We are a leading integrated utilities and energy
group, offering a full spectrum of third-party utilities services including
natural gas, power, steam, cooling water, high grade industrial water and
Integrated Utilities and Energy |
Offshore Engineering |
SembCorp Utilities (SembUtilities) continued to deliver
strong results in 2004. Turnover climbed 50% to S$2,927.6 million from
S$1,950.5 million and was driven primarily by the robust performance of
the Singapore and UK operations.
Profit After Tax and Minority Interest (PATMI) was higher at S$125.2 million
from S$98.3 million, up by 27%.
SembUtilities continued to account for half of SembCorp Industries’
Integrated Utilities and Energy
The Integrated Utilities and Energy segments had a remarkable year. Turnover
grew 72% to S$2,516.1 million due to increased contribution from our Singapore
and UK operations. PATMI increased 76% to S$158.0 million.
Singapore operations continued to deliver solid performance. Demand for
utilities services was strong due to the growing regional and global demand
for petrochemical products. The chemical industry in Singapore grew 7.8%
in 2004. In addition, the full year contribution of the increase in shareholdings
in SUT Sakra (from 80% to 100%), SembGas (from 50% to 70%), and SembCogen
(from 70% to100%) in late-2003 also contributed to the growth of earnings.
In early 2005, we integrated the operations of SembGas, SembCogen, SUT
Sakra, SUT Seraya and three chemical feedstock units under the SembCorp
Utilities umbrella to capitalise on greater synergies in providing bundled
services to customers. All assets and liabilities of SUT Sakra and SUT
Seraya have also been transferred to SembCorp Utilities.
Integrated Utilities and Energy continue to make considerable progress
in overseas ventures. Overseas operations accounted for 23% of Integrated
and Energy’s turnover and contributed to 28% of Utilities’
SembCorp Utilities UK was the main driver for the success in overseas
operations. Full year contribution from the UK in 2004 coupled with higher
power prices facilitated the increase in its turnover. A total of 143
new contracts and deals worth S$171.2 million were secured during the
SembCorp Utilities UK’s first expansion since it was acquired came
to fruition with a new 42 megawatt gas turbine and boiler facility coming
online late last year, boosting the existing Wilton power station’s
total capacity to 197 megawatt. The facility uses the latest “Dry
Low NOx” technology, which improves the environmental efficiency
of the power station by reducing emissions.
The additional capacity is intended to improve the overall reliability
of the site and provide further capacity to meet the needs of site customers.
Phu My 3, our investment in a 717 megawatt combined cycle gas turbine
in Vietnam, successfully began commercial operations in March. The plant
achieved profitability in its first year of operations. Phu My 3 is part
of the greater Phu My power complex which will house six power plants
with a total generating capacity of 3,600 megawatt. Phu My 3 is under
a 23-year Build, Operate, Transfer (BOT) arrangement with the government
In addition, our investments in China are progressing healthily and on
course. Nanjing SembCorp SUIWU, our investment in the wastewater treatment
plant in Nanjing Chemical Industrial Park will officially come online
in the second quarter of 2005. Construction for Shanghai Caojing Cogeneration
in Shanghai Chemical Industrial Park is ongoing, with Gas Turbine Phase
I expected to be completed by end this year.
With its huge domestic market, China remains an important site for petrochemical
investments. We formed SembCorp Utilities Investment Management (Shanghai)
Limited in June to provide support and a beachhead for our current and
upcoming activities in the country. This wholly owned subsidiary received
a China Regional Headquarters status from the Ministry of Commerce and
has a registered capital of US$2.0 million.
We also realised the value of our 30% stake in Kwinana Cogeneration Plant
in early 2005 for S$32.0 million due to the limited growth potential in
the Western Australia market.
Offshore Engineering produced a weak set of results in 2004 due to project
losses incurred during the year.
We have been directing our energies to steering the business back on track.
We installed a new management team and tasked them to put in tighter systems
and processes for better management control. These included conducting
more frequent management meetings to assess the status and deliverables
of ongoing projects, as well as strengthening risk management procedures
across the business operations. We also undertook reviews to improve efficiency
and optimisation of resources. In October, we parted with our 30% stake
in associate Sime SembCorp Engineering for RM65.0 million.
Our orderbook stood at S$304.0 million as of end-2004. Profitable execution
of ongoing contracts was given priority and we concentrated on bidding
for new contracts that meet our risk management guidelines. In October,
in partnership with Saipem Asia, we were awarded a US$112.0 million contract
to perform the engineering, procurement and fabrication of the Riser Platform
Topsides for PTT Public Company Limited’s Third Transmission Pipeline
Project in the Gulf of Thailand. We also secured an order in February
2005 to fabricate and integrate topsides for a floating production storage
and offloading vessel from ConocoPhillips China Inc. The project is estimated
to be worth more than US$200 million and will be executed jointly with
SembCorp Marine’s Sembawang Shipyard.
Integrated Utilities and Energy is anticipated to continue to perform
well in 2005 riding on the improvements and growth in the petrochemical
industry. Singapore and UK operations are expected to generate stable
income and organic growth from increased demand for utilities services
due to customers’ favourable operating environment. We expect a
new wave of chemical investments to take place on Jurong Island in Singapore
and we believe we are well positioned to meet this new demand. Similarly,
we anticipate additional investments and expansion in our customer base
in Teesside in the UK.
Synergies from the transfer of SUT Sakra and SUT Seraya assets and liabilities
to SembCorp Utilities should start showing results this year. In addition,
contribution from Nanjing SembCorp SUIWU in China is expected to be gradually
felt during the second half of the year.
Our priority in 2005 will be to deliver to, or exceed, the level of satisfaction
of our customers by ensuring constructive and reliable services. The focus
will also be to strengthen our existing operations in Singapore and UK,
and paying special attention to the development of the Chinese operations.
We are also looking for sites where we can establish a new beachhead.
An ongoing strategy is identifying potential greenfield and brownfield
acquisitions and investing in sites where growth potential is highest
and where we can add the most value.
With some progress being made at restructuring our offshore engineering
business, the key objective for 2005 will be to capitalise on the achievements
made in the past and to further improve its performance. Our focus is
to turnaround the business by delivering existing projects and securing
new ones while stringently ensuring that new projects are profitable,
and their costs managed well.
We are optimistic of the prospects for 2005 given industry fundamentals
and the fruition of earlier investment decisions. Excluding extraordinary
items, we expect operating profit in 2005 to be higher than in 2004.