Good morning, and welcome to Sembcorp Industries full year 2021 results presentation webcast. I'm Xin Jin from Group Investor Relations. The members of the panel for today's presentation are Group President and CEO, Wong Kim Yin, and Group CFO, Eugene Cheng. Without further delay, I will now hand over the time to Kim Yin to begin the results presentation. Kim Yin, please.
Thank you, Jin. A very good morning, and thank you for logging on to Sembcorp Industries full year 2021 results briefing. For the full year of 2021, the group delivered a strong set of results. Turnover was SGD 7.8 billion, up 43% from 2020. EBITDA was SGD 1.3 billion, up 9%. Adjusted EBITDA was SGD 1.5 billion, up 5%. Net profit before exceptional items was SGD 472 million, up 57%, while net profit was SGD 279 million, up 78%. Earnings per share was SGD 0.156, and EPS before exceptional items was SGD 0.264. Group ROE was 7.9%, and group ROE before EI was 12.9%. The board is proposing a final dividend of SGD 0.03 for ordinary shares for FY 2021.
Together with the interim dividend of SGD 0.02 paid in August 2021, this will bring our total dividend for the year to SGD 0.05 for ordinary share. Let me now go through the key highlights of our different business segments. For renewables, net profit of the renewables segment increased 22% to SGD 56 million in 2021, up from SGD 46 million in 2020. This was driven by higher contribution from our wind business. In 2021, we made strides in growing our renewables portfolio. In Singapore, as many of you would know, we successfully commissioned the 60-MW-peak floating solar farm at Tengah Reservoir, and this is one of the largest inland floating solar farms in the world.
The solar farm was completed in under a year, despite manpower and supply chain constraints due to COVID-19 pandemic, and this is now a showcase of our solar capabilities as a leading regional renewable energy player. In Southeast Asia, we grew our solar capacity in Singapore and Vietnam by a total of 166 MW in 2021. In China, we announced two acquisitions of operational wind and solar assets totaling 2.5 GW. In November 2021, we announced the acquisition of a 98% stake in a 658 MW portfolio of operational wind and solar assets, and that will provide a scalable platform for us to drive further growth in the country. This was followed in December by the acquisition of a 35% interest in SDIC New Energy. This transaction has since completed.
The SDIC New Energy portfolio consists of 1.9 GW of operational wind and solar assets located across seven provincial regions in China. These two acquisitions anchors our position for significant growth in China, which is one of the world's largest renewables market. In India, we secured 210 MW of renewables contracts, including a 180 MW wind power project in the eleventh nationwide wind power auction held by SECI. Upon completion of the project, the power output will be sold to SECI under a 25-year long-term power purchase agreement. This brings our gross renewables capacity installed and under development in India to 2.3 GW. In U.K., a further 10 MWh of our battery energy storage portfolio was commissioned, bringing our total operational battery fleet to 70 MWh. The remaining 50 MWh is expected to be completed this year.
We saw good progress and momentum in our growth as a leading renewable player in 2021. We secured a total of 2.9 GW of renewable energy projects, and this brings our gross installed renewables capacity to 5.3 GW, including the 658 MW portfolio acquisition in China, which is pending completion by the first half of this year. Together with over 800 MW of capacity to be completed between 2022 and 2023, our total gross renewable capacity will be 6.1 GW. We are on track and are pushing confidently towards our target of 10 GW by 2025. The integrated urban solution segment delivered a strong performance in 2021. Net profit before exceptional items was SGD 155 million, and that's up 37% from SGD 113 million in 2020.
This was mainly driven by higher contribution from the urban business and the solid waste management business in Singapore. Net profit was SGD 161 million, up 15%. Despite the shutdowns and delays in regulatory approvals caused by COVID-19 and the resulting slow pace of land sales in the first nine months, higher earnings from urban land sales were recorded due to land price increase across all industrial parks in Vietnam and Indonesia. Total land sales for the year remained resilient at 168 hectares compared to last year's 172 hectares. Net order book is at 279 hectares compared to 277 hectares in 2020. In China, we achieved record land sales at the Sino-Singapore Nanjing Eco-Hi-Tech Island project with the sale of 9 plots of industrial and business and commercial and residential land.
The urban business continued to focus on building its land bank to ensure a stable launch pipeline. We received the investment license to develop a 481-hectare new industrial park in Quang Tri Province, central Vietnam. The province has been earmarked as a future economic hub along the East-West Economic Corridor linking Vietnam, Laos, Thailand and Myanmar. Now, with the establishment of the joint venture company completed this month, our total land bank has increased from 12,588 hectares to over 13,000 hectares. We now have 15 urban projects strategically located across Vietnam, China and Indonesia, and that provides the platforms to leverage our businesses, drive synergies and future growth in sustainable solutions. The conventional energy segment also delivered a very strong performance in 2021.
Net profit before EI was SGD 373 million, up 52% from SGD 245 million in 2020. This is driven by strong performance in India, Singapore and UK, especially in the fourth quarter of 2021. Net profit was 54% higher than 2020 at SGD 174 million. Exceptional items totaling a negative SGD 199 million were recorded mainly due to the SGD 212 million impairment for the 49% owned Chongqing Songzao coal-fired power plant in China. In India, earlier this year, we secured two long-term power purchase agreements for our supercritical power plants. The first PPA was to supply 625 MW of power to Andhra Pradesh for 12 years, and the second was to supply 200 MW of power to Bangladesh until May 2033.
With these agreements, 85% of our India thermal plant capacity is now underpinned by long-term and mid-term PPAs. We have also restructured the India corporate entities. The thermal and renewable businesses in India are now held under separate corporate entities. Moving to Singapore, we were appointed by the Energy Market Authority as the new LNG importer. Our portfolio of energy solution enables us to provide sustainable, competitive and reliable energy for our customers in Singapore, where natural gas continues to be a dominant energy source, and even as we continue to grow our renewables business. The flexible generation assets in the U.K. also performed very well in 2021.
The volatility in the country's wind generation and weather conditions during the year has resulted in increased imbalance in the system, and we were able to capture the resulting high prices through being vigilant and keeping our operational performance, maintaining high reliability. With sustainability and decarbonization in mind, we continue to pursue new green technologies that will aid in the decarbonization of the energy sector. In October 2021, we signed a strategic collaboration MOU with Chiyoda Corporation and Mitsubishi Corporation to explore the feasibility and implementation of a commercial scale supply chain to deliver decarbonized hydrogen into Singapore. We also announced the collaboration agreement with Zero Degrees Whitetail Development to explore the development of U.K.'s first net zero power station at Luton International T-site. This slide provides a snapshot of where we are today against the strategic targets we set out for 2025.
As mentioned, net profit from Sustainable Solutions comprising the Renewables and Integrated Urban Solutions segments grew by 33%. Now, in the meantime, contribution from Conventional Energy segment increased by 52%. Now, as a result, Sustainable Solutions accounted for 35% of Group net profit this year. In terms of our Renewables target, we secured 2.9 GW of renewable projects in 2021. When we complete the 658 MW acquisition in China, again, it's expected within the first half of this year. We will have 6.1 GW of gross installed capacity in the portfolio. Urban land sales at 168 hectares, despite COVID-19, remain resilient. Again, with the addition of the Hwa Chi project, total land bank is now 13,000 hectares.
We will continue to focus on growing our land bank to ensure a steady launch pipeline. For carbon emission intensity, we are at 0.51 tons of CO₂ equivalent per MWh. Decarbonization remains one of our key focus, and we are committed to achieving our 2025 target. As you can see, we have made decent progress, and we will continue to focus on our 2025 targets as we transition the portfolio brown to green. Now, let me hand over to Eugene to take you through the group financial review. Thank you for your attention.
Thank you, Kim Min, and good morning to the analysts, the investment, as well as the financing community. It is my pleasure to take you through the details in relation to our FY 2021 financial performance relative to FY 2020. Now, on this slide that you're seeing on your screen here presents the top-level details. As Kim Min has highlighted early on, as a group, our turnover, we turned in SGD 7.8 billion for FY 2021, representing a 43% increase over FY 2020. That allow us to achieve an EBITDA close to SGD 1.3 billion. Taking into account of our share of results of associates and JVs, we have an adjusted EBITDA of close to SGD 1.5 billion for FY 2021.
That flows down to a net profit before exceptional items of SGD 472 million, which represents a 57% increase over the SGD 301 million last year. That is also the highest level of net profit before exceptional items we have seen since 2018. In addition, based on the survey of the analyst consensus in relation to our net profit before exceptional items, we are confident that this number has meaningfully exceeded the expectations. Now, we have seen exceptional items of SGD 193 million in FY 2021, and as you all know, SGD 212 million of this is in relation to the impairment of our Chongqing Songzao Sembcorp Electric Power assets as announced in our first half results.
