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Edited Transcript of U96.SI earnings conference call or presentation 15-Nov-19 1:00am GMT

Q3 2019 Sembcorp Industries Ltd Earnings Presentation

Singapore Nov 22, 2019 (Thomson StreetEvents) -- Edited Transcript of Sembcorp Industries Ltd earnings conference call or presentation Friday, November 15, 2019 at 1:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Graham Cockroft

Sembcorp Industries Ltd - Group CFO

* Lay San Ng

Sembcorp Industries Ltd - SVP of Group Strategic Communications & Sustainability

* Neil Garry McGregor

Sembcorp Industries Ltd - CEO, Group President, Member of Technology Advisory Panel & Executive Director

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Conference Call Participants

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* Cheryl Lee

UBS Investment Bank, Research Division - Head of Singapore Research, Executive Director and Analyst

* Gerald Wong

Crédit Suisse AG, Research Division - Head of Research

* Jason Yeo

Goldman Sachs Group Inc., Research Division - Equity Analyst

* Zhiwei Foo

Macquarie Research - Analyst

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Presentation

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Operator [1]

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Thank you for standing by, and welcome to Sembcorp Industries 9-Month 2019 Results Conference Call. (Operator Instructions) I must advise you that this conference is being recorded today, Friday, the 15th of November 2019.

I will now like to hand the conference over to your first speaker, Ms. Lay San.

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Lay San Ng, Sembcorp Industries Ltd - SVP of Group Strategic Communications & Sustainability [2]

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Good morning, everyone, and thank you so much for calling in to Sembcorp Industries 9 months 2019 results briefing.

I'm Lay San from Group Strategic Communications and Sustainability. And I'm here with Group President and CEO of Sembcorp Industries, Neil McGregor; and Group CFO, Graham Cockroft. To enable you to follow the briefing, it would be helpful for you to have our announcement kit on hand. This includes a copy of our MASNET financial statement, a PowerPoint presentation of the results as well as our press release. This call is being webcast, and you can also follow the results briefing slides online, and this can be accessed at our homepage, www.sembcorp.com.

Without further delay, I'll now hand over to Neil and Graham to take us through the results this morning.

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Neil Garry McGregor, Sembcorp Industries Ltd - CEO, Group President, Member of Technology Advisory Panel & Executive Director [3]

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Thank you, Lay San. Good morning, everyone. Thank you for calling into Sembcorp Industries 9 Months 2019 Results Teleconference.

For 9 months 2019, the group continued to deliver profit growth, despite the challenging operating environment for the Marine business. While group turnover was $7.3 billion compared to $9.1 billion in the prior period, this was mostly due to lower revenue recognition from rigs and floaters and offshore platform projects for the Marine business. Profit from operations, or PFO, and net profit continued to improve, with PFO up 5% to $656 million, and net profit up 9% to $262 million.

Earnings per share for the period was $0.132 and the group annualized return on equity was 5.1%. At the beginning of 2018, we started on a divestment program, our peripheral assets to unlock value. We are pleased to announce that to date, we have achieved $550 million of cash proceeds, meeting our divestment target of $500 million ahead of plan.

Let me now take you through the key developments in our Energy segment. This is Slide 4. For 9 months 2019, the Energy business continued to deliver an improved performance, posting a net profit of $258 million, up 5% from $246 million in the prior period. The net profit growth was driven mainly by contribution from our new power assets in Bangladesh and Myanmar, as well as additional renewables capacity in China. We have made progress in our strategy, particularly on strengthening our sustainable energy portfolio, cementing our position as Singapore's largest home-grown international renewable energy player.

In Singapore, we are actively partnering organizations to accelerate the adoption of renewable energy in the country, and we have grown our solar power capacity to close to 170 megawatts peak.

Sembcorp Energy India is today one of the largest wind developers there. Having secured 800 megawatts in the nationwide wind power auctions, we were the first company to deliver installed capacity awarded under these auctions. We have successfully commissioned an additional 357 megawatts for the SECI 2 and 3 wind power projects, bringing the total commission capacity for SECI wind projects to more than 600 megawatts, which is about 75% of the 800-megawatt total. We expect to complete the remaining capacity by the end of this year.

