Sembcorp Industries Ltd (U96) Earnings Call Transcript

Ladies and gentlemen, good morning, and welcome to Sembcorp Industries First Half 2022 Results Presentation. A warm welcome to you to viewers tuning in via the webcast. I'm Xin Jin from Group Investor Relations. [Operator Instructions] 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.

Good morning, and welcome to Sembcorp Industries First Half 2020 (sic) [ 2022 ] Results Briefing. This is the first time we are doing this in this room. So we're very excited about the new space. It has been in place, I think, for more than a year, but we haven't been doing it here because of COVID and all that, so we took the opportunity to bring you. So this is what we call [indiscernible] where by then our staff can mingle and interact and work together with each other, right? Behind me are some screens. They are not designed for this purpose to be the backdrop for our results briefing, no. Each of these screens, they are made up of panels. By the way, they are low-cost panels, not high resolution stuff. But each of these screens, we -- what we do is that we will put up operating statistics of our power plants as well as our water businesses and everywhere else around the world. So a visitor or our staff when they come into this room, they can look at the screen and regularly get an immediate sense as to whether or not our India wind farm is having good wind, our Vietnam power plant, is it having an availability issue and so on and so forth. So we want to use this space to communicate internally as well externally, the breadth of this company as well as to let people bring together this spirit of one Sembcorp understanding the -- what our colleagues are doing around the world, right? So just a little bit of that advertisement. But otherwise, let me get into the results briefing. Thank you. So in the first half of 2022, the group delivered a strong set of results. Turnover increased 45% to $4.8 billion. EBITDA was $865 million, up 35%. Adjusted EBITDA was $998 million, up 34%. Net profit before exceptional items was at 95 -- 94% up at $490 million. And net profit after exceptional items was also at $490 million compared to $46 million in 1 half 2021. Earnings per share was $27.5, and group annualized ROE was 23.1%. The Board has announced an interim dividend of $0.04 per ordinary share, which will be paid in August 23, 2022. Let me go through the key highlights for our different business segments. For renewables, net profit increased to $76 million in first half 2022 from $24 million in first 2021, this was mainly driven by contributions from our newly acquired assets in China. The acquisition of SDIC New Energy was completed in January this year. And Shenzhen Huiyang New Energy, we called H-Y-N-E was completed in June. In India, we experienced higher wind resource in the first half of 2022 compared to the same period last year. And in Singapore, the solar operations performed well, benefiting from higher spot prices with strategic portfolio management. In terms of capacity, we secured an additional 0.9 gigawatts of renewable projects during the first half of 2022. Our gross renewables capacity now stands at 7.1 gigawatts with 1.7 gigawatts under development. So in the span of 1.5 years, we have more than doubled our gross renewables capacity as shown in the chart and the proportion of renewables capacity in our group energy portfolio has increased meaningfully from 25% to 43%. The renewables business continued to gain good traction with progress made in the first half of the year across all the key markets. In Singapore, we were appointed by the Energy Market Authority to build 200-megawatt hours of energy storage systems on Jurong Island in June. And this is expected to be online by the end of this year. Also in Singapore, we have secured 44-megawatt peak of solar capacity, including the JTC SolarRoof 3 tender. Our solar farm at Tuas was opened in May, marking Sembcorp's first completed ground mount solar project in Singapore. It is also the country's first solar farm with an integrated rain water harvesting system. In China, our gross operational capacity has grown from 725 megawatts to 3.3 gigawatts with the completion of the acquisitions mentioned just now. And this anchors our position for further growth. In India, 115 megawatts of renewable projects were secured during first half 2022. These contracts were secured with the government as well as commercial and industrial customers. This brings gross renewables capacity under development in India to 725 megawatts. However, there are some delays to the execution of the 400-megawatt utility scale solar project in Rajasthan. In the U.K., a further 50-megawatt hour of battery storage was commissioned, bringing our operational battery fleet to 120-megawatt hours. We also secured a 15-year capacity market contract that will contribute to the 300-megawatt hours of battery storage project. Our battery storage portfolio in Singapore and U.K. now stands at 624-megawatt hours, and this establishes us as one of Asia's largest battery operators. Let me switch to Integrated Urban Solutions segment. Under this segment, net profit before exceptional items was $62 million compared to $63 million in first half 2021. Contribution from the Urban business was steady with lower land sales mitigated by higher average transacted land prices and residential sales. In first half 2022, urban land sales was 42 hectares and net order book remained healthy at 288 hectares. During the period, our energy from waste plant, Wilton 11 in the U.K. has performed well as it benefited from higher power prices. This was partially offset by higher operating costs in the Waste business in Singapore. The Urban business continues to focus on building its land bank. We incorporated the joint venture company for our new industrial park in Quang Tri province in Vietnam and have also started the development of 1,000 hectares of VSIP Binh Duong III. Under conventional energy, we posted a net profit of $397 million, an increase of 115% year-on-year. The better performance was driven mainly by higher electricity prices in Singapore and India. We also realized gains from favorable gas hedges on the back of higher fuel and electricity prices in Singapore. SEIL Project 2 in India has commenced supply of power to Bangladesh under the 200-megawatt long-term power purchase agreement since the end of March. And in Singapore, we were appointed by the Energy Market Authority to offer competitive fixed price contracts to business consumers such as SMEs, helping to provide pricing stability amidst the volatility Singapore power market. So as at first half of 2022, this is where we stand against our 2025 strategic targets. Sustainable solutions comprising the renewables and integrated urban solutions accounted for 25% of group net profit compared to 35% as at 2021. Despite the decline, it is important to note that the Sustainable Solutions portfolio performed well, with net profit growing by 59% year-on-year. However, we saw strong earnings contribution from the Conventional Energy segment, which led to it being a bigger contributor of group net profit. Gross installed capacity, as mentioned just now, as at the end of first half 2022 was 5.4 gigawatts, in addition, 1.7 gigawatts of renewable capacity is under development, and these are expected to be operational between 2022 and 2024. That takes our total portfolio of projects, operational and under development to 7.1 gigawatts. Urban land sales for first half 2022 was 42 hectares due to the timing of land sales. We will continue to focus on growing our land bank to secure a steady launch pipeline. Carbon emissions intensity for first half 2022 was 0.51 tonnes of carbon dioxide equivalent per megawatt hour. This is similar to 2021 numbers, but an improvement from first half 2021. As a group, we continue to actively explore options to reduce our emissions intensity. We have made good progress and remain focused on the execution of our brown to green transformation strategy and to achieve our 2025 strategic goals. Eugene will now take you through our group financial review. Thank you.

