Ladies and gentlemen, good morning and welcome to SempCorp Industries Half Year twenty twenty one Results Presentation Webcast. I am Lei San from Group Strategic Communications. The members of the panel for today's presentation are Group President and CEO, Wong Kim Min and Group CFO, Eugene Cheng. Without further delay, I will now hand over the time to Kim Min to begin the results presentation. Kim Min, please.
Thank you, Lee san. Thank you, Lee san again. Good morning and welcome to SempCorp Industries First Half twenty twenty one Results Briefing. In the first half of twenty twenty one, despite continued challenges due to the COVID-nineteen pandemic, Sempcor continued to deliver essential products and services to our community. Our operations continued without disruption and delivered a resilient underlying performance.
Now let me briefly outline the key financial figures. In first half twenty twenty one, the Group delivered a turnover of SGD3.3 billion, up 26% from first half twenty twenty. EBITDA was Singapore $640,000,000 up 20%. Adjusted EBITDA was Singapore $744,000,000 up 14%. Net profit before exceptional items was $Sing 252,000,000 up 69 percent while net profit was $Sing46,000,000 compared to a net loss of $Sing42,000,000 in first half twenty twenty.
Earnings per share EPS was 0.2.6 dollars and earnings per share before EI before extraordinary items was $0.141 Group annualized ROE was 8.5%. The Board has announced an interim dividend of 0.0¢ per ordinary shares, which will be paid on August 24, 2021. Next, let me go through the key highlights for our different business segments. Focusing on the Renewables segment of our sustainable solutions portfolio, Net profit of the segment was $24,000,000 in first half twenty twenty one compared to $33,000,000 in first half twenty twenty. This was mainly due to low wind resource in India.
Performance from our wind assets in China was steady and the energy storage portfolio in the UK performed very well. For the first half of the year, we secured an additional 105 Megawatts of renewable projects in Singapore and Vietnam and continued to grow our renewables portfolio. In the first half of twenty twenty one, 78 Megawatts of solar projects commenced operations in Singapore and Vietnam as well. Most notably, we successfully commissioned the 60 Megawatt Peak Floating Solar Farm at Tenghe Reservoir in Singapore. This is one of the world's largest inland floating solar photovoltaic systems and it is a showcase of our solar capabilities as a leading homegrown renewable energy player.
Our gross installed renewables capacity now stands at 2.7 GW compared to 2.6 GW at the end of 2020. Next slide please. The Integrated Urban Solutions segment has maintained steady profitability. Net profit before EEI of the segment was $63,000,000 compared to $64,000,000 in one half twenty twenty. Net profit was $69,000,000 compared to $66,000,000 the year before.
Urban land sales was 68 hectares and net order book was 238 hectares in first half twenty twenty one. Lower commercial and residential land sales in China and lower land sales in Indonesia resulted in lower contribution from the urban business, but this was offset by better performance from the waste business. The urban business continued to focus on building its land bank and platforms. In March, 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 with the East West Economic Corridor linking Vietnam, Laos, Thailand and Myanmar.
In Singapore, in support of the government's green plan and our own decarbonization efforts, we launched Singapore's 1st solar powered EV charging hub in July this year. We plan to open the hub for public use by other industrial vehicles by 2020. The Conventional Energy segment delivered a resilient underlying performance in first half twenty twenty one. Net profit before EI was $185,000,000 up 46% compared to first half twenty twenty. This is driven mainly by higher energy demand and margins in Singapore and India.
The flexible generation assets in the UK also performed well. As announced on August 2nd, an exceptional item of negative $212,000,000 was recognized for the impairment of the Chongqing Songzhou coal fired power plant in China. Apart from losing its cost advantage as a mine mouth plant with the closure of the Chongqing mines, in the longer term, we also expect the asset to face competitive pressure from green energy. This is very much aligned with our underlying thesis for our brown to green transformation strategy. Including this exceptional item, net profit for conventional energy was negative $27,000,000 In Singapore, we were appointed by EMA, Energy Market Authority, as a new term liquefied natural gas importer in March.
Our portfolio of energy solutions enables us to provide sustainable, competitive and reliable energy for consumers in Singapore where natural gas, the cleanest form of fossil fuel, continues to be a dominant energy source even as we continue to grow our renewable business. And in April, our utility service agreement with Eastman Chemical, a major customer on Jurong Island. That agreement ended and we will no longer have profit contribution from Eastman in the second half of the year. Now in May this year, we unveiled our strategic plan to transform our portfolio from brown to green and we laid out our strategic targets for 2025. This is just to remind you that these are our targets.
Next slide please. So now this slide provides a snapshot of where we are as of first half twenty twenty one against the strategic targets we set out for 2025. So in 1 half twenty twenty one, we secured an additional 105 Megawatts of Renewable Project Pipeline and continue to look to building our pipeline across Southeast Asia, China and India. Our in stock renewable capacity grew to 2.7 Gigawatts. While the proportion of profit contribution from sustainable solutions may vary from one reporting period to the next, we are firmly on our transformation journey.
We are focused on achieving our 2025 targets, leveraging our capabilities and partnerships with stakeholders, building on exclusive platforms so that we can be the leading pan Asian provider of sustainable solutions delivering long term value and growth to our stakeholders. Let me hand the time over to Eugene who will take you through the Group financial review. Thank you.
Many thanks, Kim Min. And good morning and thank you, investment community for joining SANKOP Industries results briefing. I shall now take you through the Group's financial performance for the 6 months ended June 30, 2021. Now as you remember during our Investor Day on May 27th of this year, we unveiled the Group's strategic plan to transform our portfolio from ground to grid with growth driven by the Renewables and Integrated Urban Solutions businesses. Now I will now go through our financials under the new segments which largely would be renewables and integrated urban solutions which collectively forms the sustainable solutions segment which we have talked about as well as the conventional energy and other businesses and corporate segments.
Sempcor Industries achieved a turnover of 3,300,000,000 for the first half of twenty twenty one, 673,000,000 or 26% higher than the corresponding period of 2,600,000,000. The higher turnover was driven mainly by the conventional energy segment with improvement in the power demand as well as margins and spreads. Group EBITDA which excludes major non cash items was RMB640,000,000 or RMB107 1,000,000 or 20 percent higher than the corresponding period last year. Including share of results from associates and JVs of RMB104 1,000,000, our adjusted EBITDA was RMB744 million being 93,000,000 or 14% improved over the first half of twenty twenty. Adjusted EBITDA growth was in line with the growth in turnover though offset by lower contribution from urban land sales and losses from the coal business in Chongqing, Songtao, China.
Net profit before extraordinary items in the first half of twenty twenty one increased by 103,000,000 or 69 percent to 252,000,000 driven by higher contribution from our conventional energy segment in line with turnover as well as EBITDA and adjusted EBITDA. The growth in adjusted EBITDA was enhanced further by the lower net finance cost offset by higher corporate tax mainly due to UK's increase in corporate tax rate as announced earlier this year. Year on year, net finance cost was lower by $36,000,000 through loan repayments and refinancing of the $1,500,000,000 Marine Bonds last year and a lower interest rate through existing revolving credit facilities. The extraordinary item of negative 206,000,000 for first half of twenty twenty one comprises an impairment of 412,000,000 of the Chongqing Song Zhao power plant as announced on the 2nd August 2021 and that is offset by a gain of R6 million from the divestment of Samkok Jing Wen Water Company which was completed in May of this year. Net profit from continuing operations was 46,000,000 for first half of twenty twenty one, 88,000,000 higher than the first half of twenty twenty.
Post the demerger with Semcom Marine in September 2020, financials of the marine business have of course been presented as discontinued operations. Earnings per share before extraordinary items for first half of twenty twenty one was 14.1¢ and earnings per share was 2.6¢. Annualized ROE for the Group was 8.5% for first half of twenty twenty one and would have been a 14 closer to 14% before extraordinary items. Now the renewables segment recorded a turnover of $146,000,000 compared to $127,000,000 in the first half of twenty twenty. The increase was driven by higher contribution from solar segment and also from the energy storage and luxury businesses in UK.
Now integrated urban solutions turnover of 218,000,000 was 21,000,000 or 11% higher than the corresponding period last year. This increase was mainly due to contribution from the businesses acquired by the waste management business last year and that is offset by an absence of turnover from water businesses divested in the second half of twenty twenty, namely our Panama as well as Chilean water assets. The urban business comprises largely associates or joint ventures and that will be accounted for under equity method which we will touch on in the subsequent slides. The conventional energy segment recorded a turnover of 2,800,000,000 543,000,000 or 25 percent higher than the corresponding period last year. The better performance was due to higher energy demand and margins in Singapore and India as well as better operating performance of the UK flexible generation assets.
Other businesses reported a turnover of $170,000,000 in the first half of twenty twenty one, an increase of $100,000,000 mainly attributable to SemCorp's specialized construction. In the first half of twenty twenty, SSE was impacted by circuit breaker measures implemented in Singapore, resulting in labor constraints and that has resumed in the first half of twenty twenty one this year. Now this table shows the net profit contribution from the respective segments before and after exceptional items. The key highlights here are we do have a lower renewables profit and that's a result of lower wind resource in India as well as we do have some startup costs for the solar business in Vietnam as we focus on ramping up renewables growth in that place. Integrated Urban Solutions profit was lower due to lower contribution from land sales in the urban business and that is offset by higher contribution in the waste business.
