Sembcorp Industries Ltd (U96) Earnings Call Transcript & Summary

Ladies and gentlemen, good morning, and welcome to Sembcorp Industries' First Half 2023 Results Presentation. A warm welcome to viewers tuning in via the webcast. I'm Xin Jin from Group Investor Relations and Media Communications. Before we begin, we would like to request for all mobile phones to be switched to the silent mode please. If you feel unwell, do approach our staff for assistance. Thank you. The members of the panel for today's presentation are Group President and CEO, Mr. Wong Kim Yin; and Group CFO, Mr. Eugene Cheng. There will be a question-and-answer session after the presentation. [Operator Instructions] Without further delay, I will now hand over the time to Kim Yin to begin the presentation. Kim Yin, please?

Thank you, Jin. Good morning, and welcome to Sembcorp Industries for us to deliver this first half 2023 results. On this first slide, for the first half of 2023, the group delivered a strong set of results. Turnover was SGD 3.7 billion, 6% lower year-on-year, while EBITDA was $993 million and this is 59% higher than the same period last year. Adjusted EBITDA was $1.1 billion, an increase of 50%. Net profit before exceptional items increased 55% to $602 million, while net profit was $608 million, 56% higher year-on-year. Earnings per share, EPS before EI was $0.337 and EPS was $0.0341. Annualized group ROE before EI was 26.6% and group ROE was 26.7%. With this as our results, the Board has announced an interim dividend of $0.05 per ordinary share, which will be paid on August 22, 2023. Eugene will give you more details on the financials later. In the meantime, let me go through the key highlights of our business segments. Under Renewables, we continue to make good progress and maintain momentum in growing our portfolio. We added 2.1 gigawatts in the first half of the year, mainly through organic growth, increasing our gross renewables capacity to 11.9 gigawatts. Renewables now account for 61% of our group energy portfolio. During the period, we completed 3 acquisitions that we announced last November. This includes the 583 megawatt Vector Green portfolio in India, the 795 megawatt portfolio through 49% owned Beijing Energy Sembcorp and 892 megawatts portfolio through 45% owned Xingling New Energy. Our partnerships in China have enabled us to successfully scale up our renewables' footprint organically. Since the acquisition of SDIC New Energy, we have added a further 1.7 gigawatts to the portfolio, including a 750 megawatt concentrated solar power project. Our joint venture with SDIC subsidiary, Xingling New Energy, also commissioned its first 100 megawatt, 200 megawatt hour energy storage project in China. This is testament of our ability to leverage our partnerships, which are platforms for us to grow our sales further. In March this year, we were awarded our first greenfield renewables project in Oman. This is a 500 megawatt build-own-operate solar plant, which complements our existing capabilities and track record in the power and water desalination sector in the region. The plant will be operational by 2025 and will be backed by a 20-year power purchase agreement. Just a little bit more details on our expanding portfolio in China. As mentioned earlier, we are developing new projects with our partners. 2 notable projects to highlight. This was secured in first half 2023. The first one is a 750 megawatt Concentrated Solar Power Project. This is in Gansu province, right? And the second one is the 100 megawatt Battery Energy Storage System in Hunan. The Concentrated Solar Project in Gansu, they call it CSP is a project that we are developing in our JV platform with SDIC. It consists of 640 megawatts of solar PV and 110 megawatts of concentrated solar power or CSP again. The CSP plant serves as an energy storage component of an integrated solar project. In a CSP plant, the sunlight is reflected by mirrors and focused on the fluid heat receiver. The heated fluid is pumped to a heat exchanger where the fluid transfers its heat to water, turning it into steam. This steam is then used to generate electricity through a steam turbine generator. This project is expected to complete in 2024. The Energy Storage System in Hunan is our first organic growth project through our joint venture, Xingling New Energy. Hunan is located in Central China. It's one of the country's power demand centers. The bundling of utility scale solar or wind projects with battery energy storage systems, either through self-development or leasing of ESS has become a requirement in Hunan for grid stabilizations as renewables grow. Our project successfully achieved full capacity connection to the grid in June and its entire leasing capacity will be allocated to renewable projects owned by our partner, Wuling Power. We expect to sign a 20-year capacity leasing contract from 2024 onwards. These batteries will also provide ancillary services to state grid. These 2 projects highlight our ability to expand with our partners. We continue to explore other potential projects as energy storage becomes a requirement to make the local grid more resilient. We move on to Integrated Urban Solutions. In the first half of 2023, we achieved higher urban land sales at 85 hectares compared to 42 hectares in the first half of 2022. And land sales in Indonesia have increased, mainly driven by higher manufacturing activity after the easing of COVID-19 travel restrictions. Land sales in Vietnam was lower due to pending approvals from local authorities. In China, the property market continued to be challenging. Net order book remained healthy at 292 hectares compared to 288 hectares in first half 2022. Earnings contribution from the waste business in Singapore was lower due to the cessation of one of our public cleaning contracts in the second half or rather the second quarter of 2023. We move on to Conventional Energy. Under Conventional Energy, we secured 2 notable long-term power purchase agreements in Singapore, an 18-year PPA with Micron Semiconductor to supply up to 450 megawatts as well as a 10-year PPA with Singtel with an estimated annual contract value of $180 million. These contracts have allowed us to improve the earnings visibility of our assets moving forward, particularly for the Singapore market, which was more merchant in nature. Compared to the previous year, our gas portfolio, which is contracted for more than 5 years, has increased to 48% from 39%. Including the Micron and Singtel PPAs, 96% of our gas portfolio capacity is contracted, providing earnings visibility for the segment going forward. We also augmented our existing natural gas supply with a $1.9 billion gas sales agreement in June to import natural gas from Indonesia. Delivery is expected to commence from 2024 for a tenure of 4 years. Separately, as part of our asset renewal plan, we are developing a new multi-utility center and a 600 megawatt hydrogen-ready combined cycle power plant on Jurong Island. Powered by a new advanced combined cycle gas turbine, this facility will be among Singapore's most efficient cogeneration plants capable of blending hydrogen at up to 30% of total fuel feedstock when operational by 2026. As at the first half of 2023, this is where we stand against our 2025 targets that we announced in 2021. Sustainable solutions comprising the renewables and Integrated Urban Solutions segments remain at 27% of group net profit, similar to end 2022, and this is due to the strong earnings contribution from Conventional Energy segment. Net profit from the Sustainable Solutions increased 20% year-on-year with Renewables net profit increasing by 54%. And in terms of our renewables target, we have achieved 8.6 gigawatts of gross installed capacity and a further 3.3 gigawatts of gross installed capacity under our portfolio. That takes our total to 11.9 gigawatts expected to be achieved well before 2025. And we will continue to look for opportunities to grow this portfolio moving forward. Urban land sales in first half 2023, were at 85 hectares as mentioned just now. We expect land sales, particularly in Vietnam to pick up in the second half of the year. But as mentioned, it's still contingent upon obtaining local authorities' regulatory approvals. And we continue to focus on growing our land bank to ensure a steady launch pipeline under urbans. And with the divestment of Sembcorp Energy India Limited, SEIL, we have met our 2025 carbon emissions intensity target ahead of time. Excluding emissions from SEIL, which has been removed from our Scope 1 and Scope 2, first half 2023 emissions intensity continued to reduce to 0.29 from 0.31 tonnes of carbon dioxide equivalent per megawatt hours in 2022. So with that, let me ask CFO, Eugene to take you through the group financial review. Thank you.