Thank you, Kim Yin. And a warm welcome to all analysts and our banking community, and it is my pleasure to take you through a more detailed review of our financial circumstances for the first half of 2022. I will first share that these set of results were achieved of the backdrop of 4 key elements. First is of the backdrop of global geopolitical tensions that have been driving tightness in commodity markets and which led to the second element, stronger electricity prices across key markets that we operate in. Now we also operate against a rising interest cost environment. And in the midst of all of that, in the last element, we mentioned is that we continue to drive growth in our renewables segment and also efficiency across our business to realize the earnings as reported. So the overall results in comparison to first half '21 last year, turnover has increased 45% to $4.8 billion, as Kim Yin mentioned, compared to a $3.3 billion last year. I would go into a little more of the relative segments in the subsequent slide. EBITDA has increased 35% from $640 million in the first half of 2021 to $865 million for this current half under consideration. Our share of results from associates have improved from $104 million last year, the same period last year to $133 million this year. The bulk of the improvement really came the completion of the SDIC acquisition since January of this year, which contributed $23 million as disclosed in the financial statements that was released. That brings us to adjusted EBITDA being $998 million for this half compared to $744 million in the previous period, which represents a 34% increase. And therefore, our net profit before exceptional items is $490 million representing a 94% increase over $252 million, which achieved last year. And given that you would have recalled that last year, we had an exceptional item where we wrote off our China SongZao plant of $206 million. And so from a net profit perspective, it is a very, very significant increase. So EPS before exceptional items, we did realize $27.5 for this half compared to $14.1 in the previous period, increasing by a similar magnitude as our net profit before exceptional items. And our earnings per share compared to the same period last year reflects the increase as well. ROE on an annualized basis for this half is 23.1% compared to 8.5% last year. Now if you move on to the next slide. In terms of group turnover, the renewables turnover increased 52% over last year, realizing $222 million in this half, compared to $146 million in the same half last year. The key contribution to that, firstly, is as mentioned earlier, the successful completion of the SDIC portfolio, which contributed for 5 months in this particular half and also the completion of the HYNE portfolio which was completed at the beginning of June. So therefore, contributing 1 month in this particular half. In addition to that, we also saw higher wind resource realized in India, which also came off the back of a greater efficiency of the operations of the assets resulting in higher energy-based availability for us to capture the higher wind resource. In addition, our solar assets in Singapore also benefited from stronger usages prices in this particular half. The Integrated Urban Solutions segment remained stable compared to last year. And our Conventional Energy segment saw a significant increase in the turnover, realizing $4.2 billion of turnover relative to $2.8 billion at the same time last year, representing a 51% increase. From a turnover perspective, we did see stronger tariffs particularly on the IEX for the India coal business and also stronger electricity tariffs in the local Singapore markets. Our U.K. pickup plants have also performed well. So we move on to the next slide, which will detail the breakdown of the group net profit. I just want to focus us largely on the upper half of the slide, which represents our net profit before exceptional items as there are no exceptional items for this particular half. For renewables, net profit have increased by 217% to $76 million in this particular half compared to $24 million last year. And the big part of it is really for the reasons at the turnover level that was discussed in the previous slide. I think in addition to that, our India portfolio also realized some O&M efficiency gains, particularly with the taking back for one of the SECI projects where we took over the O&M operations back from the OEM. And if you mentioned -- and if you recall during the Investor Day presentation, we say that as we take back the O&M operations from the OEM, we will be able to realize up to 30% of cost savings. So we did realize that in the first half for one of the SECI projects. In addition to that, we have also refinanced portions of our India Green portfolio with refinancing a certain portion of the project finance debt to a more fixed rate corporate guarantee debt of a green loan format, and that has also brought about interest cost savings. Now when we move on to the Integrated Urban Solutions, our performance is stable, realizing $62 million in net profit in the first half of 2022 compared to $63 million last year. The Urban business had a stable performance on a year-on-year basis. In terms of our U.K. waste-to-resource business in the waste and waste-to-resource segment that has performed slightly better compared to last year, while it is slightly offset by our local sand waste business that has faced rising cost from both fuel as well as manpower. Our water business continued to remain stable within the Integrated Urban Solutions segment. Now moving on to the Conventional segment. The Conventional segment for this particular half performed significantly better than the same period last year as well. We realized net profit of $397 million compared to $185 million last year, representing a 115% increase. Now the reasons for that partially have been discussed also in the previous slide, as a result of the higher electricity prices that we see across our markets. Now in addition to that, we have also benefited from a strong gas portfolio, particularly in Singapore, where we have a diversified sources and also have hedge positions since last year, and that has allowed us to have a hedge gas position to take advantage of the high electricity prices, therefore, realizing the higher gas price spreads. Now in relation to our other businesses, we realized $10 million this year compared to $13 million in the same half last year, slightly decreased, and this is really due to a timing of a recognition of the order book for the key business in the other business is our Sembcorp specialized construction business. So we expect our earnings to catch up in the second half. Now for corporate, we realized a cost of $55 million compared to $33 million last year, representing a 67% increase. The key element of the increase is really because of rising interest costs and also incurring higher interest costs for funding the equity purchases of SDIC as well as the HYNE portfolios. Now in addition to that, it is also worthwhile to note that in the first half of 2021, we realized a fair value gain of $7.1 million in relation to one of our -- in relation a [indiscernible] venture fund was invested in before. But that same position this year realized a fair value loss of $2 million. So explaining a $9 million delta in relation to that difference. So that gives an overall picture of how our net -- group net profit variances is in this half compared to last. Now if we move on to the next slide. This is presenting what I've just discussed in a pictorial format, so I will not run into a lot of detail. But if we move from left to right of the chart, you would see that from a sustainable solutions perspective, right, the bulk of the net -- group's net profit improvement came from renewables, which added $52 million. As mentioned earlier on, a lot of it is in relation to the completion of the acquisition of the HYNE portfolio as well as the SDIC portfolio. In the first half of this year, the SDIC New Energy portfolio contributed $23 million and the HYNE portfolio with only 1 month of contribution contributed $7 million. Integrated Urban Solutions, as mentioned earlier on, has a steady performance. Now if we move to the Conventional Energy segment, if you recall earlier on, first half of this year, we realized $397 million in net profits. Now if we look at the distribution of debt net profit, $196 million of that come from Singapore operations, and the rest of it is split approximately evenly between India core as the U.K. and Middle East operations. A point to note though, in the $212 million year-on-year gain of the performance realized in the Conventional Energy segment in the first half of this year compared to last year, $92 million of that came from hedging unwinding gains as well as other income. Now what is this hedging unwinding gain? Just to characterize it. This hedging unwinding gain came as a result of -- we had a cargo that is coming in, in the first half and we had secured a hedge against that last year. Now the cargo was subsequently canceled as a result of certain circumstances. And as a result, we also unwound the hedge that was against the cargo and therefore, realizing a cash gain. So it's not a mark-to-market gain, but it is a cash gain that is realized in that hedging gain. So in addition to that hedging gain, we also have other one-off-ish income that was realized in the first half in India, particularly relation to capacity -- annual capacity reconciliation charges, late payment surcharges