KEPPEL Infrastructure Holdings, a subsidiary of Keppel Corporation : BN4 +0.76%, will be looking to import renewable energy from Laos and Cambodia into Singapore, as it inked two exclusive and binding agreements with the two countries.

 

In addition to sourcing for reliable and sustainable energy resources through cross-border power trade with economies that are part of Asean, these agreements will also support the development of regional power grids that Singapore will tap on in its energy transition journey, said Keppel in a bourse filing on Wednesday (Oct 26).

 

These latest agreements, signed by Keppel Infrastructure&rsquo s subsidiary Keppel Energy, come after Keppel successfully imported up to 100 megawatt of renewable hydropower from Laos in June this year, through the Laos-Thailand-Malaysia-Singapore Power Integration Project.

 

Cindy Lim, chief executive officer of Keppel Infrastructure, said that the agreements are an important step to accelerate the development of renewable energy resources and seize opportunities arising from the Asean Power Grid&rsquo s vision of multilateral electricity trading beyond international borders, including the potential importation of low-carbon electricity into Singapore.

 

&ldquo Through this, not only can Asean transit towards a greener energy mix more rapidly, but it will also bolster the energy resilience of Singapore and the region,&rdquo said Lim.

 

Through its collaboration agreement with Cambodia and the Cambodian conglomerate Royal Group Power, Keppel Infrastructure will look at the development and operations of selected renewable energy projects in Cambodia.

 

These projects have an installed capacity of about 2,500 MW collectively, and up to 1,000 MW would be exported to Singapore via submarine high-voltage transmission.

 

The collaboration agreement will also explore the joint development of an onshore transmission line from the border between Laos and Cambodia through Cambodia, so that low-carbon electricity can be exported to Singapore, where Keppel Energy would be the off-taker.

 

Keppel Infrastructure would also be exploring opportunities in importing renewable energy from Laos to Singapore together with construction services company PSGC, through the memorandum of understanding (MOU) signed by both parties.

 

The signing of the MOU further supports a bilateral MOU on energy cooperation between the governments of Singapore and Laos, earlier in September 2022.

 

As part of the bilateral energy cooperation MOU, Keppel and PSGC will jointly study the development, implementation and operations of selected pumped-storage hydroelectricity and solar power generation facilities in Laos in respect of the export of low-carbon electricity to Singapore, thereby advancing the cooperation between Laos and Singapore in the cross-border power trade

 

KEPPEL Corporation : BN4 +0.76% posted a 24 per cent rise in revenue to S$6.8 billion year on year for the first nine months of 2022. Excluding discontinued operations, the conglomerate&rsquo s revenue grew 15 per cent to S$5 billion over the same period.

 

In its business update on Thursday (Oct 27), the company noted that net profit for the same period also rose year on year due to stronger performance from the energy and environment as well as asset management segments.

 

Still, net profit for the third quarter of 2022 fell year on year due to the absence of the gain from the en bloc sale of a project in China.

 

Keppel attributed the growth in revenue to higher contributions from Keppel Infrastructure, Keppel Offshore & Marine (O& M), telco M1 and asset management arm Keppel Capital. 

 

It also noted that its net gearing increased to 0.79 times as at Sep 30, 2022, from 0.68 times on Jun 30, 2022. As at Sep 30, 70 per cent of Keppel&rsquo s borrowings were on fixed rates, with an average interest cost of 2.88 per cent and weighted tenor of about three years. 

 

The company attributed the higher gearing ratio to the payment of 2022&rsquo s interim dividend and the repurchase of shares as part of its share buyback programme. 

In addition, the company also announced that it has signed revised agreements in connection with the proposed O& M transactions.

 

&ldquo The revised terms simplify implementation, provide greater deal certainty and expedite the completion of the proposed combination of Keppel O& M and Sembcorp Marine, allowing Keppel to further accelerate the execution of its Vision 2030 strategy,&rdquo it said. 