Thank you, Kim Yin. So, it gives me pleasure to take you through highlights of the details of our performance in first half '23 this year compared to first half '22 of last year. So, in terms of headline key financials, our turnover declined slightly by 6% from about $3.9 billion last year to $3.7 billion this year. As Kim Yin highlighted earlier on, the key reason for that is a reduction in terms of gas revenues out of Singapore, of which I will elaborate on later. Now, in terms of EBITDA share of results of associates of JVs, net of tax, summing up to our adjusted EBITDA, our adjusted EBITDA has increased by 50% from $759 million last year to $1.1 billion this year. This increase in EBITDA is largely driven by a strong performance in our Conventional Energy segment as well as contribution from new acquisitions that came through in the first half of 2023 this year, as well as a full half contribution by a couple of acquisitions that were completed in the first half of 2022 last year. So those elements contributed to our net profit before exceptional items, increasing by 55% from $389 million to $602 million in the first half of 2023. Now, taking into account our discontinued operations, which is related to SEIL, our India coal business, of which the divestment took place in January of this year, in first half of 2022, the coal business contributed $101 million in the net profit. And in relation to the divestment of SEIL, you would have recalled that I have guided at the end of December 2022 results announcement that we would be likely realizing a loss on disposal as a result of the flushing out of our foreign currency translation reserve in relation to SEIL. That has come through, and that has resulted in a negative $78 million. So, net profit for the period, taking into account discontinued operations is $530 million compared to $490 million. Now, if we look at our EPS before extraordinary items, we turned in $0.337 for the first half of '23 versus $0.218 for the first half of '22. And our annualized return on equity before exceptional items is 26.6% for the first half of 2023 compared to 18.3% for the same period last year. Now when we look at the group turnover, when we look across the different segments, the Renewables turnover increased by 71%, largely as a result of full half contribution by the HYNE portfolio that was completed in May of last year as well as the completion of the acquisition of Vector Green, which took place in the earlier part of January this year. We also saw the contribution from the Singapore BESS, the energy storage system, which came online at the beginning of this year. So that has contributed to the strong turnover increase for Renewables. For the Integrated Urban Solutions, turnover has declined slightly by 5%. And this lower turnover is largely a result of a cessation of a public cleaning contract in our SembWaste business, essentially the Central South district, which we have already highlighted last year. In terms of our Conventional Energy business, turnover dropped by 13% from $3.3 billion to $2.9 billion. The key reason is because we have a decline in gas sales for those that are indexed to HSFO. You would have seen that average HSFO has declined from $610 or so in the first half of last year to $420 this half. But in spite of the decline in revenues, the margins in relation to the gas sales is still preserved because our gas costs against these gas sales are not fixed, obviously, right, else it wouldn't be hedged. And hence, we still realize the margins, the same expected level of margins from the gas sales. Now moving to the next slide, where we look at the group net profit. Our Renewables net profit as highlighted earlier up to this point, has increased to 54% from $76 million to $117 million, largely as a result of the completion of all the acquisitions and the new projects coming online as well as the Singapore Battery Project coming online. Now you may ask why did the net profit for Renewables increased slightly lower than revenues. The answer to that is really because of intangible -- noncash intangible amortization that came through as a result of the acquisitions. So, the noncash intangible amortization was about $13 million for the year period. Now for the Integrated Urban Solutions segment, net profit has declined by about 23% from $62 million to $48 million. The key contributory factors was India urban business itself, we saw certain weaknesses in the China property market. And in terms of the Vietnam business, we expect the regulatory approvals to come through in the second half. So, we do expect the earnings, particularly in relation to the Vietnam urban business to be a little more back ended through this year and that will come through in the second half. But of course, that is mitigated by higher land sales that was recognized in Indonesia. In addition to those elements that impacted the urban business, we also saw lower contributions in our SembWaste business. And as mentioned earlier on, it is largely due to the loss of a public cleaning contract in Central South. For the Conventional Energy business, we saw our group net profit before EI increased from $296 million to $435 million, an increase of 47%. And this is really driven by the strong power prices that is achieved through ensuring our assets are optimized. Our gas across portfolios is optimized to be able to capture the strong power prices, particularly in the [ urban ] market. Now of course, going forward, our Singapore portfolio would be a lot more contracted, but I would elaborate it in a subsequent slide. Now, in terms of corporate costs, we did see an increase, a significant increase in corporate costs. Now this is mainly due to an increase in corporate level interest costs of about $60 million, of which slightly less than half of that is for the purpose of funding the acquisitions that closed in the first half of this year as well and we also saw some base rate increases as a result of the 29% floating rate portion that was exposed. In addition to that, we also saw a corporate level cost increase in relation to the completion of certain strategic initiatives as well as a certain cost in relation to the execution of certain M&A transactions. So all in all -- I forgot to mention about the DPN income. Of course, this is the first half where we recognized the deferred payment note income that is coming through from the SEIL sale. So, what we have recognized in the first half of this year is $122 million, which comprises of 2 portions, $84 million that is coming from the interest income and about $38 million, which is a result of positive ForEx gains due to a positive movement of the rupee against the Sing dollars. So all in all, we have that accounts from a segmental perspective, our net profit before exceptional items of $602 million, a 55% increase from $389 million. So now this slide basically -- I wouldn't touch too much on this. It essentially pictorially explains the narrative that I have provided earlier on in terms of how our net profit has progressed from $389 million to $602 million for the reasons that we have discussed. So, if we move to the next slide. Now I just want to touch a little bit about our Conventional Energy portfolio. As you have heard, Kim Yin mentioned earlier on, where we stand as of 30 of June this year, right? 48% of our conventional gas portfolio capacity is contracted for more than 5 years. And 48% of that is between 0 through 5 years and only about 4% of that is exposed to spot. Specifically for the Singapore capacity for the first half of this year, right, what we have seeing is that between January to July of this year, our level of contracted positions was a little lower for a couple of reasons. Number one, we had a takedown of one of the GTs. And also, this is in view of the long-term PPAs that is expected to be signed and coming in from the second half of this year. So naturally, because of that, particularly in the second quarter of this year, we were able to take having the assets up, we were able to capture a meaningful amount of pool gains. But going into the second half, as you can see, which is the darker green portion of the shaded area chart, our expected contracted capacity would increase markedly again, and we expect to see slightly over 2/3 of our capacity contracted underpinned by the long-term PPAs as well as the 1 to 3 years retail contract. We expect this contracted position to persist not just through the second half of this year, but essentially, the philosophy to carry through into 2024 and beyond as well. So what does that mean for us is that we do expect our conventional earnings to be a lot more stable. And in addition to that, there were concerns about how the potential