and also a reversal of certain provisions. So as mentioned earlier on, other business declined slightly as a result of a slower recognition of income and also because of lower government grant compared to what was received in the first half of 2021. And for corporate, as mentioned earlier on for the reasons discussed earlier. If you move to the next slide, this slide details our group capital expenditure and also equity investment. Now the total capital expenditure and investments incurred in the first half of 2022 was approximately $1 billion. The bulk of it is in relation to the equity investment into the SDIC portfolio as well as the HYNE portfolio that is approximately $850 million. Now the rest of it is CapEx across our renewables, Integrated Urban Solutions and Conventional Energy segments, of which the bulk is also invested into renewable of $95 million. So our total investments into the Renewables segment was 94% of our total capital expenditure and equity investments for the period. If we move on to the next slide. So from a group free cash flow perspective, our cash flow before working capital changes is $860 million, which represents a significant increase from the same period last year as a result of the strong underlying performance. Changes in working capital increased to $257 million compared to $137 million last year as a result of a slight increase in inventories, particularly in India, in the month of June. The reason is because in the month of June, we have had our typical annual overhaul for our coal units in India. And as a result, there was a less electricity sales, resulting in a slightly higher inventory. The inventory will be expected to be worked through in the coming months. So all in all, taking into account our divestments and dividends and interest income as well as our net investments in CapEx adjusting for expansionary CapEx and equity investments that was actually paid out during the period. Our free cash flow is $593 million compared to $562 million the previous period. Now if you move on to the next slide, which shall discuss our group borrowings. So our group borrowings increased by slightly over $1 billion, and that is really driven as a result of funding the completion of the acquisition of SDIC as well as HYNE. I think other than that, the rest of our positions remain fairly stable from our December 31 positions. What's important to note is that because of the improvement in our underlying results, our balance sheet metrics have improved compared to December 31, 2021 with debt-to-EBITDA reducing from 5.7 to 5x on the basis of our annualized first half performance. Debt to adjusted EBITDA, and if you recall, adjusted EBITDA being EBITDA, adding back a share of profits of associates decreasing from 4.9x to 4.3x, and EBITDA interest coverage ratios increasing from 3x to 4.5x and the corresponding adjusted EBITDA to interest coverage ratio improving from 3.5 to 5.1x. So if you look at our current group debt profile, we have improved our weighted average debt maturity from 4.8 years to 5.1 years with terming out of our debt. And a lot of it has been achieved in the past year with the issuance of a green and sustainability financing instruments. Now till date, we have issued and have a range up to -- up to $2.9 billion of green and sustainability financing, which includes our $400 million green bond done in June of last year, the $675 million sustainability-linked bond done in October last year, another $300 million 7-year sustainability-linked bond done in the first quarter of this year and also the announced $1.2 billion revolving sustainability RCF that was also announced around the same time of the sustainability-linked bond that was done this year. In addition to that, if you will recall, I also mentioned earlier on that in our SGI or the India green portfolio, we have also refinance started and refinancing a portion of their project finance debt with green loans secured by our corporate guarantees. So that has allowed us to term out our maturities and achieve a weighted average debt maturity of 5.1 years where we stand right now compared to 4.8 years previously. We will continue to work on the refinancings of our corporate debt, those that are coming due within 1 year and within 1 to 2 years, and we are confident that we would be able to do that given the momentum of our recent refinancings and debt issuances. Now our borrowing profile, where we stand right now, we have 32% of our total debt are coming from green and sustainability linked borrowings, which is a significant improvement from a year ago. So we are achieving a balance of borrowing profile right now, and we are looking to increase the proportion of our debt that comes from green and sustainability link sources. In terms of our hedging profile, currently 51% of our debt is fixed with 49% of that floating. Now that would have been approximately 57% fixed, if not for the consolidation of the HYNE portfolio that came in only in June this year. The bulk of the HYNE portfolio that is still a local project finance debt and this floating rate benchmark against the China LPR. From an interest rate perspective, the China interest rate environment is currently a lot more benign than what the global interest rate situation is suggesting, given China's intent to still manage the monetary policies balance against a GDP growth. But in light of that, we will also be working to review the HYNE portfolio and to increasingly fix the rates there as well. So the last thing to mention on this page is our weighted average cost of debt, which we have reduced it to 4.7% where we stand currently relative to a 4.8% as at December 31 of this year. We have been facing a rising base rates. I think that's a reality. But I think what has worked in our favor is in the recent refinancings that we have achieved using the green and sustainability-linked financing format. We were able to reduce our margins and spreads. And as a result, still able to manage our weighted average cost of debt to within a 0.1% reduction compared to where we stand at the end of December of this year. So our group liquidity position remains strong. Our cash and cash equivalents stands at $1.275 billion relative to $1.3 billion at the end of December 31, not changing very much. As mentioned earlier on, our -- we continue to have significant committed RCF and facilities to provide the liquidity to help us fund growth. And as of June 30, our committed unused RCFs stands at $2.5 billion. Now if we move on to the last slide. So in light of all of that, we have released the following outlook statement to the market to share our thinking in relation to the second half of this year. We recognize that our group has performed well in the first half, and it's mainly driven by the Conventional Energy segment as a result of higher electricity prices in Singapore and India, as well as having a favorable gas hedges that allow us to realize those gains. Now in the second half of this year, we do expect our underlying earnings for the Conventional Energy segment to remain strong if the market conditions that we have seen in the first half of this year remain. The performance of the Renewables segment in the second half would be underpinned by a full half year contribution from the China renewables portfolio that have been acquired, namely SDIC as well as the HYNE portfolios. Now in terms of corporate costs, we do expect that to increase as a result of continued rising interest rates and of course, higher borrowing cost as a result from the acquisitions of the SDIC and Huiyang portfolios. Now you will recall in the first half of this year, those interest costs that have been incurred was 5 months for SDIC and 1 month for HYNE. And in the second half of this year, we will see a full 6 months impact of that. But all in all, we do expect our full year results to be significantly higher than 2021. And we do want to remind everyone that we continue to operate in a global economic condition that is -- that remains uncertain. So as a result, it is our expectation that the commodity markets could potentially continue to be volatile, and we continue to face supply chain risks caused by the ongoing geopolitical tensions. And we do expect our interest rates continue to increase, right? And as different governments also seek to have tighter monetary policy to contain inflation, thereby potentially bringing about the risk of a global recession which could potentially negatively impact our performance. But all in all, the group will still continue to focus on the transformation of our portfolio from brown to green and achievement of our 2025 targets. Now just a couple of points to mention of developments to note. You will recall that earlier in this month, we have also made an announcement of what's going on in Myanmar in relation to our Myingyan IPP. We just want to share that it continues to operate and payments from the offtaker have also been promptly received in accordance with this contract. And we'll continue to monitor the developments in Myanmar closely and the market accordingly. We do have a couple of planned maintenance shutdowns. We would -- in the second half of 2022 currently right now in July, one of the units in SEIL Project 2 is still undergoing overhaul as part of our maintenance program. And we also would have a planned maintenance shutdown for our biomass power station in the U.K. as well. So a couple of developments to know. So I would -- I will end my presentation here, and we're happy to take the questions from the floor.

