Sembcorp Industries Ltd

Ladies and gentlemen, a very good morning to everyone joining both in person and on the web. Welcome to SEMCorp Industries' full year 2025 results presentation. My name is Sinjin from Group Strategic Communications and Portfolio Management. Before we begin, may I request that all mobile phones be switched off or set to the silent mode. And if you feel unwell at any point, please approach our staff for assistance. Joining us on the panel today are our Group CEO, Mr Wong Kim In, and our Group CFO, Mr Eugene Cheng. There will be a question and answer session following the presentation. Without further delay, I will now hand over to Kim In to begin the presentation.

Kim In, please.

Thanks, Jin. Good morning. A very happy Lunar New Year to everyone. Let me now quickly get into the results of 2025 Now, before I begin, I want to also set the stage. Compared to 2024, we have had, those of you who have been following us would know that we have a significant headwind in 2025, right? The margins in Singapore has been under a lot of pressure with the increase in the supply in the Singapore market. That's the first one. In our UK, you know, margins and volume also come under pressure. China Renewables continue to face heavy containment as well as pricing pressure so despite those headwinds we were able to offset the impact from those and came out in a resilient outcome which is you can call it flex but it is not without effort that we can get to the one billion dollar mark so for consecutive years we stay at that level and that has given us that the confidence to come out and say that, hey, look, the underlying cash flow and the business is strong and resilient and actually the cash flow is growing. um and because of that we uh convince the board to allow us to increase the dividend it's just an indication it's not much of an increase two cents out of uh uh 25 cents it is uh still we recognize that we lack our peer group in terms of dividend payout right but now that again we are operating at this one billion dollar platform this uh this normal new normal that uh may not be new it's been three years but I think everybody is convinced that we have that underlying capability to increase our dividend to close the gap between our ourselves and our peer group right so the idea is that in terms of returns one can look forward to dividend and then the second thing is that in terms of growth we show you that in the year we are pending the completion of major acquisition in Australia opening up a new market for growth a new platform for growth that is of scale so returns and growth that's the message if I want you to take away two messages please those will be the two messages so then now let me then go through some of the details in 2025 performance The turnover was $5.8 billion, adjusted EBITDA $2 billion, underlying net profit $1 billion. So, you know, easy to remember, 6 to 1. That's how I remember the minus around numbers. Underlying earnings per share $56.4 cents, ROE 18.2%. So as I mentioned just now, we propose a final dividend of $0.16, bringing the total of the year to $0.25. This is, compared to 2024, the $0.23 is a 9% increase. And again, like I said, we recognize the gap in terms of payout ratio and dividend yield from our peer group. And the idea, the intent is that over time, we're very comfortable and confident that we can close that gap. then into the business segments under gas and related services earnings of the group continue to be anchored by gas and related within the segment the Singapore portfolio contributed $538 million in net profit or 77% of the GRS segment's net profit a combination of long term contracted portfolio as well as the incremental contribution from Sunoco Energy provided the anchor for the earnings in 2025 during the year in the last year we secured 370 megawatts of long-term contracts of which 150 megawatts was from Micron which we announced in January this year so we continue to execute this strategy to capture demand from data centers and high-tech manufacturing customers as of February 2026 right now close to 80 percent of Semcorp's portfolio is contracted for five years and above while the Senoco Energy's portfolio contracts are short-term so in 2026 just to go a bit further five percent of the Semcorp portfolio will have to be re-contracted Well, about 50% of Senoco Energy's portfolio must be re-contracted. So, we expect that, of course, lower blended spark spread for the new contracted volumes. So, 50% of Senoco, 5% of the SEMCorp portfolio. So, this impact will be partially offset by operational and financial synergies from both portfolios. Then, in the fourth quarter of this year, 2026, The commissioning of the 600 MW hydrogen-ready power plant is expected to take place. It is highly efficient and that will enhance our fuel and cost efficiency of the entire fleet. During the year 2025, we've also secured long-term PPA for SEMCorp Salalah independent water and power plant. This 10-year contract will commence from April 2027. The previous contract which is currently running is of a 15-year contract and will expire in April. So we secure another 10 years and that will provide the stability coming in from the contribution of Oman. So the Middle East is entering a new phase of rising energy demand driven by industrial and digital hubs that require reliable uninterrupted power we have extensive experience operating critical power and water infrastructure in the region and we will selectively pursue growth opportunities in the Middle East moving on to renewables during the year we maintain the pace of growth in the selected geographies, adding 3.6 GW of new capacity to our portfolio compared to the end of 2024. The earnings from the renewable segment increased 5% year-on-year. This is despite the contribution from China renewables declining to $74 million from $89 million in 