TPC may affect us. But as we go -- look ahead in terms of the level of contractedness of our portfolio and the length in which we expect it to be increasingly contracted, we do expect the impact of TPC on our Singapore conventional earnings to be much muted. So, if you look at the next slide, we talk about our group capital expenditure. Total capital expenditure and investment for the first half of 2023 is $875 billion. Of which the bulk of it is really invested in renewables, almost 94% of that. And in the Renewables segment, the CapEx is really largely related to wind and solar projects in India and Singapore as well as for battery storage in the U.K. Now, the equity investment portion for the renewables pertains largely to the acquisitions of the renewable portfolios in China as well as India. And when we look at the next slide, which highlights our group free cash flow position, we are quite pleased to see that our cash flow generation ability has increased in the first half of 2023 as well. Essentially, our cash flow from -- net cash flow from operating activities is $742 million and a significant increase from $566 million the year before. Now if we take into account what we consider as a stay-in business on maintenance CapEx, free cash flow is $791 million for the first half of 2023 compared to $593 million the year before. So when we look at our group borrowings and our capital position, as of 30 of June, we have gross debt of $7.5 billion, yes, an increase of approximately $400 million compared to 31 of December, the year before. Of course, the increase in the gross debt largely is to fund the completion of the acquisitions that took place in the first half of this year. Total equity increased from $4.2 billion to roughly $4.8 billion, resulting in total capital increasing from $11.2 billion to $12.2 billion. Now, in terms of our cash position, we saw cash reducing from about $1.3 billion to $882 million. The reason for that is because we were freeing up a lot of the excess cash within the countries to part fund the investments that we are making in the Renewables segment. So the balance of that will help us manage a negative carry in terms of drawing down too much debt for funding the acquisitions. But all in all, we are quite pleased to see that our leverage ratios have improved markedly. On an annualized basis, our gross debt to adjusted EBITDA improved from 4.5x to 3.3x. Our net debt to adjusted EBITDA improved from 3.7x to 2.9x and our coverage ratio is essentially EBITDA to interest improved from 4.2x to 4.8x and adjusted EBITDA to interest 5x to 5.6x. Now, when we look at our group debt maturity profile, essentially, it has significantly being lengthened compared to 2 years ago. And from a weighted average debt maturity standpoint, where we stand right now is 4.5 years, which is commensurate with where things stood as of 31st of December. Now you would see that within 1 year, we have about $1.4 billion of debt that is coming due. Approximately $260 million of that is self-amortizing project finance payments that ultimately will be backed by cash flows at the project level. So from a corporate debt refinancing standpoint, we have about $1.2 billion. Essentially, all of those debt that is coming due are in the process of being refinanced and we have absolutely no issues with access to capital. In any case, in terms of our available liquidity, we have $880 million of cash on balance sheet plus a free on-demand working capital of $1.6 billion debt totaling to $2.5 billion of on-demand available liquidity that will be more than sufficient to cover that. But in any case, we do not expect to use any of those resources because where we stand right now, we expect the $1.2 billion to be refinanced and all the discussions with our banks and the financing partners is already underway. In terms of weighted average cost of debt compared to where we stood in 31st of December, it increased from 4.1% to 4.7%. Now as explained at the full year earnings announcement, 4.1% represented the average weighted average cost of debt for the whole year of 2022. But by the fourth quarter of December of 2022, our weighted average cost of debt as a result of rising base rates was at 4.4%. So essentially from 4.4% to 4.7%, roughly 30 basis points increase. It's some continued base rate increase in the 29% floating portion. But in addition to that also, we did consolidate some higher cost debt as a result of the completion of the Vector Green acquisitions. We do see opportunities, particularly in the second half for us to put -- lower our average cost of debt from 4.7% to something lower through continued refinancing efforts, particularly in India and also in China. Now when we look at our group liquidity, I've touched on that. Cash and cash equivalents as of 30th of June, we have $880 million. As of 30th of June, we have unutilized committed facilities of $2.5 billion. But as of August of 2023, the committed unutilized credit facilities has fallen slightly to $1.6 billion. The reason for that is that we have one committed RCF facility that was still benchmark on the older SOR regime. And as we all know, term loans that are benchmarked against the SOR, right, is expected to be transited to SORA. But given that this particular RCF would have matured in August of this year, right, we have decided not to transit that RCF from SOR to SORA. So, we have kind of allowed that facility to lapse but we are in the process of redocumenting that $850 million. So we do expect to maintain our committed RCF facilities. So, if we go to the next slide to talk about the outlook that we expect to see into the second half. Essentially, our strong performance in the first half of 2023 is driven by the Conventional Energy segment. We saw higher power prices and also increased operational capacity in the Renewable segment as a result of the commissioning of new projects as well as acquisitions that we have made. Now moving into the second half, we do expect an increase in our contract positions, particularly with longer tenure PPAs. We will expect our Conventional Energy segment to provide a stable earnings profile into the second half of the year. Now for the Renewables segment, we expect that to increase for the full year, right, especially with the contributions that has come through from the completed acquisitions. However, as you all know, when you look at the seasonality of our historical earnings, second half of the year for the Renewables segment is traditionally seasonally lower than the first half. Particularly for the urban business, we expect the full year performance to be dependent on the pace of the regular approval -- regulatory approvals that will come true for Vietnam in the second half and possibly property market recovery in our countries of operations, particularly China. But we do -- we are confident to say barring unforeseen circumstances, our full year underlying earnings for the group will be higher than 2022. And we do expect our second half earnings to be better than the second half of last year as well. But of course, notwithstanding the strong performance and the positive outlook, we do recognize that global growth is still -- still -- is projected to slow down amidst high inflation. The monetary policies remain tight, particularly out of the U.S. And as a result of that, resulting in rising interest rates and they still remain potential geopolitical tensions. Of course, these macro factors could weigh down on the global economy and ultimately impact business performance. But nevertheless, as we have always emphasized, we will continue to focus on the execution of our strategy and leverage on our -- on both our energy and urban capabilities to continue to see opportunities to grow in the energy transition. So a couple of developments to note. We do have planned maintenance for our Phu My 3 power plant, approximately 3 weeks in the second half of this year. And that same plant will reach the end of its term of operations at the end of February in 2024. And that has -- that development has been highlighted to the market earlier this year as well. So with that, I end -- oh, okay. Thanks for that, Xin. So I think many people have been waiting for this date. So, I just want to ask analysts and as well as our investors to save the date. We will be conducting our Investor Day on the 6th of November 2023. That's on a Monday. You have a good chance to rest over the weekend, set yourself up for it and update your reports very quickly after that Investor Day. But we do hope to make it an engaging session for you to help us understand what we envisage as targets for the next phase of growth. So with that, I end my presentation and we are happy to take questions.

