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Report to Shareholders 2006
grow
beyond...
numbers.
More than delivering strong financial numbers,
we are strengthening the sustainable growth
platforms of our key businesses to further
increase shareholder value.
Keppel Corporation Limited
(Incorporated in the Republic of Singapore)
1 HarbourFront Avenue
#18-01 Keppel Bay Tower
Singapore 098632
Tel: (65) 6270 6666
Fax: (65) 6413 6391
Email: keppelgroup@kepcorp.com
www.kepcorp.com
Co Reg No: 196800351N
Contents
1
2
10
28
29
30
32
34
38
40
42
64
66
68
76
90
96
97
98
100
110
116
124
130
138
Group financial highlights
Chairman’s statement
Grow beyond
Keppel Corporation at a glance
Group strategic directions
Group at a glance
Keppel around the world
Board of Directors
Keppel Group Boards of Directors
Senior management
Corporate governance
Investor relations
Awards and accolades
Special feature – Nurturing a safety culture
Special feature – Advancing technology,
growing innovation
Special feature – Keppel Bay
Operating and financial review
– Group structure
– Management discussion and analysis
– Offshore & Marine
– Property
– Infrastructure
– Investments
– Financial review and outlook
– Operations sustainability
144
148
153
154
158
159
160
163
164
165
204
213
214
215
216
Nurturing people
Corporate social responsibility
Directors’ report & financial statements
– Directors’ report
– Balance sheets
– Consolidated profit and loss account
– Statements of changes in equity
– Consolidated cashflow statement
– Notes to consolidated cashflow statement
– Notes to the financial statements
– Significant subsidiaries and
associated companies
– Statement by directors
– Independent auditors’ report
Interested person transactions
Directors and key executives
225 Major properties
228
231
232
233
234
237
238
Group five-year performance
Group value-added statements
Share performance
Shareholding statistics
Notice of annual general meeting/closure of books
Financial calendar
Corporate information
We leverage our core
competencies, form
value-enhancing
partnerships, develop
intellectual capital,
nurture our global
workforce and enhance
execution excellence to
realise the maximum
potential of our
key businesses.
Group financial highlights
In 2006, we achieved new highs
in our performance indicators
as we continued to increase
shareholder value.
Earnings per share
cents
2005
2006
72.1
95.4
Return on equity
%
2005
2006
16.4
19.1
Distribution per share
cents
2005
2006
46.0
56.0
Total Shareholder Return
%
2005
2006
32.5
65.3
For the year ($ million)
Revenue
Profit*
EBITDA
Operating
Before tax
Attributable
Operating cashflow
Free cashflow
Economic Value Added (EVA)
Per share
Earnings* (cents)
Before tax
Attributable
Net assets ($)
Net tangible assets ($)
At year-end ($ million)
Shareholders’ funds
Minority interests
Capital employed
Net borrowings
Net gearing (times)
2006
2005 % change
7,60
5,688
+34
93
804
,39
75
,854
,480
423
599
467
826
564
1,559
694
199
+55
+72
+38
+33
+19
+113
+113
23.
95.4
5.34
5.7
87.8
72.1
4.65
4.47
4,205
,393
5,598
,339
0.24
3,646
1,289
4,935
2,320
0.47
+40
+32
+15
+16
+15
+8
+13
- 42
- 49
Return on shareholders’ funds (%)
Profit before tax*
Attributable profit*
24.7
9.
20.0
16.4
+24
+16
Shareholders’ value
Distribution (cents per share)
Interim dividend (gross)
Final dividend (gross)
Capital distribution (net)
Total distribution
Share price ($)
Total Shareholder Return (%)
*Before exceptional items
2.0
6.0
28.0
56.0
7.60
65.3
10.0
13.0
23.0
46.0
11.00
32.5
+20
+23
+22
+22
+60
+101
Q
2Q
2006
3Q
4Q
Total
1Q
2Q
Group quarterly results ($ million)
Revenue
EBITDA
Operating profit
Profit before tax
Attributable profit
Earnings per share (cents)
,544
207
76
255
70
2.6
,646
27
85
332
96
24.9
,969
249
28
277
20
25.6
2,442
258
225
275
84
23.3
7,60
93
804
,39
75
95.4
1,133
159
128
204
144
18.4
1,162
153
127
201
133
17.1
2005
3Q
1,637
147
120
200
141
17.9
4Q
Total
1,756
140
92
221
146
18.7
5,688
599
467
826
564
72.1
Group financial highlights
Keppel Corporation Limited
Report to Shareholders 2006
Chairman’s statement
We shall continue with our strategic
initiatives to sustain the Group’s
earnings growth. Our relatively
strong balance sheet will enable us
to further broaden our earnings base
going forward.
2
Chairman’s statement
Keppel Corporation Limited
Report to Shareholders 2006
Dear Shareholders,
2006 marked another outstanding year for the Keppel Group.
We achieved a new record Profit after Tax and Minority
Interests (PATMI) of $751 million, an increase of 33% over
2005. Earnings per share (EPS) grew by 32% to 95.4 cents
which is also the highest ever achieved. This brings the
compounded annual growth rate of our EPS to 22.3% over
the past six years. Our businesses generated strong free
cashflows of $1.5 billion in 2006. This halved the Group’s
gearing to 0.24x. At the same time, both our Return on
Equity (ROE) and Economic Value Added (EVA) increased
significantly. ROE rose to 19.1% from 16.4% in 2005, whilst
EVA more than doubled to $423 million.
The Board has recommended a final cash dividend of 16
cents per share and a capital distribution of 28 cents per
share, bringing the total distribution to shareholders for 2006
to 56 cents per share. The final dividend, subject to
shareholders’ approval at the Annual General Meeting
scheduled on 27 April 2007, is proposed to be paid on
15 May 2007. The payout represents 53% of PATMI for 2006.
Over the period from 2000 to 2006, we have distributed over
$2 billion to our shareholders amounting to 66% of PATMI
earned during the period. The Total Shareholder Return (TSR)
last year was 65%. The Board has also proposed a sub-
division of each share into two shares, subject to approval by
shareholders and the Singapore Exchange.
I am pleased to report that during the year we have further
strengthened the growth platforms in our various businesses,
and have already seen some encouraging initial payoffs from
our Property and Infrastructure businesses. Against the
backdrop of this sterling performance, we shall continue with
our strategic initiatives to sustain the Group’s earnings
growth. Our relatively strong balance sheet will enable us to
further broaden our earnings base going forward.
visibility has been further extended with deliveries stretching
into 2010. It secured 36% of the 28 new jackup orders,
confirming its market leadership in jackup drilling rigs.
Last year, the market also placed orders for 18 new
semisubmersibles, an increase of 50% over 2005.
Keppel O&M’s strategy of capacity allocation during the year
to capitalise on the anticipated strong demand for deepwater
semisubmersibles yielded good results. It successfully
captured some 28% share of the global semisubmersible
market, winning all the semisubmersible orders placed by
US drillers.
Overall, the orders we received underscored our extensive
reach and long-standing relationship with many of our
customers. In 2006, US drillers formed one-third of the
number of rig orders we clinched but European customers
have become an increasingly important part of our customer
base whilst India is a fast growing market for us. Last year,
we won four jackup orders from the Indian market. This
formed two-thirds of that market. We were also awarded
contracts by our Russian customers to build a specialised Ice-
Class FSO and Ice-Class AHTS, and two icebreaker vessels.
Amidst a global phenomenon of tight shipyard capacity and
labour resources as well as drilling equipment, delays and
cost overruns are a very real execution risk. At Keppel O&M,
our operational excellence during the year was underpinned
by the delivery of 26 newbuilds and conversions, all delivered
to our customers on time or ahead of time and within budget
and in accordance with specifications to meet our customers’
needs. In addition to our strong project management skills
honed through decades of experience as a rigbuilder, owning
our proprietary designs provides us flexibility and control
during construction and commissioning. Indeed, six of the ten
jackups that were delivered worldwide were based on the
KFELS B Class and Super B Class designs.
Offshore & Marine
Keppel O&M’s outstanding performance
Keppel Offshore & Marine (Keppel O&M) had another good
year in 2006. It secured record orders of $7.3 billion compared
to $6.5 billion the previous year. This, supplemented by
variation orders, led to its net orderbook growing by a
creditable 46% to $10.5 billion as at end-2006. Earnings
We also continued to scale up the capabilities of our global
network of yard facilities. Following the upgrading of our
yards in the Philippines in 2005 to take on offshore and more
complex jobs, our Batangas yard has, in December 2006,
successfully delivered its first offshore project – construction
of the lower pontoon of a semisubmersible for ENSCO –
with more underway. Similarly, our Kazakhstan facility built
Chairman’s statement
Keppel Corporation Limited
Report to Shareholders 2006
3
Chairman’s statement
We have made good progress
in driving our growth initiatives
across the spectrum of our
businesses. The Group’s earnings
will steadily become more broad-
based over the next few years,
with growing contributions from
the Property and Infrastructure
divisions as we extend our
overseas reach and strengthen
our competitiveness.
EPS
cents
2002
2003
2004
2005
2006
EVA
$ million
46.3
51.0
59.9
72.1
95.4
(295)
(125)
2002
2003
2004 35
2005
2006
199
423
and delivered its first offshore vessel. Keppel Verolme in the
Netherlands, jointly with sister yards, Keppel FELS and
Keppel Shipyard, is also upgrading another semisubmersible
for US$177 million.
We also continue to identify strategic acquisitions to add to
our global network of 17 yard facilities. During the year, an
MOU was signed with Qatar Gas Transport Company to
develop and operate a new shipyard in Ras Laffan, Qatar.
This will provide us with a strategic foothold in the Middle
East market and deepen the existing relationship which
Keppel Shipyard has with the Qatar Gas companies.
Meanwhile, our new Nantong shipyard in China, which
commenced operation in early 2006, has 13 vessels
under construction, of which most are offshore support
vessels. Last year, apart from leasing a site near our Shipyard
Road facility in Singapore, we also set up a joint venture
fabrication facility in Bintan to support our offshore work.
Our relentless focus on innovation has spurred us to look
beyond traditional boundaries and markets. Exploration &
Production (E&P) activities are evolving towards more
challenging frontiers. On this, I am pleased that our R&D
efforts have achieved some early success. Since its launch
late last year, we have received two orders for the new
KFELS N Class jackup. Worth US$371 million and US$392
million each, they are the largest jackup rigs to be built in
Singapore and among the world’s largest jackups to be
constructed for the North Sea. Designed to operate in harsh
environments, they are also capable of undertaking drilling
and production concurrently in marginal fields. The KFELS N
Class followed the success of our KFELS Super B Class
jackup, which caters to the demands of drilling in deeper
depths at high temperature and pressure. We also
introduced our new Ice-Class FSO and ice-breaking vessels.
Designed to meet operating demands in harsh environments
such as the Caspian Sea and Arctic Circle, our ice-breaking
vessels are ‘firsts’ for an Asian yard. Another notable
achievement is our 140 million contract to build a floating
heavy lifter, an innovative first-in-the-world lifter providing a
robust, safe and cost-efficient solution to decommission
offshore structures. This marks our entry into the
decommissioning market in maturing fields such as
those in the North Sea.
4
Chairman’s statement
Keppel Corporation Limited
Report to Shareholders 2006
As the largest LNG shiprepair yard in Asia outside Japan,
we are poised to tap the sharp growth in the LNG carrier fleet.
Apart from undertaking the first-of-its-kind conversion of a
LNG carrier into a floating LNG storage and re-gasification
unit, we have also clinched a service agreement for
dry docking and retrofitting of LNG carriers chartered by
Qatar Liquefied Gas Company. The proposed development
of an LNG import terminal in Singapore by 2012 should
potentially present more opportunities for our shipyards.
As exploration progresses into production and development,
increased demand for production facilities is expected.
Through FloaTEC, our joint venture with J Ray McDermott,
with its offering of a suite of production semisubmersibles,
spars and tension leg platforms, and our floating production
and storage solutions, we are well placed to capitalise on this
favourable trend.
Oil & Gas
Making steady progress upstream
Our 45%-owned associate, Singapore Petroleum Company
(SPC) has had an active year in growing their upstream
business. It made further investments in upstream assets
as well as commenced several drillings and appraisals of
those prospects acquired previously.
During the year, SPC acquired a 45% participating interest in
an exploration prospect in the Song Hong Basin, offshore
Vietnam, and expanded its interest to 33% in another
exploration prospect in offshore Cambodia. Recently, it
acquired a 35% interest in an exploration prospect in the
Australian Bass Basin, its first such venture in offshore
Australia and a strategic move outside of its existing
Southeast Asian footprint.
As a result of these efforts over the last two years, SPC
now owns a portfolio of six exploration and development
prospects in Indonesia, Vietnam, Cambodia and Australia.
Currently, the Kakap field in Indonesia is the only acreage in
SPC’s portfolio that is in the production phase, but this is
expected to be followed by the Oyong field coming into
production this year. SPC has also acquired a 4.7% stake in
Tap Oil, an E&P company, who is also our joint venture
partner in the Bass Basin prospect. Tap Oil has interests in
E&P assets in offshore Western Australia and New Zealand,
and a permit interest in the Philippines.
From solely an investor in oil & gas fields already in
production, SPC has steadily expanded its involvement in the
E&P value chain to acquire acreages and participate in
exploration and development.
Against the backdrop of healthy global economic growth and
tight refining capacity, refining margins in Asia should remain
reasonably robust, although from time to time, the refining
industry can be characteristically volatile. Additional refining
capacities would be entering the market, particularly from
2008 onwards and we will continue to monitor this and
execute our marketing strategies appropriately. On the other
hand, the sharp rise in construction costs of refineries has
prompted some greenfield refinery projects to be reviewed.
SPC will continue to scale up its upstream investments.
This is one of the key thrusts supporting SPC’s sustainable
growth platforms.
Property
Balanced growth on multiple fronts
The results of our efforts in the past five years to broaden
our property footprint in the emerging regional markets are
encouraging. Keppel Land’s regional operations in China,
India, Vietnam and Indonesia contributed 64% of its earnings
in 2006. To further extend our reach into second-tier cities in
niche segments, Keppel Land has increased its stake in
Evergro Properties which is now a 71%-owned subsidiary
with projects in Tianjin, Jiangyin and Changzhou.
Looking ahead, we can expect Keppel Land’s overseas and
Singapore engines to be firing strongly. With the robust
office and high-end residential sectors, the Singapore market
should become a strong contributor to Keppel Land’s growth
over the next few years.
In Singapore, we sold over 1,200 homes, more than double
that achieved in 2005. Our thrust into the luxury high-end
market in Singapore proved immensely successful. Marina
Bay Residences, a waterfront lifestyle icon in the heart of the
new financial precinct, achieved a record price of $3,450 psf
for a penthouse unit and an average price of about $1,950 psf.
Chairman’s statement
Keppel Corporation Limited
Report to Shareholders 2006
5
Chairman’s statement
I have earmarked R&D and
Corporate Social Responsibility
as our focus areas this year.
These will follow on our 2006
focus initiative of developing
our human capital at all levels
across the Group to support our
business plans.
We shall continue to establish our mark in the waterfront
residential market in Singapore, and aim to replicate our
Marina Bay Residences’ success with Reflections at
Keppel Bay, a premier waterfront lifestyle development
designed by acclaimed architect Daniel Libeskind. To be
launched in the near future, it will comprise 1,129 units of
luxurious homes in a stunning waterfront setting,
complemented with a world-class marina. Reflections at
Keppel Bay further manifests our thrust into the high-end
residential market, providing potentially attractive earnings
for the Group over the next few years.
As the leading prime office player in Singapore, Keppel Land
is poised to benefit from the strong demand for office space
in the CBD. There is no significant new office supply until our
Marina Bay Financial Centre (MBFC) Phase 1 comes on stream
in 2010. Furthermore, some 1.3 million sf of existing office
stock is expected to be taken out for redevelopment and
conversion. Prime rents which averaged about $8 psf in 2006
are still a third below that reached in 1990 and lower than
those in other key Asian cities such as Hong Kong. This
strong outlook has prompted the Keppel Land consortium to
recently exercise its option to acquire an adjacent land which
will form the second phase of MBFC. In its recent Budget
2007, the government’s prognosis of Singapore’s economy
is upbeat. It projects GDP to grow by 4.5% – 6.5% in 2007,
with prospects in the next five to 10 years looking bright,
barring external shocks. Underpinning this optimism is
Singapore’s strength to capitalise on globalisation.
The ongoing transformation to remake Singapore into
a world-class city to attract global companies and draw
international talents is already bearing fruit and augurs
well for both the office and residential markets.
One Raffles Quay is fully leased to blue-chip names in the
financial sector. The upcoming MBFC is set to become the
most sought-after office address in Singapore. Offering
1.6 million sf of quality office space, large column-free floor
plates and world-class amenities, MBFC will reinforce
Singapore’s standing as an international financial centre in Asia.
Keppel Land continued to make steady progress in growing
fee-based income. K-REIT Asia was listed in April last year.
