari at the time as it was not involved with well operation and production. It was only involved in search operations. In 2014, Venari saw no problems as its wells were not primed for production till 2019/2020. So the company went on to gain fame as it discovered several blocks with substantial reserves. It had built up very significant inventory and leaseholds. Venari had in fact tied up with Chevron Corporation, ConocoPhillips and Anadarko Petroleum for development and production. 

But the prolonged and deeper downward pressure on oil price continued. When it went below US$60 per barrel, the bottom fell out. This price level is the break even for deepwater oil production at the time. Private equity funders are an impatient lot. In times of a prolonged depressed price in the industry, very rarely will they accept the strategy of consolidation and sitting out the cycle. Many E&P outfits funded by private equity folded. Oil companies with deeper pockets and longer term strategies swooped up distressed assets at a fraction of its cost. In 2019 Venari sold its assets to Talos Energy for US$5,000,000, what Singaporeans would call peanuts. Early this year, Venari ceased operations.

It's always been said of GIC having a lower risk appetite than Temasek and thus CPF money are relatively in safer hands. It's probably a fallacy. GIC have been participating as co-investor of Temasek in many risky startup companies. Venari is just an example. 

In Venari, Temasek demonstrated the courage to invest against industry trend. There is nothing intrinsically wrong with this as long as their expert interpretation led to a belief there is an opportunity to be seized. As long as it was an educated guess, the ability to hold contrarian views is a strength. Had there been no catastrophic collapse of oil price, which no one in 2012 could foresee, Venari was well-positioned to generate astounding capital gains. The investment can not be questioned, but the divestment, one may differ. What a waste selling off the assets at terribly distressed price if oil price surge again. It is now about US$40/barrel. What might it have been if there were no pandemic. Whatever the case, oil is a scarce resource and it is an existential commodity. The E&P business is about surviving with the commodity cycles, sitting out the low and extracting profits on the high. Its about sniffing out good sites, hitting some loosing wells and some winning wells and hoping the winners outperform and absorb the loosers. It's putting huge capital for the long haul in an extremely high risk-high ROI gamble. If one looks at the big boys, the perspective is very clear. Chevron Corp is 141 years old, Royal Dutch Shell is 113, Mobil is 109, Total is 96 and even Petronas is 46. Then again, Temasek and GIC could have been dissenting voters in the decision to sell.

Of the US$2.4B total funds, how much was provided by Temasek and GIC is unknown. It is possible the duo pumped in US1B in total. They lost the bet and money is gone.

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Temasek's investments in oil companies has'nt been rosy. Check out other companies I have covered :   FTS International, Chesapeake,Cheniere,  Kunlun Energy,  Orchard Energy, Seven energy    

Check out Portfolio Compilation

View an attempt to list Temasek portfolio with links to microblogs of troubled assets such as these. It's a work-in-progress that gets updated as and when they are published. If you wish to be updated on new microblogs, simply submit your email in the box on the top, right. Thank you.

Temasek Tracking - Orchard Energy, SG state oil company failed to take off

 

2008  Company incorporated (June)
2009  Won the concession to explore at West Belida Block, Jambi, South Sumatra, Indonesia
2009  Company sold to RH Petrogas Limited

Orchard Energy Pte Ltd was incorporated in 2008 as a 100% owned subsidiary of Ellington Investments Pte Ltd. Temasek owns 100% of Ellington.

Orchard was set up to go into the business of upstream oil and gas exploration, development and production. Orchard thus joined a bunch of state-owned oil exploration companies such as Japan Petroleum Exploration Co, Korea National Oil Corp, China National Offshore Oil Corp, India's Oil and Natural Gas Corp, Malaysia's Petronasl Thailand's PTT Exploration and Production and Indonesia's Pertamina.

It was the new kid on the block in an extremely tough and high risk industry. Orchard basically started from scratch and had to build head counts in various specialist expertise such as geologists, geophysicists, deep sea drilling engineers, consultants, drilling contractors, third-party specialists, etc. The company started off with S$13,000,000 seed capital and it is not known if it had taken on debt. The capitalisation is peanuts, a drip in the ocean, for an upstream oil project.

