Sembcorp Industries is buying a stake in a renewable energy company in China. This will enable the Singapore-listed energy and urban solutions provider to enter into a partnership with the world’s largest renewables player.

Sembcorp announced on Thursday that wholly owned subsidiary, Sembcorp Energy (Shanghai), is acquiring a 45.3 per cent interest in Hunan Xingling New Energy for 1.1 billion yuan (S$204 million) from Wuling Power.

Wuling Power is an affiliated company of Chinese state-owned enterprise State Power Investment Corporation (SPIC).

The transaction will result in Xingling New Energy becoming a joint venture between Sembcorp and Wuling Power, with the SPIC affiliate holding the remaining 54.7 per cent stake in Xingling New Energy.

“SPIC is the largest renewables player in the world with over 80 gigawatts (GW) of installed capacity. Sembcorp is privileged to partner them,” said Sembcorp group president and chief executive officer Wong Kim Yin.

“We look forward to expanding on this deal to broaden the strategic partnership with SPIC, especially in renewables and green energy,” he added.

Sembcorp’s CEO of China Alex Tan noted that Xingling New Energy is SPIC’s first renewable energy joint venture with a foreign strategic investor.

“This partnership will allow Sembcorp to establish a presence in Hunan province, a new market for us,” he said. “Hunan is one of the key energy demand centres in China, and we look forward to working closely with Wuling Power to support China’s renewable energy needs.”

Xingling New Energy will own a portfolio of wind and solar assets – comprising 830MW of installed renewable capacity and 62MW under development – in the provinces of Hunan and Guizhou.

The acquisition will push Sembcorp’s gross renewables capacity globally to 9.4GW – one step closer to its target of reaching 10GW of gross installed renewables capacity by 2025.

Sembcorp said the transaction, which is expected to be completed in the first half of 2023, will be funded through a mix of internal cash resources and external borrowings.

It added that, upon completion, the acquisition is expected to be accretive to earnings.

Sembcorp shares were trading up three cents, or 1 per cent, at $3.08 at 10.15am on Friday, after the announcement. THE BUSINESS TIMES

Editor’s note: This article has been edited to reflect the correct acquisition amount of $204 million.