Sembcorp Industries Ltd

Ladies and gentlemen, good morning and welcome to SEMCorp Industries' half-year 2021 results presentation webcast. I'm Leisan from Group Strategic Communications. The members of the panel for today's presentation are Group President and CEO Wong Kim Min and Group CFO Eugene Cheng. Without further delay, I will now hand over the time to Kim Min to begin the results presentation. Kim Min, please.

Thank you Laysan. Thank you Laysan again. Good morning. and welcome to SEMCorp Industries' first half 2021 results briefing. In the first half of 2021, despite continued challenges due to the COVID-19 pandemic, SEMCorp continued to deliver essential products and services to our community. Our operations continued without disruption and delivered a resilient underlying performance. Now let me briefly outline the key financial figures. In first half 2021, the group delivered a turnover of SGD$3.3 billion, up 26% from first half 2020. EBITDA was SGD$640 million, up 20%. Adjusted EBITDA was SGD$744 million, up 14%. Net profit before exceptional items was SING dollars $252 million, up 69%, while net profit was SING dollars $46 million compared to a net loss of SING dollars $42 million in first half 2020. Earnings per share EPS was 2.6 cents, and earning per share before EI, before extraordinary items was 14.1 cents. Group annualized ROE was 8.5%. The board has announced an interim dividend of 2.0 cents per ordinary shares, which will be paid on August 24th, 2021. Next, let me go through the key highlights for our different business segments. Focusing on the renewable segment of our sustainable solutions portfolio, net profit of the segment was 24 million in first half 2021, compared to 33 million in first half 2020. This was mainly due to low wind resource in India. Performance from our wind assets in China was steady, and the energy storage portfolio in the UK performed very well. For the first half of the year, we secured an additional 105 megawatts of renewable projects in Singapore and Vietnam and continue to grow our renewables portfolio. In the first half of 2021, 78 megawatts of solar projects commenced operations in Singapore and Vietnam as well. Most notably, we successfully commissioned the 60 megawatt peak floating solar farm at Tenge Reservoir in Singapore. This is one of the world's largest inland floating solar photovoltaic systems. And it is a showcase of our solar capabilities as a leading homegrown renewable energy player. Our gross installed renewables capacity now stands at 2.7 gigawatts compared to 2.6 gigawatts at the end of 2020. It's like this. The integrated urban solution segment has maintained steady profitability. Net profit before EEI of the segment was 63 million compared to 64 million in one half 2020. Net profit was 69 million compared to 66 million the year before. Urban land sales was 68 hectares and net order book was 238 hectares in first half 2021. Lower commercial and residential land sales in China and lower land sales in Indonesia resulted in lower contribution from the urban business, but this was offset by better performance from the waste business. The urban business continues to focus on building its land bank and platforms. In March, we received the investment license to develop a 481-hectare new industrial park in Quang Tri Province, Central Vietnam. The province has been earmarked as a future economic hub, along with the East-West Economic Corridor linking Vietnam, Laos, Thailand and Myanmar. In Singapore, in support of the government's Green Plan and our own decarbonisation efforts, we launched Singapore's first solar-powered EV charging hub in July this year. We plan to open the hub for public use by other industrial vehicles by 2020. The conventional energy segment delivered a resilient underlying performance in first half 2021. Net profit before EI was 185 million, up 46% compared to first half 2020. And this is driven mainly by higher energy demand and margins in Singapore and India. The flexible generation assets in the UK also performed well. As announced on August 2nd, an exceptional item of negative 212 million was recognized for the impairment of the Chongqing Song Zhao coal-fired power plant in China. Apart from losing its cost advantage as a mine mouth plant with the closure of the Chongqing mines, in the longer term, we also expect the asset to face competitive pressure from green energy. This is very much aligned with our underlying thesis for our brown to green transformation strategy. Including this exceptional item, net profit for conventional energy was negative 27 million. In Singapore, we were appointed by EMA, Energy Market Authority, as a new term liquefied natural gas importer in March. Our portfolio of energy solutions enables us to provide sustainable, competitive and reliable energy for