Sembcorp receives court judgment validating its South African water asset divestments

THE South African Supreme Court ruled in an update to legal proceedings that the Sembcorp group’s 2018 divestments of its South African water assets, which a third party contested in court, were valid. 

On Tuesday (Dec 10), the group said it received an appeal judgment last Thursday affirming that its 2018 divestments of its South African municipal water assets for 718 million rand (S$70 million) were valid and enforceable.

In December of 2018, the group announced that its wholly-owned subsidiary Sembcorp Utilities (Netherlands) NV (SUNNV) had sold its entire stake in Sembcorp Utilities South Africa (SUSA) and its 100 per cent effective stake in Sembcorp Silulumanzi to South African Water Works. 

Although the group obtained municipal consent before the sale’s completion, a third party who unsuccessfully attempted to gain a local minority shareholding in one of the divested assets, Sembcorp Silulumanzi, challenged this consent in the South African High Court under the government’s Broad-Based Black Economic Empowerment programme. 

In the event that the divestments had to be reversed following legal proceedings, parties to the deal would have needed to reapply for the consent of the Mbombela local municipality. 

In November of 2020, Sembcorp announced that it had entered into legal proceedings over the matter. 

Neither the group nor its subsidiaries were parties to the legal proceedings when they were first launched in July 2019 until Sembcorp Industries requested and was granted approval by the court for SUNNV and SUSA to be joined as parties to the proceedings to protect its interests. 

The judgement is not expected to have material impact on the earnings per share and net tangible assets per share of Sembcorp for the financial year ending December 31, 2024. 

Shares of Sembcorp closed up 0.7 per cent S$0.04 at S$5.62 on Tuesday before the news.