Singapore-based marine and offshore engineering Sembcorp Marine expects losses to continue this year as it faces COVID-19 constraints and a shortage of skilled workers.
Sembcorp Marine provided the outlook in an interim business update for the first quarter of 2021 published Monday, which also offered an update on the continuing impact of the COVID-19 pandemic.
“The Group continues to face COVID-19 supply chain constraints and shortage of skilled workers. Foreign workers who left Singapore over the past year could not return due to ongoing border controls in countries such as India and Bangladesh. The improving Singapore economy has also led to increased competition for foreign labour already here, resulting in attrition of labour 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 coordinating and re-scheduling project completions with customers continues to be a “key priority,” adding that the group has not experienced any cancellations to-date on existing projects. The group is also “actively sourcing” skilled workers from other countries and working authorities to expedite their entry into Singapore.
The group also highlighted a significant contract win in renewable energy sector, as well as long-term repair & upgrade contract secured with European cruise ship owner and completion of a floating storage regasification unit.
In the first quarter, Sembcorp Marine and GE Renewable Energy’s Grid Solutions jointly secured a US $900 million contract from RWE Renewables to supply the high voltage direct current (HVDC) electrical transmission system for the 1.4 gigawatt (GW) Sofia Offshore Wind Farm (Sofia). The contract scope includes the design, construction, installation and commissioning of the offshore converter platform (OCP), comprising a 18,000-tonne topside and jacket foundation structure piled into the seabed.
“The contract win for Sofia validates the Group’s push into the renewable energy market and adds to our list of projects secured in the offshore wind sector,” the update said. Sembcorp Marine is currently also building two topsides for the offshore substations at Ørsted’s 1.4GW Hornsea 2 Offshore Wind Farm in the UK North Sea. It is also currently fabricating 15 jacket 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 marine sector.
Operations Review Highlights
In mid-March, Sembcorp Marine delivered to KARMOL a floating storage regasification unit (FSRU) ahead of its deployment to Senegal. The 125,000 cubic metre vessel, KARMOL’s first FSRU, will bring cleaner LNG-powered electricity to locations where domestic gas production or infrastructure are not yet available.
Our Repairs & Upgrades business delivered the following key projects in 1Q21:• Major upgrade of heavy-lift vessel Aegir for Heerema Marine Contractors for deployment to Changhua Offshore Wind Project in Taiwan;
• Major upgrades of FPSO Ningaloo Vision and FPSO Tantawan;
• Major repairs of four LNG carriers; and
• Repairs and upgrades of 10 cruise ships.The Group continued to focus on the safe and timely execution of its existing order book of over S$1.89 billion, including S$0.29 billion of ongoing repairs and upgrades for delivery in 2021.
The Group secured multiple contracts for repairs and upgrades, including a long-term contract with a European owner and operator of luxury cruise ships and yachts. With this win, Sembcorp Marine works with four global operators who together own more than 15 cruise brands.
On future orders, the market sentiment has improved although the post-COVID-19 recovery remains uncertain. There are increasing signs of active reviews of FIDs (final investment decisions) and improved orders 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.
You can find the full Interim Business Update here.
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