Sembcorp Industries Ltd (U96) Earnings Call Transcript & Summary

Ladies and gentlemen, a very good morning to everyone joining us both in person and online. Welcome to Sembcorp Industries First Half 2026 Results Presentation. I'm in Xin Jin from Group Strategic Communications and Portfolio Management. Before we begin, may I kindly request that all mobile phones be switched off or set to silent mode. Thank you. Joining us on the panel today are our Group CEO, Mr. Wong Kim Yin; and our Group CFO, Mr. Eugene Cheng. [Operator Instructions] Without further delay, I will now hand over to Kim Yin to begin the presentation. Kim Yin, please.

Good morning. Welcome to SGI First Half '26 Results Briefing. Let me begin with the key highlights. For the first half of 2026, turnover was SGD 3.8 billion, EBITDA, SGD 768 billion, adjusted EBITDA, SGD 947 million. Underlying net profit was SGD 369 million, and this translates into earnings per share of SGD 0.207 and annualized group ROE of 13%. We completed the acquisition of Alinta in June. We are showing the pro forma financials, and this illustrates the group's earnings profile with Alinta included for the full period of the first half. On a pro forma basis, turnover would have been SGD 5.6 billion. EBITDA and adjusted EBITDA would have been SGD 1.2 billion and SGD 1.4 billion, respectively. Underlying net profit would have been SGD 558 million with earnings per share of SGD 0.314 and annualized group ROE at 19.1%. The acquisition of Alinta broadens Sembcorp's earnings base and increases the contribution from integrated platforms with recurring cash flows. So in line with our outlook for the full year, we are pleased to increase the interim dividend to SGD 0.11 per share, up from SGD 0.09 a year ago. Allow me to take you through the performance of each of the business segments. First, under Gas and Related Services. For the first half of 2026, underlying net profit for the segment was SGD 285 million. Spark spreads were lower in the first half. This was partially mitigated by our contracted portfolio. As of June 2026, 80% of Sembcorp's gas-fired generation portfolio, excluding Senoko's, is contracted for 5 years and above. Our overseas assets remain resilient. In the Middle East, our operations performed well despite ongoing geopolitical tensions. We further expanded our platform in the Middle East through the 2.6 gigawatt Taweelah C independent power project in Abu Dhabi, underpinned by a 21-year PPA and a strong contractual framework. The project will provide long-term earnings visibility and stable cash flows to our overseas portfolio. In the U.K., earnings were lower following the closure of one of our industrial customers. We are actively repositioning the Wilton site to capture new demand from data centers and digital infrastructure. Looking ahead, our 600-megawatt hydrogen-ready power plant remains on track for completion in the fourth quarter of this year. This will enhance our generation capacity and the competitiveness of our generation fleet. During the period, we also secured 150-megawatt long-term power purchase agreement with Micron, bringing our total contracted supply to the semiconductor manufacturer to 600 megawatts. In addition, we announced an agreement to acquire 20% stake in Aster Power, where Sembcorp will have -- will be the sole gas supplier to the Aster facilities. And overall, gas and related services remains well-positioned, supported by our contracted base, integrated gas and power capabilities, and growing demand from AI-related industries. The Renewables segment faced a challenging first half with underlying net profit of SGD 69 million. In China, generation hours experienced weak wind and solar resources. curtailment lower tariffs and the removal of VAT refund on onshore wind projects further impacted the segment. Our focus remains on disciplined execution and value creation within the portfolio. India remains a bright spot with renewables. We have 3.6 gigawatts of projects with high tariffs secured in the pipeline. Today, the group has a total of 6.6 gigawatts of renewable capacity under construction. As this pipeline comes into operation, it will strengthen the portfolio's earning potential and long-term value. With a sizable operating base and a strong pipeline under construction, we are now well positioned to unlock greater value from our investments in the Renewable segment. We move on to Integrated Urban Solutions. The IUS segment delivered underlying net profit of SGD 62 million in the first half of 2026. This mainly reflects the absence of contribution from SembEnviro following its divestment in March 2025, partially offset by improved performance from the water business on stronger contribution from industrial water. Our urban business continued to expand its footprint and build recurring income. In Vietnam, we secured 6 new projects, including the group's gross development land area to over 18,000 hectares across 31 projects, achieving our 2028 target well ahead of schedule. We are also growing our ready-built facilities portfolio. Gross floor area has grown from 134,000 square meters in 2023 to over 1.1 million square meters as of June 2026. This will strengthen the base for recurring income moving forward. Looking ahead, we expect a strong second half from higher land sales. In Kendal Industrial Park, Indonesia, 40 hectares of land sales have already been secured and are expected to be recognized upon handover in the later part of the year. Within the water business, we continue to sharpen our portfolio and focus on areas where we see stronger returns. During the