Improvement in conventional energy segment due to is due to the better performance in Singapore and India and higher profit from other businesses, it was due to higher contribution from SENCOK Specialized Construction, which was impacted by COVID-nineteen in the first half of twenty twenty. Now this chart, reconciles the Group's net profit to net profit before extraordinary items from the first half of twenty twenty to the first half of twenty twenty one and it shows the variances for each business segment on a year on year basis. Now, under sustainable solutions which comprises the renewable segment as well as the integrated urban solution segment, Renewables performance in first half twenty one was impacted by low wind resource in India as I previously discussed and for the integrated urban solutions, lower net profit is due to timing of land sales of urban business where we had lower recognition land sales in the first half of twenty twenty one compared to the first half of twenty twenty. First half of twenty twenty one also includes contribution from a waste business which was applied from Veolia as as announced last year in June 2020. The conventional energy segment saw stronger performance from Singapore, India as well as the UK flexible generation assets as a result of higher demand as well as margins and spreads.
Now this was partially offset by the Chongqing system of our plant turning into losses in the first half of twenty twenty one. In Singapore, just to highlight, there is also a net gain of a $13,000,000 as a result of, you know, hedging, dynamic hedging activities that will unwind in the P and L in the subsequent periods upon the delivery or sale of underlying hedge items. In India, prior period recoveries net of expected credit loss provisions amounted to RMB27 1,000,000 contribution in the first half of twenty twenty one. In the other business segment, resumption of business activity for Semcorp Specialised Construction which was highlighted earlier early on was impacted by COVID-nineteen in first half twenty twenty and business activities have resumed in this financial quarter. For the corporate segment, the improvement was driven largely by lower interest costs arising from refinancing of our R1.5 billion dollars bond with revolving credit facilities and we have also tightened cost control across corporate spending in general.
For the exceptional items, as mentioned earlier on, the first half twenty one exceptional items of negative $206,000,000 comprises $6,000,000 gain from the divestment of Sempock Jingmen Water Company and an impairment loss of $212,000,000 as a result of Chongqing Shun Sao Power Plant. This slide shows the capital expenditure of the Group. Capital expenditure of $176,000,000 that was incurred in the first half of twenty twenty one was mostly for new solar projects in Singapore and the UK battery facilities and the first half twenty twenty one equity investment of $4,000,000 in renewables related to investments in our joint venture in Vietnam, particularly our Vietnam Singapore Smart Energy Solutions segment. Moving on to the next slide, first half twenty twenty one cash flow from operating activities was 418,000,000 or RMB274,000,000 higher as compared to the first half of twenty twenty. This was mainly driven by improved operating performance and changes in working capital.
Net cash flow used in investing activities was RMB 57,000,000 dollars mainly for the purchase of property, plant and equipment, partially offset by proceeds from the divestment of Serje Chiwan, Sembawang Engineering Company and Sampoq Jin Ren Water Co. Excluding expansionary capex, Group free cash flow for first half of twenty twenty one was 562,000,000. Now as at 30th June 2021, the Group's net debt was 6,600,000,000 which is marginally lower than R6,700,000,000 as at 31st December 2020. Total borrowings remained steady as decrease in long term borrowings due to loan repayment was offset by our very successful issuance of Green Box. Now as you know, in June 2021, we have successfully launched our inaugural 400,000,000 green bond offering which was very competitively priced at 2.45% for a 10 year issuance.
This is also the 1st certified green bond under the climate bond standards by a Singapore based energy company and for the first half of twenty twenty one, gross debt to annualized EBITDA and annualized adjusted EBITDA was 6.0 and 5.2 times respectively while interest cover over EBITDA and adjusted EBITDA was 3.0 times and 3.5 times respectively. This was an improvement over the respective ratios as at December 31, 2020. Now this table highlights the maturity profile of the debt at the end of June 2021. The maturity profile has not changed substantially on the 31st December 2020 other than for rolling forward of the 6 month period ended 30th June 2021. Now as at June 30th, 2021, out of 7,700,000,000, half percent of our debt is due within a year, 43% between 1 to 3 years, 31% of our debt is due after 5 years.
Our debt has a weighted average maturity of 4.5 years and weighted average borrowing cost of 5.1%. Now if you will recall during the Investor Day in May, we have highlighted the 2,000,000,000 of corporate maturities coming due in years 2 3. As discussed previously, the bulk of it relates to maturities in our revolving credit facilities that have been drawn to fund the redemption of the 1,500,000,000 marine bonds last year as well as other NTM securities currently. The intention as highlighted during investor day will be for us to tap on our access into the sustainability linked instruments and traditional NTM bond markets to term out the maturities. At the end of June 2021, the Group's cash and cash equivalents were $1,200,000,000 and our unutilized committed facilities were $1,200,000,000 an increase of $400,000,000 since December 31, 2020 with 400,000,000 term notes of green bonds as issued in 2021.
In total, the Group had 2,400,000,000 of cash, cash equivalents and unutilized committed facilities at the end of June 2021. The Group also had unutilized uncommitted facilities and unutilized trade related facilities of S3.7 billion and S818 million respectively and as mentioned during the Investor Day, our target would be to free up and maintain at least SGD1.5 billion of committed RCF facilities to underpin our 5 year strategy execution and as mentioned in the slide early on, we are in the process of turning up the maturities in RCFs. Moving on to the business outlook for the rest of the year, significant challenges remain for the economies around the world. Uncertainties continue to persist with regard to the COVID-nineteen pandemic with the potential resurgence of infections globally. Now underlying the performance of the group will also be negatively impacted by changes in the customer profile in the United Kingdom and Singapore as well as loss of income from divested water assets in Panama and Chile.
There are potential downside risks in the conventional energy segment across markets due to higher market volatility as well as higher fuel costs. In addition, there will be planned maintenance shutdowns in Singapore, Myanmar and India in the second half of twenty twenty one. The group is continuing to transform its portfolio to focus on sustainable solutions that support the global energy transition and sustainable development. In the first half of twenty twenty one, 78 megawatts of renewable energy capacity was installed and approximately 87 megawatts of renewable energy capacity is expected to come on stream by the end of 2021. We just want to point out other developments for Notey, performance of the second half of twenty twenty one is expected to be impacted by planned maintenance shutdowns for the Singapore energy from waste plant, the Singapore Min Jin, the Samcott Min Jin power plant in Myanmar and for India's SEIL Project 1 and Project 2 power plants and impact on earnings in Singapore and Vietnam as the natural there would be impact on earnings in Singapore and Vietnam as a natural gas contract in Singapore approach expiring in 2028 as well as Phuong Yi 3 power plant in Vietnam as it faces reducing tariffs as its power purchase agreement approaches expiry in 2024.
Now with this, I end my presentation and we are happy to take any questions that you may have from the analysts. Thank you.
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 will be prompted to unmute yourself to ask the question. Please repeat your name and state your company when you have been unmuted. If you are unable to ask your question in the webinar, you can e mail your questions to our Investor Relations mailbox at investorrelationssemcop.com
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the management will address them during the session. Thank you.
Hello. I'm Terrence from Phillip Securities Research. Thanks management for the presentation today and opportunity to ask a question. I was just wondering if management can provide more details on the impact of your earnings from the planned maintenance shutdowns for your Singapore plants and some of the India plants as well? Thank you.
Eugene? Okay. In terms of the impact, in general, we do have, you know, scheduled maintenance. It's just that for the second half of this year, some of our maintenance, particularly with the EFW plan in the first half has been delayed into the second half. So on a year on year basis, you know, we do expect to have a slightly higher maintenance days compared to last part of this year.
So in general, you know, the assets that will be impacted highlighted will be our EFW plant in Singapore, right, our Min Gen plant in Myanmar as well as of course both India P1 and P2 plant. In terms of the specific quantum of the impact, we are not able to disclose that, but suffice to say there will be a greater impact in terms of, you know, fire maintenance shutdown compared to last time.
Sorry, this may be a bit of a stupid question, but can I find out why the maintenance day seems to be a little bit higher than planned?
In relation to that, right, both P1 and P2, right, in terms of the maintenance, right, they're undergoing their annual, you know, kind of like a plan capacity overhaul. So that's a little longer than a usual maintenance. And also mentioned earlier on, right, for our EFW plant, this year we are also doing the maintenance because there was a defer of some of the maintenance hours in the first half into this of this year into the second half. So compared to last year, we will have a higher amount of amount of time.
Terence, if I may add, some of these well, actually all of our maintenance regimes, it depends on very strict engineering requirements, right? Let's say gas fire plant like Mingjiang, every X number of hours, you will have a different type of maintenance overhaul. So Mingjiang plant is relatively new plant, but you have hit the point where we have to do a hot gas pump inspection, right? So the hot gas pump inspection is a major undertaking. We need to get 100 engineers or technical people that are not present in Myanmar into Myanmar to help us do this maintenance.
