Sembcorp Industries aims for double-digit return on equity in the next five years with its new growth strategy, president and chief executive Neil McGregor said yesterday.
A key focus of the blueprint involves repositioning the utilities business to improve returns and shorten the time to generate earnings from assets.
A rumoured privatisation of Sembcorp Marine is off the table for now as Mr McGregor said the parent group would want to ride through the cycles with the firm.
Its utilities division is set to transform into an originator, owner and operator of assets. In addition to developing projects from scratch, it will invest in assets that are closer to starting operations. This will shorten the time taken for its asset portfolio to reap its targeted returns.
The plan also provides for the division and its parent group to "scale and optimise its integrated energy platforms and develop a pipeline for active capital recycling".
The intent is to focus on three business lines.
One is gas and power, including thermal power, gas imports and retail and regas infrastructure.
Another is renewables and environment, focusing on renewables, water and wastewater treatment and waste-to-resources.
The third is merchant and retail. This is to enable the business to capture opportunities closer to customers.
Mr McGregor said that in mapping out these business lines, the group took into account major challenges in the changing global energy landscape. These include decarbonisation of the world's energy mix, decentralisation of the supply chain, digitalisation of energy systems and demand disruption from key trends, including electric vehicles.
Mr McGregor identified Europe, South-east Asia and Australasia as growth regions for the group's renewable business.
It has also set up a fuel trading unit to handle liquefied natural gas cargo. This will go towards augmenting the supplies to Jurong Island, which now mainly come from piped imports from Indonesia.
Mr McGregor said the pursuit of long-term growth by re-investing cash means it will look at "capital recycling", or opportunistic divestments of assets held by its utilities division. For a start, it will float the Indian units of its utilities division on two stock exchanges there. But the group will retain a controlling stake in the consolidated entity - Sembcorp Energy India - after the initial public offering that is projected for later this year.
The group also plans to divest more assets to generate $500 million cash. It has entered into a conditional agreement to divest its municipal water operations in South Africa.