 

Keppel chief executive Loh Chin Hua noted that it is well ahead of the company&rsquo s three-year asset monetisation target and is on track to exceed the S$5 billion mark before the end of next year. It has announced asset monetisations worth close to S$4.4 billion to date.

 

SEMBCORP Marine and the offshore and marine (O& M) arm of Keppel Corporation : BN4 +0.76% have entered into revised agreements regarding their merger.

 

Instead of a one-for-one share exchange between Sembcorp Marine : S51 +1.67% and the combined entity, which was the original plan, Sembcorp Marine will now directly buy over all of Keppel O& M&rsquo s stake from Keppel, excluding its legacy rigs and associated receivables, for S$4.5 billion, said both companies in separate bourse filings on Thursday (Oct 27).

 

This revised deal is S$378 million lower than if the one-for-one share exchange option was pursued, as Keppel O& M had been valued at S$4.87 billion under the previous terms.

 

Under the original agreement, after shareholders of Sembmarine swapped 31.4 billion of their shares for new shares in the combined entity on a one-for-one basis, the combined entity would then issue 39.9 billion shares priced at S$0.122 each to acquire Keppel O& M.

 

The new shares are priced at that level because it was the volume-weighted average price of Sembmarine for the 10 trading days to Apr 26, which was the day before the merger was officially announced.

 

This would also mean that shareholders of Sembmarine will hold 44 per cent of the combined entity, while Keppel Corp will hold 56 per cent.

 

If the original deal had gone through, the combined entity would have been valued at S$8.7 billion, with an indicative net order book of more than 50 jobs worth S$6.4 billion.

 

After the acquisition of Keppel O& M under the new terms, the enlarged Sembmarine would have a total net orderbook of more than S$18 billion, said Keppel.

 

Sembmarine shareholders will own 46 per cent of the enlarged entity, while Keppel and its shareholders will own 54 per cent. The number of new shares to be issued will thus be reduced by 3.1 billion, equivalent to about 10 per cent of Sembmarine&rsquo s market capitalisation.

 

Sembmarine said that this improved exchange ratio would deliver better value upfront to existing shareholders, as fewer shares will be issued for the acquisition, and they will also retain a larger stake in the company after the deal is completed.    

 

As for Keppel, it will retain 5 per cent of the expanded Sembmarine, instead of 10 per cent in the combined entity under the previous terms.

 

It will distribute 49 per cent of Sembmarine shares inspecie to its shareholders, instead of 46 per cent of the combined entity.  

 

&ldquo While the exchange ratio for Keppel has been lowered slightly, this is still a very positive outcome for Keppel and its shareholders,&rdquo said Keppel&rsquo s chief executive officer Loh Chin Hua.

 

For one, Keppel shareholders will receive approximately 19.1 Sembmarine shares, with an implied value of S$2.331 for every Keppel share held. This will be higher than the earlier indicated amount of 18.5 separate combined entity shares, with an implied value of S$2.263 for every Keppel share held. 

 

Due to the volatile and uncertain environment, getting the deal completed as soon as possible was a major consideration behind the changes.

 

Sembmarine said in its filing: &ldquo The parties believe that it is critical for the proposed combination to be completed as soon as possible, so that the benefits of an enlarged entity can be realised sooner. Besides the expected synergies, an enlarged Sembcorp Marine will be in a better position to deal with the above challenges and compete against the global competition.&rdquo

 

Both companies are targeting to complete the proposed combination by the end of this year subject to the relevant regulatory approvals.

 

They both said that the transaction is now simplified, as it eliminates the requirement for a separate combined entity to be interposed as the listed entity holding both Keppel O& M and Sembmarine.

 

This means that the new terms would only require majority approval by Keppel shareholders and Sembmarine shareholders, and court approval will no longer be required. The transfer of the listing status from Sembmarine to the combined entity will also no longer be required. 

 

Sembmarine said the reduced transaction complexity and third-party consent requirements could cut the completion time by up to two months.