So I'd like to need to when you drive a car, your first 10000 hours they ask you to go in there, they just look at the engine oil, check the brakes, then they send you out takes 2 hours. Now if your car is already 50,000, the ton maintenance you do at 50,000 is different. They will need it to need you to keep the car there for 1 days, 2 days, something like that. So it just happened that we have a hot gas pump inspection in Myanmar. Our EFW plant maintenance was, as Yu Jin mentioned, somewhat deferred, right?
And then our Q1, Q2 will be coming we've knocked against this particular milestone where we really need to take it down to examine some of the equipment. So compared to what is important is that I think while we cannot give you the exact number, compared to first half or rather second half twenty twenty, we have all these maintenance that we didn't have last year, right. So what we are pointing towards is that because of that, these assets will not be in the position to contribute at least during the period that they are down, right? And these are not short. We're talking about 45 days here, 30 days there and so on.
I hope that that shed some color on it, although we don't provide all the details.
Yes. Thanks so much, Kim Bin and Eugene for this. Maybe if I can launch me with one more question. Can I get more color on the wind power situation in the first half of twenty twenty one? And maybe also what's your outlook for the maybe rest of the year as well?
Thanks.
Yu Jin, do you want to take a step first?
Yes, I'll take the first step. For the conventional power business for the first half of the year, we compared to last year where the first half was particularly late shift by COVID, not that India is not still struggling with COVID right now, we did see about 2 to 3 months where demand for power was higher than last year, right, generation did go up and as a result, you know, the dark spreads, the tariffs and also dark spreads particularly, you know, on the uncontracted portion did go up. So as a result, we did see a stronger performance out of India for the conventional, the thermal business, both from a demand as well as a, you know, a spread of perspective. Now coming into the second half, you know, we're starting to see a demand taper off a little bit, right? I think the second element to consider is also, you know, rising coal costs.
As you would know, coal prices have been increasing fairly significantly, so the uncontracted portion of our India core business is affected as well. So in general, right, we do see a tapering off of demand and as a result of rising fuel costs, resulting in a compression of the dark spreads expected in the second half.
And also the we have had while we for a couple of months we see the demand improving and then spreads improving and then India got hit with this this very serious wave of COVID, right, if you remember a few months ago. So then suddenly the demand taper off because economic activities are affected. So then right now what we're seeing is that wave has more or less tabled in India, right. So second half, you like to think that maybe you will recover, but we haven't seen enough of it. So and that wave has actually ripple out in Southeast Asia.
You're beginning to see more cases in Myanmar, especially much closer to Indonesia, Malaysia as you've observed. So we think COVID will continue to be a significant impact to our business in the second half, even though it's you just can't tell, right? You don't know. For a while, Singapore was okay. Vietnam was okay.
Then now you look at even China, there's so many cases. So how is it going to impact depends on government actions, how much they shutdown and the impact on economic activities. But we want to we just want to be very cautious. Now coming back then to India, other than conventional energy, of course, the renewable energy. And this is something that we season after season we watch very closely.
We are very big in wind. I don't know whether we can go up that slight with the wind resource in India, the historical one. Listen, do we have are we able to flash that? So if you see this, this is from 2,000, right. If you just look at wind speed, of course India is very big place up, right.
So this is sort of a very grossed up average. But it gives you a sense of if you are running a wind business in the based on India. Of course in specific locations we have got very detailed charts. But for the purpose of this you can see how historically this has changed in India. This is across 7 states.
And last year, 2020, we actually had a little bit of a very stressful time. It was historical loan. And then this first half, we see it coming back a bit. But win is win, right? We hope that we have hit the trough.
We look at the trends. It goes up and down. We hope that we hit the trough and that it is on its way up. Right? But we are also wanting, this is not something that we can put any certainty behind.
So, but to put into perspective, I think since you asked about India specifically and we, especially in terms of renewables, one of our biggest contributors and portfolio in terms of capacity is actually in India, our wind portfolio. So this is something that we watch very carefully, very closely. And we are hoping that India wind, at least in terms of resource, has hit a trough and it's on its way up. But we'll only find out when the wind blows other than the punt. But so I just want to put that keep that perspective share that with you so that then every time we say that, hey look, we are having low wind resource in India, low wind resource in India, what does that mean?
How does how do we think about it historically? How do we then even form a view moving forward? So this hopefully at least provides some additional data. I hope that helps a lot, Terrence.
Yes, Ki Bin, Eugene, thanks. That helps a lot. Can I just ask one last question? The contribution Landseo's contribution from China was a little bit softer in the first half of twenty twenty one. I was just wondering if this is a little bit more one off or your CV says potential continuation of for second half especially of the first half?
Yeah. I think in relation to that, Terence, it is more of a timing issue, right, where in terms of the land sales timing, where you know it is a little slower compared to last year. I think going into the second half, we do expect from the urban achieve, right, to see the momentum of the land sales resume, right, across China and Vietnam as well. And, you know, this is just really in relation of, I mean, I don't think we are really seeing, you know, a structural softening at this point of time. But of course, one point to take note is that the COVID situation, depending on how the COVID situation develop across our key markets will have an impact, right?
Because, you know, in terms of land sales, many people actually would want to physically be able to look at the land and some of the properties as well. So if there's COVID restrictions continue to worsen, for example, and people find it difficult to travel, then there could be, you know, further slowdown in the sales. But in general, you know, we do not see this land sales softening as being a structural softening.
Yeah. No, certainly agree. It is as long as you have the land, you're holding it eventually and we had to time it properly so that we get the optimize the price outcome as well, right. So, and it's just in terms of I think what is important is that you have to see whether we continue to have the ability to acquire new land bank, right. And then from time to time, are we able then to monetize it, develop and monetize it.
Holding it for a while, I think it's fair game and depends a lot on short term government restrictions, especially in the COVID season. So to be very honest, I'm not very worried about that at all. In fact, sometimes you think if you owe it a bit longer, maybe the uplift is much better at the right time to release it.
Thanks so much, Eugene. Kimi, that's all from me. Thank you.
Thanks, James.
Next in queue, we have Rahul Bhatia. Rahul, you've been prompted to unmute yourself. Please proceed to ask your question.
Thank you. Hi, good morning, everyone. I have few questions. Maybe I'll take it 1 by 1. Firstly, I think if we compare the China coal assets and India coal assets, we impaired the China coal asset this time.
But if we think about the reasons, right, like short term reason, the coal price is high, long term reason, there is a transition to green energy. Then why how these two assets are different that it led to an impairment in China, but not in India and specifically for the P2, which is uncontracted mostly?
In the case of China, Rahul, what is happening is that that plant was built next to the mine so that then you can take advantage of the low cost of fuel, right. That provides the business and the plant with a very distinct advantage, right. So what happened is that with the closure of the mine, it has lost that distinct advantage. In fact, it is now in a disadvantage because it has to transport all that coal from other places in order to keep it running. Then at the same time, China is and that part of China is on its path to really push ahead on decarbonizing.
So Chongqing, it is in the confluence in the region where they have access to hydropower and increasing hydropower through transmission lines coming from Zhanjiang. And there are also buildings in the surrounding areas, a lot of renewables, wind and solar. You can tap on the neighboring provinces like Sichuan, even Gansu. We can bring all that renewable power into Chongqing. So when we look at impairment and carrying value, the long term prospects of the business is obviously most important, right?
Short term, things can come up and down season after season. Of course, it does impact earnings and profitability. But more importantly is long term value. So in the case of Chongqing, with the loss of the mine and the mine mouth coal, it has lost its long term competitive position. And with the new sources coming in from transmission line, hydros, renewables, we see that its long term future is in fact more challenged than less, right.
And compared to P2 now, P2 doesn't have this loss of advantage. The long term, you can still see that there is you can ascribe value to the long term viability of the business. Now we share the concern actually when we think about these core assets and you were there when we come up with our strategic plan to need to drive ground to green. We watched this very carefully between the China coal plant and India coal plants. In the case of PON T2, what we monitor it closely to study the carrying value versus the long term viability in value.
Now one of the key indicators to the P2 and for that matter PMP2 business, SEIL, we call it SENKOP Energy India Limited, is whether or not we will be able to secure contracts. So if we are able to secure long term contracts that's again coming back is an indication that there is value beyond the immediate term. And once you have that, then there is some confidence and support to stand behind the carrying value on the books, right? So I'm just to summarize, answer to your question, between China and India, really it is we look at long term value. China, it lost its long term competitiveness when it lost the mine and the source of coal.
In the case of India, we have no such condition, number 1. Number 2, long term value, we continue to watch it very closely with the brown to green considerations in our mind. Well, as an indication of its long term value is whether or not it will be able to secure longer term contracts, right? So those are the there are many other intricate considerations when people put together cash flows, discount rates and so on. But in a nutshell, the difference between China and India core businesses, when we look at we don't have to impair, not to impair.
This is a key difference, right? Now again, I want to emphasize that for India core business, we are watching it very closely. And we do share the for whatever it is worth, I think we care about it as much as you do, if not more so. So I hope I sort of shed some light on how those decisions are made and the thinking behind them. Eugene, you have anything to add to that?