That is partially offset by SGD 6 million of gain from the divestment of Jingmen, a water asset, in China, and also SGD 13 million gain from a U.K. land sales and connection fee income. That brings us to a net profit from continuing operations of SGD 279 million, which represents a SGD 78 million increase from SGD 157 million last year. What this means for us would be we have realized earnings per share before exceptional items of 26.4 cents per share, which is a 66% increase from 15.9 cents the year before. From continuing operations of 15.6 relative to 7.8 cents the year before, a 100% increase.
From ROE before exceptional items standpoint, we turned in 12.9% for our business this year relative to 5.9% last year. Taking into account exceptional items, our ROE from continuing operations, but after exceptional items, was 7.9% compared to 3% last year. All in all, a very strong set of results. Now, when we look at the group turnover breakdown from the Sustainable Solutions, the Renewables segment saw a 26% growth in terms of turnover, and this is driven by good performance from the wind portfolio. We saw higher energy base availability from the India portfolio, slightly offset by lower wind for the year of FY 2021. We also saw stable performance from the Chinese China portfolio.
There were some revenues realized from green credit sales in India. In addition to that, the battery portfolio in U.K. also contributed. We have 70 MW that start contributing in the year of FY 2021, and that led to a 26% increase year-on-year. For the integrated urban solutions, most of the revenues from the consolidated basis is actually from our waste management and waste resources business and a portion of our water operations. The increase of 10% is largely as a result of a resumption of operations in FY 2021 from our waste management business and also the full year effects of the consolidation of the Veolia acquisition that have resulted in that growth.
All in, the sustainable solutions revenues was SGD 819 million for FY 2021, representing a 17% increase over FY 2020. Conventional energy turned in a turnover of SGD 6.7 billion relative to SGD 4.6 billion the year before, a 46% increase. Much of this is driven by strong merchant market performance, particularly where we saw high energy demand and also high margins both in terms of the dark spreads and spark spreads realized across the U.K., India as well as Singapore, particularly in the fourth quarter of last year where we saw the hike in energy prices. In terms of other business, turnover for FY 2021 was SGD 297 billion, a 72% increase over FY 2020.
The reason for that is our specialized Sembcorp's specialized construction business resumed normal operations in FY 2021 over to FY 2020, where it was impacted by COVID. That leads to our total turnover of SGD 7.8 billion, realizing a 43% increase year-on-year. Moving on to the next slide. This slide shows the breakdown of the group net profit, and I will focus the discussion largely on the net profit before exceptional items. Renewables net profit before exceptional items was SGD 56 million for the year, which represents a 22% increase over FY 2020. The key operational reasons for that increase attracts the discussion in relation to turnover earlier on. A couple of points to note here.
In the Renewables segment for FY 2021, as a result of continuing to grow our portfolio towards our 10 GW target and also you know realizing the significant acquisition opportunities that came through from China, which will be completed in FY 2022. We have incurred development expenses of about SGD 11 million in FY 2021, which was not as material in FY 2020. Also in FY 2021, the battery portfolio experienced a deferred tax expense of SGD 4 million as a result of U.K. legislated tax increase from 19% to 23% by FY 2023. All in all, adjusting for these differences on a like-for-like operational basis, our Renewables segment turned in actually SGD 71 million relative to SGD 46 million the year before.
Integrated Urban Solutions saw net profit of SGD 155 million, a 37% increase over SGD 113 million in FY 2020. The bulk of the performance is driven by Urban, which saw increased land sales, particularly in the latter part of the second half towards the fourth quarter across China, offset with slightly lower land sales in Vietnam and Indonesia. For Vietnam, as you know, through the year of FY 2021, it was impacted by COVID, but we did see, you know, the situation lightening up and opening up towards the end of the year. Also, average selling prices realized were higher.
Now, for the Conventional Energy business, we turned in SGD 373 million in FY 2021, representing 52% increase over SGD 245 million in FY 2020. To give a little more color and context of that SGD 373 million, the coal business contributes to about approximately 20% of the segment earnings for FY 2021. Which means that the increase of SGD 128 million year-on-year, approximately 75% of that increase is really driven by our gas business in Singapore as well as our UK Flex business. The bulk of the increase, in dollar terms, for the Conventional Energy business is driven by our gas portfolio.
Other businesses turned in a net profit of SGD 25 million, over SGD 11 million, a 127% increase for the reasons I discussed earlier on for turnover, which you know references the fact that you know the Sembcorp specialized construction business resumed normal operations relative to FY 2020, which was COVID hit. Now, for corporate, you know FY 2021 saw a negative expense of SGD 137 million, over SGD 114 million, which on headline perspective looks like an increase of 20%. To contextualize that SGD 137 million, again there were two factors that led to that increase.
Number one, we made a SGD 10 million contribution to the Sembcorp Energy for Good Fund, which looks at the CSR activities in the sustainability arena, which is completely aligned with our with our key strategy of brown to green, and also making sustainability our business as a very core central value and tenet of Sembcorp Industries. Now, the second element is you would also notice that under our share plans, we have also revamped and relooked at our incentive structure. There were increased provisions in relation to such incentive structures, partly driven by the balanced scorecard performance, as well as putting in place necessary incentives to align you know the key personnel of Sembcorp Industries with our strategic execution going forward.
In note 6C of our SGXNet, you will notice that, you know, we have discussed, you know, this new incentives that is aimed to align, you know, our performance compensation in line with the execution of our strategic initiatives. Adjusting for these amounts, our corporate cost for FY 2021 is probably in the SGD 85 -90 million, which represents a 25%-27% decrease year-on-year. I will not discuss the total net profit after exceptional items for the key reasons that drive, you know, the performance has been discussed. Now, if we move to the next slide. I will not dwell on this slide.
This is representing, you know, the commentary in relation to the earlier slide in a pictorial form to help you visualize that better. If we move on to the next slide. Now group ROE. We saw strong group ROE performance across all our key segments. Renewables 4.6% relative to 4.2%. As contextualized earlier on, taking into account the development spend in FY 2021 and also the deferred tax expense impacting the battery portfolio. Our renewables ROE realized in FY 2021 will be about 5.9% or closer to 6%. Now, if you'll recall, we have mentioned earlier that we expect the ROE trends to trend in relation to the maturity of the asset portfolio.
As of now, the asset vintage or the age of our assets, average across, you know, the portfolio that contributed in FY 2021 was between four to five years. In that asset class vintage, we expect ROEs of between 5%-7%, which, you know, adjusting for the amounts, the elements that I talked about earlier on. The ROEs of 6% on a like for like year basis, you know, falls within expectations.
Of course, going forward, I did guide everyone that, you know, when the assets mature, generating cash flows and, amortizing debt in years six, all the way up to years 15, you will see ROEs trending above 10% towards a 15%. Beyond years 15, you will start to trend upwards in north of 20%. You know, the ROEs for the renewables, for FY 2021 is expected in light of the vintage of the assets, that we have. For integrated urban solutions, we turn in 9.9%, which is a significant improvement from 7.4% the year before. For conventional energy, 11.4% compared to 8.3%.
The group ROE realized was 12.9% relative to 5.9%, taking into account of a group leverage effect on the ROEs. Moving on to the next slide. In terms of capital expenditure and equity investment, you will notice that the bulk of our capital expenditure is in the renewable segment to continue to invest and to drive growth. You know, point to note is that you have noticed that we have announced in the last quarter of last year that we have made the two significant Chinese acquisitions of which SDIC have completed in January of this year. We are continuing to work on the completion of the CGN portfolio.
It is still expected and on track to complete within the first half of FY 2022. CapEx that is incurred in the integrated urban solution segment is largely in relation to our waste management business on renewal CapEx and also in relation to some of the sector tenders that we have secured. In the CapEx that is incurred in the conventional energy and other businesses, it's you know, largely of the replacement CapEx nature. Moving on to the next slide. From a group free cash flow standpoint, we're pleased to say that for FY 2021, we turned in a very strong operating cash flow before working capital changes, and that's SGD 1.3 billion.
Taking into account changes in working capital and also tax that were paid, it was SGD 1.2 billion for the year of FY 2021. Now, from a cash flow from investing activities standpoint, we did realize SGD 483 million of cash from a combination of divestments, dividends, as well as interest income. We did spend net CapEx of SGD 583 million. Taking and adding back, you know, expansionary CapEx as well as equity investment. Our free cash flow for the year was SGD 1.3 billion relative to SGD 700 million the year before. Moving on to the next slide. In terms of group borrowings, we did see gross debt reduce about SGD 400 million as a result of a continued project financing amortizations.