In the U.K., the first 60 megawatts of our 120-megawatt battery energy storage project commenced operations in October. The 120-megawatt portfolio represents one of Europe's largest energy-based energy storage projects, adding to our U.K. operations, the flexible fleet, which helps to counter the intermittency of renewable power resources. During the quarter, we also entered the renewable energy space in Vietnam. As we formed a partnership with Becamex and VSIP to introduce a new generation of sustainable smart energy solutions to the country through corporate PPAs.

We are reshaping our portfolio, building a strong, balanced portfolio that is aligned with market trends and supports sustainable development. Our total operating capacity is now over 12,000 megawatts globally. This comprises a diversified mix of fuel sources, including renewables and battery energy storage, which is approximately 20% to 25% of our portfolio. This year, our capital recycling efforts continued with the divestments of Xinmin and Lianyungang water assets in China and the sale of utility assets, formerly serving Jurong Aromatics Corporation to ExxonMobil in Singapore in October.

We remain committed to unlocking value in India. The timing of an initial public offering will be dependent on market conditions. In the U.K., we are pleased to update that the European Commission has approved the Capacity Market Scheme on the 24th of October this year. The U.K. government has commenced step to reinstate the capacity market, and we will be recognizing capacity market revenue from the fourth quarter of 2019.

Now we move to Slide 5. This gives you a snapshot of our renewables portfolio. Renewables has been a key focus area in our strategy as we sought to reshape our energy portfolio amidst the global energy transition. Last year, we stepped up our commitment to sustainability, setting a target to double our renewables capacity to around 4,000 megawatts by 2022 as part of our climate change strategy. We are today, Singapore's largest home-grown international renewable energy player, with our global renewables portfolio growing by 20% to more than 2,600 megawatts spanning a total of 4 markets. Profit contribution from our renewables business has also grown threefold since 2016.

Now moving on to our Marine business, which is Slide 6. The business continued to face intense competition, posting a net loss of $38 million. New orders secured to date was $845 million, including an FPSO conversion job from Shapoorji Pallonji and Bumi Armada and offshore wind contract with the first time customer, Jan De Nul, as well as a repeat floating production unit order from Shell. The total net order book stood at $2.4 billion, excluding the Sete Brasil drillships. On October 7, Sembcorp Marine announced the final settlement with the Sete Group on 7 drillship contracts signed with them in 2012.

Under the settlement that titles to 5 of the 7 drillships will be retained by Sembcorp Marine. While the titles to the remaining 2 drillships in advance construction progress will be apportioned between Sembcorp Marine and Sete Brasil, according to payments already received from Sete Brasil. Once the conditions precedent are met, the drillship contracts will be terminated and the parties involved will mutually release each other from all claims related to the contracts.

Looking ahead, challenges in the offshore and marine sector persist and competition still remains intense. Activity levels in all segments remains low, except for repairs and upgrades. Sembcorp Marine is expecting a trend of losses to continue into the fourth quarter and the full year losses to be higher than last year.

Now on to Slide 7, our Urban business. The Urban business registered a net profit of $30 million. Contribution from Vietnam remains stable, while China's earnings were lower. The total land sales was comparable to the 9-month prior period at 175 hectares, with continued interest in Vietnam industrial land, which has been strong. Net order book remained healthy at 455 hectares, a 17% increase compared to the previous -- prior 9 months, mainly driven by an increase in Vietnam land commitments, reflecting the strong demand for industrial land there. The sale of Riverside Grandeur in Nanjing is expected to be recognized in 4Q 2019, subject to legal completion of the development.

Now let me hand the time over to our Group CFO, Graham, to take you through the group financial review. Thank you very much.

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Graham Cockroft, Sembcorp Industries Ltd - Group CFO [4]

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Thank you very much, Neil, and good morning, everyone. It's my pleasure to take you through the group's financial review for the 9 months 2019.

We start on Slide 9, looking at group profit and loss. Sembcorp Industries posted a turnover of $7.3 billion for the 9 months of 2019, 20% lower than the corresponding period last year. Despite the lower turnover, the group earned an EBITDA of $1 billion for the 9 months of 2019, 22% higher than the prior year. Profit from operations, PFO, of $656 million was 5% higher year-on-year.

