SINGAPORE (Oct 29): Sembcorp Marine (SMM) has won two new renewable energy engineering projects collectively worth over $200 million from Denmark’s Ørsted Wind Power as well as Norwegian shipping company Norled AS.

The first contract comes from Ørsted Wind Power’s subsidiary Optimus Wind Limited for engineering, procurement, construction, hook-up and commissioning works on two topsides.

With a combined weight of approximately 8,700 tonnes, they will be fabricated at SMM’s integrated yard facilities for delivery in the first quarter of 2021.

Once completed, the topsides will be deployed at the 1.4 gigawatt (GW) Hornsea 2 Offshore Wind Farm in the UK North Sea, which will be capable of supplying green electricity to over 1.3 million UK households when operational in 2022.

Separately, SMM’s has been contracted to design and build three identical plug-in ropax ferries for Norled AS, which will be built to a proprietary design from SMM subsidiary LMG Marin with delivery slated for 4Q20.

Main image: Artist’s impression of the Norled hybrid plug-in ropax ferry

This marks the group’s first design-and-construction roll on/roll off passenger (ropax) ship project.

Specially tailored to Norled’s shortsea Hella-Vangsnes-Dragsvik connections in Norway, each the 84.2m long multi-deck, double-ended ferries will be able to carry up to 300 passengers and crew, as well as 80 cars or a combination of 10 cars and 10 trailer trucks.

They use lithium-ion batteries for propulsion, complemented by energy-efficient solutions throughout the vessels’ design and shore-side hydroelectricity recharging points along their service route.

This will enable the ferries to operate with zero emissions cost-competitively, says SMM, as they will operate normally on zero-emissions battery power at a service speed of 10 knots. When required, they can run on combined battery-diesel hybrid backup modes.

While SMM expects a positive contribution to its earnings from the contracts with Optimus Wind Limited and Norled AS, these latest contract wins are not expected to have any material impact on the group’s NTA and EPS for the current financial year.

UOB Kay Hian analyst Foo Zhi Wei beleives margins on the ropax ship project are likely to come in lower than average, as SMM will be constructing the vessels for the first time. The contracts are within Foo's $2 billion contract win assumption for 2018. 

"While contract wins are lumpy, there is a rising likelihood of SMM missing our assumption as the year closes," notes Foo in a separate report on Monday. 

"Net gearing continues to rise, though this is expected to fall from the influx of cash from its divestment of all the stranded rigs on its balance sheet to Borr Drilling. This hinges on the assumption that Borr is able to make the payment in the years to come. So a risk of a cash call remains, albeit at a lower probability," he adds. 

Coupled with concerns over profitability, Foo does not expect a turnaround for SMM within the next two quarters, and hence maintains his "hold" call on the stock with a price target of $1.83. 

Shares in SMM are trading flat at $1.61 as at 11:06am.