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What Does the Future Hold for SembCorp Industries Limited?  

Utilities and marine engineering conglomerate Sembcorp Industries Limited (SGX: U96) has seen better times.

The business and shares of its major subsidiary SembCorp Marine Ltd (SGX: S51) have been dragged down by the potential bankruptcy of a major customer, Sete Brasil. Meanwhile, the conglomerate also cut its dividend recently. All told, Sembcorp Industries has seen its shares shrink by over 35% in value since the start of 2015.

But beyond its troubles, there may be areas in which SembCorp Industries can grow as well.

During a recent earnings briefing, Tang Kin Fei, SembCorp Industries’ chief executive, gave an update on the company’s Vision 10/10. For those who may be unaware, SembCorp Industries has a target to grow its power and water capacity (in operation and under development) to 10,000 megawatts (MW) and 10 million cubic meters per day, respectively. Hence, the name Vision 10/10.

At the end of 2015, SembCorp Industries had 10,616 MW in power capacity and 9.2 million cubic meters per day of water capacity. Naturally, the question was about what is next, or like one analyst suggested, is there a Vision 20/20? Tang responded:

“I think 20/20 did come to our mind, but I think water is quite different. Energy sector, the growth can be lumpy and quite big but for water we are focusing on not municipal water, but industrial water. And the next few years, we think that the growth in industrial water will not be as rapid as the energy sector.

So, we still expect to have some momentum in the power sector. But with this economic downturn, with this slowdown in the growth, as you can see, in fact last five years we have grown quite substantially, in fact last year alone we have grown by 3,000 MW which is quite substantial. So, we continue to work hard and strive hard to achieve a higher growth.

But as I said earlier, we have a new platform, a renewable energy platform. We expect, through this renewable energy platform, we will grow in our renewable energy capacity between 500 to 1,000 MW per year. Our renewal energy platform is very strong in the wind capability, we are focusing our energy this year in the solar energy area. So, that is something we want to go into, we believe that the future of the world is going towards less carbon emission and I think that this is the area with the growth potential for the long term. In addition to thermal power. So, we have more platforms to grow our business.”

SembCorp Industries has a bevy of projects in both power and water lined up to be executed over the next three years. As Tang alludes to, there were 3,800 MW of power capacity and 1.3 million cubic meters per day of water and wastewater capacity on the cards between 2016 and 2018.

2016-03-01 SembCorp Presentation
Source: SembCorp Industries’ earnings presentation

All these will come at a cost, though. As investors, we may want to weigh the growth potential of the projects above against the increased capital expenditure that would come with them.

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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.