SembCorp Industries

SembCorp
Sembcorp wishes to update that following the exit of Eastman Chemical Singapore Pte Ltd (Eastman) from its manufacturing site operations on Jurong Island, we have now received notice to terminate the utilities services agreement from Eastman.

Net profit contribution from Eastman in FY2020 was about five percent of Group net profit before exceptional items (from continuing operations) in the same period.

https://links.sgx.com/FileOpen/NOTICE%20...eID=661461

SembCorp@209
profit warning due to fully impaired $212m assets
https://links.sgx.com/FileOpen/Sembcorp%...eID=676899

https://drive.google.com/open?id=1ET58x8...hE-8FE_s1X

Stay home and stay safe, everyone.

Sembcorp@203
1HFY2021 Result w 2cts div
https://links.sgx.com/FileOpen/SCI_1H202...eID=677593


https://drive.google.com/open?id=1Zy7CVL...U7TqKHyC6D

Stay home and stay safe, everyone.

Headline profitability improvement looks strong and there is demonstrated confidence as the Company doubles its interim dividend.

Dwelling into the numbers (page13 of results presentation), most of the gains (212mil) are coming from the electricity supply to Singapore/India, with 92mil (~43% of 212mil) coming from hedging/other income. A few thoughts to this:

(1) Similar to SIA hedging their fuel costs, SCI gains from these economic hedges when their input cost rise. So hedging is doing its work due to the commodity price rises in the last 6-12months. On a long term basis (or over a basis of a commodity boom/bust cycle), we would expect the gains and losses to roughly cancel. Since SCI is generating electricity, a basic need, we are talking about pretty serious catastrophes (eg. war and natural disasters) for them to meet the fate of SIA in 2020 (high losses from their hedging but unable to take advantage of the low fuel prices due to worldwide lockdowns)

(2) Excluding those exceptional gains, another 120mil additional gains from higher electricity prices in both Singapore and India. It seems this business is benefiting from inflation (or the misery of the masses), at least based on the way prices are calculated. While there is strong rule of law in Singapore but the higher prices go, the more nervous the investor may have to be, especially in foreign emerging economies like India.

SEMBCORP DELIVERS STRONG 1H2022 PERFORMANCE

- 1H2022 net profit before exceptional items up 94% at S$490 million
- Significant growth achieved in renewables portfolio

1H22 results: https://links.sgx.com/FileOpen/SCI_1H202...eID=726243
1H22 presentation: https://links.sgx.com/FileOpen/SCI_1H202...eID=726245

I thought this is a great sale as it deleverages the balance sheet as interest rates start to rise. More importantly, it removes a potentially risk asset. Most people think utilities/infrastructure are stable risk-less assets but this treatment can only be readily applied when the asset are in developed countries that apply/respect/follow the rule of law.

Proposed Sale of Shareholding in Sembcorp Energy India Limited

• Base Purchase Price: The consideration for the SEIL Sale Shares payable by the Purchaser to SCU is INR117,338 million
(approximately S$2,059 million1). The Base Purchase Price is 1.0x of the SEIL book value as of 30 June 2022

• Final Purchase Price: The Base Purchase Price is subject to certain adjustments3 on and after the date of completion under the Share Purchase Agreement

https://links.sgx.com/FileOpen/Proposed%...eID=730870

(06-09-2022, 07:15 PM)weijian Wrote: I thought this is a great sale as it deleverages the balance sheet as interest rates start to rise. More importantly, it removes a potentially risk asset. Most people think utilities/infrastructure are stable risk-less assets but this treatment can only be readily applied when the asset are in developed countries that apply/respect/follow the rule of law.

Proposed Sale of Shareholding in Sembcorp Energy India Limited

• Base Purchase Price: The consideration for the SEIL Sale Shares payable by the Purchaser to SCU is INR117,338 million
(approximately S$2,059 million1). The Base Purchase Price is 1.0x of the SEIL book value as of 30 June 2022

• Final Purchase Price: The Base Purchase Price is subject to certain adjustments3 on and after the date of completion under the Share Purchase Agreement

https://links.sgx.com/FileOpen/Proposed%...eID=730870

The disposal is settled by deferred payment note with a tenor for as long as 15 years to 24 years. Cash flow wise, doesn't seem to have much immediate effect.