Thank you, Kim and Eugene. We have now come to our Q&A session. [Operator Instructions] First question, please, from Rahul in the front row.

Rahul Bhatia from HSBC. 3 questions from my side. First, a quick check on the Page 14 slide, the split between contracted and uncontracted capacity in Singapore. Can I confirm you said 2/3 capacity will be contracted from July onwards?

Yes. For the Singapore capacity, yes, that's correct.

And how much was it in 2022?

In 2022, it was approximately about 2/3 as well. But going into second half, it will be slightly above 2/3.

Second, you mentioned about Investor Day on 6 November. Could I request you to share with us 3 or 4 key topics that the management wants to address at Investor Day?

I think we -- in Investor Day 2021, we came out and laid out our 5-year targets. Well, actually, it was only 4 years. It was 2025. And then we say, this is our growth plans. This is how we're going to fund it. This is why we think we believe we have a good chance of succeeding. So, now that quite a number of those targets have been achieved, then it is quite natural for us to say, look, then it's time to revise a 5-year target. So, we will be coming out to tell you 5-year target. The date that we have in mind is 2028, right? So within the 5 years, where do we see Sembcorp ending up, particularly with regard to our renewable strategy, around the green strategy, particularly with regard to how are we going to fund it, right? So that's a question that's always out there. We would also be sharing with you some of the why and the how, which is some capabilities to the extent there is time and to the extent it is interesting to you. So, those will be the main theme. So basically, recasting 5-year target, laying out the growth plan, how we're going to fund it and again, if there's time, what are the key elements to success. Then in the meantime, leading up to 6th November, if you have any feedback, if there are areas in which you think we should cover, please do give us the feedback so that then we can consider putting it into our presentation. So, if I'm not wrong, I think Jin has really reached out to some of you to get that feedback. So, please do that. I'm very keen to hear from you, including also format. If you want to do those visits, you want it to be a 3-day event, I shall oblige and make sure that we fit everybody. But so far, what we're getting back as feedback is that folks, you guys are busy people and you want it like give me the answer right now. It can be done in 5 minutes, all the better. So, we'll calibrate and we'll try to balance that. We also timed it such that it is actually right after our Board strategy sessions, right? So that then we will -- what we will tell you will get the full endorsement and support as an institution coming into the day. That's why it is a little bit later than we had earlier indicated either September, October, but then we put it on in November. And to Eugene's point, you say, instead of a Friday, we put it on a Monday, so a bit kinder on people's schedule over the weekend. So, I hope I dealt with that.

My third question is on Myanmar operations. Could you update us how it is going on? And I recall there were some provisions taken in second half of 2022. So, were similar kind of tests done as part of first half results as well?

For Myanmar, we have performed the same ECL review in -- at the end of the second half. And the conclusion that we stand is that from a risk profile standpoint, it hasn't really changed or deteriorated. So, there was no additional provisions in relation to that. The plant is still operating well, right? The positive thing is that we are still generating, right? And we're still receiving payments amazingly ahead of due date. So, those are -- that's the situation that we're seeing in Myanmar. Of course, we monitor the broad sanctions situation very closely as well. We did note that there were some sanction activity. I mean it's public knowledge where a couple of local banks, right, were sanctioned. We also saw, I think, one of our local banks did close bank accounts in relation to Myanmar Airlines. But I think when we examine the underlying of that, we are quite confident that at this point in time, it doesn't express any deterioration of credit in relation to EPG, our counterparty. So in relation to that, there's no deterioration in risk profile. Yes.

Next question, please.

Just following up on Rahul's questions earlier. The 2/3 contracted, in first -- it was in first half, that's 2/3 contracted, right? So, the slide that you put up for the [indiscernible], the one that you showed. Is that the same capacity that we saw in first half?

No. No, let me put it up for you. Okay? Thanks, [ Yuki ], for the question. It simply means I did a bad job of explaining this slide, but okay, I'll try again. Okay.

Maybe I wasn't listening properly. It's my fault.

Okay. The pie chart on the left, that talks about the contractor capacity for all our conventional assets like Singapore and the overseas IPP as well. Now, this is to give you a flavor that our conventional earnings is actually increasingly a lot more contracted, particularly towards more than 5 years. Now almost 50% of our capacity will be contracted from 1 and 5 years. Now the chart on the right-hand side is specifically in relation to our Singapore capacity, right? Now historically, we are roughly 2/3 contracted through 2022. But what I was trying to highlight here is that for the first half of 2023, you can see in terms of the dark green shaded area, the contract levels dropped down a bit. Now why did that drop down, right? Firstly, we did have a turbine takedown for planned maintenance. We did highlight that at the year-end earnings. The second thing also is that we were in the process of putting in place the large PPAs, right, which were 450 megawatts announced for Micron as well as the Singtel one. So, those will come in to contribute from July onwards. We all know that one is 15 years, one is 10 years. So, we do expect the second half level of contractedness to go back to similar levels of 2022 and slightly more. So that's why it's going to be slightly over 2/3. And because the contracted position now in the second half of 2023 onwards is going to be underpinned more by these long-term PPAs, we are quite confident that our level of contractedness of the portfolio will be maintained beyond 2023 into 2024. Now you also have heard us mention that in the current climate, there are more and more significant consumers of electricity being keen to signing long-term PPAs. So, you would also imagine that we would be looking to contract more of our capacity of such nature as opposed to a shorter-term 1- to 3-year retail contracts. Yes.

The reason why I asked is because you actually expect CE to be stable, even though your contracting portion will actually go up in second half?

That's correct. So contracting go up, the CE earnings will become more stable.

More stable. Just on DPN in India, I mean, the operating profit has been very strong, stronger than I think before we sold them. So, just wanted to hear just some channel check, what's happening there? And what is the receivable that's left as well?

I think post the sale, clearly, from an operational standpoint, that is really left to the management team under the guidance of the new owners, right? So, we do not have operational control. So clearly, we do not drive or have anything in relation to driving operations of the asset. But of course, in our position as a DPN lender, we do monitor their operations on a monthly basis, we do get operational reports. And what is happening on the ground, we do still see earnings stable because they are contracted with PPAs. In terms of receivables, their EMI receivables are still being paid down, right, quite quickly. Every single monthly installment has been met without any delay. So, we are quite pleased to see the receivable situation for SEIL at the ground level continue to improve and be met. So so far, of course, with every period-end, we are also expected to review the cash flow as well as the collectability of the expected repayments of the DPN. And as of 30th of June, we have reviewed those cash flows as well. And the conclusion is that the DPN is still expected to be repaid within its life. And so as a result, there is no fair value change in relation to that.

Can I check how much is left in the receivables? The one that they used to have, the $700 million where we slowly...

It has come down significantly, right? I think because we don't have any operational controls, we -- I'm not privy to talk about the details in SEIL.

Just one last question in terms of the supply and demand situation in Singapore. So we know -- I know that you only have a little bit of exposed to spot. But I just want to draw a reference to what's happening in the Singapore power market, where we actually had half in terms of the USEP prices in July. It's a matter of all gencos not needing to shut down? Or I know you said both, but just wanted to hear your view on what's happening on the ground. Like why you said half? If you need, your reaction from TPC, which you'll say no. But why is it and where are we heading towards second half?