2024. In India, we have seen improved contribution from the existing fleets as well as from newly commissioned megawatts. During the year, the pipeline continues to grow in renewables. We acquired 300 megawatts of solar capacity and secured 1.5 gigawatts of green fuel bins comprising hybrid projects, round-the-clock projects, firm and dispatchable renewable energy projects. We are actively exploring capital recycling options in India. In the Middle East, we successfully entered the wind market in Oman with 125 megawatt greenfield development project underpinned by a 20-year PPA. In Singapore, we were awarded solar projects totaling 236 megawatt peak including two floating solar projects reinforcing our position as the country's leading floating solar energy player in Southeast Asia we completed the acquisition of the 49 megawatts hydro project in Vietnam and a 280 megawatt solar and energy storage portfolio in Indonesia which is currently under construction so our total group renewable capacity is now 20.4 GW of which 5.4 GW are secured either under construction or under advanced development. This 5.4 GW of new capacity will progressively come online between 2026 and 2030. Integrated Urban Solutions The net profit for the IUS segment was stable. Earnings from our water segment was stable. stable while contribution from the other divisions were lower due to the absence of contribution from SEM Waste or SEM Enviro. Obviously, we closed the deal to divest the SEM Waste in, was it February? March 2025, so it's been some time. So compared to 2024, the contribution from SEM Waste is of course no longer there. um urban business continue to secure new industrial projects bringing its our total gross development land area to over 16 000 hectares in Vietnam we secured four new investment licenses and this brings the total number of projects in Vietnam to 22. in Indonesia we are developing The 500 ha Kendall Industrial Park Phase 2 Remember that Phase 1 is almost mature and most of the land has been sold So now we are moving on to Phase 2 with 500 ha And we are also progressing on the development of the 100 ha Tembisi Innovation District in Batam we have also doubled our leasable gross floor area to 1.1 million sqm from half a million sqm in 2024 and the occupancy rate of our operational industrial properties increased to 96% from 76% as of the end of 2024 so in terms of both growth in square meters and also in terms of occupancy rate the IUS team has done well to improve the performance so this will particularly this area will further strengthen our recurring income coming up from IUS so we will continue to review and sharpen our portfolio as we did through the sale of SAM waste and the divestment of municipal water business in China during the year. The long-term fundamentals of SAM Corp is very strong. We are in the right places. We have got secured cash flow through contracts with high-quality customers. and later Eugene will show you the underlying cash flow coming from the Singapore portfolio and then post completion the Alinta portfolio is actually very very robust but in the near term we are facing some headwinds which shouldn't be new these are the things that we experienced in 2024 but in 2025 or rather in 2025 and in 2026 we will want to flag that in front of you give you a little bit more color what we will do about them In Singapore, with a new supply coming on stream, we can naturally expect the worst bug spreads. And since 2023, you know that we have been transforming our portfolio by leveraging our position as an integrated gas and power player as well as the largest renewable player in Singapore to secure long-term contracts. So what was previously a very merchant-heavy portfolio is now a largely contracted one. Of course, I'm speaking about the Semco portfolio, not the Senoko Energy portfolio. Now, Senoko Energy, we will go in there and try to add value as we did with our own portfolio. But the good thing is that we got it at a price, at an investment level that is very comfortable, notwithstanding the merchant nature of the business. But as a portfolio, there are significant synergies in terms of financing, in terms of operations, in terms of how we run the plant. For instance, we can sign a hedging contract with Sunoco to provide insurance so that then we can aggressively contract our baseload high efficiency units in the SEMCorp portfolio. So, there are significant synergies. We bought Senoco at a very attractive valuation. And, you know, in combination, we are now the largest fleet of gas-fired power stations in Singapore. Together with our integrated gas portfolio and as well as our position as the largest renewable player, we are very well positioned We think that we are highly competitive and the diversified portfolio will position us to capture the growing AI demand in Singapore, particularly from data centers and high-tech manufacturing sectors. Let's go off script a little bit. When we say Today, there's a lot of hype about AI, you know, shares, share price of some of these companies, tech companies are very high. We're not in that game. But by the time the AI demand translates into energy demand, and it translates into a contract with SEMCorp, that is a solid demand because that demand for energy is coming from micron is coming from data centers that are hyperscalers with good credit profile right so we are sort of on the receiving end of it I'm not saying that we are AI company now but by the time we receive the the demand translated from all the noise in the market it is actually a very very solid demand that we are capturing right so the important thing is that we're ready to capture it and what we're saying here is that we are very well positioned to capture that demand if I move on to China of course we will continue to face curtailment and tariff pressures alongside with the recent cancellation of