We saw our total equity increase from SGD 3.035- 3.9 billion, bringing our total capital number to SGD 11.3 billion relative to SGD 11.2 billion the year before. Now, from a debt portfolio standpoint, debt SGD 7.4 billion is largely categorized into our corporate level debt of about SGD 4.9 billion and project finance level debt of SGD 2.5 billion. Taking away our cash and cash equivalents for the year ended 31st December 2021, we have a net debt of SGD 6 billion. That brings us to our capital management metrics, where debt to EBITDA has reduced from 6.5x in 2020 to 5.7x in 2021.
Debt to adjusted EBITDA, which is EBITDA adjusted, adding back you know the share of profits from our associates and JVs. Given that a significant amount of our earnings are contributed there. Our debt to adjusted EBITDA have declined from 5.5x in 2020 to 4.9x . EBITDA to interest improved from 2.4x- 3x . Adjusted EBITDA to interest improved from 2.8x- 3.5x . This slide is something that you're familiar with as well, which lays out the group maturity profile for the group. Now, I just want to focus everybody to the table on the top left-hand corner, which largely highlights the maturity profile as of the 31st December of 2021.
Our debt portfolio carries a weighted average maturity of 4.8 years and a weighted average cost of borrowings of 4.8%. You will have noticed that as of December 31st, 2021, and also as highlighted during the investor day, we have a moving forward of our debt maturities. Now you see meaningful maturity of corporate debt within 2022 and also in 2023. Now, as mentioned early on, we will be proceeding to look at the various elements, particularly green and sustainability-linked avenues to refinance that. With that is an objective in FY 2022.
We will also continue to tap the green and sustainability linked financing markets in 2022 to raise the necessary growth capital to continue to drive growth towards our 10 GW target. Moving on to the next slide. From a liquidity standpoint, as of December 31st, 2021, apart from the cash and cash equivalents of SGD 1.3 billion, just want to highlight to everyone that we have unutilized committed RCF facilities of close to SGD 2 billion. As you have recalled during Investor Day, one of the key elements that underpin the financing, the success of the financing of our group ambitions is to retain committed RCFs of at least SGD 1.5 billion to underpin the investments and execution.
As of 31st of December 2021, we have SGD 2 billion of liquidity available for us to draw on in quick short notice to be able to fund growth. Moving on to the next slide. Summarizing all of that, we had a very strong year in FY 2022. Sorry, in FY 2021. As we look ahead in FY 2022, you know, we do hope that the market fundamentals that has helped that has been with us in FY 2021 will carry on forward. You know, looking into 2022, we do see that there are risks and uncertainties that will persist, right?
That would be naturally the continued impact of the COVID-19 situation on even global economic recovery and also a rising interest rate environment. Now, in 2021, a lot of the significant performance was driven out of the Conventional Energy segment. Of course, the Renewables as well as the Integrated Urban Solution segment performed well as expected. For the Conventional Energy segment, they did benefit from a strong you know energy demand as well as higher spark and dark spreads and margins are realized by in the fourth quarter of 2021. The underlying performance of this segment will continue to be subject to global energy market conditions and commodity prices as we go into 2022. If the market fundamentals hold up you know we
We are definitely we'll be hopeful of that. You know, that same market fundamentals will continue to underpin the conventional energy segment. It's really, really dependent upon the market fundamentals and the market conditions. Also the last element to highlight is that we continue to focus on our growth, right? We expect to complete the 658-MW CGN portfolio in the first half of 2022, and we are very well on track for that. As mentioned by Kim Yin, our gross renewables capacity installed and under development will reach 6.1 GW, achieved at the end of our first year of execution against our 2025 10-GW target. We continue to focus on transforming our portfolio from brown to green and the achievement of the 2025 targets.
Just a few points to note that is on our radar. Phu My 3 power plant in Vietnam will undergo major maintenance in 2022, and we do expect tariffs continuing to reduce as the PPA approaches expiry in 2024, something that is already disclosed and made known to the market early on. For the waste business, there would be an absence of contribution from the Woodlands-Yishun sector, which expired on 31st December of 2021. Going into 2022, the contribution from this is not expected to be very material. Of course, for the Myingyan IPP, we continue to operate and we continue to provide essential power to the people of Myanmar.
Payments continue to be prompt, and the plant continue to operate well. Given the situations in Myanmar, we will continue to monitor the developments very closely. Thank you, everyone. That ends my presentation and account to all of you in relation to our performance for FY 2021. A very strong set of results that you know has been put up. Now we wanna open ourselves up for Q&A.
Okay. Thank you, Eugene and Kim Yin. We will now proceed to the Q&A session. Here are some quick instructions. To ask a question, please click the Raise Hand button located at the bottom of your Zoom window. If you would like to cancel your question, you may lower your raised hand with the same button. When it is your turn to ask your question, we will call upon you, and you'll be prompted to unmute yourself to ask the question. Please repeat your name and state your company when you have been unmuted. Thank you.
First in queue, we have Zhiwei. Zhiwei, you've been prompted to unmute yourself. Please proceed to ask your question.
Hey, thanks. Can you hear me?
Zhiwei, we can hear you.
Right. Thanks. Well, Kim Yin, Eugene, congratulations on an outstanding second half. I actually have four questions. The first question is on conventional energy. I know you don't really talk about quarterlies these days, but could you kind of walk us through the cadence of your earnings within the business across second half? Reason being is that your clean PATMI was about flat half on half, but yet you also called out an exceptional 4Q 2021 on better energy demand and margins. Trying to understand what went on during the quarters, it would be helpful if you can talk about it in the context of Singapore, India, and the U.K.
Sure.
The second question is, On renewables, right? Could you talk about your, what you mean by lower wind resource in India? What was the impact from this sale of green attributes, and, how do you see the winds blow in 2022? Third question is on carbon tax. Could you like, help us understand what that amount was in 2021? What steps are you taking to kind of like address the step-up in carbon tax going to 2024 and 2025? Last question is on gas. I think your Grissik, your agreement for the Grissik deal is coming up for renewal in 2023. How should we think about the volumes and pricing on recontracting relative to your current obligations? Thanks.
Okay. I think many of these, Eugene, maybe you should take a first shot at addressing two of these questions.
Why don't I take it? First, to address you know your questions in relation to the conventional business segment. We do not release the earnings from a quarterly segment standpoint, but I can give you a color in relation to you know how things have progressed. Now, particularly for U.K., across the you know from September and into the last quarter of last year, right? Given you know hitting the winter months and continued volatility that we did see in the as a result of the renewables generation contribution to the national grid, there was a significant volatility.
For our U.K. flexible generation, we were able to capture many of those scarcity events, particularly in the fourth quarter of last year. That helped you know generate you know higher earnings in relation to you know the U.K. business. Now, for India, as you know, our P2 was not you know completely contracted. There was significant exposure to the IEX market. If you look at how the IEX market had performed, particularly over the months of September and October, right, into the earlier part of November, it has been very strong. In fact, if you look at our IEX, you know, tariffs in the month of October itself, it hit as high as INR 8.
You know, that also saw a very strong, you know, realization of, you know, the market earnings from India in the fourth quarter. I think closer to home in Singapore, I think you would have seen also, you know, how the USEP prices has trended. Particularly in the months of October and November and December, we saw USEP prices in Singapore hitting as high as, you know, in excess of $400 per MWh relative to 3Q, right? That was July to September, where USEP prices was, you know, ranging in the 150-ish kind of a range.
You know, we did see that a significant step-up in terms of these market elements that have, you know, has driven contribution to earnings. That said, in Q4 also, we have made our assessment in relation to several things. Some couple of elements were what I've talked about early on in relation to, you know, contribution to the Sembcorp Energy for Good Fund, and also in relation to putting in place the provisions for the transformation incentives going forward. In addition to that, you would have noticed that in our disclosure, there were about SGD 30 million of cost provisions made for remediation of legacy sites.
This relates to certain legacy sites in the U.K. that had, you know, some issues in relation to asbestos. This provision is in relation to, you know, the demolition and the removal of some of these legacy installation. You know, based on our assessment right now, we do not expect any of that to continue. Largely, that will characterize, you know, the evolution of, you know, the earnings in the second half for the conventional segment. Now, the second question is in relation to renewables.
Now, if you recall, particularly in the first half of last year, for India, from a wind resource standpoint, we did see a lower wind resource relative to historical averages. You know, we were able to offset that by having a stronger energy-based availability. Now, in India in particular, we also saw the realization of income from a certain green credit sales. It's something that we have started doing, you know, in a greater scale.