I think the payment terms seemed incredibly long (and may indicate the cashflow position of this unit) but it removes an overhang with ref to below

(12-09-2017, 07:21 PM)karlmarx Wrote:

(05-08-2017, 07:12 PM)choya Wrote: Another issue maybe due to this -

http://www.businesstimes.com.sg/energy-c...oper-costs

The BT article says, "Sembcorp Industries Ltd said recurring payment delays by Indian electricity retailers are piling on costs to operators and are bad for the renewable power business it wants to build."

But why are the electricity retailers delaying payment? Are they having cashflow issues? If so, why? Did SCI not claim that there is a lot of demand for electricity in India? Wouldn't business be brisk for electricity retailers?

The answer to these questions is perhaps because most of the consumers have been 'getting' electricity for free...

“Stealing power is considered a birthright by many, and anyone who tries to stop this is frowned upon,” said Padamjit Singh, a board member at Transparency International India and a member of the All India Power Engineers Federation, an industry advocacy group. “Power thefts are posing the biggest challenge to ensuring electricity access to all citizens, which is absolutely necessary for equitable growth of our country.”

https://www.bloomberg.com/news/articles/...ion-market

This helps us understand why SCI has been having difficulty in securing long-term PPAs with the local electricity retailers in India, over the past year.

More importantly, this highlights the importance of understanding the local condition in which your listed companies are operating in. I wonder if SCI was aware of this issue. Perhaps they were keeping their fingers crossed that the local authorities will stop electricity theft.

interesting perspective:

In order to reduce its official carbon footprint, Sembcorp Industries Ltd. sold two coal-fired power plants to an Omani group for $1.5 billion. The company told shareholders that the sale would lower its greenhouse gas emissions intensity by 38%, more than enough to dodge the penalties attached to the company’s sustainability-linked bonds.
But the firm financed the sale  of the assets with a 15-year loan and retains “substantial” liabilities and “operational influence,” over the business, according to a report by Anthropocene Fixed Income Institute, a London-based think tank. That effectively makes Sembcorp a shadow bank for the coal industry, Anthropocene argues, and the carbon footprint of the coal plants shouldn’t be removed until the loan is fully repaid. 
Sembcorp, in which Temasek holds a 49% stake, has two outstanding sustainability-linked bonds totaling S$975 million ($697 million). Under the performance targets, the company has to pay an extra 25 basis points in interest if it failed to meet the emissions intensity targets. - Bloomberg

With all these "ESG-friendly" behavior on-going, this probably suggests that OPMIs will be better served focusing on the supply side of the Capital Cycle..

(09-11-2022, 11:59 AM)specuvestor Wrote: interesting perspective:

In order to reduce its official carbon footprint, Sembcorp Industries Ltd. sold two coal-fired power plants to an Omani group for $1.5 billion. The company told shareholders that the sale would lower its greenhouse gas emissions intensity by 38%, more than enough to dodge the penalties attached to the company’s sustainability-linked bonds.
But the firm financed the sale  of the assets with a 15-year loan and retains “substantial” liabilities and “operational influence,” over the business, according to a report by Anthropocene Fixed Income Institute, a London-based think tank. That effectively makes Sembcorp a shadow bank for the coal industry, Anthropocene argues, and the carbon footprint of the coal plants shouldn’t be removed until the loan is fully repaid. 
Sembcorp, in which Temasek holds a 49% stake, has two outstanding sustainability-linked bonds totaling S$975 million ($697 million). Under the performance targets, the company has to pay an extra 25 basis points in interest if it failed to meet the emissions intensity targets. - Bloomberg

ya this is the kind of problem that has been affecting and will continue to plague the space for years, following the letter but not the spirit of ESG. not to smack sembcorp only cos i think many firms are doing similar actions, fulfilling metrics to show goodness but from the POV of the Earth, nothing changes. reminds me of how countries outsource their plastic burning to others and claim their have among the lowest plastic waste.

in this case sembcorp did the hard work of developing, catalyzing, financing, commissioning the coal plants.....then handed it off to a diff owner. doesnt feel quite right but in the end, incentives drive actions.