SINGAPORE - Sembcorp Industries is selling its stake in Sembcorp Energy India (SEIL) in a $2.1 billion move that will see it give up ownership of India's largest independent power producer and enable it to achieve its carbon emissions target ahead of time.
SEIL operates two coal-fired plants totalling 2.6GW, which is enough to power more than 2.5 million households in India, Sembcorp said on Monday.
Sembcorp is selling them to Tanweer Infrastructure, the electricity company indirectly owned by a consortium involving private equity firm Oman Investment Corporation, at an implied price-to-book ratio of 1. The price-to-book ratio compares a company's market value to its book value.
The move will reduce Sembcorp's greenhouse gas emissions by more than 37 per cent and enable it to meet its 2025 emissions target ahead of time. The sale will be complete six months after shareholders grant their approval at an extraordinary general meeting to be convened in November.
Upon completion of the sale, just over half of Sembcorp's energy portfolio of 14GW will consist of energy generated by renewable sources, up from 43 per cent currently.
That could take earnings from its sustainable solutions portfolio for the first half of this year to just over 30 per cent, up from 25 per cent currently.
When asked how proceeds from the sale would be utilised, chief executive Wong Kim Yin said the objective of the sale is for Sembcorp to decarbonise and improve its ability to service its debt.
This will put the company in a better position to raise the capital needed to invest in green assets, and raise its ability to grow and reward shareholders with higher dividends over the longer term, Mr Wong said.
Sembcorp announced in May last year its long-term strategic plan to transform its portfolio from brown energy assets to green by exploring deals in India, China and South-east Asia.
It also set a 2025 target of reducing its greenhouse gas emissions by 26 per cent from 2020 levels. The SEIL sale will enable it to achieve that target ahead of schedule.
Shares of Sembcorp closed Monday at $3.33, up 0.3 per cent, before the announcement.