The contribution, it's a you know at a level where it is not completely material, but not absolutely very large, but it is something that we'll continue to grow in relation to the green credit sales. As a group, and maybe Kimin could also help to articulate thoughts around the strategy. We are now thinking of how we could look across the group and harness the use of our green attributes more. I believe you know your couple of other questions, one of them you know I may have forgotten them. Do you mind-
Carbon.
On carbon taxes. Okay. We do not disclose, you know, our carbon tax cost, but particularly to Singapore, we have said before, and it is still the same, that you know Singapore emissions is about 10% of our group emissions, right? With that, our group emissions is about 36 million tons per year. You will be able to triangulate to what our Singapore emissions would be. Based on the carbon tax amount, you will be able to you know draw your you know conclusion in relation to that. The last point is in relation to the renewal of.
Grissik. There are gas contracts in Indonesia.
The gas contract in relation to Indonesia. Yes. You know, there's still gas reserves in relation to that, but we will be running on a depleting basis up to 2028. We are reviewing our commercial options in relation to that right now. Yeah. Wong Kim Yin, any areas you would like to supplement?
No. Yeah. Thanks, Eugene. It's quite complete. But in a nutshell, 4Q, really the second half of 2021, at the beginning of the second half, when we briefed you on the half year earnings, there was a lot of uncertainty, so we couldn't see with full clarity what's gonna happen. What Eugene described in terms of winter tightness in the U.K. market especially, and then, you know, all that talk about the new energy crisis, right? If you've been following the energy markets, all that really happening in the fourth quarter.
With all the tightness from upstream all the way to downstream, then we see margins for us in the power market that we operate, U.K., Singapore, you know, becoming bigger, right? In a nutshell, we captured all that in the 4Q and have to be very honest, we didn't see the extent to which it was coming, right? For the same reason, it's very important to emphasize that, for the same reason, although we think some of the macro conditions contributing to this tightness seems to be, you can expect it to persist, right? All the reports and all the studies are done by all the think tanks and academics seem to suggest that it will sustain.
We want to be very cautious. If you see our prospect statement, we say that, look, you know, conventional energy has done well, right? Moving forward, you know, for it to continue to do well, it depends on this market conditions that is prevailing now to continue. All right? That's the important point that I thought I should supplement to what Eugene has mentioned. On the Indonesian gas contract, yes, it is depleting. It is until 2028. All that has been disclosed. We continue to talk to the upstream.
You know, there's still some gas reserve except that, you know, of course, the cost of extraction compared to when it was first built up 20 years ago, the cost of extraction for every unit of gas is just gonna be a little bit more expensive. It becomes a cost benefit analysis from the upstream producer's perspective versus our perspective whether or not we would buy it and how much of it we can sell in Singapore. Suffice to say, with last year's awarding of the LNG license to be one of the LNG importers into Singapore, then our portfolio of gas business is now, you know, more complete, you know.
West Natuna Gas continues to, you know, we can continue to 2028 depleting, but, you know, there's the opportunities to buy more, depending on, you know, availability and price. Then, you know, we are now importing LNG as well to supplement the entire portfolio. Today, actually, if I'm not wrong, we are the largest importer of natural gas in Singapore, and we intend to keep it that way. All right. I don't know whether that addresses your question, but, on the gas, that's what I have to say. Eugene mentioned about the. In terms of renewables, yes, they you know.
Again, we are subjected to the wind conditions and especially if you look at 2020, because we have so much concentration of wind assets in India. A low wind season in India, notwithstanding that we are spread across the entire western coastline of India, our assets. But we were quite in terms of outcome, there was still that concentration. I think what I'm trying to say is that moving forward, increasingly the concentration is lighter. You know, we are having now, you know, portfolios of wind assets in China, right? So now if you plot the map of China with the completion of the two acquisitions, one of them still pending, right? But we are quite confident it should close.
With the completion of that, together with our original 700 MW, 725 MW Fangchenggang, we got assets all over China, you know? I'm quite proud to actually note that. Coming back, the important point from a portfolio perspective is that then the diversification, hopefully the effect moving forward as we continue to grow, then this low wind and this concentration, the you know, season to season that sometimes we suffer from, hopefully from the portfolio perspective, we will enjoy the benefit of this diversification.
Thanks, Wong Kim Yin. Thanks, Eugene Cheng. Just one follow-up. Coming back to the conventional energy, you flagged all the clusters. It mostly happened within the fourth quarter . In your second half, we didn't see it as higher earnings overall in the second half, so it was flat instead. What was driving it? Does that mean that your 3Q was actually not as good, and the 4Q was actually bringing it up? Is that a correct way to think about it?
Actually, I think in relation to that, right, 3Q performed as I mentioned earlier on, right? For 3Q in itself, okay, U.K. you know did not have as much you know tightness, right? Relative to 4Q when we go into the winter season, right? In relation to Singapore, as I mentioned earlier on, when we look at the USEP prices, you know, in Q3 we're still averaging about $150+, and then in Q4 it stepped up into $400+. There is a differentiation in terms of the performance you know from the markets in 4Q relative to 3Q.
Now, I've also mentioned that in 4Q, right, there were some elements that impacted the conventional market segment. One of that is in relation to a $30 million provision in relation to a remediation of the legacy sites. That is in the SGXNet, and that is in relation to remediating and demolishing certain installations in the U.K. that are, you know, were impacted with asbestos. But we are, you know, reviewing the situation. It was very quite clear to us that, you know, with that, we do not expect any further issues going forward.
All right. Thanks. I'll hand it over.
Next in queue we have Terence Chua. Terence, you have been prompted to unmute yourself. Please proceed to ask your question.
Thanks so much. I'm Terence from Phillip Securities Research. Congratulations on the strong second half results. I have three questions, but I think I would just go run the questions one by one. My first question is, can you provide more details of your new long-term power purchase agreements in India? What rates are these secure at, and are there any inbuilt escalation in these long-term agreements? That's my first question.
We won't be able to tell you the details of the contracts. I understand where you're coming from. You probably are trying to build up the cash flow from this. Suffice to say, usually we don't talk about the margins, right?
No, we don't. We can't. Yeah.
I think what is important is that I think, let me share this. I used to think about the two Indian power plants, P1 and P2. They almost cancel each other out. One of them is quite profitable because of its contracts. The other one, because without contracts, it is, you know, really taking its chances in the wholesale market. At the same time, while it is taking its chances, it is also cycling up and down. These plants are not designed to run that way, right? Your operating cost increases, your outlays increases, a lot of other issues happen.
Now with the contracts, instead of one, the numbers from one plant canceling out largely the contribution from the good one, now both are going to be in the positive range. Let's put it that way. The fact that they are all long-term contracts, the AP, Andhra Pradesh contract is going to be 12 years. The Bangladesh contract, although smaller, it's up to 2033. Right. Also quite profitable. Right? If I may, because the market in India is also becoming more mature and more competitive, right? The margins from the AP contract is not as good as the margins from our P1, our power, our first, our early contracts.
All right? They're not as good, right, but they are good enough to underpin the profitability of P2 itself. So much so that when we put the two together, compared to when, again, like I said, when you used to cancel one another out, now both are contributing. I don't know whether that helps you, but the escalation at the terms of the contract, those we are unable to disclose. They are governed by the confidentiality under those contracts. Eugene, is there anything you can say to help Terence?
No, no. Kim Yin, I think that's exactly it. You know, the two contracts will underpin the profitability of P2. We can't share the terms because, as you know, you know, these are signed with discoms. We can't talk about the terms. Just one more point to note is in terms of timing of a contribution. The AP625 is expected to come on stream for FY 2023, whereas the Bangladesh 200, we expect it to start contributing from Q2 onwards already for this year.
Yeah. Thanks, Kim Yin. Thanks, Eugene. I think you provided a little bit more color, so it's clearer. My second question is, can you comment a little bit on the sales in China? How are you seeing sales in China, especially in the last, yeah, in second half?
Sales as in, the turnover, you mean?
Yeah. Correct.
Okay. Eugene, you wanna take that?
Oh, yeah, I'll take first. I think, you know, in the second half in China, you know, bulk of the turnover, it's, you know, our renewable assets, as well as the contracted water assets. Second half for China, it was stable, right? They did not perform, you know, out of expectations. The availabilities were still within expectations. You know, they generated in line with historical and also, you know, our expectations.
They are largely contracted assets, renewables, water, as well as renewables. You know, asset performances, you know, continue to be strong in availabilities, you know, a stable performance in the second half.
Is that true for your land sales as well in China?
Land sales in relation to urban. In relation to the land sales, yes, we saw a strong performance, particularly also coming in the fourth quarter for the urban side of things, where we saw, you know, a growth in the land and property sales, particularly in the Sino-Singapore Nanjing development.