With an initial portfolio of four buildings which are 100%
occupied, K-REIT Asia has yielded total returns to shareholders
6
Chairman’s statement
Keppel Corporation Limited
Report to Shareholders 2006
of 71% as at end-2006. K-REIT Asia targets to triple its assets
under management to about $2 billion in the next few years.
During the year, Keppel Land raised its stake in Equity Plaza
from about 35% to 65%, with the intent of value optimisation.
Plans are also underway to extract value by redeveloping
Ocean Building into a top-notch prime office building.
We are also building Singapore’s newest waste-to-energy
(WTE) incineration plant which is scheduled to be completed
in 2009 under a 25-year Design-Build-Own-Operate contract.
When completed, the plant will be able to treat 800 tonnes
of solid waste a day to generate more than 20 MW of
green energy.
Keppel Land’s real estate fund management arm, Alpha
Investment Partners, also had a fruitful year, growing its
assets under management from $980 million at end-2005 to
$2 billion. On a leveraged and fully invested basis, assets
under management will amount to more than $4 billion.
Its final closing for its Alpha Core Plus Real Estate Fund
raised $720 million, far exceeding expectations. All funds
under Alpha’s management have continued to exceed the
returns expected by investors.
Regionally, China, India, Vietnam, Indonesia continue to
provide substantial growth opportunities in the residential
market. We have successfully rolled out several product
lines, from townships to high-end apartments, villas and
lifestyle homes. These have been well-received by the
respective local communities. Our township platform
catering to the middle income market will continue to benefit
from the rising home ownership trends and growing demand
in Asia. Our first township project in Chengdu, China, has
almost fully sold its over 2,100 units launched in the initial
phases. Going forward, we have 21,000 township units in
Vietnam, Indonesia and China to be launched. We will also
seek to leverage on our array of core competencies to
develop new growth initiatives, extend our overseas reach
and strengthen our competitiveness.
Infrastructure
Taking off
Our Infrastructure division is on a strong footing for growth.
Several important targets set in place over the last few years
have been reached and will provide impetus for meaningful
earnings growth in the years ahead.
The highlight in 2006 for our Infrastructure division was the
award of a $1.7 billion contract to design, build and operate an
integrated solid waste management centre for the government
of Qatar. This is a landmark project for Qatar, being the first
such environmental engineering plant in the Middle East. It is
also the largest environmental engineering undertaking won by
a Singapore company in the international market.
We pitted against some of the largest international names in
the industry for this significant and high-profile project. It is
testimony to Keppel Seghers’ waste-to-energy technology
and innovation in offering a compliant, cost-competitive and
superior plant. It is yet another demonstration of how we,
as a Group, harnessed our resources and networks to create
synergies and value. Adding to this is our winning partnership
with the National Environment Agency, which has a strong
solid waste management track record in Singapore.
I am pleased that the strategic and tactical pieces that we
set out to put together in our environmental business are
coming into place. Our strategic move to make environmental
engineering one of our key businesses started with the
acquisition of Seghers Better Technology in November 2002.
Seghers was then a company under receivership and after
being acquired, it was necessary for us to first put the house
in order. We re-focused and streamlined its activities into
two core areas of focus, namely, WTE and water treatment.
These restructuring costs, whilst necessary, caused a drag to
KIE’s earnings in 2004. We then set out to establish our track
record in Singapore by securing the NEWater (2004) and fifth
incineration (2005) plants. KIE has since returned to
profitability in 2005.
Our 500 MW cogen plant on Jurong Island in Singapore
as well as the Ulu Pandan NEWater Plant will soon
commence operation. Our 150 MW power barges in
Ecuador have commenced operation last December
under a 15-year concession contract.
These projects, together with Seghers’ 30 years of
experience in this business, provided the platform to
spearhead our overseas thrust. Seghers’ established track
record particularly in Europe complements Keppel’s intimate
understanding of the ASEAN region, China and India.
Chairman’s statement
Keppel Corporation Limited
Report to Shareholders 2006
7
Chairman’s statement
It is our aim to build upon this momentum. We are pursuing
various WTE and water projects in Europe, Middle East and
Asia. The strong baseload from the Qatar contract will place
KIE in an even stronger position to invest in resources, both
capital and technologies.
KIE’s growth thrust premises on a multi-pronged and
well-balanced business model. One aspect of its business
involves developing and selling technology packages to
customers. Another facet involves designing and building
water and waste treatment plants, such as the Qatar project.
These asset-light approaches complement the third
component which is in Design, Build, Own & Operate
(DBOO) projects such as the NEWater and the fifth
incineration plants in Singapore.
The market landscape for environmental solutions is
favourable, with ample opportunities to further expand our
business. The lack of space in rapidly urbanising regions, and
contamination by landfills to soil and groundwater are driving
demand for WTE plants. Indeed, WTE is becoming a more
environmentally friendly and cost-effective option for
countries facing land constraints and adverse landfill
environmental impact. Even in the developed world,
governments are imposing more stringent waste disposal
regulations, in part to respond to emission reduction
requirements under the Kyoto Protocol. In Europe,
about 45% of municipal solid waste is treated through
landfilling. At the same time, in the medium to longer term,
there is a potential replacement cycle for WTE plants that
were built in the early 1980s. Today’s high energy cost
environment further enhances project economics for new
WTE plants because of their green energy production.
Broader-based earnings ahead
In summary, I am pleased to report that we have made good
progress in driving our growth initiatives across the spectrum
of our businesses. The Group’s earnings will steadily become
more broad-based over the next few years, with growing
contributions from the Property and Infrastructure divisions
as we extend our overseas reach and strengthen our
competitiveness. I am optimistic that we can leverage our
core competencies to further enhance our growth prospects
in each of our key businesses. At the operational level, we
will continue to focus on execution excellence to crystallise
our strong order books into solid earnings growth ahead.
In addition, I have earmarked R&D and Corporate Social
Responsibility as our focus areas this year. These will follow
on our 2006 focus initiative of developing our human capital
at all levels across the Group to support our business plans.
The Grow Beyond media campaign was successfully rolled
out to communicate our brand to the public and support our
talent recruitment drive. Earlier this year, we sponsored the
highly popular TV Mandarin serial The Peak, which was
filmed at some of our shipyards, raising public awareness of
the talent needs of the offshore and marine industry.
R&D
We are increasing resources in R&D which will be
spearheaded by Keppel O&M and KIE. In line with this thrust,
parallel R&D developments will be given more emphasis with
the inauguration of technology centres in Keppel O&M and
KIE in 2007. Through these technology centres, we will step
up the growth of our in-house competencies to conduct
application R&D, product and process development and
technology foresight. These will further augment and
complement our business units’ existing collaborations with
research institutions, both locally and abroad.
Meanwhile, the Keppel Technology Advisory Panel set up in
2004, and comprising eminent scientists, distinguished
industrialists and successful practitioners, serves to guide
management on macro industrial and technology trends.
Corporate Social Responsibility
At Keppel, we believe that Corporate Social Responsibility
should form part and parcel of our business strategy to
generate a sustainable earnings growth. Our past
contributions have taken many forms, through volunteerism
and charity, contributing to education, the arts and sports, or
towards business community development. It is my aim to
bring what we have been doing so far another step forward.
This requires a conscious commitment in all we do to
contribute to the economic development, social well-being
as well as the environment of the countries where we
operate in. Adopting best employment practices and
providing a conducive and safe workplace for our staff and
8
Chairman’s statement
Keppel Corporation Limited
Report to Shareholders 2006
family are only some facets. Inculcating a Corporate Social
Responsibility culture in all our management and staff across
the globe has to be a steady and life-long process. Our
success ultimately depends on the collective will of over
29,000 Keppelites across 33 countries, united under a
common dynamic vision to Grow Beyond. It is thus pertinent
we do so in a systematic, holistic and practical manner.
Over the course of the year, we shall roll out some initiatives
towards achieving these ends.
Cultivating a ‘Green’ culture
KIE will spearhead the Group’s thrust in contributing to a
sustainable and healthy environment and in cultivating a
‘Green’ culture within the group. Keppel Seghers will work
towards ISO14000 environment management systems and
standards certification, with its suppliers and subcontractors
encouraged to meet higher environmental standards. Initial
steps to enhance resource efficiency in our products,
facilities, services and operations will be carried out through
energy audits of group facilities and property designs to
meet BCA Green Mark award standards. Technologies will
be applied towards energy and resource efficient products to
minimise effluent discharge such as Keppel Seghers’ flue
gas treatment and wastewater treatment systems.
Environmentally sustainable infrastructure projects such as
waste-to-resource conversion, recycling and natural resource
conservation are useful platforms to build upon. In addition,
suitable opportunities for green technology investment
and partnerships will be explored.
Reinforcing safety
‘Safety First’, whilst seemingly a common cliché, is a
fundamental business practice that we take seriously.
Even as we pride ourselves on good safety records and
practices, with Keppel O&M for example achieving an
Accident Frequency Rate of 1.2, compared to previous year’s
1.73, safety is one of the priorities the Group will champion
further in the years ahead. Embracing safety is a win-win for
all. Achieving a strong safety record is a paramount social
responsibility to all our stakeholders, which in turn also yields
positive commercial benefits.
In January 2006, I invited Mr Yeo Wee Kiong, an independent
director, to chair the Group’s Board Safety Committee to
review and oversee the effectiveness of the Group
companies’ safety management system. Comprising three
independent directors and I, the Committee also creates a
forum for discussion on developments and best practices in
safety standards, and assists in enhancing safety awareness
and culture within the Group. A year on, the boards and
managements of all our business units have become
increasingly involved in strengthening the safety practices in
all our companies. Plans are underway to roll out similar
initiatives to all our overseas operations. It is our goal to
move from a safety-compliant mindset to one where a safety
culture becomes a natural seamless part of our day-to-day
activity. Ultimately, we aim to create a safety culture that
drives each employee’s thoughts and actions in their
personal and professional lives.
It remains for me, on behalf of Management, to take the
opportunity to thank the Board for its counsel and guidance
and all Keppelites for their keen commitment and relentless
drive towards achieving excellence in whatever we do. I am
confident that once again we shall succeed in our collective
effort to create more value for all our stakeholders as we
embark on this next phase of our growth and development.
Last but not least, I would also like to thank our customers,
business partners and shareholders for your confidence in
us. With your continued support, we shall be inspired to do
even better in the years ahead.
Yours sincerely,
LIM CHEE ONN
Executive Chairman
13 March 2007
Chairman’s statement
Keppel Corporation Limited
Report to Shareholders 2006
9
Keppel Corporation
has the depth and
breadth to grow beyond.
Our core competencies supported
by our financial strength and firm
foundation built through the years
drive our growth. Our sound
financial discipline and corporate
agility in a changing environment
are reflected in our strategic
planning and business decisions.
In building upon our growth
momentum, the application of our
technology innovation, together
with the well-orchestrated and
safe execution of our projects,
has strengthened our lead. As
we further enhance shareholder
value, we will continue to focus
on business excellence which has
earned us the recognition of being
a valued business partner, solutions
provider and employer of choice.
0
Grow beyond
Keppel Corporation Limited
Report to Shareholders 2006
Depth and breadth ...
in financial performance
enables Keppel to deliver
greater shareholder value
in portfolio of leadership
businesses underpins Keppel’s
ability to maximise potential
in execution allows Keppel to
achieve business excellence
in reputation distinguishes
Keppel as a partner, provider
and employer of choice
Grow beyond
Keppel Corporation Limited
Report to Shareholders 2006
reaching higher
Depth and breadth in financial performance
enables Keppel to reach higher in terms of
profits and shareholder value. In 2006, pre-tax profit
crossed the $ billion mark for the first time, while
Total Shareholder Return of 65% again surpassed
that of the Straits Times Index.
reaching higher
The sterling performance of our multi-business
growth platforms will enable us to further broaden
our earnings base going forward.
We are building businesses in the Keppel Group to sustain
earnings growth. With our multi-business strategy, Group
earnings will become more broad-based with contributions
coming from all divisions.
4
Grow Beyond
Grow Beyond
Grow beyond
reaching higher
Depth and breadth in execution
Depth and breadth in execution
Keppel Corporation Limited
Report to Shareholders 2006
Multi-business strategy supports broad-based earnings
2006 was another record-setting year for Keppel. Profit
after Tax and Minority Interests (PATMI) reached a historical
high, with pre-tax profit crossing the $1 billion mark for the
first time in the Group’s history, on the back of $7.6 billion
in revenue. These results show that our consistent multi-
business strategy has worked well.
Keppel Corporation was named one of the five “superstars”
in the conglomerate category in the Forbes’ Global 2000
report dated 29 March 2007. The ranking takes into account
the company’s long-term growth and quality of corporate
governance. The report is a ranking of the world’s biggest
public companies.
Looking ahead, Group earnings are expected to become
even more broad-based in the next few years, with
increasing contributions from the Property and Infrastructure
divisions. Consequently, overall earnings are likely to be
less susceptible to fluctuations in the business cycles of
our key divisions.
Robust earnings generate attractive returns
Keppel’s spectacular earnings have consistently led to
generous dividend payouts over the years. In addition to
improving share price, such high dividends have resulted in
Total Shareholder Return (TSR) of slightly above 65% last
year, significantly outperforming the 32% yielded by the
benchmark Straits Times Index. Our five-year TSR averaged
51% per annum, strongly surpassing the Index’s 18% during
the same period.
Strong balance sheet powers new growth initiatives
We have a strong balance sheet that gives us the financial
ability and dexterity to further strengthen the growth
platforms of our key businesses.
We also have an efficient capital structure, with healthy free
cashflow and low net gearing. In 2006, our free cashflow
amounted to $1.5 billion, due mainly to strong operating
cashflow from the Offshore & Marine business, while net
gearing at 0.24x was down from 0.47x the year before.
Disciplined financial management drives
prudent investments
Keppel continues to place great importance on financial
discipline. For example, the Group applies stringent
investment criteria, with all project investments having to
meet a hurdle rate of at least 12% and to be EVA-positive.
Such stringent financial management, together with the
relentless building of our financial strength, allows us to
make timely and prudent investments.
Our robust financial strength is our competitive advantage.
In addition to record earnings in 2006, our sound financial
discipline has enabled us to generate greater returns to our
shareholders through dividends. The market also recognised
our efforts, according us with an improvement in share price
in 2006.
A major factor contributing to our success is strong leadership.
Our management team possesses integrity, bold vision and a firm
grasp of industry fundamentals. Their in-depth knowledge of the
industries in which our businesses operate and the environment
at large, gives them the insight to lead wisely and set clear
strategic directions for the Group.
Grow beyond
Grow Beyond
Grow Beyond
reaching higher
Depth and breadth in execution
Depth and breadth in execution
Keppel Corporation Limited
Report to Shareholders 2006
5
forging ahead
Depth and breadth in portfolio of leadership
businesses allows us to maximise potential and
forge further ahead. Already a world leader in
rigbuilding, we are aggressively fortifying our core
competencies and intensifying our development of
new growth platforms in our key businesses.
forging ahead
We have made good progress in driving growth
initiatives across the spectrum of our businesses and
will leverage our core competencies to further enhance
growth prospects in each key business.
In 2006, we clinched 36% and 28% respectively of the
jackup and semisubmersible (semi) orders worldwide,
maintaining our market lead in both sectors. We also
secured the first KFELS N Class jackup contract and
clinched all semi orders placed by US drillers.
8
Grow beyond
forging ahead
Keppel Corporation Limited
Report to Shareholders 2006
Technology innovations unlock embedded
growth options
We view technology innovations as engines for our
future growth. Our strategy is to align our R&D activities
to complement existing business activities and develop
technologies that will sustain and further the Group’s
long-term growth. We have successfully commercialised
some of our technology innovations in our Offshore and
Infrastructure businesses.
Strong global network creates new opportunities
Our globalisation has provided us the platforms to create
opportunities and expand into new markets worldwide.
In addition to providing clients operating in different markets
unparalleled services, our “Near Market, Near Customer”
strategy has enabled us to seize new business opportunities
and paved our way into new markets. Our divisions routinely
scan the environment to identify new sources of growth
even in non-traditional markets.
Leadership in rigbuilding bolsters Group strengths
We leverage our core competencies to intensify our
development of new growth platforms for sustainable
earnings growth.
Our offshore business is well-positioned to meet the
fast-growing demand for deepwater exploration and
production by developing innovative solutions. We seek
to replicate this success in our Environmental Engineering
business, with Keppel Integrated Engineering leading
Singapore over time to become a global centre of excellence
for water and environmental technology.
Premier property developer strengthens
regional footprint
Our Property Division is seeking to participate more
vigorously in the real estate value chain by growing beyond
our established role as property developer of premier office
buildings and distinctive residential homes, to also become a
leading regional REIT and fund manager.
Apart from developing townships and residential properties
to cater to strong demand for quality housing across Asia,
we are unlocking value from commercial properties in
Singapore through K-REIT Asia and overseas. Our real
estate fund management, Alpha Investment Partners, is also
capitalising on strong interest in Asian property from foreign
funds to extract maximum value for investors.
