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Ang Kong Hua, Chairman (right)
Tang Kin Fei, Group President & CEO (left) |
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Dear Shareholders,
Sembcorp delivered a strong performance in 2010.
Our net profit attributable to shareholders (net profit)
for the year grew 16% to S$792.9 million, while
turnover was S$8.8 billion compared to S$9.6 billion
in the previous year. The Group’s return on equity
was a healthy 22% and earnings per share amounted
to 44.4 cents. Economic value added was a positive
S$809.4 million, while cash and cash equivalents
stood at a strong S$3.5 billion.
We are pleased to inform you that for 2010, the
Board of Directors is proposing a final tax exempt
one-tier dividend of 17 cents per ordinary share,
comprising an ordinary dividend of 15 cents and
a bonus dividend of 2 cents. This marks an increase
of 13% from 2009’s 15 cents per ordinary share.
With a 39% appreciation in our share price during
the year, our total shareholder return (TSR) for 2010
was 43% relative to the benchmark Straits Times
Index’s TSR of 13%.
In 2010, apart from the delivery of solid financial
performance, our focus has continued to be on
positioning Sembcorp for the future. During the
year, we actively broadened our asset portfolio
through organic growth and strategic investments,
strengthened our operational and technological
capabilities, and enhanced our leadership positions
in key markets.
Over the course of the year, our Utilities unit
made significant progress in growing our energy and
water businesses and building a pipeline of projects
for a greater recurring income base. We increased
our gross power capacity installed and under
development by more than 40% to 5,600 megawatts
and grew our water capacity in operation and under
development by around 50% to six million cubic
metres per day. Marking a major milestone for our
Utilities business in the fast-growing water sector, we successfully acquired Cascal, a leading provider
of water and wastewater services to the municipal
market, through a voluntary tender offer in 2010.
With the acquisition, Sembcorp is now a global
water service provider with capabilities to serve both
industrial and municipal customers. At US$6.75 per
share, the total consideration for our 97.66% stake
in Cascal amounted to US$203 million. Cascal has
been delisted from the New York Stock Exchange
and deregistered with the Securities and Exchange
Commission and is now fully integrated into the
Sembcorp Group. Squeeze-out proceedings under
the Dutch Civil Code are now ongoing for Sembcorp
to achieve full ownership of the company.
Our entry into the fast-growing Indian energy
market also marked an important strategic milestone.
In 2010, we signed a joint venture agreement with
Gayatri Energy Ventures to acquire a 49% stake in
Thermal Powertech Corporation India, which is set
to build, own and operate a 1,320 megawatt coal-fired
power plant using high efficiency supercritical
technology in Krishnapatnam, Nellore District in
Andhra Pradesh, India. The joint venture became
effective in February 2011 and the upcoming facility
is expected to begin commercial operations by 2014.
The S$1.9 billion facility will be well-positioned to
meet the growing power demand in the southern,
western and northern regions of India, which the
Central Electricity Authority of India expects to
increase at a compounded annual growth rate of
9% over the next 10 years.
In 2010, we continued to strengthen our market
position as a global leader in the provision of energy,
water and on-site logistics to industrial sites. In
Singapore, our Utilities business secured contracts
to supply utilities services to LANXESS and Jurong
Aromatics Corporation, our first anchor customers
in Jurong Island’s new growth area comprising the
Tembusu, Angsana and Banyan districts. To support the energy and water requirements of these customers as
well as other companies coming into this new area,
we are developing a new 400 megawatt gas-fired
combined cycle gas turbine cogeneration plant as
well as new facilities to provide the integrated supply
of steam, water and industrial wastewater treatment
services. Representing a total investment of approximately
S$840 million, the industrial wastewater treatment
facility is expected to begin operations in 2012, while
the cogeneration plant and the other multi-utilities
facilities are expected to be completed by the second
half of 2013. The development of this new cogeneration
plant is set to transform Sembcorp into a more
significant player in the Singapore energy market and
its eventual capacity of 800 megawatts of power will
double our existing power capacity in the country.
In China, the business delivered a strong
performance while we continued to strengthen our
presence in the country, establishing and growing
our operations in key regions. With the acquisition
of Cascal, we added six municipal water operations
to our business. We also established a new beachhead
in southern China with a joint venture to provide
wastewater treatment services to industrial and
municipal customers in the Qinzhou Port Economic &
Technological Development Zone in Guangxi province.
We now have energy and water operations in 12
locations in nine provinces and are strategically
located in key industrial sites and cities in China.
In 2010, we also continued to expand our existing
facilities in tandem with customer demand and
increased our wastewater treatment capacity in
Zhangjiagang and Nanjing. Notably, signifying the
successful implementation of our high concentration
industrial wastewater treatment model in China, we
completed an additional facility in Nanjing capable
of treating customers’ high concentration industrial
wastewater directly from source. This plant follows
from our earlier wastewater treatment facility opened in 2009 in the Zhangjiagang Free Trade Port Zone,
which was China’s first plant capable of treating high
concentration industrial wastewater without customers
having to invest in pre-treatment facilities.