You know, these land sales were, you know, a mix of industrial, commercial, and also residential land sales, and that contribute, you know, in the second half towards the fourth quarter. If I just add a little bit more color, then certainly the earnings and or the turnover from the water business and renewable business, you can expect that to be quite stable, right, other than you're affected by wind conditions. Land sales, you know, season to season, right. Price is one factor. The sale of land very often is also affected by regulatory approvals, things like that, right? You know, simple thing, like you want to sell your car parks. In China, you can sell car park.
You need to be able to, you know, get all kind of approvals associated with delineating the car parks properly and then getting the approval to even market it and sell it. Those are what I want to flag. You already pointed out then. I assume that your question is coming from the angle of, you know, how stable the cash flow and the turnover that we can get from China. I think the water as well, the renewable segment, you know, those are more predictable, other than wind. The land sales, you know, I don't want to. I think it is subject to season to season, the projects that come along.
It is natural to be expected in this type of real estate, like developer, like business. That's why we look at urban as a part, right? We do hold ourselves accountable. I go to Calvin, our Urban CEO, and say, "Look, you know, you don't give me, you know, big gyrations in your earnings as much as you can. Let's sustain it." We set ourselves a target of 500 hectares in 2025 on a sustained basis. Then he has to look at—we have to look at the urban portfolio. If China is not, you know, we have a good season, then next season we expect, you know, a bit slower sales.
We have to make it up with our Vietnam. You know, if the South Vietnam is a bit slow, then the North Vietnam have to pick it up or Central Vietnam to pick it or Indonesia. We think about it in terms of the land sales more as a portfolio, right? That then you can mix and match season to season, because these things take time, and they are very subject to project specific conditions, or you might want to call them risk in terms of timing.
Thank you so much. That's very insightful. For my last question, as you continue to transform your portfolio from brown to green, so I noticed that you all do some acquisitions as well. I'm just wondering where are you finding all these acquisitions? Sorry, it may be a stupid question. Thanks.
No, it's not. I'm also asking myself all the time where to buy more. If you notice, this season we're in China, right? We made acquisitions. I can tell you that, our India team, U.K. team, Singapore team, Southeast Asia team, we're all looking. In China, what happened is that, you need to be at right place, right time, right? We're leveraging on our existing relationships and partnerships. That's why a year ago, when we came out here and said, "Look, this is our strategy moving forward, you know, we're leveraging on partnerships and platforms," we actually were thinking along these lines already, right?
Today, you look at China, very difficult to get in, right? Flights get canceled. You know, you need to do three weeks of quarantine, and everything else. The geopolitics also drive away certain type of investors. We've been there. We've got boots on the ground. We have an office. We've got people running around. We've got relationships that we built up. We have got partners that we, as I mentioned earlier, we have made money together and we've lost money together. The trust, the profile, the relationships are there to enable us to harvest these opportunities when we're ready to do so.
When we went back to China, when we said, "Look, this season we are ready to do things, partners, you know, can we rekindle where we chopped off a few years ago?" The initial reaction was, "Oh, are you sure now this time, you know, don't play me out." You know, the moment we show them that we can make decisions fast, the moment we are able to show them that we mean what we say, that we can deliver and that we are very serious and we have the resources and support behind us, the deals start coming. All right.
Without answering your question directly, because I also don't have a silver bullet, but I think in terms of China as a given that we have been able to cut a couple of deals in quick succession, that was my observation as to what happened really because we were able to leverage on our existing position. China. India is a different situation.
Southeast Asia partnership is again a different situation. Our leveraging on our profile, our reputation, our relationships, that's in a nutshell where we think we find these deals. There will always be the options and the bankers who bring us opportunities and so on, but I think some of the best deals come from referral. Though I don't know whether that give you enough, Terence, if you're asking me, you know, the next question is, you know, Can you show me your pipeline? I don't think I can show you the pipeline. If I want to go further, you know, internally, we have an investment process whereby we have a two-gate process.
You know, the first gate to clear the strategy, and then the second gate, you know, for when we want to make a commitment. We add up the numbers from gate one and also add up the numbers from gate two. You know, it's a classic funnel, right? The numbers are big enough that we are comfortable that we have the opportunities that we can chase and enough for us to be quietly confident that we will meet our 2025 targets. Let's put it that way.
That's comforting. Thanks. Thanks, Kim Yin. Thanks, Eugene. Thank you. That's all from me.
Thanks, Terence.
Next in line we have Suki. Suki, can you please proceed to unmute yourself and ask your question?
Hi. Good morning, or rather good afternoon.
Good day.
Can I just check on your presentation, Eugene? You mentioned on renewable, you were going through the exceptionals and all, then you said that it would have been SGD 71 million versus last year, SGD 46 million. Can you explain that again, please?
Yeah. Okay, because in the SGD 56 million that we have this year, right, we did incur about SGD 11 million of development costs, right, for the purpose of growing the portfolio. A part of that SGD 11 million of development costs also includes, you know, the usual development due diligence and all that, you know, for the Chinese acquisitions which did not contribute in FY 2021. That's an element of that. The second part of that also is that there's a SGD 4 million deferred tax expense charge on the U.K. batteries.
That is a result of the U.K. announced legislation corporate tax rate increase, right, from 19% currently to 25% for FY 2023. You know, from an accounting standpoint, once we know of that, we would have to accrue deferred tax liabilities and deferred tax expenses ahead. You know, when you adjust for the development expenses as well as that, you know, to have a fair comparison to FY 2020 where it is largely operating assets operating as usual, that would be the fair comparison on a year-on-year basis.
Oh, okay. This 11 and 4 is largely incurred in second half, right? Your comments is relating to second half, right?
No. You know, throughout different points in time. Of course, more of it is in the second half.
Yeah.
Because, you know, a meaningful amount of that it's in relation to the Chinese acquisition, which, you know,
Yeah. The development cost.
Was announced. Yes.
Got it.
You know, in the December.
Okay.
November, December. Yeah.
Okay.
You know, the SGD 4 million deferred tax expenses was in the first half.
Oh, okay. Thanks. Just on that renewable, I just have to look at half-on-half performance. It actually did much better compared to first half in terms of renewables. I just want to recap. Thanks for walking through very detailed, but just want to recap that the second half is because good wind, 'cause seasonally, one of the quarters in India would be strong wind. China is actually in line because second half usually is weaker compared to first half. And then it's because of green credit, right?
Yes.
'Cause, you also mentioned in the slides that U.K. battery storage is good, but is it very material to actually cause the increase in, half on half performance in renewables?
Sorry, which one? The battery performance or.
Yeah, battery, right? For renewables. Second half is stronger than first half, maybe because of good wind in India and green credits, right?
Yes, correct.
Okay.
That's right.
Okay. Just on the conventional energy, you also mentioned that gas portfolio very strong in Singapore. Are we referring to strategic gas sale?
No, no, we're not talking about strategic gas sales. We're talking about gas as in our gas-fired power cogens in Singapore.
Oh, okay.
Yeah. Not strategic gas sales.
Okay. Because of the.
When I talk about gas business, it's more in relation to our assets as opposed to a gas sale business. Yeah.
Okay. That was just talking about the high usage that you actually saw in 4Q.
That's correct.
Now that it has actually come down by 40% in February, and also you also mentioned that in India, because P2 it's quite exposed to IEX. IEX has also come down this year. That's why we just have to cannot use what we saw in second half to expect this year, right? Wong Kim Yin, that's what you meant, right?
Yes. Yeah.
Okay. Also, just on landfill, so Urban Solutions did so well because of landfill and land prices in China or both?
No. In relation to that, we saw a strong land sales from China on a year-on-year basis.
Okay.
For Vietnam and Indonesia, from a land sale standpoint, it didn't really improve a lot more. I mean, Vietnam is like, you know, it was impacted by COVID, but we did see better overall average selling prices for Vietnam.
The increase in performance, the strong performance in Urban Development in China is because of landfill and land prices increase in China?
Landfill, Vietnam, and Indonesia.
Yeah.
Land prices in Vietnam and Indonesia. Okay.
That's right.
Yeah.
Hey, Cynthia, there's also one other element apart from urban. Okay, the waste business also contributed meaningfully in FY 2021 over FY 2020.
Mm-hmm.
FY 2020, the waste business was impacted by COVID. In FY 2021, a few things, a return to normal operations, okay? We did win another sector, and also we had full year contribution from the Veolia assets. Going into-
Ah.
Yeah, going into FY 2022, you know, one of the developments is that we did lose one sector, which is a Woodlands-Yishun sector.
Okay.
You know, the contribution is not that material.