Our financial strength and business leadership have placed us in a
solid position to invest and increase our capability and resources
in R&D. To this end, we are setting up technology centres in
Keppel Offshore & Marine and Keppel Integrated Engineering.
Keppel Kazakhstan LLP was set up in a move to service
the emerging offshore oil and gas industry in the
Kazakh Sector of the Caspian Sea as part of Keppel’s
“Near Market, Near Customer” strategy.
The launch of a transportation barge AKKU1, built for Agip
Kazakhstan North Caspian Operating Company N.V., was graced
by His Excellency Nursultan A Nazarbayev, President of the
Republic of Kazakhstan.
Grow beyond
forging ahead
Keppel Corporation Limited
Report to Shareholders 2006
9
going further
Depth and breadth in execution drives Keppel
to go further and achieve excellence in its
businesses. Engaging our stakeholders, we bring
our experience and expertise to bear in the design
and development of all our projects to enable us
to deliver quality products and services on time
and within budget.
going further
We will continue to focus on excellence in execution to turn
our strong order books into solid earnings growth.
Our healthy order book for Offshore and Marine Division is
providing us strong earnings visibility into 2010. Key to our
success is a commitment to engage our customers, understand
their needs and tailor solutions.
22
Grow beyond
going further
Keppel Corporation Limited
Report to Shareholders 2006
Smart and safe project execution ensures
excellent delivery
Engaging our stakeholders ensures that we are able to
provide on-time and within budget product and service
delivery. This includes managing the supply chain of material
and equipment to facilitate timely execution of our projects.
Our project management capability also extends to
inculcating good safety practices and management as we
believe that this is essential to our project excellence.
Strong designs exceed customer expectations
Keppel prides itself on being a very strong engineering
organisation. Coming from a multi-disciplinary engineering
background, our staff are well-qualified and equipped with
cutting-edge tools and technology. Coupled with the fact
that we own the designs of many products, we are able to
quickly and cost-effectively propose design solutions to fit
our customers’ specific needs and exceed their expectations.
Apart from engineering, our portfolio of award-winning
residential developments and investment-grade commercial
properties from Keppel Land also bears the quality
hallmark of product excellence. In making environmental
preservation and enhancement of community life a design
and construction priority, we meet the needs of the present
without compromising resources for future generations.
Expertise and experience create a competitive advantage
The collective expertise and experience of Keppel’s skilled
and diverse workforce in 33 countries is a formidable
competitive advantage. Our businesses are able to leverage
this knowledge base of our people to improve processes,
productivity and cross-fertilise ideas for greater efficiencies.
To sustain this advantage, we are continuing to draw and
build our talent pool to meet the challenges of an
ever-changing marketplace.
Entrenched procedures and processes ensure
production quality
The well-documented processes in our yards and plants are
executed with clock-work precision and with an emphasis
on ‘doing it right the first time’. In all our facilities, we have
procedures in place to promote an error-free approach to
work, minimising wastage and undertaking continuous
improvement. Our systems are also audited regularly in
compliance with ISO standards, and we work closely with
various classification societies.
Good safety practices are key to our operational excellence.
Our Offshore & Marine division maintained its good safety
performance in 2006, further improving the 10-year low
Accident Frequency Rate from 1.73 in 2005 to 1.20 in 2006 for
its Singapore yards.
Saigon Sports City is an integrated township development
developed by Keppel Land to meet the aspirations of the
burgeoning Vietnamese middle class for quality housing.
Comprising 3,000 residential units, commercial space and a
recreational sporting club, the township offers a convenient and
comfortable lifestyle in a planned and integrated community.
Grow beyond
going further
Keppel Corporation Limited
Report to Shareholders 2006
23
setting benchmarks
Depth and breadth in reputation distinguishes
Keppel as a partner, provider and employer
of choice. We believe in setting benchmarks
in corporate governance to maximise long-
term shareholder value, and in corporate social
responsibility as a commitment to communities
where we operate.
setting benchmarks
Building strong relationships with various stakeholders will be
our constant focus even as we strengthen our commitment
to corporate social responsibility.
As part of good corporate governance, management ensures
that all directors, including non-executive directors, are kept
well-informed of the Company’s businesses and affairs.
26
Grow beyond
Grow Beyond
setting benchmarks
Depth and breath in reputation
Keppel Corporation Limited
Report to Shareholders 2006
Strong governance protects shareholder interests
Keppel emphasises the adoption of good corporate
governance practices to safeguard the interests of our
shareholders. This policy stems from an internal corporate
desire to ensure proper management of the company and
to excel, rather than as a response to external pressure.
We believe that this helps us to maximise long-term
shareholder value.
Solid Keppel brand makes us an employer of choice
Keppel’s strong corporate brand serves to attract talents to
the Group, which is reputed to be strong with fast-growing
global businesses. We are recognised as an employer of
choice with tremendous career opportunities across
the Group.
As a people developer, our core values that drive success
and compassion encourage the development and growth of
the myriad of talents in the Group to carry out our businesses
in the different environments.
Business excellence promotes us as a trusted
partner of choice
Keppel has a strong corporate reputation as a versatile and
reliable group fully committed to our contractual agreements
with customers and partners alike to achieve a win-win
partnership. We are known in the market for our Can Do!
spirit and on-time and on-budget deliveries of projects.
The Keppel brand carries a premium and opens doors for
our business units around the world. Our core values and
business excellence are consciously replicated in all our
operations worldwide.
Corporate citizenry through community involvement
Keppel is highly regarded for its corporate social
responsibility. We are pro-active in our corporate citizenry,
recognising it as part of our commitment to help build
a better future for the various communities where we
operate. We will continue to support charities, volunteer
work, education, the arts, sporting activities and disaster
relief efforts, as well as promote international and regional
business investment and trade, and strengthen inter-country
business relationships.
In order to attract the best and the brightest to join us, we
launched the Grow Beyond campaign over the television, print
media and the web. The campaign was also carried through
various events and activities, including the Grow Beyond series
of motivational talks. Apart from enhancing our profile, the
campaign has created much buzz and excitement in Keppelites.
We seek to be active citizens in the communities
we operate in. Keppel Group’s adopted charity is the
Association for Persons with Special Needs (APSN).
In this event which was held at the culmination of the
Inter-SBU games, funds raised went towards providing senior
students of APSN training in employment-related skills, to help
the students achieve financial independence.
Grow beyond
Grow Beyond
setting benchmarks
Depth and breath in reputation
Keppel Corporation Limited
Report to Shareholders 2006
27
Keppel Corporation at a glance
In growing beyond our financial
targets, we are committed to nurture
our corporate attributes that enable
us to turn potential into results.
$7.6b
Revenue
Increased 34% from FY05’s $5.7 billion
Surpassed the previous high of $6.2 billion achieved in FY 2000.
Revenue fell in 2001 following the Group’s divestment of the
banking and financial services businesses. Revenue fell again
in 2004 to $4.0 billion with the deconsolidation of SPC. Strong
revenue growth from the Offshore & Marine and Property
businesses resulted in the new record revenue for the Group.
$75m
PATMI
Increased 33% from FY05’s $564 million
New high for PATMI breaking previous record set in 2005.
Compounded annual growth rate for PATMI from 2001 to 2006
was 23%. This is the eighth year-on-year profit growth since 1998.
9.%
ROE
$423m
EVA
Increased 2.7% above FY05’s 6.4%
Highest ROE achieved by the Group to date. ROE has improved
year-on-year for the eighth year. ROE in 1998 was 3.9%.
It surpassed 10% since 2001 and breached 15% in 2004.
Increased $224 million from FY05’s $99 million
EVA more than doubled the amount achieved in FY05, setting a
new record EVA for the Group. EVA was negative $665 million in
2001. This has improved year-on-year to the current $423 million.
This is an improvement of $1.1 billion over six years.
95.4cts
EPS
Increased 32% from FY05’s 72.cts per share
EPS growth kept pace with PATMI. No significant dilution in
EPS because no major capital call was made since 1997.
56.0cts
Distribution
Increased 22% from FY05’s 46.0 cts per share
Comprising a final dividend of 16 cents, a capital distribution
of 28 cents and an interim dividend of 12 cents already paid.
Current year’s distribution represents 53% of PATMI. The Group
has consistently distributed more than 50% of its PATMI to its
shareholders for the past six years.
$,480m
FCF
0.24x
Gearing
Increased 3% from FY05’s $694 million
Strong cashflow from all our businesses. Group operating
cashflow was about $1.9 billion with substantial contribution
from projects of Offshore & Marine division.
Reduced from FY05’s 0.47x
Strong cashflow of the Group resulted in the lower gearing ratio
of the Group. Gearing has been reduced from 1.12x in 2001 to
0.77x in 2003 to the current 0.24x. This places the Group in a good
position to further strengthen its earnings base going forward.
28
Keppel Corporation at a glance
Keppel Corporation Limited
Report to Shareholders 2006
Group strategic directions
Keppel aims to deliver sustainable
value for stakeholders by growing our
businesses through innovation with
discipline and integrity.
Strategic directions
Objectives
Strategy in action
Fortifying Core
Competencies
• Underpin value creation by
investing in R&D to strengthen
technology capabilities for
long-term growth
• Foster growth by enhancing
operational competitiveness
through strategic investments
and partnerships with
trendsetters
• Build people to share a common
culture and a drive to grow
beyond today
Expanding Global
Footprint
• Leverage the Group’s strong
global network for new
business opportunities
• Leverage the Keppel brand
equity to enhance its presence
in existing markets and
penetrate new markets
Increasing Business
Robustness
• Protect long-term earnings
through commercial excellence
and mitigation of risks
• Drive best practice initiatives
through operational excellence,
superior cashflow and strong
earnings returns to shareholders
Leveraging
Growth Platforms
• Leverage Group’s depth of
technology and breadth of
its multi-businesses and the
scale of embedded growth
options of these businesses to
develop new growth platforms
for robust and sustainable
earnings streams
• Technology leadership
• Business leadership
• Expansion in
existing markets
• Penetration into
new markets
• Group-wide
implementation of
Enterprise Risk
Management, Business
Continuity Plan and
Safety Best Practice
• Creation of a highly
efficient capital base that
can grow consistently
through all phases of
the business cycle
• Development of new
growth drivers within
key businesses
• Maximisation of
asset returns
Case study: KFELS N Class
Partnering its trendsetting
customer, Keppel Offshore &
Marine’s R&D arm, Offshore
Technology Development,
developed the technologically-
innovative KFELS N Class jackup
rig for operation in harsh
weather conditions similar to
the Norwegian sector of the
North Sea. Two KFELS N Class
rigs have been ordered.
Case study: Tapping China’s
demand for quality homes
Under a joint venture with Surbana
Corporation, Keppel Land is
developing The Botanica, a 42-ha
residential township in southeast
Chengdu. To be developed over
five phases, The Botanica will yield
a total of 8,200 residential units,
spread over a mix of low and high-
rise apartment blocks. Phase One
comprising 970 residential units
has been fully sold. 89% of the
1,150 launched units in Phase Two
have been sold. More units are
being launched in 2007.
Case study: Business
Continuity management
Initiated by Group Risk
Management, the Group focused
on developing the Business
Continuity Plan (BCP) for the
possible pandemic flu scenario.
BCP activities carried out in 2006
included setting up of Pandemic
Flu Committees in all business
units, developing BCPs and
conducting simulation exercises
for pandemic flu outbreaks in the
yards and testing remote access
procedures in office environments.
Case study: Landmark contract
in Qatar
Our Infrastructure Division’s
pursuit for growth was rewarded
with a landmark deal in 2006, when
Keppel Integrated Engineering
clinched a contract to design,
build, operate and maintain Qatar’s
largest integrated solid waste
management facility. Harnessing
its environmental engineering
proprietary technology and
experience, the company secured
the largest project to be awarded
at that time by the country’s
government to a Singapore firm.
Group strategic directions
Keppel Corporation Limited
Report to Shareholders 2006
29
Group at a glance
The Keppel Group is focused on
enhancing the value of our portfolio
of key businesses.
Keppel Corporation
Division
Strong governance
The Group firmly believes that a genuine commitment to good
governance is essential to the sustainability of our businesses
and performance. Key to good governance is a strong and
independent Board, engaging the executive directors and
management, and at the same time, providing wise counsel
and excellent insights.
Our Board of Directors comprises seven independent
directors, one non-executive director and three executive
directors. Presiding over strategic directions and corporate
governance of Keppel Corporation, the Board also oversees
the businesses and processes of the Company.
Strategic management
Based in Singapore, Keppel Corporation provides strategic
direction to the business units and co-ordinates corporate
services including audit and risk management, corporate
planning, corporate communications, finance, human
resources, information services, legal, tax and treasury.
Consistent efforts
We remain steadfast in our strategy of building our key
businesses of Offshore & Marine, Property, Infrastructure
and maximising value embedded in our Investments.
To achieve consistent performance, our disciplined investment
approach supports long-term growth and balances this with
fair returns to stakeholders.
High priority is placed on talent management, technology
development and acquisition, brand equity enhancement,
network building with strategic partners and trend-setters
as well as cultivating a corporate culture of integrity and the
Can Do! spirit.
Collective strength
With operations spanning 33 countries, our strength is
underpinned by Group cohesiveness across different business
units and between business units and the Headquarters.
We use our collective experience, expertise and network to
realise the Group’s common vision while also achieving one
another’s priorities and focus.
There is open communication between management and the
Board, and as a result, Keppel Corporation benefits from the
counsel, guidance and expertise of Board members.
Keppel Corporation operates in a global environment that is
rapidly uncertain and highly competitive. We believe that this
concerted approach to our business has enabled us to
keep delivering on our promises to our stakeholders.
30
Group at a glance
Keppel Corporation Limited
Report to Shareholders 2006
Offshore & Marine
Keppel Offshore & Marine
has a network of 17 yards
spanning the world with
expertise in:
• The design, construction,
repair and conversion
of drilling rigs and
production units
• Shiprepair & conversion
• Specialised shipbuilding
Property
Keppel Land and its
Singapore-listed units
Evergro Properties and
K-REIT Asia are geographically
diversified in Asia
They engage in:
• Premier property development
• Management of property
funds and real estate
investment trust
Infrastructure
The Infrastructure Division is
involved with these key
activities:
• Keppel Integrated
Engineering – provision of
environmental solutions
and engineering services
• Keppel Energy – supply,
generation and retailing
of power
• Keppel Telecommunications
& Transportation – provision
of network engineering and
logistics services
Investments
Our Investments comprise
the following Singapore
Exchange-listed associated
companies:
• Singapore Petroleum
Company – regionally
integrated oil and
gas company
• k1 Ventures – investment
company
• MobileOne – wireless
telecommunications
company
4,112
5,755
448
711
847
1,155
Revenue
$ million
2004
2,428
2005
2006
PATMI
$ million
2004
191
239
2005
2006
Revenue
$ million
2004
2005
2006
PATMI
$ million
2004
2005
118
118
2006
96
Highlights
Vision and Focus
Results
• Leading worldwide market
share of 60% of jackup
deliveries in 2006
• All 26 deliveries on time
or ahead of time and
within budget in 2006
• Collaborations bearing
results with launch of new
products such as the KFELS
N Class jackup, DSSTM 38 and
DSSTM 51 which have gained
client acceptance
To be the provider of choice and partner in solutions in its
chosen segments of the offshore and marine industry
Focus for 2007/2008
• Leverage the “Near Market, Near Customer” locations to
offer higher value propositions
• Enhance and market suite of proprietary deepwater
production solutions
• Continue to execute projects well with on time,
on budget deliveries
• Forge strategic partnerships with trendsetters
• Strengthen the Health, Safety and Environment system
• Marina Bay Residences
achieved record price of
$3,450 psf for penthouse
• Entered new cities with
Keppel homes – Tianjin in
China and Kolkata in India
• Successfully launched and
sold homes in The Botanica,
Chengdu, China
• Raised stake in China-focused
Evergro Properties for growth
in China’s second-tier cities
• Launched K-REIT Asia, poised
to unlock further value in
Singapore office buildings
• KIE’s entry into the Middle
East with a $1.7 billion waste
management project in Qatar
• Keppel Energy’s 150 MW
power barges commenced
operations in Ecuador
• Keppel Energy commissioned
its 500 MW cogeneration
plant on Jurong Island
• Keppel T&T acquired a 30%
stake in iCELL Networks to
install and operate a wireless
network in eastern Singapore
• SPC unlocked value in
upstream assets with Oyong
ready for production in 2007
• M1 launched its wireless
broadband service, allowing
users to surf almost anywhere
in Singapore
• k1 reaped strong contributions
from transportation leasing
company Helm Holding and
retail gasoline company
Mid Pac Petroleum
To be a leading property developer in Asia and a premier
property fund manager
Focus for 2007/2008
• Capitalise on the development of Singapore’s new downtown
and Keppel Bay
• Continue to roll out townships and other residential projects in
China, Vietnam and Indonesia
• Generate more fee-based income through K-REIT Asia and
Alpha Investment Partners
To build a select portfolio of environmental engineering, power
generation, network engineering and logistics businesses
Revenue
$ million
Focus for 2007/2008
• Division to contribute meaningfully to Group net earnings
in 2007 and beyond
• KIE – concentrate on thermal and water solutions
• Keppel Energy – build a strong, regional power generation and
gas supply business
• Network Engineering – expand into emerging markets and
grow business in WiFi
• Logistics – tap China’s growth in land transportation and
warehousing needs
2004
2005
2006
PATMI
$ million
(24)
(35)
803
671
570
32
2004
2005
2006
To maximise value of businesses and investments for
shareholders
Focus for 2007/2008
• SPC – continue to increase E&P portfolio through
acquisition of high-potential assets
• k1 – continue to seek additional investment opportunities that
are accretive to earnings and cashflow
• M1 – to increase usage from existing customers in the
non-voice segment
Revenue
$ million
2004
21
2005
58
2006
121
PATMI
$ million
2004
2005
2006
124
Group at a glance
Keppel Corporation Limited
Report to Shareholders 2006
231
242
3
Keppel around the world
We have a global presence in
33 countries with overseas customers
as our earnings mainstay.