Probably not the expert in this, but the chart that you have in front of you, you can see the -- to your point, it's quite volatile, the USEP, right, going up and down. And we do expect the volatility to continue because demand, if you -- according to EMA, a long-term demand growth could be as high as 4% for the next 10 years, 15 years, right? So -- and if that is indeed the case, there will be shortage with especially some of the older plants in the fleet -- in the Singapore fleets retiring, that's the expectation. Of course, a very big uncertainty is imports from neighboring countries coming into Singapore. Now if those things come earlier, of course, then the gap will be filled. And conversely, if they are delayed, then there will be -- there could be an extended period of shortage. So I can't -- for immediate future, we cannot really comment too much. The longer-term future, you can see the plans that EMA has laid out really is to want to secure reliability and supply for Singapore, right? So that part of it, you can see that. So near term, if it is going to be volatile like this, and I am not answering your question asking why this has happened? Really, it is because the demand supply is actually on the margin already, right? So on the margin, slight changes on the demand side or the supply side, the plant shuts down for shortage spike up in demand, hot weather can actually move prices quite a lot. So it is much tighter compared to, of course, 10 years ago or even 5 years ago. So that part of it, I'm not telling you anything you do not really know. So -- but suffice to say, and we -- I don't want to say we actually predicted all of this. But we've -- that was that knowledge that we have gained from other markets that we know that we don't want to be exposed to this. And that's why we started -- if you look into the market in terms of the players, I dare say, we were the first, who were going out there to wanting to contract long, leveraging on our existing gas and electricity market position to contract long. And what we are very comfortable saying is that now with this type of contracted position, we somewhat insulate ourselves or somewhat is the wrong term. It's actually largely insulate ourselves from the fluctuations coming in, in the next -- certainly, if you look at the chart for the next 5 years, right? For the next 5 years, I'm almost for the entire portfolio, very highly contracted, right? So that is deliberate strategy. And I think that has given us the confidence to come out and say sure, unforeseen circumstances, we feel confident that our earnings stability contributing from CE, conventional energy is much more stable and internally when we do budgets and projections is much more predictable. So that's not answering your question specifically, but the market is tighter, right? In the long run, really big uncertainty is import coming in and also new capacity addition. So EMA is going out there to say look, let's build, right? So that's really what's happening. And in the near term, because of the price volatility, they are saying let's put in a temporary price cap, right? And then, why do quite temporary because they're putting in open cycle picking plants, right? So I do expect that when the open cycle plants are up, then the temporary price cap will be lifted, right? Now -- having said that, if you think about it, the TPC is set at a level, whereby it is in the few hundred dollar per megawatt hour, sorry, level. And within that, most generators would still be able to get a decent spread. So even if the TPC were to come in for the partner is exposed to the spot market, we think it is at a place, where we can still make money given our cost structure, right? So maybe that's the additional comment beyond what you asked. I think that's as far as really we should comfortably talk about. But in the meantime, our official statement is that we continue to support Singapore's energy demand. And we -- as a Singaporean player, homegrown, we will be there and it's a good business for us so.

Next question from Mayank. Sorry, on the right-hand side, I think it's Jenny.

Sorry. Yes.

Hello. Yes. [ Janice ] from The Business Times. I just want to ask Sembcorp had open talks for the sale of its -- potential sale of its waste business and the plant, right? Can -- what are the factors for the failed talks like if you all could elaborate on why the sale didn't go through?

Okay. Can I take that? So we -- yes, indeed. So -- we actually are always looking at the portfolio, right? Sembcorp, we own a lot of things. I don't know whether you know, we actually own the Singapore Mint. I have said that before, some of you might have heard me. And so we're always looking at the portfolio, are there opportunities for us to improve optimize, maximize shareholder value, right? So there were some talks. We actually hired advisers, started the process to look into it. And then usually, we will come out and announce and you know, our style, when something becomes more concrete, then we'll come and tell you, right? Otherwise, they are actually at any one point in time, there are things that are going on. We talk to people all the time. So that particular situation, there was a leak. And given the rules, our hands are compelled, and we are tied, and we have to come out and say something and that people got excited over it, which is fine. I thought unnecessary, but prematurely, it was leaked out there that we were talking to people and prematurely, the outcome of those talks didn't meet our expectations, right? And if it's not going to be good enough, we're not going to do it. So I think if I twisted the other way around, is -- I would say that this actually an example of us not doing things indiscriminately or we are actually watchful of shareholder value. If it is -- if we're not going to -- we will not do it just because we have announced it or it has leaked out, right? There's been so many leaks now. [ There are ] people say we're looking at this thing in India, looking at that thing in over there. We -- different companies have different style and what I want to take opportunity to explain is that we will come out and say something obviously, in accordance to the rules, but then within the flexibility of the rules, we take the position that if it is something that is meaningful and is ready, we will come out and tell you enough about it, right? So in that particular situation, I'm glad, there's opportunity for us to explain. We were forced to come out and say something because there was a leak and it was premature. And sure enough, the thing didn't turn up. We walked away from it because it doesn't do our shareholders any good if we follow through. So I hope, I dealt with that. Thanks. It's Mayank, I think.

Mayank.

Yes.

Yes. So few questions from my side. First and foremost, I think can we get a bit of details around UKPR of how -- because it's a peaking plant. But like in terms of operationally, how things have been and how have been the contribution in the first half compared to what was going on in the last because last year was a great year, I suppose, for UKPR, but how have things normalized there?

Okay. From a contribution perspective, for UKPR in the first half of the year, obviously, from earnings standpoint, it was slightly lower compared to last year, right, given that from the first half of the year, we did see from a weather pattern standpoint, we didn't see as much wind, right? And we have a less wind contribution into the grid, so they need to call on peaking plants and also the demand ultimately for fast response will be a bit lower. But nevertheless, we did see that from a peaking plant standpoint, that was a phenomenon of the weather that we see in the first half of this year. And in the longer term, from a fundamental standpoint, we do still expect renewables penetration in U.K. to grow, right? So we do expect the fundamentals for peakers to remain intact for U.K. But of course, you would imagine from quarter-to-quarter, half-to-half, period to period, it really depends on weather patterns as well. So what we have seen in the first half was a little bit of a low wind for the national grid, and as a result, demand for the peaking type services did fall off a little bit relative to the first half of last year. Yes.

It becomes [indiscernible] an upside. We're lucky in the sense that the entire portfolio is -- we have got strong performance in some of the more -- the bigger contributors are right? So U.K. if it comes in especially the UKPR peaking portfolio, to get as an upside, so.

I think the second question was more in terms of receivables in China and India on the renewable side. How have things improved there? Like can you just talk about that? And how has that impacted your working capital in this first half?

Okay. For receivables in China, I think it is public knowledge. There is a subsidy audit that is ongoing. Subsidy audit has been completed. And what I've been -- what we understand that's happening on the ground is that, I think the central government is a little overwhelmed trying to complete the audit results and getting that out, right? So for us, naturally, across our entire portfolio, the SOEs, as well as our own control portfolio, different projects have went through the audit and different projects or rather what we call the project companies are getting cleared through the audit within the central government schedule. So I think right now, we have not seen any of the projects being dropped off the subsidy list. And we are confident because naturally, we have done our own assessment as well. We are confident that we really do not expect any of the project companies to fall off their subsidy list. So naturally, until the subsidy audits is completed, the collection of the subsidy receivables will be a little slow. But of course, when we look at the payment patterns that come out from the [indiscernible] fund historically, what tends to happen is once they're clear, they are comfortable, then our payments tend to come in a chunky bit. So we see that -- we saw that take place in some of our SOE portfolios. So I think the -- what we would say right now is that we are confident that our projects will not fall off the subsidy list. And from a subsidy receivable standpoint, the timing would be as such. And our historical pattern is such that it tends to be paid out in chunks. Yes.

And India, can you talk about India?

Your question was specifically subsidy receivables in China.

And India as well.

Okay. So for India, it's the good thing. It's that we do have the EMI scheme that has been signed up between -- for the ones with SECI, that's fine, right? There are absolutely no concerns. For the ones that are signed up with discoms, we have the EMI schemes. And as mentioned earlier on, they are dutifully paying down the EMI receivables as well. So we do not see any particular issues for the India receivables.

