The key motivation behind the deal is to establish a bridgehead for Sembcorp in Australia, in order to expand its renewables portfolio over time. The deal requires shareholder approval, and an Extraordinary General Meeting has been scheduled for the end of January 2026 at which a vote will be taken. Detailed information on the deal will be dispatched to shareholders in mid-January.
The deal structure is fairly transparent, and Loy Yang B’s emissions will be consolidated in Sembcorp Group’s carbon footprint once the transaction closes. Still, there are questions that should be pertinent to investors across the capital structure:
1. Previous commitments to investors
In 2021, SC stated in its strategic plan that it “commits to not invest in new coal-fired energy assets.”[1] The company has also committed to a 2.7MT CO2e 2030 emissions target, as laid out in the ESG Framework of the green bond SCISP SGD3.65% 10/2035 (issued Oct 2024) and the prospectus of the SCISP SGD3.55% 01/2046 (issued June 2025). It has now acknowledged this target will not be reached.[2] The pro forma emissions of SC for 2025 are estimated to be 18.1MT CO2e.
- How should bond and equity holders respond to departures from earlier commitments?
2. Revenue thresholds for thermal coal exclusions
In the company’s presentation published at time of official deal announcement, in the pro forma appendix, SC explicitly states that “Coal-fired generation contributes <5% of total SCI turnover on a pro forma basis for LTM June 30, 2025, and FY2024.” [3] This is likely included in order to assuage the concerns of investors with 5% thermal coal revenue thresholds.
- For investors with such thresholds, are details on turnover/revenue numbers sufficient to ensure they are not at risk of breaching their own coal exposure commitments or is more information required?
- A previous conversation[4] around SC has focused on its exposure to a financed/operated thermal coal plant in India. The company has previously argued that this unit should not be recognised as part of its carbon footprint. Diligent investors with thermal coal sensitivities may need to revisit this exposure, and determine whether it could make a material impact on Sembcorp’s total balance sheet/economic risk exposure to thermal coal?
3. Future thermal coal mine exposures
Loy Yang B is, according to the Australian Energy Market Operator, expected to continue operating until 2047.[5] This would generate around 150MT of direct CO2e emissions, based on back-of-the-envelope calculations. Furthermore, the unit will likely be the sole customer of the Latrobe Valley mine site, which currently supplies the AGL Loy Yang A thermal unit, set to be retired in 2035. There is currently an option for Alinta to buy the lignite mine from AGL, which seems the only viable option if Loy Yang B should continue operating until 2047.[6]
- Investors with restrictions on open pit thermal coal mining would be diligent to request information with respect to Sembcorp to assist (financially, operationally, or otherwise) the continued operation of the Latrobe Valley thermal coal mine after the planned AGL exit in 2035?
4. Decommissioning plans
Previous suitors for Alinta, such as KKR and EnergyAustralia (the owner of the Yallourn coal plant), have struggled to win it over, citing Loy Yang B as a deterrent.[7] One reason SC may be more eager to acquire the asset is that it has a faster decommissioning plan than the one currently in place. Such a plan, in AFII’s view, should be viewed quite positively.
- What are the decommissioning plans for LYB?
Who is potentially affected?
Sembcorp equity is owned by a large variety of shareholders, not least through indexed products, with a broad geographic dispersion. When it comes to bondholders, data is sparser, and the deals are all SGD-denominated, indicating a fairly local investor base. All bond transactions have been either in green or sustainability-linked[8] format, except for one instrument issued in 2025. For a guide on how investors can engage with companies explicitly through their bond holdings, please refer to “Finding your voice: tools for better bondholder engagement on climate and nature risk”, AFII, 12 Dec 2025.
[1] “SEMBCORP UNVEILS STRATEGIC PLAN TO TRANSFORM ITS PORTFOLIO FROM BROWN TO GREEN”, Company press release, 27 May 2021.
[2] “ANNOUNCEMENT OF PROPOSED ACQUISITION OF SHARES IN PIONEER SAIL HOLDINGS PTY AND LATROBE VALLEY POWER (HOLDINGS) PTY LTD”, Company announcement, 11 Dec 2025.
[3] “Strategic Entry into Australia: Proposed Acquisition of Alinta Energy”, Company presentation, 11 Dec 2025.
[4] E.g. see “Sembcorp’s ease in curtailing emissions exposes a sustainable financing loophole”, The Business Times, 23 Nov 2022; "Singaporean Sembcorp votes to sell Indian coal business", Financial Times, 8 Nov 2022.
[5] “Victorian Annual Planning Report”, AEMO, Oct 2025.
[6] We note that a plan for rehabilitation of the mine site is due to be delivered by late 2027, further supporting evidence that AGL is preparing for a closure at least in 2035. “Loy Yang Mine Rehabilitation”, AGL company webpage, accessed Dec 2025.
[7] "Alinta’s Singaporean suitor ready to sign on the dotted line", Financial Review, 7 Dec 2025.
[8] For updates on Sembcorp’s SLBs see, “A watershed year for the SLB market”, AFII, 15 Jul 2025.