Offshore & Marine
Azerbaijan
Brazil
Bulgaria
China
India
Indonesia
Japan
Kazakhstan
Norway
The Philippines
Qatar
Singapore
The Netherlands
United Arab Emirates
United States of America
Vietnam
Property
China
India
Indonesia
Japan
Korea
Malaysia
Myanmar
The Philippines
Singapore
Thailand
United States of America
Vietnam
Infrastructure
Argentina
Australia
Belgium
Brazil
China/Hong Kong
Ecuador
France
Germany
Indonesia
Malaysia
Mexico
Nicaragua
The Philippines
Qatar
Singapore
Spain
Sri Lanka
Sweden
Thailand
United Kingdom
United States of America
Vietnam
Investments
Australia
Cambodia
China/Hong Kong
Indonesia
Singapore
United States of America
Vietnam
United States of America
North America
$1,575m
Mexico
Central America
$373m
Nicaragua
Ecuador
Brazil
South America
$672m
Argentina
Revenue by market
Total FY06 Revenue: $7,601m
: $1,575m
North America
Central America : $ 373m
: $ 672m
South America
: $2,444m
Europe
: $ 231m
Middle East
Japan/Korea/Taiwan : $ 86m
: $ 418m
China/HK
: $ 45m
India
: $1,661m
ASEAN
: $ 96m
Australia/NZ
32
Keppel around the world
Keppel Corporation Limited
Report to Shareholders 2006
Norway
Sweden
Europe
$2,444m
United Kingdom
Belgium
Germany
The Netherlands
France
Bulgaria
Spain
Kazakhstan
Azerbaijan
Japan
China/HK
$418m
Korea
China
Japan/Korea/Taiwan
$86m
Hong Kong
Vietnam
Myanmar
Thailand
Cambodia
The Philippines
Qatar
United Arab Emirates
Middle East
$231m
India
$45m
India
Sri Lanka
Malaysia
ASEAN
$1,661m
Singapore
Indonesia
Australia
Australia/NZ
$96m
Offshore & Marine
Azerbaijan
Infrastructure
The Philippines
Qatar
Singapore
The Netherlands
United Arab Emirates
United States of America
Brazil
Bulgaria
China
India
Indonesia
Japan
Kazakhstan
Norway
Vietnam
Property
China
India
Japan
Korea
Indonesia
Malaysia
Myanmar
The Philippines
Singapore
Thailand
United States of America
Vietnam
China/Hong Kong
Argentina
Australia
Belgium
Brazil
Ecuador
France
Germany
Indonesia
Malaysia
Mexico
Nicaragua
Qatar
Singapore
Spain
Sri Lanka
Sweden
Thailand
The Philippines
United Kingdom
United States of America
Vietnam
Investments
Australia
Cambodia
China/Hong Kong
Indonesia
Singapore
Vietnam
United States of America
Revenue by market
Total FY06 Revenue: $7,601m
North America
: $1,575m
Central America : $ 373m
South America
: $ 672m
Europe
Middle East
: $2,444m
: $ 231m
Japan/Korea/Taiwan : $ 86m
China/HK
India
ASEAN
Australia/NZ
: $ 418m
: $ 45m
: $1,661m
: $ 96m
United States of America
North America
$1,575m
Mexico
Central America
$373m
Nicaragua
Ecuador
Brazil
South America
$672m
Argentina
Norway
Sweden
Europe
$2,444m
United Kingdom
Belgium
Germany
The Netherlands
France
Bulgaria
Spain
Kazakhstan
Azerbaijan
China/HK
$418m
Korea
China
Hong Kong
Japan
Japan/Korea/Taiwan
$86m
Qatar
United Arab Emirates
Vietnam
Myanmar
Thailand
Cambodia
The Philippines
Middle East
$231m
India
$45m
India
Sri Lanka
Malaysia
ASEAN
$1,661m
Singapore
Indonesia
Australia
Australia/NZ
$96m
Keppel around the world
Keppel Corporation Limited
Report to Shareholders 2006
33
Board of Directors
Over and above their roles,
our Directors bring perspectives
gained from their distinguished
careers to the strategic governance
of our Group.
Lim Chee Onn, 62
Executive Chairman
Chairman, Executive Committee
Member, Board Safety Committee
Tony Chew Leong-Chee, 60
Lead Independent Director
Executive Chairman, Asia Resource Corporation
Member, Executive Committee
Member, Audit Committee
Lim Hock San, 60
Independent Director
Chief Executive Officer, United Industrial Corporation
Chief Executive Officer, Singapore Land
Chairman, Audit Committee
Member, Executive Committee
Member, Board Risk Committee
34
Board of Directors
Keppel Corporation Limited
Report to Shareholders 2006
Sven Bang Ullring, 7
Independent Director
Chairman, Board of The Fridtjof Nansen Institute, Oslo, Norway
Chairman, Nominating Committee
Chairman, Remuneration Committee
Member, Board Safety Committee
Tsao Yuan Mrs Lee Soo Ann, 5
Independent Director
Executive Director, SDC Consulting
Member, Nominating Committee
Member, Remuneration Committee
Member, Board Safety Committee
Leung Chun Ying, 52
Independent Director
Chairman of Asia Pacific, DTZ Debenham Tie Leung
Member, Remuneration Committee
Board of Directors
Keppel Corporation Limited
Report to Shareholders 2006
35
Board of Directors
Oon Kum Loon, 56
Independent Director
Chairperson, Board Risk Committee
Member, Audit Committee
Member, Executive Committee
Member, Nominating Committee
Tow Heng Tan, 5
Non-Independent and
Non-Executive Director
Senior Managing Director, Investments, Temasek Holdings
Member, Executive Committee
Member, Remuneration Committee
Member, Board Risk Committee
Yeo Wee Kiong, 5
Independent Director
Managing Director, Yeo Wee Kiong Law Corporation
Chairman, Board Safety Committee
Member, Board Risk Committee
36
Board of Directors
Keppel Corporation Limited
Report to Shareholders 2006
Choo Chiau Beng, 59
Senior Executive Director
Member, Executive Committee
Teo Soon Hoe, 57
Senior Executive Director and
Group Finance Director
Member, Executive Committee
Board of Directors
Keppel Corporation Limited
Report to Shareholders 2006
37
Keppel Group Boards of Directors
Our various boards are focused on
governing effectively in serving
the interest of stakeholders of each
business unit.
Keppel Offshore & Marine
Choo Chiau Beng
Chairman/
Chief Executive Officer
Teo Soon Hoe
Senior Executive Director
and Group Finance Director
Keppel Corporation
Tong Chong Heong
Managing Director/
Chief Operating Officer
Charles Foo Chee Lee
Managing Director
(Special Projects)
Sit Peng Sang
Chief Financial Officer
Bjarne Hansen
Senior Partner
Wing Partners I/S, Denmark
Prof Neo Boon Siong
Director
Asia Competitiveness
Institute
Lee Kuan Yew School of
Public Policy
National University of
Singapore
Stephen Pan Yue Kuo
Chairman
World-Wide Shipping Agency
Prof Minoo Homi Patel
Head of School & Professor
of Engineering
School of Engineering,
Cranfield University, UK
Dr Malcolm Sharples
President
Offshore Risk & Technology
Consulting, USA
Keppel Land
Lim Chee Onn
Chairman
Executive Chairman
Keppel Corporation
Kevin Wong
Managing Director
Choo Chiau Beng
Chairman/
Chief Executive Officer
Keppel Offshore & Marine
Heng Chiang Meng
Director
Calm Investments
Khor Poh Hwa
Senior Adviser to
CPG Corporation
Lee Ai Ming (Ms)
Deputy Managing Partner
Rodyk & Davidson
Edward Lee
Former Ambassador to
Indonesia
Lim Ho Kee
Chairman
Singapore Post
Niam Chiang Meng
Permanent Secretary
Ministry of Community
Development,
Youth and Sports
Tan Yam Pin
Former Managing Director
Fraser and Neave Group
Teo Soon Hoe
Senior Executive Director
and Group Finance Director
Keppel Corporation
Wee Sin Tho
Chief Investment Officer
National University of
Singapore
Keppel Energy
Lim Chee Onn
Executive Chairman
Keppel Corporation
Prof Tsui Kai Chong
Professor of Finance/Provost
SIM University
Ong Tiong Guan
Managing Director
Keppel Telecommunications
& Transportation
Teo Soon Hoe
Chairman
Senior Executive Director
and Group Finance Director
Keppel Corporation
Lam Kwok Chong
Managing Director
Prof Bernard Tan Tiong Gie
Professor of Physics
National University of
Singapore
Tan Boon Huat
Chief Executive Director
People’s Association
Tan Tin Wee
Associate Professor of
Biochemistry
National University of
Singapore
Reggie Thein
Independent Director
Choo Chiau Beng
Chairman/
Chief Executive Officer
Keppel Offshore & Marine
Teo Soon Hoe
Senior Executive Director
and Group Finance Director
Keppel Corporation
Keppel Integrated
Engineering
Wong Boon Kong
Chairman
Chua Chee Wui
Chief Executive Officer
Lawrence Lim
Director
Luc De Ryck
Senior General Manager
Soh Chee Keong
Executive Director
Tong Chong Heong
Managing Director/
Chief Operating Officer
Keppel Offshore & Marine
38
Keppel Group Boards of Directors
Keppel Corporation Limited
Report to Shareholders 2006
k Ventures
Steven Jay Green
Chairman/
Chief Executive Officer
Former US Ambassador to
Singapore
K-REIT Asia Management
Prof Tsui Kai Chong
Chairman
Professor of Finance/Provost
SIM University
Kevin Wong
Non-Executive
Vice Chairman,
Managing Director
Keppel Land
Singapore Petroleum
Company
Choo Chiau Beng
Chairman
Chairman/
Chief Executive Officer
Keppel Offshore & Marine
Koh Ban Heng
Chief Executive Officer
Bertie Cheng Shao Shiong
Chairman
TeleChoice International
Cheng Hong Kok
Director
Dr Chin Wei-Li,
Audrey Marie
Executive Director
Vietnam Investing
Associates – Financials (S)
Pte Ltd
Ang Kong Hua
Executive Director
NatSteel
Kamal Bahamadan
Founder and
Managing Partner
The BV Group
Choo Chiau Beng
Chairman/CEO
Keppel Offshore & Marine
Dr Lee Suan Yew
Medical Practitioner and Past
President of the Singapore
Medical Council
Goon Kok-Loon
Chairman
iPLaboratories
Lim Chee Onn
Executive Chairman
Keppel Corporation
Geoffrey John King
Director
Vermilion Oil & Gas Australia
Tan Teck Meng
Professor of Accounting
Singapore Management
University
Datuk Paduka Timothy
Ong Teck Mong
Acting Chairman
Brunei Economic
Development Board
Teo Soon Hoe
Senior Executive Director
and Group Finance Director
Keppel Corporation
Teo Soon Hoe
Senior Executive Director
and Group Finance Director
Keppel Corporation
Yong Pung How
Former Chief Justice
Republic of Singapore
Goh Toh Sim
Chief Executive Officer/
Executive Director
Ang Wee Gee
Director
Regional Investments
Keppel Land
Choo Chin Teck
Director
(Corporate Services) and
Chief Financial Officer
Keppel Land
Chow Wing Kin Anthony
Partner
Peter C. Wong,
Chow & Chow
Patrick Choy
Chairman
Global Strategy
Company Limited
Goh Yong Hong
Executive Deputy Chairman
Singapore Turf Club
Kevin Wong
Deputy Chairman
Managing Director
Keppel Land
Tan Swee Yiow
Chief Executive Officer/
Director
Director
(Singapore Commercial)
Keppel Land
Lee Ai Ming (Mrs)
Deputy Managing Partner
Rodyk & Davidson
Lim Poh Chuan
Director
Income Partners Funds
Dr Chin Wei-Li,
Audrey Marie
Executive Director
Vietnam Investing
Associates – Financials (S)
Pte Ltd
Evergro Properties
Chew Heng Ching
Chairman
Chairman
(Governing Council)
Singapore Institute of
Directors
Keppel Group Boards of Directors
Keppel Corporation Limited
Report to Shareholders 2006
39
Senior management
Our leaders steer the group to
grow beyond today.
Magdeline Wong
General Manager
(Group Tax)
Tina Chin
General Manager
(Group Risk Management
& Audit)
Caroline Chang
General Manager
(Group Legal)
Sim Chey Hoon
General Manager
(Corporate Development/
Planning)
Sharon Lua
General Manager
(Group Human Resources)
Martin Ling
Deputy General Manager
(Group Information
Technology)
Keppel Corporation
Limited
Lim Chee Onn
Executive Chairman
Choo Chiau Beng
Senior Executive Director
Teo Soon Hoe
Senior Executive Director
and Group Finance Director
Corporate Services
Chan Soo Sen
Director
(Chairman’s Office)
Director
(Group Human Resources)
Paul Tan
Group Controller
Wang Look Fung
General Manager
(Group Corporate
Communications)
Lynn Koh
General Manager
(Group Treasury)
Offshore & Marine
Choo Chiau Beng
Chairman/
Chief Executive Officer
Keppel Offshore & Marine
Tong Chong Heong
Managing Director/
Chief Operating Officer
Keppel Offshore & Marine
Sit Peng Sang
Chief Financial Officer
Keppel Offshore & Marine
Chee Jin Kiong
Executive Director
(Human Resources)
Keppel Offshore & Marine
Charles Foo Chee Lee
Managing Director
(Special Projects)
Keppel Offshore & Marine
Michael Chia Hock Chye
Executive Director
Keppel FELS
Nelson Yeo Chien Sheng
Executive Director
Keppel Shipyard
Hoe Eng Hock
Executive Director
Keppel Singmarine
Property
Kevin Wong
Managing Director
Keppel Land
Choo Chin Teck
Director
(Corporate Services)
Group Company Secretary
Keppel Land
Tan Swee Yiow
Director
(Singapore Commercial)
Keppel Land
Ang Wee Gee
Director
(Regional Investments)
Keppel Land
Augustine Tan
Director
(Singapore Residential)
Keppel Land
Loh Chin Hua
Managing Director
Alpha Investment Partners
Tan Swee Yiow
Chief Executive Officer
K-REIT Asia Management
Goh Toh Sim
Chief Executive Officer/
Executive Director
Evergro Properties
40
Senior management
Keppel Corporation Limited
Report to Shareholders 2006
Infrastructure
Lam Kwok Chong
Managing Director
Keppel Telecommunications
& Transportation
Unions
Keppel FELS
Employees Union
Yap Huat Hin
President
Ong Tiong Guan
Managing Director
Keppel Energy
Keppel Employees Union
Mohd Yusop B Mansor
President
Keppel Services Staff Union
Quah Kim Boon
President
Shipbuilding &
Marine Engineering
Employees Union
Wong Weng Onn
President
Lim Chin Siew
Executive Secretary
Chua Chee Wui
Chief Executive Officer
Keppel Integrated
Engineering
Investments
Koh Ban Heng
Chief Executive Officer
Singapore Petroleum
Company
Steven Jay Green
Chairman/
Chief Executive Officer
k1 Ventures
Neil Montefiore
Chief Executive Officer
MobileOne
Senior management
Keppel Corporation Limited
Report to Shareholders 2006
4
Corporate governance
The board and management of Keppel Corporation Limited
(“KCL” or the “Company”) firmly believe that a genuine
commitment to good corporate governance is essential to
the sustainability of the Company’s businesses and
performance, and are pleased to confirm that the Company
has adhered to the principles and guidelines of the new Code
of Corporate Governance 20051 (the “2005 Code”), save for
Guideline 3.1 (Chairman and CEO should be separate persons)
the reason for which deviation is explained in this report.
The following describes the Company’s corporate governance
practices with specific reference to the 2005 Code.