The improved EBITDA mainly came from the Energy and Marine businesses, offset by a lower contribution from the Urban business, while the better PFO performance came mainly from the Energy business.

Finance costs of $440 million were 24% higher compared to the corresponding period in 2018. And the increase came mainly from the Energy and Marine businesses, higher average bank borrowing for ongoing projects and working capital needs. The increase was also due to the interest costs no longer being capitalized at our Myingyan and Sirajganj projects after they completed or achieved commercial operation last year. The 9-month 2019 finance costs also included $16 million of deemed interest cost on lease liabilities from the adoption of SFRS(I) 16, which took effect on the 1st of January 2019.

Higher finance income was attributable to interest income received from customers of Marine under a deferred payment arrangement. The group's effective tax rate of 33% for the 9 months 2019 was lower than the 53% of 2018. The overall lower tax expense was mainly due to lower [tax expense] from the India Energy business following the amalgamation of our thermal power operations as well as the recognition of tax losses and tax incentives from the Marine business.

Net profit after tax and after noncontrolling interests was 9% higher at $262 million. Earnings per share was $0.132, and return on equity on an annualized basis was 5.1%.

Turning to Slide 10. Group turnover. The Energy business recorded a turnover of $4.8 billion, approximately $149 million or 3% lower than the prior year. The reduction in turnover rose mainly from India, Bangladesh, South Africa and Singapore.

In India, we had a shutdown of Unit 1 of our Project 1 power plant in January and February of this year. In Bangladesh, lower construction revenue from Sirajganj was recognized compared to 2018, where there was a higher contribution recognized during the conduction phase under IFRIC 12 accounting.

There was no turnover recognized from South Africa posts its divestment in 2018. In Singapore, a lower turnover was a result of lower gas sales and lower turnover from the solid waste management business, post the divestment of paper and medical waste businesses there.

And Marine's lower turnover was the result of lower revenue recognition for rigs and floaters and offshore platform projects, mitigated by higher repair and upgrade revenue. Increase in Other businesses turnover came mainly from our design and construction business.

Turning to Slide 11, group profit from operations. The group registered profit from operations of $656 million in the first 9 months of '19, an increase of 5% against last year. 9-month '19 PFO for Energy was 8% higher compared to 9-month '18. The improved performance came mainly from our international businesses. I'll go through those details on subsequent slides.

Marine's 9-month '19 loss from operations of $54 million was comparable to the 9-month '18 result. The 9-month '19 result continues to be impacted by the low overall business volume. 9-month '19 PFO for Urban declined mainly due to lower land sales in China as compared to the 9 months of '18. As you all know, Urban's profit is lumpy and depends on the timing of land sales. The increase in PFO for Other businesses came mainly from the design and construction business, which had divested its loss making business, sorry, loss-making investment in Sembcorp EOSM on November 2018. And the group's higher corporate costs were mainly due to an increase in consultancy and personnel costs as the group continues to build and deepen its capabilities and new business lines, such as digital and technology.

Turning to Slide 12. The group posted a net profit of $262 million for the 9 months of '19, 9% higher than the 9 months '18 net profit of $241 million. Energy business net profit increased 5% to $258 million compared to 9-month '18 profit of $246 million, and we'll provide more details on that breakdown in the next few slides.

Marine's net loss of $38 million for the 9 months of '19 was better than last year's net loss of $50 million. The better performance was mainly due to lower net interest expenses and higher tax credit recognized in the period.

Urban's net profit in the 9 months of '19 was mainly attributed to a steady performance from Vietnam. The lower net profit compared to '18 was mainly due to lower land sales in China. And the improvement in Other businesses, again, came from the design and construction business post the divestment of the loss-making investment in Sembcorp EOSM in November of last year.

Turning to Slide 13, Energy PFO. Energy PFO of $684 million represents an 8% growth year-on-year. You can see the growth came mainly from the Rest of Southeast Asia, the Rest of the World and China.

