Sembcorp Industries Ltd (U96.SI) Earnings Call Transcript & Summary

Good evening, everyone. Thank you for dialing in for the briefing following our announcement this evening. I'm Jin from Group Corp Communications & Investor Relations. On the panel today are Group CEO, Mr. Kim Yin Wong; Group CFO as well as President and CEO of Integrated Urban Solutions, Mr. Eugene Cheng; and President and CEO of Renewables East, Mr. Alex Tan. Without further delay, I'll hand the time over to Kim Yin for opening remarks. Kim Yin, please?

Good evening, everyone. Thank you for taking time to join us on this call at such short notice and at this hour. This evening, we announced the proposed acquisition of Alinta Energy, a leading integrated energy company in Australia. Let me start with the transaction overview. The proposed transaction involves an agreement to acquire 100% of Pioneer Sail Holdings and Latrobe Valley Power Holdings collectively known as Alinta Group. This acquisition is expected to deliver immediate earnings and returns accretion. On a pro forma basis, EPS is expected to increase by 14% to SGD 0.65 for the last 12 months ended June 30, 2025, and 9% to SGD 0.63 for financial year 2024. ROE is expected to increase to 22.5% and 22.3% in the respective periods. The equity consideration is approximately AUD 5.6 billion. The acquisition is competitively valued at an enterprise value of AUD 6.5 billion, representing an EV to EBITDA multiple of 6.6x based on LTM ended June 30, 2025. The transaction will be fully funded by a bridge facility of AUD 6.5 billion with no equity funding required. Completion is expected in the first half of 2026, subject to shareholder and regulatory approvals as well as other customary closing conditions. Alinta is a leading integrated energy player, operating across multiple states in Australia as well as New Zealand. The company has a generation portfolio of 3.4 gigawatts, comprising 2.8 gigawatts of installed generation assets, including gas, coal and wind providing reliable baseload generation. It also has 0.6 gigawatts of third-party wind and solar assets from which Alinta offtakes power to supplement its own supply. The company has a significant development options pipeline of 10.4 gigawatts. These projects span wind, solar and firming technologies such as gas peakers and storage, which are critical for future transition. Alinta serves a sizable pool of almost 1.1 million retail customers across electricity and gas retail markets. Alinta Group is underpinned by strong financials. For financial year 2025, Alinta delivered an underlying adjusted EBITDA of AUD 987 million, and underlying net profit of AUD 483 million. Underlying ROE was 14.6%, reflecting healthy profitability. Let me take you through the strategic rationale of this transaction. First, the acquisition offers a strong strategic entry into Australia, a AAA-rated country with significant growth opportunities. Second, as an integrated energy player, Alinta is underpinned by strong fundamentals to fund growth to drive energy transition. And third, this is an accretive acquisition that provides both financial uplift and scale for Sembcorp. Now let me invite Alex Tan, our President and CEO of Renewables East to bring you through in greater detail.

Thank you, Kim Yin. So just let me start by explaining why Australia is an attractive market for Sembcorp. Australia is a AAA-rated country. We have a stable regulatory framework for the energy market, and this provides both transparency and predictability. The market is large and growing. Australia has about 87 gigawatts of installed capacity in the national energy market and a very sizable addressable renewables market, which is expected to exceed 200 gigawatts by 2050. The country has clear structural drivers for decarbonization. The state government has legislated its climate targets backed by strong policy incentives to drive transition including our goal to achieve 82% renewable electricity by 2030. Finally, the Australian energy market offers long-term growth potential. The phasing out of coal power to transition to renewables will accelerate the buildup of renewables. However, even as the country expands its renewable capacity, thermal baseload remains essential for grid stability during the transition. And this creates a unique opportunity for integrated players like Alinta that can deliver reliable power today while investing in clean energy for the future. For Sembcorp entering via an established platform like Alinta offers a strategic base for us to invest long term and scale up the renewables development. It also rebalances Sembcorp's portfolio towards developed markets. Alinta brings 3 key strengths that make it the right platform for Australia's transition. First, a high-quality generation portfolio with significant coast-to-coast operational footprint; second, a strong and diversified renewables and firming project pipeline; and third, strong financial fundamentals to fund future investments. These attributes make Alinta a very compelling platform for the long-term growth. Alinta's operational footprint is one of its biggest strengths. It operates across diverse geographies and technologies, given its scale and flexibility. On the West Coast, Alinta owns two gas plants, Pinjarra and Wagerup, and holds a 30% stake in the Yandin Wind farm, one of the largest and most efficient wind farms in the state. On the East Coast and in New Zealand, Alinta owns three gas plants, Braemar in Queensland, Bairnsdale in Victoria and Glenbrook in Northern New Zealand as well as the coal plant, Loy Yang B, one of the most reliable baseload assets in Victoria. In addition, Alinta has contracted 0.6 gigawatts of third-party wind and solar capacity from which Alinta offtakes power to supplement its generation supply. In total, Alinta has 3.4 gigawatts of installed and contractor capacity. Alinta's footprint and portfolio provides scale and geographic diversity, and more importantly, the ability to serve retail customers competitively by owning generation assets close to major demand centers such as Victoria and Queensland. The coast to coast presence has also helped Alinta secure a significant portion of market share in the retail segment. It's currently the #1 private integrated gas and electricity provider in the Wholesale Electricity Market which is the primary electricity market on Australia's West Coast. Combined with a robust trading and portfolio management platform, Alinta is well positioned to optimize both portfolio value and enhance returns. Alinta's development pipeline is substantial with 10.4 gigawatts of options aligned with the country's energy transition needs. This pipeline includes onshore and offshore wind, storage and gas firming projects providing a balanced mix of technologies across multiple states. Many of these sites are located near existing transmission infrastructure with land already secured, an advantage that lowers costs and speeds up delivery. Alinta is led by an experienced in-house development team with a proven track record of delivering large-scale projects and minimizing execution risk through disciplined planning and strong stakeholder management. And combined with Sembcorp's global experience, Alinta's deep local expertise will enable us to pursue renewables and firming opportunities to drive Australia's transition. Financially, Alinta is underpinned by strong fundamentals, delivering consistent underlying earnings growth since 2022, underlying adjusted EBITDA and net profit have achieved compounded annual growth rate of 11% and 14% between 2022 and 2025, respectively. Underlying EBITDA margins have also been consistently superior and stable compared to peers. Cash generation is robust, underpinned by resilient operations. These fundamentals: strong earnings, margins and strong cash generation, provide the capacity to pursue Alinta's development pipeline while maintaining a very strong capital position. Finally, a key success factor for this acquisition is the strength of Alinta's leadership team. The business will continue to be led by its experienced management, who has a proven track record of delivering transformation and growth. At the helm is Jeff Dimery, Managing Director and CEO, who has been with Alinta for over a decade and led this transformation. Under his watch, Alinta has achieved more than tenfold EBITDA growth. Jeff is supported by a seasoned executive team, each with more than 15 to 20 years of industry experience. The depth of expertise and continuity ensure operational excellence and stability for Alinta stakeholders. I'll now invite Eugene to take you through the financial impact of this acquisition and our ESG considerations.