value-added tax refunds for onshore wind projects. So these are developments that will affect the entire sector, not just us. Now, we will remain very disciplined in managing our portfolio exposure in China in terms of thinking through project additions or even divestments. We will allow time for expansion of transmission network and also pursue contracts to try to stabilize earnings. Having said all that, to put things into perspective by now, if you look through the numbers, China is a relatively small contributor to the entire picture. And as I mentioned just now, notwithstanding the headwinds and the lower contribution and the reducing contribution in the last couple of years, we were able to plug the gap through other means. The last one is the UK. The closure of our key customers' operations, particularly SEVIC, has driven largely by weak economics, of course, in the industrial sector, as well as in the UK in general. We are driving active cost management and repositioning the business to capture data center opportunities. We'll talk a little bit more about why we think we can capture that in the next slide. So I mentioned just now that we believe we're well positioned to support the region's accelerating AI-driven energy demand. So allow me to take a little bit of time to elaborate. Our gas and related services provides reliable baseload energy. We are well positioned to capture more demand from new data centers as well as the semiconductor sector. As we have shown you, we now supply almost 700 megawatts of the high-tech manufacturing sector which includes also the recent 150 megawatt contract with Micron. Our renewable business delivers tailored green PPA solutions and long-term renewable energy supply for high demand industries to meet their clean energy targets. Contracts secured include the supply of power-backed renewable Energy Certificates to Day 1 20 MW data centres under 10-year PPA. So data centre Day 1 20 MW through a 10-year contract. That sets the tone of what we can expect moving forward as more new data centres gets planted in the region and particularly in Singapore. We've also signed a 25-year renewable energy purchase agreement with Meta Platforms and this is to build own and operate 150 MW floating solar farm in Kranji and finally under the IUS business we provide low carbon infrastructure to customers and we are able to develop sustainable data center infrastructure with partners to supply land and power along with other green services So, within the Tembasi Innovation District in Batam, Indonesia, we can accommodate up to 100 megawatts of data center capacity. For those of you who are familiar, Batam, of course, is already seeing the connection of fiber coming in from companies such as Intel. So, it is not whether there will be data centers, it is when and of what size. And what we have there in Tembasi is already 100 hectares of land ready to connect up to all this data centre demand. And in the UK, Wilton offers 138 hectares of ready land with immediate grid connection and supporting infrastructure. and that is naturally attractive for potential data center developments right because as you know for their centers one of the biggest constraint is the power supply right and if you in a place like UK or for that matter Singapore Australia places like this to bring a new substation and a high voltage cable to supply a newly increased demand from data center that will take time so existing infrastructure existing land will provide that opportunity so together in GRS in renewables as well as in IUS SEMCorp is actually a very attractive comprehensive energy and infrastructure partner for the AI players By integrating reliable baseload, scalable renewables, and sustainable urban solutions, we want to capture the region's growth while enabling our customers to accelerate their decarbonization and digital transformation ambitions. I shall not go through this in the script that Jin has given me. I think what I want to emphasize before I hand over to Eugene for the detailed numbers is again first in terms of returns you can we are expecting that we will be able to improve our dividend payout ratio and dividend yield steadily over the coming years and this year the two cents increase compared to 2024 is just an indication and we have deliberately been quite prudent given that we are pending the closing of a major transaction in Australia so to close the gap in terms of dividend yield and payout ratio compared to our peer group so that is the first thing and the underlying cash flow I have explained where our balance sheet and cash flow positions when we discuss the Alinta acquisitions a month ago. But if we need to provide elaboration again, I'll be happy to do that later. But suffice to say, we're very comfortable with our balance sheet position. We have very strong cash flows coming in. In fact, we struggle to find the type of growth opportunities like Alinta where we can deploy the cash flow so naturally either you grow or you reward shareholders and return it to them in the form of dividends so that's the first thing and the second thing is that in terms of growth we have immediately in front of us Alinta which we will hopefully complete sooner than later but certainly we expect within this year if not the first half and Alinta will provide at least for the next few years a significant scale market and a significant growth capabilities with a very strong management team down under to help us grow the entire energy portfolio the least of it is a 10 gigawatt renewable pipeline that they have already identified and in addition to a very energy staffed high demand growth Australia energy market so certainly in the next few years in terms of returns and in terms of growth we are quite set up for that so that's the picture that I want to leave with you before I hand over to Eugene so Eugene please excuse me