Understand. Thank you. Also just corporate costs. You mentioned that you did some revamp in incentives, et cetera, hence it was actually quite high relatively in second half. Is that a one-off thing? Should we be-
Yeah.
Yeah.
I mean from a provisioning standpoint, right, it is in relation to the achievement of balanced scorecard and also you know providing in relation to these incentives going forward. Going forward, we would assess you know the achievement of the balanced scorecard obviously. You know that you know the quantum in itself you know we will not say that it would persist going forward.
What's more important is to note that, you know, the actual gross corporate costs, that is the running corporate costs, for the group, you know, adjusting for those two elements is actually around SGD 85 - 90 million, which is already about a 25%-27% reduction from the same 114 the year before.
Okay. Thank you. That's all from me.
Thanks, Suki.
Thanks, Suki.
Next in queue, we have Pei Hwa. Pei Hwa, you've been prompted to unmute yourself. Please proceed to ask your question.
Oh, hi, Kim Yin, Eugene Cheng. This is Pei Hwa Ho from DBS.
Hi, Pei Hwa.
Congrats on a good result. Yeah. Thanks for the presentation. I have a few questions. You are asked one by one.
Yeah.
I think first is on the plant maintenance. I recall that during first half briefing, you did guide that there's some pushback for plant maintenance for first half or second half, and hence you do extra loss of income there.
Okay.
Did it actually take place as planned? What was the downtime that impact the second half performance?
Uh-
Just wondering whether the, this also contributed to that offsetting of
Yes, correct. Pei Hwa, you are correct, because we did have a plant maintenance for several of our assets in the second half. I think one key one is first Myingyan, right? We had our hot gas path inspection. In the second half part, you know, I think it was, if I recall, over the months of October going to November. We did see, you know, roughly 34 days impact. For India, right, for both P1 and P2, right? For P1, we had a kind of like an annual overhaul, you know, roughly about 29 days in the second half.
For P2, right, we have, you know, about 45 days. 45 days in the second half as well.
Okay. Yeah. Thank you. Second question is relating to India as well. Now that we have both plants 80%-90% contracted on Northern PPA, I know you mentioned many times, so just want to hear again, what's your update, any update on the plan for these coal-fired plants? Is there any chance we stand a better position to have a cooperation of these two power plants?
Kim Yin, you want to take that?
The two things I was expecting you to also ask about, you know, in the past season, always impairment, right? This, with the contracts, as I mentioned just now, I think it was Terence's question. It underpins the profitability. Because of that, I think, the headroom as we go through season after season to assess impairment, which we always do, right, on all our assets. The headroom for this is now, you know, much wider compared to, you know, 1, 2. That's one. In terms of, certainly it positions us, it stabilizes the business, right? As compared to the past, you live season by season, thinking whether or not you're gonna make money. Now, you know, with the contracts, the plan is run.
It has a certain stable operation profile, right?
Mm-hmm.
In so doing, you know, the longevity of it is becoming clear. In a nutshell, it has stabilized the business. Once it's stabilized, the options open up, right? You could keep, you could sell, you could recycle capital, you could do things with it, right? The short answer to your question, yes, you know, it puts ourselves in a much better position to consider some of these options, right? You know, we say it also in the same breath that, look, you know, we are very committed to meeting our decarbonization objectives. The coal plant is a major source of decarbonization or rather carbon contribution.
Again, having said that, we also said all along that there are many ways to decarbonize, you know. You know, again, you being able to have positive cash flow and stable earnings allows us then again to consider all these other options other than corporate action or divestment if that's what you're having in mind. Yes, short, very short answer, but I wanted to spice it up a lot with explaining, you know, that it actually opens up all the options which we are obviously very committed to exploring.
Is IPO, the whole SEIL still an option or are we more looking to divest the coal-fired asset outright or
In a way, IPO
Option.
Is also one form of divestment.
Mm-hmm.
I mean, like, I think we put that as a possibility that that's always an option out there to doing something like that.
Sure.
Next.
Try my luck.
Yeah. No, no. Again, with the complex, you know. Now, all those become much more of a possibility, right? You know, with all the contracts here for IPP, something that one season makes money, one season don't, sometimes run, sometimes don't. Very difficult, right?
Mm-hmm.
Everything else, you know, resource, you want to hire people, so easier. You want to retain talent, also easier. I wanted to take this opportunity of your question to share how important these two contracts are, because it really changes.
Mm.
The profile of the entire, you know, coal business, our India business. For that matter, it has a material impact from decarbonization, from earnings, from profitability. All those things. It has made a huge difference. Do you have other questions, Behma, or, you know, you're very satisfied with my answer? I can't tell you that I have a contract that I signed, that I will do this or that with it.
Rahul Bhatia. Next in line, we have Rahul Bhatia. Rahul, you've been prompted to unmute yourself. Please proceed to ask your question.
Yes. Thanks. Hi, good afternoon. I just have two questions. Firstly, I want to touch on the 2025 targets, in particular related to sustainable solution profit and emissions. Now, given the stronger performance of conventional energy and assuming it continues, do you think that doing divestments is now all the more critical to achieve these two targets versus your expectation one year back, in addition to continue to increase renewable capacity? My second question is, Eugene, you mentioned about corporate debt that need to be refinanced in next couple of years. Given the higher interest environment, do you think that the financial expenses may actually now increase as compared to the decline we saw in 2021 versus 2020? Thank you.
Thanks, Rahul. I'll do the first one. Eugene takes the second. It wasn't. How shall I put it? When we planned the 2025 targets, we considered the scenario of, you know, stronger conventional contributions, changing the mix. Because one of our targets in the donut, right? We say that, look, 2020 60/40, green versus brown, right? Where green is 40, brown is 60, and our target is 2025 70/30. 70 green, 30 brown, right? It has always been within our scenario planning that, you know, a year like this can happen in which even though our green has grown and contributed well, right? But our brown actually contributes even more, right?
Because of that, you know, our ratios go a bit out. Instead of moving closer to 70/30 green versus brown, I'm actually moving backwards into let's say 35%, you know, from 40% green, right? But that doesn't. When I say it's within our planning scenarios, it doesn't detract us because we knew that this could be. If we continue to grow our green, we are quite confident that, or rather we see a path if we execute as we say we would, to reach the 70/30 in 2025. Your question, if I recall correctly, was, you know, does it then increase the urgency for us to do certain things, right?
You know, I think the short answer is that no. We do not just because of this. It's a good problem to have in some ways, right? Because all your assets are performing well. What we want to do, 70/30, to reach our target. Underlying that, there's also the total earnings target that we, you know, even though we didn't put it out there for 2025, there's also a total earnings target that we need to meet. We are hoping that the size of the donut will not reduce. The short answer to your question, you know, we're not going to dump assets, conventional assets, so that we can meet our 70/30, if that is the question.
We will want to grow our green fast enough so that we'll reach our target in that sense. Our brown we would look at value accretive actions. We will only do it if it meets our objectives. I don't, Eugene, I don't know whether you
Yeah.
I missed out on the question from Rahul.
Yeah. I think, Kim Yin, you highlighted it, appropriately. I think, you know, Rahul, you know, we set our targets. We also, you know, set up what we think are certain, growth targets that we set for ourselves now. We did say at that point in time, you know, for the renewables standpoint, you know, we expect CAGR to be around 30%. When we look at our first year, you know, on a year-on-year basis, if we adjust, you know, for the development costs as well as the deferred tax expenses, we actually grew about 45%-46% year-on-year. Kinda at least, you know, in line with the trajectory that we talked about.
The Integrated Urban Solutions, we say that, you know, CAGR, right? In our first year, we realized 37%. You know, at least, you know, the growth that is in relation to the Sustainable Solutions segment that we talk about is in line with what we have guided. A bit better, but of course, this is the first year of execution. You know, we'll see how it goes, you know, over the next five years. You know, at least in the first year, you know, the growth rates that we are showing, you know, it's pretty much in line.
Now, on your second question in terms of the refinancing, given the interest rate environment, I think, Rahul, the reality is that the interest rate environment is really moving, right? The Fed has came out. The Fed has said, given the indication that you know rate hikes are gonna happen. You know, in terms of the refinancings, I think it would be you know reasonable to expect that from a base rate perspective, you know, we do expect that to increase. Okay? What we will do is that compared to the historical financings, you know, given where we are right now, given the fact that we are you know transformed, right?
We have released the oil and gas business. We are now focused on sustainable renewables and the sustainability theme growth and growing very fast. You know, being able to structure credibly you know sustainability-linked financing instruments. We hope to tighten you know our credit spreads relative to what we have in the past. It would be a net effect. There will be a net effect, right? The base rates will you know come up because unfortunately, that's what you know the Fed has really indicated.
