Keppel continues to proactively expand in the areas of renewables, clean energy, decarbonisation and environmental solutions. From July to August 2022, Keppel announced about S$2.4 billion^[1] worth of energy & environment related investments jointly undertaken with its managed funds and business trust, harnessing the synergies of Keppel’s eco-system and business networks to scale up in its focus areas. Keppelite brings you highlights of these deals.

Wind energy in Europe

Keppel Corporation and Keppel Infrastructure Trust (KIT)^[2] are jointly investing €305.0 million (approximately $445.3 million) to acquire a 50.01% stake in a special purpose vehicle (SPV)^[3] that holds 50% of Borkum Riffgrund 2 (BKR2), an offshore wind farm in Germany. The remaining 49.99% stake in the SPV will be retained by Gulf Energy Development Public Company Limited (Gulf), one of Thailand’s largest private power producers. Ørsted, the world’s leader in offshore wind power owns the remaining 50% stake in BKR2.

This follows another joint initiative between Keppel Corporation and KIT to invest $234 million in onshore wind assets with a capacity of 258MW across Norway, Sweden and the United Kingdom, announced earlier in July.

Located 59km off the coast of Lower Saxony in the North Sea, Germany in an area with high wind availability, BKR2 has an operating capacity of approximately 465MW.

BKR2 has an attractive Feed-in-Tariff and guaranteed floor price till 2038, providing strong cash flow visibility for the project. The project also holds a 20-year power purchase agreement and a 20-year operations and maintenance agreement (OMA), until 2038, with Ørsted. The long-term OMA has a largely fixed operational cost base which provides significant cost certainty and cash flow visibility.

The transaction will also contribute to KIT’s target of increasing exposure to renewable energy assets by up to 25% of equity-adjusted assets under management (AUM) by 2030, increasing KIT’s exposure from 4% to 11%^[4].

Mr Loh Chin Hua, CEO of Keppel Corporation, said, “The demand for renewable energy is expected to intensify as the world journeys towards its net zero goal. We are pleased to strengthen our partnership with best-in-class partners such as Gulf and Ørsted through this transaction, and look forward to future collaboration opportunities. This transaction is aligned with Keppel’s Vision 2030, which see renewables, clean energy and decarbonisation solutions playing increasingly integral roles as we make sustainability our business. It also demonstrates how we can harness the Group’s eco-system and business networks to source for and capture opportunities to scale up in our focus areas and grow recurring income.”

Mr Jopy Chiang, CEO of KIFM, said, “This transaction marks KIT’s first investment in the offshore wind sector, and our second investment in the European renewable energy market, further reinforcing our strategy to grow our Energy Transition segment and almost tripling KIT’s renewable energy portfolio to over 700 MW. Underpinned by favourable tailwinds such as energy security, electrification and higher projected demand for green energy in the future, this investment underscores the global acceleration towards decarbonization and net-zero. The Trust will continue to make inroads to capture more opportunities in the renewable energy sector, in support of our ESG target.”

Waste management in Asia

According to the World Bank, global waste generation is growing from 2.24 billion tonnes in 2020 to nearly 3.88 billion tonnes by 2050. As a developer and operator of Waste-to-Energy (WTE) plants with a suite of solid waste management solutions, Keppel recently acquired two waste management and treatment companies in line with Keppel’s Vision 2030 to provide solutions for sustainable urbanisation.

South Korea

Keppel Infrastructure Trust (KIT), Keppel Asia Infrastructure Fund LP (KAIF) and Keppel Infrastructure, have jointly acquired a 100% stake in South Korean waste management company, Eco Management Korea Holdings (EMK) for KRW 626.1 billion (approximately $666.1 million). KIT holds a 52% interest in the special purpose vehicle created for the transaction, while KAIF and Keppel Infrastructure hold a 30% and 18% interest respectively.

EMK is a leading integrated waste management services player in South Korea, serving the national market. Operating six waste-to-energy (WTE) plants and five sludge drying facilities, EMK has the third largest incineration capacity (404 tonnes per day) in the nation. It is also the largest waste oil refiner (154 tonnes per day) in South Korea and manages and owns a landfill, which has the fourth largest capacity in the nation (1.5 million m³).

