Engaging Keppelites around the world - Keppel Corporation
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A Publication of Keppel Corporation
ISSUE
02
2020
www.kepcorp.com/ekeppelite
Engaging Keppelites Waste
management
Stronger
together
around the world solutions
MCI (P)
060/01/2020 14 23 44
Contents
1 Editor’s Note 32 Injecting further vitality into the Tianjin Editorial Advisor
2 Keppel Corporation Financial Results Eco-City Ho Tong Yen
Financial highlights 33 Ensuring business continuity
In conversation through the COVID-19 pandemic
10 Keppel Pacific Oak US REIT Key 34 Triple-A rating Editor
Sue-Ann Huang
Business and Operational Updates 35 Frontline heroes
11 Keppel REIT Financial Results
12 Keppel DC REIT Key Business and HSEMATTERS
Copy Editors
Operational Updates
Lee Wan Jun, Ariel Tee
13 Forward together 36 Safety excellence
SPECIAL FOCUS GETTING TO KNOW YOU Editorial Team
Ana Luisa Cruz, Ang Lai Lee, Brian Lee,
14 Engaging Keppelites around the world 38 Spotlight on: Mr Linson Lim Dorothy Lim, Elizabeth Widjaja,
18 OneKeppel Awards Emmeline Khoo, Fiona Aw, Frances Teh,
20 What the refreshed vision, mission, 40 Fuelling the future of green energy Glenda Yang, Grace Chia, Guo Xiao Rong,
and core values mean to me Hoo Yao Lin, Ivana Chua, Loh Jing Ting,
KEPPELITES AROUND THE WORLD Nikki Lam, Roy Tan, Tang Yi Bing, Teri Liew,
23 Waste management solutions Vanessa Ng, Yolanda Guo
24 Expansion in Yangtze River Delta region 42 Taking a bite out of the Big Apple
Email: keppelgroup@kepcorp.com
25 Address for the privileged
Website: www.kepcorp.com/ekeppelite
26 Creating value 43 Inspiring dialogue
28 M1 wins 5G network licence Powering up digital skill sets Keppelite is a publication of Keppel
29 Joint studies for Floating Data Centre 44 Stronger together Corporation, and is published quarterly
Park and LNG-to-power solutions 47 Supporting tenants affected by by the Group Corporate Communications
30 Reliable delivery COVID-19 Division. All rights reserved. Permission from
Test-bedding cleaner energy solutions 48 Caring for the environment the publisher is required for reproduction by
any means in whole or in part.
Printed in Singapore by
Image Printers Pte Ltd.
Cover image: A Keppel-led consortium has secured an Engineering, Procurement and Construction
contract for the development of a Waste-To-Energy facility and a Materials Recovery Facility for
Singapore’s new Tuas Nexus Integrated Waste Management Facility (artist impression pictured).
1 EDITOR'S NOTE
Editor’s Note
COVID-19 is a global crisis, impacting While supporting efforts to combat US$1 billion Keppel Asia Infrastructure
the health and well-being of numerous COVID-19, we are also uniting our people Fund (pages 26 and 27).
people, disrupting economies, and to deliver on our mission to provide
transforming many aspects of modern life solutions for sustainable urbanisation. Furthermore, Keppel Offshore & Marine
that we have come to take for granted. has formed a partnership with Energy
In February 2020, we held our annual Market Authority to develop innovative
Keppel’s first priority in our response to the group-wide townhall, the Global Keppelite energy solutions (pages 30 and 31), while
pandemic is to safeguard our employees, Forum, where Mr Loh Chin Hua, CEO Keppel Data Centres is exploring the
customers and stakeholders. In addition, of Keppel Corporation, unveiled the feasibility of developing a Floating Data
we have put in place robust measures Group’s refreshed Vision, Mission and Centre Park in Singapore (page 29).
to ensure business continuity. Keppel’s Core Values, and provided an overview
businesses provide many essential of Keppel’s progress towards Vision 2020 COVID-19 is accelerating changes in
services – such as power, water and waste and our plans for the future. The inaugural how governments, businesses and
treatment, telecommunications, data OneKeppel Awards were also presented people work and interact, including the
centres and logistics – which continue to at the Forum to recognise impactful and increasing prevalence of telecommuting,
operate during the pandemic, including collaborative business units, Keppelites virtual meetings and digital transactions.
the circuit breaker period in Singapore and projects (pages 14 to 19). These may bring about lasting changes
(page 33). in social norms and human behaviour,
Despite COVID-19, Keppel continued beyond the immediate impact of the
We are proud of the numerous Keppelites to actively pursue exciting business pandemic. Keppel will continue to
across the Group who have been working opportunities. A Keppel-led consortium embrace our core value of agility in
tirelessly on the frontlines and behind- has secured a $1.5 billion Engineering, adapting and responding to the evolving
the-scenes to keep our operations Procurement and Construction contract environment, while preparing to seize
running. Their efforts ensure that critical for the development of a Waste-To- opportunities that may emerge during
services remain available (page 35). Energy facility and a Materials Recovery and after COVID-19.
Facility for Singapore’s new Tuas
During this challenging period, Keppel Nexus Integrated Waste Management Amidst these changes, we remain
has also stepped forward to support Facility (see page 23); M1 was awarded steadfast in providing reliable, quality
communities where we operate and a 5G network licence together with services, and staying true to our vision of
committed over $5 million to support StarHub (page 28); while Keppel Capital building a sustainable future for all.
those affected by the pandemic in continued to attract strong interest
Singapore and overseas (pages 44 to 47). among investors, and launched the Keppelite Editor
2
Keppel Corporation Financial Results
Resilience in adversity
Mr Loh Chin Hua, CEO of Keppel Corporation, discussed the
Group’s performance and operations amid the COVID-19
global pandemic at the Company’s 1Q 2020 financial results
announcement on 29 April 2020. Keppelite reproduces his speech.