[Operator Instructions] Zhiwei?

Zhiwei from Macquarie. Congratulations management on a set of very stellar results. I have 2 questions. I think it's directed to Mr. Wong. The first question is about your strategy, right? A large part of your outperformance this year has been driven by conventional and it's kind of like overshadowed the renewables part. So the question is, given the macro environment and how you have been more inorganic in your strategy to grow your Renewables business, right? How do you see your Renewables business kind of playing catch up to what conventional has provided in the coming 2, 3 years? I know you have 7.1 gigawatts now, and you probably have another 2.5 gigawatts that's in the pipeline, but not included in the announcement, bring you close to your 10 gigawatt target. So just trying to get a sense of how you think about your renewables earnings profile over the next 2, 3 years? The second question is on, I think, fuel hedging. You've obviously benefited from hedging your fuel costs in Singapore, at least for this year. So trying to understand what's your strategy to hedge once you roll over into FY '23?

Thanks, Zhiwei. All good questions. Renewable strategy, if you think about it, what is facing us? Many people might agree that we are looking at strong prospects of recession, right? I'm seeing many people, I'm not in a position to make forward-looking predictions. But seems to have expectations that there will be a recession maybe as early as end of this year, next year. You can see some demand disruption. This morning, read a news, WTI crude prices went down to USD 88, quite a big and quick decline, signaling worries about demand disruption. So there is that looming, the rising interest costs, as well as some of these geopolitical concerns, Taiwan and so on. Now having said all that, these concerns are geopolitics as well and so on and so forth. They actually point towards more stronger desire to be less dependent on imports, stronger desire to be diversified in our sources of supply when it comes to key inputs like your energy, right? And renewables is one of those things that just about everybody has something even if you stay in an apartment, you can share the rooftop with your neighbors. So -- but in a more macro sense, almost all the countries, even at all Singapore has some solar. So -- and if you look at the general direction in terms of going green, that hasn't abated despite some of the macro conditions that I spoke about. So directionally, going green, the demand that we would be experiencing, I think long term, we are still quite confident. So that's the first thing. Short term, there will be some speed bumps, right, because of, again, rising interest rates because of demand being slower. But having said that, again, it's something that everybody else is experiencing. So what we need to do in the next 6, 12 months is actually to be very disciplined in our growth, right? So we mentioned inorganic in order to make the 10 gigawatts. Yes, that definitely is something that we have experienced. As you can see, we can't get to 7 gigs without having done the acquisitions, we have also some -- a fair bit of organic growth if you think about 100 megawatts here, 100 megawatts there. Those are not small, but -- and they do add up. So what I'm trying to say is that the first general direction, we think is still sound long term, right? Near term some speed bumps, so will have to be careful. And if we are disciplined and if we know what we're doing, the next 6, 12 months actually presents even more opportunities. When the tide recedes, you will see who is swimming naked, sorry to put it that way. But there could actually be opportunities that will come about for us to think about some inorganic growth, but we need to be very disciplined. So it is not a given, right, but hopefully, from our past behavior, it gives a bit of indication and some confidence. And of course, Eugene and I sitting here together with the rest of the team, it's incumbent on us to be very watchful. So hopefully, that gives a bit of a sense as to how we see our growth continuing in the next -- towards our 2025 target. So the other thing is also for whatever it is worth, we are a little bit ahead of our schedule. So that gives us the confidence not having to rush. That gives us that opportunity to -- in using the same words to be a bit more disciplined. So even if I am a little bit more careful, and I don't have to rush to get to 10 gigs, I'm ahead of the game, right? So that -- so we are -- again, if I may, long direction remains the same. Our target remains the same, still committed fully to go behind it. We're a little bit ahead of the game. Next 12 months, a bit of speed bumps, experience by everybody. We need to be very disciplined. We have a little bit more luxury given that we're ahead of our game, and we have all the resources lined up, and we have the teams on the ground that are -- that will enable us to capture the opportunities when they come about. So I hope I deal with that. And on fuel hedging, can I ask Eugene to help me out with that?

I think in relation to the fuel hedges as mentioned earlier on, right? The key thing is once we have clarity on the position and the cargoes of the gas that is coming in, we would put on the hedge. So for this particular year, right, the gas positions that we have the cargoes that are scheduled to come in that was contracted last year, we will have put in the hedges last year already. So right now, we are contract. We are reviewing the gas positions in relation to our needs next year. And as we contract the cargo coming in, we will put on the hedges. So what you expect to see is that for our gas position next year, we will be hedging. We have already put in hedges for a meaningful part of it. But as we progress through the second half of this year, we will be contracting and also putting on hedges. So our -- in short, the answer to your question that way is that we will hedge our positions next year. Not all of it is currently hedged, but we'll be hedging through the course of this year.

I have 2 follow-ups. The first 1 is in terms of where you see people potentially swimming naked, which geographies would those be? The second question is to Eugene. Could you just give us a sense of what sort of brand or WTI equivalent those hedges would translate to?

Okay. In terms of summing naked, I can tell you where we are hunting. We continue to hunt in Southeast Asia, China, India, right? And these are big markets. When you talk about Southeast Asia, you're talking about a collection of 10 countries, of course, we focus in Vietnam, Indonesia and Singapore. So it is not across the board. If you're asking about -- or rather I'm thinking about your question in terms of geography, I'm trying to say that each of these 3 regions are big and they are diverse. And there will be pockets of strengths. And just as there will be pockets of weaknesses. So I -- what I can tell you is that we will continue to hunt in these places. We do not -- right now if you ask me whether am I going to Europe, right now, other than watching it from U.K. and having boots on the ground in the U.K., where we will also see that as our home market, one of the home markets. The rest of Europe, it will be something that we would have to be very disciplined about, let's put it that way. But Southeast Asia, China, India will be our hunting ground, continue to be that very focused, not deviating from our strengths.

I think, Zhiwei, to answer your question, are you asking for a hedging gas cost -- because it's like -- because I just want to understand what exactly you're asking for.

Yes, I am. So I'm trying to figure out where your rough range of prices you hedges so that when we look at where public benchmarks are, we can roughly get a sense of what your spreads might be.

Yes. Okay. So Zhiwei, I think in relation to that question, we do not disclose our actual gas costs. Now what I would tell you is that our gas contracts, right, they are typically formularized with a certain indexation to one of these things, right? So the typical index is JKM, Brent, some HSFO as well. So typically, it's a base of a pricing formula against these indices. So naturally, once we have contracted a cargo that is coming in, then what is variable in the price formula obviously, is the index. And then we will hedge against the index in relation to the cargo that's coming in. So it will be a portfolio approach in managing our gas sources, both PNG as well as LNG, right, and are hedging specifically to -- in relation to our cargoes that's coming in. So unfortunately, I won't be able to share with you the exact gas costs. But if you see the trends, essentially, we will be hedging against forward expectations of where your JKM and Brent will be coming in over the course of this year.