And turning to Slide 14, we provide a reconciliation there of Energy's PFO between the 9 months of '18 and the 9 months of '19. And you can see the underlying PFO increased from $646 million in the 9 months of '18 to $687 million in the 9 months of '19. The variances for the geographical signals are detailed below. I'll just highlight a few. So higher profit was driven mainly by Myingyan and Sirajganj Unit 4 under the Rest of Southeast Asia and Rest of the World, respectively. As both plants commenced commercial operations in phases during the year 2018, 2019. 9 months '19 results in Myingyan also included liquidated damages and a vendor settlement income.

China improved our bid results from its thermal and renewable energy businesses.

India, with new capacities added to the renewable fleet there in SEIL, SEIL Project 2 power plant achieving higher dark spreads from better short-term contracted positions and lower coal costs. These improvements were offset by the shutdown of Unit 1 -- Project 1 in the first quarter of '19. So overall, for the 9 months of '19, the load factors at each of the plants were 77% for Project 1, 82% for Project 2 and 26% for SGI for the renewable portfolio.

These overall gains across the regions were offset by Singapore's lower PFO due mainly to higher open electricity market operating expenses and the absence of contributions from divested businesses. Also, the 9 months of '18 had included some one-off income from pipeline construction and the sale of excess strategic fuel.

Turning to Slide 15. We look at Energy net profit. For the 9 months, net profit increased from $246 million in the 9 months of '18 to $258 million for the 9 months of '19. Excluding exceptional items, Energy 9 months '19 underlying profit increased from $256 million to $261 million. The better performance was mainly due to the increased EBIT of $14 million, which I highlighted on the prior page. Due to better performance from geographical regions of Rest of Southeast Asia, the Rest of the World and China, an increase in the share of associates and joint ventures of $27 million, driven by better performance from Vietnam, China and the Middle East. These 2 offset by higher net finance cost of $67 million and profit attributable to noncontrolling interest of $3 million. Taxes were lower by $34 million as tax expenses for India were lower following the amalgamation of our thermal power operations there in the fourth quarter of 2018.

Turning to Slide 16 on group CapEx and equity investment. You can see there that capital expenditure incurred in the 9 months of '19 was mainly for the expansion on the CapEx -- sorry, at the India renewable energy business, battery facilities in the U.K. and for Marine's Yard. The equity investment made was mainly for the incorporation of subsidiaries under the Urban business for residential development in Hai Phong City in Vietnam in the first quarter of 2019.

Turning to Slide 17, group cash flow. You can see there that the 9-month '19 cash flow from operating activities was $845 million, $468 million higher than the $377 million of the 9 months of '18. In the 9 months of '19, Marine generated net cash from operating activities of $20 million, $135 million better than the 9 months of '18.

Marine's cash from operations before changes in working capital was $146 million. This amount was reduced by working capital for ongoing projects, less receipts from completed projects.

For Energy and Other businesses, cash flow from operating activities increased by $333 million. This improvement came from both better operating results and less need for working capital.

The 9 months of '18 working capital changes included an increase of $181 million and service concession receivables from Myingyan and S4. These receivables are being collected over the period of the concession contracts from when the power plants commenced commercial operations.

Net cash flow used in investment activities was $549 million, mainly for CapEx, as detailed in the previous slides, offset by proceeds from divestments, dividend and interest income received. The proceeds from the disposal of Gallant Venture shares was $62 million. Excluding expansionary CapEx, free cash flow for the 9 months of '19 was $934 million.

Turning to Slide 18, where we break out group borrowings. You see there, the group's net debt was $9 billion as at the end of September -- as of 30 September 2019. Interest cover was 2.4x, while gross debt, net debt to capitalization ratios were 0.57% and 0.48%, respectively.

Total gross debt of $10.7 billion as at 30 September '19 was comparable to the level at December 31, 2018. The profile of debt has changed with an increase in project finance debt from $3.2 billion to $3.7 billion, and an increase in corporate debt from $3.3 billion to $4.4 billion, with the issuance of a $1.5 billion 5-year bond that was used to provide a subordinated loan to Marine in July of 2019. Correspondingly, Marine's external debt reduced by $1.6 billion.

On Slide '19, we provide further details on the debt profile -- sorry, debt portfolio, where we're showing how the debt is profiled over time. So as at 30 September 2019, over $10.7 billion, 29% of our debt is due within 1 year, 17% between 1 to 3 years and 26% of our debt is due after 5 years.