Following the change in Singapore and circuit breakers in various countries, have also expedited payment terms
Exchange’s (SGX) regulations regarding and disruptions to the workforce and for the SME (small and medium-sized
quarterly reporting, Keppel Corporation will supply chains, Keppel’s businesses have enterprises) community to help improve
be switching to half-yearly reporting. We inevitably also been affected. their cashflows during this period.
welcome the SGX’s move to encourage the
market and companies to take a longer- Keppel’s diversification helps to Financials
term perspective on growth. However, strengthen our resilience during Amidst a challenging environment, Keppel
in view of the voluntary pre-conditional times like these. Many of our made a net profit of $160 million. All our key
partial offer by Temasek, we will continue to businesses provide essential services, business units remain profitable, despite
provide quarterly reports for the duration of such as power, data centres and the pandemic. Net profit was 21% lower
the offer period, to keep the market abreast telecommunications, and continue to than the $203 million for 1Q 2019, mainly
of the Company’s latest performance. We operate even during the ongoing circuit due to the absence of $49 million in profit
will also take this opportunity to provide an breaker in Singapore. The health and from the disposal of a stake in Dong Nai
update on how Keppel’s business has been well-being of our employees are our Waterfront City in Vietnam last year. Our
affected by COVID-19, and the steps we are top priority, and we have put in place Return on Equity was 5.7% on an annualised
taking in response. all the necessary precautions, such as basis. Free cash inflow was $37 million in
split teams and safe distancing, at our 1Q 2020, compared to a free cash outflow of
Impact of COVID-19 workplaces as we continue operating $534 million in 1Q 2019, mainly due to lower
COVID-19 is having a massive impact through the pandemic. I would like to working capital requirements.
on the lives of countless people around take this opportunity to express my
the world, as well as the global economy. deep appreciation to the many frontline Net gearing rose slightly to 0.88x as at
International Monetary Fund has projected and operational staff in Keppel, who 31 March 2020, compared to 0.85x as at
that the global economy may contract are working hard to provide essential 31 December 2019, mainly due to acquisitions
by 3% this year. Based on Singapore’s services for the community during and investments during the quarter.
Ministry of Trade and Industry’s advance COVID-19.
estimates, the Singapore economy Keppel continues to have a strong
contracted by 2.2% year-on-year in Beyond what we are doing within the balance sheet and the necessary credit
1Q 2020. In response to COVID-19, the Group, Keppel is also supporting national lines to finance the Group’s operations.
Singapore Government has unveiled a and international efforts to combat Nevertheless, given the tightening liquidity
series of impactful support measures, COVID-19. These include a $4.2 million environment, we are watching our cashflow
to help the people and companies in relief package co-funded by directors, and gearing carefully, and will manage
Singapore tide through the crisis. management and staff of the Group costs across the Group, as we prepare for
to support vulnerable communities in a difficult operating environment that may
Keppel operates in over 20 countries, Singapore. The package goes towards persist for some time.
providing solutions for sustainable supporting families living in 1 and 2-room
urbanisation. We are not directly involved Housing and Development Board flats Offshore & Marine
in the sectors most severely impacted by through rebates offered by Keppel Over the past two months, oil prices have
COVID-19. Nevertheless, with the sharp Electric, M1 and City Gas, as well as been roiled by shrinking global demand
fall in global economic activity, lockdowns The Courage Fund, among others. We caused by COVID-19, as well as the
3
O&M’s projects have been delayed. We
have served force majeure notices to
customers of the affected projects and
are working closely with them to mitigate
the impact of COVID-19.
As at end-March 2020, our net orderbook
stood at $4.0 billion. While progress in
securing new orders has slowed due
to COVID-19 and the fall in oil prices,
Keppel O&M continues to have a
sizeable orderbook which will keep our
yards occupied for the next two years.
We continue to focus on execution, and
delivered two newbuild projects and a
floating production storage & offloading
modification and upgrade project in
1Q 2020, despite COVID-19.
Many of Keppel’s businesses provide essential services such as power, data centres (pictured) and Our pivot away from oil has helped
telecommunications, and continue to operate even during the ongoing circuit breaker in Singapore.
Keppel O&M remain resilient, with
renewables and gas-related solutions
making up the majority of our orderbook.
We will continue to actively pursue
price war triggered by Saudi Arabia. The more diversified business, compared to opportunities in gas and renewables, and
International Energy Authority estimated the situation a few years ago, when the also repurpose Keppel O&M’s technology
that global oil demand could fall by 9% this offshore rig building business ground to for other floating infrastructure uses.
year due to COVID-19. Brent hit a low of an abrupt halt after years of rapid growth.
below US$20 per barrel, a level not seen Earlier this month, Keppel O&M signed
since the early 2000s. The weak demand For 1Q 2020, Keppel O&M made a net a memorandum of understanding with
for oil coupled with overflowing storage profit of $3 million. At the operating level, the Energy Market Authority to develop
capacity even resulted in WTI (West Texas the profit was $28 million, higher than sustainable energy solutions. Keppel O&M
Intermediate) plunging into negative territory the $3 million operating profit in 1Q 2019; is also setting up a Floating Living Lab
last week. Given the current highly volatile but this was partly offset by losses from off its Tuas shipyard, which will serve as
environment and low prices, oil majors associated companies. a platform to testbed and commercialise
are curtailing exploration & production promising power and technology solutions
spending, which will push back the nascent In Singapore, Marine & Offshore for the marine sector.
recovery that we had just begun to see in Engineering companies involved in ship/
the Offshore & Marine (O&M) sector. vessel repair and maintenance and Property
overhaul services have been defined Amid a challenging environment, our
We expect the O&M business to face as essential services. Our Singapore Property Division achieved a net profit of
very challenging conditions in the yards have continued to provide these $35 million for 1Q 2020. This was lower than
near future. We would also need to essential services during the circuit the $132 million in 1Q 2019, mainly due to
keep a close watch on customers and breaker, but with reduced manpower and the absence of gains from the divestment of
associates who would be affected if various precautionary measures in place. the stake in Dong Nai Waterfront City, and
there is a prolonged downturn in oil Our overseas yards are also operational, a tax write-back last year.
prices. Nevertheless, Keppel O&M is in except for those in the Philippines,
a stronger position to weather the crisis due to the lockdown imposed by the Keppel Land has limited retail and
today, compared to 2015, when the last Philippine Government. hospitality assets and our office portfolio
crisis began. Over the past few years, is relatively resilient to COVID-19. The
Keppel O&M has undertaken extensive Arising from the lockdowns in various impact of the pandemic is therefore mainly
rightsizing and reduced its overheads. countries and disruptions to international on residential trading projects and its
Today, it is a leaner, more efficient, and supply chains, several of Keppel impact across markets is not uniform. The
4
Chinese market slowed down during
the lockdown over the Chinese New
Year but has since started recovering.