So really, China is building up, as the audit results are delayed. But in the meantime, we feel like all the necessary documentation and the conditions to fit into the subsidy scheme we have met. So we're waiting for them to complete it. And in the meantime, it's building up, it's not a happy situation, but this is the Chinese government, right? So India is actually, I would say, stable.

Yes. Yes. I would say, stable. No -- at this stage, no reason for concerns.

And the 2 projects that you have been get -- got in China now, like can you talk a bit about how the structure is in terms of PPA pricing, the time lines, CapEx? Anything around that? Can you talk about on those 2 projects?

Well, the...

China CEO, here. So do you mind...

Can you pass him the mic. Can somebody some him the mic.

Yes. So Mayank, you guys are fortunate because...

No, no, behind you, behind you.

We have our SLC members here. So...

Yes. China CEO, Alex.

Mayank, I am -- let me just try to address your question. So typically, the PPAs in China, they range between 1 years to 5 years. So the PPAs that we signed locked up usually last between 3 years to 5 years, that's considered long term. And then once it expires, we renew them. So historically, it has been the case.

On the prices, generally, the PPA prices, they are reference prices, right? They refer to -- it depends on the grid that they are in provincial grid. So you're the expert like you're going to ask this. But the provision -- for the benefit of others, the grids, typically, the marginal plants or the cost setting plants or the price setting plants are the co-plants. So to the extent if the project that we have, which is a renewable project wind or solar has a favorable cost structure relative to the marginal price setting coal plants in their system. Generally, the tariff that we get will give us the margins that we need for the project to be viable. So it is very different than a case whereby I can tell you, I signed a 20-year PPA in Vietnam, that's fixed price, right? And it doesn't matter, but it's the hydro plant cost or the nuclear plant cost. But in the case of China, there's every provincial grid they have their reference prices. So it is quite a regulated price. It's not a merchant price, but it is a regulated tariff that we receive, right? So every time when we go into a project, we always say, "Hey, look, where does this project's cost sit with their -- the -- this particular grid's marginal cost. Of course, also taking into consideration they could also build transmission lines that have import from other grids, right. But generally, China is a big place. There are still pockets of -- you can still work out what is the cost to the grid. So I don't know, whether I answered your question. So contract term, 5 years rolling prices depending on the location and it gets reviewed every now and then. But so far, in fact, our -- if I have to extend ourselves a bit further, Alex, our China portfolio so far has really delivered what we expect and then some a little bit higher than what we expected in terms of returns, right. We've been a bit lucky. We were good partners. So there is good growth, there's organic growth. And then there is also the entire portfolio overall delivering what it was supposed to deliver. Your earlier question was good in the sense that in terms of the subsidy, there is the one thing that's building up the receivable, that's the one thing that if we had to hold something that so far, we're not happy with, that's the one thing, right? But like I say, we have done everything that we need to do to make sure that our projects qualify for those subsidies. It's just waiting for them to finish their audit. And if they have a backlog, we can go in politely fast, but not going to chase them very hard. Yes.

I think, Mayank, the additional point, and we have talked about this before is to again stress that one of the advantages is really the benchmarking the renewable tariff against the [indiscernible] because that gets reset on an annual basis, right? And we know that on the longer-term secular trend, that it allows for to a certain level of inflation that is reflected in commodities to be priced into the renewables as well. So I think it's important to that -- from our perspective. While it sounds like it's an annual tariff. But actually, from a longer-term perspective, right, that in itself gives a certain level of inflation protection into the tariff.

And what would be the CapEx for these 2 projects, the new ones?

We -- from a CapEx perspective, for these 2 projects, we have not disclosed it. So it's probably not convenient for us to share it.

And I think the last question was more in terms of the interest cost that you earlier highlighted. What was the impact of the acquisitions, especially Vector Green in terms of the cost of going from that nearly 30 bps [ per year ] first half versus last year?

Yes. The 30 bps was a couple of things, right? You will recall that I did a bond -- a fixed rate bond, right, in April of this year. So in the fixed rate bond itself, we have already seen 7-year pricing even for green bonds, step up to about the 4.6% range already, right? So we did see interest rates coming up already. So naturally, as we fix some of those rates at the marginal stack up of my interest cost of the portfolio that is starting to pick it up a little bit. Now of course, when we acquire some of these assets, for example, Vector Green, it's kind of like averaging my cost of debt into a more expensive local India debt, right? And then from a project finance standpoint, there's still a process, you will imagine it's probably pushing towards the high-9s and the kind of level of interest costs. So naturally, that will also contribute in uptick a little bit. But of course, the positive thing is that all this together in China, as well in the HYNE portfolio, right, where the average interest costs in there, right, in renminbi terms is in excess of 5%. So these are all opportunities for us to refinance down for us to ultimately bring our weighted average cost of debt down as well. Yes.

[indiscernible] right in front, second row, please.

Sorry, pardon my ignorance. Just referring to this slide over here. When you say contracted capacity, what comes out in the contracts, do you state the selling price? Or do you give yourself the stated margin? And then the contract between like one, Micron and Singtel, are they similar? Or is other variation in between different customers?

Yes. It's the differentiation between merchant and contracts. So this is what we're trying to differentiate here. So when we say merchant, that means you know that in Singapore, there's a wholesale electricity market. Every half hour, the exchange -- the power exchange will match demand and supply and the price is set. So generators must bid they are generating capacity into it and they say, "Oh, I have 100 megawatts, and I want to price it at $50 per megawatt hour. So I will bid for the next half hour, $50 per megawatt hour for 100 megawatts. Now if the clearing price is for that particular half an hour ended up at $75 per megawatt hour, then my 100 megawatts will be consumed, if you had to look at that way, right? So in that sense, every half hour or they're hit, you are -- you don't know how much volume you can sell, you don't know how much price you will receive. So that is price and volume risk is called merchant risk. So what people try to do is that either you are very confident that it doesn't matter, who is setting price, I bid 0, right? I will sure get. So it's a bit like COE. You bid 0, you should get then whatever is the current price, $120,000 for one COE, you're going -- you collect it, then you pay $120,000. But if you bid $121, you won't get it, then you don't dispatch or you don't run. So when we say we -- when we say contracted capacity, we are differentiated -- differentiating the part of our fleet. So let's say, I have 1,200 megawatts of power plants in Singapore, right? Of the 1,200 megawatts, am I taking the entire 1,200 megawatts and bidding into the system, as I discussed to you just now. But if I have a contract, I go to Micron, I sign a 18-year contract. The 18-year contract will have a certain volume in it. We announced 450 megawatts. And we also say that these 450 megawatts will be at this price. Now the price would be -- could be fixed, could be indexed to my gas price, could be indexed to the -- even the USEP price. But we both agree that come what may 450 megawatts you will take, and then there will be this pricing that we are both comfortable with. So by doing that, we're no longer having the uncertainty of volume, as well as price. So that's what we mean by when we come out with a chart and we say a contracted position, we are differentiating that with the position in which it is spot -- spot, the part in the light green. That's the part that we are going into the market every half hour and seeing whether or not we can make good money. Now if you look back into history, this chart again. So in -- between April and July, the system price went with the -- the dark blue line, there was a spike. To the extent I am in the light blue area, which means, I'm not contracted, then I go, and I'm able to get dispatch in there during that time, then I make that high price in the market, right? So one has to decide, do I bet on the market having these spikes and then be not contracted and going there to capture this or do I sign up the contract, which is the darker green part, and then I get a certainty on volume and price, right? So that's the trade-off. And what we are saying by coming out with this chart, we are telling everyone that look, moving forward, given the uncertainty, given the regulatory changes that can be expected to come in, we are taking the position that we rather have certainty than to take our chances in the market. That's really the message that we are sending out. And what -- and from this chart, you can see, we are getting -- we're increasing over time our contracted portfolio versus the spot portfolio, right? And over time, we're also not making those announcements about our contract with Micron, our contract with Singtel and so on and so forth. And there are many, many smaller contracts that we sign up, as part of the portfolio. And that's why then you go to the left-hand side, you see this pie chart. Some of it, the contract is greater than 5 years, some of it is between 0 years and 5 years. It depends on the customer. If the customer is -- have the appetite to only sign 2 years contract, then we sign 2 years with them, right? If it is someone like Micron, who wants a long-term certainty we lock in 18 years, right? So that's -- but suffice to say, if you look at this chart, what we are saying is that at least half the portfolio is greater than 5 years contracted, right, or almost half of the portfolio is greater than 5 years and then the other half, we are contracted to 0 years to 5 years. I hope, I answered your question.

