Last week we saw a new sector rise to the top of our ESG Safeguard Platform: Industrials. Traditionally this sector rarely receives significant press attention, but over the past 7 days we saw a rise in focus on Clean Technology and Pollution Management. Singapore based Sembcorp Marine (SGX:S51) led the way with significant commitments in gearing operations towards wind energy installation. GE was not far behind.
Last week we saw a new sector rise to the top of our ESG Safeguard Platform: Industrials, led by Sembcorp Marine (SGX:S51) and General Electric.
Both are far from new companies, but their approaches from a business standpoint are new in how they are embracing a role in renewable wind development. Sembcorp Marine is a Singapore based company that focuses on specialized shipbuilding as well as offshore oil rig installations. Like most companies involved with fossil fuels, they are being forced to reckon with the reality that renewables are here to stay. Although weathering heavy financial losses due to reduced demand in oil services, there was good news in the company’s earnings call this week. Specifically, wind power will be a major focus for the company going forward. The earnings call mentions significant growth in offshore wind revenues with two major clients utilizing their services for operations.
Ørsted Energy (ORSTED:DK) is currently using Sembcorp Marine services for its Hornsea 2 wind project. RWE Renewables (RWE:DE) selected Sembcorp Marine during the summer to help develop the 1.4 Gigawatt Sofia wind farm. Both projects are located offshore from the United Kingdom.
It is not by accident that Sembcorp Marine was able to get involved with wind development as oil took a downturn. The earnings call specifically mentions how they were able to incorporate their proficiencies with offshore platform installation, into successful partnerships with renewable energy companies. Also mentioned was how they were able to repurpose equipment originally intended for oil rigs, towards wind farm installations instead. This is a great example of companies that have been geared towards oil for decades pivoting away without starting from scratch. Many of the industrial equipment providers for fossil fuels have core competencies in installation and distribution that can be transferred to renewable energy. Those that begin to adapt like Sembcorp Marine will benefit in the long run.
General Electric (GE) also had a recent impact in wind energy. The company announced two projects they will be involved with taking place on two separate continents. In Sweden, GE will supply Europe’s largest onshore wind farm. GE’s Cypress onshore turbines are equipped with ice mitigation systems optimized for colder climates. This project is being undertaken with independent asset manager Luxcara.
In Vietnam, GE has been awarded a contract to develop a wind farm for Ocean Renewable Energy Joint Stock Company. The Cau Dat Wind Farm will be the first ever such undertaking in the Lâm Ðông province of Vietnam. The project is expected to be completed by the third quarter of 2021. Both projects speak to GE’s adaptability to engineer wind solutions in two very different climate conditions.
Both industrial heavyweights are showing that renewable energy is not just good for the environment but has the potential to be a real revenue driver for industrial companies that have long relied on the success of fossil fuels. As oil and coal become an ever smaller segment of the global energy mix, industrials will need to adapt their solutions, and leverage their abilities towards renewable energy.
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This communication does not represent investment advice. Transcript text provided by FACTSET and S&P Global Market Intelligence.
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