In Singapore, the market slowed down
with the closure of showrooms during
the circuit breaker and more cautious
sentiments among buyers; while the
market in Vietnam remained relatively
resilient during the quarter.
In 1Q 2020, we sold around 450 homes,
higher than the 390 homes in 1Q 2019,
with total sales value of about
$320 million. China contributed to the
bulk of home sales, with 330 units.
Significantly, more than 200 of these units
were sold in February and March 2020,
after the COVID-19 outbreak, reflecting
the improving confidence and sentiments
in China. Over the last weekend of April,
we launched 251 units of a residential
project in Wuxi and 164 units, or 65%,
were booked over the weekend, at prices
comparable with homes sold last year.
1
Home sales were slower in Vietnam
mainly because we did not launch any
new projects during this period, while
in Singapore, we sold about 50 units.
of gross floor area, of which about Even excluding this gain, Keppel
We expect to recognise revenue for 50% is under development. They will Infrastructure performed well, with
some 8,830 overseas homes already progressively contribute to the Group’s earnings double those of 1Q 2019, mainly
sold worth about $4.1 billion upon stable recurring income, when the driven by improved performance in
completion and handover from 2Q projects are completed. Energy Infrastructure.
2020 to 2023. With the slowdown in
construction resulting from COVID-19, Keppel Land and Keppel REIT have With rapidly depleting landfill capacities
the handover of certain projects may rolled out a series of measures to and rising public awareness of
be delayed by a few months. support the tenants in our commercial environmental and pollution issues
properties, who have been affected in many cities around the world,
Our total residential landbank by COVID-19. We will do what we can governments have become more
currently stands at about 45,000 to support our stakeholders, where proactive in sourcing for sustainable
homes. As part of our capital recycling possible, through this difficult period. waste management solutions. Leveraging
strategy, Keppel Land divested our its advanced technology and strong track
equity interest in the Jiangyin project Infrastructure record in execution, Keppel Seghers is
in China for approximately The Infrastructure Division made a net well positioned to support governments
$95 million. Keppel Land also profit of $174 million for 1Q 2020, compared and industries with its sustainable
continued to deepen its presence in to $16 million over the same period a year environmental solutions.
promising Chinese regions, such as ago. This was on the back of improved
Taicang City, to meet the demand for earnings from Energy Infrastructure, as Earlier this year, Keppel Seghers won
homes in the greater Shanghai area. well as a gain of $131 million arising from two contracts to supply waste-to-energy
the reclassification of Keppel Infrastructure (WTE) technology and services to Gujarat
Our commercial portfolio stands Trust from an associated company to an in India. These WTE projects would be
at about 1.6 million square metres investment. the first-of-their-kind in Gujarat.
5
In April 2020, a Keppel-led consortium time, Keppel Data Centres continues to Investments
secured a $1.5 billion contract to design explore innovative and energy efficient Our Investments Division recorded
and build a 2,900 tonnes per day (tpd) data centre solutions. It is now looking a net loss of $52 million this quarter,
WTE plant and a 250 tpd Materials into the feasibility of developing a compared to a net profit of $49 million
Recovery Facility, which will be part Floating Data Centre Park at the Loyang in 1Q 2019, which had benefitted from a
of Singapore’s new integrated waste Offshore Supply Base in Singapore. fair value gain from the re-measurement
management facility. Keppel’s share of of the previously held interest in M1 at
the contract is about $720 million. As the In April 2020, Keppel Telecommunications acquisition date. Earnings for the quarter
consortium lead, Keppel Seghers will be & Transportation (Keppel T&T) sold a were also dampened by mark-to-market
in charge of overall project management, small 2.33% stake in Keppel DC REIT. losses on some of our investments.
as well as providing the core WTE This was an opportune move to realise
technology solutions. the profits from our data centres business, Asset Management
allowing the funds released to be Keppel Capital continued to generate
In the meantime, construction works redeployed to seize other opportunities. steady recurring fee income, though
at the Keppel Marina East Desalination We expect to recognise a gain of about earnings were lower than in 1Q 2019,
Plant (KMEDP) and Hong Kong $46 million from the transaction. After mainly due to mark-to-market loss of
Integrated Waste Management Facility the sale, Keppel T&T continues to be the $26 million on its holdings in a listed REIT.
have slowed as a result of COVID-19. single largest unitholder and sponsor
However, the KMEDP remains on track to of Keppel DC REIT, and we remain Despite the challenging economic
commence operations later in 2020. committed to the long-term growth of the climate, Keppel Capital continued to
REIT. see strong investor interest for quality
Digitalisation continues to drive demand real assets that provide stable, long-
for data centres. With COVID-19 and COVID-19 has also increased the demand term cashflows. The recently launched
work from home arrangements further for online sales and urban logistics, US$1 billion Keppel Asia Infrastructure
increasing the demand for digital especially for fast moving consumer Fund and its co-investment vehicles
connectivity, Keppel Data Centres has goods and health products, but there has have, through a second closing and an
received enquiries from customers on been a corresponding reduction in the impending commitment from the Asian
new data centre capacity. At the same demand for other non-essential goods. Infrastructure Investment Bank, raised
1. In 1Q 2020, Keppel
2 Land sold 44% more
homes in China than
in 1Q 2019, mainly in
Nanjing (pictured),
Chengdu and Wuxi.
2. The recently launched
US$1 billion Keppel
Asia Infrastructure
Fund has acquired, as
its first investment, an
interest in the Gimi
floating liquefied
natural gas facility.
6
total aggregate capital commitments model. During the quarter, M1 and will streamline and focus our business in
of US$570 million. The Fund has also StarHub also submitted a joint bid for a four key areas: Energy & Environment,
acquired as its first investment an 5G licence. Urban Development, Connectivity and
interest in the Gimi floating liquefied Asset Management, all of which are part
natural gas facility. Sino-Singapore Tianjin Eco-City of a connected value chain, which we will
In China, our joint venture master grow both organically and inorganically.