Yes. Thanks, Kim Min. I think Rahul, in looking at, I obviously will give a slightly more technical answer. In looking at impairment, the key question is that what are the triggers, right, that will lead us to believe that there is a long term, there's a clear long term diminution in the value of the asset and as Kim Min has already pointed out, the key trigger there is the fact that the coal mine has lost its mine mouth advantage, right? So as Kim Min has pointed out, the plant was designed and also contracted on a basis that it would be able to get this very advantageous and cheap out of your, out of, you know, our partner in Chongqing.
Now with that advantage gone, you will have to then, number 1, import coal from regional provinces, therefore being exposed to market pricing of coal and the second thing, you know, quite substantial coal logistics costs such that the landed coal price foreseeable into the long term, right, coming into that plant is very, very much substantially greater. So as a result of that and also taking into account, you know, as the the mine, the closure of the mines really came up on government policies, we also considered, you know, whether there would be a sustainable clear articulation of long term, a sustainable support from the Chongqing government into the longer term and I think at this point in time, you know, there is the sufficiency and the clarity of that is not clear. So, you know, the very fact that the very reason, the reason that, you know, the very reason for the plant being there is really not and also the fact that there doesn't seem to be any long term support and mitigating factors for the reason, the structural change, therein lies the trigger for the impairment. And for India, as Jimin has rightly pointed out, at this stage, that's not there, right?
But of course, you know, we will be looking at the Indian assets very closely with that, you know, those concerns in mind.
Thank you. This is very clear. Thank you. So, Mimi, I just want to move on and discuss about the divestment company of the 5,500,000,000 5 year investment plan. So why in your internal assumptions you are including this impaired China coal asset as one of the components for divestment?
And secondly, if I think about if I assume that you would be thinking about divesting the India coal assets in future or you are trying to right now, what is the key bottleneck you see? Will it be about finding a buyer or would it be about getting the right price based on your book value?
If I hear you correctly, Rahul, and correct me if I'm wrong, then you are in the case of China, of course, having written it down, our main consideration will be to decarbonize, right? So we are committed in our 2025 plan that we need to reduce our cover intensity, right, and also want to increase the contribution from our green sustainable solutions assets. So I think those are the key considerations that will be driving our thinking in the next few years to acquisition as well as divestment. So I think I just want to set that as the broad picture so that then you can see how our thinking will be guided by those priorities. So then when it comes to India to your question whether or not it is the buyer, whether or not it is the assets, again we are thinking about the key criteria is to how are we going to increase the contribution from our green portfolio, how are we going to decarbonize the portfolio, bearing in mind that these assets are the ones that are giving us a very heavy carbon footprint,
while at
the same time, they are also contributing to the earnings portfolio. I won't be able to tell you exactly what we are doing because I think those are commercially sensitive. I hope you could understand who we are talking I think those are commercially sensitive. I hope you could understand who we're talking to, what our structure we're talking to. But suffice to say, again, guiding our thinking at the end of the day is that slight with the donuts as well as the bar charts that we I never stopped flashing this type in front of the board, in front of management and also in front of you as I did just now to I think to aligning all the thinking that those are the guiding priorities in our mind to in terms of management portfolio moving forward.
So the fact that with this particular trigger, we have to write it down, which is not by itself not a good thing, right, you have to write down of such a magnitude. But every every club has a silver lining. So having written it down, it does creates a lot more flexibility and perhaps optionality as to how we may decarbonize from that point.
Yes. And just to supplement Kim Min's point, Rahul, I think if you're talking about the RMB5.5 billion of which the expectation is about 50% is to be, you know, a mix of options, if you recall, right? It's going to be funded from operating cash flows, coming from growth, from divestments as well as capital recycling. So I think, you know, in terms of funding that portion, right, we do have a very significant portfolio of assets that will be reaching a maturity at different points in time and also we have a stable, sustainable solution segment as well. So clearly, when we think about capital recycling, we will be cycling through those assets to see what is suitable recycling as you know for the factors that we have discussed during the Investor Day.
So, you know, we are not hinging clearly on just divestments alone, but on that part of that, it is a holistic look in terms of allocating operating cash flows, divestment as well as capital recycling proceeds, just to be clear.
Alright, thank you. Thank you. I think I'll pause for now, maybe come, I'll come back later if there is a chance I need a chance further. Thank you.
Thanks, Wahpu.
Next in queue, we have Fu Zhuwei. Zhuwei, you've been prompted to unmute yourself. Please proceed to ask your question.
Hi. Thanks for the opportunity. I have two questions, one on Singapore and another on India. I think in Singapore, you talked about in your presentation about how you're seeing some stronger demand and better margins that's driving the Singapore earnings. Could you just like give a little bit more color on the front?
And as we go into second half, where I can see that the U. S. EP prices have spiked in July, How should we think about the profitability about your Singapore Energy business? Then on India, I think without sounding like an environmentalist, your wind speeds have been affecting your SGI earnings for about 2 consecutive years. Now let's say the wind speeds don't improve from here, how would this impact your renewable strategy in India?
Thanks.
Yes. I'm going to touch on the stronger demand and better margins in the first half that impacted Singapore. I think in the first half, you know, there are a couple of things that happened, right? We see, you know, better than last year in terms of electricity generation, right? And also in terms of spot spreads, we did achieve slightly better than expected spot spreads, partly because of the advantages in tariff, in order to find that we are able to pass some vesting debits and recover that from our end customers.
In terms of, you know, the GATT, the steam sales situation, as you would know, HSFO prices were high, higher than the last year, in the first half of this year. So the combination of that did help overall spot spreads as well as gas margins in the first half of this year. Coming into the second half of this year, I think the key thing that we see is that in terms of gas, JKM indexes were going up coming to the second half and you know as a result of that, we do see that potentially impacting margins overall. Now, Ki Bin, do you have anything to comment?
No, no. On that, I was going to comment on India. I think this, the wind resource assessments, they are based on very technical sophisticated studies. So, Leisa, you can cut this slide also if you want. I think we've shown it before, but the point really is that we don't think we will stop in India to stop.
So when you have a big enough portfolio, you would hopefully have more portfolio effect, that's number 1, as we grow our portfolio. Number 2 is over even across all India, right, I show you the grossed up 7 state wind resource charges now. There's also the historical ups and downs. So if your question and I read it very carefully is that how does it impact the renewable strategy if these bids do not approve. I think we the long term or at least the engineering studies are suggesting that this is part of the ups and downs, right?
And it should be fair given. And again, if we have the portfolio and we have the point mitigation measures, we should be able to write ups and downs, right? So that's the whole point about this. So at this point, there is no desire to adjust our renewable strategy in India because we have experienced bad wind year or 2 bad wind years. Now the next slide that you know, Leisan can we have the next slide?
So that's the existing portfolio. Then moving forward in our new assets that we either built or we acquire, we have to look at how the slide just now and this slide is trying to explain that there are many things that we get into in terms of assessing moving forward, what type of win we can expect. So we hope we are sharpening our pencils and doing better on the one hand. On the other hand, we hope that based on all the studies that all the experts are able to show us, it shows that there's going to be the ups and downs and last year was a historical low. Now I'm not the expert and I'm not able to obviously say, oh, it's going to stay there, it's climate change.
Right? And so that's why we're not coming out to say, although this is all due to climate change now, it's still climate change. All that studies go haywire. So we know that there's climate change, but there's the what the best of available assessments that we have between us, the entire industry is that it is a cyclical and that if you especially if you have a big enough portfolio, you'll be able to have the portfolio effect going into it. Then on our part, we have to sharpen our pencils in terms of doing better in forecasting, doing better in terms of capturing, then doing better in terms of mitigating some of these effects.
I think in our Investor Day and you will that's the way we also spent a bit of time talking about what we would do to make sure that when the wind is blowing, we are available, right, and still not being there, not being available because of maintenance or other reasons and not being able to capture it. So again, relative to some of the other players that we observe, relative to even ourselves between self operation and outsource operation. Putting in this concept and driving people through this concept of energy based availability has really helped us capture more wind than others than otherwise that we were not looking at it. So the point really is, very long winded way I went through all that is that at the end of the day, the first short answer to your question, no, it doesn't change our wind strategy just because we have too low win years. And you can see that first half of the year is better than last year.
We don't know we're not willing to I'm not willing to sit here and just tell you that second half is going to be better than last year's second half at show, but we'll see. But again, the wind studies that is available to us and we're deploying the best that is available and also all the other mitigation measures that we have and also the capabilities and knowledge that we're accumulating over time is helping us do better than the next guy. So I think this is a it's to some extent, it's relative. We're watching the Olympics now, right? It's always relative.
You beat the next guy, you're good. So are we able to do better however slightly than our competitors in this game, then I think we'll be fine. And India will always have a wind industry. India will have to tap the wind resource as it goes on to its renewable green journey, right. So there is no doubt that wind industry will continue to be high growth as well as a very important source of energy for India.
And because of that, we are already in India. We already have a critical mass and a good position. To continue to want to play in that market. And like I say, it's like the Olympics, you have to run a bit faster, run a bit smarter. Last, outlast, outsmart, outplay, as long as you have the ability to do a little bit better, if not a lot better, you will be fine.
