SembCorp Industries

[Greenrookie]

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..

Hi, my 2 cents take.

Although cost is reduced but selling price is reduced too. The net effect of falling price should only be beneficial if selling price is sticker then cost.

Also, low price might also suggested excess supply and weak demand.

Like steel manufacturers, the low steel price should reduce costs, but with the weak steel selling price, most steel manufacturers I tracked are performing worse.

[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.

[mscheng13]

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.

So I guess the drop in sembcorp utilities is not so much due to oil price but more due to lower energy demand? But it seems to affect the local side only whereas the overseas energy plants are still doing well.. Demand for water/wastewater services should also be inelastic..

[corydorus]

There's mention on intense competition in the local power market. Anyone has info on this ? Who are they ?

[CityFarmer]

There's mention on intense competition in the local power market. Anyone has info on this ? Who are they ?

I am not sure, but retailer are allowed to sell excess power back to grid, will that created part of the "competition"?

[corydorus]

There's mention on intense competition in the local power market. Anyone has info on this ? Who are they ?

I am not sure, but retailer are allowed to sell excess power back to grid, will that created part of the "competition"?

Singapore is far from it. I am not aware there is such locally. Even if there is should be very small.

[Clement]

There's mention on intense competition in the local power market. Anyone has info on this ? Who are they ?

There are the big power generation companies, Seraya, Senoko and Tuas Power as well as smaller players like Hyflux (Tuaspring), Keppel and Pacific Light.

[vingaard]

There's mention on intense competition in the local power market. Anyone has info on this ? Who are they ?

There are the big power generation companies, Seraya, Senoko and Tuas Power as well as smaller players like Hyflux (Tuaspring), Keppel and Pacific Light.

You are spot on. There is a battle for market share for the past 18 months by the gencos. Some contracts are signed at prices where the gencos don't have any profit margin.

One industry insider claimed that they are forced to sell because they have a take or pay contract to buy LNG and need to sell electricity to cover the cost of committed feedstock purchases.

[corydorus]

thanks for the information. This get me started in my investigation.

Here's some interesting information for read up.

https://www.ema.gov.sg/electricity_market_overview.aspx
More than 90 per cent of the electricity in Singapore is generated using imported natural gas.

https://www.ema.gov.sg/cmsmedia/Publicat...202014.pdf
Page 19 on Market Share.

[cfa]

The sellers are back .