In addition, a large Asian pension fund developer Sino-Singapore Tianjin Eco-
and a sovereign wealth fund each City Investment and Development Co., Capital allocation will be driven by the
committed US$200 million to be invested Ltd. (SSTEC) continued to drive the Group’s strategy and business model.
in funds managed by Keppel Capital. development of the Tianjin Eco-City. These include (i) whether the business
In April 2020, SSTEC sold a residential contributes to our ROE target of 15%, (ii)
Separately, the Keppel-Pierfront Private plot for RMB 1.17 billion, at a land whether it is scalable, (iii) its potential
Credit Fund achieved a first close of price comparable to a similar plot sold for integration and synergy with other
US$200 million earlier in April, while in 2019. This reflects the continuing parts of Keppel, and (iv) whether it
Keppel Capital has entered a 50:50 confidence and demand for land in is aligned to our Vision, Mission and
joint venture with Australian Unity to the Eco-City. The sale is expected to environmental, social & governance
establish funds focused on the Australian contribute earnings of about $30 million goals. As part of the process of
metropolitan office sector. to the Group when it is completed in the refocusing our business, we have
second quarter. commenced a strategic review of our
M1 logistics business.
With consolidation of a full quarter’s Vision 2030
earnings, M1 made a bigger contribution As we manage the impact of COVID-19, Keppel’s Vision 2030 is close to being
to the Group, compared to 1Q 2019. we remain focused on executing finalised, and we will share more with
Demand for mobile services remained our plans and building a sustainable the investment community in the next
resilient despite the pandemic. M1 business for the long term. During the few weeks.
added 20,000 postpaid customers in the FY 2019 results announcement, I spoke
quarter. However, roaming and prepaid about Keppel’s Vision 2030 exercise, To conclude, COVID-19 will cause
revenue have fallen due to the sharp where we gathered younger business considerable disruption and pain.
drop in international travel, while the leaders in the company to draw up The post-pandemic world may also
sale of handsets and information and Keppel’s long-term strategy. This not be the same as before. Trends
communications technology related process, which started from 1H 2019, has like working from home, learning
equipment have also slowed due to continued over the past few months. from home and online shopping will
customers deferring their spending and probably become even more prevalent.
supply chain disruptions. Looking ahead, we see Keppel growing Countries and companies may seek to
increasingly as one integrated business, further diversify their supply chains.
Over the past few months, M1 has collaborating and channelling our This will create additional disruptions,
enhanced the connectivity solutions capabilities to provide solutions for as well as opportunities for companies
across its business lines to support sustainable urbanisation. Through able to seize them. Notwithstanding
customers’ needs amid COVID-19. Keppel Capital, we will tap third-party the immediate challenges posed by
Notwithstanding the short-term funds for growth and our eco-system COVID-19, there is inherent value in
headwinds, COVID-19 has accelerated of REITs and business trusts to recycle Keppel’s businesses and our synergy
digital transformation for many capital. Many investors are on the as a group providing solutions for
organisations as well as the adoption of lookout for real assets with cashflow. sustainable urbanisation. This will not
new ways of working. This will, over the Opportunities could emerge after the change because of the pandemic.
longer term, create new opportunities for COVID-19 crisis and Keppel is well Keppel has faced many challenges
our connectivity business. positioned to tap these opportunities, over the past five decades. I am
together with our strategic investors. confident that working together as
In the meantime, M1 is continuing its a group, and with the support of
transformation to enhance its digital We will take a disciplined approach to our stakeholders, we will overcome
capabilities and digitise its business managing our businesses. The Group COVID-19 and emerge stronger.
7
Keppel Corporation Financial Results
Financial highlights
Keppelite reproduces excerpts of the presentation by Mr Chan Hon Chew,
CFO of Keppel Corporation, on the Company’s 1Q 2020 financial performance.
1Q 2020 financial highlights
$m 1Q 2020 1Q 2019 % Change
Revenue 1,857 1,531 21
Operating Profit 273 322 (15)
Profit Before Tax 247 283 (13)
Net Profit 160 203 (21)
EPS (cents) 8.8 11.2 (21)
1Q 2020 financial highlights However, operating profit fell by 15% expense and lower share of losses from
In 1Q 2020, the Group recorded a net or $49 million despite higher revenues, associated companies.
profit of $160 million, which was 21% largely due to the absence of fair value
lower than the same quarter last year, gain on remeasurement of previously Free cash inflow was $37 million during
with the Infrastructure Division being the held interest upon acquisition of M1 the quarter, as compared to an outflow of
top contributor to the Group’s earnings, compared to first quarter in 2019, lower $534 million in the 1Q 2019 mainly due to
followed by the Property Division and gain on disposal of subsidiaries and lower working capital requirements from
Offshore & Marine Division. This translated higher fair value loss on investments, Property Division and positive working
to Earnings Per Share (EPS) of 8.8 cents. partly offset by the mark-to-market capital changes for Infrastructure
gain from reclassification of the Group’s Division, partly offset by higher
Consequently, annualised Return on Equity interest in Keppel Infrastructure Trust working capital requirements from the
decreased to 5.7% as at 31 March 2020. from an associated company to an construction progress of Offshore &
investment carried at fair value through Marine Division’s major projects such
The Group’s revenue for the first quarter comprehensive income. as the Awilco semisubmersibles, Borr
was 21% or $326 million higher than jackup rigs and Golar Gimi Floating
1Q 2019. Higher revenues from the Profit before tax of $247 million for Liquefied Natural Gas vessel.
Offshore & Marine and Investments 1Q 2020 decreased by a smaller extent as
divisions were partially offset by lower compared to the decrease in operating For more information on the results,
revenues from the Property Division. profit, due mainly to lower net interest please visit www.kepcorp.com.
8
Keppel Corporation Financial Results
In conversation
Keppelite shares highlights of management’s responses to questions from the media and analysts at
the Company’s 1Q 2020 results conference call.
Q: How are the downturn and current of our colleagues and co-workers, who it is to reassure them that they will get paid.
oil prices impacting new order flow for were deemed to be in close contact They do not have to worry about being paid.
Keppel O&M? with the infected employee, on leave of The main thing is to get well.
absence. That expanded very quickly to
LCH: The current situation with the oil price 1,200 workers by 6 April. Over time, we We are also now planning: When the
has obviously created some challenges for have put almost 4,000 workers on leave circuit breaker is over at some point, how
the offshore sector. Fortunately for Keppel, of absence. This was on our own accord, do we return to work safely? At the end
our existing orderbook is quite decent. We before any intervention by MOH. of the day, safety comes first. This has
have almost $4 billion of net orders that will guided us in how we have managed this
keep us busy, at least for the next two years. The safety of our workers comes first. very difficult moment, and it will continue
Keppel O&M moved very quickly to to guide us as we think about post-circuit
We have also pivoted away from oil ensure that we were able to get some breaker, because the danger will still
since 2015, so you will find that the control over the situation. probably reside for quite a while.
majority of orders in our orderbook are
in renewables, gas solutions and non-oil We cannot talk about the individual Q: Given the encouraging performance
and gas. Going forward, you would expect conditions of the workers; but generally, from the China residential launches over
that unless oil prices recover faster, there as you have read in the papers, amongst the weekend, are you planning to ramp
will be an impact on the Exploration & the migrant workers, most of the cases are up launches over the next few months?