In 2009 Orchard won the Production Sharing Contract to drill for oil in Indonesia waters, in the area West Belida Block, Jambi, South Sumatra. This was to be undertaken in a JV between Orchard's subsidiary, Orchard Energy (West Belida) Ltd and P.T. BEL West Belida in which Orchard had 94% interest.

Before the ink on the Production Sharing Contract can dry, Temasek suddenly had a change of heart and sold off Orchard Energy. It never explained the reasons.

The Sales & Purchase Agreement was signed in Dec 2009 between Ellington and Petrogas, a company listed on Singapore Stock Exchange. Orchard had burnt almost its entire capital. Its net asset by then was about S$350,000. Petrogas paid cash consideration of about S$350,000 and assumed contract liabilities of US$5,700,000. Loss to Temasek was S$12,650,000. Could be more if there were intra-company indebtedness written-off. We don't know if there were any. 

Petrogas is itself a small cap stock and newbie in oil E&P. in 2015 Petrogas surrendered the concession after a study determined there was no oil or gas in the block.

This was no financial investment. It was Temasek doning the Economic Development Board hat. It was Temasek's attempt to create a state-run oil company that will ensure sustainable natural gas supply for Singapore. The mission is of national interest, but what happened to the execution? Was it a bunch of finance guys ai'nt no good oil men?

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Temasek's investments in oil companies has'nt been rosy. Check out other companies I have covered :  FTS International, Chesapeake, Cheniere, Kunlun Energy  Venari Resources  Seven energy



Check out Portfolio Compilation

View an attempt to list Temasek portfolio with links to microblogs of troubled assets such as these. It's a work-in-progress that gets updated as and when they are published. If you wish to be updated on new microblogs, simply submit your email in the box on the top, right. Thank you.

Temasel Tracking - Kunlun Energy

Kunlun Energy is a subsidiary of PetroChina Company Limited, China's largest gas producer by capacity. KE is Hongkong-based as is listed on the HK stock exchange. It focuses on the exploration, development and production of crude oil and natural gas.

Mid 2012 KE issued new share placement of about US$1.3B. Temasek and RJJ Capital took out half of the placements. How much was Temasek's investment is not publicised. The placement was for 800,000,000 shares, so Temasek and RJJ took 400,000,000. My guess is Temasek being the giant and RJJ the dwarf, the split between the two of them is 3:1. The issue price was HK$13.10 so Temasek's investments worked out to HK$4.23B, roughly US$506,000,000.

Today, KE's price is HK$5.22. Temasek is sitting on roughly US$202,000,000 unrealised losses.

Temasek, and many other investors, bought into Ji Xiping's 'Greening of the economy' policy. It was a move towards building a resource-conscious and environmentally friendly society. The LPG play had main stage. By 2015 it became clear demand for natural gas was not going to have the volumes as earlier thought. KE price retreated by more than 50%.

Natural gas is still a very important part of China's long term future plans. It has in the meantime restructured its gas pipeline. The vast network of pipelines has now been taken over by PetroChina and Sinotec at positive valuations which allowed those who built the infra to exit without losses. The use of pipeline transmission will be open to all natural gas suppiers at a fair price. This is positive for LNG players like KE.

KE is not in distress. In fact, at today's low price, it is a recommended buy. But for Temasek, who bought in at the height, it will be a long while before it can see positive valuations. 

Temasek bought in at a time when China's commitment to clean economy promised great opportunities for non-fossil energy. Certainly not an investment move that can be faulted. It was however, a herd instinct to follow the flavour of the month. Any investor with cash to spare can do the same. The investor that makes the difference is the one who can read what's ahead before anyone else does - getting in ahead of others, and exiting before it's too late. Ultimately, it has to be on this basis that we measure Temasek. And on this score, the stuttering Chinese economy was already evident by 2010. Is that a double whammy bad gamble on China and energy or what?   

