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<Meeting Takeaways> Sembcorp Industries – Key takeaways from site visit to Tengeh Floating Solar Farm

  • Successful commencement of one of the world’s largest inland floating solar farm marks another significant milestone in SCI’s green transformation
  • Testament to SCI’s impressive execution and engineering capability
  • Renewables drive to accelerate hereon; India, Vietnam, China and Indonesia are key growth markets 
  • One of the best renewable energy and ESG proxies in Singapore; Reiterate BUY and S$2.40 TP

We came away from a site visit to Sembcorp Industries’ (SCI) first floating solar farm at Tengeh Reservoir (Tengeh), feeling more assured on the Group’s execution of “Brown to Green” transformation strategy and technical capabilities in renewables

One of the world’s largest inland floating solar farm. Tengeh, operating since July-2021, has 122,000 solar panels spanning across 45 hectares (equivalent to about 45 football fields) with 60 megawatt-peak (MWp) solar photovoltaic (PV) capacity. It has a 25-years PPA with PUB, with excess generation to be sold to grid. The electricity generated from the solar farm will be sufficient to power Singapore’s five local water treatment plants, offsetting about 7% of PUB’s annual energy needs and reducing PUB’s carbon footprint.

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Impressive execution and development capability. Despite COVID disruptions and challenges in building a floating solar farm for the first time, SCI took only 8-months to complete the project, as per plan. Management has adopted the best practices observed from solar farms in Korea and China, and further improved them to better suit the weather and environment in Singapore reservoir. For instance, the farm uses double-glass panel with seal instead of usual single-glass, and thicker cable (to reduce power loss) for better performance and durability, even though at a higher cost. It has also prudently entered into long-term O&M contracts and  insurance coverage to minimise any potential unexpected costs resulting from equipment breakdown or faster than expected degradation. This demonstrates SCI’s engineering capabilities and emphasis on quality and long-term return. 

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Accelerating renewables drive. With 400MW solar capacity, SCI accounts for ~40% of current renewable capacity in Singapore, contributing meaningfully to the government’s plan to build 2GW renewables by 2025. Other initiatives in Singapore include HDB rooftop solar, JTC mobile solar (which could be relocated when required and collect rain water) and corporate solar installation. Outside of Singapore, SCI is also stepping up efforts to push ahead projects in Vietnam (industrial park rooftop solar), India and China following relaxation of cross-border traveling. Including recent acquisition of renewable assets from CGN in China, SCI’s effective gross installed capacity for renewable portfolio will be lifted to ~4.1GW, ~30% of its total power capacity. This represents c.58% increase from 2.6GW as of end 2020, marching towards its target of 10GW by 2025. 

Reiterate BUY and TP S$2.40. We continue to favour SCI as one of the best renewables and ESG proxies in Singapore.