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Publish Date : 17-Sep-2014

Sembcorp Industries (Sembcorp) will be announcing its plans to expand its energy business in China with the signing of a conditional joint venture agreement with a subsidiary of Chongqing Energy Investment Group, Chongqing Songzao Coal and Power LLC, to collaborate on a mine-mouth coal-fired power project in Chongqing municipality. The agreement includes the acquisition of a 49% stake in an existing 300-megawatt coal-fired power plant as well as in the joint development of an adjacent 1,320-megawatt coal-fired power plant, which will be one of the most efficient power plants in Chongqing.

The two power plants are located at the mouth of the coal mines and are the only mine-mouth coal-fired power plants in Chongqing. This strategic location will bring about significant savings in logistics costs, enabling the joint venture to be a low cost power producer. The coal mines are owned by Sembcorp’s project partner, Chongqing Songzao Coal and Power LLC, further ensuring the reliability of coal supply. The entire project will cost approximately RMB6 billion (approximately S$1.2 billion), with the development of the new 1,320-megawatt plant expected to complete in 2017. The project will significantly strengthen Sembcorp’s energy business in China, increasing the Group’s power capacity in the country by about 2.5 times from 987 megawatts to 2,607 megawatts.

Chongqing Energy Investment Group, owned by the Chongqing Municipal Government, is the largest energy production and supply group in Chongqing with businesses in coal and gas supply as well as power projects including renewable energy plants. It is currently ranked seventh in Chongqing’s top 50 companies and 338th in the top 500 Chinese enterprises with total assets exceeding RMB80 billion as at end 2013. Tang Kin Fei, Group President & CEO of Sembcorp, said, “We are excited to embark on this strategic partnership with Chongqing Energy Investment Group and to expand our energy business in China with this new beachhead in Chongqing. With Sembcorp’s experience in the energy business globally, we believe that we will be able to bring our expertise to this partnership and complement Chongqing Energy Investment Group. Together we are confident that the facilities will be developed and operated efficiently to international standards. We look forward to being a strategic partner to Chongqing Energy Investment Group and to further collaboration on other energy projects.”

This transaction is expected to be completed by 2015 upon the satisfaction of certain conditions precedent, including approval by relevant Chinese authorities. The transaction is not expected to have a material impact on the earnings per share and net asset value per share of Sembcorp Industries for the current financial year.

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