For its commitment to transparency, Keppel Corporation
was recognised at the Securities Investors Association’s
7th Investors’ Choice Awards. We received the Golden Circle
Award for being the overall winner of the Most Transparent
Company Award.
Demonstrating their commitment to safety, the Board of
Directors, senior management and safety managers across
the Keppel Group attended a safety seminar initiated by
Keppel Corporation’s Board Safety Committee (from left)
Mr Yeo Wee Kiong, Chairman of the Board Safety Committee
and Tsao Yuan Mrs Lee Soo Ann.
1 The Code of Corporate Governance 2005 issued by the Ministry of Finance on 14 July 2005.
42
Corporate governance
Keppel Corporation Limited
Report to Shareholders 2006
Code of corporate governance 2005
Specific principles and guidelines for disclosure
Relevant guideline or principle
Guideline 1.3
Delegation of authority, by the board to any board committee, to make decisions on certain
board matters
Guideline 1.4
The number of board and board committee meetings held in the year, as well as the attendance of
every board member at these meetings
Guideline 1.5
The type of material transactions that require board approval under internal guidelines
Guideline 2.2
Where the company considers a director to be independent in spite of the existence of a relationship
as stated in the Code that would otherwise deem him as non-independent, the nature of the director’s
relationship and the reason for considering him as independent should be disclosed
Guideline 3.1
Relationship between the Chairman and CEO where they are related to each other
Guideline 4.1
Composition of nominating committee
Guideline 4.5
Process for selection and appointment of new directors to the board
Page reference
in this report
Pages 45,
57 to 61
Page 44
Page 45
Page 45
Not
Applicable
Page 47
Page 48
Guideline 4.6
Key information regarding directors, which directors are executive, non-executive or considered by the
nominating committee to be independent
Pages 216 to
220 and 223
Guideline 5.1
Process for assessing the effectiveness of the board as a whole and the contribution of each individual
director to the effectiveness of the board
Principle 9
Clear disclosure of its remuneration policy, level and mix of remuneration, procedure for setting
remuneration and link between remuneration paid to directors and key executives, and performance
Guideline 9.1
Composition of remuneration committee
Pages 49,
61 to 63
Pages 50
to 53
Page 50
Guideline 9.2
Names and remuneration of each director. The disclosure of remuneration should be in bands of $250,000. Page 52
There will be a breakdown (in percentage terms) of each director’s remuneration earned through base/fixed
salary, variable or performance-related income/bonuses, benefits in kind, and stock options granted and
other long-term incentives
Names and remuneration of at least the top 5 key executives (who are not also directors).
The disclosure should be in bands of $250,000 and include a breakdown of remuneration
Guideline 9.3
Remuneration of employees who are immediate family members of a director or the CEO, and whose
remuneration exceed $150,000 during the year. The disclosure should be made in bands of $250,000 and
include a breakdown of remuneration
Guideline 9.4
Details of employee share schemes
Guideline 11.8
Composition of audit committee and details of the committee’s activities
Guideline 12.2
Adequacy of internal controls, including financial, operational and compliance controls,
and risk management systems
Page 52
Page 53
Pages 156,
157, 174 and
175
Pages 53
and 54
Pages 54
and 55
Corporate governance
Keppel Corporation Limited
Report to Shareholders 2006
43
Corporate governance
Board’s conduct of affairs
Principle 1: Effective board to lead and control
the company
The principal functions of the board are to:
• decide on matters in relation to the Group’s activities
which are of a significant nature, including decisions on
strategic directions and guidelines and the approval of
periodic plans and major investments and divestments;
• oversee the business and affairs of the Company,
establish, with management, the strategies and financial
objectives to be implemented by management, and
monitor the performance of management;
• oversee processes for evaluating the adequacy of internal
controls, risk management, financial reporting and
compliance, and satisfy itself as to the adequacy of
such processes;
• assume responsibility for corporate governance.
All KCL directors are expected to exercise independent
judgment in the best interests of the Company. This is one of
the performance criteria for the peer and self-assessment on
the effectiveness of the individual directors. Based on the
results of the peer and self-assessment carried out by the
KCL directors, all KCL directors have discharged this duty
consistently well.
To assist the board in the discharge of its oversight function,
various board committees, namely the Executive Committee,
Audit Committee, Board Risk Committee, Nominating
Committee, and Remuneration Committee, have been
constituted with clear written terms of reference. All the
Committees are actively engaged and play an important role
in ensuring good corporate governance in the Company and
within the Group. In addition, a Board Safety Committee was
recently formed in January 2006. The terms of reference of
the respective board committees are disclosed in the
Appendix to this report.
The Board meets six times a year and as warranted by
particular circumstances. Telephonic attendance and
conference via audio-visual communication at board
meetings are allowed under the Company’s Articles of
Association. The number of board and board committee
meetings held in FY 2006, as well as the attendance of each
board member at these meetings, are disclosed below:
Lim Chee Onn
Tony Chew Leong-Chee
Lim Hock San
Sven Bang Ullring
Tsao Yuan Mrs Lee Soo Ann
Leung Chun Ying
Oon Kum Loon (Mrs)
Tow Heng Tan
Yeo Wee Kiong
Choo Chiau Beng
Teo Soon Hoe
No. of Meetings Held
Board
Meetings
Audit Executive Nominating Remuneration
Safety
Risk
Board Committee Meetings
Non-executive
Directors’ meeting
(without presence
of management)
8
7
7
8
7
7
8
7
7
8
7
8
–
5
5
–
–
–
5
–
–
–
–
5
–
–
–
–
–
–
–
–
–
–
–
0
–
–
–
3
2
–
3
–
–
–
–
3
–
–
–
2
2
2
–
2
–
–
–
2
4
–
–
4
4
–
–
–
4
–
–
4
–
–
4
–
–
–
5
2
4
–
–
5
–
3
4
4
4
4
4
3
4
–
–
4
Keppel group boards of directors
44
Corporate governance
Keppel Corporation Limited
Report to Shareholders 2006
The Company has adopted internal guidelines setting forth
matters that require board approval. Under these guidelines,
new investments or increase in investments and
divestments exceeding $100 million by any Group company,
and all commitments to term loans and lines of credit from
banks and financial institutions by the Company, require
the approval of the board. Further, any investment of
$100 million and below but which does not have strategic
fit with any of the Company’s core businesses, is not
EVA-positive, or does not generate Return on Equity of at
least 12% on a stand-alone basis, would require specific
board approval. Each board member has equal responsibility
to oversee the business and affairs of the Company. The
management on the other hand is responsible for the
day-to-day operation and administration of the Company in
accordance with the policies and strategy set by the board.
A formal letter is sent to newly-appointed directors upon
their appointment explaining their duties and obligations
as director. All newly-appointed directors undergo a
comprehensive orientation programme which includes
management presentations on the Group’s businesses and
strategic plans and objectives, and site visits.
The directors are provided with continuing education in areas
such as directors’ duties and responsibilities, corporate
governance, changes in financial reporting standards, insider
trading, changes in the Companies Act and industry-related
matters, so as to update and refresh them on matters that
affect or may enhance their performance as board or board
committee members.
Board composition and guidance
Principle 2: Strong and independent element on
the board
To carry out its oversight function well, the board must be an
effective board which can lead and control the business of
the Group. The KCL directors believe that, in view of the
many complex businesses that the Company is involved in,
the KCL board should comprise executive directors who
have intimate knowledge of the business, and independent
directors who can take a broader view of the Group’s
activities and bring independent judgement to bear on issues
for the board’s consideration.
The Nominating Committee determines on an annual basis
whether or not a director is independent, bearing in mind the
Code’s definition of an “independent director” and guidance
as to relationships the existence of which would deem a
director not to be independent. The Nominating Committee
also deems a director who is directly associated with a
substantial shareholder as non-independent, although such a
relationship has not been expressly adopted in the Code as
one that would deem a director not to be independent.
Mr Tow Heng Tan, who is Senior Managing Director,
Investments, Temasek Holdings, is therefore deemed non-
independent by the Nominating Committee. Further, in its
deliberation as to whether or not a director is independent,
the Nominating Committee also takes into account whether
a director has business relationships with the Company or
any of its related companies, and if so, whether such
relationships could interfere, or be reasonably perceived to
interfere, with the exercise of the director’s independent
judgement with a view to the best interests of the Company.
In this connection, the Nominating Committee noted that
Mr Leung Chun Ying would be deemed non-independent by
virtue of his position as substantial shareholder, director and
chairman of DTZ Debenham Tie Leung (“DTZ”) which
provides real estate services to Keppel Land. However,
the Nominating Committee considers that the integrity
and independence of Mr Leung Chun Ying are beyond
doubt in view of his credentials, the results of the self
and peer assessment on the effectiveness of Mr Leung
as director, and his actual conduct during board and board
committee meetings.
The Nominating Committee is of the view that, taking into
account the nature and scope of the Company’s businesses,
the board should consist of nine to 11 members. The board
currently has majority independent directors with a total of
11 directors of whom seven are independent.
The nature of the directors’ appointments on the board and
details of their membership on board committees are set out
in the Appendix hereto.
Corporate governance
Keppel Corporation Limited
Report to Shareholders 2006
45
Corporate governance
The KCL non-executive directors meet regularly without the
presence of management to discuss matters such as the
changes which they would like to see in board processes,
corporate governance initiatives, matters which they wish
to discuss during the board off-site strategy meeting, and
the remuneration of the Executive Chairman and two
Executive Directors.
Chairman and Chief Executive Officer
Principle 3: Chairman and Chief Executive Officer
to be separate persons to ensure appropriate balance
of power, increased accountability and greater capacity
of the board for independent decision-making
Mr Lim Chee Onn is both the Chairman and Chief Executive
Officer of the Company. The board confirms that this has
not concentrated power in the hands of one individual
or compromised accountability and independent
decision-making for the following reasons:
1. the independent directors form the majority on the
KCL board;
2. the independent directors actively participate during
board meetings and challenge the assumptions and
proposals of the management unreservedly, both during
and outside of board meetings via e-mail or the
telephone, on pertinent issues affecting the affairs and
business of the Group;
3. to enhance the independence of the board, a Lead
Independent Director has been appointed to coordinate the
activities of the independent directors and act as the
principal liaison between the independent directors and the
Chair on sensitive issues. The Lead Independent Director
holds meetings with the independent directors (without
the presence of management) at least twice a year.
The Nominating Committee is satisfied that the board
comprises directors who as a group provide core
competencies such as accounting or finance, business or
management experience, industry knowledge, strategic
planning experience and customer-based experience or
knowledge, required for the board to be effective.
The KCL board and management fully appreciate that
fundamental to good corporate governance is an effective
and robust board whose members engage in open and
constructive debate and challenge management on its
assumptions and proposals, and that for this to happen,
the board, in particular, the non-executive directors, must be
kept well informed of the Company’s businesses and affairs
and be knowledgeable about the industry in which the
businesses operate. The Company has therefore adopted
initiatives to put in place processes to ensure that the
non-executive directors are well supported by accurate,
complete and timely information, have unrestricted access
to management, and have sufficient time and resources to
discharge their oversight function effectively. These
initiatives include regular informal meetings for management
to brief the directors on prospective deals and potential
developments at an early stage before formal board approval
is sought, and the circulation of relevant information on
business initiatives, industry developments and analyst and
press commentaries on matters in relation to the Company
or the industries in which it operates. A two-day off-site
board strategy meeting is also organised for in-depth
discussions on strategic issues, to give the non-executive
directors a better understanding of the Group and
its businesses, and to provide an opportunity for the
non-executive directors to familiarise themselves with
the management team to facilitate the board’s review of
the Company’s succession planning and talent management
programme. The Company has also made available on the
Company’s premises an office for the non-executive
directors’ use at any time to facilitate direct access to
management. Further, a Directors’ Portal has been
established as a secured web-based resource centre for the
depositing and retrieval of board materials, information on
industry developments, and analysts’ and other reports on
matters relating to the Group, and to provide an alternative
medium for the continuous exchange of information and
views among board members via secure internet access.
46
Corporate governance
Keppel Corporation Limited
Report to Shareholders 2006
In the case of KCL which is in three large core businesses,
the board is of the firm and unanimous view that it is in the
best interests of the Company to continue to have an
Executive Chairman so that the board, and in particular the
non-executive directors, can have the benefit of a Chairman
who is knowledgeable about the businesses of the Company
and is thereby better able to guide discussions and ensure
that the board is properly briefed in a timely manner on
pertinent issues and developments, and at the same time
the benefit of objective and independent views from the
independent directors.
It is evident from the results of the assessment on the
effectiveness of the board, and from the assessment on the
performance of the Chairman, that the Executive Chairman
has enhanced the effectiveness of the individual non-
executive directors, and the board as a whole, by providing
the board with a thorough understanding of the businesses
and ensuring open and robust dialogue between the board
and management. It is the KCL board’s belief that it is the
person who fills the role that matters, rather than whether
the roles are separate or combined per se. The board retains
the right to review the current status as facts and
circumstances change.
The Executive Chairman, with the assistance of the
Company Secretary, schedules meetings and prepares
meeting agenda to enable the board to perform its duties
responsibly having regard to the flow of the Company’s
business and operations.
The Executive Chairman sets guidelines on and monitors the
flow of information from management to the board to ensure
that all material information are provided timeously to the
board for the board to make good decisions. He also
encourages constructive relations between the board and
management, and between the executive directors and
non-executive directors. In this regard, the Executive
Chairman has initiated informal meetings on a regular basis
for management to brief the directors on prospective deals
and potential developments at an early stage before formal
board approval is sought. He also ensures that relevant
information on business initiatives, industry developments
and analyst and press commentaries on matters in relation to
the Company or the industries in which it operates are
continuously circulated to board members so as to enable
them to be updated and thereby enhance the effectiveness
of the non-executive directors and the board as a whole. He
has also made available on the Company’s premises an office
for the non-executive Directors’ use at any time to facilitate
direct access to management.
The Executive Chairman also ensures effective
communication with shareholders.
The Executive Chairman takes a leading role in the
Company’s drive to achieve and maintain a high standard of
corporate governance with the full support of the directors,
Company Secretary and management.
Board membership
Principle 4: Formal and transparent process for the
appointment of new directors to the board
Nominating Committee
The Company has established a Nominating Committee to,
among other things, make recommendations to the board on
all board appointments. The Nominating Committee
comprises entirely independent Directors; namely,
Mr Sven Ullring
Tsao Yuan Mrs Lee Soo Ann
Mrs Oon Kum Loon
Chairman
Member
Member
The terms of reference of the Nominating Committee are
disclosed in the Appendix hereto.
Corporate governance
Keppel Corporation Limited
Report to Shareholders 2006
47
Corporate governance
Process for appointment of new directors
In 2004, the Nominating Committee recommended, and the
board approved, a formal process for the selection of new
directors to increase transparency of the nominating process
in identifying and evaluating nominees for directors. The
Nominating Committee (NC) leads the process and makes
recommendations to the board as follows:
(a) NC evaluates the balance of skills, knowledge and
experience on the board and, in the light of such
evaluation and in consultation with management,
prepares a description of the role and the essential and
desirable competencies for a particular appointment.
(b) External help (for example, Singapore Institute of
Directors, search consultants, open advertisement) to be
used to source for potential candidates if need be.
Directors and management may also make suggestions.
(c) NC meets with the short-listed candidates to assess
suitability and to ensure that the candidate(s) are aware of
the expectations and the level of commitment required.
(d) NC makes recommendations to the board for approval.
Criteria for appointment of new directors
All new appointments are subject to the recommendation
of the Nominating Committee based on the following
objective criteria:
(1) Integrity
(2) Independent mindedness
(3) Diversity – possess core competencies that meet the
current needs of the Company and complement the skills
and competencies of the existing directors on the board
(4) Able to commit time and effort to carry out duties and
responsibilities effectively – proposed director is on no
more than six principal boards
(5) Track record of making good decisions
(6) Experience in high-performing companies
(7) Financially literate
The Nominating Committee is also charged with the
responsibility of re-nomination having regard to the director’s
contribution and performance (such as attendance,
preparedness, participation and candour), with reference to
the results of the assessment of the performance of the
individual director by his peers for the previous financial year.
The directors submit themselves for re-nomination and
re-election at regular intervals of at least once every three
years. Pursuant to the Company’s Articles of Association,
one-third of the directors retire from office at the Company’s
annual general meeting, and a newly appointed director must
submit himself for re-election at the annual general meeting
immediately following his appointment.
As a matter of policy, a non-executive director would serve a
maximum of two three-year terms of appointment. However,
the board recognises the contribution of directors who,
over time, have developed deep insight into the Group’s
businesses and operations and who are therefore able to
provide invaluable contribution to the board as a whole.
In such cases, the board would exercise its discretion to
extend the term and retain the services of the director
rather than lose the benefit of his contribution.
The NC is also charged with determining the “independence”
status of the directors annually. Please refer to page 45 on
the basis of the NC’s determination as to whether a director
should or should not be deemed independent.
