Fundraising for the flagship Keppel Sustainable Urban Renewal Fund saw good traction and the Company is working towards the first closing soon. Pictured: Keppel South Central, one of several buildings undergoing sustainable urban renewal by Keppel’s Real Estate Division.
Stronger 3Q & 9M performance
In its voluntary business update, Keppel Corporation reported that its net profit from continuing operations for 9M 2023 grew year-on-year (yoy), bolstered by stronger performance from the Infrastructure and Connectivity segments. Net profit for 3Q 2023 was also stronger yoy, with all three horizontal segments — Infrastructure, Real Estate and Connectivity — registering improvements.
The Infrastructure Division continued to record strong earnings growth in 3Q and 9M 2023 underpinned by its robust integrated power business. As at end-September 2023, 100% of Keppel’s customers were locked in with fixed or indexed electricity price plans for the next two years. In 9M 2023, the Infrastructure Division secured more than $1.3 billion of new Energy-as-a-Service (EaaS) contracts, bringing Keppel’s long-term supply & services contract backlog to $4.1 billion with earnings visibility over 10-15 years.
The Company’s revenue from continuing operations was $5,274 million for 9M 2023, up 5% from $5,016 million in 9M 2022, with higher contributions from the Infrastructure and Connectivity segments.
In the first 10 months of this year, Keppel announced the monetisation of some $865 million of assets, including the $323 million[1] dividend in specie of Keppel REIT units, which was approved by Keppel Corporation shareholders at the extraordinary general meeting on 18 October 2023. Significantly, Keppel has announced $5.3 billion in monetisation since the start of the programme in October 2020, outperforming its $3-$5 billion asset monetisation target ahead of the end-2023 deadline. The Company is now working towards its next target of achieving a cumulative $10-$12 billion in asset monetisation by the end of 2026.
Net gearing increased slightly to 0.89x as at end-September 2023 from 0.86x as at end-June 2023, mainly due to the payment of interim dividends. Keppel continued to strengthen its business resilience amid a high interest rate environment; as at end-September 2023, about 61% of Keppel’s borrowings were on fixed rates, with an average interest cost of 3.71%[2] and a weighted tenor of about 3 years.
Mr Loh Chin Hua, CEO of Keppel Corporation, said, “Keppel has made strong progress executing our transformation plans and continued to deliver superior value to our investors. We have announced about $5.3 billion in asset monetisation to date, exceeding our target of $3-$5 billion ahead of schedule. Even excluding the gains from the divestment of our offshore and marine business, our continuing operations delivered strong performance, which bodes well for Keppel as we press forward with our asset-light strategy to grow recurring income.
“Amidst the volatile environment, we will continue to pursue our growth trajectory as a global asset manager and operator with deep capabilities in infrastructure, real estate and connectivity. Yesterday, our shareholders approved the Company’s name change to “Keppel Ltd.”, with effect from 1 January 2024, reinforcing our efforts to shed Keppel’s conglomerate structure to become one integrated company.”
In the first nine months of 2023, Keppel generated $178 million[3] in asset management fees. Despite the challenging environment, Keppel’s private funds and listed trusts raised about $1.0 billion in equity in 9M 2023. They also made total acquisitions of about $1.7 billion in 9M 2023, of which about $600 million were in 3Q 2023. About $500 million in divestments were completed in 9M 2023.
The Company also reported increased fund activity across all three of its segments over the past few months. In the Infrastructure segment, Keppel’s new flagship fund Keppel Core Infrastructure Fund achieved its first close of U$575 million ($783 million), out of its initial target size of U$2.5 billion ($3.4 billion). Keppel also strengthened its presence in private credit, acquiring the remaining 50% interest in Pierfront Capital Fund Management Pte. Ltd., which offers bespoke private credit financing solutions in real asset sectors.
In the Real Estate segment, the Keppel Education Asset Fund expanded its footprint into Australia, with the acquisition of two education assets in Sydney for approximately A$198 million ($175 million). In South Korea, Keppel’s private funds acquired Citibank Center Korea and the Bank of Korea's Sogong Annex Facility in Seoul. Meanwhile, fundraising for the flagship Keppel Sustainable Urban Renewal (SUR) Fund saw good traction and the Company is working towards the first closing soon. The Company has also secured initial equity commitments of RMB 1.6 billion ($300 million) for its China-focused SUR programme, which can potentially have assets under management of about RMB 3.9 billion ($728 million) when fully leveraged and invested.
In the Connectivity segment, Keppel secured co-investors to acquire a 60% stake in Keppel’s share of the Bifrost Cable System, which is expected to be ready for service in 2024.
Looking ahead, Keppel expects fund management and investment momentum to increase, with more than five new funds in the process of fundraising and being planned for launch in the next two years, and a deal flow pipeline of more than $13.0 billion.
Read more about Keppel’s 3Q & 9M 2023 business update here:
[1] Based on the last traded price of Keppel REIT units on the SGX-ST on 26 July 2023 of S$0.915; the final value of the dividend in specie will be based on the price of Keppel REIT units on the completion date on or about 7 November 2023.
[2] For reference, the 3-year Singapore SORA-OIS rate was 3.52% as at end-September 2023.
[3] Includes 100% fees from subsidiary managers, joint ventures and associated entities, as well as share of fees based on shareholding stake in associate with which Keppel has strategic alliance.