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Earnings Call Analysis
Summary
Q1-2019
In the first quarter of 2019, Sembcorp Industries achieved a notable increase in net profit, rising 21% to $93 million, bolstered by strong performance in the Energy sector. The company's revenue reached $2.5 billion, reflecting a 10% decline year-on-year. The Energy segment drove this performance with a 21% increase in profit to $85 million, supported by enhanced operations in India and the UK. However, marine and urban sectors faced challenges, resulting in lower contributions. Looking ahead, Sembcorp expects stable profitability, underpinned by a robust order book of $5.8 billion in Marine and ongoing capital recycling efforts aimed at $500 million by 2020.
Thank you for standing by, and welcome to Sembcorp Industries' First Quarter 2019 Results Conference Call. [Operator Instructions] I must advise you that this conference is being recorded today, Wednesday, the 15th of May 2019.
I would now like to hand the conference over to your first speaker, Ms. Ng Lay San. Please, go ahead.
Good morning, everyone. Thank you so much for calling in to Sembcorp Industries' first quarter 2019 results briefing. I'm Lay San, from Group Strategic Communications & Sustainability, and I'm here with Group President and CEO of Sembcorp Industries, Neil McGregor; and Group CFO, Graham Cockroft.
To enable you to follow the briefing, it would be helpful for you to have our announcement kit on hand. This includes a copy of our MASNET financial statement, a PowerPoint presentation of the results, as well as our press release. This call is being webcast and you can also follow the results briefing online. The webcast can be accessed through our website homepage, www.sembcorp.com.
Without further delay, I'll now hand over to Neil and Graham to take us through the results this morning.
Thank you, Lay San. Good morning, and thank you once again for calling in to Sembcorp Industries' first Q 2019 results webcast.
For the first half of 2019, group turnover was $2.5 billion compared to $2.8 billion in first Q 2018. Profit from operations, or PFO, and net profit improved. PFO grew 4% to $223 million from $214 million in first Q 2018. While net profit increased by 21% to $93 million from $77 million in first Q 2018. Earnings per share for the period was $0.047 and group annualized return on equity was 5.4%.
I shall now run through first Q 2019 highlights for each of our key businesses, Energy, Marine and Urban. In line with our strategy to reposition as an integrated energy player, we have renamed our utilities segment Energy. Well, this also better reflects the nature of the business, which centers on the provision of integrated solutions across the entire energy value chain. This is in addition to the provision of utilities.
Let me now take you through key developments in our Energy business this quarter. In the first Q 2019, the Energy business performed well. Net profit grew 21% to $85 million compared to $70 million in first Q 2018. The earnings growth was underpinned by improved India performance and the recognition of peak winter availability payments for UK Power Reserve. We continued to grow our operational power capacity for both our thermal power and renewable portfolios.
For thermal, the Sembcorp Myingyan Independent Power Plant in Myanmar, which fully commenced commercial operations in 2018, was officially opened in March this year. The power plant marks many firsts in Myanmar and represents an important milestone in the development of the country's power sector. It is the first competitively tendered IPP in the country and also the first with integrated solar power generation. Our Sirajganj Unit 4 Power Plant in Bangladesh was also successfully completed in April 2019.
For renewables, we signed contracts for over 10 megawatts peak of rooftop solar and completed a 2.8 megawatt rooftop solar farm for YCH in Singapore. We now have a global energy portfolio of over 12,400 megawatts, with 11,800 megawatts in operation and 650 megawatts of renewables under development.
In line with our portfolio rebalancing strategy, our capital recycling efforts continued with the recent divestment of Xinmin Municipal Water Asset in China. Since the beginning of 2018, we have unlocked cash proceeds of about $220 million. This is more than 40% of the $500 million of divestments we target to achieve by 2020.
On the Marine front, amid difficult conditions for the offshore and marine industry, the business broke even in first Q 2019. The business secured new orders worth $175 million for projects comprising the design and construction of the biggest LNG bunker vessel built in Singapore and repair and modernization works for 13 cruise ships. With this, the total net order book for Marine now stands at $5.8 billion.
Sembcorp Marine continued to enhance its intellectual assets and competencies. The acquisition of Semb-Eco core patents in January 2019 has strengthened Sembcorp Marine's position as an industry leader for ballast water treatment, exhaust gas cleaning, as well as bio-fouling and corrosion control solutions.