Marine's debt due within 1 year amounts to $1.3 billion. On the 8th of July 2019, the Marine business drew down a subordinated loan of $1.5 billion from Sembcorp Industries and retired some of its short-term borrowings. It's currently working on reprofiling its remaining borrowings with longer term maturities. 34% or $3.7 billion of our total debt is project finance debt, which are mostly attributed to India, Myanmar and Bangladesh. And we've provided a further breakdown of the borrowings in the appendix.

Slide 20, we've added a new slide to the pack. This is on group liquidity as at the 30 of September and the end of last year. And there, you can see the group's cash and cash equivalents and unutilized committed facilities were $1.7 billion and $2.7 billion, respectively. So in total, the group has a combined $4.4 billion of cash and committed facilities available.

With this I leave my presentation, and we can take any questions that you may have. Thank you.

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Lay San Ng, Sembcorp Industries Ltd - SVP of Group Strategic Communications & Sustainability [5]

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Thank you. Well, all now -- the panel will now be happy to take any questions you may have.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question is Cheryl Lee from UBS.

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Cheryl Lee, UBS Investment Bank, Research Division - Head of Singapore Research, Executive Director and Analyst [2]

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Can I just ask a few questions about -- may I find out, please, what was UKPR's contribution in third quarter? And also, could you remind us what was typical amount of capacity payments every year that we expect?

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Neil Garry McGregor, Sembcorp Industries Ltd - CEO, Group President, Member of Technology Advisory Panel & Executive Director [3]

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Go ahead, Graham.

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Neil Garry McGregor, Sembcorp Industries Ltd - CEO, Group President, Member of Technology Advisory Panel & Executive Director [4]

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Just pull up the information, Cheryl.

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Lay San Ng, Sembcorp Industries Ltd - SVP of Group Strategic Communications & Sustainability [5]

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Cheryl, for 3Q is it or 9 months?

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Cheryl Lee, UBS Investment Bank, Research Division - Head of Singapore Research, Executive Director and Analyst [6]

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3Q.

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Lay San Ng, Sembcorp Industries Ltd - SVP of Group Strategic Communications & Sustainability [7]

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You would like -- 3Q UKPR was negative $14 million.

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Cheryl Lee, UBS Investment Bank, Research Division - Head of Singapore Research, Executive Director and Analyst [8]

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Okay. And could you remind us what the capacity payment?

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Neil Garry McGregor, Sembcorp Industries Ltd - CEO, Group President, Member of Technology Advisory Panel & Executive Director [9]

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Yes, Cheryl, that does not include the capacity payments, because they're not due for accrual until fourth quarter.

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Cheryl Lee, UBS Investment Bank, Research Division - Head of Singapore Research, Executive Director and Analyst [10]

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Yes, understand. And on a full year basis, what was the capacity payment that you should have received?

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Neil Garry McGregor, Sembcorp Industries Ltd - CEO, Group President, Member of Technology Advisory Panel & Executive Director [11]

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About $15 million.

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Graham Cockroft, Sembcorp Industries Ltd - Group CFO [12]

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On an annual basis.

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Cheryl Lee, UBS Investment Bank, Research Division - Head of Singapore Research, Executive Director and Analyst [13]

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Okay, understand. And then a follow-up question for me would be, if I look at the Utilities division, the corporate and others, our number is...

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Neil Garry McGregor, Sembcorp Industries Ltd - CEO, Group President, Member of Technology Advisory Panel & Executive Director [14]

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Hang on. Cheryl, just a hang on a moment, we're just checking. But normally in the shoulder season, which Q3 is. Remember, it is the U.K.'s summer period. So you don't expect UKPR to be -- for its earnings to be solid during that period. Where -- it's usually the Q4 and Q1 periods, where you will see the contribution come through. Of course, capacity markets have got to come back in. But as I said, that won't happen until Q4. The determination was made in October to restart the regime and to take off the suspension. So all money is due over the time period of the suspension will be paid out, and that is higher than the $15 million.

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Cheryl Lee, UBS Investment Bank, Research Division - Head of Singapore Research, Executive Director and Analyst [15]

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Could you just remind us...