The NC also determines annually whether a director with
multiple board representations is able to and has been
adequately carrying out his duties as a director of the
Company. The NC took into account the results of the
assessment of the effectiveness of the individual director,
and the respective directors’ actual conduct on the board,
in making this determination, and is satisfied that all the
directors have been able to and have adequately carried
out their duties as director notwithstanding their multiple
board representations.
48
Corporate governance
Keppel Corporation Limited
Report to Shareholders 2006
The NC has adopted internal guidelines addressing
competing time commitments that are faced when directors
serve on multiple boards. As a guide, directors should not
serve on more than six principal boards.
The following key information regarding directors are set out
in the following pages of this Annual Report:
Pages 216 to 220 and 223: Academic and professional
qualifications, board committees served on (as a member or
Chairman), date of first appointment as director, date of last
re-election as director, directorships or chairmanships both
present and past held over the preceding five years in other
listed companies and other major appointments, whether
appointment is executive or non-executive, whether considered
by the Nominating Committee to be independent; and
Page 155: Shareholding in the Company and
its subsidiaries.
Board performance
Principle 5: Formal assessment of the effectiveness of
the board as a whole and the contribution by each
director to the effectiveness of the board
The board has implemented formal processes for assessing
the effectiveness of the board as a whole, the contribution
by each individual director to the effectiveness of the board,
as well as the effectiveness of the Chairman of the board.
To ensure that the assessments are done promptly and fairly,
the board has appointed an independent third party (the
“Independent Co-ordinator”) to assist in collating and
analysing the returns of the board members. Mrs Fang Ai
Lian, Chairman, Ernst & Young, was appointed for this role.
The evaluation processes and performance criteria are
disclosed in the Appendix to this report.
Noting that all directors participated in the assessment
exercise for FY 2006, that all new requirements and
guidelines in the 2005 Code had been factored into the
FY 2006 assessment forms ahead of time of the coming into
effect of the 2005 Code, and that the Company had acted on
the feedback received from the previous year’s assessment
exercise, the Independent Co-ordinator concluded that the
Company took the assessment exercise seriously. As
regards the corporate governance principle that there should
be separation in the roles of the Chairman and CEO, the
Independent Co-ordinator opined that: “Based on my
observations as Independent Co-ordinator, I believe the
Board has adequately addressed the safeguard in Principle 3
and Guideline 3.1 of the Code.”
The board assessment exercise provided an opportunity to
obtain constructive feedback from each director on whether
the board’s procedures and processes allowed him to
discharge his duties effectively and the changes which
should be made to enhance the effectiveness of the board
as a whole. The assessment exercise also helped the
directors to focus on their key responsibilities. The individual
director assessment exercise allowed for peer review with a
view to raising the quality of board members. It also assisted
the Nominating Committee in determining whether to
re-nominate directors who were due for retirement at the
next annual general meeting, and in determining whether
directors with multiple board representations were
nevertheless able to and had adequately discharged their
duties as directors of the Company.
Access to information
Principle 6: Board members to have complete, adequate
and timely information
As a general rule, board papers are required to be sent to
directors at least seven days before the board meeting so
that the members may better understand the matters prior
to the board meeting and discussion may be focused on
questions that the board has about the board papers.
However, sensitive matters may be tabled at the meeting
itself or discussed without any papers being distributed.
Managers who can provide additional insight into the matters
at hand would be present at the relevant time during the
board meeting. The directors are also provided with the
names and contact details of the Company’s senior
management and the Company Secretary to facilitate direct
access to senior management and the Company Secretary.
Corporate governance
Keppel Corporation Limited
Report to Shareholders 2006
49
Corporate governance
The Company fully recognises that the continual flow of
relevant information on an accurate and timely basis is critical
for the board to be effective in the discharge of its duties.
Management is therefore expected to provide the board with
accurate information in a timely manner concerning the
Company’s progress or shortcomings in meeting its strategic
business objectives or financial targets and other information
relevant to the strategic issues facing the Company.
Management also provides the board members with
management accounts on a monthly basis. Such reports
keep the board informed, on a balanced and understandable
basis, of the Group’s performance, financial position and
prospects and consist of the consolidated profit and loss
accounts, analysis of sales, operating profit, pre-tax and
attributable profit by major divisions compared against the
budgets, together with explanation given for significant
variances for the month and year-to-date.
The Company Secretary administers, attends and prepares
minutes of board proceedings. She assists the Chairman to
ensure that board procedures (including but not limited to
assisting the Chairman to ensure the timely and good
information flow to the board and board committees, and
between senior management and the non-executive directors,
and facilitating orientation and assisting in the professional
development of the directors) are followed and regularly
reviewed to ensure effective functioning of the board, and
that the Company’s memorandum and articles of association
and relevant rules and regulations, including requirements of
the Companies Act, Securities & Futures Act, and Listing
Manual of the Singapore Exchange Securities Trading Limited
(“SGX”) are complied with. She also assists the Chairman
and the board to implement and strengthen corporate
governance practices and processes with a view to enhancing
long-term shareholder value. She is also the primary channel
of communication between the Company and the SGX.
The appointment and removal of the Company Secretary are
subject to the approval of the board.
Subject to the approval of the Chairman, the directors,
whether as a group or individually, may seek and obtain
independent professional advice to assist them in their
duties, at the expense of the Company.
Remuneration matters
Principle 7: Formal and transparent procedure for
developing policy on executive remuneration and for
fixing remuneration packages of individual directors
Principle 8: Remuneration of directors should be
adequate but not excessive
Principle 9: Disclosure on remuneration policy,
level and mix of remuneration, and procedure for
setting remuneration
Remuneration Committee
The Remuneration Committee comprises entirely non-
executive directors, three out of four of whom (including
the Chairman) are independent; namely:
Mr Sven Ullring
Tsao Yuan Mrs Lee Soo Ann
Mr Leung Chun Ying
Mr Tow Heng Tan
Chairman
Member
Member
Member
The Remuneration Committee is responsible for ensuring a
formal and transparent procedure for developing policy on
executive remuneration and for fixing the remuneration
packages of individual directors and senior management.
The Remuneration Committee assists the board to ensure
that remuneration policies and practices are sound in that
they are able to attract, retain and motivate without being
excessive, and thereby maximise shareholder value. The
Remuneration Committee recommends to the board for
endorsement a framework of remuneration (which covers all
aspects of remuneration including directors’ fees, salaries,
allowances, bonuses, options and benefits in kind) and the
specific remuneration packages for each director and the
Executive Chairman. The Remuneration Committee also
reviews the remuneration of senior management and
administers the KCL Share Option Scheme.
The Committee has access to expert advice in the field
of executive compensation outside the Company
where required.
50
Corporate governance
Keppel Corporation Limited
Report to Shareholders 2006
Annual remuneration report
Policy in respect of Non-executive Directors’ remuneration
The non-executive directors are paid directors’ fees, the amount of which is dependent on their level of responsibilities. Each
non-executive director is paid a basic fee. In addition, non-executive directors who perform additional services through board
committees are paid an additional fee for such services. The members of the Audit, Board Risk, and Executive Committees
are paid a higher fee than the members of the other board committees because of their heavier responsibility. The Chairman
of each board committee is also paid a higher fee compared with members of the committee in view of the greater
responsibility carried by that office. Executive Directors are not paid any directors’ remuneration. The amount of directors’
fees payable to non-executive directors is subject to shareholders’ approval at the Company’s annual general meetings. The
framework for determining director’s fees for non-executive directors is as follows:
Non-executive director
Audit, Board Risk & Executive Committees
Remuneration, Nominating &
Board Safety Committees
Chairman
Member
Chairman
Member
$40,000 per annum
$30,000 per annum
$15,000 per annum
$15,000 per annum
$7,500 per annum
Ratio to Retainer of $40,000
1.00
0.75
0.38
0.38
0.19
At the forthcoming extraordinary general meeting to be held
on 27 April 2007 (the “EGM”), the board, at the Remuneration
Committee’s recommendation, will be proposing that the
remuneration of the non-executive directors be made partly
by way of directors’ fees in cash and partly in a fixed number
of shares (“Remuneration Shares”). The board believes that
the incorporation of an equity component in the total
remuneration of the non-executive directors would achieve
the objective of aligning the interests of the non-executive
directors with those of the shareholders and the long term
interests of the Company. If approved by the shareholders,
the Company will be able to compensate the non-executive
directors in the form of shares in the Company in addition to
directors’ fees in cash. For the financial year ended
31 December 2006, the Company is proposing to procure the
purchase from the market of 8,000 shares in the Company
solely for the purpose of the delivery of 1,000 shares to each
non-executive director as part of directors’ remuneration.
This proposal will also be subject to shareholders’ approval at
the EGM. The number of Remuneration Shares to be awarded
may be reviewed from time to time for subsequent financial
years but any change is not expected to be significant.
Remuneration policy in respect of Executive Directors
and other Key Executives
The Company advocates a performance-based
remuneration system that is highly flexible and responsive
to the market, Company’s, business unit’s and individual
employee’s performance.
The total remuneration mix comprises three key components;
that is, annual fixed cash, annual performance incentive and
long-term incentive. The annual fixed cash component
comprises the annual basic salary plus any other fixed
allowances. The annual performance incentive is tied to the
Company’s, business unit’s and individual employee’s
performance, inclusive of a portion which is tied to EVA
performance1. The long-term incentive is in the form of
share options which are granted based on the individual’s
performance and contribution.
The compensation structure is designed such that to stay
competitive and relevant, the Company benchmarks its
annual fixed salary at the market median with the variable
compensation being strictly performance-driven. More
emphasis is placed on the “pay-at-risk” compensation as an
employee moves up the corporate ladder, with increasing
percentage on long-term incentive. This allows the Company
to better align executive compensation towards shareholders’
value creation.
The executive directors participate in a long-term incentive
scheme in the form of the KCL Share Option Scheme, details
of which are set out in pages 156, 157, 174 and 175.
Corporate governance
Keppel Corporation Limited
Report to Shareholders 2006
51
Corporate governance
Level and mix of remuneration of Directors and Key Executives (who are not also Directors) for the year ended
31 December 2006
The level and mix of each of the directors’ remuneration, and that of each of the key executives (who are not also directors),
in bands of $250,000 are set out below:
Variable or
Performance-
Related
Income/
Bonuses
Base/
Fixed
Salary
Directors’
Fees
Benefits-
in-Kind
Share
Options Remuneration
Shares 5
Granted
Remuneration Band & Name of Director
Abv $7,250,000 to $7,500,000
Lim Chee Onn
Abv $5,250,000 to $7,250,000
Nil
Abv $5,000,000 to $5,250,000
Choo Chiau Beng
Abv $4,000,000 to $5,000,000
Nil
Abv $3,750,000 to $4,000,000
Teo Soon Hoe
$250,000 to $3,750,000
Nil
Below $250,000
Tony Chew Leong-Chee
Lim Hock San
Sven Ullring
Tsao Yuan Mrs Lee Soo Ann
Leung Chun Ying
Oon Kum Loon (Mrs)
Tow Heng Tan
Yeo Wee Kiong
Remuneration Band & Name of Key Executive
Abv $2,250,000 to $2,500,000
Koh Ban Heng
Abv $2,000,000 to $2,250,000
Tong Chong Heong
Wong Kingcheung, Kevin
Abv $1,000,000 to $2,000,000
Nil
Abv $750,000 to $1,000,000
Lam Kwok Chong
Ong Tiong Guan
Chua Chee Wui
16%
74%
–
n.m.2
10%
16%
73%
–
n.m.2
11%
21%
65%
–
n.m.2
14%
–
–
–
–
80%
85%
81%
78%
73%
86%
81%
80%
–
–
–
–
–
–
n.m.2
22%3
n.m.2
n.m.2
19%
12%4
n.m.2
n.m.2
n.m.2
35%
40%
17%
25%
53%
27%
39%
54%
49%
32%
38%
31%
33%
22%
52%
–
–
–
20%
15%
19%
22%
27%
14%
19%
20%
–
–
–
–
–
–
Notes:
1 A portion of the annual performance incentive is tied to EVA performance whereby one third from current year EVA and one third from accrued EVA bank is
paid out provided EVA remains positive. The balance two thirds will be accrued as EVA Bank and this bank is at risk and can become negative should EVA
performance be adversely impacted.
2 n.m. – not material.
3 Received Singapore Petroleum Company Restricted Shares.
4 Received Keppel Land Limited Share Options.
5 Estimated value based on KCL shares’ closing price of $17.60 on the last trading day of FY 2006.
52
Corporate governance
Keppel Corporation Limited
Report to Shareholders 2006
Remuneration of employees who are immediate family
members of a Director or the Executive Chairman
No employee of the Company and its subsidiaries was an
immediate family member of a director or the Executive
Chairman and whose remuneration exceeded $150,000
during the financial year ended 31 December 2006.
“Immediate family member” means a spouse, child, adopted
child, step-child, brother, sister or parent.
Management provides all board members with management
accounts on a monthly basis. Such reports keep the board
members informed of the Group’s performance, position and
prospects and consist of the consolidated profit and loss
accounts, analysis of sales, operating profit, pre-tax and
attributable profit by major divisions compared against the
respective budgets, together with explanations for significant
variances for the month and year-to-date.
Details of the KCL Share Option Scheme
The KCL Share Option Scheme (“Scheme”), which has been
approved by shareholders of the Company, is administered
by the Remuneration Committee. Please refer to pages 156,
157, 174 and 175 for details on the Scheme.
Accountability and audit
Principle 10: The board should present a balanced
and understandable assessment of the Company’s
performance, position and prospects
Principle 11: Establishment of Audit Committee with
written terms of reference
The board is responsible for providing a balanced and
understandable assessment of the Company’s performance,
position and prospects, including interim and other price
sensitive public reports, and reports to regulators (if
required). Management provides all members of the board
with management accounts which present a balanced and
understandable assessment of the Company’s performance,
position and prospects on a monthly basis.
The board has embraced openness and transparency in the
conduct of the Company’s affairs, whilst preserving the
commercial interests of the Company. Financial reports and
other price sensitive information are disseminated to
shareholders through announcements via SGXnet to the
SGX, press releases, the Company’s website, and public
webcast and media and analyst briefings. The Company’s
Summary Financial Report is sent to all shareholders and its
Annual Report is available on request and accessible on the
Company’s website.
Audit Committee
The Audit Committee comprises the following non-executive
directors, all of whom are independent:
Mr Lim Hock San
Mr Tony Chew Leong-Chee
Mrs Oon Kum Loon
Chairman
Member
Member
Mr Lim Hock San and Mrs Oon Kum Loon have accounting
and related financial management expertise and experience.
The board considers Mr Tony Chew as having sufficient
financial management knowledge and experience to
discharge his responsibilities as a member of the Committee.
The Audit Committee’s main role is to assist the board to
ensure integrity of financial reporting and that there is in
place sound internal control systems. The Committee’s
terms of reference are set out on page 58 herein.
The Audit Committee has explicit authority to investigate any
matter within its terms of reference, full access to and co-
operation by management and full discretion to invite any
director or executive officer to attend its meetings, and
reasonable resources to enable it to discharge its functions
properly. The Company has an internal audit team and
together with the external auditors, report independently
their findings and recommendations to the Audit Committee.
The Audit Committee met with the external auditors
and with the internal auditors five times during the year,
one of which was conducted without the presence of
the management.
Corporate governance
Keppel Corporation Limited
Report to Shareholders 2006
53
Corporate governance
During the year, the Audit Committee performed
independent review of the financial statements of the
Company before the announcement of the Company’s
quarterly and full-year results. In the process, the Committee
reviewed the key areas of management judgment applied for
adequate provisioning and disclosure, critical accounting
policies and any significant changes made that would have a
great impact on the financials.
The Audit Committee also reviewed and approved both the
Group internal auditor’s and external auditor’s plans to ensure
that the plans covered sufficiently in terms of audit scope in
reviewing the significant internal controls of the Company.
Such significant controls comprise financial, and operational
and compliance controls. All audit findings and
recommendations put up by the internal and the external
auditors were forwarded to the Audit Committee. Significant
issues were discussed at these meetings.
In addition, the Audit Committee undertook a review of the
independence and objectivity of the external auditors through
discussions with the external auditors as well as reviewing
the non-audit fees awarded to them, and has confirmed that
the non-audit services performed by the external auditors
would not affect their independence.
The Committee also reviewed the adequacy of the internal
audit function and is satisfied that the team is adequately
resourced and has appropriate standing within the Company.
The Committee also reviewed the “Keppel: Whistle-Blower
Protection Policy” (the “Policy”) which provides for the
mechanisms by which employees and other persons may,
in confidence, raise concerns about possible improprieties
in financial reporting or other matters, and was satisfied that
arrangements are in place for the independent investigation
of such matters and for appropriate follow-up action.
