Towards a Greener Future Sembcorp Industries Annual Report 2020 Sembcorp’s purpose and passion is to do good and play our part in building a sustainable future. Our vision is to be a leading provider of sustainable solutions – supporting development and creating value for our stakeholders and communities. Environmental, Social and Consolidated Overview Governance Review Financial Statements Group FY2020 Highlights 1 Sustainability Report 35 Directors’ Statement 74 Chairman and CEO’s Statement 2 y About this Report 35 Independent Auditors’ Report 84 Supporting a Renewables Future 6 y Managing Sustainability 38 Balance Sheets 90 – Our Sustainability Framework 38 Consolidated Income Statement 92 – Supporting the SDGs 39 Consolidated Statement Operating and Financial Review of Comprehensive Income 93 – Sustainability Governance 39 Consolidated Statement – Memberships and Associations 39 Group Financial Review 8 of Changes in Equity 94 y Our Material ESG Issues 40 y Financial Highlights 8 Consolidated Statement Enabling a Low-carbon of Cash Flows 98 y Five-year Financial Performance 10 and Circular Economy 40 Notes to the Financial Statements 101 y Value Added and Productivity Data 12 – Climate Change y Treasury Management 14 – Resource Management Energy Review 16 – Local Environmental Protection Other Information Urban Review 22 Empowering Our People and Communities 43 Additional Information on – Health and Safety Directors Seeking Re-election 222 Our Leadership – People Shareholding Statistics 226 – Community Corporate Information 228 Board of Directors 28 Embedding Responsible Business Practices 48 Glossary Inside back cover Technology Advisory Panel 32 – Corporate Governance Senior Executives 33 – Ethical Business and Compliance – Risk Management Corporate Governance Statement 54 Investor Relations 71 Group FY2020 Highlights Overview Group: Continuing Operations1 Group 6,735 1,427 247 5,447 1,184 Turnover EBITDA 19% 17% Net Profit / (Loss)2 S$5,447m S$1,184m (S$997m) US$4,089m US$889m (997) (US$748m) 2019 2020 2019 2020 2019 2020 456 6.9 12 5.9 301 Net Profit before EI Return on Equity Earnings / (Loss)2 34% before EI Per Share 14% S$301m (57SG cents) US$226m 5.9% (57) (43 US cents) 2019 2020 2019 2020 2019 2020 305 4.5 5 4 Net Profit 3.0 Dividends Per Share 157 49% Return on Equity 20% 33% S$157m 4 SG cents US$118m 3.0% 3 US cents 2019 2020 2019 2020 2019 2020 Energy 6,138 360 195 5,266 297 160 Turnover Net Profit before EI Net Profit 14% 18% 18% S$5,266m S$297m S$160m US$3,953m US$223m US$120m 2019 2020 2019 2020 2019 2020 Urban 280 117 117 92 Turnover3 Net Profit before EI Net Profit 97% 60 49% 21% S$9m S$60m S$92m 9 US$7m US$45m US$69m 2019 2020 2019 2020 2019 2020 EI: exceptional items m: million 1 Following the completion of the distribution in specie of ordinary shares in the capital of Sembcorp Marine Limited to Sembcorp Industries shareholders (the Distribution), the performance of the Marine business for the period from January 1, 2020 to September 11, 2020 is reported under discontinued operation 2 Includes a non-cash, non-recurring fair value loss of S$970 million recorded following the completion of the Distribution and net loss from the discontinued Marine business 3 Most of our Urban businesses are associates or joint ventures. Turnover reflects payment for services provided to these associates or joint ventures. For 2019, turnover included recognition from the sale of Riverside Grandeur in Nanjing, China, a residential development wholly-owned by Sembcorp Chairman and CEO’s Statement Overview Dear Shareholders, The demerger via a distribution TOWARDS A in specie of Sembcorp Industries’ stake 2020 was a year of immense challenge in Sembcorp Marine was completed in GREENER FUTURE and profound change. Nations, September, following a recapitalisation companies and individuals struggled of Sembcorp Marine through a We aim to transform to cope with the impact of the global S$2.1 billion renounceable rights issue. coronavirus (COVID-19) pandemic. Our shareholders received 491 Sembcorp Meanwhile, disruption to the energy Marine shares for every 100 Sembcorp our portfolio towards sector continued to gain pace. Industries shares owned, with no cash outlay. The demerger has unlocked value, a greener future, by In some ways, this unprecedented change with our share price increasing 78% mirrored Sembcorp’s own. We started a in 2020 following its completion. focusing on growing new chapter in our history, by ushering in new leadership and completing the The board proposes a final and total our renewables and landmark demerger between Sembcorp dividend of 4.0 cents per ordinary share for sustainable urban Industries and Sembcorp Marine. 