Mr Jopy Chiang, CEO of KIFM, said, “The acquisition of a majority stake in EMK is in line with KIT’s strategy of investing in good quality environmental businesses that generate long-term stable cash flows with the potential for growth, given the positive sectorial tailwinds for waste management in South Korea. The strategic addition of this waste management platform will enable KIT to grow its income base and improve portfolio resiliency with an evergreen business. In addition, the proposed acquisition will also diversify KIT’s income geographically, enhancing the resilience of our portfolio.”

Ms Christina Tan, CEO of Keppel Capital, the parent company of the manager of KAIF said, “We are pleased to tap on the Keppel Group’s collective strengths to acquire KAIF’s first environmental investment since the Fund’s launch in January 2020. We are confident that EMK, a company providing essential services, will deliver strong and sustainable returns to our investors.”

Ms Cindy Lim, CEO of Keppel Infrastructure, said, “Keppel Infrastructure’s co-investment with KIT and KAIF in EMK is a prime example of how we can collaborate and unlock value as OneKeppel to grow our sustainable infrastructure business using an asset-light model, in line with Keppel’s Vision 2030. We hope to not only leverage EMK’s scale, expertise and leadership position in South Korea to grow our environmental as well as energy-as-a-service business in the region, but also synergise with EMK, through Keppel Seghers’ leading WTE technology, to complement its growth in the South Korean market.”

Singapore

KAIF and Keppel Infrastructure have jointly acquired an 80% interest in a Singaporean environmental services company, 800 Super Holdings (800 Super). KAIF and Keppel Infrastructure hold 48% and 32% interest respectively in 800 Super. Mr William Lee, 800 Super’s co-founder and CEO, holds the remaining 20% interest in 800 Super and continues to be 800 Super’s CEO post investment by the Keppel consortium.

The total purchase consideration for the 100% interest in 800 Super is $380 million, of which the Keppel consortium has funded $304 million. 800 Super is a leading integrated environmental solutions provider in Singapore and has four main operating segments, waste management, waste treatment, integrated public cleaning and other environmental services. It is one of three licensed public waste collectors in Singapore, providing municipal waste collection services. 800 Super also provides waste removal and recycling services for commercial and industrial customers.

800 Super owns and operates an integrated waste treatment plant in Tuas, which is able to treat 568 tonnes of controlled waste per day, and a 2.88 MW biomass co-generation plant. It also owns and operates Singapore’s largest biomass fuel preparation facility, which is capable of processing 400 tonnes per day of processed horticulture and wood waste into compost and biomass feedstock.

Ms Cindy Lim, said, “The acquisition of a strategic interest in 800 Super complements and broadens the range of environmental services that Keppel Infrastructure offers. It will also create opportunities to synergise operations and enhance competitive advantages of the two companies. As demand for environmental services continues to rise in Singapore and the region, we look forward to working closely with the management of 800 Super to pursue more opportunities by leveraging our technological differentiators, deep technical know-how and operating performance track records.”

The Keppel consortium believes that 800 Super will be a strong addition to the Keppel Group. 800 Super is well positioned to realise its market potential by unlocking the latent capacity in its waste treatment segment to meet increasing demand in the sector. The transaction is in line with Keppel’s Vision 2030, which places sustainability at the core of the Company’s strategy and marks KAIF’s first investment in the Singapore environmental services sector.

“We are pleased to add another sterling asset to KAIF’s portfolio. 800 Super’s strong market position will enable it to capture more opportunities as Singapore intensifies its sustainable waste management efforts. We are confident that 800 Super will contribute to strong and sustainable returns for our investors,” Ms Christina Tan said.

Hydrogen-ready power plant in Singapore

Keppel Infrastructure, through its wholly owned subsidiary Keppel Energy, has reached final investment decision to develop a 600MW state-of-the-art, advanced combined cycle gas turbine (CCGT) power plant. To be built in Jurong Island, the Keppel Sakra Cogen Plant (KSCP) will be the first hydrogen-ready power plant in Singapore.