period, we completed the divestment of a municipal water in Qinzhou. This is our second municipal water exit in China since December '25. So as you can see, we remain focused on growing the urban portfolio and its recurring income while optimizing our water portfolio to build stronger earnings base for the segment. For Alinta, the acquisition of Alinta Energy was completed in June 2026, adding a high-quality integrated energy platform in Australia to the group. On this slide, we are showing Alinta's first half performance to provide a clearer view of the strength and earnings capacity of the business. Alinta delivered a strong first half with underlying net profit increasing to SGD 231 million from SGD 101 million a year ago. This was supported by a high thermal fleet availability and Alinta has the lowest cost generation base in all of Australia through its fleet of generation plants, particularly Loy Yang B coal facility in Victoria. During the first half of '26, Alinta also strengthened its long-term gas position. It secured 2 new long-term gas supply contracts with Chevron and LNG Japan in Western Australia. The business also benefited from strong portfolio management, capturing value through portfolio flexibility across generation and retail markets. Alinta's first half performance reflects the strength of its integrated platform. Looking ahead, its strong generation, retail and development capabilities are expected to strengthen Sembcorp's earnings base, enhance recurring cash flows, and add further resilience to Sembcorp's diversified portfolio. I would like to touch on this growing wave, and some people call tsunami, of AI and data center demand. As you all know, AI and data center growth is increasingly becoming relevant to our portfolio. New data center bids require both power supply reliability and a credible pathway to low-carbon energy. This plays to Sembcorp's strength given our integrated energy portfolio and the suite of lower carbon solutions. In Singapore, we are a trusted partner to data center and digital infrastructure customers with over 1 gigawatt of power purchase agreements secured. I'm pleased to share that, as the latest development, Senoko has entered into an arrangement with Micron for the development of a direct connection infrastructure. As you know, Senoko and Micron, their facilities are next to each other in the northern part of Singapore. So this direct connection infrastructure is an important step for Senoko to support the power supply needs of Micron's advanced wafer fabrication facility, the current as well as future developments. Other than Singapore, in the U.K., our Wilton site provides a strong platform for data center development. Phase 1 with 200 megawatts of data center capacity is currently under planning. Wilton might be the only one, if not one of very, very few platforms, that is able to deliver 280 megawatts by 2028. Many players have land and -- but in order to secure power to the land, it will take them into the 2030s before the commissioning of any data centers that will come along. So Wilton, in the U.K., has a very precious commodity in the form of the powered land that's available by 2028 and in utility scale of 280 megawatts. So the site is very well-positioned with immediate grid connection, ready infrastructure as well as water availability. I spoke about Singapore and U.K. And in Australia, Alinta adds a coast-to-coast integrated energy platform with 3.4 gigawatts of operational, thermal, and renewables capacity. In generation, retail and development capabilities position Alinta very well to serve growing AI-driven power demand. And closer to home, across ASEAN, we have established data center footholds in Vietnam and Indonesia. In Vietnam, we received investment approval to develop a data center within Saigon Hi-Tech Park, very near to Ho Chi Minh City -- well, in fact, it is in Ho Chi Minh City. In Indonesia, we've told you that Batam is an emerging location for data centers supported by its connectivity to Singapore with submarine cable networks. So across all these markets, we have got platforms, ready platforms, that are able to capture the structural growth in digital infrastructure demand, leveraging on our existing power, renewables, and urban capabilities. The second half of the year, we'll start with a very positive note. For the Gas and Related Services, in July, it was a very strong month. USEP prices in Singapore averaged SGD 240 per megawatt hour. And this, of course, creates opportunities for our GIS team to capture value from the spot market. And this is, of course, markedly improved from the first half. Alinta also delivered a strong performance in July across both the East and West Coast markets of Australia during this peak winter period. The business should continue to benefit from favorable market conditions as well as resilient customer growth. In India, our renewables business also performed well, supported by higher wind resource across the entire portfolio. So these are all developments that underscore our confidence in the group's outlook for the full year. I want to emphasize on the strength of that confidence, the Board has supported us to increase our dividend to SGD 0.11 despite a weaker performance in the first half. This is part of our effort to -- in recognition that our dividend payout is lagging our peer group and is part of our -- this recognition to lever up to our peer group in terms of the dividend payout moving forward. I will now hand over to Eugene. He will tell you more about the financials and the details before we go into Q&A. Thanks.

