SINGAPORE – Sembcorp Industries and Keppel could benefit from Singapore’s plans to strengthen its energy infrastructure over the next five years, as rising electricity demand and concerns over fuel security keep the power market tight.
The Energy Market Authority (EMA) announced a five-year plan on Oct 26 covering electricity generation, natural gas supplies, the power grid, solar deployment, energy storage and electricity imports.
Singapore’s peak electricity demand reached 8.6 gigawatts (GW) in August 2026 and is projected to rise to between 9.9GW and 13GW by 2031, driven partly by data centres, semiconductor manufacturing and electric transport.
Morgan Stanley analysts expect the tighter market to lift power margins for Sembcorp and Keppel, whose power contracts are due for renewal in the coming quarters.
About 33% of Sembcorp’s power contracts and 20% of Keppel’s are due for renewal, the analysts said.
They forecast a 15% increase in contract power spreads, potentially raising their earnings estimates for the two companies by 15% to 20% for the second half of 2026 and the whole of 2027.
Power spreads refer to the difference between the price generators receive for electricity and the cost of the fuel used to produce it. Wider spreads can improve margins, although actual profits also depend on plant efficiency, operating costs and contract terms.
Morgan Stanley expects power margins to settle at about $45 to $50 per megawatt-hour, compared with its previous estimate of $40, as the market remains tight despite new generation capacity coming online.
Under EMA’s plan, five natural gas-fired power plants are expected to become operational between 2026 and 2031, increasing Singapore’s electricity generation capacity by about 26% from around 12GW today.
EMA is also evaluating proposals for additional gas-fired plants that could begin operating by 2032, and may call for more proposals over the next five years if demand continues to grow strongly.
Natural gas accounts for about 95% of Singapore’s electricity needs. To strengthen supply security, Singapore plans to increase its liquefied natural gas (LNG) regasification capacity from 10 million tonnes a year to 15 million tonnes when a second LNG terminal at Jurong Port becomes operational by 2030.
The push comes amid concerns over the reliability of piped gas supplies from Indonesia. Since Oct 24, Indonesia has cut pipeline gas exports to Singapore by 31 billion British thermal units per day.
Indonesia supplies about 70% of Singapore’s piped natural gas and around 30% of its total natural gas imports. The latest cuts affect less than 2% of the Republic’s daily gas needs.
Analysts do not expect Singapore to struggle to make up the shortfall, as it could import more gas from Malaysia or buy additional LNG on the spot market.
Singapore is better prepared than during previous Indonesian supply curtailments in 2021, although global gas supplies remain tight, said Macquarie Capital research analyst Zhiwei Foo.
Morgan Stanley expects gas costs to continue rising until 2027, before increased US exports potentially lead to a global glut and lower prices.
Higher import costs could also feed into domestic inflation.
Standard Chartered Bank chief economist Edward Lee said economists were monitoring whether imported inflation would push up underlying inflation.
If inflation broadens while economic growth remains firm, the Monetary Authority of Singapore could tighten monetary policy again as early as January, although Standard Chartered expects policy to remain unchanged.
For Sembcorp and Keppel, the availability and cost of fuel will remain important determinants of earnings.
Sembcorp gets about two-thirds of the gas it needs for power generation and piped natural gas from Indonesia. The supply cuts could affect 4% to 5% of the group’s gas needs, Morgan Stanley estimates.
Keppel is less exposed to Indonesian gas because most of its supplies come from Malaysia and LNG imports, according to JPMorgan analysts.
Sembcorp shares fell more than 4 per cent when the market opened on Oct 26, while Keppel shares rose 1 per cent.
Beyond generation and gas infrastructure, Singapore plans to invest up to $5.3 billion between 2025 and 2029 to expand its power grid. This is 11 times the investment in the preceding five years.
The broader infrastructure expansion could create opportunities for companies involved in energy projects, grid equipment, engineering and storage technologies, although the eventual beneficiaries will depend on which firms secure contracts, analysts said.
Sembcorp eventually closed 2.8% down, at $5.84, while Keppel ended 0.9% up at $10.09 on Oct 26.
