Temasek warns of volatility as annual profit declines

"The global contagion risks from Europe over the next 12-24 months are not insignificant," Suppiah Dhanabalan, Temasek's chairman, said in his foreword to the fund's 2012 annual review. "Other medium term risks include a tepid recovery in the USA and its substantial debt burden as well as structural challenges in Asia. These may trim the growth potential of Asia, and heighten volatility in this decade. Growth in general will be more tentative."

Singapore corporations such as Singapore Airlines, Neptune Orient Lines and Singapore Telecommunications, which account for a large part of Temasek's portfolio, were the principal drag on performance. The companies came under pressure due to rising costs and weaker global demand.

Total shareholder returns (TSR) on a one-year basis, described as a "modest" 4.6% last year, fell to 1.5% for 2011-2012, although the 10-year TSR was 10%, up from 9%. Operating cash flow came to S$16.8 billion, down from S$20.1 billion a year earlier.

Investments for the last year totaled S$22 billion, compared with divestments of S$15 billion, with energy and resources a particular area of focus. Temasek committed $$3.38 billion to three US energy companies: shale energy specialist FTS International, alternative fuels transportation firm Clean Energy Fuels, and fertilizer producer The Mosaic Company.

It also injected S$300 million into US liquefied natural gas (LNG) exporter Cheniere Energy and was a cornerstone investor in the IPO of Kulun Energy, another LNG player. Both deals were completed in partnership with RRJ Capital, a private equity firm set up by Richard Ong.

Temasek reduced its exposure to Asia, with the Singapore and Asia ex-Singapore shares falling to 30% and 42%, respectively. Allocations to Australia and New Zealand and North America and Europe both increased. Financial services still accounts for the largest part of Temasek's portfolio on a sector basis, but its share fell to 31% from 36%. Energy and resources, meanwhile, jumped from 3% to 6%.

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• Topics
• Southeast Asia
• Performance
• Temasek Holdings
• Singapore
• China
• Southeast Asia
• USA
• energy
• Sovereign wealth fund