Following the launch of the Policy, a set of guidelines which
was reviewed by the Audit Committee and approved by the
board, was issued to assist the Audit Committee in
managing allegations of fraud or other misconduct which
may be made pursuant to the Policy, so that:
•
investigations are carried out in an appropriate and
timely manner;
• administrative, disciplinary, civil and/or criminal actions
that are initiated following completion of investigations,
are appropriate, balanced, and fair; and
• action is taken to correct the weaknesses in the existing
system of internal processes and policies which allowed
the perpetration of the fraud and/or misconduct, and to
prevent a recurrence.
On a quarterly basis, the management reports to the Audit
Committee the interested person transactions (“IPTs”) in
accordance with the Company’s Shareholders’ Mandate for
IPT. The IPTs were reviewed by the internal auditors. All
findings were reported during Audit Committee meetings.
Internal controls and risk management
Principle 12: Sound system of internal controls
The Company’s approach to risk management and internal
control is set out in the “Operating and Financial Review”
section on pages 139 and 140 of this Annual Report.
The Company’s internal and external auditors conduct an
annual review of the effectiveness of the Company’s material
internal controls, including financial, operational and
compliance controls, and risk management. Any material
non-compliance or failures in internal controls and
recommendations for improvements are reported to the
Audit Committee. The Audit Committee also reviews the
effectiveness of the actions taken by the management on
the recommendations made by the internal and external
auditors in this respect.
During the year, the Audit Committee reviewed the
effectiveness of the Company’s internal control procedures
and was satisfied that the Company’s internal controls are
adequate to meet the needs of the Company in its current
business environment.
54
Corporate governance
Keppel Corporation Limited
Report to Shareholders 2006
Board Risk Committee
In 2004, as part of the effort to further strengthen the
Company’s risk management processes, a Board Risk
Committee was formed to assist the board in examining the
effectiveness of the Group’s risk management system to
ensure that a robust risk management system is maintained.
The Committee reviews and guides management in the
formulation of risk policies and processes to effectively
identify, evaluate and manage significant risks, and discusses
risk management strategies with management. The
Committee reports to the board on material findings and
recommendations in respect of significant risk matters. The
detailed terms of reference of this Committee is disclosed
on page 58 herein.
The Board Risk Committee is made up of three independent
directors (including the Chairman) and a non-executive
Director who is independent of management. Mrs Oon Kum
Loon was appointed Chairman of the Committee because of
her wealth of experience in the area of risk management.
Prior to serving as Chief Financial Officer in the Development
Bank of Singapore (DBS), she was the Managing Director &
Head of Group Risk Management, responsible for the
development and implementation of a Group-wide integrated
risk management framework for the DBS Group. Mr Lim
Hock San, who is the Chairman of the Audit Committee that
reviewed risk management processes prior to the setting up
of the Board Risk Committee, is the second member of the
Board Risk Committee. The third member is Mr Tow Heng
Tan who has deep management experience from his
extensive career spanning the management consultancy,
investment banking and stock-broking industries. The fourth
member is Mr Yeo Wee Kiong who is the Managing Director
of Yeo Wee Kiong Law Corporation. Mr Yeo sits on the
boards of several companies (listed and non-listed) and has
vast experience in the corporate world and wide knowledge
ranging from engineering, finance and law.
Internal audit
Principle 13: Independent internal audit function
The role of the internal auditors is to assist the Audit
Committee to ensure that the Company maintains a sound
system of internal controls by regular monitoring of key
controls and procedures and ensuring their effectiveness,
undertaking investigations as directed by the Audit
Committee, and conducting regular in-depth audits of high
risk areas. The Company’s internal audit functions are
serviced in-house (“Group Internal Audit”).
Staffed by suitably qualified executives, Group Internal Audit
has unrestricted direct access to the Audit Committee. The
Head of Group Internal Audit’s primary line of reporting is to
the Chairman of the Audit Committee, although she reports
administratively to the Executive Chairman of the Company.
As a corporate member of the Singapore branch of the
Institute of Internal Auditors Incorporated, USA (“IIA”),
Group Internal Audit is guided by the Standards for the
Professional Practice of Internal Auditing set by the IIA.
These standards consist of attribute standards, performance
standards and implementation standards.
During the year, Group Internal Audit adopted a risk-based
auditing approach that focuses on material internal controls,
including financial, operational and compliance controls.
Audits were carried out on all significant business units in the
Company, inclusive of limited review performed on dormant
and inactive companies. All Group Internal Audit’s reports are
submitted to the Audit Committee for deliberation with
copies of these reports extended to the Executive Chairman
and the relevant senior management officers. In addition,
internal audit’s summary of findings and recommendations
are discussed at the Audit Committee meetings.
Corporate governance
Keppel Corporation Limited
Report to Shareholders 2006
55
Corporate governance
The Company is not implementing absentia voting methods
such as voting via mail, e-mail or fax until security, integrity
and other pertinent issues are satisfactorily resolved.
The Company Secretary prepares minutes of shareholders’
meetings, which incorporates substantial comments or
queries from shareholders and responses from the board and
management. These minutes are available to shareholders
upon their requests.
Securities transactions
Insider Trading Policy
The Company has a formal Insider Trading Policy on dealings
in the securities of the Company and its listed subsidiaries,
which sets out the implications of insider trading and
guidance on such dealings. The policy has been distributed
to the Group’s directors and officers. It has also adopted the
Best Practices Guide on Dealings in Securities issued by the
SGX. In line with Best Practice Guide on Dealing in Securities
issued by the SGX, the Company issues circulars to its
directors and officers informing that the Company and its
officers must not deal in listed securities of the Company
one month before the release of the full-year results and two
weeks before the release of quarterly results, and if they are
in possession of unpublished price-sensitive information.
Communication with shareholders
Principle 14: Regular, effective and fair communication
with shareholders
Principle 15: Greater shareholder participation at
Annual General Meetings
In addition to the matters mentioned above in relation to
“Access to Information/Accountability”, the Company’s
Group Corporate Communications Department (with
assistance from the Group Finance and Group Legal
Departments, when required) regularly communicates with
shareholders and receives and attends to their queries
and concerns.
Material information is disclosed in a comprehensive,
accurate and timely manner via SGXnet and the press.
To ensure a level playing field and provide confidence to
shareholders, unpublished price sensitive information are not
selectively disclosed, and on the rare occasion when such
information are inadvertently disclosed, they are immediately
released to the public via SGXnet and the press.
Shareholders are informed of shareholders’ meetings
through notices published in the newspapers and reports or
circulars sent to all shareholders. Shareholders are invited at
such meetings to put forth any questions they may have on
the motions to be debated and decided upon. If any
shareholder is unable to attend, he is allowed to appoint up
to two proxies to vote on his behalf at the meeting through
proxy forms sent in advance.
At shareholders’ meetings, each distinct issue is proposed
as a separate resolution. The Chairman of each board
committee is required to be present to address questions
at the annual general meeting. External auditors are also
present at such meeting to assist the directors to address
shareholders’ queries, if necessary.
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APPENDIX
Board Committees – Terms of reference
A. Executive Committee
(1) Consider and, if deemed fit, approve investments,
acquisitions and disposal of assets of the Company and
its subsidiaries which are above $10 million or 10% of
the net tangible assets (whichever is the lower) of the
respective companies but less than $100 million.
(2) Consider and recommend to the Board proposed
investments, acquisitions and disposal of assets of the
Company and its subsidiaries which are $100 million
or above.
(3) Consider and recommend to the Board proposed
investments and acquisitions of the Company and its
subsidiaries which do not fall within the Company’s
core businesses but which are considered strategic
investments for the long-term prospects of
the Company.
(7) Consider and recommend to the Board on proposed
performance bonds and guarantees to be furnished by
the Company or its subsidiaries which are above
$100 million.
(8) Consider and, if deemed fit, approve loans to companies
within the Keppel Group of an amount exceeding
$30 million but up to $100 million.
(9) Consider and, if deemed fit, approve foreign exchange
transactions for companies within the Keppel Group
of an amount exceeding $100 million but up to
$200 million.
(10) In relation to matters which require the approval of this
Committee pursuant to other provisions of these terms
of reference, approve the affixation of the Common
Seal onto any legal document in accordance with the
Company’s Articles of Association.
(11) Approve the banks in Singapore and overseas with
which the Company may transact.
(12) Approve the establishment and registration of local and
(4) Consider and, if deemed fit, approve capital equipment
foreign offices of the Company.
purchases and leases of the Company and its
subsidiaries which are above $10 million but less than
$100 million.
(5) Consider and recommend to the Board on proposed
capital equipment purchases and leases of the
Company and its subsidiaries which are above
$100 million.
(6) Consider and, if deemed fit, approve performance
bonds and guarantees to be furnished by the Company
or its subsidiaries which are above $10 million but less
than $100 million.
(13) Carry out such other functions as may be delegated to it
by the Board.
(14) Sub-delegate any of its powers within its terms of
reference as listed above, from time to time, as this
Committee may deem fit.
Matters arising at meetings of the Executive Committee
shall be decided by a simple majority of votes including the
affirmative vote of at least one member who is an
independent director.
Corporate governance
Keppel Corporation Limited
Report to Shareholders 2006
57
Corporate governance
B. Audit Committee
(11) Review interested person transactions.
(1) Examine the effectiveness of the group’s internal
(12) Investigate any matters within the Audit Committee’s
control system, including financial, operational and
compliance controls, to ensure that a sound system of
internal controls is maintained.
purview, whenever it deems necessary.
(13) Report to the Board on material matters, findings and
recommendations.
(2) Review audit plans and reports of the external auditors
and internal auditors, and consider the effectiveness of
actions or policies taken by Management on the
recommendations and observations.
(3) Review financial statements and formal announcements
relating to financial performance, and review significant
financial reporting issues and judgements contained
in them, to ensure integrity of such statements
and announcements.
(4) Review the independence and objectivity of the external
(14) Perform such other functions as the Board may
determine.
(15) Sub-delegate any of its powers within its terms of
reference as listed above from time to time as this
Committee may deem fit.
C. Board Risk Committee
(1) Review and guide the group in formulating its
risk policies.
auditors annually.
(2) Discuss risk mitigation strategies with Management.
(5) Review the nature and extent of non-audit services
(3) Examine the effectiveness of the group’s risk
performed by the auditors.
(6) Meet with external auditors and internal auditors,
management system to ensure that a robust risk
management system is maintained.
without the presence of Management, at least annually.
(4) Review and guide in establishing a process to effectively
(7) Make recommendations to the Board on the
appointment, re-appointment and removal of the
external auditor, and approve the remuneration and
terms of engagement of the external auditor.
(8) Review the effectiveness of the Company’s internal
audit function.
(9) Ensure that the internal audit function is adequately
resourced and has appropriate standing within the
company, at least annually.
(10) Review arrangements by which employees of the
Company may, in confidence, raise concerns about
possible improprieties in matters of financial reporting
or other matters, to ensure that arrangements are in
place for the independent investigation of such matters
and for appropriate follow up action.
identify, evaluate and manage significant risks.
(5) Review risk limits where applicable.
(6) Review the group’s risk profile periodically.
(7) Provide a forum for discussion on risk issues.
(8) Report to the Board on material matters, findings
and recommendations.
(9) Perform such other functions as the Board
may determine.
(10) Sub-delegate any of its powers within its terms of
reference as listed above from time to time as this
Committee may deem fit.
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Corporate governance
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Report to Shareholders 2006
D. Nominating Committee
(1) Recommend to the Board the appointment/
re-appointment of directors.
(2) Annual review of skills required by the Board, and the
size of the Board.
(3) Annual review of independence of each director, and to
ensure that the Board comprises at least one-third
independent directors.
(6) Administer the Company’s employee share option
scheme (the “KCL Share Option Scheme”) in
accordance with the rules of the scheme.
(7) Grant share options under the KCL Share Option
Scheme as this Committee may deem fit.
(8) Sub-delegate any of its powers within its terms of
reference as listed above, from time to time, as this
Committee may deem fit.
(4) Decide, where a director has multiple board
representation, whether the director is able to and has
been adequately carrying out his duties as director of
the Company.
Save that a member of this Committee shall not be involved
in the deliberations in respect of any remuneration,
compensation, options or any form of benefits to be granted
to him.
(5) Decide how the Board’s performance may be evaluated,
and propose objective performance criteria to assess
effectiveness of the Board as a whole and the
contribution of each director.
(6) Annual assessment of the effectiveness of the Board as
a whole and individual directors
(7) Review succession plan.
(8) Sub-delegate any of its powers within its terms of
reference as listed above, from time to time, as this
Committee may deem fit.
E. Remuneration Committee
(1) Recommend to the Board a framework of remuneration
for board members and key executives.
(2) Determine the specific remuneration packages for each
director and the chief executive officer (if the chief
executive officer is not an executive director).
(3) Decide the early termination compensation (if any)
of directors.
(4) Consider whether directors should be eligible for
benefits under long-term incentive schemes (including
weighing the use of share schemes against the other
types of long-term incentive scheme)
(5) Review the terms, conditions and remuneration of the
senior management.
F. Board Safety Committee
a. General Principles
(1) The Board Safety Committee (the “BSC”) is a
committee of the board of directors of Keppel
Corporation Limited (“Keppel”).
(2) The BSC is formed to assist in enhancing the
Keppel Group’s commitment to work safety in
the work places of its member companies.
(3) The objective of the BSC is to assist in
fostering and sustaining a first-world safety
culture in the Keppel Group. This will involve
efforts which would span the long term and
would emphasise key fundamentals.
(4) A sub-objective of the BSC is to assist member
companies in their compliance to the standards
required of the newly enacted WHSA.
(5) The BSC may, in consultation with the
Chairman of the Board, engage third party
OSH professionals from time to time to
assist in the discharge of any aspect of the
committee’s function.
(6) The BSC shall be supported by an adequate
support administration staff as may be required.
Corporate governance
Keppel Corporation Limited
Report to Shareholders 2006
59
Corporate governance
b. Scope of Coverage
(1) The BSC should assist member companies in
reviewing and setting policies, guidelines,
directions and appropriate incentives to nurture
and sustain a first world safety culture within
the Keppel Group.
(2) The BSC should examine with the management
of the member companies as to whether the
safety functions in the respective member
companies are adequately resourced (in terms
of number, qualification and budget), vested
with appropriate standing within the
companies, and with the systems to reasonably
ensure that they are able to adhere to the three
primary elements of risk management. The
three elements are:
• Assessment of risks before commencement
of work (“Risk Assessment”);
• Elimination of identified risks (“Risk
Elimination”); and
• Minimisation of identified risks where
such risks cannot be eliminated
(“Risk Minimisation”).
(3) The BSC’s focus will be to:
• enquire as to whether due processes,
checks and balances and audit protocols are
in place in member companies in respect of
OSH management;
• ensure that internal processes are in place
to enable the BSC to conduct reviews
and to be updated by the management of
the member companies or appropriate
external specialists;
• assist in ensuring that proper processes are
in place in each member company to
ensure that the safety functions in the
respective member companies are
adequately resourced (in terms of number,
qualification and budget), vested with
appropriate standing within the organisation,
and with the systems to reasonably
discharge their work safety obligations;
• assist in putting measures in place to bench
mark the member companies’ OSH
management systems against industry
best practices;
• ensure that safety personnel or managers
with safety responsibility have
unencumbered and unfettered reporting
lines to the CEO of member companies,
notwithstanding that operationally, the
safety function has a reporting line to the
Head of Operations; and
• assist in putting in place proper processes
towards ensuring that information on
safety risks are disseminated to all
affected persons, and that employees
and contractors are properly trained
and supervised.
(4)
In connection with the above, the BSC should
also examine with the management of the
member companies as to whether the
secondary elements of work safety – such as
keeping work force and others informed;
keeping adequate records; and sustaining
ongoing training are property addressed.
(5) The BSC may consider proposals by member
companies on changes, either in part or in
whole, to their OSH management systems
and/or work safety related matters.
(7)
(6) The BSC may carry out such investigations
into any work safety related matters as the
BSC may deem fit.
In connection with a(4), and as a start, each of
the member companies of the Keppel Group
shall be advised to perform a self evaluation
as to their existing OSH management
systems and for each of these member
companies to deliver the outcome of their
self evaluation as soon as practicable, but not
later than 15 July 2006.
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Corporate governance
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Report to Shareholders 2006
c. General Provisions
(1) The BSC may sub-delegate any of its powers within its terms of reference as listed above from time to time as
it may deem fit.
(2) The BSC shall report to the Board on material matters, findings and recommendations.
(3) The BSC shall perform such other functions as the Board may determine and may invite any person who is not
a director of KCL Group to be part of the BSC either on an ad-hoc basis or for a term of time.