Thank you, Kim Yin. Now we move on to the first slide. So on an overall basis, all the factors that Kim Yin talked about flowed through, right, into our underlying net profit, which are purely on a reported performance basis. Our underlying net profit was down 25% from SGD 491 million to SGD 369 million. I think from a pro forma perspective, if we have seen what Alinta would have contributed to kind of like show what a full first half run rate would have been for us this year, right? That would have been SGD 558 million. Now there are a few items below the underlying net profit to take note. I think in terms of the DPN ForEx loss, the India rupee continued to depreciate slightly against the Singapore dollar and hence, a SGD 57 million mark-to-market loss, markedly lower than last year, right? We did see the Indian rupee turn slightly in Q2 of this year. Now the fair value loss on energy derivatives of $10 million, that's a purely mark-to-market as of 30th June position of Alinta's hedge positions, so not reflective of what cash flows have been as of 30th June. And exceptional items of $152 million comprises $155 million of transaction cost, that is in relation to the acquisition of Alinta, offset by $3 million from a gain from divestment in the China water portfolio. Now this $155 million is largely substantially all the costs already for the transaction. Now some of you may ask why is it lower than what was previously guided, which was closer to $190-plus million. The reason was because in the previous guidance of the transaction cost, we have included in there the possible breakage cost of refinancing certain U.S. private placement debt facilities. So we were fortunate that upon the completion of the transaction, many of these U.S. private placement debt investors actually saw the credit improve, and hence, we're more than happy to stay. So that is a savings in terms of the transaction costs. Now if we move on to the next slide, I will go into detail in terms of group net profit impact. For the Gas and Related Services as a segment, right, we did see a 14% or a $45 million decline year-on-year in terms of our net profit. Now you have seen from the earlier slide that for Singapore, it declined by about $33 million. The contributory factors of that is really a result of lower spreads from recontracting, both across the Sembcorp as well as the Senoko portfolio through 2025 and coming into the earlier part of 2026. Now in general, our overall portfolio average spreads declined by about $8 per megawatt hour to average around the low 50s. Now we also saw a couple of things. In the first half of 2026, there were some one-off gains, including cargo diversion gains that we were not able to realize in the first half of this year. And also, there were some gas cost increase in Senoko as a result of a gas curtailment, but that impact is small. Probably we are talking about a $4 million type impact. So all this contributed overall to a decline of $33 million from Singapore year-on-year. Now the U.K. saw a close to a $22 million decline year-on-year. And as guided at the earlier part of this year, we did see a loss of customers, petrochemical customers, and as a result, also a demand from them. We are working, as I came in talking about, redesignating Wilton for the use of AI as well as data centers. And we will -- we are looking into the second half to see if something materialize, okay? Now for the rest-of-the-world in the Gas and Related Services, we actually saw a $7 million improvement year-on-year across the different countries coming from various factors, cost savings, efficiency gains, and so forth. So that's the Gas and Related Services segment. Now I'll talk about renewables first. Now the Renewables segment saw a decline of 48% or $63 million year-on-year. I think in the first half of this year, and you would have seen also the earnings announcements as well as profit guidance from pure renewables companies in China and also some in India that one key element that was quite common across the renewables business was resource, right? So we did see a weak resource across both wind and solar across China, some -- a little bit of India as well as Southeast Asia. So the impact of resource in the first half of this year actually saw a $40 million impact, close to $40 million impact of the $63 million that we talked about. And China basically saw close to $30 million of that $40 million impact, okay? And specifically for China, we also saw a couple of other impacts. One, we did talk about the VAT that was lost. It was a $12 million full year. So $6 million of that came through in the first half. And in addition to that, we also foresaw a further $6 million impact as a result of lower market trading tariffs for the portion of the China portfolio that has to be put on market trading as a result of the move towards more market trading by the various provinces. Specifically for curtailment, it is rather mixed. We did see curtailment improve for certain provinces that includes areas like Guangxi, Yunnan as well as Guizhou. And we did see worsening in some other regions as well, particularly in Hunan, where hydro output was high and increased. Hence, there was increased curtailment across solar and wind. And also in Ningxia itself, where there was a one-off outage of a cross-province transmission line for inspection. So in the second bucket of curtailment impacts, at least at this point in time, it doesn't look like it's systemic. Now the Northwestern part remains elevated and unchanged. So curtailment remains high in the northwestern part of the country, right? I think for India, there was some resource impacted in the first half, particularly over wind. But as Kim Yin has highlighted, we did see a strong improvement of that in July. Now for our storage portfolio, right, which is largely centered around the U.K., we did see batteries prices decline by about $5 million in the first half, driven purely by supply and demand dynamics in the market. So basically, that accounts for the renewables performance and a big part of it is really due to resource in the first half, okay? On Integrated Urban Solutions, net profit declined by $16 million. And of course, SembWaste no longer contribute. So that in itself contributed to a $10 million decline. Now urban saw a $4 million decline year-on-year, but that is really contributed by a delay in the recognition of KIK's 40 hectare of land sales. Now again, in the first half of this year, we did see more rainy days and hence, the land preparation and the resettlement was a little delayed. But I'm very happy to say that we have completed the handover to the customer, and we have booked the earnings in August, it would be booked in August, and that's about $11 million. So see it as $11 million, which would otherwise have been booked in the first half, essentially moved into August. So all in all, IUS, apart from some timing of land sales, no real surprises there. And I'll talk a little bit about Alinta. So we closed the Alinta transaction on 11th June 2026, hence, not any meaningful recognition. But I think it's important to note that the first half performance was strong, right? We saw $231 million contribution from Alinta in the first half on a full half basis, which was a meaningful growth year-on-year. Now it's important to note that from that $231 million, $100 million of that is, really, from optimizing our green certificates portfolio, right, against a certain offtake. And it will not be repeated in the second half, but we do have visibility of the optimization opportunities into 2027. Decarbonization Solutions, essentially, we did see our losses narrowed by $5 million, and that is really driven through a tightened cost control. And from a corporate perspective, interest cost increased slightly, $3 million. That is really for the purpose of funding the acquisition of Alinta in June. And our overall corporate cost, we did tighten by $6 million, which is a result of a tightened cost management as well. In terms of other business, which really comprises the -- our specialized construction business as well as the Mint business, it declined slightly, but this is really as a result of the timing of percentage of completion recognition of the projects that the specialized construction management business is operating. So all in all, those are the key segmental operational updates in the first half that really explains the results. Now moving on to our group capital expenditure. We have significantly tightened CapEx and investment spending, excluding Alinta, where we did $257 million of CapEx and investment spend in the first half of 2026 relative to $567 million the year before. And of