Sembcorp Industries - CGS-CIMB Research 2022-11-18: Acquiring More Solar & Wind Assets For ~s$204m

Sembcorp Industries - Acquiring More Solar & Wind Assets For ~s$204m

  • Sembcorp Industries (SGX:U96) is acquiring a 45.3% interest in Xingling New Energy (Xingling) from Wuling Power, an affiliated company of State Power Investment Corporation Limited (SPIC). Wuling Power holds the remaining 54.7% interest in Xingling. The assets are contracted to the grid for 1 year or 3-5 years, pegged to coal on adjustable grid tariffs. ~60% of contracts are eligible for government subsidies.
  • Total consideration amounts to ~Rmb1,058m (~S$204m) for 830MW of installed renewable capacity and 62MW under development in Hunan and Guizhou. Upon completion, Sembcorp’s total gross renewable capacity will increase to ~9.4GW (~3.4GW solar, ~5.6GW wind, and ~0.3GW energy storage), including WIP assets, even closer to its 10GW target by 2025F, according to Sembcorp.
  • Management reiterated in the briefing that Sembcorp will not pursue equity fundraising. The transaction will be funded internally and through external borrowings. Sembcorp said its net gearing is between 1- 1.3x currently, which we think could be slightly raised post the 3 recent acquisitions (BEI, Vector Green, and Xingling). We are still comfortable with the slightly raised net gearing seeing that its renewable peers average ~2.3x net debt/equity now.
  • We also think Sembcorp is in a stronger position now compared to in May 21 to service its debt since the recently-purchased ~2.3GW of renewable assets are immediately cash flow-generative upon acquisition and power sales remain strong, according to Sembcorp.
  • Management also said that it is exploring capital management strategies that could include selling minority stakes of its current assets, listing yield vehicles, and/or raising private funds for Limited Partners (LPs) to directly invest into projects with Sembcorp.
  • We estimate that all three acquisitions will add ~S$60-70m to our FY24F net profit forecast for Sembcorp, or ~10% to FY24F EPS.

Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @

LIM Siew Khee CGS-CIMB Research | Izabella TAN CGS-CIMB Research | 2022-11-18

Previous report by CGS-CIMB:
2022-11-14 Sembcorp Industries - Likely To Up 2025 Target Of 10GW Renewable Energy Capacity.

Price targets by 3 other brokers at Sembcorp Target Prices.
Listing of research reports at Sembcorp Analyst Reports.

Relevant links:
Sembcorp Share Price History,
Sembcorp Announcements,
Sembcorp Dividends & Corporate Actions,
Sembcorp News Articles

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