Can I add that maybe Eugene is the opportunity to emphasize that? We -- when we hedge, really, it is in relation to our procurement and our procurement in terms of gas and coal, which is in relation to our operations. We are not out there to trade for profit, right? So it is -- so that's the first point to make, right? So we expect that we'll be running our power plant in order to serve the demand. So we know how much gas we would need to run the portfolio of plants that we have and we go out there and buy ahead of time because it takes time for the ship to come to Singapore, right? It takes time for it to be unloaded and then for it to be used. So it's a rolling. So that's the first point is that it is in relation to operations. Second point to emphasize it is on a rolling basis because you have to keep buying and you don't buy too far. Because then the ability to hedge the hedging market will become illiquid if it is too far ahead, right? So there's a certain -- we are hedging, we are buying, and we're hedging what we buy to meet our operational requirements. So when you think about it being rolling, that means our hedges are following the market up and down. So that we are not out there to say, "Oh, maybe next year, gas prices will be still very, very high." so do a bit a bit more than double what we need and that's when you get caught. We're not in that business. We cannot do that. We don't know how to do that. So I just want to emphasize that it has been one point. And related to that, then it's also an opportunity to talk about the gas hedge that we realized in the first half of this year, right? So that, to some extent, it's a onetime thing because we -- again, like I said, we hedge based on our operational needs as they turn out. That particular shipment for one reason or another was not no longer used and then we unwind that. But that is not something that we expect that will be repeated in the second half or for that matter in the future, right? So I just want to take the opportunity to explain that. I don't know whether you can add color to that.

No. Thanks for that, Kim Yin. I think what Kim Yin has alluded to, again, just for the clarity of everyone else is that in the first half, we did recognize as part of that $92 million of income that I highlighted in the conventional segment. Then that was the result of unwinding one of the gas hedges where the cargo did not come in, right? So play this out with me, back in 2021 we contracted the cargo. So at that point in time, naturally, we'll put on the hedge against that particular cargo, okay? So when the cargo did not come in, right, then what we did was that we unwound the hedge and then there was a gain because there was gain against where the spot price was as how these hedges will work. So we realized a cash gain on that. Now so for the rest of the gas portfolio where we actually burn then what will happen is that we'll take shipment of the cargo, right, at the contracted price index against the spot index at the time when they come in, but we will have hedged that as well. So then the -- let's say, this is the hedge price and the cargo that's coming in, the index is higher than hedge price. So the physical would be higher cost but we would have the corresponding gain. And then this whole hedge, which is, obviously, there will be hedge accounting -- hedge accounted for. We'll then go into cost of sales. So just to clarify that if the cargo comes in, that's how it will work. For that particular one that what Kim Yin has mentioned, the cargo did not come in, so we unwound hedge. And we have to unwind the hedge because if not, it will be a trading position, right? And then that resulted in the in the cash gain. So naturally, that particular gain would not -- you would not expect it to happen from time to time because our cargo will come in. And as Kim Yin has mentioned, we were burning for operations.

Rahul Bhatia from HSBC. Just continuing on this hedging aspect. So could you share your -- how you are thinking about hedging in first half of 2022 because both coal and gas prices were at sky-high. Did you actually do hedging? And what is the time period of hedging you look at versus the contracts you have? Is it like both our 12 months, 10 months down the line? How do you think about that? Second question is on the 2025 targets, as Kim Yin mentioned, right, you're already ahead on the renewable portfolio. But what about integrated Urban Solutions and emissions? There has not been significant movement -- upward movement in both these sites. So what are the plans forward for that? And finally, just a quick check on India thermal coal plants. Could you talk about the access to coal there? Did you face any challenges in first half 2022? And maybe just share with us what are the sources of coal for India operations?

I deal with the second one first, so the fuel hedges, India. So in terms of the other targets, Integrated Urban Solutions, a lot of it is land sales, right? And the target is land sales to reach 500 hectares or land sales for 1 year. Right now, it is still impacted at some 170. You don't see it increasing a fair bit. We are still confident we can meet it. Why? Because our land bank continues to grow. Land sales, to some extent, especially in our biggest market, Vietnam is affected by COVID. But this season, anybody who travels to Vietnam, you should know the place is booming. So that's why even some of the historical ones, we are getting -- we're beginning to see higher prices. So we are quite confident to meeting the target because we have the land bank. We have the project pipeline and whether or not you reach 500 or 600 depends on what you launch. So there's some element of it being able to plan and time some of this. The implanting is actually we do now is sustainable. So I can boost the sales in 1 year to make 500, I can next year. At some price somebody will buy, right? But I think what we want to -- what we want to show is a good sustainable land sales pipeline. And I'm saying that our land bank and our order book is what is giving us the confidence that we will be able to get there. So first, land bank, we continue to gain the land bank, as I mentioned in my presentation, we've got new park -- 1,000 hectare new park that has been developed and so on and so forth. So that part of it is good. Then our order book at 288 hectares, right? That is well ahead of 1 years' worth of land sales, right? So 2021 land sales of 170 hectares. The order book itself is a 288. So it's strong. You see the demand. So you're not so worried. It's more a matter of us developing it and timing it a little bit slower initially because of mobilization, because of COVID and all that. So that's on the Integrated Urban Solutions. Then in terms of the carbon intensity, if you -- the 2025 target is one of carbon intensity, and we designed it deliberately so, so that then we don't have a gun to our head to resolving coal issue. If you work through the numbers as strong as our -- we reach our 10 gig target, we generate enough of green megawatts, the intensity will come down. So that is the first thing. And second thing, with regard to the -- to our coal positions, again, we do not have something to report at this meeting, but we continue to be working very hard to explore the options that is available to us. And as you know, the last time we met, we just signed the contracts in India. And that has really given us a very big boost to the earnings and the cash flow profile from those businesses are -- from those contracts are boosted already this season by the Bangladesh's 200 megawatts. And then above and on top of that by early next year, the AP 625 contract will kick in, and that will really -- if I recall, some 85% will be totally contracted. And that will put us in a very strong position to explore options on that. So the intensity target, we're also quite confident that we can make it on the back of strong renewables megawatts growth -- megawatt hours growth as well as potential onetime so-called step down in terms of our government footprint if we are able to find inorganic solutions for reducing carbon in our -- especially in our coal business. In terms of -- the last question was gas hedges. The first one, gas hedges. The access to coal. Yes. So the access, we actually -- this last 12 months, there has been tightening and so on in different quarters. And we were very lucky in the sense that we have got many sources. So the team in India has done well to have diversified the sources and options. The fact that we're next to the port is very useful. So -- and also the fact that our plant is able to burn coal from more sources and otherwise is also very -- making it very useful. So I'm saying we are at a better position than many, if not most, to deal with coal shortage. And we have been leveraging on that position. I'll give you one example. For instance, our plant is able to burn Indonesia coal without too much of adjustments, right? Because Indonesia coal has high moisture content. Some other coal plants are reluctant to use it because it will cause operational complications and let's put it that way. So we have domestic coal and we got international sources, and we also are more flexible in terms of the input that we can put inside our boilers. So that has given us a better way to manage. And so far, it has served us very, very well. And as you can see the results coming out from P1 and P2 in the first half of this year is a testament to good management of fewer input. I think even if your plan is available, no coal, you're finished, right? So I think that part of it, fingers crossed, but we feel that we are in a good position relative to others. If there's a shortage, we wouldn't -- maybe I'll be speaking too early, but we'd like to think that we are in a better position to manage that. I don't want to say that we're the last to be hit, but we'll be in a good position to manage them, let's put that way.

