In Singapore, the largest renewable energy company is Sembcorp Industries (SGX: U96). Although it has a large conventional energy business, which stems from its reliance on natural gas, the company has also been growing its clean energy portfolio at a rapid pace.
As more corporates regionally and around the world seriously consider the merits of renewable energy, from both a cost and environmental perspective, SGX-listed Sembcorp Industries is well-positioned to benefit enormously from the transition.
Here are 5 things you should know about Singapore’s leading renewable energy giant.
#1 Used To Own A Majority Stake In Sembcorp Marine
Previously, Sembcorp Industries may have looked like an industrial conglomerate – with the firm owning sizeable stakes in certain sub-sectors.
Sembcorp used to have a majority 61% ownership stake in Sembcorp Marine. The subsidiary was eventually spun off in a 2020 demerger – and after merging with Keppel Offshore & Marine, renamed Seatrium Limited (SGX: S51).
This demerger was part of Sembcorp Industries’ overarching strategy to focus on two existing core businesses – energy and urban development.
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#2 “Brown To Green” Transformation Plan
Having separated from Sembcorp Marine, the leadership team at Sembcorp Industries identified 3 “megatrends” to capitalise on for future business growth: decarbonisation, electrification, and urbanisation. As part of this pivot, the company unveiled its “brown to green” transformation plan at its Investor Day in May 2021.
This outlined the company’s plan to grow its renewables portfolio at a compound annual growth rate (CAGR) of 30% until 2025. As part of that target, Sembcorp Industries also announced its aim to quadruple its renewables installed capacity from 2.6 gigawatts (GW) at the end of 2020 to 10 GW by 2025.
By the time it hosted its 2023 Investor Day late last year, the company already had over 8 GW of installed renewables capacity. The initial 10 GW by 2025 target was extended to 25 GW by 2028.
#3 Acquiring wind and solar assets in India and China
Unsurprisingly, Sembcorp Industries is looking to acquire renewable energy assets outside of Singapore to grow its portfolios. India and China, the world’s two most populous countries, are central to this plan.
Already, Sembcorp Industries has bought a variety of wind and solar assets in the two countries over the past two years. Recently, in November 2023, Sembcorp Industries finalised two deals, one in each country, for a combined S$200 million that would see the company acquire 428 megawatts (MW) of wind assets.
Adding to its acquisition spree has been the disposal of “dirty” power-generating assets, such as a coal plant in India.
#4 Majority Of Profits Still Come From Fossil Fuels
Despite its industry-leading position as a clean energy giant in Asia, the majority of Sembcorp Industries’ profits still come from its conventional energy (CE) business – fossil fuels in other words.
During the first half of 2023, its CE business generated S$2.85 billion in revenue, making up 78% of the company’s overall revenue of S$3.66 billion.
Source: Sembcorp Industries H1 2023 earnings presentation
Nevertheless, the company has laid out an ambitious plan to generate around 70% of its net profit from “sustainable solutions”, like its renewables and integrated urban solutions businesses, by 2025.
#5 Pays a growing dividend
Sembcorp Industries has a patchy track record of paying dividends. It had to cut its dividend heavily in the mid-2010s due to the slowdown in revenue from oil & gas-related business for Sembcorp Marine.
However, now that it has refocused on recurring income streams, tied to long-term power purchase agreements (PPAs) in the renewable energy space, its management has been confident enough to raise dividends in the past two years.
From 2020 to 2022, it raised its ordinary dividend per share (DPS) from 4 Singapore cents to 8 Singapore cents, meaning its dividend has a 41.2% CAGR from 2020-2022.
Indeed, that solid growth was kept up in H1 2023, as the company raised its interim DPS 25% year-on-year, from 4 Singapore cents in H1 2022 to 5 Singapore cents for H1 2023.
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Building A Greener World, While Rewarding Shareholders
Sembcorp Industries has been at the forefront of efforts in Singapore to generate cleaner, and greener, power.
The company also owns one of the world’s largest floating solar farms – on the Tengeh Reservoir in Singapore – which is made up of 122,000 panels and covers roughly the size of 45 football pitches.
It has also been proactive in trying to acquire renewable energy assets across Asia. Investors have rewarded the approach as Sembcorp Industries shares are up over 100% in the past five years and was among the top-performing stocks of the Straits Times Index (STI) in both 2022 and 2023.
Read Also: How Much Would Investors Have Made If They Invested $1,000 In Every SGX ETF Launched In 2023?
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