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SembCorp Industries’ Important Progress In Energy-From-Waste Project In The UK

Sembcorp

Utilities and marine engineering outfit SembCorp Industries (SGX: U96) announced this morning that it has achieved financial close for its energy-from-waste project in the UK. ‘Financial close’ is generally used to describe how a company has settled all the project and financing agreements it needs to allow funds to start moving so that its projects can actually begin to be implemented.

The energy-from-waste project would require a total investment of around £250m (approximately S$513m) and the costs would be funded through long-term non-recourse project finance loans from seven different banks that include Banco Bilbao Vizcaya, Sumitomo Mitsui Banking Corporation, and UK Green Investment Bank.

The project would see Sembcorp Industries, SITA UK, and I-Environment Investments Limited embark on a 40:40:20 joint-venture to develop a facility in Wilton International, a 770-hectare industrial site located at Teesside, UK, which SembCorp Industries owns, operates and manages.

The facility would be capable of producing up to 49 megawatts of gross power or 190 tonnes per hour of steam, using municipal or commercial waste supplied by Merseyside and Halton Waste Partnership under a 30-year contract.

The join-venture will also be developing a waste transfer station in Knowsley, Merseyside, UK to transport waste from there to the facility in Teesside. Both the transfer station and the energy-from-waste facility are slated to come online by 2016.

SembCorp Industries has a strategy to focus on green businesses and wishes to transform Wilton International into a green hub. The energy-from-waste facility will be the company’s second green energy facility on the industrial site after the SembCorp Biomass Power Station, which has been up and running since 2007.

The new facility will allow SembCorp Industries “to divert waste from landfill, convert waste to energy, reduce the consumption of fossil fuels and also lower carbon emissions. When completed, the plant will divert up to 430,000 tonnes per year of waste from landfill and reduce carbon emissions by an estimated 130,000 tonnes per year, compared to landfilling an equivalent amount of waste.”

Finally, the new facility would be able to provide SembCorp Industries with “a new income stream” and “enhance the competitiveness” of its operations on the Wilton International site after it comes online.

SembCorp Industries’ Utilities segment, of which the energy-from-waste facility would likely belong, has seen its pre-tax operating profits increase substantially from S$247m in 2009 to S$597m over the last 12 months. It has had a huge role to play in maintaining the company’s pre-tax operating profits above the S$1.1b mark since 2009 as the Marine segment, represented by SembCorp Marine (SGX: S51), has seen pre-tax profits drop from S$858m to S$609m in the same time period.

Segment

2009

Last 12 months

Utilities revenue

S$3.71b

S$5.29b

Utilities pre-tax operating profit

S$247m

S$597m

Utilities pre-tax operating profit margin

6.6%

11.3%

Marine revenue

S$5.72b

S$5.21b

Marine pre-tax operating profit

S$858n

S$609m

Marine pre-tax operating profit margin

15%

11.7%

Source: S&P Capital IQ

SembCorp Marine’s profit margins haven’t shown signs of recovery yet, and if the situation persists, it would be up to the Utilities segment to carry the team.

As such, important developments within the Utilities segment, like the energy-from-waste project for instance, would be worthwhile to note for investors.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Chong Ser Jing doesn’t own shares in any companies mentioned.