course, the equity payment for Atlanta was close to SGD 4.4 billion that was -- that outflowed in June of this year. Now when we move over to free cash flow, okay, this -- which is the next slide. So this is the slide where I have to go into some details in terms of reconciliation, okay? Now I have to talk about some numbers to put first half '25 and first half '26 on a like-for-like basis, okay? So in first half '25, we reported a free cash flow of SGD 1.3 billion. But out of that SGD 1.3 billion, if you look in the cash flow statement, you will realize that SGD 383 million of that is really proceeds from the sale of SembWaste. So if you remove that, our first half free cash flow would have been SGD 930 million, okay, SGD 930 million for the first half of 2025. Now if we look in the first half of 2026, our free cash flow were impacted by 3 key things. Number one, Alinta's transaction cost, SGD 155 million. So that clearly wasn't incurred last year. There was also SGD 80 million of a prepayment in relation to Taweelah C for the commencement of a project that sits in our working capital, right? Of course, that will reverse itself out later. And then in terms of our deferred payment note receipts, so there was a slight delay in the funds flow. So about SGD 90 million of that will flow into Sembcorp in August this year rather than in the May, June period. So when you adjust the free cash flow of SGD 373 million of all that, you end up at SGD 700 million. So the difference of SGD 130 million of first half free cash flow, you would notice that it will tie in roughly with the underlying net profit decline, of which, as I mentioned, as Kim Yin mentioned earlier, we do expect the second half to be stronger. So when we look at the group borrowings, our net debt right now sits at about $13.9 billion, and it increased by about $6 billion. Most of it is a result of the acquisition of Alinta, the equity purchase price as well as consolidating Alinta's net debt. And we also continue to deploy capital for the completion of CCP 4 and also the execution of our ongoing pipeline in SGI, which is our India Renewables. Now it is important to note that we have reported our net debt to adjusted EBITDA on a first half pro forma basis. So what does that mean? So we took our first half, including Alinta, for the full half run rate. But of course, we excluded roughly $100 million of the LGCs gain from Alinta because we do not expect that to be repeated in the second half. And on an annualized basis, that comes up to a net debt to adjusted EBITDA of 5.3x, which is roughly expected as a result of the completion of the transaction. Now we remain very confident that with the continued cash flow as well as the some growth expected in Alinta, the delivery of CCP 4 going forward as well as continued development of the pipeline in India as well as a possible capital recycling exercises, we will deleverage in the coming years to come. Now in terms of the group debt profile, I think from a debt maturity profile, it hasn't changed a lot, right? You will notice that our weighted average debt maturity actually have improved slightly in, in spite of a rolling forward 1 quarter and funding from Alinta. And also our weighted average cost of debt came down from 4.5% to 4.3%. That was because the funding of -- in raising the financing structures and debt for Alinta, we have achieved a very attractive metrics. The weighted average cost of debt for the funding of Alinta's acquisition was 3.4% and the weighted average tenor for the Alinta funding package was about 6.6 years, okay? So very strong financing metrics. Now you will notice that our hedging profile has come down from the 70-ish percent down to 57% fixed. Now that is because in the funding of Alinta, about $1.6 billion of that, we are now using a 2-year revolving credit facility at very low cost. That in itself is close to about 1.5% in terms of interest cost. So the reason why we did that was because -- so with this RCF, we will be better able to strategically tap the different types of markets, whether it is the bank market or the long-term bond market to term out that 2 years RCF, right? I think in addition to that, if we have a 2-year runway to term it out, it also gives us the opportunity to reduce that $1.6 billion through paydowns. So we may not need the full $1.6 billion in long-term permanent debt, which obviously on average will be at higher cost. So that is the strategy that we chose to take. So in short, it simply means that the 57% fixed ratio, ceteris paribus, all else equal, you would expect that to increase as we term out the $1.6 billion 2-year RCF. But all in all, we are very pleased that we achieved very, very competitive terms as well as the cost of financing for the acquisition of Alinta, which is also a testament of the financiers view of the asset that we acquired, led by a very strong management team led by Jeff. And the last one is to talk about group liquidity. Our cash and equivalents have increased as a result of the consolidation of Alinta and our unutilized committed facilities also increased from $2.5 billion to $3.6 billion. So more than ample liquidity across the whole group. Now I'll talk a little bit about the outlook. The outlook statement in itself, I wouldn't read it. I'll leave it to you to read it in itself, but I will talk about the different segments in greater detail. For the Gas and Related Services, I think we know the first half 2026 backdrop, right, where we saw a weaker performance because of lower recontracted spreads and certain gas curtailment and also a U.K. market softness. But as we head into the second half of 2026, directionally, we expect second half of 2026 to be meaningfully higher than the first half. Now there are 3 key areas to take note. Number one, we will have higher levels of retail and vesting contracts that we'll be generating for in the second half compared to the first half. And these are also contracts with slightly better spreads, okay? Secondly, we do see portfolio optimization opportunities. as a result of occurrences of the first half, we do have some excess gas in the second half. And with the additional capacity that the CCP 4 presents, we see the opportunities of potentially optimizing that gas. And by optimizing the gas, it could be a sale of the gas or it could be generating the gas into the pool. And of course, we have to see what gives us a stronger spark spreads -- implied spark spreads. And of course, the third thing is CCP 4 significantly more efficient. So you would see improvement in the spark spreads simply by heat rate efficiencies. So Gas and Related Services. I think for Alinta, in the second half -- well, okay, back to Gas and Related Services Kim Yin has also highlighted, I think we also had a strong July month, driven by a strong USEP outcome, and we did see some pool gains. Now for Alinta, for the second half, you have a 6-month contribution. The performance will largely be supported by a pretty favorable operating conditions and also our resilient customer book, right? In July in itself, Kim Yin also highlighted we see a strong performance -- trading performance across both West Coast as well as East Coast. But at this point in time, I'm still holding on to the $100 million contribution in the second half for Alinta. And then for the Renewables segment, I think in the second half, performance is always seasonally lower than the first half, right? But I think the -- we will also continue to execute the growth pipeline. But of course, when you look at the schedule, we are not expecting a lot of capacity contribution coming through in the second half. The only point that I will note for the second half of 2026 is that we continue to watch closely the resource situation. I think there potentially would still be possible resource uncertainties, although in the month of July, factually, we did see both wind and solar resource improve against our expectations. But we will have to continue to monitor how a possible resource variations could take place in the next 5 months. And for Integrated Urban Solutions, we certainly expect higher land sales simply by the timing of land sales. We have a clear visibility in terms of the pipeline that's underpinning the order book for the land sales. And as mentioned earlier on, we have already confirmed the recognition of close to SGD 11 million as a result of the completion of the 40 hectares of land handover in KIK. So I think that completes my report in relation to the first half of 2026. And the key note is that we do expect the second half to be meaningfully stronger than the first half, and July data shows the green shoots of that. So thank you and open for Q&A.