We did see it last year, the opportunity in tightening of our credit spreads, and also we will continue to drive that in the current year.
Thank you. Very clear. Thank you.
Thanks, Rahul.
Okay. We have received some questions in the IR mailbox, and I'll read out the question. The first question is from Goh Lay Peng from Fullerton Fund. On the long-term PPA signed in India, what are the committed tariffs of the two PPAs? I think that has been answered earlier already. The second is based on recently announced budget 2022, what is the impact of carbon tax on Sembcorp Industries?
Yes. I think that also has been dealt with, right, carbon tax?
Yeah.
If anything to add is that, Singapore business contributes to 10%, as Eugene mentioned just now, of our carbon footprint, right? Among the plants that we have, they're coming from our Jurong Island assets, right? They are cogeneration assets. What happens is that we generate steam as well, right? Being cogeneration assets compared to the similar technology power generation. What happens is that we have F-class technology combined cycle gas turbines. When you generate steam together with it, together with electricity, your thermal efficiency, as calculated, will be better, right? Coming back, our Jurong Island assets are all cogeneration assets, and that puts us-
Kim Yin, just to clarify, you said coal. It's gas and renewable assets. Yeah.
Gas generation assets. Sorry. Very important.
Yeah, very important distinction.
Anyway, the point is that because we have cogeneration.
Okay, C-O. Okay.
Cogeneration assets, which means we generate electricity. At the same time, we also generate steam for our customers in Jurong Island. When we are also generating steam, our efficiency is higher. Compared to others who don't do that, all right, in a similar machine, our efficiency is higher. What the carbon tax does is that you will penalize the higher emitting. The higher the carbon intensity, the more you will be penalized. From a competitive landscape perspective-
Right. Ours being cogeneration facilities, selling steam as well, having then a slightly higher efficiency, puts us in a better competitive position. That's the additional point that I wanted to add. In addition to the fact that, look, you know, the entire market is burning gas. The entire market is actually made up of largely F-class technology machines. You know, the party that has a slightly better competitive advantage, slightly better efficiency will be slightly advantaged when the same tax, same carbon cost is imposed on everyone, right? That's the additional point. Not that it's gonna be earth-shattering or change materially things, but we are in no worse position compared to others.
If anything, a slightly better position. I hope that adds on to the point that Eugene made just now.
Okay.
Okay.
Next.
Yeah. Jin, the next question.
Yeah, the next question is from Jagdeep of Nuveen. Sembcorp Industries has a substantial portion of floating rate debt. In light of the rising interest rate environment, please update the financing strategy and how we should think about interest rate sensitivity and impact to the PNL going forward. What is the target gearing level for this year? Should we assume further decline?
Okay, I'll take this question, Xin Jin. Jagdeep, thanks for that. I think in terms of the floating rate debt, over time, we have already reduced it meaningfully. You know, when we look at how we have progressed across 2021, where we, you know, focus on raising long tenor fixed rate debt in relation to our floating. We have reduced our floating rate exposure meaningfully. I think right now, you know, for the SEI portfolio, our fixed to floating exposure is about 55%-45%.
The focus, as we execute our refinancing as well as our new growth financing plan in 2022, we expect to reduce, you know, the fixed-rate composition of our debt further towards the 80% mark. Okay? In terms of where it stands now, you know, on the sensitivity impact of our P&L going forward, you know, where we stand right now, in terms of, you know, P&L sensitivity, every 1% increase in base rate probably would, you know, result in a pre-tax P&L impact of about, you know, SGD 30 million or so, right?
We expect that sensitivity to reduce as we, you know, fix the portfolio meaningfully in 2022 as well. The second question, Jagdeep, that I can see right here is that you're asking other companies in the renewable space globally have highlighted inflationary costs on project development combined with greater competition for acquisitions. How is SEI adjusting its acquisition strategy and targeted returns? Should we assume lower ROE targets going forward for new projects? Okay. I think, you know, for this question, I think it is, you know, it is known that, you know, in the renewables new bidding space, right, is getting competitive.
You know, in driving our growth, you know, as mentioned before, how we view our projects would be you know a pretty you know a very methodical you know build-up of what we expect cost of capital is, right? Then you know assessing the risks of you know the cash flows against you know this cost of capital. I think you know that will continue to be our key you know way in which we will assess the new projects going forward. You know we continue to be very disciplined in terms of you know how we select projects on that basis.
Now, because of the competition that we face for new projects, we have also, you know, highlighted previously, we are also augmenting our growth with acquisitions. Now, of course, the acquisitions and origination opportunities will come in various forms, right? For example, you know, in India, two in China acquisitions that we made, right? It was a very, you know, proprietary origination that took place.
Increasingly, from an acquisition perspective, we will continue to, you know, leverage on our, you know, networks, our ability to, you know, have visibility to many of these acquisitions to put ourselves in a more positive position to secure the acquisitions without going out into a very high-profile cost and cost of capital battle, which will obviously could lead to, you know, winning target companies at a, you know, ROE, ROEs and returns that are maybe too low. The other element also is that particularly, you know, in India, right, where we have built up our platform in scale and strength, right?
One, our acquisition strategy also is to acquire portfolios where there are opportunities for us to enhance it in terms of, from O&M perspective, from energy-based availability perspective, and a potential refinancing. You know, we would also focus on those acquisitions, where, you know, it is not so much for the best price bid for, but also an opportunity for us to add value to it and therefore enhancing returns.
Our approach to this will be a very balanced one, leveraging on our capabilities, but yet also keeping a very disciplined view on our cost of capital in assessing you know the acquisitions and the projects. The third question that you're asking, Jagdeep, is in relation to how much land acquisition should we expect in the Urban Solutions segment this year, and where are the opportunities? I think in terms of land acquisition quantums, right? As you know, we are targeting being able to sustain over 500 hectares of land sales by 2025.
You know, of course, through 2022, we will continue to build up, you know, our land bank, commensurate with that, you know, that target in mind. Where are the opportunities? You know, we'll continue to focus, you know, across where we are very strong in Vietnam. You know, we'll continue also to, you know, to leverage opportunities in China and, you know, and also in Indonesia. Just wanna see if Kim Yin has any thoughts to add.
No, not really. Thanks, Eugene. I thought that was very clear. Thanks.
Thanks, Kim Yin.
Moving back to Zoom, we have Suki on the line. Suki, you've been prompted to unmute yourself. Please proceed to ask your question.
Sorry. Okay, I just have some clarification. Kim Yin, just now you were talking about India, right? On wider headroom in terms of I think it was in relation to Pei Hwa Ho's question on impairment. Are you saying that because with the contracts we know that actually put the company at a better state in whatever that you want to do? Are you suggesting that looking at the contracts and the value in use versus the carrying cost, there is no need for impairment as of what you can see now?
Okay, Kim Yin, let me answer that one. Suki, you know, you and I both know that, impairment testing, it's, you know, it's an application of accounting standards, okay? And also a methodology in doing so. Clearly, you know, in line with, you know, every results announcement, we will test the assets for impairment. Of course, having this PPAs in place, right, it gives, you know, a greater certainty in terms of the future cash flows of the assets. When we test the assets for impairment in relation to value in use, you use the, a very technical term, which is correct.
That's how we are, how we've done it in conjunction and in agreement with our auditors at KPMG. The conclusion is quite clear that, you know, there is no need for impairment.
Thank you. That's very clear. Also just on the contract that will start to contribute, Bangladesh will actually start to contribute this year. Can I just check because P2 was significantly exposed to IEX, and IEX was so strong second half last year. Was the plant profitable? And if it is not, is it because of maintenance?
Okay. For P2 last year, right, it was not yet profitable. Okay. In terms of the losses, it was very much reduced. Okay? You know, the strength in IEX, just to point out Suki, it wasn't like throughout the whole year. Okay?
Yeah.
It really come in, you know, September, October, and the earlier part of November.
Yeah.
where, you know, we saw it hitting like INR 8 for tariffs. You know, that was like, I would say almost unprecedented high. Okay?
Yeah.
It wasn't for the full year. Of course, in the context of P2, the earnings that was made during that few months, you know, of course, made up for a lot, you know, relative to, you know, it's a past performance. That's one thing to consider, not for the full year. The second thing to consider also for P2, right, in the last quarter, it went through, you know, almost 40-45 days of a capital overhaul.
Yeah.
Net, it was still not profitable but very much reduced in terms of the losses.
Thanks. I was just trying to see whether there's a chance that P2 would be profitable when Bangladesh comes in, assuming that our IEX remains at current level, not the super high level?
I would say that you know, with it coming in, you know, the likelihood of that happening, it's a lot stronger.
Thanks.
Yeah.