Thank you, Alex. Now let me take you through the pro forma figures of this transaction. As you can see from the table, the acquisition will deliver immediate financial accretion to Sembcorp. Now the top half of the table presents the underlying numbers in relation to both Alinta as well as Sembcorp, which as you know, excludes the impact of exceptional items, our deferred payment note FX mark-to-market swings as well as fair value adjustment and mark-to-market swings on energy derivatives on Alinta's financials. On a pro forma underlying basis for FY 2024, adjusted EBITDA and net profit will see a 44% and 28% uplift, respectively. Earnings per share is expected to increase by 28% to SGD 0.73, and ROE will increase from 20.1% to 26%. Similarly, for the last 12 months ended 30th of June of 2025, adjusted EBITDA and net profit would increase by 42% and 23%, respectively. EPS is expected to increase by 23% to SGD 0.70 and ROE will improve to 24.3%. Now when we look at reported figures, which takes into account all the impact of our DPN mark-to-market swings as well as fair value adjustments on the energy derivatives adjusted EBITDA was increased by 33% in FY 2024 and 36% in the last 12 months ended 30th June 2025. Net profit will increase by 9% and 14%, respectively. Earnings per share would increase by 9% and 14% similarly, respectively, and ROE would improve to 22.3% and 22.5% respectively. Now beyond earnings accretion, this acquisition strengthens our risk profile. Post acquisition, pro forma underlying net profit for the last 12 months ended 30th of June of 2025, will increase to AUD 1.2 billion with a higher proportion coming from OECD markets. Today, 55% of group net profit are from OECD markets and Singapore. And after the acquisition, this will increase to 64%. There will also be an increase in our gross generation capacity from 28.3 gigawatts to 31.1 gigawatts post acquisition with 31% of our portfolio coming from OECD and Singapore markets. This rebalancing is deliberate and strategic. With this acquisition, we strengthened our presence in developed markets with transparent frameworks and therefore, reducing regulatory risk and exposures. Our portfolio risk profile will shift towards lower risk jurisdictions. It also strengthens our portfolio resilience with greater geographic diversification, reducing earnings volatility across different market cycles. And finally, the acquisition delivers an immediate step-up in capacity and operational footprint. Now the transaction will be fully funded by cash and debt with no equity raising required. We have secured a fully committed bridge facility of AUD 6.5 billion as well as a standby working capital facilities of AUD 1.2 billion for the purpose of refinancing any potential existing debt in Alinta. So the AUD 1.2 billion revolving facility is not expected to represent incremental debt. Now these facilities will be used for the purchase consideration as well as refinancing of Alinta's existing debt as I mentioned earlier on and funding of its working capital and other transaction costs. In terms of long-term funding strategy, the bridge facility will be refinanced through a mix of Alinta level debt as well as long-term funding raised by Sembcorp via syndicated loans and corporate bonds. To give an illustration of the enterprise value of AUD 6.5 billion given Alinta's currently fairly underlevered balance sheet, which is less than 1x EBITDA level, we believe we could optimize leverage there by AUD 2 billion. That leaves AUD 4.5 billion to be taken out by long-term bank and syndicated facilities, representing about 60% of the AUD 4.5 billion as well as a potential longer-term capital markets instruments that represents close to 40% of that AUD 4.5 billion. Post acquisition, our leverage remains -- we believe the leverage remains within our investment-grade parameters. Net debt to adjusted EBITDA and adjusted EBITDA to interest ratio on a pro forma basis will increase to 4.6x and 4.5x, respectively. And more important than that, while near-term leverage will increase as a result of the transaction because Alinta has strong cash flow generation capabilities, as Alex have earlier pointed out, we expect the group balance sheet to be able to deleverage steadily going forward. And as a group, Sembcorp will continue to focus on maintaining a strong balance sheet discipline as well as an investment grade credit profile. We also remain committed to maintain our dividend for the full year. And more importantly, given the expected cash flows as well as the leverage profile going forward, we do expect to be able to maintain our dividend profile for the years ahead. Alinta provides a reliable baseload portfolio that supports grid stability. The portfolio has an average availability factor of 93%, well above peer average of 76%. Its gas peakers achieved an average start reliability of 99%, outperforming all global benchmarks. Loy Yang B, which is a 1.1 gigawatt coal asset in Victoria is one of the most reliable generators in the national electricity market. And it supplies 20% of Victoria's energy demand, making it critical for system stability, particularly in Victoria. Now as Australia builds out its renewables capacity, we believe Loy Yang B will play a bridging role, providing reliable baseload while supporting an orderly transition. Sembcorp is completely committed to working collaboratively with government, industry as well as the community to support an orderly and responsible transition. And we will do so via the development and execution of Alinta's renewable development pipeline of 10.4 gigawatts. The future portfolio, assuming all of the pipeline is built up, will comprise 45% of renewables and 26% of storage capacity. This mix ensures reliability while driving down emissions intensity over time. Now in terms of our climate action trajectory, previously, we have committed to reducing emissions intensity to 0.15 tons of carbon dioxide emissions equivalent per megawatt hour by 2028 and absolute emissions down to 2.7 million tons by 2030. However, with the addition of Alinta's portfolio, our near-term emissions are expected to first increase before decreasing later on. This means we will not be able to meet the earlier targets that we have mentioned. Our updated target is to reduce emissions intensity to 0.26 tons of carbon dioxide equivalent per megawatt hour of generation by 2035, which was developed with reference to country-specific well below 2 degrees trajectories. We remain committed to our net 0 Scope 1 and 2 emissions by 2050 and remain focused on driving energy transition in the markets where we operate. And to achieve our target emissions intensity, we will focus on 4 key levers. We will grow renewables as well as storage technologies, which is a core operating capability within Sembcorp's portfolio. We will also leverage low-carbon technologies. We will manage fossil generation to reduce emissions through efficiency improvements, and we also will apply disciplined capital recycling. In summary, this slide outlines our approach to driving energy transition responsibly. Energy demand has continued to grow faster, driven by digital and electrification demand. Even as countries remain committed to energy transition, they must ensure energy demand and development needs are met. This necessitates a more nuanced and inclusive approach to transition, balancing energy security, affordability and sustainability to align with the government's plans as well as community needs. In relation to Alinta's generation portfolio, Sembcorp recognizes the role Loy Yang B plays in providing 20% of Victoria state's energy demand with flexible and low-cost base load electricity, along with essential system services required to support the integration of renewables into the grid. We will work closely with governments and stakeholders to support Australia's national climate targets through renewables and low-carbon solutions. Through Alinta, we will continue to invest in communities to create lasting change and our goal is to make the transition inclusive and equitable. Finally, we will uphold strong governance and local stewardship to ensure continued accountability and operational excellence of the assets. Now in terms of the indicative transaction timeline for this announced transaction, this transaction will require shareholder approval. The circular and notice of the extraordinary general meeting will be dispatched targeted in the middle of January of 2026 with the EGM expected to be scheduled towards the end of January 2026. And subject to shareholder approval and the fulfillment of other conditions precedent, including regulatory approvals, we aim to complete the transaction in the first half of 2026. I'll now hand the time back to Kim Yin to share the closing remarks.

Thanks, Eugene. To wrap up, let me just once again highlight the key takeaways. First of all, why Australia? Now Australia is a AAA-rated country with supportive regulatory framework towards transiting its coal-fired generation baseload towards firm renewables. The country also has a legislated 2050 net 0 target. This aligns with Sembcorp's energy transition objectives. Second, Alinta is a high-quality integrated energy platform that delivers today and is well positioned to drive transition with substantial renewables and firming technology pipelines. This presents an attractive opportunity for Sembcorp to help drive Australia's energy transition. Third, this is a highly accretive acquisition. The acquisition is immediately accretive, delivering financial uplift, expanding operational scale and strengthening our risk profile through greater exposure to developed markets. Lastly, we remain committed to a responsible energy transition, balancing reliability, affordability and sustainability as we grow. This is a pivotal step in Sembcorp's transformation journey to deliver value for our stakeholders while supporting Australia's clean energy future. Thank you.

Thank you, Kim and Eugene and Alex. [Operator Instructions] The first question is from Sumedh Samant of JPMorgan.

I have maybe three questions to kick off. Firstly, if I look at your sort of pro forma numbers that are provided for FY '24 to last 12 months, June '25, what I could see is that the accretion of EBITDA, so the EBITDA number seems to be coming down a little bit. We are just trying to understand why is that? Is there a seasonality component or do we think that the peak of EBITDA is behind us? That's my first question. My second question is with regards to the coal-fired power plant, as it's too early, you must have think a lot about it. Sembcorp tried hard to get rid of the coal exposure, but we are now getting that again. So trying to understand how you convince your equity and debt holders to get around it, considering it's going to be a sizable asset? Or else, do you have any plans to remove it from your balance sheet similar to the SEIL transactions in the past? And perhaps my third question is on your gearing. Obviously, it's a very large transaction. It's almost half of your market cap. How do we -- or where do we see gearing to be comfortable levels? Considering that, again, we are already going to go almost close to 4.5 to 5 kind of levels. So is that still comfortable? Or do we see some equity issuance risk in the future?

Let me take the coal question first, and I'll ask Eugene to look after the EBITDA as well as the gearing questions. Now we are approaching this acquisition in Australia from the perspective of firmly engaging in energy transition. We see ourselves as an energy transition player, very much committed to it. We are attracted by Alinta's big renewables pipeline. I think just now, we explained that there's 10 gigawatts and bigger renewables pipeline that we can look forward to. So when we approach this acquisition, the idea really is that, look, this is a portfolio. By building out -- by supporting Alinta management in Australia to build out the renewables pipeline, we can help to transit this portfolio. Carbon intensity of the portfolio will reduce, right? So that's the first point. And in terms of transition, we are also cognizant that at the end of the day, it is very important to have a just and inclusive transition. The recent COP30, the team was just transition. So what that means is that energy, security, affordability are just as important as sustainability. So in this case, the coal asset under Alinta is some of the most reliable and lowest cost asset that is operating in Australian market. So its role today is actually very critical for the Australian national electricity market to have a very more competitively priced power as well as a reliable supply even as new sources and greener sources are added to the port, right? So without firming or without firm baseload technology, the transition in any market cannot be sustained. So we see this, again, coming back, being an energy transition play the portfolio is what we are acquiring. And over time, we see a definite right path towards reducing the carbon intensity building on what we do best, which is supporting investments in renewables technology. So hopefully, that addresses your question on coal. Anything to add, Eugene?

No. I think from a coal perspective, that made sense. Now I'll first talk about the pro forma numbers from FY '24 and the last 12 months for 30th of June 2025. Now if you look at the EBITDA performance of Alinta, where it's year-end, it's 30th of June, 2025, for the year ended last 12 months into June 2025, we did an EBITDA of AUD 987 million whereas in 2024, adjusted EBITDA for Alinta was AUD 843 million. Now adjusting for certain mark-to-market gains on the derivatives, the EBITDA of FY 2025 would seem to be flattish or slightly lower relative to 2024. Now this is one of the key reasons is because Alinta across the years of 2024 and 2025, they had a favorable swap contracts, particularly in Queensland that has -- was expiring in 2025 and it's not expected to go going forward. So that explains why when we adjust out the mark-to-market from derivatives, the adjusted EBITDA for 2025 has declined slightly. Now going forward, taking a longer term trend and expectation of the adjusted EBITDA for Alinta, particularly in the markets that they operate in Australia, we believe that the EBITDA performance over a period of time would be stable. Now the reason why the financial performance over a longer period of time, over several years, we expect that to be the case is because Alinta has a very able, right, operationally able. You have heard me mention that the uptime of the operational assets, particularly Loy Yang B, which is the coal asset, it's high, above 90%. The short-run marginal cost of the assets are also low, which puts it in a position to be able to generate efficiently to meet its retail demand. Now having said that, the contract levels of Alinta, of course, shorter term in nature relative to what you are potentially used to in Singapore. So typically, across C&I and retail contracts as well as swaps and hedges that are typically important. Alinta's generation capacity against this demand is typically contract forward by about approximately 1.5 years. As a result, while in the longer term, given the operational and cost advantage that Alinta has in its portfolio, plus the fact that for Australia in general, going forward, because of the coal closures of plants that have already taken place. It is in a short baseload situation with no expectation of a baseload capacity increasing in the foreseeable future. We do expect the pricing environment to be more favorable. Having said that, given the shorter-term contract nature of Alinta, we do expect slightly more favorability in terms of the adjusted EBITDA, but taking a longer-term view, given the characteristics that I talked about, the low-cost efficient and highly available generation assets with a strong C&I and retail demand as well as pricing outlook, which looks more benign, given the fact that in general, East Coast markets are short on baseload. We do expect EBITDA to be, in general, more stable. Now one point to note also is that for Alinta, particularly on the West Coast, it's less of a merchant contracting, and they do have forward capacity markets. So EBITDA and cash flow generation on the West Coast are certainly a lot more stable. So that is the consideration in addition to the EBITDA trends. Now in terms of gearing, as I highlighted, post this transaction, our net debt to adjusted EBITDA will increase to 4.6x. Now as mentioned earlier on, our goal is to whenever we go into a particular investment, we like to deploy capital into stronger and the foreseeable operational cash flows that will clearly give us the opportunity for deleveraging. So similarly, for Alinta, right, we are seeing our net debt to adjusted EBITDA go up to 4.6x. And we do expect that in the coming years, given the operating cash flow generation of the business, we will expect to see deleveraging to come down. So because of that, we do believe that over a 5-year investment and leverage trajectory, we would be able to still comfortably manage our leverage as well as access to debt and cost of that capital in the investment grade range and we do not expect -- there will be no equity issuance risk. In the leverage and the cash flow profile, we also expect to be able to maintain our dividend and we endeavor to keep and maintain our dividend profile.