Production spending by the oil majors. either asymptomatic or they have very mild
symptoms. More importantly, at this moment, LCH: It is very encouraging, and we are
Having said that, we continue to see none of our workers are in the ICU (intensive looking at how we can do more launches.
quite strong enquiries and interest in care unit). We are watching this very closely. We have quite a number of units in
the renewables space; and I believe that China, a number of projects that are
demand for production assets like FPSOs Keppel is acknowledged in the industry for launch-ready. Depending on the market
and FLNGs will remain quite robust. running very good quality dorms. These conditions, if we think it is favourable, we
dorms would typically have a sitting room will definitely push ahead.
Q: Both foreign worker dormitories that with two bedrooms. We also have a games
Keppel operates are under quarantine, can room, a supermart and various recreational For Vietnam, there was not much sales in
you take us through the situation there? facilities for the workers. the first quarter, not because the market
was weak, but mainly because we have no
LCH: Both dormitories, Acacia and From the agencies that have worked with units to sell. The reports on the ground are
Cassia@Penjuru, have been gazetted us on these two dorms, their feedback on that the demand for housing apartments in
and isolated by Ministry of Health (MOH). the morale and discipline of our workers Ho Chi Minh City remains strong.
MOH has designated three clusters in our was very good, and of course we do our
Group. One is at Keppel Shipyard, and two best. It is a very difficult situation for them. We are now looking to see whether we
at the dormitories you have just mentioned The management team at Keppel O&M is in can have some projects to launch. Our
that are operated by Keppel Housing. regular contact with the workers. It is not just colleagues in Keppel Land Vietnam are
about providing food and all that, which is quite confident that we can get a good
We had our first COVID-19 case at Keppel very important, but also providing access so result. We have also heard in recent
Shipyard on 30 March. We were very that they can speak to their families with SIM days that the lockdown in Vietnam
fast in quickly putting about a hundred cards and also with WIFI. More importantly, has either been removed or has been9
reduced, and some of the retail malls that has taken place over time. If you We were very pleased to see that three
are also now reopened. look at KIT’s portfolio, it has evolved very credible developers registered to
over the years and the nature of the tender for this site, and there was quite
Q: Are the plans to redevelop Keppel assets has expanded beyond the focus active bidding. We managed to sell the site
Towers still ongoing? Or will the plans be as well as the scope of the Group. In at a small premium to the reserve price.
delayed in the current environment? 2015, there was the combination of
KIT and Cityspring Infrastructure Trust It is one of the themes that we see,
LCH: Keppel Towers has been decanted. (Cityspring). If you look at the assets, namely that the pandemic has affected
We used it for a while as an alternate there are a lot that are not quite the different parts of our business and even
work site in March. During March, in the Group’s focus. More recently, KIT geographies differently. We have seen that
early part of the virus pandemic, we had invested in Ixom, which just happened China was the first to be affected. They
split teams and some of us were actually last year. went through a very severe lockdown
using Keppel Towers for a few weeks. particularly in Hubei and Wuhan. But in the
But it is now vacated. The plan is that it Arising from the merger with Cityspring, last few weeks, many of these cities are
will be demolished and redeveloped. I do our stake was also diluted down to 18%. now back online, including Wuhan.
not believe there will be any delays, other With the recent development in terms of
than the fact that we can’t start work the reduction in our Board representation, We have seen that the land sales in
during the circuit breaker. and also the undertaking to provide KIT some of these cities have been quite
unitholders with the right to endorse the encouraging, where developers are
Q: On the partial sale of Keppel DC appointment of directors of the Trustee- bidding and are prepared to bid, and
REIT units, is this a general cash-raising Manager, these have resulted in the loss frequently the sites are being obtained
strategy that we can expect given the of significant influence over KIT. at a premium. Some of the premiums are
current circumstances, or is this just quite significant over the reserve price.
to take advantage of the share price of So the right accounting treatment for
Keppel DC REIT? the stake in KIT is not as an associate, For the SSTEC land sale, the price per
but it should be an investment. Under square metre of about RMB7,000 is about
LCH: This is just part of our way of the accounting standards, even for the same as a site that we sold last year.
recycling and locking in some profits. investments you have a choice between
This is done by Keppel T&T. We are still fair value to P&L and fair value to OCI As for whether we will sell more sites this
very bullish about the data centre space. (Other Comprehensive Income). We have year, that would depend on the market
You know the business model we have chosen to account for it as investment conditions. SSTEC does some self-
with using private funds to work with for fair value to OCI. The reason is that development and also does land sales. So
investors to build this and then hopefully the sponsorship relationship is still very we would expect that to continue.
when it is de-risked, monetise it by selling important. That is important to reinforce,
it to Keppel DC REIT. From time to time, because the sponsorship relationship CHC: The buyer is a major developer
Keppel T&T will also need to free up its is for the mutual benefit of both KIT listed on the Hong Kong Stock Exchange
capital, so that we can continue to invest in and Keppel. We do not expect to sell with headquarters in Tianjin.
new projects that are under development. the stake for profit in the future. So
So, it has got more to do with that. any movement in the fair value goes to Q: On the Temasek partial offer, is
the OCI, rather than P&L. That is the there any financial impediment given
I think Hon Chew and the finance team rationale behind that. the volatility that we are seeing in the
have done a great job in making sure that market right now?
the Group’s finances are in good order, Q: Could you give us more colour on the
in good shape. That would explain why buyer and price of Tianjin Eco-City’s LCH: There are three MAC (material
you can see that the cash balance in the recent land sale? Should we be expecting adverse change) clauses. As of the first
Group has gone up. more in 2H 2020? quarter results, I do not believe we have
breached any of these three MAC clauses.
