Sembcorp Industries Ltd

Ladies and gentlemen, a very good morning to everyone joining us both in person and online. Welcome to SEMCorp Industries' first half 2026 results presentation. I'm Xin Jin from Group Strategic Communications and Portfolio Management. Before we begin, may I kindly request that all mobile phones be switched off or set to the silent mode. Thank you. 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. For those joining us online, please submit your questions via the Q&A box by clicking on the raise hand icon on the webcast page. Without further delay, I will now hand over to Kim Min to begin the presentation. Kim Min, please.

Good morning. Welcome to SEI First Half 2016 Results Briefing. Let me begin with the key highlights. For the first half of 2026, turnover was $3.8 billion, EBITDA $768 billion, adjusted EBITDA $947 million. Underlying net profit was $369 million, and this translates into earnings per share of $0.207 and annualized group ROE of 13%. We completed the acquisition of Alinta in June. We are showing the pro forma financials and this illustrates the group's earnings profile with Alinta included for the full period of the first half. On a pro forma basis, turnover would have been $5.6 billion. ETH and adjusted ETH would have been $1.2 billion and $1.4 billion respectively. Underlying net profit would have been $558 million with earnings per share 31.4 cents and annualized group ROE at 19.1%. The acquisition of Alinta broadens Semcorp's earnings base and increases the contribution from integrated platforms with recurring cash flows. So in line with our outlook for the full year, We are pleased to increase the interim dividend to $0.11 per share, up from $0.90 a year ago. Allow me to take you through the performance of each of the business segments. First, under gas and related services, for the first half of 2026, underlying net profit for the segment was $285 million. Spark spreads were lower in the first half, This was partially mitigated by our contracted portfolio. As of June 2026, 80% of SEMCorp's gas-fired generation portfolio, excluding Senoco's, is contracted for five years and above. Our overseas assets remain resilient. In the Middle East, our operations perform well, despite ongoing geopolitical tensions. We further expanded our platform in the Middle East through the 2.6 gigawatt Tawila Sea Independent Power Project in Abu Dhabi. Underpinned by a 21-year PPA and a strong contractual framework, the project will provide long-term earnings visibility and stable cash flows to our overseas portfolio. In the UK, earnings will lower following the closure of one of our industrial customers. We're actively repositioning the Wilton site to capture new demand from data centres and digital infrastructure. Looking ahead, our 600MW hydrogen-ready power plant remains on track for completion in the fourth quarter of this year. This will enhance our generation capacity and the competitiveness of our generation fleet. During the period, we also secured a 150 MW long-term power purchase agreement with Micron, bringing our total contracted supply to the semiconductor manufacturer to 600 MW. In addition, we announced an agreement to acquire 20% stake in Esther Power, where Semcorp will be the sole gas supplier to the Esther facility. And overall, gas and related services remains well positioned supported by our contracted base, integrated gas and power capabilities and growing demand from AI related industries. The renewable segment faced a challenging first half with underlying net profit of 69 million. In China, generation hours experienced with wind and solar resources. the tailwind lower tariffs and the removal of VAT refund on onshore wind projects further impacted the segment. Our focus remains on discipline execution and value creation within the portfolio. India remains a bright spot with renewables. We have 3.6 GW of projects with high tariffs secured in the pipeline. Today, the group has a total of 6.6 GW of renewable capacity under construction. As this pipeline comes into operation, it will strengthen the portfolio's earning potential and long-term value. With a sizable operating base and a strong pipeline under construction, we are now well positioned to unlock greater value from our investments in the renewable segment. move on to integrated urban solutions. The IUS segment delivered underlying net profit of $62 million in the first half of 2026. This mainly reflects the absence of contribution from SAM Enviro following its divestment in March 2025, partially offset by improved performance from the water business on stronger contribution from industrial water. Our urban business continued to expand its footprint and build recurring income. In Vietnam, we secured six new projects, including the group's cross-development land area to over 18,000 hectares across 31 projects, achieving our 2028 target well ahead of schedule. We are also growing our ready-built facilities portfolio. The gross floor area has grown from 134,000 m2 in 2023 to over 1.1 million m2 as of June 2026. This will strengthen the base for recurring income moving forward. Looking ahead, we expect a strong second half from higher land sales. In Kendo Industrial Park, Indonesia, 40 hectares of land sales have already been secured and are expected to be recognised upon handover in the later part of the year. Within the water business, we continue to sharpen our portfolio and focus on areas where we see stronger returns. During