COVID-19 caused considerable human suffering and disruption to the global economy. But it also engendered fast and furious experimentation the world over, giving rise to new ways of working and new business models. Keppel was fortunate to have embarked on our digitalisation journey a few years ago, which allowed us to transit quickly to working from home, or from almost anywhere.

In May 2020, despite the pandemic, we unveiled Vision 2030, our long-term roadmap to grow and transform Keppel into an integrated business providing solutions for sustainable urbanisation. We will focus on four key areas, namely Energy & Environment, Urban Development, Connectivity and Asset Management, all part of connected value chain, while putting sustainability at the core of our strategy.

The macrotrends that Vision 2030 seeks to address, such as rapid urbanisation, the energy transition, climate change, digitalisation and super liquidity, were identified pre-COVID-19 but remain highly relevant today. If anything, some of these trends have been further accelerated by the pandemic, and we have to act quickly and decisively to transform and seize opportunities.

With a sharpened business focus and an asset-light model, we will take a disciplined approach to capital allocation, and proactively unlock capital that can be recycled into growth opportunities. As part of our Vision, we have identified a group of assets with a carrying value of $17.5 billion that can potentially be monetised over time. These assets do not include our key business platforms or fixed assets such as the yards that we operate, nor do they include some of the units that we hold in the REITs and business trust to align interests with their Unitholders.

We have set ourselves the target to monetise about $3–5 billion of this substantial asset pool over the next three years, which will provide the balance sheet space for us to invest in the many exciting growth opportunities we have identified across our business lines.

It is true that the logistics business has been a beneficiary of the COVID-19 pandemic. We have seen strong growth in the demand for urban logistics and channel management. The decision to divest, however, is in line with the more focused and disciplined approach towards capital allocation which we have committed to as part of Vision 2030.

We believe we have a good logistics business, but it is currently subscale. While it is possible for us to invest more capital and grow the business over the long term, we believe that a third party may be able to provide a better eco-system to scale up the business. Thus far, we have received strong interest from potential buyers. We are currently evaluating the bids and have shortlisted a few parties for deeper engagement. We are keeping our options open and may decide either to divest our logistics business completely or continue holding a minority stake.

We believe that our shareholders, as well as investors of our private funds, appreciate companies like Keppel, who embrace sustainable practices, and can also provide innovative solutions that contribute to a greener and better world. We are also seeing growing interest from other stakeholder groups, including governments and customers, to work with us on different infrastructure and urban development projects that contribute to a more sustainable future.

We are applying the lens of sustainability to the Group’s major investment decisions. With the risks and impact of climate change becoming more evident, we have introduced a shadow carbon price in the evaluation of all major investments. This would help us better understand the carbon footprint of our business activities, and the possible impact of future carbon taxes, and also avoid potential future stranded assets.

Over and above running our business in a sustainable and environmentally responsible manner, we see Keppel playing a significant role in helping businesses and communities become more sustainable through the solutions that we provide. Beyond the solutions that Keppel is already well-known for, such as waste-to-energy (WTE) and water solutions, district cooling plants, green buildings and townships, we are pushing boundaries to explore and develop new solutions that can contribute to combatting climate change, while also opening up new profit pools for the Group.

Under the auspices of the National Research Foundation, Keppel Data Centres Holding (KDCH) joined hands with several industry leaders to develop the first end-to-end decarbonisation process in Singapore that can help reduce carbon intensity across key sectors such as energy, chemicals and construction. Such carbon capture, utilisation and sequestration technologies can potentially be implemented in KDCH’s own operations, as well as various parts of Keppel to create cleaner products and solutions that help to advance climate action and the circular economy. In the same vein, we are exploring floating data centre technologies as well as other innovative solutions including a cold energy harnessing facility and a hydrogen powered tri-generation plant to reduce the carbon footprint of data centres.

We are also advancing our presence in the renewables space as a developer, owner and operator of renewable energy infrastructure. In December 2020, Keppel Renewable Energy announced the development of a large-scale, greenfield solar farm in Queensland, Australia. To be completed in 2023, the 500MW solar farm will be connected to the national energy market for consumers and also businesses seeking sustainable energy solutions, including Keppel-related companies in Australia. We have announced a target to expand the Group’s portfolio of renewable energy assets to 7GW by 2030.

Collectively, our expertise in green data centre technologies and ability to tap renewable energy puts Keppel in a good position as we work with the authorities in Singapore and other countries to develop new low carbon data centres, as well as with our customers who are increasingly focused on sustainability. What I have shared are just a few examples of the many exciting opportunities that we see in various parts of our business. There would be even more growth opportunities, new profit pools and synergy unleashed as we link up our varied offerings and solutions across an integrated value chain as OneKeppel.

Of the approximately $17.5 billion of monetisable assets that we have identified across the Group, about 30% or $5.3 billion comprises our quality residential landbank and residential development projects that are held at cost.

The strategy of activating our sizeable landbank has served us well. For the whole of 2020, Keppel Land announced asset divestments of about $1.3 billion. This includes four residential projects across China and Vietnam, which are equivalent to about 8,200 units sold en-bloc, over and above the 3,340 homes that Keppel Land sold in the normal course of business during the year.