Yes. I think on the coal situation, Kim Yin, if you allow me, I would just add a little more detail. So as you would know, our domestic PPAs is served by domestic coal in India, right, from Coal India. We do have allocation for that, and we are one of the more efficient plant. We stand higher in the merit order. So for our domestic PPAs, we do have that stable allocation from Coal India, and we have not faced a significant situation for that. Now for our Bangladesh export PPAs, as of now, 450 megawatts of that, we do have a long-term coal supply agreement with a party in Indonesia, right, 1 fixed price and 1 is indexed against the API4 Index -- sorry, the GCN Index. So the -- those couple of sources of coal have been very stable as well, and we have not faced any form of a shortage in relation to that. Now so on the IEX front, we obviously cannot burn domestic coal. So as I mentioned earlier on, we do have these coal supply contracts that's coming into Indonesia that has provided us with the necessary coal to serve the IEX market as well. To supplement debt, there is also the source of e-auction coal locally, which means that when Coal India has an unallocated domestic coal, they'll put it up for e-auction and then we have also access to those coal sources. So as of now, these key sources of coal that is coming through to us has not experienced any form of shortage pressures, and we continue to leverage on them. Then, Rahul, on your first question in relation to hedge. Again, we don't speculative the hedge, well, if that concept even exists. So it simply means that we will have visibility of gas sources, contracted gas cargo that is coming in before we put in any hedge, right? So we do not hedge -- we do not have an open hedge. That's the policy that we have. So we have 2 sources of gases. We have gas coming in from pipe natural gas, and we also have gas coming in from LNG. So typically, we have at least 12 months of visibility of a gas cargo coming in. And whenever we have an identified cargo that's coming in, we will hedge against the cargo. So that is essentially how we have managed the gas portfolio and as well as the hedges against the cargoes that are coming in.

I'm Izabella from CGS CIMB. I have 2 questions. Firstly, what's your progress on decarbonization in India for SEA side? Secondly, will you be able to sustain your poses dividends for the second half of the year or more?

I'll take the dividend. Okay. So in relation to the dividend question, you will notice that our interim dividend of $0.04 is already a doubling of where we were last year in light of the results that we have achieved this year. I think if you have to recall, the dividend policy that -- well, it isn't exactly a policy, I will call it the dividend principle that we have set for ourselves. We do want to make sure that our shareholders appropriately rewarded with a sustainable cash dividend that also balances against our brown to green transition and growth objectives. As a result, in the second half of this year, how we would view, we would view that dividend principle in light of the financial results that we would receive this year -- that we achieved this year and also the objective of growth. I think an indication will be, if you look at how we have managed interim versus final dividends last year, right? And historically, that will give you an indication on how we would think about it. We do recognize that this year, it's a strong year, right, although, albeit much of the outperformance are potentially in the merchant markets. So we are also reviewing the possibility of rewarding shareholders with special dividends in conjunction with our typical ordinary dividend policy. So I would say that, that would be -- how we will look at the full year dividend in the second half. And then the first question is in relation to our decarbonization thing of India.

Yes. We have spoken about that on quite a number of occasions Izabella. So you have to put up a me, especially those who have heard it before to -- for me to repeat it. Yes. There are many ways to decarbonize, right? The most directly, you shut it down. You don't run. Then there's no carbon. Another way is that you could change the feedstock. So if you're not burning coal, you're running something else that is deemed to be greener, then you can decarbonize. So there could also be other technical technology-related solutions that could be possible, right. Some people talk about blending with ammonia. And to the extent the ammonia is produced in a green manner, then your carbon footprint comes down. There are also commercial ways of dealing with it, of course, there's the multi-laterals are talking about providing a framework whereby they would provide a money or support for substitution of coal-fired megawatt hours with green megawatt hours, right, ADB was talking about it particularly in the context of Philippines, right. We did have conversations with them with regard to India. So that's one way. Of course, at the end of the day, the other way to do it is just a clean divestment, yes. So we explore and develop all these options proactively. At the moment, we are exploring and developing them very proactively. Like I say, we are not able to tell you anything in terms of progress this season, we're hopeful that we would be able to share something in future seasons. But I want to reemphasize that this is one of the most important, if not the most important agenda on our transformation journey, right. So I want to reemphasize that the commitment of the management behind this target, behind this goal is underpinned very, very directly by also incentive programs. I don't stop just at this table, but also my India colleagues my CEO, India Vipul Tuli, his key management team. We are all on the same strong commitment framework if I have to treat that way. So what I want to say, again, reemphasizing is that the various ways of doing it, we're proactively developing each of them. We are very committed to this target and that we hope to see some progress in that department soon. But we have to, in the meantime, make sure that we do not destroy value. As we go about decarbonizing, there will be value impact, but we have to weigh the short-term value impact versus the long-term value gain depending on the solution that we're looking at, right. Because if you -- let's say, if you change the feedstock, and of course, your input costs will be different. And how does that -- you have ongoing operating cost issue, how to deal with that. So those must be adequately that with what we want to make sure is that we balance all the considerations and make sure that something comes out, when we do that, we decarbonize in a responsible manner, responsible to all our stakeholders, yes. So but again, a very important target. We are all committed to it. So I hope I somewhat give you some assurance that we are on it. But I cannot say this is definitely the way to go or there is definitely I can't -- I'm not in the liberty to disclose that at this stage.

We have questions from participants online. So this is from Jagdeep Ghuman from Nuveen Asset Management. The first question is a follow-up on decarbonization. Has a strong power price environment positively affected or accelerated these discussions or improve the potential valuation of these assets? That's his first question. The second is, how have rising interest rates affected the company's ability and strategy to acquire renewable energy projects as project IRRs have declined and funding costs increased, are there still positive spreads to be seen? Any particular geographic markets or asset categories increasingly being emphasized or deemphasize? And lastly, does the company see opportunities to invest in geothermal, such as in Indonesia where natural resource is plentiful and government policy is increasingly supportive?

