Keppel Corporation Limited has rolled out what it described as “the next steps in its roadmap,” which could include new departures, monetising assets, and changes at its longstanding offshore and marine business.
Keppel O&M is a well-known builder of offshore rigs and offshore vessels with facilities in several countries, but like many yards has been hard hit by the sharp reduction in demand since the oil price fell and Covid-19 adversely affected oil companies’ plans. It has however established a foothold in the offshore wind sector and has been contracted to build platforms such as offshore substations.
Keppel Corporation chairman Dr Lee Boon Yang said of the plan: “The board and management are committed to drive Vision 2030 and realising Keppel’s full potential as an integrated business, providing solutions for sustainable urbanisation.
“We have identified attractive opportunities in each of our focus areas of Energy & Environment, Urban Development, Connectivity and Asset Management… and are mobilising to capture these opportunities and continuing our efforts to operationalise our integrated business model.
“With a sharpened business focus and an asset-light model, we are taking a disciplined approach to capital allocation, to allocate more capital to our growth platforms and unlock value from more integration and synergies within the group, while continuing to recycle capital to enhance the group’s overall return.”
Keppel said it regularly reviews its portfolio of assets and as part of its asset-light business model, and the company has identified assets with a total carrying value of approximately S$17.5Bn based on the group’s balance sheet as at 30 June 2020 “that can potentially be monetised over time and channelled towards growth initiatives.”
These include the group’s landbank, development projects, investment properties, assets being developed and stabilised for monetisation through Keppel-managed or third-party platforms, various funds and investments, “as well as non-core assets such as Keppel Offshore & Marine’s (Keppel O&M) oil rigs.”
They do not include Keppel’s key business platforms, fixed assets such as Keppel O&M’s yards, or some of the units that the group holds in real estate or other investment trusts where holding of these units aligns Keppel’s interest as the investment managers, with that of the unitholders.
However, the company went on to say that, “concurrently, the company will commence a strategic review of its offshore and marine business amid the sector’s challenging environment, exploring both organic and inorganic options.”
Keppel said organic options include reviewing the strategy and business model of Keppel O&M, assessing its current capacity and global network of yards and restructuring to seek opportunities as a developer of renewable energy assets. The company said inorganic options would range from strategic mergers to disposal.
At a briefing, Keppel Corporation chief executive Loh Chin Hua said: “Keppel is well-placed to weather the challenging environment and chart our growth path. As we execute our long-term plans and build growth engines for the future, we will also seek to realise the group’s current potential by unlocking about S$3-5Bn of our monetisable assets over the next three years, which will be redeployed to seize new opportunities and improve returns.”
The company’s chief executive said growth initiatives included renewable energy, but said the company “will also need to review its business portfolio from time to time,” hence the decision to conduct a strategic review of the offshore and marine business.
In 2019, the Keppel O&M secured its first renewable energy contract since 2010 when it was awarded a contract for the DolWin 5 converter stations, in partnership with Aibel.
A consortium comprising Keppel O&M subsidiary Keppel FELS Limited and Aibel secured the contract from TenneT.
More recently, Keppel O&M’s subsidiary Keppel FELS also secured a contract from Ørsted for two offshore substations for the Greater Changhua offshore projects in Taiwan.