Sembcorp Industries' Utilities arm Q1 2015 net profit dropped 19% Y-O-Y. Will Sembcorp Utilities ride out this storm? What happened? Utilities dropped 19% largely due to lower Singapore's contribution. Why? All because of the drop in "Vesting Contract Level" (VCL). What is VCL? Vesting Contract was introduced by EMA (Energy Market Authority) in 2004 to curb the abuse of market power by the leaders. How does it work? With Vesting, a percentage of the market's volume is sold on a fixed price. In 2014, VCL was set at 40%, with the vesting price 31% premium to the spot price. This meant that 40% of the Genco's revenue was recurring in nature, set at 31% above the spot price. EMA dropped a bomb At its biennial review, EMA will decrease the VCL from: From 40% in 2014 to 30% in 1H 2015 to 25% in 2H 2015 to 20% in 2016 Since ......