On the first question about stronger electricity prices and margins and so on. Obviously, one is happier when you have an asset that can generate margins, right? So definitely, the value of these assets have been enhanced. And I think primarily attributable to the contracts that we were able to lock in, right? Even though have we not done the contracts, the spot market might have also rewarded us handsomely, right, with shortages. But what we want is we have a more stable profile to cash flow as well as -- and of course, earnings are, right. The contracts have given us the opportunity now or that profile now, this 2 business, P1, P2 or CIL. Now with the contracts have a stable profile that enables at least the perception of risk has come down, right. So I may not -- I think it is quite obvious in everybody's mind that that has provided in many people's minds, that makes it a business that is much more valuable. So yes, is the short answer to the question. And whether or not it will be more attractive from an investor's point of view, from a buyer's point of view. We'd like to think that most buyers would value stability over a very volatile fees and farming business. And from a core operator perspective, even as an owner today and for the team on the ground, coal plants are designed to be baseload. So having that stability and that assurance that I don't have to cycle the plant up and down. And then even though we might make me money, but I have a stable profile allows for planning, allows for financing, allows for recruitment and all that. So net-net, very, very positive. So I agree with the situation that yes, indeed, this has, in our mind, make it much more valuable business. So that's the first one. In terms of higher interest rate environment, I would ask Eugene to provide more color. But before I ask him to do that. I think we want to bear in mind that this is -- rising interest rate affects everybody, not just us, right. Of course, we are in the path to grow. And does it affect our competitiveness when it comes to dealing with when it's a competitive acquisition or a tender, bid situation, it doesn't -- I like to think that it doesn't affect our competitiveness because the same condition would apply to anybody else who is trying to make the investment, that's number one, right. Of course, if somebody comes along and decide to take aggressive stance on interest rates going down, then, of course, that can affect whether or not you win or lose. But having said that, even without the current interest rate environment, somebody can still come along and make their tell assumptions, right. So from that perspective, everything else being equal, it is -- it doesn't reduce our competitiveness. Then does it is -- is our funding capacity affected. We continue to see at least as of today, we are able to raise the capital that we want to grow into the area that we have told everybody we are going into, which is the green, right. So Eugene, you might.

Thanks for that Kim Yin. I think I absolutely concur with what a given a share, right, in terms of how it impacts us competitively. Well, the interest rates to get factored into looking at projects or acquisitions in 2 ways, right? One is the actual interest cost that you would incur in funding for the acquisition. And the second is cost of capital, which is a hurdle rate, which any same investor would have to take into account. So I would say that given the rising interest rate environment, that would through those 2 factors, it will impact all in the same way. So then from our perspective, it's as what Kim Yin has mentioned earlier on, we would obviously be more disciplined when we assess these investments. And secondly, when we look at funding these investments, we would also look at the interest rate outlook. I think from our perspective, I think interest rates increasing, that has really come through. That is a reality. Now the thing is that -- and the question is that how much and how long, and that is anybody's guess, right? I think what is somewhat more encouraging for me is that in the latest FOMC meeting, although the 35 bps hike was still put through. The commentary, right, that are the narrative that accompanies that rate hike was a lot more dovish as compared to before. Recognition of a potential recession, potentially coming nearer sooner rather than later. And those factors suggest that perhaps the interest rate hikes will not be as aggressive as initially expected. And we did see that reflected in the markets. USG 10-year treasuries have traded back now. The last I checked; it did go down as low as about 2.75% range. It come back up slightly hovering around 3%, but meaningfully lower than the 3.5% ranges that hit earlier this year where the full-blown guns all firing absolute hawkish stance that was taken by the Fed. Now the second thing also is that Fed fund rates where they're expected to land at the end of 2023 have somewhat also moderated, right? I think previously, it was 3.25% to 3.5%, now expectations have come down to 3%. So I think while interest rate increase, it's accepted. But I'm personally encouraged that at least the magnitude and the outlook, it's a lot more dovish. Now what does it mean for us at Sembcorp that when we look at our funding? So clearly, we will have to leverage on our strategic position and our ability to tap particularly the agreed and sustainability-linked financing because in all -- whatever the funding is for, it is completely aligned to that -- to their purpose and the team. And as mentioned earlier on, we were able to manage our margins and spreads given the intent as well as the mode of financing that we are using. And we will continue to use that to kind of like balance off against the potential base rate increases. So I think from the tangible interest cost perspective, we want to believe that our ability to tap into the green and sustainability linked financing and also being able to achieve better than traditional financing spreads and being able to leverage on that through. So who we are at Sembcorp with the support of our financiers? Many of them are sitting in this room to drive through the transition. But having said that, how the interest rates were factored into cost of capital hurdle rates considerations, that is something that would be a few samely by all investors. And as Kim Yin has alluded earlier on, we will continue to do that as well. Yes.

The -- just a little bit more to add to that. It's the way I talked about people swimming assuming naked. So while leverage interest rate goes up, that's when you might see some opportunities come around. So if one is having a strong enough ability to ride through this time of period, that's when, in fact, it reads out, it separates the whole pack. When interest rate is very low, everybody has access to money, the competitive environment is actually much more intense in that sense. But at the moment -- actually, so in that sense, it may actually be a good thing to those who have access to funding, right. So that's one. There was the question about geothermal. I think right now, we've been focus on wind and solar. We would like to, if anything, go into more adjacent areas. So let's say, if there's a offshore wind opportunity, yes, we'll be very happy with that, especially with a lot of offshore capabilities also vested in Singapore, in SembMarine, for instance, our sister company. If anything immediately adjacent to us today, I want to say is batteries. So batteries is increasingly, we see as a very, very integral and necessary part to any renewable's portfolio. In any grid because storage, the issues associated with operations and integration of intermittent renewables is not a mountable. So -- and the cost of battery, cost structure actually has come to a stage to a point whereby it is actually commercially viable, if not attractive. Certainly in the U.K., we find that attractive. The -- our battery portfolio there is serving a critical role, dealing with all the frequency support in the various slices of the grid, and we're making good margins coming out of it. And we see that, that could -- batteries could become important as more and more grids integrate more and more renewables into their portfolio, right. So where we are in Asia, this battery experience that we have is really giving us a very good advantage or a lead. I'd like to think that we are in a good lead. We are in a good lead; it takes time to learn how to operate these things and especially an advanced market like the U.K. So today, we claim at least operational 120 in the U.K. and by the end of this year, 200 in Singapore megawatt hours of batteries, and we are developing more in the U.K. where, again, commercially, it's viable and attractive and we want to position ourselves to be in this space, one of the leaders in Asia, if not in the world. So I took the opportunity of the question to explain if we want to do adjacent green business, we think that this is where we want to -- we have decided that we will go big into in addition to wind and solar. But in terms of geothermal, the -- first, we do not necessarily have a position today. We do not have any -- too much operating experience in the space. The opportunities are also not very pronounced in terms of where we operate in. Of course, if you go to Indonesia, you go to Japan, they will claim to have a lot of potential for geothermal, but we are not actively hunting for geothermal projects if that helps answer that question. But where are we actively hunting, of course, continue to be win in solar, right, to get to our 10 gigs. But batteries would be something that you should we are -- usually follow us. If you're interested in looking at a developer who is becoming a leader in the battery space. So I hope I shed a little bit more color to that -- related to that question, taking the opportunity.

Questions from the audience. Lady...

Anita from Business Times. Just want to get a feel of be high prices and the energy complex. And now given broader slowing economy. If you are already seeing signs of slowing energy demand? And if yes, in which markets? And if no, how soon could you expect that? Are you expecting that to happen? That's my first question. My second question is in relation to the conflicts over Taiwan. How would Sembcorp be bracing for worst-case scenario, if at all, if the tensions escalate?