consumers in Singapore, where natural gas, the cleanest form of fossil fuel, continues to be a dominant energy source, even as we continue to grow our renewable business. And in April, our utility service agreement with Eastman Chemical, a major customer on Jurong Island, That agreement ended and we will no longer have profit contribution from Eastman in the second half of the year. Now in May this year, we unveiled our strategic plan to transform our portfolio from brown to green and we laid out our strategic targets for 2025. This is just to remind you that these are our targets. Next slide, please. So now, this slide provides a snapshot of where we are as of first half 2021 against the strategic targets we set out for 2025. So in one half 2021, we secured an additional 105 megawatts of renewable project pipeline and continue to look to building our pipeline across Southeast Asia, China, and India. Our installed renewable capacity grew to 2.7 gigawatts. While the proportion of profit contribution from sustainable solutions may vary from one reporting period to the next, we are firmly on our transformation journey. We are focused on achieving our 2025 targets, leveraging our capabilities and partnerships with stakeholders, building on exclusive platforms so that we can be the leading Pan-Asian provider of sustainable solutions, delivering long-term value and growth to our stakeholders. Let me hand the time over to Eugene, who will take you through the group financial review. Thank you.

Many thanks, Kevin. And good morning and thank you, investment community, for joining SEMCorp Industries results briefing. I shall now take you through the group's financial performance for the six-month ended June 30th, 2021. Now, as you remember, during our investor day on May 27th of this year, we unveiled a group strategic plan to transform our portfolio from brown to green, with growth driven by the renewables and integrated urban solutions businesses. Now, I will now go through our financials under the new segments, which largely would be renewables and integrated urban solutions, which collectively forms the sustainable solutions segment, which we have talked about. as well as the conventional energy and other businesses and corporate segments. SamCorp Industries achieved a turnover of $3.3 billion for the first half of 2021, $673 million or 26% higher than the corresponding period of $2.6 billion. The higher turnover was driven mainly by the conventional energy segment with improvement in the power demand as well as margins and spreads. Group EBITDA which excludes major non-cash items was $640 million or $107 million or 20% higher than the corresponding period last year. Including share of results from associates and JVs of $104 million, our adjusted EBITDA was $744 million being $93 million or 14% improved over the first half of 2020. adjusted EBITDA growth was in line with the growth in turnover, though offset by lower contribution from urban land sales and losses from the coal business in Chongqing, Songzhou, China. Net profit before extraordinary items in the first half of 2021 increased by $103 million or 69% to $252 million. driven by higher contribution from our conventional energy segment in line with turnover as well as EBITDA and adjusted EBITDA. The growth in adjusted EBITDA was enhanced further by the lower net finance cost offset by higher corporate tax, mainly due to UK's increase in corporate tax rate as announced earlier this year. Year on year, net finance cost was lowered by $36 million through loan repayments and refinancing of the $1.5 billion marine bonds by last year, and a lower interest rate through existing revolving credit facilities. The extraordinary item of negative $206 million for first half of 2021 comprises an impairment of $412 million of the Chongqing Songzhao Taofan as announced on the 2nd of August 2021. That is offset by a gain of $6 million from the divestment of Sam Cork Jingmen Water Company, which was completed in May of this year. Net profit from continuing operations was $46 million for the first half of 2021, $88 million higher than the first half of 2020. Post the demerger with Semcorp Marine in September 2020, financials of the marine business have of course been presented as this continued operations. Earnings per share before extraordinary items for first half of 2021 was 14.1 cents and earnings per share was 2.6 cents. Analyzed ROE for the group was 8.5% for first half of 2021 and would have been closer to 14% before extraordinary items. The renewables segment recorded a turnover of $146 million compared to $137 million in the first half of 2020. The increase was driven by higher contribution from the solar segment and also from the energy, storage and battery businesses in the UK. Integrated Urban Solutions' turnover of $218 million