Thank you, Kim and Eugene. We will now proceed to the Q&A session. For those in the room, please raise your hand and a microphone will be brought to you. Kindly state your name as well as the organization that you represent before you ask your questions. [Operator Instructions]

My first question is current spot spark spread have spiked. Has this been mainly driven by the force majeure? And if yes, when do you expect the overall spread to be -- spot spark spread to be normalized?

Okay. [Foreign Language]. No, I think, Siew Khee, in -- at least based on what we are monitoring, we know that the USEP, it's always driven by marginal cost of SRMC, right? And the key SRMC, of course, is JKM. I think for many of you who have interacted with me post March up to May, June last year, the issue was that JKM has no conviction, right? It increased up to $18. And then next thing it comes back now $15, $14. But I think through July, what we saw was a pretty firm JKM outlook, $20, $21, and it remained that way. And that really drives the USEP outcome. I think the reality is that it is hard to say, right, how that will hold out for the rest of the year. But if you look at the forward curves, normalization of JKM seems to -- it seems to suggest that normalization of that is really post 2026 into 2027. But again, those are forward curves. It can change. So I guess the point that I'm trying to make is that we are seeing firmness in the JKM market. But of course, that situation could change.

So the forward curve, however, possible changes that you can happen, that's the best you can go away, right? So today, you look at forward curve, it has firmed. People can offer all kind of reasons why, right, compared to the Ukraine situation where suddenly there was a shortage and then prices spike up. This time around, because of preparation, many economies are able to draw on their storage, right? Maybe it has gotten to the point where some of the storage is being used up, maybe, right? Or it may be that the people are already factoring in that this situation in the Middle East is going to drag, right, on-off, on-off. And because of that, they start to price it into the gas prices. But it has -- if you remember, when we first looked at this, we were actually quite surprised that it didn't go the way Ukraine did, right? So -- but now I think that this -- the forward curve is the best way to think about where the market is heading, right? So I don't think we can sit here and have a crystal ball and tell you that it's going to stay there forever. But we also cannot offer any reasons why, but I was just trying to suggest some of the conventional wisdom. You ask AI today, they will tell you that all okay, use the storage. So -- but all that chewing up a lot of time, I was just trying to say that we do think that this time, it could last at least for a short while, right? It probably will last because there's no good reason for it to come down also. The demand is actually quite firm, and you can see new demand coming through over time. So it's -- with demand holding up and the main factor being the supply and if the supply side dynamics doesn't look like there's any possibility that the things will just dramatically improve from a supply side, and the forward curve should hold out.

Then just on the new plant coming in, which month will it come in?

It will be early part of -- end Q3, early Q4, yes.

It's already connected to the grid. It is already generating power, and we're already clocking revenue. But it will be coming on progressively ramping up, right? So of course, we want to do more of that sooner than later, but it is really connected to the grid as we speak.

Okay. I just have 2 more questions before I jump back to the queue. So just on that itself, just if you use your crystal ball again, next year, we have so many new plants coming in. How do you actually manage to rationalize your old plants or optimize your overall portfolio so that the market is rational that the spark spread -- spot spark spread don't come down because there are so many plants that are coming in.