the period, we completed the divestment of a municipal water in Qingzhou. This is our second municipal water exit in China since December 25. As you can see, we remain focused on growing the urban portfolio and its recurring income while optimizing our water portfolio to build stronger earning space for the segment. For Alinta, acquisition of Alinta Energy was completed in June 2026, adding a high-quality integrated energy platform in Australia to the group. On this slide we are showing Alinta's first half performance to provide a clearer view of the strength and earnings capacity of the business. Alinta delivered a strong first half with underlying net profit increasing to $231 million from $101 million a year ago. This was supported by a high thermal fleet availability and Alinta has the lowest cost generation-based in all of Australia through its fleet of generation plants, particularly Layang Bee Coal Facility in Victoria. During the first half of 26, Linta also strengthened its long-term gas position. It secured two new long-term gas supply contracts with Chevron and LNG Japan in Western Australia. The business also benefited from strong portfolio management, capturing value through portfolio flexibility across generation and retail markets. Alinta's first-half performance reflects the strength of its integrated platform. Looking ahead, its strong generation, retail and development capabilities are expected to strengthen Semcorp's earnings base, enhance recurring cash flows and add further resilience to Semcorp's diversified portfolio. I would like to touch on this growing wave and some people call tsunami of AI and data center demand. As you all know, AI and data center growth is increasingly becoming relevant to our portfolio. New data center bids require both power supply reliability and a credible pathway to low carbon energy. This plays to SEMCorp's strength given our integrated energy portfolio and the suite of lower carbon solutions. In Singapore, we are trusted partner to data center and digital infrastructure customers with over one gigawatt of our purchase agreement secured. I'm pleased to share that the latest development, Senoco has entered into an arrangement with Micron for the development of a direct connection infrastructure. As you know, Sunoco and Micron, their facilities are next to each other in the northern part of Singapore. So this direct connection infrastructure is an important step for Sunoco to support the power supply needs of Micron's advanced wafer fabrication facility, the current as well as future development. other than Singapore, in the UK, our Wilton site provides a strong platform for data center development. Phase one, with 200 megawatts of data center capacity is currently under planning. Wilton might be the only one, if not one of very, very few platforms that is able to deliver 280 megawatts by 2028. Many players have land, but in order to secure power to the land, it will take them into the 2030s before the commissioning of any data centers that will come along. So Wilton in the UK has a very precious commodity in the form of the powered land that is available by 2028 and in utility scale of 280MW. So the site is very well positioned with immediate grid connection, ready infrastructure, as well as water availability. Let's talk about Singapore and UK. In Australia, Alinta acts a coast-to-coast integrated energy platform with 3.4GW of operational thermal and renewables capacity. In generation, retail and development capabilities position Alinta very well to serve growing AI-driven power demand. And closer to home across ASEAN, we have established data center footholds in Vietnam and Indonesia. In Vietnam, we received investment approval to develop a data center within Saigon High Tech Park very near to Ho Chi Minh City, or in fact it is in Ho Chi Minh City. In Indonesia, we've told you that Batam is an emerging location for data centers supported by connectivity to Singapore with submarine cable networks. So across all these markets, we have got platforms, ready platforms that are able to capture the structural growth in digital infrastructure demand. leveraging on our existing power, renewables and urban capabilities. The second half of the year will start with a very positive note. For the guest and related services, in July, it was a very strong month. USEP prices in Singapore averaged $240 per MWh and this of course creates opportunities for our GIS team to capture value from the sport market and this is of course markedly improved from the first half Alinta also delivered a strong performance in July across both the east and west coast markets of Australia during this peak winter period. The business should continue to benefit from favorable market conditions as well as resilient customer growth. In India, our renewables business also performed well, supported by higher wind resource across the entire portfolio. So these are all developments that underscore our confidence in the group's outlook for the full year. I want to emphasize on the strength of that confidence the board has supported us to increase our dividend to 11 cents despite a weaker performance in the first half. This is part of our effort in recognition that our dividend payout is lagging our peer group and is part of our recognition to level up to our peer group in terms of the dividend payout moving forward. I will now hand over to Eugene. He will tell you more about the financials and the details before we go into Q&A.