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Temasek's investments in oil companies has'nt been rosy. Check out other companies I have covered :  FTS Internationa l, Chesapeake, Cheniere, Orchard Energy. Venari Resources Seven energy

Check out Portfolio Compilation

View an attempt to list Temasek portfolio with links to microblogs of troubled assets such as these. It's a work-in-progress that gets updated as and when they are published. If you wish to be updated on new microblogs, simply submit your email in the box on the top, right. Thank you.

Temasek Tracking -- Cheniere Energy Inc

 
1996  Started as oil & gas exploration company
2005  Switched to LNG, invested heavily in terminals
2010  Became LNG exporter
2012  Temasek bought 15,500,000 new shares in May (US$217,775,000)
2012  Temasek bought another 2,800,000 shares in Q3
2013  Temasek divested
2014  Temasek bought 6-1/2 year 4.875% pa Convertible PIK Notes (est US$335,000,000)
2020  In Q1 Temasek sold part of the Convertible Notes

Cheniere Energy Inc is in no way a troubled company. It is included in Temasek Tracking blogs as an interesting commentary on the SWF's investment in the oil sector.. 

Cheniere is a Houston-based energy company primarily engaged in LNG-related businesses. It owns and operates 2 major LNG terminals - the Sabine Pass terminal and the Corpus Christi terminal. It is today the 3rd largest LNG exporter in the world. In years 2010-2015 it rode on the expansion of US export of LNG. Its financials is aggressive, dividends lacklustre but outlook is stable. It has high volume capacity and long term contracts locked in. In 2018 it signed a 25 year supply contract for US$25B with Taiwan's NCC state-run oil company.

Temasek's investment and divestment:

Date	Shares	Low	US$	High	US$
May 2012	15,500,000	US$14.05	217,775,000	US$14.05	217,775,000	Bought at IPO
2012 Q4	2,800,000	US$12.50	35,280,000	US$16.63	46,564,000	Bought
2013 Q1	-9,100,000	US$18.25	-166,075,000	US$28.00	-254,800,000	Sold
Aug 2013	-9,200,000	US$27.93	-256,956,000	US$27.93	-256,956,000	Sold

Temasek made realised gains of between US$159m to US$284m within 1/2 years, an incredible ROI.
Having fully divested, Temasek re-invested in mid-2015 by subscribing to a convertible notes issue. This is a 6-1/2 years 4.875% Convertible PIK Note. It is unsecured with bi-annual coupons. PIK means payment-in-kind. There is no cash payment for interest; it is added onto the Note principal amount. From SEC filing 31 Mar 2020, the value balance was shown at US$428,186,000. Working backwards, the original Notes purchased is estimated at US$335,000,000. In Q2 this year, Temasek sold off principal value of US$162,353,000. leaving a current balance of US$265,833,000. With bond prices at historic highs due to depressed interest rates, and the Notes having about a year to run, the sales probably fetched some capital gains. However, the issue was not listed which means the sales was a negotiated one, thus incurring heavy legal costs. That said, the sales should have easily fetched cash inflow of at least US$262,000,000. Partial sales of the bonds in Q2 this year was most likely to free up some liquidity under the difficulties of the Covid pandemic.

The investment and divestment raised some questions. 

Temasek had said the Cheniere investment is a “longer term interest” in the energy sector.  The stake was part of a broader plan to co-operate with Cheniere and RRJ Capital, a US private equity group, to take advantage of the US shale gas revolution. In April 2012 Temasek had created a separate unit, known as Pavilion Energy, to invest in LNG supply chains, with an “initial capital commitment” of $1bn.

Given this statement, the divestment of Cheniere within 1-1/2 years is puzzling. It is possible Temasek acted opportunistically to realise substantial gains.The divestment was made when Cheniere was on a bull run. Perhaps the decision was made with some foresight as oil prices started to collapse from Q4 of 2013. The argument against this is, in the US market, LNG price is not indexed to oil and Cheniere has long term supply contracts. That's why Cheniere was out-performing the oil industry at the time. If it was a trading call, the timing was bad.