Q: Could you share the rationale for LCH: The SSTEC (Sino-Singapore Tianjin
reclassifying Keppel Infrastructure Trust Eco-City Investment and Development LCH – Mr Loh Chin Hua,
(KIT)? Co. Ltd.) land sale is something that is CEO of Keppel Corporation
quite encouraging. This is, of course, still
CHC: The KIT reclassification did not very early days in terms of China coming CHC – Mr Chan Hon Chew,
just happen overnight, but is something back from their lockdown. CFO of Keppel Corporation10
1. The functional
collaborative spaces in
Keppel Pacific Oak US
REIT’s properties provide
a live-work experience
for tenants. Pictured here
is Bellevue Technology
Center in Seattle,
Washington.
2. HSBC Singapore begins
its 10-year lease at
one of Keppel REIT’s
properties, Marina Bay
1 Financial Centre Tower 2
(pictured), in May 2020.
Keppel Pacific Oak US REIT Key Business and Operational Updates
Steady returns
Keppel Pacific Oak US REIT (KORE) has Based on the latest audited financial Notwithstanding the COVID-19
adopted half-yearly announcement of statements of KORE for the financial year situation, the Manager remains focused
financial statements with effect from the ended 31 December 2019 (FY2019), had the on delivering sustainable distributions
financial year ending 31 December 2020. restructuring been completed on 1 January and strong total returns to Unitholders.
Accordingly, the next announcement 2019, the distributable income for FY2019 KORE’s resilient and highly diversified
of financial statements will be for the would have increased by approximately 1.5%. portfolio with low tenant concentration
half-year period ending 30 June 2020. risk will continue to sustain long-term
Nevertheless, KORE has provided key In 1Q 2020, the Manager leased returns for Unitholders.
business and operational updates for 104,000 sf of space, mainly in Seattle,
the first quarter of 2020 to engage Atlanta and Houston. This was With approximately 55% of its
investors and other stakeholders on the equivalent to about 2.2% of KORE’s portfolio in the key technology hubs
performance of KORE. total portfolio, bringing KORE’s portfolio of Seattle, Denver and Austin, KORE’s
committed occupancy by net lettable focus on the growth in defensive
KORE has achieved distributable income area to 94.0% as at 31 March 2020. technology and healthcare sectors is
of US$14.4 million for 1Q 2020, 16.1% KORE’s overall portfolio recorded a a distinctive factor and a cornerstone
higher than in 1Q 2019. The continued positive rental reversion of 12.0%. For of its strategy. Almost all of KORE’s
year-on-year improvement is largely due the rest of 2020, KORE has only 6% of leases have built-in average annual
to contributions from One Twenty Five leases due for renewal. rental escalations of 2.6%, which will
in Dallas, Texas, which was acquired in continue to be a key organic growth
November 2019, as well as positive rental The Manager continues to maintain driver for Unitholders.
reversions from leasing done in 2019. its prudent approach towards capital
management. KORE has limited Looking ahead, the Manager remains
On 7 April 2020, the final tax regulations interest rate exposure with term loans committed to operational excellence
under Section 267A of the United States significantly hedged. As at 31 March with a focused leasing strategy to
Internal Revenue Code were issued. Arising 2020, the weighted average term to maximise rents and achieve positive
from the final regulations, with effect from 16 maturity of KORE’s debt was 2.9 years rental reversions, while seeking value
April 2020, KORE has reverted to a structure with an all-in average cost of debt of accretive acquisitions in key growth
which does not involve the Barbados 3.53% per annum. Aggregate leverage markets, as well as maintaining a
entities, largely following the structure which and interest coverage ratios were 36.9% prudent approach towards capital
KORE used when it was initially listed. and 4.2 times respectively. management.11
Keppel REIT Financial Results
Resilient income
Keppel REIT has achieved distributable will also be able to utilise one month’s Notable tenants that are scheduled to
income of $47.3 million for 1Q 2020, security deposit to offset rent payment. move into Keppel REIT’s properties
including capital gains distribution of include HSBC Singapore, whose 10-year
$5.0 million. Notwithstanding the absence As for Keppel REIT’s overseas markets, lease at Marina Bay Financial Centre
of rental support and lower income support measures in line with the relevant Tower 2 begins in May 2020, as well as
contribution following the divestment of government advisories issued will also be the Victoria Police, whose 30-year lease
Bugis Junction Towers in November 2019, extended to all qualifying tenants. These at 311 Spencer Street in Melbourne is
distributable income was maintained measures serve to support the business expected to start by end-2Q 2020.
year-on-year due mainly to the continuity of tenants and the long-term
acquisition of T Tower in May 2019, higher interests of all stakeholders. The COVID-19 pandemic presents
capital gains distribution, as well as lower unprecedented challenges to the
borrowing costs. Distribution per Unit for As at 31 March 2020, Keppel REIT’s business community. The Manager
1Q 2020 was 1.40 cents. portfolio committed occupancy was remains focused on maintaining
high at 98.9%. The portfolio and top ten stable and sustainable distributions
As at the end of 1Q 2020, the majority of tenants’ weighted average lease expiry to Unitholders, and achieving
loans due in 2020 have been refinanced (WALE) remained long at approximately long-term growth. Keppel REIT ’s
while commitments have been received 4.7 years and 6.7 years respectively. portfolio of established tenants from
for the remainder. Aggregate leverage diversified sectors, high portfolio
was 36.2% and all-in interest rate Keppel REIT has a diversified tenant committed occupancy and long
was 2.58% per annum with interest base, many of whom are established WALE will continue to support the
coverage ratio at 3.2 times. To meet blue-chip corporations. REIT ’s income resilience.
future financing obligations, Keppel
REIT has approximately $966 million
of undrawn credit facilities available, of
which approximately $400 million are
2
committed facilities.
With the safety of its tenants as the Manager’s
first priority, precautionary measures were
implemented across all properties at the
onset of the COVID-19 outbreak.