In line with Keppel’s asset-light business model, it is intended that Keppel Asia infrastructure Fund (KAIF) and Keppel Energy will hold 70% and 30% equity interests in Keppel Sakra Cogen Pte.Ltd. (KSC) respectively. KSC and Keppel Energy will enter into a turnkey contract for the development of the Plant, whose total investment value is expected to be around $750 million.

A consortium comprising Mitsubishi Power Asia Pacific and Jurong Engineering has been appointed to undertake the engineering, procurement and construction (EPC) of the Plant. A long-term service contract for major maintenance of the CCGT was also awarded to Mitsubishi Power Asia Pacific.

Running initially on natural gas as primary fuel, KSCP is also designed to operate on fuels with 30% hydrogen content and has the capability of shifting to run entirely on hydrogen. In addition, as a CCGT power plant, it will be able to produce steam, for use in industrial processes for the energy and chemicals customers on Jurong Island.

Expected to be completed in 1H 2026, KSCSP will be the most cutting-edge and energy efficient power plant in Singapore, which will translate into superior performance, such as lower emission intensity and higher operation flexibility. This advanced CCGT will be the most efficient among the operating fleet in Singapore and will be able to save up to 220,000 tonnes per year of CO₂ as compared to Singapore’s average operating efficiency for equivalent power generated. Such savings translate to an in CO₂ equivalent of translates to taking about 47,000 cars off the road per year.

Ms Cindy Lim said, “The 600MW Keppel Sakra Cogen Plant will be Singapore’s first hydrogen-ready and most advanced, high-efficiency combined cycle gas turbine power plant, placing Keppel Infrastructure at the forefront of the effort to decarbonise Singapore’s power sector. When completed, this asset will grow Keppel’s power generation portfolio from the current 1,300 MW to 1,900 MW, allowing us to capture a larger market share as the demand for reliable energy continues to rise with Singapore’s economic development.”

Running initially on natural gas as primary fuel, KSCP is also designed to operate on fuels with 30% hydrogen content and has the capability of shifting to run entirely on hydrogen. In addition, as a CCGT power plant, it will be able to produce steam, for use in industrial processes for the energy and chemicals customers on Jurong Island.

When completed in 1H 2026, KSCP will be the most cutting-edge and energy efficient power plant in Singapore, which is designed to provide superior performance, such as lower emission intensity and higher operation flexibility. This advanced CCGT will be the most efficient among the operating fleet in Singapore and will be able to save up to 220,000 tonnes per year of CO₂ as compared to Singapore’s average operating efficiency for equivalent power generated. The CO₂ savings translate to an equivalent of taking about 47,000 cars off the road per year.

Ms Christina Tan said, “The joint investment by Keppel Infrastructure and KAIF in the Keppel Sakra Cogen Plant reflects the Keppel Group’s asset-light business model as we seize opportunities in the energy transition. We believe that hydrogen, as a low-carbon fuel, will play a critical role in supporting Singapore’s commitment to decarbonise its power sector. Keppel Capital will continue to leverage the synergies of the Keppel Group to identify and invest in such future-ready projects to create value for our investors.”

In addition to the contracts awarded for KSCP, Keppel New Energy, Keppel Infrastructure’s New Energy Division, also signed a Memorandum of Understanding (MOU) with Mitsubishi Heavy Industries, Ltd. to carry out a feasibility study on the development of a 100% ammonia-fuelled power plant on a selected site in Singapore. This MOU seeks to address the energy trilemma and contribute to building a more resilient and sustainable energy sector in Singapore and the region. The signing of the contracts and MOU was witnessed by Dr Tan See Leng, Minister for Manpower & Second Minister for Trade and Industry on 30 August 2022.

^[1] As at 21 September 2022.

^[2] Through its Trustee-Manager, Keppel Infrastructure Fund Management Pte Ltd (KIFM).

^[3] The SPV is currently wholly owned by Gulf International Holding, a subsidiary of Gulf Energy Development Public Company Limited (Gulf).

^[4] Based on KIT’s pro-forma assets under management.