It is more likely the divestment was due to change in plans with regards to Pavilion's direction. Again, if that was the case, subscribing US$335,000,000 to the Cheniere PIK Convertible Notes in 2015 does'nt make sense. The oil and LNG market had collapsed. Why pick bonds that has a conversion price of US$93.64 which was 50% above traded price at the time and the market in nosedive. Why pick a 4.875% pa bond when its own total shareholder return for 2015 was 19.2%, and longer term returns from 5 to 30 years were all higher than the bond coupons. Why pick an unsecured, unlisted bond with a "B+" credit rated company. And why have a term that allows co-investor RJJ Capital the right to transfer their bonds to Temasek. 

No loss was incurred, but the investment throws up puzzling questions. 

Follow this blog for the curious case of RJJ Capital and Temasek that I will blog on in due time.

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Temasek's investments in oil companies has'nt been rosy. Check out other companies I have covered :  FTS International,  Chesapeake,  Kunlun Energy, Orchard Energy,  Venari Resources  Seven energy


Check out Portfolio Compilation>

 

View an attempt to list Temasek portfolio with links to microblogs of troubled assets such as these. It's a work-in-progress that gets updated as and when they are published. If you wish to be updated on new microblogs, simply submit your email in the box on the top, right. Thank you.

Temasek Tracking - Nigerian oil & Seven Energy International Lid

2004  Seven Energy founded
2014  Temasek invested US$120m
2015  US$450m debt issue subsidiary Acugas
2017  Nigerian national oil company terminated SSA with Seven
2019  British group Savannah Energy finalised acquisition of Seven assets

Did Temasek wilfully, negligently, or foolishly, end up as the biggest shareholder in a company that was alleged to be partly owned by two suspected criminals who are said to have laundered stolen Nigerian oil funds through the company?

Seven Energy International Ltd is an indigenous Nigerian oil and gas exploration, development and production company with a focus on supplying gas to the domestic market. It is a holding company registered in Mauritius. In Nigeria, it operates under Septa Energy Nigeria Ltd which has since been renamed Seven Exploration and Production Limited. 

Nigerian Petroleum Development Co (NPDC) acts like the state national oil company. It owns the onshore oil fields and contracts out to upstream oil companies under Strategic Alliance Agreements. These SAAs are agreements for cooperation among two or more independent firms to work together toward common objectives but they are not joint ventures. Septa received SAA for 3 fields in 2010. All oil production revenue goes to NPDC which then remits the percentages back to Septa.

Read BBC 9 Jan 2014 : Nigeria bank chief Sanusi told to resign by Goodluck Jonathan

On 25 Sep 2013 Lamido Sanusi, the Governor of the Central Bank of Nigeria, wrote a long letter to President Goodluck Jonathan. This letter was leaked and it was all over the media and internet. Sanusi laid out the bad stuff - serious corruption in the oil sector, plunder, missing US$20billion, money laudering etc. He fingered specifically 3 persons - former Nigeria Petroleum Minister Diezani Alison-Madueke and two prominent Nigerian businessmen and oil traders Jide Omokore and Kola Aluko. Aluko owns Atlantic Energy as well as CEO of Seven Energy. Omokore was chairman of Atlantic. Sanusi also highlight both Atlantic and Seven Energy have no capital, no expertise or experiece in oil production and questioned why they were given 5 SAAs. The president sacked Sanusi.

A lot of red flags were already on the internet at the time Temasek bought into the company in April 2014. Was it a case of sub-quality due diligence, or maybe, as seen again and again, a flamboyant and outwardly impressive company frontman Aluko has such persuasive influence. Many Chinese investors are in the African oil sector, but they are there living out the in the mud, the dangers and amongst the local operatives. They know how to make their calls. Can investments in such volatile business in such fluid states be safely managed in plush air-conditioned comfort thousands of miles away?