In the Middle East, we commenced construction
of the US$1 billion Salalah Independent Water and
Power Plant, our first project in Oman. Targeted to
begin full commercial operations in the first half
of 2012 with a gross power generation capacity of
490 megawatts and a seawater desalination capacity
of 15 million imperial gallons (or 69,000 cubic metres)
per day, the facility, which is 60% owned by Sembcorp,
is set to be the largest and most efficient power and
water plant in the Governorate of Dhofar and will play
a major role in meeting the region’s growing power
and water needs. During the year, we also signed a
memorandum of understanding with the Abu Dhabi
Water and Electricity Authority for the development
of a new seawater reverse osmosis plant on the site
of our 40%-owned independent water and power
plant in Fujairah in the UAE. Targeted for completion
at the end of 2013, the expansion will increase our
desalination capacity on the site by 30%, bringing
overall capacity to 130 million imperial gallons (or
591,800 cubic metres) per day. These projects in Oman
and the UAE are not affected by the current unrest in
the Middle East. Nonetheless, we continue to closely
monitor the situation in the region.
The year also saw increasing international
recognition for Sembcorp’s capabilities as a leading
water player. During the year, the Sembcorp NEWater
Plant was named the Water Reuse Project of the Year
at the Global Water Intelligence Global Water Awards,
as well as the winner of the WateReuse International
Award by the US-based WateReuse Association. Our
municipal water operations, formerly under Cascal,
also received a Distinction Award at the Global
Water Awards under the Water Company of the Year
category. In addition, we gained global recognition for our pioneering wastewater treatment and water
reclamation projects serving industrial customers in
the Zhangjiagang Free Trade Port Zone in China. Our
Zhangjiagang operations won Honour Awards in both
the East Asian and Global rounds of the International
Water Association’s Project Innovation Awards 2010,
in recognition of their effective and sustainable
approach to water management.
In 2010, our Marine business continued to deliver
strong results underpinned by its rig building, ship
conversion & offshore and ship repair businesses.
Its current orderbook stands at S$4.8 billion with
completions and deliveries stretching to 2013. This
includes S$3.0 billion in orders secured in 2010 and
S$361 million worth of contracts secured since the
start of 2011. In 2010, Sembcorp Marine also marked a
major milestone in its growth and expansion strategy
with the groundbreaking for its Integrated New Yard
Facility at Tuas View Extension in Singapore. With its
innovative work-efficient design, the state-of-the-art
yard will further bolster the Marine business’ home-based
capabilities to deliver value-added cost-efficient
solutions to its customers and is set to sharpen the
business’ competitive edge for long-term sustainable
growth. The facility’s 73.3 hectare first phase focusing
on ship repair and conversion activities is scheduled
to be completed by May 2013, with partial operations
commencing in the second half of 2012. When fully
completed, the 206 hectare yard will boost Sembcorp
Marine’s total dock capacity by 62% to just over three
million dead weight tonnes. To cater directly to one of
the fastest growing offshore oil and gas exploration
and production markets in the world, the business also
announced its acquisition of land for the development
of a new shipyard in Brazil. This comprised 825,000
square metres of freehold land with 1.6 kilometres of
coastline in the state of Espirito Santo in Brazil. The
project’s strategic proximity to the offshore Espirito
Santo Basin, one of the recently discovered giant pre-salt
oil basins of Brazil, makes it an ideal location from
which to support the country’s oil and gas activities.
In 2010, our Industrial Parks business continued its
focus on developing its industrial parks and integrated
townships in Vietnam and China. With a total gross
project size of 6,687 hectares, our projects in these
countries will provide the business with a robust
development pipeline. With more than 20 years of
experience in undertaking the development of raw land, including land resettlement and infrastructure
development, the business takes an integrated
approach to township development, designing self-sufficient
sites that provide world-class industrial,
commercial and residential space with an emphasis
on sustainable urban development. The business sold
183 hectares of land in total in 2010. 2,700 hectares
or 77% of saleable land remain available in Vietnam
and China for its future growth.
During the year, the business stepped up its successful
presence in Vietnam with the groundbreaking for
its fourth Vietnam Singapore Industrial Park (VSIP)
development in Hai Phong. Located in Hai Phong’s
new waterfront district in the North Cam River
area, the 1,600 hectare integrated township has a
planned 1,100 hectares allocated for commercial and
residential development and 500 hectares allocated
for a business and industrial park. Meanwhile in
China, new developments in the Wuxi-Singapore
Industrial Park, including a mixed-use commercial
and residential building, a business and information
technology park and a ’Solar City’ photovoltaic park,
were launched during the year. The launches were
well-received with a healthy take-up for the land and
units released for sale. The development of the mixed-use
commercial and residential building as well as the
business and information technology park marks a first
for the business as it leverages on opportunities for
selective development of commercial and residential
real estate. During the year, the business also increased
its effective stake in the Sino-Singapore Nanjing Eco
High-tech Island project from 15% to 21.5%, and
completed the concept masterplan for the 1,500 hectare
development. Situated a mere 6.5 kilometres from
Nanjing’s city centre on Jiangxinzhou, the Eco High-tech
Island will be progressively completed in phases
and is Nanjing City’s largest foreign collaborative
development to date.
