Singapore’s Sembcorp plans Indian unit IPO

The industrial conglomerate is also planning to sell a number of ‘peripheral utilities assets’ for $380m, while looking to nearly double its renewables portfolio worldwide to 4GW by 2022.

Sembcorp is consolidating its Indian energy assets, including both conventional and renewable energy projects, into one entity in a bid to streamline its shareholding structure and to enhance synergy, while planning an initial public offering for the unit.

It has filed a draft red herring prospectus for an initial public offering of Sembcorp Energy India on both the Bombay Stock Exchange and the National Stock Exchange of India.

Neil McGregor, group president and chief executive of Sembcorp, said during a press conference last Friday that the company will hold a controlling stake in the Indian entity as it continues to grow the business in India. A significant portion of the net proceeds from the Indian unit’s IPO, through which Sembcorp hopes to raise over 40 billion rupees ($617 million; €500 million), will be used to pay down debt, according to the filing.

“It’s not an exit strategy,” he added. India is one of the key markets where Sembcorp seeks to grow its business sustainably. As of December 31, 2017, the platform owned assets with a combined capacity of over 4GW.

The plans for the Indian business are part of a new strategy by Sembcorp as it looks to become an integrated energy player, strengthen its businesses and benefit from the global energy transition, following a recent strategic review.

As a result of that review, Sembcorp is planning to divest a number of “peripheral utilities assets” across the globe, aiming to raise S$500 million ($380 million; €308 million) over the next two years.

The divestments are part of the group’s broader capital recycling plan and a geographic repositioning, with the company focusing on deepening its presence in four key markets – Singapore and Southeast Asia; China; India; and the UK.

First in line is Sembcorp’s municipal water operations in South Africa, which will be sold to a consortium led by an unnamed South African infrastructure fund for about S$89 million. The deal is expected to close in the first half of this year, following regulatory approvals.

The new strategy also comprises new energy offerings built around its anchor power generation assets and a bigger ambition in the renewable energy space. Sembcorp has been a developer, owner and operator of power generation and utility assets. It will now focus on opportunities across the value chain, including gas importation, retail and merchant business.

In terms of renewables, Sembcorp looks to ramp up the portfolio to 4GW by 2022, nearly a double of its current renewables portfolio of over 2.4GW. McGregor expects three quarters of Sembcorp’s new renewables capacity will come from wind, given a higher entry barrier, with the rest from solar.