I think the -- what we have explained in the past is that with the portfolio, right, we're not just going to pump all the electrons from the new plant in addition to the old plant into the system, right? Some of it -- what we have is a portfolio of customer contracts. So we are using the more efficient plant, the new plant, to substitute out some of the less efficient plant to serve the customer. In so doing then, customer contracts don't change, right? Then if you are able to burn less gas, you actually make money. So that's one effect. The other part of it is, of course, we told you about contracting strategy. So with the bigger fleet of plant, then that gives us that opportunity now to contract more aggressively right? So the contract portfolio, we are continuing to pursue that. And then we would -- over time, the market share would then reflect the increase in the new plant. So what I'm trying to explain is that please don't expect that 600 megawatts of plant get commissioned, then suddenly our revenue goes up by 600 megawatts. It's not going to happen that way. It will be responding what we're doing is using our fleet plan and repeating myself to respond to serve our customer portfolio. And this customer contract portfolio will grow over time into the near future. So we feel actually pretty good about it. But net-net, there will be on the fringe additional revenue. As I told you just now, we are already connected to the grid. So for this second half of the year, earlier, we were thinking maybe it's October, November full commissioning, right? And for purpose of financial projection, we started adding numbers into the budget for October, November, but we are clocking some of that revenue even as we speak, taking advantage of the plant being connected and taking advantage of the higher use set in the market in the meantime. You okay there? CFO always wants me to be...

Next, Mayank.

Mayank from Morgan Stanley. So Kim Yin, first question for you at a portfolio level. 40% of your book value now sits in renewables. And obviously, it's been a struggle for the last 1.5, 2 years now for you. How are you thinking about capital deployment in renewables? Because even in the first half, a large part of the CapEx went into their ex Alinta. So is there a rethink around capital allocation in renewables in itself? And I think a related question on China, you said some of that capacity is now in the market on a spot basis. What percentage of your China renewables is now on spot?

Okay. I will ask Eugene to help me out with more details on the capital, but capital allocation is a reflection of your strategy, right? So the short answer to your question is, yes, the way we allocate capital is constantly adjusting. And when we see better opportunities, it will naturally attract the bulk of the capital, right? So Alinta was the big opportunity in front of us in the last year. So we shifted. Yes. So it's very clear how we allocate capital in that space. Renewables, from a business -- a longer-term business perspective, we believe that -- we call ourselves energy transition player. We believe that each of these sources of energy will continue to have a place in the energy mix of the customer. Customer, broadly speaking, could be countries and grids. So renewables will continue to have a place in many, many energy mixes. Yes. And you saw what happened in the Middle East and so on. Everybody has some sun, everybody has some wind. So there will be that desire to deploy assets in order to capture some of this. So we will be selective in trying to capture this. So renewables is a place in which we will continue to be looking for opportunities. But now that we have had a portfolio, right, we know we got Singapore, which is where we are very strong, right? And we -- frankly, please don't repeat the regulator, we're almost the only game in town. 60% of what's going out there is generated by us. China, we have got a lot of experience, not doing well at the moment because of all the reasons that we explained to you. But India, we have a very strong team as well, right? So we are then in a very good position now to capture those opportunities that will come along, the better ones. So I'm trying to paint the picture that renewables will always be there. We have a good position. We will leverage on our good position to capture this, always be there, better opportunities among them, right? So you can use the word selective, but selective might suggest very, very careful. But I'm saying in the context of your capital allocation question, we're looking for the higher margins. Yes. So that's why we say that, look, in India, we continue to feel good because our portfolio of projects that are coming online, what we call pipeline, those are secured. They are all in hybrid projects where the margins are higher. And so we're comfortable with that. So then in terms of moving forward of capital allocation, the -- I spoke of renewables, but I also want to touch on gas and related. We continue to think that gas and related this season, and I'm talking about 5 years, 7 years, 8 years, will continue to be very high in demand because this is the one fuel that is reasonably clean and yet able to provide very reliable power to meet this tsunami of demand coming from digital infrastructure. And we are seeing that in Singapore, as I told you, we are seeing that in the U.K., right? People are coming to us. So in a way, Wilton a chemical customer exiting -- at that time, we were all gloomy and all that, people sitting in front me was like you went there are so many trips to try to fix things. But it turned out to be a blessing in disguise because it compelled us to quickly pivot. And in that process, then suddenly, we realized we are the only sites in the U.K. that can do 2028. So the players who want to do fast, and of course, if you talk to any data center people, they say, "I want it yesterday." So it become -- position us in a very good position to cement that relationship. So gas -- coming back to capital allocation again, so renewables, there will be allocation. Gas and related, there will be allocation, and we will be directing it. I know I probably not an answer that you'll be looking for, but it's a generic answer that we'll be directing it to -- it will be chasing the higher-margin for this projects.

I think there's a second question on the proportion of the China portfolio that is now spot, right? Now back in 2024, we were around 15% or so, right, because the -- and I did guide the market that our expectation is that all the province will start moving more and more. So today, almost around 50% of the portfolio is spot ready. So they are accelerating that move.

So that number should remain around that 50% range going forward? Or you think a larger part will go into there?

[indiscernible]

No, I was just saying that with that 50% now ramp up closer to a bigger number as you kind of...

The revenues are roughly about 50-50 split between the spot and secure.