Very clear. Thank you very much, Kinyin and Eugene. I'll hand it over.
Thanks, Doolin.
Thank you. Next in
queue, we have Cheryl Lee. Cheryl, you've been prompted to unmute yourself. Please proceed to ask your question.
Hi, morning. Thank you for the opportunity to ask questions. I have 2. The first is actually about the conventional energy. And if we could get some color of the $58,000,000 improvement, the year on year breakdown.
In terms of quantum, just to get a sense, was it driven to a bigger degree to changes in India or Singapore, for example? And I guess the reason the rationale for this question is just trying to get a sense of perhaps what is sustainable or like some understanding of how much of this strength could be a bit more volatile versus from half year to half year? Thank you.
Yes, I would say Cheryl, we aren't able to give you the outright breakdown between the two segments. What I can comment is that for India, okay, you know a lot of the improvement that we see in the first half as mentioned earlier, okay, came about as a result of, you know, there are some months in which we have saw a higher than previous half in terms of demand and also a result of a dark spread. Going forward into the second half as mentioned also earlier, right, there would be an increase in the coal cost and also a tapering of that demand, although the demand really, it depends right on how the COVID situation turns out. So, you know, that would be the element in relation to India, right? Now for Singapore side of things, the improvement came both from the energy as well as the gas business.
Although on the Singapore side, you know, there was a 13,000,000 gain that is reported in the books of the conventional energy side of things that is in relation to you know hedging dynamic hedge gates that you know for this period, they were not hedge on that, but going forward, you know, it will be. But generally for Singapore, the underlying improvement that we see in the first half, right, largely it's as mentioned earlier also, improvement in energy demand, but we did see better spot spreads, right, we were able to recover more vesting debit charges through our end customers and on the gas side of things in the first half also, right, you know, we benefited from higher HSFO prices. Now there's another element to consider for Singapore in the first half. Now if you recall, last year, we did say that one of our key customers which is Eastman, was expected to exit by the end of 2020, right, without any contribution, but actually Eastman did stay until the end of the Q1, right, so that helped in performance for the first half, but of course, you know, those contributions from the Eastman earnings are not expected to be in the second half.
So I will characterize the outperformance that way, but we would not be able to share with you the breakdown of the 58 improvement across the 2 countries.
Okay. Thank you very much.
Cheryl, if I may, I'll just add a little bit more color to that. I think the prospect statement actually carefully crafted and it says a lot, right? On the one hand, there are the one time things that are not going to repeat itself like Eastman. On the other hand, we have had continued this slowdown that one can expect coming from COVID and so on. So the we would want to be very cautious to think through whether or not the second half of the year will perform like the first half.
I would caution against that, right. On top of that, we have the shutdowns that we mentioned. So the last thing I want you to do is to take our first half earnings and then just extrapolate in the second half. It's not going to happen, okay? So I think it's on a serious note to be very circumspect over the second half because the and seasonally, we usually have better first half than second half also, right?
In the case of U. K, for instance, there's the winter, right? So the winter spikes really suits our fast response and battery portfolios very well. Then as we enter the summer months, the mildest seasons for the second half of the year, we shouldn't expect the same performance from UK, right? Then India and Singapore, it's very much minus all the one time things and the shutdowns that one can anticipate.
It is also how each economy can recover from COVID, what each government does. And none of this we have any certainty or visibility. It just develops week by week. I wouldn't say day by day, but week by week. New measures have been put forth.
So we'd be very again, second half of the year, I wouldn't it will be compared to the first half and compared to the last year, I wouldn't be very wouldn't be counting on it doing as well.
Okay. No, thank you very much. That's actually very helpful. And my actually second question is about Chongqing Songdao. So, why just clarify, you have a 49% stake.
Could I just clarify issues such as management control, and like how much say you have given that you have the smallest stake? And so things like your intentions to decarbonize or maybe change the structure of the plan or who's in the driver's seat. And if you want to change sort of like the configurations and things like that, even the license, like to what extent are you able to do this easily? Not so sure.
Short answer is that the partner actually has more say, right? In fact, they are also the owners of the coal mine, the state owned company. We go in there, our role is clearly to bring in some technical capabilities, to bring in the commercial discipline, financial discipline. That was what we contribute. So in terms of, let's say, wanting to reconfigure, wanting to work with the government to recast the role of this fund, the partner will have to be in the lead and in the driver's seat, right?
So we could give suggestions, but we are not and of course, we can block it, right, as 49% as in any other 49% arrangement. But the clear lead in that situation in that business is the local partner.
Okay, understood. Thank you very much. That's all for me now. Thanks.
Thanks, Sharon. Siew Khee, next right.
Next in queue is Siew Khee. Siew Khee, you've been prompted to unmute yourself. Please proceed to ask your question.
Hi, good morning and good afternoon. I will just go one by 1 if it's possible. I do have quite a fabulous question. I tried to keep it to this big picture question. Okay?
But there are still some detailed ones that I need to check with you. In the slides, you actually mentioned that there's credit loss of R27,000,000 in India. I remember there were also such recovery last year. Is this something that we can actually expect to recur? What is it?
It's not credit loss. Right? We're talking about late payment surcharge surcharges that is recovered from, you know, the
It's a recovery allowance. Yeah. Recovery allowance for expected credit loss. Yeah. So, you know, I think,
I think in India, in terms of the earnings, apart from the higher demand, there were also, you know, 2 key elements, 3 key elements, I would say, that came up in the first half. One, we did have a positive capacity payment throughout in relation to the last financial year up to 31st March of 2021. That is for the actual financial year on the run-in India, okay? So that one, you know, that element, I'm not able to give you the breakdown, but I'm just giving you highlights of some of the elements. That element, you know, it depends from year to year on how the capacity payments actually are true up, okay?
Now the second element, which is, you know, about at least half of, you know, what is coming out of India, right, is the late payments such Majes that is levied upon the DISCOM. So that, you know, from a quarter to quarter basis, the DISCOM actually reconciles, you know, the accounts receivables with us and late payments and charges then agreed accordingly. So that will take place from a quarter to quarter basis. So going forward, you know, this conversation will continue to happen. Then the third element is slightly offset as a result of ECL charges, that will depend on the ECL assessment at the end of each financial period.
So, you know, it would be hard to say whether the ECL charges will you know, recur or not, but that will be assessed at any one point in time. So I think in the very long answer to your question, Suki, the key elements that are part of it will recur from time to time. That's particularly in relation to the late payments charges.
Thank you. So I suppose the ECL assessment will usually take place every quarter. I mean, you ought to actually, of course, by year end of their books, you would actually assess it. But I take it that you will also do it at group level when you have to report, right? Or these three elements, okay?
Yeah. Okay. Thanks. That's very helpful. So just on India again, I know that there's a difference between Chongqing and India in terms of the outlook.
So just wanted to check because CEO mentioned that the reason why there's no impairment in India is because long term outlook is still there and you're still hoping for long term PPA. Are we actually close to hearing any long term PPA coming up? Are there still long term PPA being given out right now? What I'm trying to say is because in case, you know, something happens and then you end of the year you review the book and then you decide to take a charge like Chongqing?
I wouldn't preclude that possibility, right? But as I say, there is a very strict methodology and process behind, right? Right now, there are then to the other part of the question whether or not there are long term PPAs being discussed. Yes, there are, right? And they are of it's not just one, there are several.
On top of that, there are also new possibilities coming up. For instance, the India government have put up this new bid quite around the bit, right, which is out there that we potentially can anticipate. I'm not saying that we will, I'm not saying that we will win. But to the point where I don't know there are more long term KPIs, there is this thing called around the clock bit in which they're asking for proposals for renewable plus thermal as a combination round the clock because renewables are intermittent, right? And that only certain hours, especially solar will be available.
So they want to have that supplemented by thermal power. And together, one has to guarantee, whoever is the winner of that, we will have to guarantee certain availability of energy, be it coming from green and brown, a certain profile, certain proportion must come from this and that. So, that bit will be coming up, we understand in this half of the year, but we don't know exactly when. Again, we're not saying we'll participate, we're not saying we'll win. All we're saying is that, to answer your question, whether or not there are new contracts that are out there, yes, they are, right?
And this is one example, even if it's not a pure thermal. And in the meantime, we're talking to several parties. So the idea really is whether or not going back to the point that I think Rahul was also asking, what's the difference in when do you take 1, when you don't take 1? So I cannot preclude the possibility of us taking another one on India, right? But one thing to share with you how we think about it really is that look, at the other day, does that set is that long term from when we look at a carrying value has to be based on a long term prospect of it, not just 1 year or 2 years.
And then the long term prospect really depends on whether or not this business has value, right. So if the value of the business is there's no prospect of it driving the value that we're carrying on our books, then we have to take a, by accounting principles and by commercial principles, one will have to take an impact. So again, in the case of Song Tao, it's very clear. It lost its role, it lost its advantage, it lost its rightful place in the system. It's no longer competitive.
