Sembcorp Industries' JV unit ends legal proceedings in China

CONGLOMERATE Sembcorp Industries (SCI) has concluded the multimillion-dollar legal proceedings it faced over pollution offences in China, closing a chapter in the case that has made headlines recently because of disclosure issues.

SCI stated in a regulatory filing to the Singapore Exchange on Friday that its joint-venture (JV) wastewater treatment unit Sembcorp Nanjing Suiwu (NSS) had received the final mediation document from the Chinese court.

SCI holds a 95 per cent stake in NSS.

The legal proceedings consisted of a criminal case and a related civil case over illegal discharge of wastewater by NSS. Under China court rules, these two cases were regarded and tried as one. SCI's share of the fines and cash settlement for both the criminal and civil claims stands at a total of S$54 million - S$10 million for the criminal case and a S$44 million settlement for the civil claim.

SCI stated that these were fully provided for as at Sept 30 last year, with no further financial impact arising from the conclusion of legal proceedings.

Further, it has committed to new investments of S$45 million over the next four years to develop projects and initiatives to support environmental protection in China, with a substantial portion of this being earmarked for upgrading of the facilities for the wastewater treatment business in Jiangsu.

SCI commented that the upgrading would have been necessary even without the litigation to meet new effluent discharge standards coming into force in January 2021. "These investments are expected to deliver financial returns," said SCI.

The outcome of the case had not been disclosed right after the Chinese court dismissed NSS' appeal last October, and this has sparked criticism from some corporate governance watchers and a regulator's article on timely and adequate disclosures of significant litigation.

SCI's latest announcement with the JV named and other details stands in stark contrast from its earlier disclosures in mid-January and September 2018.

The conglomerate said it was in "many months of difficult and sensitive negotiations with the provincial prosecutors" over the civil claim.

"During the entire period, the group had sought to maintain confidentiality in order to resolve the civil claim expeditiously and with the lowest quantum possible...

"While fulfilling its disclosure obligations, in determining the information on the NSS legal proceedings to be disclosed during this period, the group therefore had to balance the interests and disclosure needs of all stakeholders to ensure that legal proceedings are resolved expeditiously under the China legal system and in a manner that minimises the quantum of claims."

SCI shares closed 13 Singapore cents or 6.02 per cent lower at S$2.03 on Friday.