And that should remain around the same range going forward?

It will increase over time.

I think the second question was Alinta. While you had some very, very good quarter compared to your peers, especially AGL and Origin when you look at their numbers as well. But your net profit is still near breakeven, correct, if you look at first half? So question was more in terms of what did you guys do differently at the Alinta level versus the peers? And second thing is when we can see some ramp or if you can just give us a bit of an idea around below the EBITDA line items around Alinta.

Mayank, can you repeat that part? You were saying that the breakeven, what was the...

Alinta, if you look at the net profit was around $5 million for the...

No, that is -- no, no, no. Mayank, $5 billion is because we completed the transaction on...

Really just because of that. Got it. Otherwise, what would be the...

Full first half net income of Alinta was [ SGD 238 ]...

Okay. So that was the run rate that was normal...

Yes, yes, yes. So the reason why we showed the full first half so that you know the run rate, but the SGD 5 million was because we only completed on the [ longer term ].

So otherwise, it's the normal run rate then. Okay. Got it. Yes.

You gave me a scare.

You scared me. I was like, you stunned me.

Yes. Okay. So then run rate is fine. But on the EBITDA line, the numbers were pretty good, correct, in the first half versus the peers. So is there something that you can kind of give us an idea around, especially on the West Coast, the numbers were pretty good -- sorry, East Coast, sorry. Anything you want to kind of highlight?

Maybe this is an opportunity to introduce you Jeff Dimery. He's sitting right here. Perhaps Jeff can give a little bit of a synopsis as to how you deliver superior results.

Yes. Thank you, Kim Yin. I think the first point I would make, if you're looking at AGL and Origin, they don't have nearly the same exposure that Alinta has to the West Coast of Australia. And obviously, they've commented on the market conditions in the East Coast, where we're seeing a decline in forward prices, et cetera, at the moment. I would contrast that with the West Coast of Australia, where we're seeing record prices. So we do have quite a bit of exposure there, and we're performing very strongly in that space. On the East Coast of Australia, Kim Yin and Eugene both mentioned our play around the renewables market, around the certificate contribution from the LGC. As Eugene pointed out, we have that same opportunity in 2027. So that will come to an end. It's part of the previous legislation around how we can, I guess, bank renewable certificates and that scheme ends in 2030. So it won't be ongoing. Having said that, what I would say, and I note that the CEO of AGL also said this, when you look at the East Coast market and the outlook in Australia, today, the market prices are well below new entrant level. And so we don't think that they're sustainable where they are or we'll get no new investment in capacity into the market. And I say that against the backdrop, which is a global theme. We're seeing exceedingly strong demand for data centers. We're seeing an enormous push now into the electrification of vehicles off the back of what's happened in the Middle East. So I guess the outlook we're saying is that prices are quite subdued on the East Coast. But as we look forward with demand rising, we will need new capacity. And right now, the signal is not there. So we expect -- and I think our peers would equally expect to see a forward change in market conditions in the not-too-distant future. Having said that, the last point I would make is that whilst you are seeing declining forward curve relative to where it's been historically. We've been pretty well-hedged, so we are insulated to an extent, both today and for the short-term future in our portfolio management. So we're not anticipating. As I think the guys alluded to, we're very comfortable with the balance of calendar year and what the contribution is looking like.

Thanks, Jeff. So in a nutshell, just to -- if repeating -- at the risk of repeating, we are guiding that the second half 2026 contribution from Alinta, in terms of net profit to the Sembcorp Group, will be [ SGD 100 million ], right? So that's guidance...

It's not changing.

Yes. So usually, the first half is slightly stronger, right? So the full year will be 220, 230 type number if we were at 1st January today guiding 2026, yes. So that's -- just to be clear, that's the number. In terms of the underlying fundamentals in Australia, we are optimistic even though it is a merchant market, right? And first, Alinta is -- has a big retail portfolio that it is hedged. Maybe not 15 years, 18 years like what we can get in Singapore, 2, 3 years, but it is a retail portfolio that is also quite sticky. The other part of it is that Alinta has got low-cost generation, right? So that underpins its ability, its competitiveness in terms of keeping customers and in terms of locking in margins. Yes. The other thing is that Alinta has an East and West Coast market. In the West Coast, they are dominant, right? And they are also very strong in the gas market. So then where the market is heading, demand is growing faster than all the planners have expected. So that's the first thing. And we all know that in a place like Australia, if you want to plan new plants, it will take time, right? So even in the past, supply has trouble catching up with demand. Now with demand going up faster, the supply will take -- is actually under a lot of pressure. So in terms of market outcome, that's a good reason to be optimistic, right? So the macro is there, demand versus supply. The micro in terms of the business, low-cost generation, strong position, good management team. And that's why we're quite comfortable that this is a recurring cash flow and recurring income portfolio that will really enhance the resilience of the Sembcorp portfolio. So that's that. I want to also add a little bit more to the earlier question on capital allocation between renewables, gas and so on, right? So of course, IUS is IUS, we laid out the plan what we're doing. We're recycling capital. We're selling some of the municipal water and so on. We sold SembWaste, right? So then in the meantime, we are allocating capital to build recurring cash flow. So ready build factories in Vietnam, where we have got good access to good locations and good land. We're building up the land bank. So that part of it, there's allocation. Then in terms of gas, we spoke about that. Then renewables, I just want to add that really, we will continue to chase after the good margin projects. And where we think we would have the opportunity in terms of geography is first, India, right? As I told you, we have a good team. We have a good portfolio that is currently being developed, but we will be chasing more, but we will be conscious about chasing the good margins. But the other one is Australia, right? Because, again, the fundamentals I described to you just now. And to the extent, Alinta is in a position to build renewable portfolio to complement the existing fleet of gas as well as coal power plants in order to serve the customer better, to create optionality for their portfolio trading and optimization. Those are things that -- those are areas that we would invest in right? So that's where the -- just to complete additional geographic dimension to the capital allocation question.

