Seatrium undertakes ‘holistic’ business review; net order book hits S$20 billion

OFFSHORE and marine (O&M) stalwart Seatrium : S51 0%, formerly known as Sembcorp Marine (Sembmarine), whose net order book crossed S$20 billion in the first quarter, is not “leaving any stones unturned” in its strategic review that is set to be wrapped up by end-year, said its top executive.

The “holistic” review will, among others, look at Seatrium’s capital structure following the merger, as well as how best to position itself to tap growth opportunities amid the global green-energy transition, said chief executive officer Chris Ong during a virtual briefing on the company’s first quarter business update on Friday (May 12).

Seatrium, with a market capitalisation of some S$8.5 billion, was born out of a giant merger between Sembmarine and Keppel Corp’s O&M unit, which was completed about a month ago.

“Right now, we have started to take a look at the two companies – where are the synergies to harness… (and) to focus on executing the jobs… and make full use of all capacity we have… to get the best returns from the projects we have already secured,” said Ong.

As for the capital structure review, he said: “It is still largely made up of two very complex companies, and we would like to take a look at our debt, asset holding structure and of course, at the end of the day, the sustainability of the cash flow as a whole… and also what are the targets to prepare the company for growth.”

In response to a question on whether a share consolidation exercise would be in the offing, Ong said the review will also consider if the company will need to undertake such a move, given its very high base of outstanding shares as a result of the merger.

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“Do we have concrete plans (on share consolidation) at this moment – the answer is ‘no’. I think in the nearer future, we’ll take a look at this. This is part of the capital structure review… it will not be immediate.”

One key aspect of the review is to determine how the clean-energy transition will play out amid macro uncertainties and geopolitical tensions, as the company “doubles down” on growth areas in the renewables space, including offshore wind projects.

“So, the strategic review will come up with potential guide posts and also levers to pull on how the… changes will affect energy transition,” Ong said. He added that this could include energy security and new energy solutions, such as carbon capture, utilisation and storage.

In its latest update, Seatrium disclosed that 39 per cent of the group’s net order book comprised renewables and cleaner or green solutions. “That’s quite a feat,” remarked Ong, adding that the company expects the order pipeline for renewable projects for 2023 to stem mainly from Europe, and also potentially from the US.

Seatrium’s largest offshore renewable project involves the supply of high voltage direct current (HVDC) electrical transmission systems for three offshore wind farm projects – each valued at about two billion euros (S$2.9 billion) from TenneT TSO.

The company added that it has also secured a contract worth more than S$500 million for two offshore wind farm substations from Empire Wind, a joint venture between Equinor and BP.

Further, it has entered into an agreement with Chevron Shipping Company to provide the latter with engineering, procurement, installation and commissioning services for its liquefied natural gas fleet modification and upgrade project to support its energy transition goals.

Projects under execution make up about S$19.9 billion of its net order book, while ongoing repairs and upgrades projects contribute to the remaining, said Seatrium.

The group also recorded higher overall cash balance, following the completion of the combination with Keppel O&M, as well as improvement in operating cash flows from the completion and delivery of key projects.

Amid the ongoing energy transition and rising concerns for energy security, Seatrium expects the industry outlook for oil and gas, offshore renewables and other green solutions to continue to improve.

“With a combined order book of over S$20 billion with completions scheduled from 2023 to 2030, the group remains focused on executing well on all its existing projects,” it added.

Seatrium closed lower by 1.6 per cent or S$0.002 at S$0.124 on Friday, after the announcement.