2 Key Updates to Know for SembCorp Industries Limited

The past year has been rough for conglomerate SembCorp Industries Limited (SGX: U96).

Shares of the utility and marine giant have tumbled by one-third on the back of weaker earnings from its subsidiary SembCorp Marine Ltd (SGX: S51). In the latest quarter, SembCorp Industries also reported negative free cash flow and a net debt position of around S$4.1 billion.

In light of these, the conglomerate could use some better news.

A S$350 million windfall

Over the past week, Sembcorp Industries announced the sale of its 40% stake in SembSita Pacific Pte Ltd (SembSita) to its 60% joint venture partner, Suez Environnement Asia (Suez).

The size of the deal was A$485 million and is expected to close in the fourth quarter of the current financial year.

More importantly, this divestment is expected to net a gain of approximately S$350 million for SembCorp Industries. With the aforementioned net debt on its balance sheet, this is welcome news for the conglomerate; the deal will help pad its balance sheet for the year.

India powers up

Last week, SembCorp Industries announced the completion of the second 660-megawatt unit of its Thermal Powertech Corporation India (TPCIL) power project in India. This news comes after the first TPCIL 660 MW unit came online in April this year.

With the completion of the second unit, the first TPCIL plant is now in full commercial operation. Together, the two units make up the coal-fired power plant with a combined capacity of 1,320 MW.

According to SembCorp Industries, the TPCIL plant is currently supplying 500 megawatts to the Andhra Pradesh and Telangana Power Distribution Companies under a 25-year power purchase agreement. SembCorp Industries is expected to enter into new power agreements in the near future.

This would be important as TPCIL is still operating at a loss at the moment.

SembCorp Industries Chief Executive Officer Tang Kin Fei hailed the milestone achievement for the conglomerate. The completion of the first plant will be followed with a second 1,320 MW plant planned for 2016.

Currently, SembCorp Industries is a leading foreign energy player in India, with the TPCIL project making up a significant chunk of the company’s overall 3,300 MW power capacity in the country.

Ultimately, Foolish investors may want to see how these projects translate into profits and free cash flow for the company.

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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 contributor Chin Hui Leong doesn’t own shares in any companies mentioned.