This is a follow-up. Obviously, your margin has improved a lot from conventional energy, probably the same for the other players, as well on the other [ authority ] attending the same -- the same thing. So is the authority worry?

That's why they are putting in the temporary price cap. That's why they are building new open cycle plants. I actually cannot answer your question whether or not they are worried. You have to ask them. I'm worried about Sembcorp, and I worry about Sembcorp being exposed to merchant risk, right? And I worry about Sembcorp shareholders not getting the value from the share price. So looking at the share price when we were talking, when we started this media conference, we were at $5.60, and now we are at $5.58, is something wrong I did in the last 2 hours. So -- so...

It doesn't worth taking.

Not. So I'm trying to make the point, I'm sorry, being a bit -- sorry, I should be more serious. That's really -- I think we -- our job here is to look after Sembcorp and Sembcorp portfolio. And what we do is that then we're telling ourselves, let's not be exposed to the merchant market, taking price and volume risk when we have all our stakeholders riding on it, including our employees. So you can imagine the guys sitting in Jurong Island operating the power plant, 1 day on, 1 day off. And then in the meantime, equipment also taking a little bit of a higher stress if we are turning it on and off all the time, right? So what we think is that we -- our equipment, our crew, our stakeholders, our customers, our shareholders, I think everybody wants more stability, than otherwise, you listen to the question that was asked just now about Singapore market. Folks are worried about volatility, right? So what we're doing is that we're going in there, taking the opportunity of the market to when it makes sense to lock in this contract, so that we have stability of earnings moving forward and more predictable than we can then focus on executing our brown to green strategy. We take the brown cash flow put into the green earnings -- put into the green investments, so that's really what we're doing. Yes. All right. Zhiwei? Yes.

Yes. Zhiwei, please?

I'm Zhiwei from Macquarie. I have 2 questions. First one is on conventional energy, the second one is on interest costs. Conventional energy, you had this nice net margin improvement from about 10% in the second half to 15% in first half, right? I'm curious to understand what was driving like the 5 percentage point increase. As I understand it, from -- in second half, there was more of the contracted position, it was coming in and touch driving up that 10% margin. But at the same time, your [ Phu ] gains in first half '23, so I imagine it will drive a little bit of uplift in the margins, right? So what is the -- how much of the increase of the 5% came from your contracted position versus your Phu gains?

Okay. So your question is that the margin improvement, right? I would say that as you can see from this slide in itself, -- in the first half, right, of 2023, right, our contracted positions, it come down, right? But yet at the same time, we saw that margins go up. So I think -- and if you look at the chart, you did see in the second half, particularly Q2, where USEP prices were high. So clearly, the margin improvement that you would see would largely be attributed in us having the assets in place to capture the upside that we saw in the USEP prices, particularly in Q2. Now, I know -- I must also answer the question for you, Zhiwei. So you're [ saying ], how am I going to think about -- how we're going to think about this in the second half -- second half, right? Now second half, we are largely contracted. Now one way to think about it and one way, I would think about it, looking at the public information, right, then I'll ask myself, okay, what happens if a TPC is in place in the first half and it shaves off those peaks, right? And naturally, we have done that work, and I would be quite comfortable to tell you that if we have to shave off peaks in the first half of the year for us, potentially, the net income impact will be about $60 million, okay? So what that would mean is that going into the second half, right, assuming that with the contracted position and that peaks shaved off, that will probably give you an indication of what the sustainable earnings would look like, okay? See, you're giving me that. So I know you answered it in questions almost. So I just answered that for you because I won't be able to tell you what the spot rates are. So I must -- thought just guide you on how to think about this in relation to what goes into the second half. Yes.

Second question, interest costs. How many bps do you think your bankers would give you to lower your weighted average cost of debt?

How many bps? Dear, bankers -- no, no, I'm just kidding. Now I think in lowering the cost of financing, it is not so much just going to them and say, I want the lowest rent. It doesn't work that way. Now -- but what you would have heard me talk about right now what I'm focused on, particularly in the China HYNE portfolio, right, as well as what's coming through to Vector Green is that it's still pretty much non-recourse project financing type financing structures in there that is pushing up the interest cost. So you have heard that for the control assets in HYNE and Vector Green in this case, we are quite comfortable extending the group credit, right, to go into a corporate staff financing. The benefits, obviously, will be a marked improvement in terms of margins, right? Not -- and that's not because of my treasury hit, Michael, beating up my friends there, we're still friends by the way. It's more from the perspective of changing the debt structure. Now the other benefit, you have heard me talk about moving to more corporate style financing is that it will also remove DSCR type covenants, which tend to restrict fungibility of cash flows and also the need to maintain debt service reserve accounts, right? So using a more corporate staff financing will allow us to free off debt. And then, so we are able to free up a lot of these historically trapped cash, right, for deploy into investments. So actually, it's the way you have seen that we had quite successfully done that. So we pushed to free up, refinance a lot of the traditional project financing structures in the renewable side of things with this corporate staff financing. So because of that, you would see that we have been of the $875 million of CapEx, right? We are able to fund almost [ $400-plus ] million of that with our own cash, cash, the excess cash are sitting on the balance sheet. So which is why you are seeing that we were able to bring cash down from about $1.3 billion right down to about $880 million. And my net debt draw is only about $400 million, right? So that is the advantage of doing that. So overall, apart from bringing weighted average cost of debt down, like, it also reduces a negative carry for me, saw a more efficient use of cash. Yes.

Yes. And if I may just add, Eugene, this is -- you can see that this is a deliberate attempt to manage the debt portfolio, right, such that then, for instance, between fixed and floating, we have chosen to go 70% fixed and in so doing insulate ourselves from further jack ups. Do we talk about the...

Well.

Okay. So I'll just help give me answer the question. Well, roughly 100 bps because we have reduced our floating rate exposure, now roughly 100 bps change in interest costs, which you probably wouldn't see. But if you do see it, the impact on a pretax basis is about $20 million to $22 million, right? For our -- for full year.

Yes. For full year. Yes.

