Singapore-based Sembcorp Marine expects losses to continue this year as it faces headwinds from COVID-19 and a shortage of skilled workers.
Sembcorp Marine provided the outlook in an interim business update for the first quarter of 2021 released Monday, which also provided an update on the continuing impact of the COVID-19 pandemic.
“The Group continues to face COVID-19 supply chain constraints and a shortage of skilled workers. Foreign workers who left Singapore over the past year were unable to return due to ongoing border controls in countries such as India and Bangladesh. Singapore’s improving economy has also led to increased competition for foreign labor already here, resulting in labor attrition to competing industries. The shortage of skilled workers has impacted the execution and scheduled completion of some of our projects,” the update said.
Sembcorp Marine said that coordinating and rescheduling project completion with customers remains a “key priority,” adding that the group has not experienced any cancellations to date on existing projects. The group is also “actively seeking” skilled workers from other countries and working with authorities to accelerate its entry into Singapore.
The group also highlighted the winning of a major contract in the renewable energy sector, as well as securing a long-term repair and upgrade contract with a European cruise ship owner and the completion of a floating storage regasification unit.
In the first quarter, GE Renewable Energy’s Sembcorp Marine and Grid Solutions jointly secured a $900 million contract from RWE Renewables to supply the high-voltage direct current (HVDC) power transmission system for the 1.4 gigawatt (GW) Sofia offshore wind farm. The scope of the contract includes the design, construction, installation and commissioning of the offshore converter platform (OCP), comprising an 18,000-ton top and deck foundation structure piled on the seabed.
“The award of the Sofia contract validates the Group’s thrust in the renewable energy market and adds to our list of secured projects in the offshore wind sector,” the update stated. Sembcorp Marine is also currently constructing two decks for the offshore substations at Orsted’s 1.4 GW Hornsea 2 offshore wind farm in the UK North Sea. In addition, it is fabricating 15 foundations for the Formosa 2 offshore wind farm in Taiwan.
In February, Sembcorp Marine secured a $375 million sustainability-linked loan, believed to be the first in Singapore’s offshore sector.
Summary of the most significant transactions
In mid-March, Sembcorp Marine delivered a floating regasification unit (FSRU) to KARMOL ahead of its deployment in Senegal. The 125,000 cubic meter vessel, KARMOL’s first FSRU, will bring cleaner LNG-fueled electricity to locations where domestic gas production or infrastructure is not yet available.
Our Repairs and Upgrades division carried out the following key projects in 1Q21:
– Major upgrade of the heavy lift vessel Aegir for Heerema Marine Contractors for deployment at the Changhua offshore wind project in Taiwan.
– Major upgrades of the FPSO Ningaloo Vision and the FPSO Tantawan.
– Major repairs of four LNG carriers.
– The Group continued to focus on the safe and timely execution of its existing order book of over $1.89 billion, including $290 million of repairs and upgrades underway for delivery in 2021.
The Group secured multiple repair and upgrade contracts, including a long-term contract with a European owner and operator of luxury cruise ships and yachts. With this award, Sembcorp Marine is working with four global operators that collectively own more than 15 cruise ship brands.
In terms of future orders, market sentiment has improved, although the post-COVID-19 recovery remains uncertain. There are increasing signs of active review of FIDs (final investment decisions) and improving order visibility. However, competition for new projects remains intense.
The Group is actively tendering for more than 10 projects, especially in the Renewable Energy and Gas Solutions segment. A similar number of tenders are in progress for the Process Solutions segment covering FPSOs, FSOs and FPUs.
In terms of outlook, Sembcorp Marine offered the following:
Notwithstanding the challenging operating environment, the Group’s strategic investments have positioned us well for the global transition to a low-carbon economy and the pivot towards cleaner and greener energy sources.
With the re-introduction of COVID-19 measures in recent weeks, including tighter border controls, the Group’s operations could be further impacted by workforce supply and quarantine restraints. Current and future restrictions on travel and transportation could also disrupt global supply chains. Resolving the skilled manpower shortage on a timely basis is the Group’s key priority to address the risk of project delays or terminations.
Sembcorp Marine expects losses to continue for FY 2021.