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Neil Garry McGregor, Sembcorp Industries Ltd - CEO, Group President, Member of Technology Advisory Panel & Executive Director [16]

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So we've given you $15 million and --

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Cheryl Lee, UBS Investment Bank, Research Division - Head of Singapore Research, Executive Director and Analyst [17]

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And you haven't received a capacity payment since Q4 '18, is that right?

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Neil Garry McGregor, Sembcorp Industries Ltd - CEO, Group President, Member of Technology Advisory Panel & Executive Director [18]

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That's correct. So you can do the math.

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Cheryl Lee, UBS Investment Bank, Research Division - Head of Singapore Research, Executive Director and Analyst [19]

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Yes. And then another question is on the Utility...

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Neil Garry McGregor, Sembcorp Industries Ltd - CEO, Group President, Member of Technology Advisory Panel & Executive Director [20]

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Okay?

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Cheryl Lee, UBS Investment Bank, Research Division - Head of Singapore Research, Executive Director and Analyst [21]

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Yes. On the Utility side, the corporate and others seems a bit higher -- quite a bit higher than last year. Could you give some color on what we expect going forward?

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Lay San Ng, Sembcorp Industries Ltd - SVP of Group Strategic Communications & Sustainability [22]

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Cost in Utilities?

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Neil Garry McGregor, Sembcorp Industries Ltd - CEO, Group President, Member of Technology Advisory Panel & Executive Director [23]

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Well, corporate costs, we expect to be flat going into -- so around current run rate. And reason for that is we've been building up digital and merchant capabilities within the company. And if you look at that against, normalizing it against our PFO and the costs of the employees for the PFO is not expanding. So we are managing that. So that our costs are not going up disproportionately to our operating margin.

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Graham Cockroft, Sembcorp Industries Ltd - Group CFO [24]

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Cheryl, we also had a one-off. We also had a one-off $6 million payment effectively one hand to the other hand of -- or left to right hand within the group for a settlement across the Myingyan power plant. So there was work that was being done by the -- one part of the group for the...

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Neil Garry McGregor, Sembcorp Industries Ltd - CEO, Group President, Member of Technology Advisory Panel & Executive Director [25]

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Transfer cost.

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Graham Cockroft, Sembcorp Industries Ltd - Group CFO [26]

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Yes. So that effectively ended up as additional cost in the corporate group.

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Cheryl Lee, UBS Investment Bank, Research Division - Head of Singapore Research, Executive Director and Analyst [27]

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I see. Okay. And just...

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Neil Garry McGregor, Sembcorp Industries Ltd - CEO, Group President, Member of Technology Advisory Panel & Executive Director [28]

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So the normalized effect...

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Cheryl Lee, UBS Investment Bank, Research Division - Head of Singapore Research, Executive Director and Analyst [29]

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When you say the run rate will be the same, do you mean that the run rate on a Q-on-Q basis, at least in Q4, it might be another about $20 million to $25 million? Or do you mean on a year-on-year basis because your Q4 '18 was actually a lot (technical difficulty) cost as just lower?

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Neil Garry McGregor, Sembcorp Industries Ltd - CEO, Group President, Member of Technology Advisory Panel & Executive Director [30]

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The former.

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Operator [31]

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Our next question is Jason Yeo from Goldman Sachs.

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Jason Yeo, Goldman Sachs Group Inc., Research Division - Equity Analyst [32]

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I've got a few questions. Firstly, on the divestments, now that you have met your divestment target, what's next? Are you looking to divest more? And will the pace of investments increase?

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Neil Garry McGregor, Sembcorp Industries Ltd - CEO, Group President, Member of Technology Advisory Panel & Executive Director [33]

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Yes.

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Jason Yeo, Goldman Sachs Group Inc., Research Division - Equity Analyst [34]

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Sorry, that's yes to both?

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Neil Garry McGregor, Sembcorp Industries Ltd - CEO, Group President, Member of Technology Advisory Panel & Executive Director [35]

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Yes. If you want me to provide some additional, you want me to give the -- give you some additional color. Essentially, we are looking at our portfolio in terms of where value can be unlocked, right? And we've already mentioned our strategy is to consolidate our position. And around OECD countries that if you go back to the 2018 strategy that we -- I think we put to market at the beginning of 2018. Yes, so we talked about slimming the number of geographies and also concentrating our position more around Singapore, Southeast Asia and the U.K. So that gives you a little bit of color. And of course, we need to -- so we're looking to unlock and recycle capital where we can. So in short, yes, there's likely to be some more divestments.