And because we hedge it out, right? So now if we didn't hedge it, if all the wisdom that is circulating in the market in the next year, it's going to come down. So maybe we would benefit from that if we didn't do that, but we have chosen again to take a safer route, right? So that then it's all predictable. Then when we go into long-term projects, we know our cost of funding, and we know, where we need to price our projects, our investments, so that then we can make the margin in between. So this really is -- coming back the point really it's a deliberate attempt to manage this, and we consciously decide to live with a little bit of the carry for a while. Yes.

Okay. We have some questions from the web. I think the first is with regards to urban development. So the urban development land sales have been short of target. What is the plan for achieving our 2025 target? And should we expect the target to be reduced. What's the strategic rationale for continuing to invest capital into this business?

Let me do this in a reverse order. We actually -- much of our urban portfolio is actually under JVs. So we actually didn't have to put money into it. And even in our projections to grow it into the 500 hectares per annum, there wasn't a whole lot of capital from group having to fresh capital to be invested. They're recycling capital at the JV level, yes? So that's the first thing. In terms of the last question. Yes, indeed, it wasn't as -- it didn't grow, as we wanted it to grow, right? So part of it, as we mentioned just now, is due to hardly COVID recovery, not within our expectation. Another part of it is also, of course, in the case of Vietnam, regulatory approvals was not forthcoming. Now having said that, there is always this pent-up nation -- nature to the demand, right? They hold it back, but then the demand is hanging out there. maybe there's a hockey stick quick catch up, right? So that is something that is always on the cards. That's number one. Number 2 is, of course, internally, we have to make adjustments, right? And that's exactly why, we say, look, now is a good time for us to come out by November to tell you what are we going to do about our portfolio and what would new targets be. But the last bit is that should we expect the target to be reduced? No. I don't reduce targets. We don't make it, reduce it and then that means not making it. I don't make it -- I mean, for me, don't make it -- say don't make it -- don't reduce the target and then say, we make it, right? So I will not reduce the target and then claim that I made the target. But so if you are asking me whether or not we'll reduce the 2025 target in order for us to make it, no. Then moving forward, are we -- how do we think about urban, as a business, I'm saying in terms of the new targets and whatever we told you that in November, we'll come and tell you what we're going to do about it, right? So -- and I think I also explained a little bit in terms of the -- of some of the external factors. Those are not excuses, but those are real conditions on the ground that has slowed things down beyond what was expected. But the land is there. You saw that the land bank is being built up. The parks are there. We continue to receive strong demand from the various provinces and the central government in Vietnam. You saw that in a place like Indonesia, where we got KIK, the land sales is just phenomenal, right, much higher than we expected because the country is doing well, right? Now if you ask me, do I expect that to continue into 2025, next year, they have an election. So we wait and see, right? So -- but there is a portfolio, we've got Indonesia, we've got Vietnam because some China -- China property side slow as many of you would have expected. Vietnam, like I say, it is the regulatory approvals. In terms of actual land sales allowing you to -- even after having developed, having signed up with the provincial government and the customer waiting, it takes time for them to actually check the box and allow you to go out the door with the land sales. Those things are taking longer than we expected, but there's some pent-up demand there. In the case of Indonesia, it is booming, right? We wish we had more parks, but they only got one. notwithstanding that the numbers this first half has reflected a strong advance in the land sales in KIK Kendal, right? So that's what I can tell you, and please be a little bit patient. We'll talk to you more about targets in November.

2 questions that are finance related. The first is with the $5 billion EMTN program that is established. Does this indicate that future acquisitions will focus on Europe? And could the person ask -- the person is asking if there is any dividend policy set moving forward?

Okay. Let me answer the EMTN first. Well, the purpose of this EMTN it's allowing us to tap diversified sources of capital. So I would suggest to this person to read too much into it or whether it suggests that I'm going to be investing in euro assets, okay? I think we are quite clear that strategically, our markets of operations are India, China, Southeast Asia, Singapore, right, and U.K. for our batteries and some in the Middle East as well. So no, please do not think that just because I established a EUR 5 billion EMTN, we were thinking of investing in Europe. So the question is why -- what was different about this EMTN. Now this EMTN, its premise on English law, okay? Our traditional Singapore MTN is based on Singapore law. It still allows me to tap a multicurrency, that means U.S. dollars or euros as well. But because it is Singapore law, the pockets of liquidity that could potentially invest in my bonds are a lot more limited. Typically, you will be limited to funds that are more -- be limited to U.S. dollar or euro liquidity for funds that are more in Singapore/Southeast Asia, right? So the broader pools of U.S. dollar and euro liquidity from funds even in Hong Kong or out of Europe, will tend to prefer English law, which is a more acceptable international law. Construction is not very different from Singapore to be honest, but just because of that, it makes it easier to tap those liquidity. So I think that's the reason why we are establishing -- reestablishing the EMTN in this format. It simply means that I'm now prepared to tap and go wider in terms of where I want to look for pools of green or sustainability-linked liquidity. Now then, the question then, if you raise U.S. dollars and euros, does that mean that you are going to make the kind of investments, right? I think not necessarily so. Having the ability to tap these deeper pools of capital, it simply means that I will be able to access in those natural currencies, probably lower or cheaper interest cost on a like-for-like basis, right, in the U.S. dollar or euro currency. But of course, I will always look at it from the perspective of a cross currency, so back into Sing dollars to make sure that I do have that interest cost advantage in doing so. So in general, it being done in the format simply allows me to access deeper pools of capital, but there is no indication of where I'm going to invest, yes. So next question is, if there's a dividend policy set moving forward? I think in relation to how we approach dividend, it is still pretty much what we have always said to our shareholders. Ultimately, we have a balanced and sustainable dividend -- approach to dividends, which we expect it to be a sustainable and growing, right? And recognizing that there could be a variations in our net income, as a result of market conditions, what we tend to do, right, is to focus at a very sustainable level of ordinary dividends, and we tend to use special dividends to reward shareholders over and above the ordinary dividend. Now you would see that historically, I've tend to target around a 25% payout ratio. Nothing suggests that is going to change at this point in time from a full year basis. So, we still retain that approach to dividends. Of course, some people may ask comparable -- in comparison to other list-cos, right? Where does 25% of payout ratio stand? I think from our standpoint, right, we are very, very focused, right, in driving growth in our portfolio, and ultimately, our earnings through a transition from brown to green. And if you will recall back in 2021, we have highlighted that, that will need very, very astute capital management, right? So I think we look at it. We will always look at it from the perspective of when there is excess cash, is it better to continue to drive growth into renewables and transition, energy transition activities or to distribute back to our shareholders. But at this point in time, looking at the secular trends and the growth opportunities presented to us in that space, in the markets that we are in, clearly, growth would still, in my view, be a -- be the better option. So where we stand right now? Probably the benchmark dividend payout still stand at around 25%.

Okay. Any other questions from the floor? Okay. If not, we have now come to the end of today's briefing. Thank you very much, everybody, for joining us.

Thank you. Thanks. Still watching the share price.

Lunch is served at the foyer. So if you can, we'll be very happy for you to join us outside. Thank you.

And if I may, please appeal to you to mark the date 6th of November to the extent if you could be there, very much appreciated. We relish the opportunity to engage you -- to talk about our new plans. Thanks.