photo: singapore-sme.com

SP Group net profit averages almost $1 billion for past 13 years under the electricity tariff formula

by Philip Ang

It has been announced that electricity tariffs will increase by 2.8% for the next 3 months. This is on top of the 6.8% increase in the previous three months.

The increase can be said as unjustified because SP Group (SPG), a wholly owned company under Temasek Holdings, made a net profit (after tax) of almost $1 billion last year.  This was revealed by Leong Sze Hian in this TOC article.

After combing through every annual report since 2005, I have discovered that SPG did not earn close to $1 billion in after-tax net profit only recently: it has been making an average of almost $1 billion for 13 years.

From 2005 to 2017, SPG’s annual net profit averaged almost $1 billion. (Figures from individual SP annual reports here.)

According to EMA, the tariff comprises two key components – fuel cost and non-fuel cost. The fuel cost, or cost of imported natural gas, is tied to oil prices by commercial contracts, which change depending on global market conditions. The non-fuel cost is the cost of generating and delivering electricity to homes.

Just a decade ago, the issue of SPG’s $1 billion profit was already highlighted by Mr Leong on TOC.  Mr Leong wrote:

“If the formula for transport fares can be pegged to average wage increase, average inflation and productivity, why is the electricity tariff pegged only to fuel prices? (Note : Even this formula has led to ever increasing record profits for SMRT).

Now that two of the three power companies have been sold to foreign companies, and the third one is in the process of being sold, will the profits of power companies continue to rise? Since Singapore Power and the power generation companies (before their sale) are in a sense, owned by the state, why is the state making a whopping $1.604 billion in profits in a year, from providing a monopolistic essential good to Singaporeans? Instead of just announcing tariff increases due to fuel prices, why not require the projected increase in profits to be announced too?

The mentioned profits of $1.604 billion include the profit of the power stations which has since been sold to foreign companies.

In response to Mr Leong’s article, Worker’s Party’s Gerald Giam commented on his blog: “As with the Public Transport Council (PTC) and ministerial salaries, the Energy Market Authority (EMA) is using this ridiculous formula to justify price increases.”

SPG has consistently claimed that it reviews “electricity tariffs quarterly based on guidelines set by the Energy Market Authority (EMA), the electricity industry regulator“.

But it appears that there is a pre-determined net profit target for SPG and through a flawed formula approved by the People’s Action Party Government, SPG has managed to charge consumers of billions of dollars in electricity tariffs over the years and the predetermined net profit target appears to be almost $1 billion.

Like the PTC which fleeces public transport commuters through a constantly reviewed fare formula to ensure Temasek-linked public transport operator’s profitability, the EMA has implemented a similar formula to scam Singaporean households.

What is really incredible about SPG is its increasingly obscene profit margin during the past 4 years despite revenue falling by more than $1 billion.

Its after-tax net profit/revenue margin was 25% in the last financial year.


Is there any business with such a high profit margin?  No wonder Temasek keeps all these monopolistic companies for its “elites”  to manage.

Should Singaporeans allow themselves to be continuingly scammed by SP Group? Should SP Group be making about $1 billion in after-tax net profit every year?