What happened?
Amid all massive fallout from the Silicon Valley Bank debacle, you’d be forgiven for thinking that all stocks are falling – including in Singapore.
But that assumption would be mistaken, as the world goes on and businesses continue to operate.
That’s exactly the case in Singapore, where leading utility and renewable energy firm Sembcorp Industries Ltd (SGX: U96) saw its share price soar by over 6% today.
By the end of the trading day, Sembcorp shares had closed 6.1% higher at S$4.
That was mainly down to the fact that the company had announced (after the market closed on Monday 13 March) that it had been awarded its first greenfield renewables project in the Middle East.
The 500 megawatt (MW) solar plant would be built, owned and operated by its wholly-owned subsidiary Sembcorp Utilities and Jinko Power Technology.
It will be an 80%-20% joint venture with Jinko Power, a Chinese solar photovoltaic solutions company that has a presence in the Middle East.
So what?
This expands Sembcorp Industries’ presence in the Middle East as it already owns a 40% stake in the Salalah Independent Water and Power Plan that has been in operation since 2012.
Yet, this will be the firm’s first renewable energy foray into the region.
The contract is being awarded by the Oman Power and Water Procurement Company (OPWP) and will see Sembcorp Industries (along with its JV partner) build, own and operate the Manah Solar II Independent Power Project in Manah, Sultanate of Oman.
According to Sembcorp Industries, the project will be financed through a mix of cash and debt.
The rationale for the contract is simple. The solar plant, when completed, will be backed by a 20-year power purchase agreement (PPA) with the OPWP.
That gives Oman reliable power and also provides Sembcorp Industries with long-term visibility on cash flows generated from the asset.
Now what for investors?
This latest announcement has put Sembcorp Industries’ total renewables portfolio over the 10 gigawatt (GW) mark. After the latest announcement, it now stands at 10.3GW.
That 10GW was a goal that was set for 2025 so the company has already surpassed it with two years to spare.
It seems likely at this point that the company will revise upwards its 2025 goals for renewable energy capacity.
Sembcorp Industries shares have defied gravity so far this year, rallying over 16% so far in 2023.
Over the past 15 months, the stock has doubled – rising from S$2 at the beginning of 2022 to S$4 today.
Yet, the company’s growth path is still sizeable. The stock also trades at a 10% discount to its regional utilities peers and has a strong position as the only pure-play renewable energy stock listed on the SGX.
For shareholders, the Sembcorp Industries growth story seems to be on track.
Singapore investors should continue to watch how the company continues to extract value from its renewable energy assets as it transitions away from its conventional energy-producing ones, like gas.
Disclaimer: ProsperUs Head of Content & Investment Lead Tim Phillips owns shares of Sembcorp Industries Ltd.