The Marine business also continued to focus on actions to ensure optimal and prudent resource allocation for operational resilience, competitiveness and efficiency.
Now to our Urban business. The Urban business recorded a net profit of $7 million compared to $10 million in first Q 2018. Earnings for this business is very much dependent on the timing of land sales. While Vietnam continued to provide a stable contribution, earnings from China was lower this quarter. Order book for the business continues to be healthy at 408 hectares. This was mainly driven by land commitments from Vietnam.
In addition, we expect profit from the sale of units in the Nanjing Riverside Grandeur residential development project to be recognized progressively this year.
In summary, profound shifts in the global energy landscape are underway, but we are making good progress and repositioning ourselves for success in this environment as an integrated energy player. Meanwhile, our Urban business is performing well and we continue to look for opportunities for synergies with our Energy business. However, the market environment continues to be challenging, especially for the offshore and marine sector.
We remain fully committed to executing our strategy and lifting performance and have confidence in our strength and resilience as a group.
Now let me hand over to Graham, our Group CFO, to take you through the group financial review. Thank you very much.
Thanks very much, Neil, and good morning, everybody. Soon I'll take you through the group's financial performance for the first quarter of 2019.
If we turn to Slide 9 of the pack. There you'll see that the group achieved a turnover of $2.5 billion for the first quarter of 2019, 10% lower than the corresponding period last year. The group earned an EBITDA of $349 million in the first quarter of '19, 22% higher than the prior year.
And profit from operations of $223 million was 4% higher than the first quarter of '18. The improved performance came from Energy business, offset by lower contributions from Marine and Urban.
Finance costs were higher in the first quarter of '19. The increase came mainly from Myingyan and Sirajganj Unit 4, or S4, which achieved full commercial operations in the fourth quarter of 2018 and first phase operations in 2018 respectively, and UK Power Reserve, which was acquired in the second quarter of 2018. The finance costs of Myingyan and S4 form part of the construction costs during the construction phase. The high finance income was attributable to a payment from a customer of the Marine business.
As you can see, the group's effective tax rate of 26% for the first quarter of 2019 was lower than the 51% realized in the first quarter of '18. Tax expenses for India were lower as a result of the merger of our thermal operations -- thermal power operations in the fourth quarter of 2018.
And so net profit after tax and noncontrolling interest was 21% higher at $93 million, earnings per share was $0.047 per share and return on equity on an annualized basis was 5.4%.
We turn now to Slide 10 on group turnover. The Energy business recorded a turnover of $1.6 billion compared to $1.5 billion in the first quarter of 2018. The increase was mainly driven by the Singapore operation, which benefited from High Sulfur Fuel Oil prices and the U.K. operations, which included a contribution from UK Power Reserve that was acquired in the second quarter of 2018.
This increase was offset by lower turnover in India due to the shutdown of Unit 1 of our first thermal power plant there in January and February of this year and no turnover from the South Africa post divestment, which occurred at the end of 2018.
Marine's low turnover was the result of lower revenue recognition for rigs and floaters and offshore platform projects. The Urban business comprises mainly associates or joint ventures that are accounted for under the equity method. Therefore, the turnover reflected here was derived from providing services to these associates or joint ventures.
Other businesses many relates to minting and design and construction activities. The increase in the first quarter of 2019 came mainly from the design and construction business.
We turn now to Slide 11, group profit from operations. The group registered profit from operations, or PFO, of $223 million in the first quarter of 2019, an increase of 4% against last year. The first quarter of 2019 PFO for energy was 14% higher compared to the first quarter of 2018. The improved performance came mainly from operations in India, the U.K. and new thermal power facilities in Myanmar and Bangladesh, which commenced commercial operations in phases during FY 2018. These better results were partially offset by lower spark spreads and higher selling costs from the Singapore operations.
Lower PFO for Marine was mainly because of lower overall business volume. The first quarter PFO for Urban declined mainly due to lower land sales in China as compared to the first quarter of '18.
Group corporate registered higher costs as the group continued to build and deepen its capabilities in new business line such as digital and technology.
Turning now to Slide 12 and we look at group net profit. The group posted a net profit of $93 million for the first quarter of '19, 21% higher than the first quarter of '18. The Energy business net profit of $85 million was an increase of 21% compared to the first quarter profit of $70 million -- first quarter of '18 profit, sorry, of $70 million. We'll provide more details in the next few slides on the performance of the Energy business by geography.