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Jason Yeo, Goldman Sachs Group Inc., Research Division - Equity Analyst [36]

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Okay. My next question is on the Andhra Pradesh LoA. Any updates on that? And does the termination of the master plan township raise any question marks over this?

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Neil Garry McGregor, Sembcorp Industries Ltd - CEO, Group President, Member of Technology Advisory Panel & Executive Director [37]

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No, there's no further updates, essentially, the government of Andhra Pradesh has come to an agreement and the development will no longer continue. So we have sort of concluded the agreements, and we have shut the company down.

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Jason Yeo, Goldman Sachs Group Inc., Research Division - Equity Analyst [38]

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Okay. But you don't expect the LoA to be impacted by this?

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Neil Garry McGregor, Sembcorp Industries Ltd - CEO, Group President, Member of Technology Advisory Panel & Executive Director [39]

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The PPA? No, no, it's totally separate. That's an Urban development, whereas the Andhra Pradesh power projects are under our Energy division. So there's no relation between the 2 or no correlation between the 2. One was -- development, yes.

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Jason Yeo, Goldman Sachs Group Inc., Research Division - Equity Analyst [40]

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Yes. One last question on the Urban division. Can you share how much land transfers were done in the first 9 months? And how much land you're expecting to transfer in the fourth quarter?

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Neil Garry McGregor, Sembcorp Industries Ltd - CEO, Group President, Member of Technology Advisory Panel & Executive Director [41]

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Just a while we look those up.

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Lay San Ng, Sembcorp Industries Ltd - SVP of Group Strategic Communications & Sustainability [42]

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I think in terms of the land transfers, I don't think we disclose exactly what is going to be handed over here. But as you can see from the slide, we have already sold Nanjing Riverside development, and we are waiting for recognition of those land sales. So it's more the lumpiness of that, rather than exactly the number of hectares that is transferred. So it's just a recognition of what we really sold that is outstanding.

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Operator [43]

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Next question is Zhiwei Foo from Macquarie.

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Zhiwei Foo, Macquarie Research - Analyst [44]

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I actually have about 3 questions. The first one is on the Singapore side. I understand that you are seeing a bit of -- a better demand for electricity. So maybe you could just share with us what you're kind of like seeing on that front?

Second question is on India. I think P2 actually made a loss for this quarter. And it's -- well, it's one part due to the monsoon season. At the same time, I also understand there are some like less short-term contracts. So maybe you can just kind of elaborate on what sort of dynamics you're seeing down there?

And the third question is on what, does Sembcorp see any form of like strategic rationale or strategic value in, say, Tuaspring?

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Neil Garry McGregor, Sembcorp Industries Ltd - CEO, Group President, Member of Technology Advisory Panel & Executive Director [45]

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Okay. Do we have the demand figures?

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Lay San Ng, Sembcorp Industries Ltd - SVP of Group Strategic Communications & Sustainability [46]

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I think in terms of the demand, I think, we were referring to that with higher demand overall for our products for the Energy segment, rather than specifically for electricity.

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Zhiwei Foo, Macquarie Research - Analyst [47]

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Okay.

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Lay San Ng, Sembcorp Industries Ltd - SVP of Group Strategic Communications & Sustainability [48]

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Electricity, there was -- and there was also higher demand for electricity.

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Neil Garry McGregor, Sembcorp Industries Ltd - CEO, Group President, Member of Technology Advisory Panel & Executive Director [49]

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Was it substantial or let's go into the...

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Lay San Ng, Sembcorp Industries Ltd - SVP of Group Strategic Communications & Sustainability [50]

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How many percent was that? 8% up.

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Zhiwei Foo, Macquarie Research - Analyst [51]

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And from what you are seeing, is this something like a sort of like trend that's kind of like moving up?