The next question is from Zhiwei Foo from Macquarie.

I think I have three questions. First of all, could you start with reminding me what the peer comparable transactions are? And why is CTFE selling to you such a multiple, right? Second question is, could you go a little bit more into sort of like earnings profile of Alinta Energy. How much of this is caused by swaps? How was the most of these derivatives can swing your earnings by, right? Because I'm trying to understand why your FY '22, '23 earnings was so low, right? And then what caused it to move up in the later years? And then for the last question, it's more of like your asset -- your energy transition story. A lot of your earnings, I'm sure right now is underpinned by your thermal asset. I'm not sure how much Loy Yang B is contributing. So in the next, say, 5 years, when you transition this asset, how does that affect your overall earnings profile and your ROE when that happens? Do we expect your ROE to maintain at similar levels? Or does it come off as a result of this core transition?

Thanks, Zhiwei. This first on peer transaction, I think later, do we have that, that we can flesh or you've got numbers you can read out? Yes. So later, Eugene can read those things out. Generally, you are right. We -- this particular transaction that we're having is at reasonably competitive but also attractive multiple. Now from -- I can't speak on behalf of the seller. And I think each group has their own priorities. So I won't be able to speak on their behalf. But suffice to say, during the current owner's ownership in the last few years, Alinta has also performed very well and created a lot of value for them, right? So that's something that is quite obvious if you look at the performance of the business as well as I'm sure you can also trace when they acquired it, it was done at a lower number, right? Of course, at that time, the business was smaller. So I think if I may read it out in -- Alinta when CTFE acquired in March 2017, it was for an EV of AUD 4 billion, right? And that was a -- that was for 100% stake, right? Then in November 2023, Brookfield and EIG bought Origin Energy Markets at AUD 10 billion. That multiple was 9.6x, right? And those are some of the handy statistics that we have. So we think both the sell side as well as the buy side can see good strategic reasons why we want to do the deal together, all right? So that's the first part. In terms of the earnings volatility, if I may ask Alex to help with that, but essentially, it has something to do with the Ukraine and all the gas prices affecting the -- affected by the Ukraine war and so on from Europe and so on.

I think, Zhiwei, your question is more of a general one in terms of how stable is the earnings profile. And in terms of swaps and hedges different instruments, how much contribution, is it relative to total earnings and give you some rough numbers. So in terms of the various instruments, the rough percentage to revenues is less than 5%. And in terms of EBITDA, that's within roughly about 10%, just to give you a rough view. But I just wanted to also give you a little bit more color there in terms of why Alinta enters into various instruments. And the underlying reason for entering into such instruments is really to hedge the capacity. They are generally long in generation, which basically means that they are never short, right? They never left in -- with a naked position where they don't have the capacity but they are obligated to sell capacity. So in many cases, what they do is they go in there, for instance, Loy Yang B in Victoria, in a decent market, what they do is they lock in by selling swaps, right? This is essentially very similar to what we do in Singapore. In terms of PPAs, although our PPAs are much longer and the swaps are much shorter, roughly about 1 to 1.5 years. So that's one, right? And so what I just want to mention that and highlight that is because we are not entering into these instruments to trade, but really is to protect the downside or capture or fix the decent price. So that actually lends -- by doing that, it actually provides the stability to the cash flows and earnings.

If I may add, then it's a little bit like what we do in Singapore, right? What we call the contracts here, the contracts for differences CFDs, those are effectively swaps. So their market structure is actually quite similar or other Singapore's market structure was somewhat modeled after DAS, where there's wholesale electricity market in the middle, power generators on the one side and then customers on the other side. So the hedges or the contract for differences as Alex puts it, means for the generation output to be less exposed to the short term in the case of the national electricity market in Australia, which is I think every 5 minutes, there's a price, right? Singapore is half an hour. So to insulate one from the 5-minute volatility or prices you enter into contracts between the retail side and the generation side. And here, I want to digress a little bit because that's precisely why we -- when we look at entering into Australia, we can enter into pure power generation assets, just like renewable assets like what we do in other markets, but because of the market structure, if we just do generation, then we will be exposed to the wholesale electricity market. So we thought if there is an integrated platform like what we have now in Alinta then you have a natural hedge between generation as well as the customer and the retail end. And that is something that also we are -- the concept is very familiar to us because of what we do in Singapore, right? So that's something that's important to note. And I think, Alex, the FY '23 earnings being lower, I think just to directly hit that, is that because the -- in that year, Australia actually had experienced high gas prices for input, right? But then on the other end, on the electricity end, because he hit a certain regulatory threshold, there was a price cap. So not all the gas prices, gas costs can be passed on to downstream. And that's a simple explanation, but there's a lot more complicated involving all the hedges and so on. But in a nutshell, there was an aberration driven by the high gas import prices coming -- originating from Europe and Ukraine, right? So that's on that part of it. Energy transition story earnings being underpinned by thermal. Yes and no. As I mentioned just now, this portfolio, it is you can say they all come from thermal, but you can also say that it all comes from the retail end of things. So it is particularly integrated. Over the 5 years, for instance, we do not foresee material reduction, right? If the 5 year is the horizon, we don't see a material reduction in the ROE as well as the earnings of this business. Eugene, you have something to add to that?

I think in relation to the transition, Zhiwei, when we look at the transition profile of the coal asset, we do believe that we will have to take a longer-term view, right, probably in excess of 5 years and 10 years, right, where we will certainly aim to build out the renewables -- into accelerate building out the renewables pipeline. But of course, that will have to be matched against the pace at which the government as well as local communities and approvals would allow us to, but within the next 5 years, much as we would aim to accelerate the renewables development, but we do not believe that the pace of that is going to materially result in a significant decline of ROEs or earnings. Now having said that, it is important to note why we are taking an integrated approach in entering the market. Now of course, if you are going to do a pure renewables asset, without access and ability to generate demand with a strong retail customer book and also access to C&I with a mix of generation technologies to manage across demand and the price curves within a day, then you run the risk of having a low ROE. But I think the most important element of Alinta as an integrated retail as well as a generation portfolio is with the range of -- as we build out renewables, we will also be managing that with our batteries as well as gas peakers. The combination of the generation assets would allow us to take -- to use the right assets to generate at the right periods of the price and the demand curves during the day, right, and hence, be able to optimize the spot spread capture. So that is important because then the gent tailing capabilities would then enhance the returns from any standalone renewables asset. So we do believe that within the next 5 years, even as these -- the transition happens, we will still be able to keep our ROEs in the teens for this asset.

The other thing to note is also, of course, in the next 5 years, we do expect growth, right, growth in terms of market share, growth in terms of market demand. And so a good part of the new assets, renewable or greener powers that we may put into the system will be chewed up by the increase in the demand and the market share, right? So the overall intensity of the portfolio, carbon intensity can come down, right? But the overall profitability might not necessarily have to come -- in fact, earnings should comfortably grow. And in terms of the returns, Eugene has explained that there are reasons to believe that Alinta management will be able to keep up the ROE.

Sorry, one follow-up question, please. You pointed out that FY '23 was lower due to a spike in gas prices. Now as I understand it, there isn't a lot of gas in Australia. And unlike Singapore, you don't have the advantage of being a gas -- a licensed gas importer. So how can you assure us that if, let's say, there's another gas price spike, your strategy to ensure that you have sufficient gas, you don't pay too much and we won't have this sort of volatility in your earnings in the next 5 years?

I think clearly, if you talk to the management of Alinta, they have learned the lesson. And it comes from -- even if one doesn't have direct -- a lot of direct import, one can hedge its output through contracting, right? So if you look at the fleet of assets in Alinta, there is multiple gas assets, there is also PPAs that they buy power from producers. They will increasingly have more and more, as I mentioned just now, a growing fleet of renewable assets, right? On top of that, they have, of course, Loy Yang B to underpin. So the -- they are actually long generation compared to their customer base. So from that perspective, if managed properly, they could insulate themselves to another gas spike. And having experienced it, the management of Alinta is actually very much on top of this issue.

The next question is from Ho Pei Hwa from DBS.

Is the line clear? Can you hear me?

Yes, can hear you, Pei Hwa.

I also would like to follow up on Zhiwei's question on the earnings volatility. I mean we have been following Sembcorp and management has been prudent. I think from what we heard so far, we see that there's quite a bit of moving parts for Alinta earnings from tariff your capacity contracting to even gas costs? Just trying to understand from management standpoint, how do you plan to better manage this? Because even forward contract of 1.5 years is still relatively short. Just trying to help us better project the Alinta earnings going forward. And also what other moving parts that could materially impact our earnings? That is the first question.

You want me to answer the first one first before you -- or you want to.

Okay. I can ask the other 2 as well, if I may.

Please go, please go.

The other 2 is do we -- in this expansion in Australia by geography diversification, do we have a target as to individual country certain percentage? That's first. And then do we -- if there's another attractive deal in the coal asset again, do we foresee us may be interested is the second question. And thirdly, on the dividend, when we say we maintain the dividend, do we refer to dividend payout that we had, I think, communicated is about 40% because the last one, we also mentioned that we will maintain on an absolute basis, the DPS for this year. So just trying to confirm, are we referring to absolute EPS or the payout? Yes, that's all for me.