Next in queue we have Pei Hwa Ho. Pei Hwa Ho, you've been prompted to unmute yourself. Please proceed to ask your question.
Hi. Sorry, I was somehow the audio not working just now. I just continue to finish up my, the other question. Right.
Sure thing.
Yeah, continuously on India, I'll try my luck. I know that you can't disclose the tariff or margin for the P2 for other contracts. Let's assume that when all the 81% PPA come into effect, if you benchmark against your P1, the projected cash flow or profit or margin, do we assume, can we say, maybe give us a range that it could be 30% of P1, or 50% or 70%?
You know.
You are in range.
I mean, you can't give us a number, right? I try my luck, you know, a range, maybe that's what. Yeah. No, I am trying to help you also. I want to help myself also, right? Yes, you aim well, let's put it that way. You didn't give me that look. I mean, yeah. Actually, it's still, there's still uncertainties because of fuel supply. One of the biggest costs, one of the biggest item in the cost structure is the fuel, right? The fuel supply for the PMP 2, they're not homogeneous, right? Yeah. Not homogeneous. Yeah, not homogeneous. The sources are not homogeneous. You are in range, but I. It's not exactly that, let's put it that way.
It would change year on year. Also one point to add, Kim Lim, Pei Hwa. One point to note is that the fuel mix for P2 is different from P1. P1 is a lot of it is, you know, it's the PPAs are local discoms, so they get to use a local domestic coal under the FSA, right? But then for P2, the PPAs are too, right? You've got 625, which is under Andhra Pradesh, right? So that will allow them to use their local domestic coal.
The Bangladesh 200 and Bangladesh 250, which is currently ongoing, the fuel mix is different. So there's a certain mix of international coal that they need to bring into it. From that perspective, it is different. Okay. Right. Thanks. I mean, lastly, just would like to touch on U.K. I think you did mention an outlook statement just now that in the U.K. business, intra-quarter Q4, we still see pretty much volatility. Yeah, and I think recently you also announced plan to construct a 360 MW energy storage system at the Newton Aycliffe site.
I just wonder if you had figured a way to better manage the volatility and profitability of the battery business. Okay. Or how should you look at it? Yeah. Okay. Wait. Let me clarify myself first, Pei Hwa. For the batteries, when I say volatility, it's volatility of renewable generation contribution into the grid. Okay. That volatility is actually good for the batteries. Right. Because for the batteries, they provide ancillary services for grid stabilization, right? And also opportunities to arbitrage, you know, a spike in scarcity events, when there's a sudden spike.
In energy demand at certain blocks and time in the day, which could be caused by, you know, a renewable suddenly low wind, right? No wind means no wind now, you know. It is that volatility of energy contribution into the national grid that allow us to, you know, capture value. Yeah. I just want to clarify that point. Understand. Yeah. I voluntarily refer to the demand for the battery. Yeah. Yeah. Thank you.
We have one more question from the mailbox. This is from Rachel Lim of Schroders. Congratulations on the strong performance in 2021. Just want to clarify the point about higher ROEs as renewable assets mature. What drives this?
Yeah. As a renewables asset mature, right? In the early years, right? Your first 5-10 years, a lot of earnings would be, you know, and cash flows will be spent on number one, you know, servicing interest, right? And also debt amortization, right? As the asset mature when the debt is amortized, the interest will come down because, you know, it would be reducing balance of the debt exposure, right? And also our equity cash flows ultimately will improve. Will grow. That's the key element that's driving the ROEs improvement. Okay. That's it.
Yeah. We have no further questions on the line now.
Yeah. Kim Yin, you wanna close or should I?
No, go ahead. I think if anything, I want to make the point that, look, you know, it was a good set of results, 2021. A lot of it came through in the last calendar quarter because of the merchant markets. You know, they've done well, buoyed by the markets. Of course, we have to be there to capture it. The teams have done well also to be available and capture all that. For us to continue on the conventional energy segment, for us to continue to perform like that depends on market conditions, right?
I just want to highlight that point so that then, you know, as we chart our profile from an earnings perspective, from a business perspective in the immediate future, that has to be a key consideration, how the markets perform, right? On our part, we've done some work and we've done the work to try to reduce some of this. The India PPAs came in. That reduced a major part of the volatility associated with our India portfolio, right? Within the portfolio, there's still U.K. and Singapore that you know we were unlikely to have the long-term contracts like we could get in India, right?
That's the part that I think I want to highlight. Second thing is that.
Now extending all this, our 2025 targets, we are single-minded and focused in groups. All right. All across the next few years, we'll continue to remind ourselves and also to remind our investor community that those are our targets. 70/30, 10 GW, 500 hectares land sales, sustainable basis with the land bank building up at the same time, carbon intensity reducing. By 2030, we want to reduce our carbon footprint by half from 2010 levels. These are unambiguous and clear targets. We will continue to plow towards that. All right. That I just want to emphasize.
At the same time, in moving in that direction, another important point is that, in showing through the numbers also, Eugene explained this, now we are putting in place incentive plans that are aligned to our these targets. All right? If you're asking what has changed compared to the past, we always have incentive plans, right? This season, with the support of the board, we're putting in incentive plans that are much more targeted at individual outcome. Right? In the past, it was more sort of a collective outcome, you know, so the whole collection of targets must be met. This season we are saying, no, you know, each one of this, if one of us achieves some of this, the person instrumental to achieving that will be rewarded.
You will start seeing that in our disclosure in terms of compensation. You are already seeing that in our disclosure on the provisions for the incentives for compensation, right? Just now there was a question, hey, you know, do we see this recurring? It will recur to the extent it is on the front end of our transformation journey, right? Some of these things you put, you want to motivate people, you put that up front. You don't put it at the tail end. We're telling people that, look, you know, for instance, in my case, you know, say Kim, you know, if some of this happen, then Kim will receive, you know, some of this incentive shares, for instance, right?
Those are disclosed up front, right? They say that, "Hey, look, you know, I got so much of compensation this year." This, you know, particularly in my case, given that I'm a director and also a Group CEO, in terms of disclosure, it'll be laid out which are the parts that are deferred, which are the parts that are contingent on performance, which are the parts that are subject to clawback, which are the parts I collect now, right? More importantly, coming back to incentive plans are, in this section, linked very closely and very tightly to the delivery of our 2025 targets. All right. I think that is something that I was working on and we were working on last year.
I wasn't ready to talk about it, but this season, I think this is one of the key themes. Again, you know, that's why, you know, when we look at corporate costs, there is one part that is making the numbers look a little bit higher than it should, right? I think Eugene explained that if we look at it from a recurring run rate perspective, we actually have cranked it down.
Yeah.
We also watch our cost very carefully, right? Even as we move forward. I think we want to spend money where we're supposed to spend. For instance, you know, we are not holding back in terms of investing in capabilities, building and talent. We want to build our capabilities in renewables. We want to build our capabilities in storage. In the longer run, we will start to build capabilities in hydrogen. Right? So those very targeted. Right? So I just want to paint a picture that just, you know, short-term earnings, you know, subject to market conditions because of conventional. 2025 target's very clear. 2030 target's very clear for us. We got incentive plans, you know, for the team. The team is coming together. Everybody is pulling their weights and delivering.
We're feeling quietly confident about our ability to deliver moving forward. We have a pipeline. We can't tell you what is it. Between me and my team, I think we sort of aligned that, look, let's let the action do the talking. All right? Last year when people asked me about our pipeline, we didn't say anything, right? I think we let the action do the talking, and hopefully, you know, that would be, we continue to do that, and I think the confidence and the support will continue to build up towards it. I thank you for your support.
Yeah.
Thank you for your understanding and also, you know, your insights and your feedback. Yeah.
Just a couple of points for me to add to what Kim has said. I think that in terms of the incentives that we have revamped and we are, you know, are putting out to the market, you will notice that in our annual report this year, we will clearly disclose what are the KPIs or the goals that underpin them. You would see that they are very firmly aligned with, you know, our transformation targets that we have put out. Hopefully that will give, you know, everyone the clear comfort that, you know, those strategic targets are completely aligned with ourselves and also, you know, with our SPTs for financing.
Second point that I just want to leave us with is, you know, there seem to be some confusion in terms of, you know, the consensus and whether, you know, our earnings did meet or not. I think, you know, we have clarified, you know, the consensus expectation of our earnings before extraordinary items. Looking at the numbers, you know, you will be quite clear that, you know, what we have achieved for 472 has beaten that.
I mean, to the extent that there are misconceptions out there, you know, I would appreciate if you also help to clarify. Okay?
Well, thank you. Thanks, everyone.
Thanks, everyone.
Thank you, everyone. We have now come to the end of today's briefing. Thank you for joining us today.
Thank you.