Poorly capitalised indigenous oil companies leveraged substantially heading into the oil price crash starting around Q3 of 2013. just before Temasek took up 15.5% of the equity of Seven Energy in April 2014. The floor was giving way when Temasek stepped in. Excellent timing. 

The instability of the Nigerian currency, Naira, was already a known factor at the time of Temasek's investment decision. Since 2014 to 2020, the Naira has depreciated by 100%.

Seven was having problems of accumulated receivables due to issues of government subsidies on gas, inability to convert Naira to US$ for working capital, and the closure of Forcados export pipeline due to sabotage as the country faced high levels of industrial oil theft, as well as Islamist terrorist activities, such as Boko Harum.

Temasek made the investment in light of known liquidity, security, execution risks and naira convertibility issues.

In Jun 2015 Seven Energy subsidiary, Acugas Limited, had to take on US$495M debt in a bond issue which was listed in the Irish Stock Exchange. It is not known if Temasek participated in this. By 2016, the bond had dropped to junk status and Seven Energy was staring at bankruptcy proceedings. By 2017, having ran out of cash and thus unable to make payments to the state oil company under the SAA, the NPDC cancelled the SAA. Means Septa had no oil fields, no oil production revenue.

Seven Energy went into judicial administration in 2016 so as to restructure capital and negotiate with British oil company Savannah Energy to buy some of its assets. This transaction took a few years and was fully executed end 2019 recently. Savannah took over the 3 oil fields leaving Seven with basically only the gas distribution business under subsidiary Acugas Limited.

Jide Omokore, co businessman Kola Aluko and former Nigeria Petroleum Minister Diezani Alison-Madueke are currently being investigated for a series of multi-billion dollar fraud and money laundering offences in Nigeria, the United Kingdom and America. Seven Energy itself has not been accused of any wrong doing.

With main assets sold and the Naira depreciated by 100% since 2014, what is the value of Temasek's investment? We can't make any sense of the value as there is no current info on the company in the public domain. But it does'nt look good. The investment is basically dead man walking.

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Temasek's investments in oil companies has'nt been rosy. Check out other companies I have covered : FTS International,  Chesapeake, Cheniere,   Kulun Energy,  Orchard Energy,  Venari Resources 

Check out Portfolio Compilation

View an attempt to list Temasek portfolio with links to microblogs of troubled assets such as these. It's a work-in-progress that gets updated as and when they are published. If you wish to be updated on new microblogs, simply submit your email in the box on the top, right. Thank you.

China's crypto currency scam - how to spot a scam and falsehoods

Bitcoin and other cryptos are banned in China, and for valid reasons. China wants to develop its own central bank crypto. The expectation for the coming Chinese crypto is electrifying. It is not just because the Chinese market is huge, but the people are already in tune with a cashless society. It is an opportunity that all those who missed out on the explosive booms of Bitcoin will never want to loose out a second time round. That's probably 6 billion people. 

The Yuanpay Group calls itself "the only officially approved and controlled legal crypto platform in China". It claims to have worked with the government and banks in the development of this new crypto and is licenced to sell and trade in it. They are now open for business. You are likely to see their advertisements everywhere on how to turn $100 into $5,000. 

I blog a lot on investment related matters and I have a feeling Yuanpay's advertisement will turn up fairly often. So I want to take a few moments away from tracking Temasek's bad assets and sound the alarm bell on Yuanpay specifically and touch a bit on some quick ways to smell out a scam.

I saw this innocuous advertisement:

The advert does not tell who they are and the copywritng is an obvious click bait. That's the first give-away.

I was interested in the currency image. I want a bigger image that I could use in future, so I clicked. It brought me to what is known as the landing page.

So I landed at a page in what looks like Forbes website with headline "China Officially Backs a CryptoCurrency and Establishes it as their Official Coin".

It also says "In fact, China deputy minister of finance, Liu Kun, informed us that their new official coin starting price is just ¥0.12 cents!"

The article goes on to entice the unwary with the great opportunities for the early birds. A common feature is to show what billionaires know and you don't. This article did'nt disappoint. It has the good Sir Richard Bronson to beckon you on.