Thanks. Thank you, Kim Min. I'll move on to the first slide. So on an overall basis, all the factors that Kim Min talked about flowed through right into our underlying net profit, which are purely on a reported performance basis. Our underlying net profit was down 25% from $491 million to $369 million. I think from a pro forma perspective, if we have seen what Alenta would have contributed to kind of show what a full first half run rate would have been for us this year, that would have been $558 million. There are a few items below the underlying net profit to take note. I think in terms of the DP and forex loss, The Indian rupee continued to depreciate slightly against the Singapore dollar and has a $57 million mark to market loss, markedly lower than last year. We did see the Indian rupee turn slightly in Q2 of this year. Now, the fair value loss on energy derivatives of $10 million, that's a purely mark-to-market as of 30th June position of Alinta's hedge positions, so not reflective of what cash flows have been as of 30th June. And the exceptional items of $152 million comprises $155 million of a transaction cost that is in relation to the acquisition of Alinta. offset by $3 million from a gain from divestment in the China water portfolio. Now, this $155 million is largely substantially all the costs already for the transaction. Some of you may ask why is it lower than what was previously guided, which was closer to $190 plus million. The reason was because in the previous guidance of the transaction cost, we have included in there the possible breakage cost of refinancing certain US private placement debt facilities. So we were fortunate that upon the completion of the transaction, many of these US private placement debt investors actually saw the credit improve and hence were more than happy to stay. So, you know, that is a savings in terms of the transaction costs. Now, if we move on to the next slide, I'll go into detail in terms of a group net profit impact. For the gas and related services as a segment, we did see a 14% or a 45 million decline year on year in terms of our net profit. Now, we have seen from the earlier slide that for Singapore, it declined by about 33 million The contributory factors of that is really a result of a lower spread from recontracting, both across the SEMCorp as well as the Sunoco portfolio through 2025 and coming into the earlier part of 2026. Now, in general, our overall portfolio average spreads declined by about $8 per MWh to average around the low 50s. We also saw a couple of things. In the first half of our 2026, there were some one-off gains, including a cargo diversion gains that we were not able to realize in the first half of this year. And also, you know, there was some gas cost increase in Senokor as a result of the gas curtailment, but the impact is small. Probably we're talking about a $4 million impact. So all this, you know, contributed overall to a decline of $33 million from Singapore year on year. The UK saw a close to a $22 million decline year on year. And as guided at the earlier part of this year, we did see loss of customers, petrochemical customers, and as a result, also a demand from them. We are, you know, working as I came in talking about, you know, re-designating, you know, Wilton for the use of AI as well as data centers. And we will, you know, we are looking into the second half to see if something materializes. Now for the rest of the world in the gas and related services, we actually saw a 7 million improvement year on year across the different countries coming from various factors, cost savings, efficiency gains and so forth. So that's the gas and related services segment. I'll talk about renewables first. Now the renewable segment saw a decline of 48% or 63 million year on year. I think in the first half of this year and you would have seen also the earnings announcements as well as profit guidance from pure renewables companies in China and also some in India that one key element that was quite common across the renewables business was resource. So we did see a big resource across both wind and solar. across China, a little bit of India, as well as Southeast Asia. So the impact of resource in the first half of this year actually saw a 40 million impact, close to 40 million impact of the 63 million that we talked about. And China basically saw close to a 30 million of the 40 million impact. And specifically for China, we also saw a couple of other impacts. One, we did talk about the VAT that was lost. It was a 12 million full year. So six million of that came through in the first half. And in addition to that, we also foresaw a further six million impact as a result of lower market trading tariffs for the portion of the China portfolio that has to be put on market trading as a result of the move towards more market trading by the various provinces. Specifically for curtailment, it is rather mixed. We did see curtailment improve for certain provinces that includes areas like Guangxi, Yunnan, as well as Guizhou. And we did see worsening in some other regions as well, particularly in Hunan, where hydro output was high and increased. Hence, there was increased curtailment across Sola and Ren. And also in Ningxia itself, where there was a one-off outage of a cross-province transmission line for inspection. So, in the second bucket of curtailment impacts, at least at this point in time, it doesn't look like it's systemic. Now, the northwestern part remains elevated and unchanged. So, curtailment remains high in the northwestern part of the country, right? I think for India, there was some resource impact in the first half, particularly over wind. But as Kim Min has highlighted, we did see a strong improvement of that in July. Now, for our storage portfolio, which is largely centered around the UK, we did see batteries prices declined by about 5 million in the first half, driven purely by supply and demand dynamics in the market. so basically that accounts for the renewables performance and a big part of it is really due to resource in the first half for integrated urban solutions net profit declined by 16 million and of course you know sand waste no longer contributes so that in itself contributed to a 10 million decline now urban saw a 4 million decline year on year but That is really contributed by a delay in the recognition of KIK's 40 hectare of land sales. Now, again, you know, in the first half of this year, we did see more rainy days, and hence the land preparation and resettlement was a little delayed. But I'm very happy to say that, you know, we have, you know, completed the handovers with your customer, and we have booked their earnings in August. It will be booked in August, and that's about 11 billion dollars.