- Sembcorp (SGX:U96) has agreed to acquire Alinta Energy for S$4.8bn to be paid fully in cash. Alinta has 3.4GW power generation capacity in Australia across gas (43%), coal (33%), wind (17%), and solar (7%). A bridging loan will fund the acquisition, and equity fund-raising is not required.
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- Australia's energy market has fewer long-term contracts than Singapore's, leading to higher margin volatility. We have not incorporated the Alinta acquisition into our forecast. The acquisition will require shareholder approval and is expected to be completed in 1H26.
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The Positives
Earnings accretive acquisition.
- The acquisition is accretive on EBITDA and PATMI by 42% and 23% respectively. EV/EBITDA is essentially unchanged post-acquisition, from 8.9x to 8.6x, because net debt jumps 74% to S$5.8bn. The P/E ratio drops from 10.3x to 8.4x, but it is unclear whether intangible amortisation is required.
- We expect the debt at Alinta could be refinanced at 50-100 bps, given Sembcorp Industries' credit profile.
Better growth visibility.
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