In the coming years, the world’s economic growth
is expected to be largely led by emerging and
developing economies, particularly in Asia. With
our global footprint across six continents, we have
established strong positions in many of these markets.
Together with the healthy pipeline of projects we
have built up, we are well-positioned with the reach
and scale to accelerate our growth in these markets. Furthermore, with globalisation and urbanisation, the
world’s demand for energy, water and other urban
solutions continues to grow. As a provider of these
essential solutions, we believe that Sembcorp is also
well-placed to benefit from these growth trends.
Sembcorp’s aim is to provide shareholder value by
excelling in businesses that deliver stable earnings,
while having the ability to sustain growth over the
long term. Positioned to meet the world’s growing
needs, we stand in good stead to be able to deliver
on this promise. Nevertheless, we recognise the
need to sharpen our strategies in order to respond
nimbly to ever-changing economic and competitive
landscapes, while continuing to pursue organisational
excellence and innovation. To this end, we recognise
the importance of technology and innovation
in helping us provide the best solutions for our
customers, enhance our operational efficiency, and
shape our business strategy for tomorrow. To help us
build up our corporate muscle in this regard, a Group
Technology Committee headed by ourselves and a
centralised technology department were set up during
the year. Supported by the collective expertise of our
entire Group and in partnership with tertiary research
institutes and other expert advisors, we will continue
to see how we can access, develop, integrate and
apply technological advances across the entire span
of our Group’s activities to enhance our competitive
advantage in tomorrow’s world.
At Sembcorp, we also recognise the growing
importance of sustainability as a measure of the
true success of a company. We generate returns for
shareholders by providing essential solutions such as
energy, water and urban solutions to our customers,
and we aspire to do so in an ethical and sustainable
manner. This translates to our doing our part to limit
the environmental impact of our activities and help
our customers and communities do the same, as well
as our being a responsible employer and maintaining a commitment to invest in communities where we
operate. In 2010 we contributed over S$1 million in
cash and in kind to communities where we operate,
in aid of causes such as the environment, children and
education, sports and the elderly. To demonstrate
our commitment to sustainable development, we
also continue to track and disclose our sustainability
performance over time and have included a Global
Reporting Initiative G3 Level B sustainability report
within this annual report.
Ultimately, what is required for a company of
the future is not only physical, operational or
technological capabilities, but the right people. Our
ability to be an agile, high-performance organisation
delivering operational excellence and competitive
shareholder returns over time depends on the talent
and commitment of our staff and management
team around the world. On behalf of the board,
we would like to thank our employees for their
steadfast contribution and dedication in 2010.
At this point, we would like to acknowledge the
tremendous contribution of our former Chairman,
Peter Seah, who retired from our board in 2010 after
over a decade as our Chairman. Mr Seah presided over
Sembcorp’s board during a period of transformation
and significant growth for the company and also
chaired the board’s Executive Committee, Executive
Resource & Compensation Committee and Nominating
Committee. We have benefited immeasurably from
his wise and judicious leadership, and would like to
record our deep appreciation to him. We would also
like to thank Richard Hale and Lee Suet Fern, who have
indicated that they will be retiring from the board
at our coming annual general meeting and will not
be seeking re-appointment. An independent director
of the company for over 10 years, Mr Hale’s sterling
contributions to Sembcorp include chairing the board’s
Audit and Risk Committees, while Mrs Lee’s invaluable
contributions include having served as an independent director and as a member of the board’s Audit and
Risk Committees for over five years. We would like
to express our gratitude to them. We also welcome
our new directors, Margaret Lui and Tan Sri Mohd
Hassan Marican, who joined our board during the
year. Mrs Lui, the Chief Operating Officer of Seatown
Holdings International, joins the board’s Executive
Committee, Executive Resource & Compensation
Committee and Nominating Committee. Tan Sri Mohd
Hassan Marican brings to the board over 30 years’
experience in audit, accounting and management,
as well as rich knowledge of the oil and gas industry
as the former President & CEO of Malaysia’s Petroliam
Nasional (PETRONAS). Aside from serving as an
independent director, he also joins the board’s
Audit Committee.
Last but not least, thanks must also go to our
shareholders for your continued confidence in
Sembcorp. Your company is strong and resilient.
We have the right businesses, strategy and people
to meet the needs of the global market and respond
innovatively to the challenges our world is facing. To
achieve sustainable growth and lasting shareholder
value, your board is committed to ensuring that
Sembcorp continues to be positioned intelligently and
dynamically for decades to come in what is a rapidly
changing world. With your support, we approach the
future with confidence. |
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Chairman
February 25, 2011 |
Group President & CEO
February 25, 2011 |
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