SINGAPORE - Sembcorp Marine has proposed a further $1.5 billion rights issue to strengthen its financial position amid continued Covid-19 disruption, it said in a filing on the Singapore Exchange on Thursday (June 24).
This will also help it accelerate towards renewable and clean energy, the firm said.
It made the announcement on the same day it said it was signing an agreement with Keppel Corporation to explore a potential combination with Keppel Offshore and Marine.
Sembcorp Marine president and chief executive Wong Weng Sun said: "Since the last rights issue completed in September 2020, our operations have been severely impacted by the continuing Covid-19 disruptions.
"The liquidity from the proposed $1.5 billion rights issue will be vital in fortifying our financial position. It will ensure we emerge from this crisis as a strong and innovative player, with an increasing strategic focus on clean, sustainable and renewable energy solutions."
Sembcorp Marine noted that the offshore and marine sector has experienced a prolonged and severe downturn since 2015.
"The onset of the Covid-19 pandemic in 2020 further delayed the industry recovery and created severe disruptions, including reductions in capital expenditure by oil majors and skilled manpower shortages," it said.
It added that these disruptions have extended into 2021 with the reimposition of Covid-19 restrictions to combat new infections.
Such disruptions to yard operations have affected the group's execution and completion of projects, along with deferrals of deliveries and payments by customers.
The proposal to raise $1.5 billion is expected to be completed in the third quarter of this year. It will be on the basis of three rights shares for every two existing shares held, at a rights issue price of eight cents per share, representing a discount of 35.7 per cent to the theoretical ex-rights price.
At a briefing on Thursday, Sembcorp Marine chairman Hassan Marican said: “The ongoing Covid-19 disruptions are more severe and prolonged than we had thought. The board and management have had to act decisively and judiciously.
“We must pivot more quickly to the growing new energy segments including offshore renewables.”
An earlier rights issue completed in September last year strengthened the group's financial position and allowed it to pursue a shift to renewable and clean energy, it added.
The proceeds were used to reduce leverage and debt servicing obligations, but prolonged disruptions caused by Covid-19 still created near-term challenges.
Group finance director William Goh said at the briefing: “The rights issue will enable us to strengthen our balance sheet and enhance liquidity to meet projected operational funding needs to the end of 2022, including replenishing our working capital.
“This in turn will strengthen the confidence of our external stakeholders, especially our lenders and customers in their ongoing partnerships with us.”
This is also important as the outlook for energy transition is robust, while the outlook for oil exploration remains uncertain, Sembcorp Marine said.
The group has won several contracts in renewable and clean energy, such as wind farm projects.
Mr Goh added: “The rights issue will also enable us to augment our technological capabilities so as to maintain and enhance our competitive edge. We will be able to continue to selectively acquire and develop intellectual property and technologies, especially in relation to renewables and other clean energy solutions.
“At the same time, (we can) build the associated engineering talent to execute our solutions. We also will be able to make very selective investments to build strategic yard capabilities to execute secured projects.”
It will be seeking shareholder approval for the rights issue at an extraordinary general meeting to be convened in August.
Temasek's wholly-owned subsidiary Startree Investments has given an irrevocable undertaking to vote in favour of the rights issue at the meeting.