I take the easy one in reverse order. Dividend in the $0.23, we are very, very comfortable keeping it to that level, if not growing it. That's number one. Payout ratio, of course, as we grow the earnings base, we are hoping that we can increase the payout ratio. But suffice to say, this deal doesn't put any stress on our balance sheet. It doesn't reduce our ability to pay out the dividend, right? So that is very, very important to us, and I want to emphasize that point. So that's the first part. Then in terms of the -- if you go back to the earnings volatility point, this is, as I mentioned, just now integrated platform gentailer, they call it a generator and a retailer. They have got -- I explained just now that it's somewhat similar in market structure to Singapore. But in terms of the profile, in terms -- the both ends of the spectrum is quite different. In terms of generation, they got all these different technologies. So in Singapore, it's just all gas and otherwise solar. Then in the customer end, in Singapore, Sembcorp's customer portfolio largely underpinned by C&I, right? And Singapore has that type of customer base. But in the case of Alinta, it is a lot of more mix, right, that has got C&I as well as retail customers. Now retail customers tend not to sign very long-term contracts. But for the same reason, they're also sticky. They also very often give a healthy margin, right? So it's natural to expect that if we're looking for comfort from the length of contract cover as we did using that lens for Singapore, we will not see the same comfort if you use that as a measure in terms of length of contract and the percentage that is contracted. But I just want to point to the fact that they are the integrated nature and the type of customers that they have is quite different, right? And also because the generation end, they've got all these different technologies and they are long generation by far, and they will have a lot of levers to use in order to manage the margins and the profitability and how they want to serve the downstream customer base within their means compared to -- relative to Singapore, we have much fewer levers to pull. So that's one. And because of that, in the past few years, you can see that the Alinta management is able to consistently grow their earnings base as well as maintain their profitability, right? So that's one. And then moving forward, if you think about it, Australia as a market, it is not easy to bring in new generation capacity, as mentioned just now by one of us. You would need to have siting permits, government permits, local community approvals and so on and so forth. So even though that we do look towards the pipeline for decarbonization, the addition of new capacity will come at a certain measured pace, if I may call it. And because of that, the incumbent generators actually enjoy a healthy -- how should I put it, they do enjoy a certain advantage of incumbency in terms of their profitability and their earnings capability, right? So that's how I would think about it. Now of course, nothing beats having fully contracted, right? And we walk in there with our eyes open, knowing that this portfolio comes along with the nuances that I just described. The other part of it is, of course, when we look at the entire portfolio of Sembcorp, then with the additional diversification, then there's more opportunities to see the benefits of the diversification. If one market is a little bit down, the other market, hopefully would pick up the slack. So overall, I would like you to think about this acquisition actually allows the entire Sembcorp portfolio to be more diversified and also in a high-quality market with high-quality asset, high-quality management. Eugene, anything to add to that or Alex?

Yes. I think a couple of things that when we look at this a bit deeper. First one is there is potential to grow, right? So Kim Yin mentioned about renewables growth. On the renewable side, frankly, given our track record over the last 5 years and what we've done in various countries, we -- based on our scale today, I think we could generate or enjoy some cost benefits, whether it's in the form of equipment cost or even on Eugene side in terms of access to cheaper capital. These are things that we can do to bring the cost down when we grow renewable projects in Australia. So this is one. The other one is on the retail side, Kim Min mentioned that, too. In the West Coast, we -- Alinta has about 20% of the market share and only 5% market share in the East Coast. So on the East Coast, given where they are today and potential growth in the future, I think there is a lot of potential upside to continue to grow.

So I think to add to what Kim Min as well as Alex have highlighted, Pei Hwa I think it's important to note that again like my response to Sumedh earlier on, when we look at the market dynamics as well as Alinta's generation capabilities, it is important to note that going forward, in general, in Australia, from the perspective of at least in the foreseeable future, you will not have a huge influx of baseload capacity. And hence, given the fact that Alinta is long generation and have a very strong operational uptimes and availability is well maintained asset that's always up to capture the generation opportunities as well as the fact that it's short-run marginal cost of its portfolio is among the lowest of the gentailer. It will always be in the best position to generate as well as to capture prices. Now the other thing also to consider is that Alinta has demonstrated that it has grown its retail book, 1.1 million retail customers and on top of that C&I customers. So as -- and as it continues to service this retail customers, which tend to be sticky, also the retail tariffs in Australia are fairly stable, right? So that also gives an element of stability to the outlook of the Alinta's portfolio. Now again, I also made a point earlier on. When you look at the EBITDA, where the EBITDA and earnings are generated for Alinta, there is the East Coast and Alinta is also in the West Coast. In fact, Alinta's market position in the West Coast is -- they are actually a leading #1. The leading -- more than 50% market share in terms of gas sales and about 25% market share in terms of electricity sales. Now the West Coast market is also different because on the West Coast, the WEM, there are available forward capacity contracts, which gives a stable capacity-based earnings as well. So all in all, all this makes Alinta's EBITDA as well as earnings profile, a lot more stable relative to any of the other Australians or Australian gentailers. So these are the key differentiating factors for us to be comfortable that Alinta inherently in its portfolio as well as the market position against in the West Coast as well as the East Coast makes its earnings profile a lot more defensive and less volatile relative to the other retailers.

And this question about whether or not we'll be interested if there are other coal assets. I want to emphatically say that we shall not invest in greenfield coal, number one. We shall not invest in stand-alone coal. We -- Alinta is a portfolio that has got renewables, gas as well as this coal asset. And I want to emphasize that we enter this with the lens of supporting the energy transition and that having a very balanced and inclusive transition such that balancing all the energy, security, affordability alongside with the sustainability, and we are attracted by the large renewable pipeline portfolio so that then we can help do what we do best to support Alinta to grow the renewable portfolio so that then we can reduce the carbon intensity. So that's on that. Now whether or not there are country percentages, we do not disclose that. But I want to reassure that we watch very carefully concentration risk. And -- but today, with the inclusion of Alinta, we -- there's still headroom for Australia, right? Now whether or not there will be future opportunities for further expansion, of course, we enter this as a growth platform. The growth can come from greenfield as well as acquisitions, but we will evaluate and assess when the right opportunity comes along.

If I may ask one last question. Since now Australia will be quite a significant portion of our portfolio. How about the ForEx for Eugene? And Australia is probably near an all-time low. It may be a good time for you to acquire at this time. Just trying to understand the ForEx why, what should we think of ForEx?

Yes. I think -- Pei Hwa, I think, first and foremost, we are not ForEx traders, right? So to be very clear, we do not emphatically time any investments or entry simply because of ForEx. So our approach to managing the AUD SGD exposure, again, will be -- we will likely be leveraging Australian-denominated financing, particularly onshore in Australia and we are more focused in hedging -- naturally hedging any Australia exposure. Now having said that, we do recognize that the Australia dollar against the Sing dollar, it's in favor, right, of the Australian dollar when you look ahead. I guess, if you look at your bank projections or you triangulate forward curves between the Australian dollar, U.S. dollar as well as the Sing dollar-U.S. dollar cross rates, it will suggest that over time, the Australian dollar potentially may appreciate. But having said that, we would still tend to ensure that our exposure to Australia dollars onshore will be first naturally hedged onshore. And we would still choose to minimize any outright ForEx exposure. Of course, the net equity exposure to the Australian dollars that just like all the other subsidiaries in Sembcorp, they will not -- they can't be hedged. So I guess if you take the view that the AUD SGD as implied by -- I'm sure all of you will have access to very, very robust projections in your house views. And also taking reference to the cross rates on the forward curves of your AUD, USD as well as AUD, SGD, USD forward curves, it does imply that probabilistically speaking, the Australian dollar will be more likely to strengthen over a period of time, obviously, because I do not have a crystal ball against the Sing dollar. I would characterize it that way.

The next question is from Luis Hilado from Citi.

I just had 2 questions. The first is, if the transaction does push through, how does that impact, if at all, your 2028 targets for renewables gross capacity? Or will it be increased or it's more of a longer term? Second question is just a housekeeping one. Is there any major maintenance expected for Alinta's plants in the next 3 years or so?

To answer the second question, in the course of our due diligence, we do not expect any significant major maintenance for Alinta's plants. They are always maintained in accordance to the required maintenance schedules. And as of -- if we look ahead in the next 3 years, there are not any chunky maintenance for the plants.

And as I mentioned just now, they are long generation. The number of megawatts that they have in their fleet is bigger than the demand or the customer base that they have. So they should be able to comfortably cover that if there is any major maintenance. So that's one bit. How does it impact the 2028 targets in terms of renewable megawatts? I suppose this additional growth platform is just going to make it so much easier for us to meet the 2028 targets. The 2028 targets, even without this platform, we were quite confident to reach it. As of today, we are already 19 over 20 gigawatts really, right? So we should reach it quite comfortably. With this addition, it will be easier. So what happens is that it's supposed to be a happy situation that we are able to meet our targets set earlier, but it also suggests that then we have been a little bit too conservative. So what will happen is that at the right time, we will come out and recast those targets. We tend to do a 5-year look ahead. So hopefully, soon enough, we'll come out and when we're ready, we will articulate new targets that goes beyond the 2028 ones.

The next question is from Paul Chew from Phillip Securities.

Just 3 questions from me. Can I just reconcile the underlying net profit again? The headline numbers is SGD 416 million. But the difference such of SGD 1,248 million less the SGD, 1,016 million is SGD 232 million. I think you mentioned part of it is mark-to-market. And I believe there's also some shareholder loan interest difference. So just trying to understand, is the difference largely the mark-to-market gains that was experiencing?

Yes. The difference is largely a result of the derivatives, noncash mark-to-market. To a certain extent, it is similar to our deferred payment note, right, where at every balance sheet date, they will do a mark-to-market of those -- of the instrument. That is for ForEx. And because for the -- for Alinta, they do have a derivative hedge book for the purpose of hedging forward. So every balance sheet date, there would just be a noncash mark-to-market gain. So the difference is largely usually a result of the noncash mark-to-market outcomes.