The Marine net profit was lower for the first quarter of 2019 mainly due to lower business volume. This effect was cushioned by lower net interest expense and tax credit as compared to the first quarter of 2018.
Urban net profit was -- in the first quarter of '19 was mainly from industrial land sales in Vietnam. The lower net profit when compared to the first quarter of 2018 was mainly due to lower land sales in China.
Turning to Slide 13, Energy profit from operations by geography. You can see there that the energy PFO of $216 million was 14% higher than the first quarter of 2018 and the growth came mainly from the rest of Southeast Asia, U.K. and India. And to provide more clarity on our underlying performance, we've provided some additional details on the performance of our assets in each market. I'll take you through each of those -- through the PFO variance by geography in the next slide.
So we're now on Slide 14. Now this slide reconciles the first quarter '18 PFO to the first quarter '19 PFO and will highlight -- and would highlight any exceptional items if they were any. The underlying PFO increased from the first quarter of '18 of $190 million to $216 million in the first quarter of '19.
In Singapore, the PFO declined mainly due to lower blended spark spreads and higher open electricity market operating expenses. As mentioned in our outlook statement, we're expecting close to 11 weeks of maintenance shutdown for our cogen plant later this year.
For the rest of Southeast Asia, contribution increased with commercial operations commencing at the Myingyan plant and recognition of $6 million of liquidated damages income from Myingyan.
In China, we had lower contribution from the Changzhi water plant. That was offset by higher wind contribution with higher operational capacity, which grew from 481 megawatts at the end of the first quarter of '18 to 725 megawatts currently.
In India, the SEIL Thermal Project 2 and Project 2 contributed during the first quarter of 2019 a PFO of $20 million and $29 million respectively. Performance for Project 1 was negatively affected by the shutdown of Unit 1. Project 2 earnings improved on better short-term contracted position and lower coal costs.
In our renewables business here, SGI PFO was $26 million, with the improvement driven by better wind resource. The PFO for SGI also included a reversal of accrued maintenance fees no longer payable amounting to $7 million.
The better performance in the U.K. was driven by the recognition of triad revenue for UK Power Reserve. And while UK Power Reserve contributed PFO of $24 million in the quarter, this weaker than expected performance was due to a mild and windy winter.
U.K. ex-UKPR earnings were lower due to the shutdown of Wilton 10 Biomass Power Station and the Wilton 11 energy-from-waste plant. Wilton 10 is currently undergoing maintenance, which will take approximately 6 weeks. While the other Wilton power station will undergo major inspection and maintenance for approximately 5 weeks in the middle of the year.
For the rest of the world, higher contribution from Sirajganj Unit 4 in Bangladesh offset the loss of income from South Africa, which was divested in the fourth quarter of 2018, and South Africa contributed around $3 million in PFO in the first quarter of '18.
Energy corporate was lower due to $6 million of liquidated damages payment to Myingyan. The higher expense is also due to investments in capabilities, including digital and technology as we continued to reposition our business.
Turning to Slide 15. Here this slide reconciles the first quarter 2018 net profit to the first quarter net profit for 2019. Again, it would highlight any exceptional items if there were any. So in Energy, the underlying net profit of $85 million for the first quarter of '19 was $15 million higher than the first quarter of '18 of $70 million. The increase was due to the increased EBIT of $20 million due to the better performance from India and the U.K., as we just talked about, and the increase in the share of associates and joint ventures of $6 million driven by better performance from China, Vietnam and the U.K.
These increases were however reduced by the higher net finance cost of $21 million and the higher profit attributable to noncontrolling interests of $5 million. These were offset by the lower tax of $15 million. Our tax expenses for India were lower subsequent to the amalgamation of our thermal power operations there in the fourth quarter of 2018.
Turning to Slide 16, we talk about group CapEx and equity investment. Capital expenditure incurred in the first quarter of 2019 was mainly for the expansionary CapEx of the India renewable energy business and for Marine's Tuas Boulevard Yard.
Equity investment for the first quarter of '19 was mainly for the incorporation of subsidiaries under the Urban business for residential development in Hai Phong City in Vietnam.
