Singapore gas supply secure; higher power prices may benefit units: Sembcorp

[SINGAPORE] Sembcorp Industries has moved to address shareholders’ concerns regarding energy security, stating that its Singapore gas supply remains insulated from the escalating Middle East conflict.

In a series of responses to substantial questions ahead of its 28th Annual General Meeting (AGM), the energy giant said on Friday (Apr 24) that its diversified portfolio of piped natural gas (PNG) and liquefied natural gas (LNG) from multiple global origins mitigates near-term disruption risks.

“In Singapore, our gas supply remains secure with no anticipated disruptions in the near term, underpinned by a diversified portfolio of long-term natural gas supply contracts across both PNG and LNG from multiple global origins,” Sembcorp said. 

It added that its upcoming LNG cargo deliveries for 2026 do not originate from the Middle East. Its portfolio in Singapore also includes solar and battery, which further diversifies its energy mix.

Sembcorp further highlighted a potential silver lining for Sembcorp Power and Senoko Energy. 

As its power contracts are largely structured on a cost pass-through basis or supported by hedging, higher feedstock costs are not expected to dent margins significantly.

Instead, “with wholesale prices having risen, both businesses may stand to benefit from selling excess capacity into the spot market and, if sustained, from improved recontracting economics over time”, the company said.

Operational focus and regulatory outlook

In response to a query on if there are plans to increase Sembcorp’s ownership stake in Senoko Energy, the company clarified it has “no plans at present” to increase its stake in Senoko Energy. 

Sembcorp currently holds a 50 per cent stake in the energy supplier. 

“As a portfolio, Sembcorp will focus on operational synergies and enhancing the efficiency of its Singapore power assets as well as supporting national energy security,” it said.

Separately, addressing fears of windfall taxes – an issue that has dogged energy firms in the West – the company stated it does not expect to be affected in Australia or the UK.

Its Australian subsidiary Alinta Energy is not involved in gas production or export, exempting it from direct export taxes.

“No material impact on Alinta Energy is expected if a gas export tax were introduced,” it said.

In the UK, the government has indicated that it will introduce higher windfall taxes on certain older wind, solar and biomass plants that choose not to move onto fixed-priced electricity contracts.

Sembcorp clarified that it does not operate wind or solar assets in the UK, and its biomass plant operates under a structured subsidy framework that falls outside current windfall tax thresholds.

Board flags dividend confidence

Signalling a bullish outlook for the year ahead, Sembcorp said: “The higher dividend proposed this year reflects our confidence in the company’s future performance and ability to generate sustainable returns. We will continue to review our dividend policy.”

In response to shareholders’ queries regarding the criteria for increasing the dividend payout ratio beyond just cash-flow generation, the board underscored its commitment to long-term sustainability.

The company clarified that it adopts a five-year horizon when assessing payouts, factoring in the group’s overall financial position, earnings sustainability and the capital required for organic growth and committed investments.

The AGM will be held in a physical format at the Raffles City Convention Centre on Apr 29.

As at 3.07 pm, shares of Sembcorp were trading at S$6.79, S$0.06 or 0.9 per cent lower.