In terms of energy demand, the first half of this year, it has held up. And in some quarters, actually, in fact, it has been strong, all right? You have to recognize that energy at the end of the day, especially power that we operate in, it's a basic necessity, right. Compared to the other -- the way I would think about it is they compare to the other sectors, right, in a recession. Energy is relatively will be affected less, right. That's how I would think about it. There will be -- in a recession, there will be some slowdown, right -- like I don't -- not associated with a recession, but even in this first half of the year, you see China with the strict COVID measures, right, it has affected the economy. You see some manufacturing slowdown in China. That is widely reported, right. So that -- those are the things that I can quote. Now then our China businesses, we have a Chongqing plant in Shanghai under the JV it is -- it hasn't been really affected from a demand, from a sales perspective, all right? Now that's not to say we recession of bigger slowdown, it won't be affected. All I'm saying is that it's just energy business power especially is relatively -- will be affected relatively less compared to some of the more consumer-related type businesses like retail, maybe hospitality, travel. I think that's what I can comment. And in fact, Anita, you talk to many economies, they are in a better position to answer that question. I can only tell you how -- what we have experienced and how we see moving forward the next year. Yes, that's a general -- there's a lot of -- as I started this presentation, we think we receive a lot of feedback that a lot of people expect a recession or at least a slowdown in terms of growth for the -- during next year. But we think energy will be -- will still be needed. Energy demand, even if it has a speed bump in the near-term, we'll return to the growth path. Taiwan, you talk to anybody or there are a lot of keyboard worries who are in a much better position for me to answer Taiwan. And how is it going to affect our business in -- from a commercial perspective. I think what we need to -- what we need to be very cognizant of is we do operate in India. We operate in China. We operate in Southeast Asia. So the same geo-politic tension, for instance, before this season, it wasn't Taiwan, it was South China Sea. So how is it going to affect us? Yes. We need to be look at how our businesses could or would be affected by some of this and we have to make plans for it. So far, we are -- some of this, we are able to continue our business I think probably all the major people tell me it's not good for you to draw attention to another one. I can tell you Myanmar -- we have a power plant in Myanmar. And then there were -- there are all these discussions about how can -- what is the risk to us operating in Myanmar, but I draw your attention to that because that's an example whereby you have got a political upheaval. We -- but we are in the business of a primary input. It provides for an important source -- an important input to the quality of life to the economy. So despite the political upheaval, we are the cheapest, the cleanest, the most stable source of energy in that part of the country. And because of that, we were able to -- we see our role as continuing to serve the role and to -- and I think that is being the social responsible way to being a commercial player in a foreign country as long as we are needed, we'll continue to serve our role. And in so doing, we continue to be able to serve also our stakeholders. So moving away from Taiwan, like I say, -- we don't know so what's going to happen tomorrow. Your guess is as good as my in fact, probably better since you are closer to the situation. But I generalize that to talk about, look, we operate in the region, and the region has many flash points. Myanmar being one of them. We operate in India and China; they have devoted disputes. It doesn't stop us from serving them chip, green, stable, efficient primary input into the quality of life and the economy of all these developing nations. So maybe I should just stop there. The -- you can go on and on with this, but it's not -- I wouldn't want you to call me on Taiwan as that way I think today is about the results, and we're not -- I'm certainly -- I'm no expert in it, and we do not have business in Taiwan today.

Next question, please. Lady in white. Thanks.

First of all, congress on the fabulous results. Just would like to follow-up on Myanmar. What is the risk of any operational disruption there? And as well as the provision of impairment? And what could be the trigger for these events?

Thanks for that. I think in relation to Myanmar, there will be -- from treating, you probably know that for Myanmar, we account for that under the if at all, right? So that means this is accounted in our books as a service receivable. So the first line of assessment is really in relation to the increase. Are there any evidence that payment has stopped, that's an issue with a payment? I think at this point, while we assess the situation, we are aware right of factors. Clearly, the political situation that's going on attempts by the government who will start curbing U.S. dollar or foreign currency-denominated outflows in relation to the country. But -- we also -- but in relation to our asset in Myanmar, I think as Kim Yin has already alluded to, right, number one, essential service, number two, one of the -- we are probably one of -- I'm not sure if we are the, but we are definitely one of the most efficient producer in Myanmar. So from a generation perspective and also receipt of payments in the foreign currency denominated form continue to be. In fact, they continue to pay us on time and very promptly. So are there signs that indicate that there would be an outright provisions or impairment where we stand right now? No. Then the second level of assessment that -- is that actually a credit impairment? So that means was that an actual default on receipts in relation to the PPA. So as mentioned earlier on, they continue to pay promptly. So there is no payment default. The payment pattern continues to be prompt, which they have continued to pay, and they pay a hit of credit terms. So as a result, we do not see at this point in time an absolute trigger for impairment in relation to the Myanmar asset. But of course, we continue to monitor the situation very closely, yes.

Next question.

This is Sean from Credit Suisse. I have 3 questions. The first 1 relates to the earlier mention of a potential special dividend. So how should we think -- like how large could this maybe relative to meet your gross gearing or something, right? So that's the first. The second question is on the India decarbonization, the various options. So maybe could you talk about the considerations and trade-offs that you're looking at for the various options like say, carbon offset using cleaner feedstock and a clean divestment. No need to go to specifics as in general. The third 1 is more housekeeping. I noticed Singapore's net profit figure was mentioned for the first half of last year. So could you provide the number for the second half of last year?

So you mentioned for Singapore, the number for the second half of last year?

Yes. Conventional energy Singapore.

Yes. So I think if you recall, if you look at last year's conventional earnings in the second half, I did mention that for that -- not conventional, I'm talking about gas and related activities. I did mention that approximately 60% of that came from Singapore in the full year results. Noting a hit ready. So [indiscernible] has been taking note. So I think that will give you a edge in relation to that second question. Maybe I'll take the first question for [indiscernible]. So in relation to a special dividend, I think if you heard what I said earlier on, right, our -- from ordinary dividend standpoint, interim, we have already announced. We want to make it sustainable. So you can look at from a final perspective, how we would think about it in the second half. Now -- so again, from a special dividend perspective, it really depends on how the final results turn out, of which, as mentioned earlier on, it does depend on where the merchant markets go. And if the conditions that persist in the -- or exists in the first half carry on in the second half, then we do expect our performance continued to be strong. Then it will be reasonable to think about looking at our historical payout ratios to see how potentially the dividends could be sized, right. So I think how I'm guiding it's how the thinking or the principle behind it. But it will be hard for me to share a number, if that is what you're after. But as mentioned, our dividend principle is always look to balance that cash return to our shareholders, right? The cash return has to be sustainable. And in this current season, we will also balance that against the need for investments into the long-term. And then in terms of declared our interim dividend, you can take reference to how on an ordinary basis, the patterns in which we have -- are being -- looking at it into the second half. And then there will be merchant markets that we drive our results to be better than expected again. And then you can look at our historical payout ratios to help you think about it. Yes.