Moving to Slide 17, group free cash flow. First quarter 2019 cash flow from operating activities was $332 million, $141 million higher than the first quarter of 2018. This was mainly driven by improved operating performance and changes in working capital in the first quarter of '19.
The cash flow used in investing activities was $168 million mainly for CapEx as detailed in the prior slides. And free cash flow overall for the first quarter of '19 was $454 million.
Turning to Slide 18, where we address group borrowings. Now the group's net debt was $8.8 billion in the first quarter of '19, comparable to the end of 2018. Interest cover was 2.3x. Gross debt and net debt to capitalization ratio was 0.56 and 0.47 respectively.
Lastly, we've also revised our product segment breakdown to align with our business lines and you can find details on those new segments in the appendix.
Thanks very much for listening and we're happy to take any questions you may have.
[Operator Instructions] The first question is from Colin Tan at CIMB.
Congrats on the good set of results. Just one on the -– a question on the SEIL Project 2. Could you quantify the impact of the coal cost savings, which leads to the swing from a loss to profit for this quarter? And assuming if the coal prices -- and it looks like they'll remain -- continues to trend at current level, do we still expect to see the project maintaining the profitability trend? And whether the sale of power to Bangladesh contributes for this quarter?
Thanks very much, Colin. I'll make sure I got your questions here. You're asking for the -- what's the contribution that lower coal costs made to the Project 2 performance in Q1, the contribution from sales to Bangladesh. I think I missed the second one.
Yes, that's right.
Just coal and Bangladesh.
Just 2? Okay. So we had -- or Newcastle coal prices in the first quarter of '19 were $97 a ton versus $103 a ton in the same quarter of 2018. So 6% year-on-year improvement. The other -- the IEX prices into which some of the sales were occurring -- so this is the spot market in India -- was down a little bit as well, but lower -- a lower decrease or a smaller decrease than the reduction in coal prices.
I'll chip in here, Colin. On the dark spread, we are seeing some improvement even though, as Graham said, that we are seeing slightly weaker IEX prices. And that's the way to look at -- SEIL Project 2 is not fully contracted, so most of its pricing is connected to IEX.
We have actually had better purchasing programs for coal and improved hedging arrangements now with the growth of our merchant and retail business. So that sort of led to the improvements that you see there.
Bangladesh -- we continue to talk to Bangladesh. Currently, we have 250-megawatt contract there. We do have opportunity to discuss more, but there's nothing that we can announce at this stage. And I might also add that the letter of intent that we got from Andhra Pradesh for SEIL is still valid, but we have to wait until after the elections for a decision from the Andhra Pradesh government.
Operator, we can take the second question.
The next question is from [ Tupak Kek ] from Singapore Press Holdings.
Hello. Can you hear me? This is [ Pei Gak ] from the Business Times. I have some questions related to the Marine business segment. One is that the net profit for the first quarter of 2019 is less than $1 million. Could I have the exact figure?
Then the second question is what's the outlook for this segment? I think in the -- at the AGM, Sembcorp Marine Chairman he mentions that the company may be approaching the bottom of a very long down cycle and recovery could come as soon as later this year or in 2020. Has that -- is there a change in this outlook?
[ Pei Gak ], it's Neil here. We're just picking up the exact figure to answer your question. On the Marine outlook, I have nothing to add from what the Marine Chairman had already offered. So -- in fact our outlook statements virtually mirror Marine's and our own view in terms of whether the market is bottoming or changing I think only time will tell. We have to be guided by Marine's statements. Do we have the figure? Yes, we'll come back to you on the exact figure once we've pulled it out.
Could we take the next question first?
The next question is from Foo Zhiwei at Macquarie.
I have just 2 questions. The first one is housekeeping. I know you've given the PFO figures for India, but could we have the net profit figures for SEIL Projects 1 and 2 as well as SGI? And then after that, could we have the PLFs for Projects 1 and 2 as well.
The second question is more on your comment about the better short-term contracting position for SEIL Project 2. From what I've seen on the [ deepwater ], I've noticed that the price has actually gone up by about 20%. So I'm just wondering whether you are actually getting some benefit from that. I know that you've also mentioned that most of your capacity is still on the spot market, so it would be helpful if you could just give me a sense of what's actually on the short term, what percentage of your capacity is actually on the short-term market?