So because of that, we have to take it down. In the case of India, till today, at least this season when we looked at it, it continues to have that ability to drive value and margin, right. It's competitiveness compared to where it was 1 year, 2 year, 3 years ago has not materially deteriorated, But what we want to see is whether or not there is support. If this thing has value moving forward, it has its rightful place in the system, it continues to serve an important role serving competitively priced power notwithstanding it is called. Somebody is willing to sign you a contract.
And that is an indication that will provide the support to simply an assumption in cash flow, right? So those are the things that we're looking for and as we think about it. So season after season, we look at this very closely, right. And then when we think about this, we also think about the fact that it is cold, right. And then in the longer term, is it going to its competitiveness is going to erode as the value or rather the cost of carbon increases, right?
As the cost of carbon over time, we cannot expect that to increase especially in our strategy to go ground to green. As debt burden, we have to point that waste on to the coal fired power station in the long run, can it continue to survive, right? So that is a very high nose way of thinking about it. So I hope I've given you some color and again, the how we think about this thing. So but I don't think we can I would sit here and say, don't worry, there's not going to be another one, right?
But the way we think about it is as such. There's a good reason, there's a trigger to U. J. Point in the case of Songtau. It has lost its role.
This one is at this point continues to look like it has its rightful role now, but we are looking for validation. We are looking for support and certainty.
Thank you. That's very helpful. I guess, we just have to, just have to say sorry first in case, you know, next quarter I have to ask you this again. I guess it will just come up, like, as we are also being asked, by investors. Okay.
No. We are are more concerned than you are. I'm more concerned than you are. I look at this thing and I say, hey, look, between you and me, season after season, I come and take 1, take 1, take 1 like that. It's just I'm here.
So I we this is we're dealing with very sophisticated analysts and investors, so we want to be very upfront and we want to be clear. And we do what we at least we believe we're doing what's right.
Okay. Sorry, Yuuji, you wanted to say something?
I was just saying that to add to Kim Min's point, right, we are watching it very closely, right? We have a clear process of looking out for these impairment triggers and also, you know, a detailed way of analyzing how the triggers will factor in into assessment of the carrying values. So I think, the fact of the matter is, you know, I understand from the financial markets and also for yourself, Suki, you asked the question, but you know from our standpoint, you know, we are focused and watching on it very closely and at the end of the day, you know, it is a pretty sharp and critical assessment of the situation as Kimit has pointed out in relation to the long term prospects. So, you know, we are watching it very closely.
Okay. Thank you. Sorry, this is my last question on India. So you mentioned, I know you have actually given us a clear outlook in terms of how it would look like in second half for India and all the plants that actually have maintenance shutdown. So this first half, of course, your conventional energy, which India has actually done quite well, well with the recurring of the recoverability.
So second half with the maintenance shutdown, will it be so long that it could be in a lost position?
And
the entire for for for whole India lah? I guess not, right?
I think, suffice to say, you know, for the entire India as a country, right now we do not foresee, well, you wouldn't be in the position that you pointed out.
Okay. Thanks. Okay. And then I have just 3 last question. For UK, how is it?
You haven't mentioned anything. Was it good? Was it profitable? How's it going to, you know, what's it going to be? Outlook?
Yeah. I think for UK
How was it this half? You said that it's a little bit stronger.
I think for UK for the first half, it's strong. It did do well. I think, you know, we did see some high demand periods. We saw good margins across the both the battery fleet as well as the flexible generation fleet. I think if you recall in the investor day, Andy did pointed out that we are getting our margins particularly by deploying the battery in a dynamic demand market where the response times are so fast that you know naturally gravitate towards our battery.
So you know we did find an advantage there and we are able to realize a lot of these benefits in the first half of the UK. Now let me say that for UK in the first half, we were hit by a fairly significant, you know, deferred tax charge, right, total, you know, close to a R19 $1,000,000 of debt and that is in relation to the legislator tax change, right from 19% to 25% starting from 2023 that there has already been decided upon by the tax authorities in UK. So all in all, you know UK did have a strong performance. I think also helped by the fact that impairments were taken in the past so that a fixed depreciation and all that is also lower. Now going into the second half, I think you know across the different markets that you know generally what would be volatility, but you know give some elements which is you know structural, which is the fact that the battery portfolio did find in markets in which they can deploy at a better market, that will probably carry through.
Okay. Thank you so much. And just wanted to check on Singapore. Cogen is still in a lost position, I suppose. And with the LNG contracts rolling off, what's your long term plan for the assets in Singapore?
Ki Bin, do you want to comment on the long term view in relation to our Singapore Cogent assets?
Singapore Cogent, the government is moving quite decisively towards greening Singapore. So there's the Singapore Green Plan. And then there's the recently they announced the government's own green initiatives. So as part of that, you can see that there are some major shifts. For instance, they want to bring in quite a substantial amount of imports, right?
That's a realistic prospect. They're also talking about, of course, maximizing the amount of renewables, right? And of course, gas will continue to play a role. So I think in anticipation of clearer policy directive from government, I think what we can say is that the cogen business, we would want to we are positioning ourselves to meet the government's plans as we did. So if you look at it in terms of renewables, we are already the largest solar player in Singapore.
And in terms of imports, of course, we are also actively pursuing it. Then in terms of gas, we are our plants still have quite a number of years left in the life to go. So I think we are in a good position to serve Singapore and we're in a good position to address and answer to Singapore's call to the government's call in terms of meeting the green plan. So now if you're asking me specifically whether or not what are the life extension plans for SACRA or for Cogen. I think I will defer that discussion for another couple of seasons in anticipation of some clarity from government.
Okay. Thank you. I understand. And then my last question is, okay, your outlook statement sounds quite very full of concerns, your outlook statement. Is there anything that is exciting, positive that you can share with us that will happen in second half?
Okay. You can't tell me what you're bidding now, but I'm just saying that anything that we should be, expected over.
Okay. Give me one of you.
Can we talk about you, Jay?
Okay. I think That's
a good one too.
Yeah. I mean, to give you a sense, Suki, I think in the second half in general, as you look at what the outlook statement, what we pointed out to, it's largely in relation to our, you know, our conventional asset performance because as you can see our conventional asset performance in the first half was very strong. Okay. So we just want to make sure that the market understands that going into the second half, there will be that are tapering in demand. There would be potential pressures down.
Now on the renewables and sustainable solution side of things, I think going into the second half, you know, a couple of things to take note is that, like I rightly pointed out just now, for the UK, you know, for example, the battery portfolio, we were able to find a higher margins market to deploy into, the dynamic dependent market. Going into the 2nd part also, you know, if you look at solar, right, I think for the first half, you know, it was really a story of a ramping up in capacity, particularly in Singapore. We saw, for example the Ethna assets came up only in the Idu, right, and that asset will then continue to contribute into the full half in the second half. And then for the wind assets, you know, for India we're going into the second half, right, we do, we would see a seasonally a strong typical within a year, you know, higher wind within a year on a seasonal basis for Q3, right, until Q4 will pay for off again. So, you know, I think and also from urban, like I also mentioned earlier from a land sales perspective, you know, we did expect it to catch up in the second half, of course, barring unforeseen circumstances as a result of COVID.
So I think, you know, while a lot of the guidance given in relation to conventional business side of things, I think on the sustainable solutions side of things, you know, right now we do not see anything that is a particular concern of that kind of magnitude. So, you know, I would just categorize it that way because if you look at our outlook statement, it does, it did come out the conventional
energy scheme. We struggle a little bit because some things we most don't have anything we can talk about here. And I think to be frank, and this is plowing season. We are not in the harvesting phase in terms of our so called transition plan. So a lot of plowing is going into it.
The second half is still suffering a little bit from the lack of pipeline or the plowing that we didn't do in 2019, 2018. So in the meantime, I think keeping fingers crossed, we may be able to, if we find some new projects, some of those could be announced, then we can talk about them. But may come from places like Singapore or may come from places like India. Our CEO of China is just about landing in China this month. So that's we need to give him some time to start delivering.
So if you look short answer, to be very honest, is that there's nothing I can tell you now that you could announce.
Okay. Can and just want to okay. Sorry. Just a last question. Your other business is, you know, you mentioned, it has actually recovered.
So this will remain other business or are you would you be looking at divesting this other business to focus on renewable?
Well, I think at this point in time, Suu Kyi, the other business segment is not a main contributor. Like I said, you know, we will look at other business as well as a conventional portfolio, parts of the portfolio with the idea of maximizing value out of it. So to say, we will definitely be divesting it. You know, I think, you know, I wouldn't say that, right? I can't say that.
But you know, we will obviously be looking at optimizing and maximizing the value out of the other businesses as well.
Sure. Okay. Thank you so much.
Thanks, Yew Cheek.
Thank you.
Next in queue, we have Pek Ghe. Pek Ghe, you've been prompted to unmute yourself. Please proceed to ask your question.
Hello. Good afternoon. Could you hear me?
Yes, we can hear you. Thanks.
Hi. I have three questions. Yes, thanks for explaining the low wind resource. That's very helpful. Actually that actually began as my one of my questions earlier.
So do you see similar risk in other renewables such as solar energy, for example, low solar resource? That's one question. Do you want me to list out all my questions first?