So also when computing the earnings accretion, are you using their existing interest rates or you're imputing your own interest rates? Of course, you're taking on debt and so forth, but do you also change the interest rate assumptions on that is faced by them?

Yes. For the purpose of the accretion computation, all the external borrowings that are at the Alinta level, we are taking the assumption that they are retained. So there is no change in the interest rates. Of course, if there is an opportunity to refinance to tighter margins, especially given Sembcorp's credit now, we potentially would do so. So none of that is imputed. Now then, of course, the acquisition financing interest that we would -- we imputed our Sembcorp cost of capital. So of course, the margins will be tighter than the interest rates that are at the Alinta's level.

And sorry, if you may have mentioned this, but do you mention what's the cost of debt at Alinta level?

At the Alinta level, in Australia dollar level, the average cost of debt is around -- between 5% to 6% pretax. It will be a range, right, of loans, some closer to 5%, some 6% plus reaching 7%. But on average, it is between 5.5% to about 6% pretax.

And, I guess, if you were to borrow at your level, we can probably assume a 50, 100 basis points savings you to speculate now.

I don't need to speculate. Okay. I realize my friendly banks are not in this particular call, but I would expect it at the minimum to be the kind of levels of savings.

Okay. Just last 2. In terms of the hedging, like I said, there were mark-to-market gains, does it -- does the accounting treatment work whereby these are upfront gains then -- because then later on, you will realize lower electricity prices in the future because the gains, I presume is because prices drop. But as you realize them, the accounting impact will be to lower earnings. Is that how to understand this mark-to-market?

These mark-to-market gains are really swings against the -- where the market prices when the instruments are not due. Now of course, these hedges are taken against the physical hedge positions of the generation. So when you have a mark-to-market gain, it simply means that on the physical to underlying, you would have realized a lower physical price. Now if you have mark-to-market losses, then it simply means that on the physical side, you would have realized higher prices. So essentially, that is how that is how it works.

Okay. So -- and you do match. It's not like later on, you recognize the physical prices that are lower. So they kind of match I guess.

Yes. So that's how the hedges work. So the mark-to-market gains losses are against the physical earnings in the underlying.

Just one last one. The CapEx for the pipeline, the renewables pipeline, do you have a ballpark number that you have to commit to?

No, I think from a CapEx perspective, of course, we do not have a crystallized number at this point. Of course, they are at various stages of development. But you probably could look at average general cost of development in Australia today to impute the CapEx cost. Of course, the point to note is that while we have a 10.4 gigawatt pipeline at different stages of maturity, we do expect the execution of the pipeline to be fairly -- over a fairly long period of time, right, potentially in excess of 5 years. So while you may be able to estimate the CapEx against them but over time, potentially, there would be cost adjustments, either cost savings because of efficiency of the technology being realized of cost inflation as a result of local EPC cost inflation.

If you look at -- I think Slide 9 -- can we have Slide 9. So if you look at it, what is under construction is 400 megawatts. And then what is under development is 1.8, right? So those will give you some visibility now. Then against the cash flow, the EBITDA of this company, you would be able to see that they could actually support all that very comfortably even just from the operating cash flow. So that's -- I think that's something that you can look at.

[Operator Instructions] Zhiwei again from Macquarie.

It's -- okay, this is a question about management in Australia. And the overall gist is it sounds like you have a key man risk. How are you -- what have you put in place to kind of like ensure that you retain management as long as possible? Because if you think about -- I think Temasek once did this or Temasek affiliated entity called CitySpring once acquired this asset called Basslink, very different, more energy transmission from Tasmania to Melbourne, and they had this whole similar derivatives that they had used to hedge as well. I think when -- without the local management, there was an absolute disaster in earnings. So just -- and I'm not too sure whether SCI's Singapore team has the capability to manage the Australian market yet. So it sounds like the Australian -- current Australian management is very important. So kind of keen to what sort of plans you have to keep them there.

Alex. Okay. You want to try? Go ahead.

Maybe let me just talk a little bit about the local management team, and then I think Kim Min can chime in on some of these other comments. The local management team, if you look at Jeff, Dean Murray, who is the CEO, Jeff's right-hand man is actually Ken Woolley on the slide on the extreme left. So Ken has been with Jeff for the last 15 years. He's actually not just #2, he's basically the COO and he's got very good experience as well. And then if you move to the right-hand side, between Chris and Dan, your concern is really more around the trading portfolio management bit, both of them actually have exposure. And what Jeff has cleverly done in the past is he has rotated his key people around the various functions, including both portfolio management as well as finance. So I think that, to a large extent, mitigate the key man risk.

I also want to say, yes, there was the experience in Basslink but there is also experiences in many other companies. I personally have looked after SP AusNet as well as Jemena during my time in Singapore Power, one listed vehicle and a private vehicle, both in the power industry. So the -- we do not approach this opportunity being complacent about what you just mentioned as a potential risk. Clearly, we do not have boots on the ground. And we invest in this gentailer platform precisely because they have got a solid management team with a good track record. So working with the team to map out their next 5, if not longer-term growth plan is something that has been ongoing for a few months now. So I -- we feel like there is a strong alignment in terms of what we believe we can support in their plan and they believe that we can be the right shareholders that can drive the next phase of growth. Now all that aside, at the end of the day, it is about also putting in the right management incentive and retention plans, which we will have in place, right? So it will very closely align the management to delivering the value that they have crystallized or they will be crystallizing in their business plan. And I go back to what I started with by saying that, look, in my previous experience, we have got -- I personally have got quite a fair bit of exposure to working with Australian management teams from a Board level, from an investor level and from a Chief Executive level as well. So I don't know whether that addresses your point, but compared to Basslink is very far at the other end of the spectrum when it comes to what the Sembcorp Singapore team is and the Alinta team is that we're dealing with in this season.

And I think to add to that, Zhiwei, of course, Sembcorp has always been very careful, thoughtful in its acquisitions, right? So I think in relation to this, it will be very clear that in the course of looking at the business plans that triangulates to valuations that we are comfortable with, looking at possible levers for driving upside. If we take a 5-year view, as Kim Min has pointed out, one of the key things that we are very, very particular about is to ensure that in the course of acquiring the assets, understanding the business plan and agreeing them, right, to the -- and also diligencing the management's ability to deliver them. These -- the next 5 years target, both from a -- all the way up to stretch levels of performance would have been appropriately set as management KPIs as a part of the incentives as to ensure that we align motivation as well as ultimately driving performance as well as value. So you can be assured that we have done those things. I think the track record of this management, if you look -- take the last 5 to 7 years performance of Alinta, it speaks clearly for itself in terms of its earnings as well as cash flow generation capabilities when you compare that against the other gentailers, even against the much higher valued gentailers in Australia, you will find that the performance have been stronger in terms of CAGR performance. And more importantly, if you measure against a volatility against a mean performance, mean earnings over the last 5 to 7 years, Alinta's will be absolutely least volatile. So that clearly shows the quality of this management team. So we do believe that going forward, the important thing is that, number one, we have a high-quality management team with a demonstrated track record quite clearly, right? And going forward, we have always been very careful in terms of developing business plans that underpin our valuation and expectations and to ensure that all the way up to stretch levels are appropriately reflected in the right incentives that will motivate this management team to continue to perform at the levels that they have done so.

Yes, I guess the Board must take great care of you all, too. I have one last question. Could you just share the breakdown of how your earnings are as a split of your generation capacity, if you could?

Just for Alinta or for the Sembcorp Group?

For Alinta.

Split of earnings.

Earnings by generation capacity.

Do we disclose that?

No, we don't have that.

I think, Zhiwei, maybe we take that offline, we can follow up, help you have a sense on that. What do you mean by earnings as a split based on generation capacity? So earnings.

How much is from LYB? How much is from your gas [ diggers ].

Okay. It will be difficult because as I mentioned just now, it is a gentailer portfolio, right? So -- but we will -- I think we will try to follow up and then see what we could brief you in more details to help you understand better how to think about the risk and the attributes, how you attribute and allocate value across the assets.

But having said that, when we look at the direct coal revenues, right, that is generated by LYB, it is post acquisition in a combined Sembcorp revenue, right? It is expected to be approximately 5% or less of our Sembcorp pro forma revenue. But if you want specific down to the earnings level by generation, okay, we would have to...

I don't think Jeff thinks about his business that way.

Yes, we don't -- but anyway, we can take that...

But I think he is also trying to -- what he is trying to do is to just any good analyst, try to attribute value against each of the assets, right? So we try to help each other understand this better.

We have a follow-up question from Pei Hwa from UBS..

I'll just follow up on the growth prospects. You talked about the market share gain especially in East Coast. Could you share internally, do you have a target as to what do we see our portfolio in 3 to 5 years' time, greenfield or brownfield projects, capacity increase or volume increase.

I don't -- we don't have any clear targets for the East Coast. But clearly, if you look at the East Coast, the more of the demand is going to come from both Victoria and New South Wales to some extent, Brisbane. So in fact, one of the things that Alinta did before they started going into the East Coast was really to look at where the potential growth is going to come from in Australia. That's when they decided to move into the East Coast. They were wildly successful in the West Coast, like Eugene mentioned earlier with more than 20% market share. So East Coast now represents 5%, right? They have 5% market share. And like I said, I think with the potential growth in renewables, I think there is quite a bit of potential growth in the East Coast, but we don't -- there's no...

Qualitatively, again, for whatever this is, they are the small player in the East Coast. And yet they have the lowest cost generator in the East Coast. So that actually positions them very well to capture market share in the East Coast. So then on the West, as Alex mentioned, they are the [ Starwood ] right? So their market share when it comes to customers, you can have -- reasonably expect them to have an advantage to grow that. Now exactly how much is embedded in the business plan that we have, but I don't think we are ready to disclose that at this stage. So we register your question and then we'll try to see how we might be able to provide some guidance.

But at the minimum...

Could it be more greenfield versus brownfield?

For them, it would be more.

