Sembcorp Industries Unveils AUD 6.5 Billion Acquisition of Alinta Energy and Loy Yang B Power Station

Key Highlights

• Transaction Value: Sembcorp Industries Ltd (“SCI”) proposes to acquire Pioneer Sail Holdings Pty Ltd (“PSH”) and Latrobe Valley Power (Holdings) Pty Ltd (“LVP”) for an enterprise value of AUD 6.5 billion (approximately S\$5.6 billion).
• Acquisition Structure: SCI’s indirect wholly-owned subsidiaries, Sembcorp Australia Pty Ltd and Sembcorp Energy Australia Pte. Ltd., will purchase 100% of PSH and LVP, including assignment of existing shareholder loans and provision of replacement guarantees.
• Target Group Profile: The Target Group comprises Alinta Energy, a leading integrated energy business in Australia and New Zealand. Assets include coal (Loy Yang B), gas, onshore wind, solar, and interests in major wind farm developments.
• Financial Metrics: Target Group book value is AUD 2.5 billion, net tangible assets AUD 758 million, and net profit before tax AUD 530 million for the year ended June 2025.
• Funding: The acquisition will be funded entirely in cash via a fully committed bridge facility.
• Shareholder Approval: As a major transaction under SGX rules, it requires shareholder approval at an Extraordinary General Meeting (EGM).
• Financial Impact: Pro forma EPS expected to increase by 9-14% and ROE by 2.0-2.8 percentage points post-acquisition.
• ESG Disclosure: SCI’s emissions intensity and absolute emissions will rise in the near term, missing 2028/2030 targets, but reaffirming net zero by 2050.

Transaction Details

On 11 December 2025, Sembcorp Industries announced a definitive agreement to acquire all issued shares in PSH and LVP from Chow Tai Fook Enterprises Limited and Pioneer Sail Singapore Pte Ltd. The deal includes the discharge and assignment of existing shareholder loans and provision of replacement guarantees (up to AUD 58 million) for Target Group loan facilities.

The aggregate consideration is calculated as the enterprise value (AUD 6.5 billion), minus net debt at completion and subject to working capital and capital expenditure adjustments. The final purchase price will be settled in cash on completion.

Target Group Overview

• Alinta Energy: Operates 3.4GW of installed and contracted generation capacity (coal, gas, wind, solar), serving 1.1 million customers across Australia. Significant market shares in Western Australia and strategic assets in the National Energy Market (NEM) on the East Coast.
• Loy Yang B Power Station: Largest coal-fired asset in Victoria, supplying ~20% of Victoria’s energy demand and providing essential system services for grid reliability during the energy transition.
• Renewables Pipeline: 10.4GW of renewables and firming development projects, with 2.1GW prioritised for near-term development.
• Financials: Book value AUD 2.5 billion; net tangible assets AUD 758 million; net profit before tax AUD 530 million (year ended 30 June 2025).

Strategic Rationale and Market Impact

• Entry into Australia: SCI’s first robust entry into Australia, a AAA-rated, stable OECD market with significant renewables growth opportunities (200GW required by 2050).
• Portfolio Diversification: SCI’s developed market generation capacity exposure rises from 25% to 31%, with developed market profit after tax and minority interest increasing from 55% to 64%.
• Accretive Acquisition: EPS and ROE are expected to rise meaningfully (EPS up 9-14%, ROE up 2.0-2.8 ppt) based on pro forma effects for FY2024 and the twelve months ending June 2025.
• Renewables Acceleration: SCI leverages Alinta’s renewables pipeline, complementing its global growth in wind, solar, and energy storage. SCI targets 25GW renewables capacity by 2028.
• Baseload Reliability: Loy Yang B is a critical baseload asset, supporting grid stability and reliability while new renewables and storage are built.
• ESG Transition: SCI’s emissions intensity will increase to 0.36 tCO₂e/MWh (absolute emissions to 18.1 million tCO₂e in 2025), missing interim targets, but setting a new target of 0.26 tCO₂e/MWh by 2035 and reaffirming net zero by 2050.
• Financial Leverage: Gross debt will rise from S\$8.7 billion to S\$14.7 billion post-acquisition, with net debt/EBITDA increasing from 3.83x to 4.63x (Dec 2024 pro forma). Debt will be funded by a committed bridge facility; the company’s ability to manage leverage and refinancing will be closely watched by investors.

Shareholder Considerations & Price Sensitivity

• Major Transaction: The acquisition exceeds the 20% thresholds for net profit and consideration relative to SCI’s size, requiring shareholder approval at an EGM. Shareholders will be sent a detailed circular and can inspect the Share Sale Agreement at SCI’s office for three months.
• No New Equity Issuance: The deal will be financed by debt, with no new shares issued, avoiding dilution but increasing leverage.
• Board and Adviser Involvement: No new directors are proposed; DBS Bank and Goldman Sachs are joint financial advisers and will provide fairness opinions.
• Risk Factors: Completion is subject to regulatory approvals (Australian FIRB, ACCC, Offshore Infrastructure Regulator), third-party consents, and no material adverse change (e.g., major plant damage or large financial impact). Failure to meet these could result in deal termination.
• ESG Implications: Short-term increase in emissions may concern some ESG-focused investors, although SCI’s long-term net zero commitment remains.
• Potential for Price Movement: This is a transformative energy sector deal, significantly increasing SCI’s scale, profitability, and market exposure, but also leverage and near-term emissions. The acquisition, if completed, is likely to be price sensitive and could move SCI’s share price materially.
• Cautionary Note: Shareholders are advised to exercise caution in trading SCI shares until the EGM and further details are provided.

Next Steps

• A circular with full details and EGM notice will be dispatched to shareholders in due course.
• Enquiries may be directed to SCI’s investor relations team.

Disclaimer

This article is intended for informational purposes only and does not constitute investment advice. The proposed acquisition is subject to regulatory and shareholder approvals, and may not be completed as contemplated. Investors should consult the official circular and seek professional advice before making any investment decisions in relation to Sembcorp Industries Ltd. Share prices may be volatile and subject to material change as further information emerges.

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