The article gives a brief on Yuanpay Group and salivates you with examples of real people making easy money. It then provides a link to click to Yuanpay Group website where you can sign up. That's called funneling. The landing page funnels the unwary to the page where they sign you up.

The Yuanpay Group page provides the sign up forms to fill up. A give away here is the page is devoid of any info about the company. There is no menu and the usual about, contact, directors, products, technology, news, etc. 

Here are 2 simple things you can do to authenticate the stuff you see.

Check the domain name:

Firstly, is the Forbes article even true? Why would Forbes a reliable institution allow themselves to be used? The first thing to do is check the URL of the Forbes article which shows as :

https://agitated-mccarthy-31dfda.netlify.app/?campaignid=10974806131&adgroupid =107289741269&creative=460148792551&placement=fintel.io&matchtype=&device=
.  

The URL (Uniform Resource Locator) is a locator ID or unique address for each webpage or resource such as a file or image. In the URL, look out for the Domain Name which is the unique name for a website. A simple domain looks like this :

www.(name).(suffix)
www - this defines the content, which is the world wide web. This is not shown in browsers.
(name) - this is the name the owner has provided for their site.
(suffix) - this identifies the type or location of the site, eg 'com' is for US, 'com.sg' is for Singapore, 'gov' is for government, etc.
 
There are other characters that make it look complicated. But it is organised like this :

www.xxx.xxx.(name).(com)/xxx/xxx/xxx/xxx

The 'xxx' on the left are sub-domains (consider them as folders and sub-folders and are separated by a period).
The 'xxx' on the right are pathways to the specific resource or webpage and they are separated by a slash.

The prefix 'http://' is the scheme which dictates what protocol must be used to fetch the webpage or resource. 'http' stands for hypertext transfer protocol. 'https' is the secured version. There are other like 'mailto' and 'ftp'.

What you need to do is to look out for the domain name. For example, to sign into DBS internet banking, you go to the sign-in page, check the URL which shows :

https://internet-banking.dbs.com.sg/IB/Welcome

The domain name shows 'dbs.com.sg' so it's a valid DBS site.

For this Forbes article, the domain name is 'netlify.app'. It is definitely not an authentic Forbes article.

Fact check the image:

Googles provide for a reverse image check. Googles will show all similar images that have been posted. You can then see where and when it has been posted and trace to the origin.

To do this, go to www.images.google.com. The familiar google search page will show:

There is a difference with the usual google search page. The Google logo has an attachment "images" and there is a camera icon in the search bar. There are 2 ways to do the search.

1. Drag the image into the search bar.
2. Copy the address or URL or the image and past it on the search bar. To obtain the image address, right click the image and select the option "copy image address". Go to the google image search bar and click the camera icon. A dialog box will open. Simply paste the image address and click search.

For Chrome browser users, the easiest way to do reverse image search is to go to the image, right click and select the option "Search Google for image".

I tried to do a reverse image search on this Yuanpay image but nothing original came up. The same 'news' is copied mindlessly by silly blogs and miscellaneous sites. No other serious news media carried the article. So either this is the one and only original image or it has been doctored. If an image is doctored, its digital dna changes and google would not be able to pick up the originals. My guess is the image is doctored because it looked like a media event, in which case the same image would have been carried by many news sites. So I did additional detective work and finally saw this image in www.sbs.com.au, an Aussie news site.

This is not Liu Kun of the Ministry of Finance talking cryptocurrency, but China's Commerce Ministry spokesman, Gao Feng in July 2018 talking about a "fierce counterstrike" if Trump adds more tariff to the trade negotiations.

Other give-aways:

At the Forbes article page, all the "Forbes" sub-menus link to the same Yuanpay page. A clear sign this is fake. No other authentication required.

The smart thing about the article is the date. It is not text but there is a script running which shows the current system date when the page is opened. The viewer thinks it is the latest news. All the other websites that copied this article show dates sometime May 2020.

.
Praemonitus, praemunitus - To be forewarned is to be forearmed. 