It will be all greenfield, Hwa. I think when we look at Slide 9 of our presentation, right, it will be quite clear that we have 400 megawatts of BESS that is already under construction and another 1.8 gigawatts of pipeline that is under development. So you would expect these to be commissioned in the course of the next 5 years.

We have another follow-up question from Sumedh, JPMorgan.

Maybe just one quick question on the governance side, right? So how do you -- how does Sembcorp manage Alinta? I presume that it is going to be independent -- it is going to stay independent. It's not going to be merged into Sembcorp. And if that's the case, how do you sort of chalk out business plan per KPIs for them? I just want to understand that broadly. And secondly, on the cash flows earned by Alinta, is there any friction in terms of cash flows repatriation into Singapore? Or that shouldn't be an issue from a Sembcorp perspective?

This is 100% acquisition. So -- and Alinta, of course, has been -- they have independent management team that's running that the business for a while now. But as I mentioned, just 100% acquisition. This will become a wholly owned subsidiary. We have full control over the business. Now so what we need to do is to make sure that we strike a good balance as to how we can, as a holding company, as an investor, be comfortable with the risk management and yet enable them to grow into their business plan that they have very well put together, right? So we bought -- we come into this business believing and buying into the management business plan, and we will support them in growing that. Now having said that, as a 100% shareholder, we will want to have the usual oversight any other 100% shareholder would have. So we certainly would be wanting to have -- to do it at the Board level, right? And then at the management level, we believe that they have a very competent, very solid management team. But where it makes sense, we would also complement both sides, right? Maybe someone from Singapore can learn something from Australia and vice versa. So there could be opportunities for cross-fertilization, but we don't want to preempt all that and be prescriptive. What we want to do is that to be very respectful and understand what is going on, how are things done in the past and then find the opportunity or the gaps whereby we could add value to each other. So I want to set the perception that looking at 100% owned, we have full control, but we will be -- but we are coming in here to support the growth of the business plan and the management team, and we would look for opportunities to add value to each other, while at the same time, making sure that it meets our risk thresholds and our risk limits and work together with them to grow it, right? So in terms of the business plans and KPIs, as I mentioned, just now, they do have a business plan. Today, they have a structured short-term goals as well as long-term goals. And what we will do is that we will be coming in to first endorse their existing short-term KPIs, and we will then work together with them to develop the KPIs after we complete the deal and become owners. At the same time, the longer-term KPIs will be very much -- today, it is already sort of articulated in their midterm business plan, and we will be putting against that incentive plans and retention plans to make sure that the management is aligned with delivering what they believe they can deliver and also then, of course, be motivated to stay -- to sharing in the benefits of that delivery, right? So hopefully, that answers that. Cash flow repatriation, this one is Eugene's...

In terms of cash flows repatriation, I think between Australia and Singapore, it's one of the most friendly cash flow fungibility markets. So franked dividends, [ dividend ] that is paid out of Australian profits that have already paid Australian taxes onshore. There is no withholding tax. So it's a pretty friendly cash flow repatriation jurisdiction. So we are actually very, very comfortable in terms of the fungibility of the cash flows between Australia and Singapore.

Just one more question on the whole financing, right? I mean, as you said initially, there is going to be $6.5 billion bridge loan facility. But you also mentioned that Alinta is kind of undergeared, so we could optimize leverage there. Could you please just walk us through, again, what are the plans, and how you're going to fund it, and how those leverage will look like?

Of course, right now, Sumedh, we are in the process of structuring the longer-term financing. But the thinking is as such, okay? Now $6.5 billion is the enterprise value. Now Alinta is undergeared right now. They probably have less than AUD 1 billion of net debt. So we think that we potentially could maintain close to a $2 billion -- or 2x, approximately 2, 2.5x EBITDA of net debt in Alinta. So out of the $6.5 billion enterprise value, approximately $2 billion would reside in the Alinta OpCo itself. So that leaves AUD 4.5 billion of financing. So of the AUD 4.5 billion, we would likely look at it across 2 tranche, about close to 60% -- 60% to 65% of that will likely come in the form of long-term syndicated bank facilities, right? The target tenor of those will be in excess of 7 years, right? We're targeting about 7 to 10 years. And then the remaining 40% of the $4.5 billion would likely be looking at longer-term capital markets instruments as well. And of course, we will be targeting a very long tenors for those. So that is how we would quite efficiently structure the financing for the $6.5 billion bridge loan into the long term.

Understand. Sorry, perhaps on that long-term capital market instruments that you mentioned, what exactly are you referring to? Could you please give us some examples...

They will be debt capital market instruments, bonds. I've already said no equity fundraising, so you don't have to worry about that.

No, no. My reference was towards going into, obviously, next couple of years, are there any assets that you see on your balance sheet currently or in your current portfolio that are not warranted anymore, so that could be used towards partly financing this?

We would be -- we are always looking at the portfolio, right? It's just like earlier this year, we divested our waste business. So we will be reviewing the portfolio from time to time. But I do want to emphasize that even at the leverage that -- the pro forma leverage that we would put on for this, there is still headroom in our balance sheet in terms of debt capacity. So our 5-year plan, we -- internally, we have a 5-year plan that we are growing into. This is only part of what we plan to do and that there is actually headroom to fund what we need to do without any equity raising, right? So that I want to emphasize. So this is not like if we do this deal, then it will suck all the oxygen out and we won't be able to do another deal. And then if we want to grow further, we have to come out with EFR. No. We didn't -- when we approached the target we were looking for, all these criteria that look, will we be -- how are we going to execute our 5-year plan? Can we do it without -- do we have headroom? Can we try to avoid equity financing where we could? So that's why this particular platform is -- we like it a lot because it is very cash generating. So the cash -- underlying cash flow generating capability will allow us to quickly delever on the one hand. But moving forward, it could actually complement what we have in our Singapore portfolio to generate all that cash to fund our future growth as well into the green side. So the -- even though I didn't emphasize it, but this idea about taking brown cash flow to fund green continues to be very well and alive in the thinking moving forward. So again, there is headroom even at the 4.5x or 4.6x, if you think about it, it is not at the highest end within the industry. On the other hand, the cash flow generating capability of this business will enable us to very quickly delever. If you think about it, Singapore alone, maybe 1, 1.5 years ago, we were looking at 4x, more than 4x, 4.5x, right? And then now in a space of 1 year, we're down to 3.some, right? So it is -- on a good day, Eugene can really lay out if necessary in more details how we think the cash profile will look like. But we're very comfortable, frankly. And because of that, we're also heavy in our mind is also can we maintain the dividend payout ratio as well as the dividend payout levels. And that is something that -- that's why in the past, we have been very, very careful in terms of increasing the ordinary dividend, right? So when -- for a couple of years, we did very well financially, but we paid out special dividend. And then it's only when we became quite confident then we say, okay, let's increase it. So at the $0.23, very, very comfortable. We definitely want to keep to that level, if not increase it, as we move along. And in the meantime, for us to grow further, we feel like we do have the balance sheet headroom and then the existing assets now that we've got -- after this transaction closes, we've got Singapore, we've got Australia, both are very cash generating that will really be the twin engines that will fund our growth into the energy transition moving forward.

Thank you. There's a question from Mayank Maheshwari, Morgan Stanley.

Sorry, Kim Yin, I joined a bit late. Sorry for that. I think, Kim Yin, I have -- beyond the numbers, I had the fundamental question around -- when you look at this asset, it fundamentally changes your balance sheet in multiple ways, correct? Whether it is the mix of your fuels, whether it is the structure of the balance sheet, exposure to markets, et cetera, right? So what made you from your perspective and the Board's perspective, think that Alinta was the place to be in while you were scouting for assets around the world?

Eugene, do you want to do that?

Okay. So I think in relation to that, it was a pretty strategic approach where we took almost -- a year ago, right, at the start of the year where we took a step back and we looked at the Sembcorp portfolio. And we asked ourselves, and I hope you guys will forgive me and also Alex and Kim Yin because I'm just going to take some time to share the thinking. Now it's almost a year ago where we look at our Sembcorp portfolio, and we are -- when we look ahead over the next 5 years, the key question that we ask ourselves when we look at where energy transition is, and also when we look at how we potentially would see growth coming from with the target to hit double-digit total shareholder return in mind, how will we want to see our portfolio being constituted? Now when we look across all our different markets, the reality is that while the Sembcorp current business portfolio, driven by our core capabilities and also the -- our energy transition strategy, has worked well for us. When we look forward into the next 5 years, it may not necessarily be so. I think one of the key elements, and you all know this when you are following us. China has been a huge growth engine for us in the last 4 years, but it's quite apparent, and you have heard me and Kim Yin mention many times. And I think Alex will also admit himself that I think going forward, at least in the foreseeable future, we see capital deployment challenges for China. And clearly, it will not drive growth the same way as it did for us in the past years. I think in the Southeast Asia renewables segment, also the challenges where we are always very ready to deploy capital, but the challenge is that it's just slow, right? When you look across Vietnam, Indonesia, Philippines, each of the individual markets either are not that scalable in itself or present opportunities that are probably a lot slower than we have expected. And over the next 5 years, we do expect this region to continue to be slow, right, in terms of allowing us to grow. Then, of course, India continue to be a bright spot, and you have heard me talk about the possibility of a capital recycling the Indian portfolio, right, taking advantage of the equity markets in terms of renewables valuation there. And essentially, then in Singapore, which is very much a cash flow generating market for us. But I think you would also have seen the challenges where clearly, the visibility of -- I call them the 4 huge kahunas, right, 600 megawatts highly efficient H pluses coming on stream clearly has seen spark spreads moderated. Though just before all of you think that Singapore is ex-growth for us, we still see specific opportunities across data centers and high-tech manufacturing with specific capacities that we can clearly capture. But Singapore is probably not going to carry a double-digit TSR over the next 5 years. So we set ourselves the goal of looking to enter new markets. So what are these -- what -- and if we want to enter new markets, what do these markets have to look like for us, right? So I think, firstly, we certainly want them to average up in terms of quality, in terms of regulatory framework transparency and thereby, reducing our overall risk of our business portfolio. And secondly, be scalable enough for growth, yet clearly supporting energy transition. So you have heard me talk about this before. Middle East was one region. We have been there for a long while. Clearly, it has scale opportunities for us to grow, very long PPAs, good quality and bankable. Of course, returns are also -- we have to manage expectations because simply of the quality of the PPAs. And also regionally, we are focusing on the investment-grade markets. Then we also ask ourselves from OECD, do -- are there possibilities for us to focus on adding OECD markets into the portfolio where Singapore like, but yet having a greater scale for growth? Now across OECD markets, we are certainly not at this point in time, looking to go too far west, talking about the Americas. And I think, in Europe, as a power player, you have heard me talk about this before. I think our right to play and compete there in general is challenging, right, particularly where you have very large players there already. So when we look out here in Asia, we did consider North Asian OECD markets like Japan, clearly, from a return standpoint. It is probably lower and hence, can't be a priority market for us to be looking to grow quickly into. We did consider Korea. But I think from a cultural perspective, trying to understand how to work in the Korean market and with the Koreans continue to be something that we need to grow more in first. Now we did consider Taiwan as an OECD-like market. Now the issue with Taiwan is that we do not consider ourselves comfortable to participate in the offshore wind projects as of now. So from an onshore perspective, we are talking about 8-gigawatt peak kind of onshore demand and capacity. So in going into any new market, we clearly want to capture 2, 2.5 gigawatts that will obviously give us a very large footprint in Taiwan, which, at this point in time, may not be that comfortable relative to the position that we have in China. So while Taiwan continues to be a possibility, but may not be a priority market for us to go into. So then naturally, Australia as an OECD market open up itself. And Australia, clearly supportive of the energy transition ambitions, legislated 2050 net zero, clear intent against capping out coal generation and looking at coal closures definitely suits our strategy of doing so. And then also as a merchant market, looking at market entry strategy via a gentailer model, which is similar to what we are doing in Singapore is something that we can understand. And also, we are looking at -- and when we spent the last year or so studying the Australian market, we are also convinced that the gentailer -- the integrated retail and generation portfolio operations allow us to quite be in a position to match generation against demand characteristics and hence, drive alpha, as I will put it that way, right, higher-than-expected ROEs. So then that led to the decision to come into Australia as well as Alinta. So it was a fairly considered approach when we look across at how our portfolio -- how we would intend for the portfolio to be constituted, taking a 5-year view. And also, we did methodically consider across all the target markets, and we believe that Australia is the right one for us to go into at this point.