was $21 million or 11% higher than the corresponding period last year. This increase was mainly due to contribution from the businesses that's acquired by the waste management business last year, and that is offset by an absence of turnover from water businesses divested in the second half of 2020, namely our Panama as well as Chilean water assets. The urban business comprise largely associates or joint ventures, and that will be accounted for under the equity method, which we will touch on in the subsequent slides. The conventional energy segment recorded a turnover of $2.8 billion, $543 million or 25% higher than the corresponding period last year. The better performance was due to higher energy demand and margins in Singapore and India, as well as better operating performance of the UK flexible generation assets. Other businesses reported a turnover of $170 million in the first half of 2021, an increase of $100 million, mainly attributable to SAMCorp specialized construction. In the first half of 2020, SSC was impacted by circuit breaker measures implemented in Singapore, resulting in labor constraints, and that has resumed in the first half of 2021 this year. Now this table shows the net profit contribution from the respective segments before and after exceptional items. The key highlights here are we do have a lower renewables profit and that's a result of lower wind resource in India as well as we do have some startup costs for the solar business in Vietnam as we focus on ramping up renewables growth in that place. Integrated Urban Solutions' profit was lower due to lower contribution from land sales in the urban business, and that is offset by higher contribution in the waste business. Improvement in conventional energy segment due to its due to the better performance in Singapore and India, and higher profit from other businesses, it was due to higher contribution from SEMCorp Specialized Construction, which was impacted by COVID-19 in the first half of 2020. This chart reconciles the group's net profit to net profit before extraordinary items from the first half of 2020 to the first half of 2021, and it shows the variances for each business segment on a year-on-year basis. Now, under sustainable solutions, which comprises the renewable segment as well as the integrated urban solution segment, Renewables performance in first half 2021 was impacted by low wind resource in India as previously discussed. And for the integrated urban solutions, lower net profit is due to the timing of land sales of urban business, where we had lower recognition of land sales in the first half of 2021 compared to the first half of 2020. First half of 2021 also includes contribution from a waste business which was acquired from Veolia as announced last year in June 2020. The conventional energy segment saw stronger performance from Singapore, India, as well as the UK flexible generation assets as a result of higher demand, as well as margins and spreads. Now, this was partially offset by the Chongqing power plant turning into losses in the first half of 2021. In Singapore, just to highlight, there is also a net gain of $13 million as a result of dynamic hedging activities that will unwind in the P&L in the subsequent periods upon the delivery or sale of the underlying hedge items. In India, prior period recoveries net of expected credit loss provisions amounted to $37 million contribution in the first half of 2021. In the other business segment, resumption of business activity for SEMCorp Specialized Construction, which was highlighted earlier, was impacted by COVID-19 in the first half of 2020, and business activities have resumed in this financial year. For the corporate segment, the improvement was driven largely by lower interest costs arising from refinancing of our $1.5 billion bond with revolving credit facilities. And we have also tightened cost control across corporate spending in general. For the exceptional items, as mentioned earlier on, the first half 2021 exceptional items of negative $2.6 million comprises $6 million gain from the divestment of Semcorp Jingwen Water Company and an impairment loss of $212 million as a result of Chongqing Songzao Power Plant. This slide shows the capital expenditure of the group. Capital expenditure of 176 million that was incurred in the first half of 2021 was mostly for new solar projects in Singapore and the UK battery facilities. And the first half of 2021, equity investment of 4 million in renewables related to investments in our joint venture in Vietnam, particularly our Vietnam-Singapore Smart Energy Solutions segment. Moving on to the next slide. First half 2021 cash flow from operating activities was $480 million or $274 million higher as compared to the first half of 2020. This was mainly driven by improved operating performance and