In Singapore, to ease tenants’ cash flow
and cost pressures during the COVID-19
outbreak, Keppel REIT has extended
approximately $9.5 million of tenant
support measures. These include the
full pass-through of property tax rebates
(estimated to amount to approximately
$8.2 million) of 30% to its office tenants
and 100% to its retail tenants, in line with
the Singapore Government’s Resilience
Budget which was announced on
26 March 2020, as well as full rental
waiver for April 2020 to eligible retail
tenants. In addition, eligible retail tenants12
Keppel DC REIT Key Business and Operational Updates
Essential asset class
Updates for 1Q 2020 The Manager maintains a proactive asset clients. Global supply chains have been
Keppel DC REIT has adopted half-yearly management strategy to improve the strained due to the pandemic, and as
announcement of financial statements efficiency and returns of its portfolio. As such, the Manager is closely monitoring
with effect from the financial year ending at 31 March 2020, the portfolio occupancy the progress of its asset enhancement
31 December 2020. Accordingly, the next rate remained healthy at 94.7% and the works at Keppel DC Dublin 1, Keppel DC
announcement of financial statements weighted average lease expiry (WALE) Singapore 5 and DC1. Development of
will be for the half-year period ending remained long at 8.3 years. Intellicentre 3 East Data Centre in Sydney
30 June 2020. Nevertheless, Keppel DC is expected to be complete in 1H 2021.
REIT continues to engage stakeholders During the quarter, Keppel DC REIT
proactively, and provided key business completed the acquisition of the The data centre market remains resilient
and operational updates for the first remaining 999-year leasehold land in this pandemic. Notwithstanding
quarter of 2020 on 21 April 2020. interest at Keppel DC Dublin 1. As part increased competition in the data centre
of its proactive asset management industry, Keppel DC REIT will continue
Keppel DC REIT has delivered approach, the Manager also announced to seek growth opportunities and
distributable income of $35.8 million plans to convert vacant space at Keppel strengthen its presence across key data
for 1Q 2020, 32% higher than DC Dublin 2 into a data hall, which is centre hubs globally.
1Q 2019’s $27.1 million, supported expected to complete in 1H 2021.
by contributions from Keppel DC Completion of acquisition
Singapore 4 and DC1; both acquisitions As the COVID-19 outbreak continues On 1 May 2020, Keppel DC REIT
were completed in 4Q 2019. to evolve, the Manager has put in place announced that the acquisition of the
stringent measures at its colocation 100% freehold interest in Kelsterbach Data
Accordingly, Keppel DC REIT achieved facilities to protect its employees and Centre, in Germany, has been completed.
a distribution per Unit (DPU) of
2.085 cents for 1Q 2020, 8.6% higher
than the DPU of 1.920 cents in 1Q 2019.
Keppel DC REIT has completed the acquisition of the remaining 999-year leasehold land interest at
Keppel DC Dublin 1.
In March 2020, the Manager obtained
a EUR 50 million revolving credit
facility and a EUR 50 million term loan
facility. The REIT’s aggregate leverage
remains low at 32.2%, providing a
comfortable debt headroom to pursue
further growth.
Keppel DC REIT’s average cost
of debt remained low at 1.7% per
annum and its interest coverage
ratio remained high at 12.8 times.
As at 31 March 2020, the Manager
has locked in 77% of its borrowings
through floating-to-fixed interest rate
swaps. In addition, forecasted foreign-
sourced distributions have also been
substantially hedged till 2H 2021 with
foreign currency forward contracts.13
Forward together
We are building a sustainable future for all our
stakeholders as OneKeppel, creating a spectrum of
solutions which are good for the planet, for people and for
the Group.
Beyond the variety of businesses they represent, the
Group’s FY 2019 annual reports converge on the Keppel
difference – our ability to harness Keppel’s diverse
capabilities to create value for stakeholders at different
stages of the value chain.
Collaborating with one another, Keppel’s business units
open up opportunities that each may not have been able
to capture alone.14 SPECIAL FOCUS 15 SPECIAL FOCUS
solutions for a sustainable world, that GKF 2019, and implemented during will be reduced to five – Agility, People-focus,
are good for the planet and people, and the course of 2019. He said, “There is a Accountability, Can Do and Safety.
create new profit pools in the process.” consensus among internal and external
stakeholders that Keppel is a trusted and To reflect our common purpose and
Vision 2030 reliable company. While this is a hard- collaboration as OneKeppel, the logos
Looking ahead beyond 2020, Mr Loh earned reputation that we must maintain, with the Keppel wordmark have also been
said, “As we complete Vision 2020, we we must also strengthen our focus on aligned with effect from 1 March 2020.
must set our eyes on the future. We are sustainability, as well as be an agile
now finalising Vision 2030, with interim and innovative company. This will be an Great place to work
targets for 2025. We should grow as integral part of our strategy and how we Recognising that people are the
one integrated business, with a clear run our businesses.” company’s greatest assets, Mr Loh also
growth trajectory and a repeatable model, said, “We will continue to make Keppel a
as well as have a more rationalised To sharpen Keppel’s focus, the company’s great place to work and offer Keppelites
portfolio focusing on our key strengths vision and mission statements will be a purposeful and varied career. We have
of engineering, project development, shortened to “A trusted global company been recognised by Forbes as being
operating and managing specialised building a sustainable future” and among the world’s best employers. This
assets, as well as capital and asset “We deliver solutions for sustainable year, we will roll out further initiatives,
management. We will also continue to tap urbanisation safely, responsibly and including enhancing Keppelites’
third party funds to grow our businesses.” profitably”, respectively. physical and mental well-being. Group
1 Human Resources will also look into
Trusted and reliable company Keppel’s core values have also been implementing flexible work arrangements,
Mr Loh also shared the outcome of a reviewed. Core values with similar themes taking into account each business unit’s
Keppel brand review, announced at will be combined, and the eight core values operational requirements.”
Engaging Keppelites around the world
1. Mr Loh Chin Hua, CEO
At the Global Keppelites Forum 2020, Mr Loh Chin Hua, CEO of Keppel Corporation, 2 of Keppel Corporation,
reiterated the Group’s
provided an overview of Keppel’s progress and plans for the future, and had a commitment to provide
candid dialogue with Keppelites around the world. solutions for sustainable
urbanisation.
2. Keppelites were
enthusiastic in posing
questions during the
The sixth annual Group-wide townhall, remain agile and nimble, stay relevant improved processes through Autobots fireside chat segment.
the Global Keppelites Forum (GKF), was and retain a growth mindset in order to and HaRmony. We now have a common The questions
held on 6 February 2020 at the Suntec seize these opportunities. Moving ahead, digital spine running through the whole ranged from topics
on business strategy
Singapore Convention & Exhibition our focus is on executing our strategy.” organisation. Going forward, we will and sustainability, to
Centre. The forum was attended by be able to gain more efficiencies with how Keppelites can
about 400 Keppelites in person and Progress towards Vision 2020 process automation and continuous contribute to the growth
of the company.
simultaneously broadcasted live to Mr Loh provided an update of the Group’s monitoring.”
about 2,100 Keppelites at 60 satellite progress towards Vision 2020, which was
locations globally. launched in 2014. He said, “Collaboration The Group has also made strides in
is now more prevalent and increasingly a safety, with zero fatalities in 2019, the first
In his address, Mr Loh Chin Hua, part of the Keppel DNA. There are many time this was achieved in over 25 years.