Yes. In a nutshell, since, Mayank, you joined a little bit late, really, it is wanting to have a different -- improve the risk profile, right, or diversify and this is a AAA country, and then a clear regulatory frame and also a clear pathway into net zero, very aligned with the energy transition. And at the same time, it provides this very sizable pipeline that we can grow into in terms of renewables and firming technologies. So we need to have that profile. We need to have the size and this market and this target actually giving us that growth market that we're looking for that can allow us to engage in the next phase of our growth, right? In the last 5 years, we've grown into a certain size. And then now, in order to continue that exciting growth path, we want to double in 5 years and all that, then we need to look for new markets. And Australia presents that opportunity for us to grow into a new market with a very conducive, I don't want to say attractive, and I don't want to say -- maybe complementary is the right word in terms of the profile that you just described yourself that from many dimensions, it actually complements our portfolio very well. So I hope that, in a very lengthy way, we went around the region. But to give people a sense that it wasn't opportunistic just like that, it was actually a case in which we were -- it took Eugene and Alex, we started hunting around in Australia since, what, February or April. April.

Yes, it's right.

Mayank, are we good?

Kim Yin, just a follow-up on that. I think that's a very good detailed explanation of how we go through -- went through markets. In terms of right to win for Alinta, what do you see as the biggest strength on right to win? Because I think it's the fourth largest integrated utility player there. And also, I think in terms of risks [Technical Difficulty] has always been ahead of from a regulatory perspective and utilities versus the rest of the world. How do you assess risks versus your rest of your portfolio when you think about Australia now going forward?

No, the -- you were breaking up just now, but I heard 2 questions, right? One is for Alinta's right to win and the other one is more sort of Australia as a risk profile within the Sembcorp portfolio. And so correct me if I'm wrong. So...

That's correct. Yes.

Yes, Australia right to win, I think it crystallizes maybe 2 points. One is the management, right? This management has proven to be exceptional and be able to perform, right? And they've been together for quite a while now. So the quality of the management is important because the market is complex and you need good quality management to capture the opportunities. So that's one. The other one is that the asset portfolio of this business, again, if you look through the asset base in terms of the generating assets, and you look through the customer base in terms of where they are, they actually are in a very good position to capture more market share from a customer perspective in the East Coast, and they are very well entrenched in the West. They are -- as I mentioned just now, you might not have heard it in the East Coast, they are the smallest retailing customer base and yet they have the largest low-cost power generation, right? So that alone is -- so that's one element in the asset portfolio. So in a nutshell, to answer your question, the way we see it as management team is one reason for the right to win. The other one is the way the business has been set up and the asset base that they have -- asset base widely defined, which include the customer base, the assets, the hard assets as well. So that's on the first one. And Alex, do you have anything to add to that one?

No.

Okay. And then in terms of Australia as a risk to the rest of the portfolio, we've been telling everyone that in the first 5 years of our growth, Southeast Asia, China, India, right? So these are all developing markets. And Singapore remains a strong anchor that generates a lot of the contribution, right? Then as the developing markets portfolio grows, it actually also presents a certain increased risk profile. For instance, even though we're doing well in India, the portfolio is dominated by greenfield projects, right? And greenfield projects come with a certain profile, right? Of course, there's execution risk, there is equipment price risk, there is construction risk. But when the pipeline comes online, it will start to become very high returns, right, relative to just buying existing assets from brownfield. But for the same reason, the profile is also such that the cash flow is back-end loaded. The front end is all going in, and then it will take a while for the cash to come out from the tail end. So now Australia is providing this very complementary profile from a risk/reward profile, right? So we -- this Alinta project that we're getting, it is immediately cash generating. It is immediately earnings accretive. It does have a greenfield portfolio, but it's, as mentioned just now, and if you look at the numbers, it's very manageable within itself. We don't even have to put extra money to go in there to fund the growth even with the 10 gigawatt pipeline. And so from developing country, greenfield risk, construction, cash flow profile, developed market, AAA, brownfield, cash generating, earnings accretive, it provides a very nice anchor. And if you look forward 1 year from today, after we close this deal, you suddenly -- if you look at it, the risk and the returns, the earnings contribution profile of this business is so much as a portfolio more diversified and more robust. So my partners here at the panel, have I missed something?

I think that is essentially it.

Do we have a question from Siew Khee?

Thank you. The next question is from Siew Khee Lim, CGS.

Sorry, I also joined late. I may have -- I may ask some questions that I think I was not clear. Just wanted to check on the profitability that you shared, $483 million, how do we actually tie this back to -- if let's say, we were to actually get audited financials account? And how stable is this? And I'll follow up with other questions.

Okay. This $483 million, essentially in the audited financials, there will be disclosures in relation to fair value changes of energy derivatives. So that will be the key difference.

Difference?

Yes, that's right.

How do we look at that? Like is that -- do we have that difference to repeat every year? Or how do we forecast this stability of $483 million with the derivative gains?

Yes. So this $483 million is before the derivative gains, right? It takes out -- essentially for the $483 million, there are actually derivatives mark-to-market losses. So the reported net profit, you see is probably closer to $340 million, okay? So -- but these mark-to-market losses are really dependent on the balance sheet date where the mark-to-market, the losses somewhat like the deferred payment note, the FX changes that we have on our current balance sheet. So these will be dependent on the -- really the derivatives prices on the balance sheet date and the noncash mark-to-market losses. So...

What derivatives are these? Sorry.

These are essentially of 2 key types. One is the swaps where the Alinta could be selling swaps for the purpose of hedging the prices of the retail demand. Some of the peaking assets, for example, the gas assets in Queensland, they would potentially be selling caps, which essentially, they are selling the generation capacity as insurance to other retailers for a certain premium. And if the energy retailers call for them to generate for that at a certain price, then they will have to generate. So you would imagine for a cap, for example, they would have sold a cap at a, for example, market price at $300. So then the mark-to-market gains or losses against the $300 will essentially be at the balance sheet date, what the spot prices would be against the cap price. So that's an example of the noncash derivative losses or gains at the end of the year.

Okay. And then I just wanted to just check on the tariff that you -- I understand that the contracts are generally short term 1 to 1.5 years. How stable has the tariff been -- or how has the tariff been 1.5 years ago? And what's your outlook 1.5 years later?

Sure. Besides the tariff -- I'll get into the tariff shortly, but besides the -- because you were, Siew Khee, you were talking about the earnings stability, right? So I just wanted to give you a bit more color there since you joined a bit late, right? We actually talk about the getailer, which is the generation retail customers. And obviously, with 1.1 million customers, that provides a bit of a natural hedge in terms of earnings. So that's one. And Eugene mentioned about the hedge, which basically Alinta is long in generation. So they do sell swaps, right, which is to lock in the price, which is essentially similar to our PPAs, except that it's 18 months in nature, not 10 years. So that's the second one. In terms of growth and in terms of tariff, what we have seen historically is that every time there is a decommissioning of a coal-fired power plant, it takes that supply out, right, of the supply-demand balance, and we see a rising trend in the tariffs. And so given where Australia is in terms of the carbon transition or energy transition story and plans and going towards a 2050 net zero target, more and more of the coal-fired power plants will be decommissioned. And we believe, going forward, if history is a good predictor of the future, we do see upside in the tariff as well. Hopefully, that answers your question, Siew Khee?

Okay. I'll try to absorb it later. And also just on EBITDA margin. So before the acquisition, group margin was 31%. But after it actually dropped to 24%. Just wanted to hear your thoughts on you're willing to actually forgo this? Or do you see margin expansion going forward?

Sorry, Siew Khee, your 24% and 25%, you're referring to EBITDA margins of Alinta?