changes in working capital. That cash flow used in investing activities was $57 million, mainly for the purchase of property, plant, and equipment, partially offset by proceeds from the divestment of Shenzhen Chihuan Sambawang Engineering Co., and Sand Park Jingmen Water Co. Excluding expansionary capex, group free cash flow for first half of 2021 was $562 million. Now as at 30th of June 2021, the group's net debt was $6.6 billion, which is marginally lower than $6.7 billion as at 31st December 2020. Total borrowings remain steady as decrease in long-term borrowings due to loan repayment was offset by our very successful issuance of green bonds. Now, as you know, in June 2021, we have successfully launched our inaugural 400 million green bond offering, which was very competitively priced at 2.45% for a 10-year issuance. This is also the first certified green bond under the climate bond standards by a Singapore-based energy company. And for the first half of 2021, gross debt to annualized EBITDA and annualized adjusted EBITDA was 6.0 and 5.2 times respectively, while interest cover over EBITDA and adjusted EBITDA was 3.0 times and 3.5 times respectively. This was an improvement over the respective ratios as at December 31st, 2020. This table highlights the maturity profile of the debt at the end of June 2021. The maturity profile has not changed substantially from 31 December 2020, other than for the rolling forward of the 6-month period ended 30 June 2021. As at June 30, 2021, out of $7.7 billion, 12% of our debt is due within a year, 43% between 1-3 years, and 31% of our debt is due after 5 years. Our debt has a weighted average maturity of 4.5 years and weighted average borrowing cost of 5.1%. Now, if you will recall during the investor day in May, we have highlighted the $2 billion of corporate maturities coming due in years 2 and 3. As discussed previously, the bulk of it relates to maturities in our revolving credit facilities that have been drawn to fund the redemption of the $1.5 billion marine bonds last year, as well as other term MTM securities coming due. The intention, as highlighted during investor day, would be for us to tap on our access into the sustainability-linked instruments and traditional MTN bond markets to term out the maturities. At the end of June 2021, the group's cash and cash equivalents were $1.2 billion and our unutilized committed facilities were $1.2 billion, an increase of $400 million since December 31, 2020, with $400 million million term notes on green bonds as issued in 2021. In total, the group had $2.4 billion of cash, cash equivalents and unutilized committed facilities at the end of June 2021. The group also had unutilized uncommitted facilities and unutilized trade-related facilities of 3.7 billion and 880 million respectively. And as mentioned during the investor day, our target would be to free up and maintain at least 1.5 billion Sing dollars of committed RCF facilities to underpin our five-year strategy execution. And as mentioned in the slide earlier on, we are in the process of terming out the maturities in our RCFs. Moving on to the business outlook for the rest of the year, significant challenges remain for the economies around the world. Uncertainties continue to persist with regard to the COVID-19 pandemic with the potential resurgence of infections globally. Now, underlying the performance of the group will also be negatively impacted by changes in the customer profile in the United Kingdom and Singapore, as well as loss of income from divested water assets in Panama and Chile. There are potential downside risks in the conventional energy segment across markets due to higher market volatility as well as higher fuel costs. In addition, there will be planned maintenance shutdowns in Singapore, Myanmar and India in the second half of 2021. The group is continuing to transform its portfolio to focus on sustainable solutions that support the global energy transition and sustainable development. In the first half of 2021, 78 MW of renewable energy capacity was installed, and approximately 87 MW of renewable energy capacity is expected to come on stream by the end of 2021. We just want to point out other developments for noting. Performance of the second half of 2021 is expected to be impacted by plant maintenance shutdowns for the Singapore Energy from Waste plant. the Semcot Mingjian Power Plant in Myanmar and for India's SCIL Project 1 and Project 2 Power Plants and impact on earnings in Singapore and Vietnam as the natural gas contracts in Singapore approach expiry in 2028 as well as Fumi 3 Power Plant in Vietnam as it faces reducing tariffs as its power purchase agreement approaches expiry in 2024. Now with this, I end my presentation and we are happy to take any questions that you may have from the audience. Thank you.