Sembcorp to pay 1.5b yuan for 35% stake in Chinese renewable energy company

SEMBCORP Industries U96 : U96 0% is acquiring a 35 per cent interest in SDIC New Energy, a power company in China with a portfolio of 30 operational wind and solar photovoltaic (PV) assets, for 1.5 billion yuan (S$320 million).

Its wholly-owned subsidiary Sembcorp Energy (Shanghai) Holding has signed an equity transfer agreement with State Development Investment Corporate Group's (SDIC) Shanghai SDIC Xieli Development Equity Fund Partnership (Xieli Fund), to take over its 35 per cent interest in SDIC New Energy. SDIC is a state-owned investment holding company in China.

SDIC New Energy's portfolio has a total gross installed capacity of about 1.9 gigawatts (GW) across 7 provincial regions in China.

The power company is also 65 per cent owned by SDIC Power, the publicly-listed power arm of SDIC.

The investment is part of the group's target to reach 10GW in gross installed renewables capacity by 2025, Sembcorp said in a bourse filing on Thursday (Dec 2).

Alex Tan, Sembcorp's chief executive officer of China, expects Sembcorp and SDIC Power will have complementing strengths to drive further growth in renewables through the joint venture.

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"Sembcorp is keen to build up our renewables portfolio in China, the world's largest and fastest-growing renewables market," he said.

The acquisition will be funded through a mix of internal cash resources and external borrowings, and is expected to be completed in the first half of 2022 - subject to customary conditions precedent, including regulatory approvals and the signing of a joint venture agreement with SDIC Power.

Sembcorp expects the acquisition will be earnings accretive from the first year of the acquisition. The transaction, however, is not expected to have a material impact on the earnings per share and net asset value per share of Sembcorp for the financial year ending Dec 31, 2021.

Earlier in November, Sembcorp had also announced it was acquiring a 98 per cent interest in a portfolio of operational wind and solar PV assets, located in energy demand centres Hebei, Henan and Shandong provinces in China. The assets, acquired for 3.3 billion yuan, have a total gross installed capacity of 658 megawatts.

Shares of Sembcorp closed at S$1.93 on Wednesday (Dec 1), up S$0.05 or 2.7 per cent.

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