Yes. No, I think group.

Okay. I think for a group perspective, Siew Khee, the focus is less on EBITDA margin in itself, right, but more on ROEs. That means capital deployment and acquiring an asset and how that enhances our ROEs. So again, EBITDA margins, even in our gas business in Singapore, it could be variable, right, because it really depends on the -- for the gas that has been contracted downstream, it really depends on where the index are, right? Because if the index are higher, it may just imply a higher EBITDA margin simply because my spot spreads are actually fixed, right? So to a certain extent, the group EBITDA margin is also not necessarily a good predictor of economics or earning capability of the Sembcorp business. So we are always more focused on the ROE. I think the point that we are trying to make where we show the EBITDA margins of Alinta is to highlight that consistently, Alinta has been able to leverage on its very available as well as a cost effective generation portfolio to generate earnings, right, relative to its peers, right? Because when you look at its average EBITDA margins ranging from 15% in 2023 to 19% in 2025, where it has been expanding. It has been ahead of its peers. But for Sembcorp as a group, right, as I've always said, my focus is always on the ROE. That means it is the capital that is -- that I have deployed for the group. Ultimately, what does it drive in terms of the net income returns for us. So it's probably less about the EBITDA margin, but more for the ROE.

Sorry. So why did -- I'm not sure whether you shared, but if you shared, I'll check in with my colleague later. Why is the Alinta's margin better than peers? If you shared, it's okay. I'll follow up later.

Okay. I kind of mentioned that. The key element for the stronger and more stable actually margin performance really is because, number one, they have the highest generation length. That means they have the most capacity for the purpose of generation relative to its peers, right? So they are less likely to take shocks in relation to electricity prices. That means they don't have a situation where they have electricity demand downstream and they actually don't have enough capacity to generate for it themselves, and they have to buy electricity from other people. So Alinta does not run into that kind of situation. They are always generating their own electricity. So because of that, the generation fleet is, number one, very available, right? Average availability for their generation fleet is over 90%, which is very strong relative to the industry. So which means that they are always in a position to generate for their retail as well as C&I and wholesale customers. Then the second thing is that when we look at the average short-run marginal cost or essentially the cost of generation, right, for their fleet, they are one of the lowest. So for example, Loy Yang B, the coal plant, the average short run marginal cost is about $20 to $25 per megawatt hour, which is one of the lowest relative to the other gentailers. So that allows them to generate more effectively and more profitably relative to other GLS. So these are the reasons why.

Okay. I assume other competitors also have coal availability. What sets it apart? Unless we're saying that because the rest has less coal availability or I mean, if everybody is integrated, wouldn't everybody face the same cost structure as well as generation capacity structure?

Siew Khee, I think there are a few distinctions. You rightly pointed out that other competitors also have coal-fired power plants. Just wanted to highlight a few points, which sets Alinta apart from competition. So one, as Eugene pointed out, very cost competitive. And one of the reasons why it's cost competitive is also because it's one of the newer coal-fired power plants, right? There are older ones. Second, reliability. Third, high availability. These are things that Eugene highlighted earlier. The fourth, actually, if you look at their asset base, it's also very flexible. So the coal-fired power plant is able to turn all the way down to roughly about 40% and not all the coal-fired power plants are able to do that. So there are a few of these distinctions, which set Alinta apart.

Okay. And my last question is, they currently have 3.4 gigawatts and then we want to actually grow to 10.4 gigawatts, and we didn't really talk about the time line, right? And I know that, Kim Yin, you mentioned that it will not impact your dividend payout. But just wanted to just like realistically, when we look at the website, they say that they are growing 4 gigawatt of RE. But now we are saying that they have a 10 gigawatt growth plan. Can we be a bit more like specific on generation how many gigawatts will you increase per year?

On generation this slide actually would also tell you, right? The development cycle in Australia, obviously, is a bit longer than it is in China or India. And if you look at it, right now, they have got 400 megawatts that is under construction and 1.8 in the pipeline. The other 8 gigawatts, those will take much longer. So at any one point in time, even if the 1.8 is all, let's say, half of it is under construction, you're still talking about 1 gigawatts, right? So if I have to put a thumb against it -- a thumb rule against it, that's the kind of numbers that I will look at. But I hesitate to -- I think that thumb is very, very rough thumb, right? If we see a good project, there's no reason why we wouldn't want to go in. But we would want to do it -- and this is 100% subsidiary, as I mentioned, just now, and we will only do it if we are very comfortable. But this will be -- this will all be done in consultation with the Alinta management, and we think the pipeline is -- a good part of it is very real. And it's only, as you rightly point out, the matter of time, how you pace it out and then how you make sure that the risk reward meets the -- both Alinta as well as the shareholders' thresholds. And I believe those are quite well aligned.

Sorry, I just have one very pointed question. I just ask, please don't be offended. So how do we actually answer to shareholders on our brown to green strategy and now adding some brown into our portfolio?

As I said, we approach this. We firmly remain -- position ourselves as a player in energy transition. So the -- and we are attracted to this opportunity precisely because it has a big greenfield pipeline that will allow us to support the energy transition, to do the transition, right? And maybe you will not hear in the earlier part when I mentioned at the end of the day, this season with demand growing so strongly in many markets, because of digital, because of AI data centers and what have you, electrification included, then the balance between energy security, affordability and availability as well as sustainability will have to be a much more nuanced one, a more balanced one. In fact, in many markets, I'm sure you know, security and affordability has been put in priority even to sustainability. So as a responsible energy transition player, what we are seeing is that we are coming in here to support the transition in the relevant market. Australia is firmly on the path to a 2050 net zero. They have legislated that. They have some interim targets. And then we are in a better position than arguably the outgoing shareholder and many other incumbents to support the transition that this market as well as this player, Alinta, is undergoing. And then -- so -- and we do that by building out the greenfield portfolio. So as we build up the greenfield portfolio, the carbon intensity of this portfolio will reduce, right, even as the brown continues to be there. And over time, the brown will start to -- as the more competitive green sources come in, the brown will, over time -- may take a while, but it will over time reduce. So that's one dimension. And then the brown to green strategy, we have always said that, I'm taking the brown cash flow to fund the green. And this one fits straight into that the brown cash flow coming in from the portfolio will be used to fund the green. And we are emphatic about we're not going to build another coal plant, and we also will not be investing in another stand-alone coal plant. We look at this as a portfolio. We didn't go into this to buy the coal plant. We go into this to buy a portfolio that enable us to transit by building the green portfolio and hopefully, over time, help the community decarbonize in a sustainable, inclusive and responsible manner. A whole bunch of it, but I guess I'm just emphasizing that we are not reversing -- this is not a reversal. We are not going back into coal by itself, right? It is because it is part of our portfolio. And just now we explained to Mayank, when we look at the market, each of these, they all come with a certain portfolio. And we -- again, we approach this from a portfolio perspective. All good? Siew Khee, are we good? Yes.

We have one more question from Rachael Tan, UBS.

Rachael, yes.

This is Rachael from UBS. Sorry, I am also once again late. So I apologize if they've asked this question before. You mentioned that you still have some headroom to fund the growth that you need. Now that you've made this Alinta announcement, what are the characteristics of future assets that would appeal to you? And how would you make sure that management bench strength is not affected?

In terms of the -- if I may, can you repeat the characteristic of the future -- future assets that may appeal. I think we continue to -- the 3 growth areas that we articulated, those continue to be very relevant, gas and related services, renewable energy as well as integrated urban solutions. Each of the 3 growth areas continue to -- we are not changing from that, right? And so -- and that's why this particular acquisition is undertaken by Alex and his Renewable East site to tackle this, right? So the assets doesn't change, but now we are opening up into a new growth market so that we have more dimensions and opportunities of growth into the same areas. Hopefully, that addresses that first part. Bench strength, and you know that in the earlier part of this year, we reorganized ourselves into 3 groups -- or 4 groups, GRS, gas-related services, Renewable Energy East, Renewable Energy West as well as Integrated Urban Solutions. And we've got teams organized now fully functioning team in each of the groups. So the bench of SCI management is really chasing some of these markets quite independently almost, right? So the bench strength in that sense is not diluted. For instance, Alinta, right now, Alex is leading the charge into Australia. Now even as the activities in China has slowed down. You may know that Alex earlier has been leading our Chinese business when it was a very high growth pace. And now even our Chinese team that worked under Alex, they have matured. And when I travel there, they are all ready to come out and support activities in the other parts in the Renewable East region. So I think we are at the -- in fact, I'm glad you asked this question because we are at a place in which I want to say, after the last 5 years, the team has matured and the bench has strengthened. And then now we are at a very good place to -- even as -- when we come out here to do new markets. And that's why we feel, on the one hand, we are comfortable going into a new market. For the last -- first 4 years of our journey, you may have heard me saying -- some of you would have heard me saying, hey, look, I didn't enter into a new geography at all. We are always into the places in which we already have boots on the ground. Now with the team having matured and with the types of businesses, the 3 lines of businesses, we gain capabilities, the bench is stronger, now we're very confident that we can come out here. So certainly not diluted.

There are no further questions on the web.

Okay. So if I may, just to sum up, this is an opportunity for us to enter into a new growth market, a very complementing risk/reward profile into the Sembcorp portfolio. And I want to emphasize that we would -- it's very accretive that it doesn't -- we are very comfortable with the balance sheet and the cash flow generating nature of this business. We are very comfortable that -- and confident that we can maintain the dividend absolute amount as well as the payout ratio, if not to grow it. And most importantly, there are no plans to do any equity raising because we don't need it, and we are comfortable with the balance sheet. So if I may leave you with those few very important points that I want to emphasize. So thank you very much. I know that it's short notice. Again, it's late. And this is December, but sometimes opportunities do not fit into people's holiday calendar very well. So I apologize if I have disrupted any of your work and your lives. But thank you for taking time to hear us out. And we will follow up later with -- if there are further questions and where we could help to provide a clearer guidance on some of the matters that bothers you. So thank you very much again. Have a good night. Okay. Thanks for your time. Have a good night. Thank you.