The progress in capital recycling also reflects the discipline we have instilled in the business to evaluate and turn our assets regularly. We have shared earlier that Keppel Land’s revalued net asset value (RNAV) was $10.3 billion at the end of 2018. This was approximately $5.68 per share of Keppel Corporation, which represents a good premium compared to its book value of about $4.49 per share then. The RNAV of Keppel Land had edged up further in our last internal evaluation in early-2020. In many Asian cities where land prices have risen significantly, we are well-placed to realise the true value of our assets by divesting some of our land parcels or projects, while working with like-minded partners to co-develop others.

From time to time, we may still acquire land plots, but only when it makes sense. Through Keppel Urban Solutions (KUS), we will also be seeking opportunities as a horizontal master developer for integrated townships. KUS will work with other technology and solutions providers to create new smart districts, towns and cities. Keppel Land can develop some of the plots vertically into homes, offices and commercial spaces. In a sense, creating developable land from large tracts of raw land, by leveraging the Group’s capabilities in energy, environmental engineering, urban development and connectivity, will ultimately provide better margins. KUS can also bring in other property developers to provide more diversity in the design and construction of the cityscape. We will also stay nimble, and focus on acquiring new capabilities and business models, such as in co-living and co-working, to address the new opportunities ahead, including the evolution of real estate as a service.

As the world becomes more digitalised and connected, the demand for data centres will continue to grow rapidly. Our data centre business has been a foremost example of the potential and multiplier effect that our various business units have when they collaborate with one another to create better, smarter solutions.

KDCH, together with the private data centre funds under Keppel Capital and also Keppel DC REIT, generated total earnings of about $598 million, on average shareholders’ funds of about $382 million since 2014. This does not include the approximately $541 million premium over the carrying value of Keppel’s stake in Keppel DC REIT as at 31 December 2020.

Alpha Data Centre Fund (Alpha DC Fund), a collaboration between KDCH and Keppel Capital, has grown its portfolio to have over 1.38 million square feet of gross floor area in key economic centres across Asia Pacific and Europe. During the year, Alpha DC Fund announced that it was investing about RMB1.5 billion for a greenfield data centre development in Huizhou, Guangdong Province. This marked Keppel’s first data centre development in mainland China.

Following the success of Alpha DC Fund, we have launched the US$1 billion Keppel Data Centre Fund II (KDC Fund II) and raised more than US$500 million as at December 2020. KDC Fund II will focus on making strategic investments in fast-growing cities across Asia Pacific and Europe, widening our presence in these markets.

As we expand our data centre business in collaboration with third-party investors, we will continue to draw on our engineering nous as well as the Group’s diverse capabilities to create greener solutions and better assets that will be valued by our customers and investors.

Our Asset Management business serves as a financial twin to our other segments, providing funding and opportunities for monetisation once a solution is commercialised, de-risked and cashflow generative. In FY 2020, our Asset Management business was the second largest contributor to the Group (after Urban Development), with a net profit of $280 million for FY 2020, which included a mark-to-market gain of $131 million from the reclassification of the Group’s interest in Keppel Infrastructure Trust from an associated company to an investment.

2020 was a prolific year for Keppel Capital, which launched a series of new private fund initiatives across data centres, education, infrastructure, logistics, mezzanine debt and real estate, and raised total equity of about $4.5 billion from global institutional investors. While COVID-19 imposed restrictions on travel, Keppel Capital was able to leverage its strong network and overseas offices to continue engaging investors. During the year, Keppel Capital completed over $7 billion worth of acquisitions and divestments and saw a healthy increase in asset management fees. By end-2020, Keppel Capital’s assets under management had risen to $37 billion, a 12% growth over $33 billion in the year before.

These achievements not only reflect strong demand from investors for assets with long-term sustainable cashflow, but also their desire to work with Keppel Capital, which is part of the larger Keppel Group and eco-system. The Group’s capabilities in creating and operating real assets are an attractive proposition for the investors of Keppel Capital’s funds. Another added advantage that Keppel has is our established platform consisting of listed REITs and a business trust that can help to monetise these assets when they have been de-risked and are cashflow generating.

Keppel, as co-investor and sponsor in these private funds and listed vehicles, has also benefitted from this virtuous cycle of value creation. In FY 2020, our stakes in the various private funds and listed trusts yielded $195 million in net contributions to the Group. In addition, the private funds, such as KAIF and KDC Fund II, enable us to scale our business by tapping third‑party funds while reducing the burden on our balance sheet. And as we continue to provide services, such as development, operation and maintenance or asset management, these various sources of fees will give us multiple bites of the cherry and contribute towards growing the Group’s recurring income.

To achieve Vision 2030, we need to have the right people, with the right mindsets and skillsets, who are agile and ever-ready to learn and adapt in this fast-changing world.

I am heartened to see that despite the challenging external environment, we continue to have a high employee engagement score of 87%; higher than Mercer’s global average of 80%. In the same survey, more than 90% of Keppelites indicated that they were motivated to do more than what was required to help the Company succeed.

We are committed to leadership development and succession planning, which are pivotal to the long-term success of any company. We have announced leadership renewal in several key business units, which took effect from 15 February 2021. These next generation leaders were personally involved in formulating Vision 2030 and will work together with the rest of the Group in pursuit of our common vision.

In 2020, we were honoured to be named again by Forbes as one of the World’s Best Employers. We will continue to invest in training and developing our employees, to allow them to reach their full potential.

Despite the impact of COVID-19, I am cautiously optimistic about the future. We will continue to build on our strengths, harness technology and promote collaboration as OneKeppel, as we work towards the achievement of Vision 2030.