Yes, perhaps, definitely.
Okay. So then the second question is, could you maybe talk more about the prospects for growth from new economy businesses? Yes. And the third question is, just now Mr. Wang mentioned there's hydropower in Chongqing, I mean not from Semcorp, but does Semcorp see any business opportunities in hydropower in Chongqing or other parts of China since they are trying the government is trying to decarbonize?
Yes, these are all my questions. Thank you.
Can I clarify, Pekit, when you say new economy, what do you have in mind?
The renewables and your sustainable, yes, because as SemCop is trying to go from brown to green by 2025 with a large proportion of your portfolio contributing from these, right? Yes. So, but you some companies should be at the mercy of the headwinds, I mean, pun intended, for the low wind resource. So that's beyond human control. Yes.
So what are you good because just knowing resource has cut your the contribution by 27%. Yes. So you can't be at the mercy. So what are you going to do about it? And also what are the other any specific I mean, the prospects for growth from the new economy businesses?
Thank you.
Thanks, Peikit. First, solar resource, we do not see as much variability, right. Solar is in terms of how much sunlight you get, how much of cloud you get, cloud does make a big impact. But it is actually over a long enough period of time it is quite stable, right. So like the type of solar panels you put on rooftops in Singapore versus the top the same solar panel on the rooftop in Australia.
Australia gets much better energy generation. So those are quite known. So short answer, we don't see the same variability in solar. But for the same reason in wind, because of the variability, then there is the differentiation between better players versus weaker players. So that's something I would like to point out.
And related to your second question, so the variability, because right now we are even though our portfolio is not small, 1700 megawatts and growing in terms of wind in India, there is still that concentration result. So the short answer in my mind may not be an absolute full bulletproof answer, it's really grow out of it. When you have a big enough portfolio and have more diversification, then these variabilities you are in a better position to deal with, right, because the left hand side a bit lower, the right hand side might be a bit higher. But if you only have 2 hands, then both hands might be down. But if you've got 10,000 hands, then some of this will be up, some will be down.
So the size matters. Size does matter. Diversification does matter. By nature, they are actually quite spread out. But even then, India as a whole, as I showed you just now, over 7 regions, we just have a historical low in 2020.
So in the longer term, what we hope for, that's why we say, look, we want to grow our portfolio of renewables from 2.6 gig to 10 gig. And when we get to a bigger size, then we hopefully will have much more stable outcome in terms of resource and in terms of financial performance, right. So for instance, the 10 gig, other than India, it will come from China, it will come from Southeast Asia. And because of that, a low wind year in India might be come together in combination with a high wind year in China. So I hope that the growth and size will help portfolio diversification will help.
You asked about hydro in Chongqing. Yes, we wouldn't preclude that possibility. Although I want to be frank right now that is we don't have a strong lead in that department, right. So that's why we are hoping that we'll work with our partner to see how that business, Songtao, could be restructured when they think about it in the bigger context of the province, in the bigger context the China portfolio than our partner because they are part of the SACEC under the state owned umbrella, they may have other optionalities that they can bring into the picture. And that's why to your colleagues' earlier question, we said, look, it is we want to work with the partner to develop these options.
Hydro may well be one of them. But being very French right now, we don't have a very good lead into hydro prospects for Chongqing. Did I miss any, Eugene, did I miss any one point?
I think you have answered all the key questions.
If you are okay, if there are, you need, if that's not clear, let me know.
That's clear. Thank you so much.
Thank you. We do have some questions from the mailbox. I'll read them out. The question we have is from Mei Yang from Morgan Stanley. He has three questions.
Number 1, has SCI been able to refinance any more loans in 1H 'twenty one? Also, any plans to reduce exposure to floating rates for the rest of 2021? How has LNG prices impacted 1H21? And how does management see impact if gas prices remain high? Thirdly, we have seen peers grow renewable portfolio in 1H21.
Can you help us on SEI's progress on decarbonization plans and renewable capacity growth?
Eugene, could you deal with, you're in better position to answer the financing in the footing rate 1? Then I'll talk about the ONG.
Okay, will do. So thanks for the question, Ma Liang. I think, in the first half of twenty twenty one, right, we were able to raise the 400,000,000 of bonds, right? And actually, the bonds were quite instrumental in helping us to, well, I would say, pay out some of the RCF supported CapEx in relation to a solar in Singapore, right? So we were able to refinance part of those loans, right, with the green bond.
So we were able to do some of that. Of course, there is still dry powder from the 400,000,000 of the green bonds for deployment. Now going into the second half, we will continue to look to refinance. I wouldn't go so far as to give you the timing of our refinancing plans, but as you heard me and Marianne Karpel clearly say that, you know, we are firm believers that we have the ability to tap the sustainability link as well as the green bond markets. So we were increasingly used that to do so or to refinance and to clear out the RCS and clearly in a refinancing and clearing out our RCFs, which is, you know, RCFs are largely floating rate, you know, interest.
You know, we would also be fixing a lot of interest in doing so, right, because we see that opportunity in the current environment coming out of debt fixed rates. So these are all in our plans and we will be executing accordingly. In terms of specific timing, you know, because of these things are potentially market sensitive, we will not be guiding on
I just want to double emphasize that this plan, this question from Mayank, and it's a very good question, although today he decided to be a bit shy and give us question in writing. But I just want to double emphasize that Eugene's priority is to reduce the amount of exposure to floating rate, right. And that we are very encouraged by the fact that we are able to tap the market, right. So after I think it was in June, Eugene, you issued the R400 1,000,000 So that has given us confidence, that validates our plan that it is available to us. And in fact, the rates also, to me, there was a strong validation that we could also not just get availability of capital, but we could actually get it at very attractive rates.
So that has helped. So this will be Yigit's priority. LNG prices are being higher. Very good question because we have got some downstream contracts that have been signed and we benefit from the prices that are there. So if we're able to source LNG at attractive rates, then we actually gain from that.
So yes, if LNG prices remain high, gas prices remain high, it will reduce the opportunity for us to drive higher margin from our portfolio, right? So that's the second question. Pierce grow renewable portfolio. I think to be fair, we did grow our portfolio from even as we come out from May until now, this is 2 or 3 months from the day we told you about our round to green strategy. We have commissioned almost 80 megawatts in Singapore and Vietnam.
We have secured another 100 megawatts of pipeline. Right? So, but I am not, to be honest, we are not satisfied about this. Right? We want to run much faster.
We recognize that in order to reach our 30, 25, 10 gig target, we're going to have to run faster. We also recognize that look initially this is not an unexpected slow start as we mobilized and somewhat hampered a little bit by this COVID situation. For instance, like I said, my our CEO, China, Alex, whom you have met during Investor Day, he's only able to get to China this month, right. And even then once he lands he has to self quarantine. So these are little things that knock you back a few weeks here, a few weeks there, a couple of months here, a couple of months there.
It's actually very frustrating for us. So one thing to tell you that we are, even though we have shown some limited progress, the 100 megawatts in terms of pipeline and the commission in terms of the 78 megawatts of commission capacity, those are way short of what we would like to see, right. So that's why when Silti asked the question just now about what are the price points in the second half, in my mind, you will have to be, price points will have to be, we show you that, we show everybody that we could grow our renewables portfolio and our urban portfolio in the pace and perhaps exceeding the pace that we told you we were going to do. So the again, notwithstanding this, one can expect a slow start. We are not happy with where we are in terms of the limited progress that we have, right.
Although some would say from May to August, that's there is at least something that's moving. Suffice to say, we're pushing very hard. So decarbonization plans and Renewable Capacity Group, I thought those are hopefully added some color to it. We want to run much faster, which shows unlimited progress. If anything, again, I'm thinking aloud because Song Tao taking the write down now in a crooked sense in an ironic way, it provides a lot more optionality and hopefully will accelerate our decarbonization journey there.
Thank you, Kim Min. We now have more questions from the mailbox. This is from Joseph Tan, an individual investor. He has four questions. I will read them out now.
Number 1, given the write down in U. K. PR over the last few quarters, why were additional investments into battery technology? Is this a critical technology in your green portfolio? Number 2, exceptional items seem to be not as exceptional anymore given the recurring nature of those expenses impacting results.
And given SempCorp's investment in higher risk emerging markets, are there any lessons learned from those write downs that management can share? Number 3, given the proliferation of hydrogen and your tie up with BP in Teesside UK, can management share how hydrogen will share your green portfolio? Lastly, on the write down of your gas oil reserves and inventory at Hinglong, are there any updates?
Okay. Let me deal with the first four and address the first four and then maybe Yu Jing can help me out with the 5th one. Batteries, U. K. Is a market in which we have been in existence for quite a long time to Wilton.
And then, of course, we made an acquisition a few years ago and then we took the right back down. Now having done all that, now with a proper balance sheet, UK actually is a very good market to learn how the influx of intermittent renewable energy into a grid to learn how to operate in the environment. And we have the right assets. Factories are one of the most important elements today in order to deal with that. I have said this before but just to remind everybody, UK in terms of renewables as a percentage of their entire in stock capacity in the system, they have the they're one of the highest in the world.
