- Sembcorp Industries has agreed to acquire Alinta Energy for S$4.8bn to be paid fully in cash. Alinta has 3.4GW power generation capacity in Australia across gas (43%), coal (33%), wind (17%), and solar (7%). A bridging loan will fund the acquisition, and equity fund-raising is not required.
- We view the acquisition positively. It is PATMI accretive by 23% on trailing 12 months June 2025 earnings (pro forma and excl. amortisation of any intangibles). EV/EBITDA post-acquisition drops modestly to 8.3x. There is a pipeline option of 10.4 GW of largely renewable capacity for future growth. However, net debt to EBITDA will rise from 3.6x to 4.6x (an additional S$5.8bn in net debt). Australia's energy market has fewer long-term contracts than Singapore's, leading to higher margin volatility.
- We have not incorporated the Alinta acquisition into our forecast. The acquisition will require shareholder approval and is expected to be completed in 1H26. Separately, we are lowering our EBITDA/net profit by 7%/12%, respectively, due to lower Singapore electricity spread assumptions. Our target price is reduced from S$7.90 to S$7.10. Our BUY recommendation is maintained. We view the acquisition as a strategic entry into a new source of sustainable growth. The growth potential of China is fading, spreads in Singapore are softer, and any listing of its Indian renewable energy assets would dilute the company's growth trajectory.
Continue Reading