CEO of Keppel Corporation, shared projects today involving collaboration.
that the Group had delivered resilient Mr Loh also emphasised Keppel’s
performance despite a challenging and “We have also improved organisational commitment to sustainability, which
volatile external environment. He said, health, strengthened our succession is now a core part of the company’s
“There are challenges and risks, but also pipeline, enhanced controls, compliance strategy. He shared, “We must make
opportunities. Keppel must continue to and risk management as well as sustainability our business, and create16 SPECIAL FOCUS 17 SPECIAL FOCUS
Valuable insights Q: We emphasise our commitment to change along with it. When we are
to sustainability. Indeed, Keppel has confronted with a rapidly changing
done a lot in terms of green buildings, world, our business strategy will have to
Following Mr Loh’s address environmental solutions etc. But we also adapt accordingly. We need to have the
was a fireside chat segment, have business units that are involved right people with the right experience
where Keppelites were able in building rigs and production assets executing on the strategy.
to pose questions to Mr Loh for the oil and gas industry. How do we
reconcile our focus on sustainability, with It is important that we give people
either in person, or online our involvement in the oil and gas sector? a chance to learn and upgrade
through the Yammer platform. their skills. That is being done, and
LCH: While the world is moving something that we will continue to do.
towards cleaner energy, the reality is There could be situations where people
Keppelite shares highlights
that the shift is not going to happen may feel that they cannot make that
of the fireside chat segment, overnight. There is still a need for fossil transition, or they may feel that this
which was moderated by fuels. We identified some years ago is not the right thing for them to do.
Mr Ho Tong Yen, Director that gas will be an important transition Under such circumstances, it may be Mr Loh Chin Hua (left),
CEO of Keppel Corporation,
fuel, and we started developing gas unfortunate, but necessary for us to
of Group Corporate addressed questions from
solutions at Keppel Offshore & Marine part company. Keppelites during the
Communications. (Keppel O&M). It is not by coincidence fireside chat segment,
moderated by Mr Ho
that I have put Keppel Renewable Q: What can employees do to contribute Tong Yen (right), Director
Energy under Keppel O&M. A lot of to the long-term growth of the company, of Group Corporate
the engineering capabilities that we besides doing well in their day-to-day Communications.
have at Keppel O&M can be put to use work?
in a different way. For other aspects
of our business, we endeavour to be LCH: I would encourage all Keppelites
the most energy efficient. In terms of to bring up good ideas, new ways or circumstances of the day, is one of the LCH: When I was young, I did not have Service Commission (PSC) scholar.
our portfolio, we want to emphasise more effective ways of doing things. strengths of the Group. ambitions to become a lawyer or doctor. When I joined the workforce, we had
renewables. In the world that we are in today, it is I grew up in a simple setting. I recall, at one of the first downturns in Singapore.
important for leaders to listen more – it Q: How big of an impact will the a very young age, that a person deemed Even for scholars, the government was
Q: People-focus is one of our core values. doesn’t mean that we know everything. COVID-19 outbreak have on Keppel? to have done well in my kampung1 would not able to give us any jobs. The silver
But at the same time, Keppel O&M has If you see a trend that we are not How will Keppel navigate through this? be someone with a secondary school lining was that this allowed us to apply
undergone significant rightsizing. Other seeing, or if there is something that we qualification, working as a clerk. That was for jobs in statutory boards. I got into
business units are also looking at value can do better, we can always discuss it, LCH: Safety is our core value, and the the kind of role model that we had. Over the Monetary Authority of Singapore
enhancement, with possible headcount as we are open to ideas. most important thing is to keep our time, when I was a student, I did think and spent two weeks with them, before
reduction. How do we maintain a people safe. We have taken measures about becoming a forensic scientist. But moving to GIC.
balance between being people-focused, Q: Amongst the many initiatives or plans to do that. As for impact on Keppel that may have more to do with the fact
with the need to manage headcount to set in motion today, which do you expect financially, the immediate impact is that I enjoyed watching Hawaii Five-0 – I At GIC, I was working in the equities
improve efficiency? to have the most significant impact to not obvious as we do not own a lot of never took any steps towards that. department. I did fairly well, and
the Group in the next 10 years? hotels or retail properties, or food and after that I went to the real estate
LCH: In 2013, Keppel O&M achieved the beverage outlets, where you can see the Looking back at my career, and even department, even though my boss
Guinness World Record for delivering 21 LCH: I think Vision 2030 will be a very impact immediately. But we must also be before that when I was deciding where then said that real estate was a small
jackup rigs. Shortly after, in 2014, we went important plan. The document, when prepared for the long haul. If this turns out to go to school, I had taken some department. At that time, everyone
from 100 miles an hour to hitting a wall. It finalised, will chart our course in the next to be a long, drawn-out affair, there will be unusual paths. First, I did a degree in wanted to do investments, which was
was a matter of survival. If we did not do decade and more. The world is changing an impact on the economy, and Keppel’s real estate in New Zealand, which was considered more glamorous. But I
our rightsizing, we may not have survived rapidly. One of the key traits of Keppel is businesses will not be immune from that. not common, but that was how I could chose to do asset management instead.
as a business. that we have always reinvented ourselves. get a scholarship. You can see that I have taken slightly
We used to own a bank. At the time Q: Many Keppelites are curious to know different paths, and I don’t think that
Looking at the broader question of value when we sold the bank, that contributed more about their CEO. What was your Later, I was supposed to work in the tax that has hurt me.
enhancement across the Group, this is 50% of our profit. Some analysts back ambition when you were a student? department. However, I wanted to work
something that is necessary. The world then wondered if Keppel could survive. What path did you take to get to where for GIC, though I was not able to join LCH – Mr Loh Chin Hua,
of work has changed. With the advent Not only did we survive, we prospered. you are today? them when I applied as I was a Public CEO of Keppel Corporation
of robotics and artificial intelligence, This ability to constantly make ourselves
all our jobs will be changed. We have relevant, and reinvent ourselves to fit the 1. kampung: Malay word for villageYou can also read