UK has about 45% of their in stock capacity in the system made up of renewables. And because of that, the intermittency nature the intermittent nature of renewables is having to be dealt with, right. And batteries are there to smooth out the peaks and trough and to meet the shortages when suddenly some solar goes offline, some wind goes offline, right. And we operate in markets Southeast Asia, China, India where we're focusing new investment into. These markets today, almost all of them have their this percentage of renewables as part of the portfolio of the installed capacity 20% or less.
And eventually they will get close to that level. I don't know eventually how they would be, but you look at all the aggressive plans to build up renewable infrastructure in Southeast Asia, China, India, they will reach the U. K. Level. So what is happening in the U.
K. And our position there is helping us learn about Antigua capabilities, how we can have an advantage and position ourselves better in our priority markets in Southeast Asia, China and India. So and specific to that, batteries is a very important part. And our battery portfolio today, we are one of the largest fleets of batteries in the U. K.
System and they are serving very critical role. As Jin mentioned just now, normally in the past people talk about frequency response, voltage support and so on. We were doing that and then but they evolved into this thing called dynamic containment that requires a much shorter response time, right, a fraction of what the market used to require. And we are the batteries are serving that. So that hopefully shed some color as to why we think we want to continue to play our role as the battery using our battery portfolio and when it makes sense for us to in fact expand that role, all right, it's not just for UK and not just UK that we can make, create good value from, we could also bring that value into our quality markets in Southeast Asia, China and India.
So that's the first question. Exceptional items, I think you would in the case of Songtao, so this season is Songtao. And I think we have taken a fair bit of time explaining why this happened, right. This was a business that we commissioned 2016 if I'm not wrong, right. And there was a good reason for its existence.
It has some of the cheapest cost of power in Chongqing. And because of that, it still has its role in that in the system. Now right now, without the mine, without the chief source of coal, it has lots to show. So without repeating that, I think we have explained I have at least tried to explain that this is something that is in that sense for the lack of a better adjective, it is indeed exceptional, right? It's not every day that you lose a mind supplying your full plan.
So hope that at least in our minds that is a good reason why we have to take this impairment. And in the past seasons, of course, there were also explanations. Now it is asking whether or not there will be future items, it is part of managing a business on an ongoing basis, right? So I respect your views that how you may or may not have confidence in how we look at these things that I fully respect. But I think we're doing our level best to manage this professionally and looking at this with full financial discipline.
In terms of emerging markets, what we can learn from it and so on and so forth. As I mentioned just now, the portfolio really is helping us because for instance, what we learned in the UK now is very applicable in emerging markets. For instance, in Singapore, as we try to bring in more renewables and also more imports. Regulators also and the think tanks out here are very interested in what we do in the UK. And then between the different markets in our portfolio, we are also learning things that we can cross pollinate.
Our ability to put up rooftop in Singapore, we are again able to bring that capability to Vietnam and put rooftop solar onto our industrial parts rooftops. So I don't know whether that addresses the question that was asked. But it is asking whether or not we should I don't know whether it sounded like we if we were to learn from high risk emerging markets, are there any lessons we learned from those write downs? Certainly, we learned from the fact that in the case of Song Zhao, what is the reason for this write down, right? And I've explained that.
And those of course will not be forgotten now. But are those reasons then for us to then give up, join the tower and walk away from those markets, certainly it's a resounding no, right. And I think there are things that we're also doing well, which we have applied the lessons that we've learned. And I've given some examples of those, given the breadth of our portfolio where we could draw the learnings from. And increasingly, we are leveraging on our capabilities and the things that we've learned to give ourselves a competitive advantage.
Proliferation of hydrogen and the tie up with BP. Hydrogen is something that is very good prospects. It is one of those ideas that one of those products that has a very high energy density just at natural gas. And depending on how it is produced, hydrogen can be green. So many people will see hydrogen as a fuel of the future,
right, where
generate hydrogen perhaps through renewables, big solar farm in Northern Australia, capture all the sun energy, solar energy, translate that, transform that into hydrogen bottle and ship it to North Asia, to Japan, Singapore, Korea. So it is indeed the fuel of the future. So that's why we are working with we're tying up with various parties, which would include, in this case, you saw the announcement of BP and so on. This we are exploring, but we are also conscious that there is going to be a timeline before some of these businesses will start to be contributing, right? Some of this will take on because in order for hydrogen to take on the entire supply chain has to be developed.
We are looking at how we can position to benefit from that. But if you ask me for when we think about our plans moving forward between now and 2025, our immediate strategic plan that we have announced, hydrogen doesn't feature very heavily in it. Now. Between now and 2,030, maybe, right? So, how that will hydrogen could change our wind portfolio?
It could become a substitute for natural gas at the right time, for instance. It could become a way to help decarbonize especially urban centers, high value urban centers like Singapore and UK and London. Those are possibilities, right? But I think we can talk about this and people have full conferences, half day conferences talking about hydrogen and its potential. But suffice to say, we are monitoring and we are watching and we are participating where it makes sense to us.
But from the perspective of contribution, as I mentioned, between now and 2025, it doesn't feature. You shouldn't expect hydrogen business to be contributing significantly to our bid, to our broader green plan between now and 2025. Gasoil Research on Hing Leong. Eugene, over to you.
Yes. I think in addition to the write down of gas oil reserves and the inventory at Hing Leong, we have did that comprehensively last year. So as of this point in time, there are no further risks of any write downs in that area. In terms of the proceedings that's happening at Hing Dieng, I mean the investigations are still ongoing. So we do not have any other elements in that respect.
Thank you, Eugene. Thank you, Kim Min. We now have time for the last two questions from 2 participants and that would be Credit Suisse, who submitted their questions online as well as Shirlin Lim who has raised her hand. I'll start first with the Credit Suisse question from Sean Tan. He asked 3 questions.
Number 1, could you share what we are seeing in Vietnam and China for the appetite for renewable capacity additions? Seems rather modest in 1H. Are we seeing more queries or could we expect a potential ramp up in 2H or into 2022? 2nd question, while we have fully
impaired our stake in Chongqing Coal
Power Plant, should losses on the coal plant persist? In Chongqing Coal Power Plant, should losses on the coal plant persist, would we be recording these losses in future periods? And thirdly, would it be possible to share the breakdown in net profit by country and for SEIL, please?
Okay. I think I'll take the second and third questions first. On the third question, I think in terms of the breakdown of profits by country, right, I think as explained during the investor day, I think the key thing is that we are looking at our business portfolio going forward in terms of pillars of businesses for growth as well as the businesses to manage for value. So I think it's important for us to keep the markets focused on those pillars. I think in terms of disclosures for my country, right, you will notice in our SGX net and as well as going forward, we do disclose in our revenues as well as our total assets, but we do not have the intention to disclose a net profit by country and by specific assets, right.
So I guess the focus is really on the key pillars for growth which is renewables, integrated urban solutions, right, which forms the sustainable solution segment as well as the conventional energy which we would as stated manage for value. On the second question, which is in relation to further operating losses for China's Hongzhao, given that we have fully returned off the carrying value and also from the books, we would not be recording any further operating losses in relation to that asset. So with that I could answer in the affirmative. So on the first question which in relation to our appetite to our growth for Vietnam and China for renewable, which appears a little muted. Give me what do you think about that?
Well, certainly for no lack of appetite, right. It was up to Eugene and myself, we would say we won 10 times. We recorded a pipeline of 100 megawatts and commissioning 78 megawatts over the last 3 months, but we were like 10 times that. And I think our balance sheet and our funding capacity allows us to do that, right. So for whatever it is worth, I think this is in relation to some of the earlier question from Silke as well as Mayank, where are we how are we tracking in terms of the growth, right.
And I'm saying just repeating it a little bit that we obviously expected that the start will be a bit slower because we have to mobilize and organize ourselves and we're only beginning to put people on the ground. So we expected a slightly slower start. And we are also somewhat further slowed down because of COVID really, the lack of ability to travel. For instance, I can't go, right. And I've got many friends in China.
I was just communicating with Ericsson, my China CEO. As it turned out, many of the number 1, number 2, people in the big Chinese energy companies. These are people that I've worked with in the past and not being able to go see them and then start leveraging on those relationships is really hurting us. So in that sense, 1st, in terms of appetite, definitely wants to do a lot more in terms of speed. Right now, from May, when we come out to announce our new strategy, the growth, the pace at which we would like to go much faster, we expected a slow start, but it is further slower than because of COVID and we're not happy about that, all right.
So I think do we should we expect to see a ramp up? We definitely want to see a ramp up. We're definitely working on a ramp up. But I cannot tell you here, we have forward looking expectation that, oh, don't worry, there will be a ramp up. I can tell you that we are working very, very hard to ramp up.
Okay. Thank you. I think, Sherlyn, if you could unmute yourself and speak and ask your question. Thank you. Okay.
I think that seems to have, the hand seems to have been lowered. So thank you very much everybody for your many questions. We thank you once again for joining us. Have a good weekend ahead. And for those dialing in from Singapore, wishing you a wonderful national day ahead too.
Thank you.
Thank you. Thank you everyone. Thank you. Bye.