2020, subject to shareholders’ approval. Amid extraordinary times, the global Notwithstanding the adverse business solutions businesses. Sembcorp team responded with conditions, the Group continued to gain exceptional commitment and character. momentum in renewables growth and They were ready on the frontlines to deepened our presence in key markets. deliver reliable essential services, which continued with no disruption. They rallied together to support communities Amid extraordinary times, hard hit by the COVID-19 pandemic the global Sembcorp team and also scored wins for the business responded with exceptional in a difficult year. We salute them. commitment and character. Creating Value in a Challenging Year Together with 400MW of new solar 2020 was very challenging. While the capacity secured in India, we grew our underlying performance of our Energy global renewables portfolio in operation and Urban businesses remained resilient and under development to over 3,200MW and we continued to deliver positive in 2020. This included a 60MWp inland operating cash flow, the Group incurred a floating solar photovoltaic (PV) system net loss of S$997 million for the full year in Singapore, which will be one of the mainly due to a non-cash, non-recurring world’s largest when completed later fair value loss of S$970 million recorded this year. In India, we cemented our following the completion of the position as one of the nation’s leading distribution in specie of the ordinary shares independent power producers by being in the capital of Sembcorp Marine and a the first to successfully commission net loss of S$184 million for the Marine 800MW of wind capacity from the business prior to the demerger. In addition, first three tenders by the Solar Energy the Group recorded exceptional items Corporation of India (SECI). of negative S$144 million. Given the unprecedented impact of COVID-19 In 2020, we completed divestments in on the global economic outlook and Chile, China and Panama. Since 2018, Ang Kong Hua the challenging market environment, we have unlocked cash proceeds of Chairman (right) this included impairments amounting S$735 million through 17 divestment to S$240 million that were made in transactions, demonstrating our Wong Kim Yin the year. Without these exceptional commitment to systematic capital recycling. Group President & CEO (left) items, and excluding the discontinued Marine business, Group net profit For more on the performance of was S$301 million compared to the Group and our businesses, please S$456 million in 2019. refer to pages 8 to 27. 2 Sembcorp Industries Annual Report 2020 Sembcorp Industries Annual Report 2020 3 Chairman and CEO’s Statement Overview Transforming our Portfolio A Strong Foundation Jiangdao Intelligent Cube, a 106,218-square metre Towards a Greener Future We are confident that our strategy business park on Sino-Singapore Sustainability is our Business is built on a strong foundation. With Nanjing Eco Hi-tech Island, China, houses high-tech Looking forward, the path to a Singapore as our home base, we are companies such as Tencent post-COVID world remains unclear. well-placed to serve markets in Asia, and iFlytek Yet the megatrends of decarbonisation, where population growth is driving urbanisation and electrification are rising demand for sustainable solutions clearly here to stay. As economies start that enable rapid industrialisation, to rebuild, the emphasis is expected urbanisation and electrification. to be on resilient and sustainable infrastructure and development. Sembcorp is today one of Singapore’s largest home-grown renewable energy With our strategy fully anchored players, operating an international portfolio of wind, solar and energy storage assets. in this purpose, sustainability Backed by our strong market positions, is front and centre of all that project development and operations & maintenance expertise, we believe we can we do. It is our business. vie to be a regional front runner. We are a leading renewables player in Singapore At Sembcorp, we are driven by a with about 280MWp of solar capacity. clear purpose to play our part in We are able to offer a full suite of solutions across our businesses, we can provide sustainability. Under his leadership, building a sustainable future. With our including ground-mounted, rooftop and solutions focused on meeting the twin the reshaping of our portfolio towards strategy fully anchored in this purpose, floating solar PV systems. In India, we goals of clean energy and sustainable renewables and sustainable solutions sustainability is front and centre of all achieved the highest wind capacity under urbanisation in Asia. gained considerable momentum. that we do. It is our business. self-operations of any independent power producer in the country, thanks A Note of Thanks Before closing, we would like to again Our vision is to be a leading provider of to a solid execution track record. Across On behalf of the management and board, express our gratitude to our employees sustainable solutions. We aim to transform our markets, we leverage digital and we would like to extend a warm welcome for their hard work and dedication, and our portfolio towards a greener future, by advanced analytics – from predictive to Nagi Hamiyeh and Lim Ming Yan who to our shareholders and stakeholders focusing on growing our renewables and asset management and energy generation joined us in March 2020 and January who have stood by us.