Sembcorp buys UK's largest flexible distributed energy generator for £216m


Sembcorp Industries' wind turbines in India. Sembcorp has acquired distributed energy generator UK Power Reserve for £216 million in cash after a "competitive process".
Sembcorp Industries' wind turbines in India. Sembcorp has acquired distributed energy generator UK Power Reserve for £216 million in cash after a "competitive process".PHOTO: SEMBCORP INDUSTRIES

SINGAPORE - Sembcorp Industries has acquired distributed energy generator UK Power Reserve (UKPR) for £216 million (S$385.72 million) in cash after a "competitive process", giving the conglomerate a foothold in the UK's flexible distributed energy sector.

Sembcorp said the deal brings onboard flexible assets and solutions, as well as merchant energy capabilities. It is part of the group's strategy to rebalance its energy portfolio towards developed markets.

Said to be the UK's largest flexible distributed energy generator, UKPR owns and operates a portfolio of distributed energy generation projects across 32 locales in England and Wales, with 533 megawatts in operation and a further 480 megawatts in construction and under development, Sembcorp said in its exchange filing.

Its portfolio comprises of small-scale, fast-ramping power generation assets and rapid response batteries, which help to counter the intermittency of renewable power sources.

"Connected at the distribution level close to customer load, UKPR's assets require less investment in large power infrastructure, and are more economical to develop and operate," Sembcorp noted.

Sembcorp bought out holding company, Repono Holdco 1 (Repono) from private equity investors Inflexion and Equistone - each holding a 42.5 per cent stake - through a wholly owned entity, and the remaining 15 per cent from members of UKPR management.

The consideration was finalised after taking into account discounted cash flows and relevant transaction multiples, Sembcorp said, and will be funded via internal cash resources and external borrowings.

Once the transaction is completed by the end of the week, Sembcorp will consolidate all assets and liabilities of UKPR, including net debt.

On a proforma basis, Sembcorp's 2017 earnings per share would have been lifted to 11.11 Singapore cents from 10.51 Singapore cents if the deal had been completed that year.

Sembcorp's group president and chief executive Neil McGregor said the deal will transform the group's UK business "from a centralised utilities provider on Teesside, into an integrated energy business with operations across the country".

"It will also build up Sembcorp's merchant energy business, which we have identified as an area of focus for the group," he added.

Sembcorp's counter was trading at S$2.95, up 0.34 per cent, on Thursday (May 31) before the mid-day break.