SembCorp Industries

[vingaard]

Would anyone be able to enlighten me on how the low oil price impact on Sembcorp's utilities business?

I thought utilities are a energy intensive business and that will benefit with low oil prices..

Haven't studied throughly into Sembcorp utilities business, but low oil price will lead to low energy prices as well... and being a net seller of energy and virtue of equivalence, it'll have an impact on not just their oil dependent generators, but wood chips and other energy sources. So it won't be as beneficial as it seems. If I remember correctly a substantial part of the business is actually Sembmarine (being slaughtered by low oil) as well, which u can value it on open market.

I can understand the impact of oil price on sembmarine, however I have always thought that lower oil/energy prices should be beneficial to the utilities. Power and wastewater plants are huge consumers of energy, lower oil price should lead to lower cost of production..

The utilities in Singapore hedge their feedstock prices (linked to the price of High Sulphur Fuel Oil Cst180). Therefore, technically they are not much affected by energy price fluctuations. The risk comes if there is a mismatch between the volume of feedstock hedged and the amount of electricity offtake by customers.