Zhiwei, Lay San here. Thanks. Let me just give you the net profit numbers and PLF that you asked for. So Project 1 in terms of net profit will be negative $11 million. Project 2 -- sorry, Project 1 PLF is 58%. Project 2 net profit $2 million. Project 2 PLF is 83%.
And SGI, please? Sorry, could I have the net profit figure for SGI, please?
Sorry. SGI net profit $2 million and PLF 18%.
The Marine figure is 200 and -- net profit for first Q 2019 is $239,000 attributable to SGI. Okay, there was another question I think, which I didn't quite catch the end of it. You were talking about –- were you talking about coal and port availability? I just...
It was short-term capacity.
Short-term capacity. What percentage of it was spot. So each of the plants is about 1,250 megawatts, of which 250 megawatts is contracted in P2. And so the risk is on spot.
In short term.
In short term, yes.
So to answer your question, I think, as well, we are trying to maintain some exposure to the increasing spot price while also putting sufficient contracts in place to enable us to look for some refinancing as well.
Could I just clarify? This 250 megawatts that you're talking about is under long term PPA for Project 2, right?
Yes, correct.
And what I was asking was, for the short-term PPAs what percentage of your capacity is actually contracted?
Yes, a similar figure. It changes month to month, but it's around another 250 megawatts. So you could say that 500 megawatts, meaning the 250 from Bangladesh plus the 250 in short term gives you about 500 out of the 1,250 that has contracted. So the balance would be spot. I believe that answers your question.
Understood. And then there was one part where I was asking where -- are you actually seeing significantly higher short-term PPA prices that's helping you to actually boost the profitability for Project 2? Is it more that the short-term PPA that's helping the profitability rather than the spot prices?
Yes, so it's the -- it is the short-term contracted positions as well as lower imported coal costs that we mentioned earlier. Because the IEX, if you look at it, is higher if you look quarter-to-quarter, but actually it has gone down a bit if you look -- it's higher in trend, but quarter-to-quarter it's actually come down. So it's mainly the short-term contracted position and imported coal cost coming down that has contributed to the good performance of SEIL Project 2.
I see. Then just a little bit more on the short term. When I look at the [ deepwater ], I'm seeing prices of INR 5 to INR 6 per kilowatt hour, which is like a 20% -- 20%-25% increase from the INR 4 per kilowatt hour that was seen around April last year. Are you experiencing that sort of uplift, hence the better profitability on the short-term contracts?
We can't really give guidance on that. What you see is what you get. We have said that we expect prices to firm on the IEX over time because demand is going up and there's no -- well, capacity is not keeping up with the demand.
And we can take the next question.
Next question is from Colin Tan at CIMB.
Just a follow up on the SEIL Projects. We understand the Project 1 has -- it could be a loss of $11 million. I was just wondering if there's any one-off that led to this.
Yes, there was a machine out that was -- one of our generators had a fault which needed to be repaired and the machine was out for a period of about 3 months from -- I think it was from November through to February. But it was a core 3 months. So actually, when you see the result of Project 1, it was quite a reasonable result even though they were one plant down. There are 2 plants in each project, all right. So each of those plants is around 650-660 megawatts apiece. So one of those was down for a significant part of the period.
So you could say in Q1, basically 2 months out of 3 they were down to 1/2 load. Yes, the exact time, if you want, is 55 days in Q1. Does that answers your question, Colin?
So yes. Did it -- I was wondering whether Project 1 kind of benefited from lower costs -- coal costs?
It shouldn't do because it's a pass-through on the contracts, whereas SEIL is more exposed to coal price and dark spread. But there -- when I say it shouldn't do, there is a little bit of a mismatch in the -- between the electricity contracts that we have and the pass through arrangements that are there and we use hedging practices around trying to fix that -- fix the coal cost against the electricity cost. So meaning that we're trying to manage to a certain dark spread. So -- but generally, you would take it for Project 1 that there's very little influence of coal pricing on profit outcome.
We're happy to take the next question.
Next question is from [ Tupak Kek ] at Singapore Press Holdings.
I just like to find out if there's any impact of the ongoing trade war on Sembcorp as well as Brexit?
And the last question is about -- in relation to Hyflux. Is Sembcorp interested in any of Hyflux' businesses?
Well, between China and the U.S. -- we're not seeing a lot of impact in China per se because remember we're a utilities company and we do water and waste management services as well as power. So these are essentials essentially, so they don't turn down usually if there's an economic impact from such an activity.
