Sembcorp Marine has undergone a journey in moving away from their traditional business line of offshore oil equipment, towards wind development. We examine the company with our materiality analysis to discover their degree of follow-through, and review their recent expansion of service offerings in the form of offshore data centers.

By
Sam Leavitt
|
September 30, 2021

ESG Spotlight: From Oil to Wind, One Industrial Goes with the Flow

Article
ESG Spotlight: From Oil to Wind, One Industrial Goes with the Flow

This week we revisit Sembcorp Marine (S51:SG) on our ESG Safeguard platform, a company we previously covered in February. Six months ago, we analyzed the evolution of their business, from offshore oil projects to offshore wind. Since then, they have followed through on these convictions that new business lies in wind rather than oil, and recently explored additional service offerings in the form of offshore data centers.

ESG Safeguard Platform: Materiality Statements, Sembcorp Marine, Jan '18 - Oct '21

Trade Winds Start to Shift

We can see in the graphic that offshore wind began for Sembcorp Marine in October 2019 when they won a contract to supply 15 jacket foundations for the Formosa wind project owned by Macquarie off the coast of Taiwan. Jacket foundations are a core product of Sembcorp Marine and are applicable to offshore oil and wind projects. This project marked the entrance into the offshore wind market for Sembcorp Marine.

In July 2020 the company won more contracts for a huge project in the North Sea in conjunction with GE (GE) for Ørsted Energy (ORSTED:DK). In their 2020 Q4 earnings call, renewables already made up 21% of total revenues. It was around this time that we covered in February and began to take note of their growing interest in offshore wind.

The Winds Keep Blowing

Since February, Sembcorp Marine has displayed increased enthusiasm for this growing market. As of June, 34% of the industrial’s order book was composed of renewable energy projects. In August Sembcorp Marine announced the completion of the two offshore wind projects for Ørsted Energy. CEO Wong Weng Sun sees renewables as the future of a company that has long been reliant on supplying capital goods for fossil fuels.

Last week Sembcorp Marine signed a memorandum of understanding (MoU) with Big Data Exchange (BDx) and National University of Singapore to advance development of sustainable ocean data centers. We don’t know exactly how these data centers would operate or what exactly sustainable means in this case. The concept seems to be a data center that is powered and cooled from the ocean itself. What we do know is that Sembcorp Marine has been penciled in as a provider for offshore platforms in this nascent project.

The National University of Singapore will provide cooling technology through their Engineering Department (NUS Engineering), as well as meet sustainability and efficiency standards. There are details that will need to be ironed out as the three organizations explore this idea.

Adjusting to Change

Sembcorp Marine has made a quick transition to renewable energy, given how compatible their platforms are with wind setups, and this new endeavor into data centers marks a potential new chapter for the company. The company’s stock is down 41% on the year, but is up 7% this month.

Although the data center project may seem like a moonshot, they secured some semblance of a pipeline in wind projects marked by their growing share of total revenues that comprises renewable energy. Sembcorp Marine seems to be correct in their instincts that demand for new oil projects is dwindling as demand for offshore wind is increasing.

Furthermore, technology companies have been looking for answers when it comes to data centers and their sustainability, so Sembcorp Marine has positioned itself at a very compelling crossroads in dealing with both energy and technology companies.

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Watch Our Latest ESG Webinar: Climate Week 2021 Recap

Watch our follow-up to Climate Week webinar where we put theory into practice leveraging our new Materiality analysis to debrief Climate Week 2021. We addressed who might be greenwashing, reviewed the positive narratives from the last 12 months, and discussed who spoke to noteworthy commitments, investments, or milestones in this year’s event. We were joined again with special guest Jean Rogers, Founder of the Sustainability Accounting Standards Board (SASB) and one of the world’s leading ESG experts.

About Amenity

Amenity Analytics is the industry leader in providing insights from unstructured text by using Natural Language Processing (NLP) assisted by Artificial Intelligence (AI) and Machine Learning (ML). Amenity’s NLP system is a sector-agnostic, language-dependent tool for quantitative text analysis that is deployed across the financial services industry and beyond.

This communication does not represent investment advice. Transcript text provided by FACTSET and S&P Global Market Intelligence.

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