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Check out our Temasek Portfolio Compilation and links to troubled assets

View an attempt to list Temasek portfolio with links to microblogs of troubled assets such as these. It's a work-in-progress that gets updated as and when they are published. If you wish to be updated on new microblogs, simply submit your email in the box on the top, right. Thank you.

Temasek Tracking - India's National Investment & Infrastructure Fund

 

2015  Fund created
2018  Temasek invested US$400M

This is not about a troubled asset of Temasek. It is just a brief overview of the investment and you, dear readers, form your own opinion.

NIIF was set up by the Indian Government in 2015. The National Investment and Infrastructure Fund Ltd owns the assets and manages the fund. The government commits an inflow of 20,000 core rupees to hold 49% of the shares, the rest from institutional investors both local and foreign. (1 core = 10,000,000). It's a brave and decisive attempt by PM Modi to spur the development of poor infrastructure in the country. 

NIIF projects will be implemented strictly on commercial basis. It is splint into 3 asset specific funds:
- Master Fund
- Fund of Funds
- Strategic Investment Fund

Temasek's investment is in the Master Fund so I'll restrict the comment to this fund. It is an infrastructure fund with the objective of primarily investing in operating assets in the core infrastructure sectors such as roads, ports, airports, power etc.

Infrastructure funding for third world countries is one of the most risky investment with long drawn out gestation and low ROI. There is heightened political risk, normally when there is a regime change. (Temasek has had a taste of such political risks in the cancellation of the Andra Pradesh township project). Such projects are mostly undertaken by multilateral development banks such as the World Bank, Asian Development Bank, European Bank for Reconstruction and Development etc. The objective of these institutions is to enable the economic development of poorer countries. They are in a position to offer not just financial support but also professional advice for economic and social development of the needs of these countries. Temasek's objective should be purely investing to grow our reserve dollars.

Third world countries that try to go it alone does it with a national development bank which are often loss making as their role requires supporting subsidy policies of the government. We had the Development Bank of Singapore which by now is a full-fledged commercial bank. India has no national development bank.

NIIF currently manages about US$4B. The first project of the Master Fund is a US$3B ports and logistics platform. It has formed Hindustan Infralog Private Limited (HIPL) to handle this project in partnership with DP World, a Dubai-owned global operator of container terminals and the largest player (by volume) in the Indian container terminal market. HIPL seeks to build a US$3B equity interest in entire ports and logistics value chain. It is on an acquisition trail.

The Dubai SWF pumped in a US$1B into the NIIF Master Fund and its DP World gets a plump reward. Temasek participated in the fund much earlier than Dubai. It pumped in US$400M and gets nothing. First to subscribe, but unable to upsell the services of Singapore's PSA. 

The HIPL project has no semblance of infra building but more like 'nationalisation' of existing businesses in the ports and logistics value chain. It is out to gobble up the SMEs.

Temasek's investment is defined by six structural trends as show in the chart taken off their website.

If the chart is too small to view, don't bother to squint your eyes in vain. I'm just trying to point out this US$400M investment in the NIIF does not fall within the scope of investment that interest Temasek. So the question is what then is it all about? I posit that it is an accommodation to the Indian government. In Hokkien we call this "Eng Chiew". Why else pour this money into something with high political risk, long gestation period for returns, no easy exit pathways, and outside their interest area for investment. Singapore has bent so far back to placate the Indians with CECA, what's a peanut contribution to the NIIF if it facilitates Temasek to invest more and pour more capital into the sub-continent. 

There is a saying "India has little roads and rails and trains. It has a lot of laws. It has a lot of corruption." We should wish our Indian friends well with their infrastructure development. But we are unlikely to see returns on this investment for many many long years to come. That's my opinion.

Check out Portfolio Compilation

View an attempt to list Temasek portfolio with links to microblogs of troubled assets such as these. It's a work-in-progress that gets updated as and when they are published. If you wish to be updated on new microblogs, simply submit your email in the box on the top, right. Thank you.