What you can see though is that it does help the peripheral economies to China like Vietnam. So for instance, international companies tend to change the destination for their businesses and I think this is leading to a renaissance in the Vietnamese economy. And we are fairly well placed there as an urban developer of industrial parks and we're seeing an uptick in activity there. We're also seeing an improvement in electricity growth as the economy expands in Vietnam. The same thing is happening in Thailand, but we have no business there. So that dealt with the first one.
What was the -- and then Brexit, yes, and then Hyflux. Okay, Brexit. Yes, it is a challenging environment and Brexit -- it's not really about what's going to happen to the economy, because again, the same answer that I gave you for China is also true for the U.K. We're in essential services businesses, so utilities and the like.
Where the real issue is, is in regulatory change and we are seeing some impact of regulatory change and that has affected our position with UKPR. And that's the capacity market suspension. There is a whitepaper that's coming out later.
I think it's in June that it's due out. So we'll be able to see whether there are changes that improve or impact our distributed business in the U.K.
So it tends to be -- it's fluid because most of the government focus tends to be on issues relating to the European market as opposed to the framework and structure of internal markets that we are operating in. And those internal markets are mainly merchant, as you know. So we are expecting instability there.
Second point I would make is that UKPR is not a constant stream business; meaning, you don't expect constant or flat returns each year. It is a business involved in the capacity market and therefore will fluctuate. Its earnings will be different each year. Some years will be very good and some years will be not so good because it's dealing with putting solutions into the U.K. market to cover capacity shortfalls when they have intermittency from their significant renewables exposure. So that -- I think that deals with Brexit.
With Hyflux, we just -- we watch with interest. So I've seen the newspapers this morning where purportedly a receiver has been appointed for Tuaspring. We're keeping our options open. Naturally, if the price was right, this may be of interest to us. But we'll have to wait and see what transpires and wait for the -- for how the receivers are going to deal with the possible sale of Tuaspring. So we, like you, are also reading the news and keeping an eye on developments.
Next question.
[Operator Instructions] Next question is from Colin Tan at CIMB.
So just maybe a couple of questions on your Energy business out of India for -- maybe I'll take on China first. The profits grew quite strong for this quarter between $9 million. Just wondering if there's any one-off and whether it is due to wind capacity? Just want to get a sense if this is due to seasonal effects.
On the Singapore, whether you expect the trend to be at bottom or possibly would it continue to weaken ahead? And on the U.K., whether there's any other one-off apart from the triad payment that contributed for the profit for this quarter and do you expect this triad payment to continue to come in for the second quarter '19 as well?
Well, let me deal with the U.K. first while Graham's looking for the China side of it. U.K. is up. There is a seasonal effect because it's the end of the winter season where we get capacity payments. These are called triads. So you will not see the same profitability for Q2 or Q3 flow through.
So there's 3 markets currently that the UKPR deals in and that's short-term reserve frequency market and the balancing market in the U.K. So that tends to cover costs. So as a peaker, it is totally exposed to the U.K. merchant market and to the national grid's capacity setting mechanism. So it's variable. And Q1 tends to be the high season for profitability in UKPR. China?
Yes. So Colin, on China, I assume you're asking the first quarter '19 against the fourth quarter of '18, where we've gone from $17 million profit from China up to $29 million. And that's -- a couple of things driving that. One is our coal plant there, Songzao. We've had higher generation from that plant. There was lower generation in the fourth quarter of '18 due to lower demand from the grid, which largely is the result of higher hydrogeneration in the region.
And then also we had improved or higher wind speeds and lower curtailment at our wind assets in China as well. So we saw a stronger output there, which has been part of the improvement quarter-on-quarter.
For Singapore, I think you asked the question about whether the market has bottomed? I'm not sure anybody could say that currently. The generators are running behind their gas contracts in Singapore and I don't think we will see much of a change until the vesting contracts come off later in the year. We'll have to wait and see what that actually -- what that brings. But our expectation is that current low pricing continues for a time here until those vesting contracts change.
On the retail side, we've done reasonably well as a business, but we've been very disciplined and measured in terms of how much market share we want to attain. We're looking at base value propositions for customers, and that's the approach that we are taking. So far we're round about -- no, we don't give percentages, do we? No, sorry. Sorry, Colin. Almost gave it to you, but I'll have to hold back.