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Neil Garry McGregor, Sembcorp Industries Ltd - CEO, Group President, Member of Technology Advisory Panel & Executive Director [52]

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Well, I can't say it's a trend yet. That is a -- it is a single figure increase. I think we would have to see 2 or 3 more periods yet before we could comment on that being an increasing trend. It could be weather-related as opposed to demand-related, which is consistent to do with industrial production or something like that. I can't make that distinction, not yet anyway.

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Zhiwei Foo, Macquarie Research - Analyst [53]

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Okay. On India?

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Neil Garry McGregor, Sembcorp Industries Ltd - CEO, Group President, Member of Technology Advisory Panel & Executive Director [54]

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Right. So your second question.

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Graham Cockroft, Sembcorp Industries Ltd - Group CFO [55]

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I can take the second question. So on the second question around India and the loss at P2 for the second quarter, we had less short-term contract sales during that period. We also saw a lower IEX price during the quarter. And consequently, to some extent, a lower dark spread. So that meant we had a poorer quarter compared to the second quarter of the year. That's also just driven because you got high hydro generation going on as a result of the monsoon, which clearly means is switching away from thermal towards hydro.

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Zhiwei Foo, Macquarie Research - Analyst [56]

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Yes, yes. I mean, but why was there less short-term contract. Is this for thermal and -- I mean, is it because of lower short-term contract sales for thermal energy? Or is it like in for electricity in general -- electricity demand in general?

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Graham Cockroft, Sembcorp Industries Ltd - Group CFO [57]

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Well, that's certainly on our plant or slightly less. I mean, it's not really the primary driver. I think you'll see that the price is more of the driver than the contracted volume.

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Zhiwei Foo, Macquarie Research - Analyst [58]

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Okay. And on the last question.

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Neil Garry McGregor, Sembcorp Industries Ltd - CEO, Group President, Member of Technology Advisory Panel & Executive Director [59]

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Tuaspring, so we do have some interest in Tuaspring, but I can't say any more than that. There is a process. It is in the hands of the receiver, and we'll just have to wait and see what happens in the market.

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Zhiwei Foo, Macquarie Research - Analyst [60]

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If I may just slip in one more question. So since you're probably looking at reinvesting the money that you've earlier discussed and U.K. was one of your -- the countries of focus, is there any update on the Teesside power plant that you probably think -- that you probably have received approval in April this year?

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Neil Garry McGregor, Sembcorp Industries Ltd - CEO, Group President, Member of Technology Advisory Panel & Executive Director [61]

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We are still working on it. The investment case has not been put up for FID yet. So there were a number of options there to reinvest in Teesside. It's likely that we will not go ahead with a larger capacity investment. We will most probably look at a smaller capacity investment. When I say smaller capacity, that's something in the order of 50 to 100 megawatts rather than something like 800 or 1,600 megawatts. We do have a planning approval for -- now for a very large power project, but we don't think the climate is right for that kind of investment and given the position of our balance sheet as well, we want to be a bit conservative.

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Operator [62]

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(Operator Instructions) Gerald Wong from Crédit Suisse.

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Gerald Wong, Crédit Suisse AG, Research Division - Head of Research [63]

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I just have one question. It is about the Open Electricity Market. What are you seeing in terms of trends there? Has the competition actually started to die down? Or are you still seeing intense competition in the OEM?

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Neil Garry McGregor, Sembcorp Industries Ltd - CEO, Group President, Member of Technology Advisory Panel & Executive Director [64]

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Gerald, trends in the market, I think there is a stabilization in terms of market share. There is a realization that I think that pricing is fairly aggressive. And given where wholesale market pricing is and gas, the cost of gas, I think there has been a dialing back of competition. So that's my read of it.

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Operator [65]

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(Operator Instructions) There are currently no more questions now. Management, I pass it back to you.

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Lay San Ng, Sembcorp Industries Ltd - SVP of Group Strategic Communications & Sustainability [66]

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Okay. Thank you very much. And if there are no other questions, we will now conclude this morning's results presentation. Thank you, everyone, and have a good day ahead. Thank you.

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Neil Garry McGregor, Sembcorp Industries Ltd - CEO, Group President, Member of Technology Advisory Panel & Executive Director [67]

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Thank you.

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Graham Cockroft, Sembcorp Industries Ltd - Group CFO [68]

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Thank you.