Sembcorp to invest $700 million in green urban initiatives; first-half net profit up 2%

SINGAPORE – Sembcorp Industries will invest around $700 million in its integrated urban solutions segment to establish itself as a leading low-carbon industrial park player in Asia, it said on Aug 6.

It announced its strategic plan for the segment alongside its first-half results, which saw net profit rise 2 per cent to $540 million after exceptional items and the absence of loss from a discontinued operation.

The one-off items comprised gains from the purchase of a 100 per cent equity interest in two special purpose vehicles from green energy supplier Leap Green Energy.

Net profit from continuing operations and before exceptional items fell 12 per cent year on year to $532 million from $602 million. Revenue for the six months to June dropped 12 per cent to $3.21 billion from $3.66 billion previously.

Group president and chief executive Wong Kim Yin said: “Sembcorp produced resilient first-half 2024 results despite lower wholesale power prices and a major maintenance for our gas-fired power plant in Singapore.

“This can be attributed to our contracting strategy. The robust contribution from our portfolio provides a strong anchor for our 2024 to 2028 strategy, with our portfolio of gas and renewable energy uniquely positioned to meet the strong and increasing demand expected from corporate customers, including data centres.” 

Full-year net profit before exceptional items for the group is expected to be “fairly stable” barring unforeseen circumstances, Sembcorp said. “The group will continue to focus on the execution of its 2024 to 2028 strategy, to capture market opportunities in the energy transition and drive value creation,” it said.

“Macroeconomic uncertainty remains and geopolitical tensions, as well as potential policy changes, could impact the global economy and impact business performance,” it added. 

“In the light of the robust earnings and confidence in the group’s earnings trajectory”, Sembcorp announced an interim dividend of six cents per share, which will be paid on Aug 22. This is an increase of one cent from the dividend payout a year ago.  

Earnings for the gas and related services segment are expected to be higher in the second half of the year, compared with the first half of 2024. This is due to the completion of the planned maintenance for the cogeneration plant in Singapore and a significantly contracted position, Sembcorp added. 

It noted that excluding the planned major maintenance in the first half of 2024, earnings for the segment remained resilient despite a decline in Singapore wholesale power prices. Most of the group’s gas-fired power portfolio in Singapore is contracted, backed by long-term power purchase agreements. 

But earnings for the renewables segment are expected to be lower, due to seasonality in the second half of 2024, partially offset by new project contributions, it noted. The weak macroeconomy in China could also continue to negatively impact renewable energy demand. 

Meanwhile, the outlook of the integrated urban solutions segment is expected to be stable.  

Urban strategy

Announcing its urban strategy on Aug 6, Sembcorp said the business’ ability to attract foreign direct investment and create jobs strengthens its position to secure new projects in both existing and new markets.

“The urban business will continue to grow its presence in Vietnam and Indonesia, explore new markets and optimise its operations in China to improve returns,” it said.

It targets to accelerate land development, expanding its land bank from 14,000ha to 18,000ha by 2028.

Sembcorp also wants to grow recurring income by increasing its industrial properties to 1.5 million sq m by 2028 from 130,000 sq m, to support manufacturing demand, growing domestic consumption and e-commerce.

It aims to achieve net profit at a compound annual growth rate of more than 15 per cent from 2022 to 2028 and a return on equity of 10 per cent in 2028.  

Sembcorp’s commitment to invest $700 million in this segment represents 5 per cent of its total investments for 2024 to 2028. The investment will be funded through a mixture of operating cash flow, project financing, internal funding and capital recycling, it said.

It added that the company is also exploring partnerships to develop and grow an asset management platform, offering options for further expansion. 

Sembcorp said its key differentiation is the urban business’ ability to provide green and smart infrastructure, ensuring it remains the preferred choice for companies seeking sustainable solutions.

“With clear targets set for 2028, the urban business will leverage its extensive experience and group expertise to be the leading developer of low-carbon industrial parks in Asia,” it said.

The urban business has successfully developed 21 industrial parks spanning more than 14,000ha in key markets such as Vietnam, Indonesia and China.

Since 1994, the urban business’ industrial parks have attracted more than 1,000 customers and drawn over US$50 billion (S$66 billion) in investments, which generated over 370,000 jobs, it noted.

Sembcorp shares closed 1.3 per cent lower at $4.45 on Aug 6.