Joy from second row.

Joy from HSBC. First on -- if we can go back to spark spread, I think, Eugene, you mentioned average spark spread came down about $8. If I look at your price, I think there's a fair chunk at Senoko has already been repriced. How much more downside do we have on that your current spark spread? So that's the first question. Second, on dividend. I mean, you alluded to increasing dividend. Should we take your first half payout as your full year payout? Or should we look at the percentage of growth as an indication to a full year dividend number?

No, you're drawing a reaction from me. I'll answer the second question first.

He answered the second first.

If we're going to stop at SGD 0.11, you can take this company private. No, right? First half is SGD 0.11. Last year's first half was SGD 0.09, right? Last year's full year was SGD 0.25. So the -- we are -- I want to be very careful in my words because I was given a specific mandate what I can say, what I can't. But first, we recognize that we lack our peer group internationally as well as domestically. So domestically, if you look at it, the numbers roll off my tongue, ST Engineering payout ratio, 80-some percent, Keppel payout ratio, almost 70%. The bank's payout ratio, DPS is -- we know what they are. I think you will be more than 100%. So we lack our peer group. Peer group, today, any investor coming into Singapore will look at the stock exchange and they say, "Where do I pull my money, right?" So then if Sembcorp is lagging the peer group by so much, of course, we're the first one to be sold if they have to pull their money. And if they had to -- if we want to attract capital to come into our stock, we have to increase our payout ratio to at least be at par with our peer group, right? So that is something that we recognize, right, that we are lagging. So now you will see in the last few years, our behavior, it has been a steady increase from '24 -- '23, '24, '25 and now '26, right? So short answer to your question, no, it is a half year payout, right? And you can -- if I was an investor, I would extrapolate the full year payout with also an increase in the second half, right? So because that is in the backdrop of what I told you, what we recognize that we are lagging our peer group, right? And that we think that's one aspect to it. The other aspect is that we feel that we are actually very comfortable doing this in terms of that increasing the payout ratio, which we are very committed to. Why? Because the cash -- underlying business and the cash flow is very strong. And Eugene will be able to show you scenarios whereby even if we -- net profit doesn't perform as we expect it to grow, we will still be delevering quickly back into the 3x, 4x debt-to-EBITDA range in 3, 4 years' time. So we are very comfortable with that. And because of that, then the cash flow other than investing activities, returning it to shareholders through dividend is also an important signal to the investor community. So short answer, it's only for half year $0.11, and we are -- we recognize we are a lagging peer group. We are committed to increasing our payout ratio. The only thing I fall short of saying is to tell you what is the target.

I guess -- yes, just to clarify, I guess what I'm trying to say is $0.11 is about 53% payout on the underlying profit for first half. Can we extrapolate that ratio?

I think for this particular year on a non-pro forma basis, not unreasonable, okay? And I think historically, how you have seen we have done it, it's -- if it's a year of dividend increase, we like to think of it of increasing both first half and second half also. And we also distribute our targeted increase for the full year accordingly, right?

I don't remember the numbers, Eugene. In 2025, first half was SGD 0.09, right?

SGD 0.09, that's right.

2024, first half was...

First half was SGD 0.06.

SGD 0.06. Okay? Then 2025, second half was what?

SGD [0.16] So the difference of...

2024, SGD 0.13. Okay. Sorry, I don't have a slide to show you that, but I'm trying to show you that there's a track record you can go back.

There is a certain pattern that we do.

Yes. So I tell people, we are committed to steadily increasing it as opposed to increasing it one round, right? So somehow many people feel that steady is always better. I happen to be a little bit on the other side of the camp, but it doesn't matter. So because we are comfortable with the -- more importantly, we are comfortable with sustaining it even while we delever. So that's very important. Sustaining an increase. When I talk about sustaining, I'm talking about sustaining and increase. I'm not talking about sustaining at this level. Sustaining increased we delever, right, because the cash flow supports that. So I don't want to belabor that point. Our focus -- let's focus on the season today. It's SGD 0.11, it's SGD 0.02 more than what it used to be. And then year-end, we expect to be able to sustain the growth.

You had a second question.

Spark spread.

Spark spread. So now Senoko, we left about 20%, right? Of course, it's 20% for recontracting. A lot of it has been negotiated already. Now of course, we don't expect this to be as high as historical. But we are quite happy that the spark spreads that we are landing at is better than at the start of the year. Remember, we were struggling around 30%, 35% early on. But certainly, for this, it will be better.