Was there -- U.K. in terms of market improvement. I think the U.K. situation is really weather dependent and regulatory regime. So the big one is, what sort of regulatory regime are we heading to post the government whitepaper in June? And then, how cold or warm does the weather actually get? Because that affects demand substantially, especially for UKPR. For Teesside, mainly it's bilateral contracts that we have there with -- so this is the integrated part of the business where we serve customers directly with power and heat solutions. Anything else?
Right. So just a follow on, on China. So we've -- I mean, I'm trying to understand whether the first quarter is typically the stronger quarter during the year and whether there's any other quarter that could have a strong contribution from the wind generation?
For coal, we tend to see a high contribution on the first quarter when there's less hydro available in the winter. And then as the hydro becomes available in Q2 and Q3, we're going to see less demand on the thermal plants. So yes, I wouldn't -- you can't extrapolate straight from Q1.
Right. Maybe that I come in and visit -- revisit the SEIL project in India, particularly for Project 2. So basically, there was kind of a swing from -- kind of loss of $17 million in the fourth quarter to $2 million profit. So just could you share like the breakdown on the impact that led to this profit contribution?
Sure. So I'm showing $12 million loss in the fourth quarter, not $17 million. But nevertheless, there's sort of a swing of around $14 million over the quarter-on-quarter. And that's -- we're seeing lower imported coal price -- coal cost and better short-term contracted positions there. So it's -- I think it's just becoming a more stable business than it has been historically. PLF was about the same. It was 83%, the same. So it's really being driven off of better contracted positions.
By any chance are you able to quantify on the effect -- impact from the coal prices?
I don't have those to hand. There's an 8% reduction in the Newcastle coal price quarter-on-quarter, so from USD 105 down to USD 97.
But remember that Newcastle coal index is not the only index that effects. That's Australian coal. Generally, most of our coal actually comes from Indonesia -- so was it IC1 4? -- is the right index to look at.
Okay. Maybe just one more question on the -- under the corporate segment, the loss under this portion was $20 million for the quarter. Just wondering what attributed to this?
Sorry, what was the number you gave us, Colin?
The corporate costs.
$20 million, okay.
So part of that -- I think I said in my notes that $6 million of that was a payment of liquidated damages, effectively went from one pocket of the company to another one. So some work that our design and construction business had done for the Myingyan Power Plant. That was effectively a $6 million one-off settlement within the company from one pocket to the other.
Contra.
So that's -- the negative side of that appears in the corporate cost and the positive side appears in the rest of Southeast Asia.
So was this liquidated -- payment under liquidated damage -- the cause of it?
$6 million. So this is just for delays in commissioning.
Right. Got it.
If you strip that out, then the corporate cost is kind of flat quarter-on-quarter.
Next question is from Foo Zhiwei at Macquarie.
Sorry, it's me again. Could I just clarify something that you made in your -- on Slide 14? You talk about a reversal of accrued maintenance fee of about $7 million for SGI. Could I confirm that this $7 million flowed directly through into your net profit figure?
Yes, it does.
All right. And after that, there's this note about this credit loss allowance of about $6 million. Could I know where this is actually -- where this figure is actually buried in, under which project? Or...
That's [Audio Gap] and related to Project 1.
I see. So effectively does that mean that if I were to reverse this, Project 1 actually gets better at about $5 million loss?
Yes, that's correct.
There are no questions at the moment. [Operator Instruction] The next question is from Jason Yeo at Goldman Sachs.
I just have a very broad question. SembMarine has been talking about trying to -- or the need to [ sharpen ] its balance sheet. I'm just wondering how that is potentially affecting how you're thinking about expansion and transforming your businesses, if there's any impact?
Well, it consolidates on our balance sheet, their debt consolidates on our balance sheet. So it removes the -- well, it effectively causes some reduction on headroom on SCI. So from that perspective, that's why we're looking at recycling some cash with our own business. We know that Marine is taking some action with regard to cutting some of their costs and also bringing some of their revenues in earlier through securitization, et cetera. So whilst it is looking at those methods, we're just making sure that we have enough room to continue our own investment program while we work through different options with Marine concerning their debt. Okay?
[Operator Instructions]
Okay. If there are no further questions, then thank you everybody. We will now conclude our teleconference. Thanks once again and have a good day ahead. Thank you.
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