Nature of current directors’ appointments and membership on board committees
Director
Board Membership
Audit
Executive
Nominating Remuneration
Risk
Safety
Committee Membership
Lim Chee Onn
Executive Chairman
– Chairman
Tony Chew Leong-Chee
Lead Independent Member Member
Director
Independent Chairman Member
–
–
–
–
–
– Member
–
– Member
Lim Hock San
Sven Bang Ullring
Tsao Yuan Mrs Lee Soo Ann
Leung Chun Ying
Oon Kum Loon (Mrs)
Tow Heng Tan
Yeo Wee Kiong
Choo Chiau Beng
Teo Soon Hoe
Independent
Independent
Independent
–
–
–
– Chairman Chairman
– Member Member
– Member
– Member
–
– Member
–
Independent Member Member Member
– Chairman
– Member
– Member Member
–
–
– Member
– Member
–
–
–
– Member Chairman
–
–
–
–
–
–
Non–Independent
& Non-Executive
Independent
Senior Executive Director
Senior Executive Director
& Group Finance Director
–
–
–
–
–
Board performance
Evaluation processes
Board
Each board member is required to complete a Board
Evaluation Questionnaire and send the questionnaire direct
to the Independent Co-ordinator (“IC”) within five working
days. An “Explanatory Note’” is attached to the
questionnaire to clarify the background, rationale and
objectives of the various performance criteria used in the
Board Evaluation Questionnaire with the aim of achieving
consistency in the understanding and interpretation of the
questions. Based on the returns from each of the directors,
the Independent Co-ordinator prepares a consolidated report
and briefs the Chairman of the Nominating Committee
(“NC”) on the report. Thereafter, the IC presents the report
for discussion at a meeting of the non-executive directors
(“NEDs”), chaired by the Lead Independent Director.
Following the NED meeting, the IC will, together with the
Chairman of the NC, brief the Chairman of the board on the
report and the recommendations of the NEDs. The IC will
thereafter present the report to the board together with the
recommendations of the NEDs for discussion on the
changes which should be made to help the board discharge
its duties more effectively.
Corporate governance
Keppel Corporation Limited
Report to Shareholders 2006
61
Corporate governance
Individual Directors
The Board differentiates the assessment of an executive
director from that of a non-executive director (“NED”).
In the case of the assessment of the individual executive
director, each NED is required to complete the executive
directors’ assessment form and send the form directly to the
IC within five working days. It is emphasised that the
purpose of the assessment is to assess each of the
executive directors on their respective performance on the
board (as opposed to their respective executive
performance). The executive directors are not required to
perform a self, nor a peer, assessment. Based on the returns
from each of the NEDs, the IC prepares a consolidated report
and briefs the Chairman of the Nominating Committee
(“NC”) on the report. Thereafter, the IC presents the report
for discussion at a meeting of the non-executive directors
(“NEDs”), chaired by the Lead Independent Director.
Following the NED meeting, the IC will, together with the
Chairman of the NC, brief the Chairman of the board on the
report and the recommendations of the NEDs. The IC will
thereafter present the report to the board together with the
recommendations of the NEDs. The Chairman of the NC will
thereafter meet with the executive directors individually to
provide the necessary feedback on their respective board
performance with a view to improving their board
performance and shareholder value.
As for the assessment of the performance of the NEDs,
each director (both NEDs and executive directors) is required
to complete the NEDs’ assessment form and send the form
directly to the IC within five working days. Each NED is also
required to perform a self-assessment in addition to a peer
assessment. Based on the returns, the IC prepares a
consolidated report and briefs the Chairman of the NC on the
report. Thereafter, the IC presents the report for discussion
at a meeting of the NEDs, chaired by the Lead Independent
Director. Following the NED meeting, the IC will, together
with the Chairman of the NC, brief the Chairman of the board
on the report and the recommendations of the NEDs. The IC
will thereafter present the report to the board together with
the recommendations of the NEDs. The Chairman of the NC
will thereafter meet with the NEDs individually to provide the
necessary feedback on their respective board performance
with a view to improving their board performance and
shareholder value.
Chairman
The Chairman Evaluation Form is completed by each NED
and sent directly to the IC within five working days. Based on
the returns, the IC prepares a consolidated report and briefs
the Chairman of the NC on the report. Thereafter, the IC
presents the report for discussion at a meeting of the NEDs,
chaired by the Lead Independent Director. Following the
NED meeting, the IC will, together with the Chairman of the
NC, brief the Chairman of the board on the report and the
recommendations of the NEDs. The IC will thereafter
present the report to the board together with the
recommendations of the NEDs.
Performance criteria
The performance criteria for the board evaluation are in
respect of the board size and composition, board
independence, board processes, board information and
accountability, board performance in relation to discharging
its principal functions, board committee performance in
relation to discharging their responsibilities set out in their
respective terms of reference, and financial targets which
includes return on capital employed, return on equity, debt/
equity ratio, dividend pay-out ratio, economic value added,
earnings per share, and total shareholder return (i.e., dividend
plus share price increase over the year).
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The assessment of the Chairman of the board is based on
his ability to lead, whether he established proper procedures
to ensure the effective functioning of the board, whether
he ensured that the time devoted to board meetings were
appropriate (in terms of number of meetings held a year
and duration of each board meeting) for effective discussion
and decision-making by the board, whether he ensured
that information provided to the board was adequate (in
terms of adequacy and timeliness) for the board to make
informed and considered decisions, whether he guides
discussions effectively so that there is timely resolution of
issues, whether he ensured that meetings are conducted
in a manner that facilitates open communication and
meaningful participation, and whether he ensured that board
committees are formed where appropriate, with clear terms
of reference, to assist the board in the discharge of its duties
and responsibilities.
The individual director’s performance criteria are categorised
into five segments; namely, (1) interactive skills (under which
factors as to whether the director works well with other
directors, and participates actively are taken into account);
(2) knowledge (under which factors as to the director’s
industry & business knowledge, functional expertise,
whether he provides valuable inputs, his ability to analyse,
communicate & contribute to the productivity of meetings,
and his understanding of finance and accounts are taken into
consideration; (3) director’s duties (under which factors as to
the director’s board committee work contribution, whether
the director takes his role of director seriously & works to
further improve his own performance, whether he listens
and discusses objectively & exercises independent
judgment, and meeting preparation are taken into
consideration); (4) availability (under which the director’s
attendance at board and board committee meetings,
whether he is available when needed, and his informal
contribution via e-mail, telephone, written notes etc are
considered, and (5) overall contribution, bearing in mind that
each director was appointed for his/her strength in certain
areas which, taken together with the skill sets of the other
directors, provides the board with the required mix of skills
and competencies.
Corporate governance
Keppel Corporation Limited
Report to Shareholders 2006
63
Investor relations
Clear, consistent and timely
communication helps our investors
make informed decisions.
At Keppel Corporation, we are proactive in our investor
relations approach through frequent and regular
communications with our investors and analysts globally.
to further raise the awareness and prominence of
Keppel Corporation to the investing public, especially
the international institutions.
Our dedicated investor relations team, together with
Keppel Corporation’s senior management and business
unit heads, meets members of the investing community
throughout the year, both in Singapore and overseas.
The keen interest in the global marketplace of our company
generated an even higher level of investor activities in 2006.
We held 125 face-to-face meetings with prospective and
existing institutional investors for the year.
Amid the buoyancy of the industries that we operate in and
the several milestone business developments, we continued
to sustain a loyal following among overseas fund managers
last year. For this reason, our senior management went on
non-deal roadshows to the US, UK, Japan and Hong Kong to
meet shareholders and keep them informed of key
developments, strategic directions and long-term plans to
drive growth.
To give our investors more intimate insights into our
business units and operations, we facilitated meetings with
senior management of our key subsidiaries. In particular,
several investors, from the UK, Norway, the US and
Hong Kong visited our shipyards to view our rigbuilding
operations and facilities. Many of our investors and analysts
also have access to the senior management of our
subsidiaries at various functions, from vessel-naming to
arts and charity events sponsored by the Group.
On top of these forms of investor outreach, our management
and investor relations team also actively engage overseas
investors through conference calls. These sessions help us
clarify issues that the investors have on developments
as well as provide platforms for in-depth discussions on
our strategies.
Our drive to provide transparent and appropriate disclosure
has won the confidence of our institutional shareholders.
They collectively own more than three-quarters of our
issued shares.
We have established channels that allow us to reach more
stakeholders effectively. Our quarterly presentations are
webcast ‘live’ and these webcast sessions are accessible to
all members of the public. These serve as purposeful
platforms for senior management to discuss our performance
and business outlook. The webcast has a ‘live’ interactive
format, enabling local and overseas stakeholders to post
questions to management through the Internet.
In addition, we believe in supporting the needs of retail
shareholders through our partnership with the Securities
Investors Association of Singapore (SIAS). As a corporate
sponsor of their Investor Education Programme, we have
supported their seminars which have been instrumental in
educating retail investors and strengthening their investment
decision-making processes.
Our belief in transparent and timely communications was
put into action when we clinched the landmark $1.7 billion
infrastructure contract in Qatar in October 2006. On the
same day we signed the contract to build the Middle East’s
largest domestic solid waste management facility, we
provided comprehensive information on the plant’s design
and contract details.
Subsequently, we organised a media and analyst conference
where management discussed the contract as well as
explained its significance. A recording of the event was also
posted on the Internet on the same day.
Our investor communications help our shareholders
understand the intrinsic value of our businesses, growth
drivers and the qualities that enable us to rise beyond the
challenges in the competitive landscape. In turn, these help
As Keppel continues to grow, we believe such timely and
transparent communications will serve the interests of
investors well.
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Our investors gain insights into our business operations through
yard visits. Apart from this, the press and analyst conference is
one of the platforms that allows our management and business
unit heads to interact with the investing community.
At the presentation of the Qatar integrated solid waste treatment
facility, KIE Chief Executive Officer Chua Chee Wui shared with
the analysts on how the company competed against some of
the best international firms in the tender and that securing that
contract endorsed Keppel’s proven state-of-the-art technologies
and project management expertise. KIE is continuing to set
its sights on the Middle East to secure more projects, and will
leverage its established track record in offering both its water
and thermal waste treatment solutions to clients in that region.
Recognition
We were ranked among the best of Singapore-listed
companies in investor relations at the seventh SIAS
Investors’ Choice Awards. Keppel Corporation won the
prestigious Golden Circle Award for being the overall
winner in the Most Transparent Company categories for
multi-industry/conglomerate companies as well as those
with market capitalisation exceeding $1 billion.
We were also recognised for being among the best in
transparency among Singapore-listed companies in
The Business Times Corporate Transparency Index, as well
as by the Hewitt Best Managed Boards in Singapore Awards.
Keppel Corporation’s share price had a sterling performance
in 2006. In absolute terms, it gained 60% to close at $17.60
at the end of the year. This outperformed the Straits Times
Index’s improvement of 27% for 2006.
Our Total Shareholder Return for the year was 65.3%,
compared to 32.5% in 2005.
Investor relations
Keppel Corporation Limited
Report to Shareholders 2006
65
Awards and accolades
Beyond our financial achievements,
Keppel is recognised for our
business excellence.
Corporate governance and transparency
Securities Investors Association of Singapore
7th Investors’ Choice Awards
Keppel Corporation
• Golden Circle Award, for being the overall winner of
the Most Transparent Company Award
• Winner, Most Transparent Company Award for
Multi-Industry/Conglomerate category
• Winner, Most Transparent Company Award for companies
with market capitalisation exceeding $1 billion
• First runner-up, Singapore Corporate Governance Award
Keppel Land
• Runner-up, Most Transparent Company Award for
Property category
Singapore Petroleum Company
• Merit, Singapore Corporate Governance Award
Business Times Corporate Transparency Index
• Keppel Corporation, Keppel Land and Keppel T&T were
ranked ninth, third and twelfth respectively out of 621
Singapore-listed companies for the level, quality and
timeliness of disclosures
Singapore Corporate Awards 2006
Keppel Land
• Gold Award, Best Annual Report in award category for
listed firms with a market capitalisation of $500 million
or more
Keppel Corporation
• Silver Award, Best Investor Relations in award category
for listed firms with a market capitalisation of $500 million
or more
Hewitt Best Managed Boards in Singapore Awards 2006
Keppel Corporation
• Silver Award for high standards of corporate governance
Business excellence
• Keppel FELS Brasil was honoured with the Premio
Top Award for 2005/2006 in Brazil’s Offshore & Marine
construction sector from Brazil’s industry journals for
corporate, business and social excellence
• Keppel Land won the Euromoney Award for Excellence in
Real Estate 2006
• Keppel Shipyard secured Lloyd’s List Maritime Asia Award
for being the best shiprepair yard in Asia for the second
consecutive year
• ECHO Broadband received ISO 9001:2000 certification for
its quality service
Keppel Land garnered recognition for its property projects
as follows:
Caribbean at Keppel Bay
• Winner (Residential category), FIABCI Prix d’Excellence at
the International Real Estate Federation competition
• Gold Award (Implementation/Residential), Landscape
Industry Association (Singapore) Awards of Excellence 2006
• Merit Award, Building and Construction Authority’s
Construction Excellence Awards 2006
• Gold Award, Implementation/Residential category;
Silver Award, Maintenance category, by the
Landscape Industry Association (Singapore) for
landscaping excellence
The Tresor
• Green Mark Gold Award, at the Building and Construction
Authority’s Construction Excellence Awards 2006 for
environmental friendliness in design
The Waterfront, Chengdu, China
• Model Residential Development of the International
Community Award from the Department for Brand
Endorsement, Chengdu Housing Bureau
66
Awards and accolades
Keppel Corporation Limited
Report to Shareholders 2006
MOM and ASPA awards
The Keppel Group’s unwavering commitment to achieving
the best of industry standards in safety has once again been
recognised. In addition to the numerous awards won group-
wide, Keppel O&M bagged seven out of nine Silver awards in
the Marine category at the annual Workplace, Safety and
Health Awards (WSH). The annual event, co-organised by the
Ministry of Manpower and the Workplace Safety and Health
Advisory Committee (WSHAC), gives recognition to companies
that have achieved excellent performance through sound and
effective management of workplace, safety and health issues at
their workplaces.
Patron of the Arts
Keppel Corporation was presented the Friend of the
Arts Award for the fifth consecutive year in 2006. It sponsored
the distinguished instrumental and vocal ensemble of Baroque
music, Collegium Vocale Gent, at the Esplanade Concert Hall.
Both Keppel FELS and SPC received the Arts Supporter Award.
Keppel FELS presented the music prodigy, Bebel Gilberto’s
concert on 31 March 2005; while Keppel Group showcased
a world-class act – The Gala Concert: Lorin Maazel and the
Singapore Symphony Orchestra – to classical music lovers
in Singapore on 13 March 2006 at the Esplanade. Pictured
here are Mr Jaya Kumar, GM of Marketing, Keppel FELS;
Ms Wang Look Fung, GM of Group Corporate Communications,
Keppel Corporation and Mr Lee Chiang Huat, CFO and
Senior VP of Singapore Petroleum Company, with the
Arts Awards.
Villa Riviera, Shanghai, China
• Asia’s Best Metropolitan Villa award, conferred by the
United Nations Renju Environment Development
Promotion Association, International Land Agent
Association, France Architectural Stylist Association and
Asian Real Estate Highest Leadership Conference
Organising Committee
Corporate citizenship
• Keppel Land and Keppel Shipyard received the Defence
Partner Awards from the Ministry of Defence for
supporting civil defence
• Recognised by various customers with safety and
early-delivery bonuses of $2.6 million, including recognition
for six million man-hours with zero lost-time incidents
during construction of Petrobras’ floating production units,
P-52 and P-51
Keppel FELS Brasil
• Received BVQI Safety and Occupational Health
Administration OHSAS 18001 and ISO 14001
System of Environmental Administration certification for
the alignment of Brazilian operations with Keppel O&M’s
and international environmental and safety standards
• Keppel Shipyard received the Job Redesign Grant from the
Singapore National Employers Federation for enhancing
work processes to enable the hiring of mature workers
Keppel Shipyard
• Clinched a gold award from Singapore’s National Community
Safety & Security Programme for active participation in
ensuring security
Safety
Keppel FELS, Keppel Shipyard and Keppel Singmarine
• Garnered seven silver Innovation for Occupational Safety &
Health Awards from the Ministry of Manpower and the
WSHAC for sound and effective management of workplace
safety and health issues
Singapore Petroleum Company
• Singapore Refining Company’s staff and contractors
achieved six million man-hours over three years with
zero lost-time incidents
Awards and accolades
Keppel Corporation Limited
Report to Shareholders 2006
67
Nurturing a safety culture
Keppel Group believes that good safety management contributes to
operational excellence. The Group has embarked on a journey to
build a safety culture at our workplaces by inculcating a mindset
among our employees of putting safety first.
In line with this objective, Keppel Corporation formed the
Board Safety Committee on 17 January 2006 to enhance the
Group’s commitment to “Safety First”. Chaired by Mr Yeo Wee Kiong,
Independent Director of the Keppel Corporation Board, the
four-member committee of which the Executive Chairman of
Keppel Corporation Lim Chee Onn is also a member, aims to assist in
fostering and sustaining a first-world safety culture in the Keppel
Group. Keppel Land has since established a Board Safety Committee
comprising four directors on 1 March 2007, further emphasising the
company’s commitment to workplace safety.
Nurturing a safety culture
“We shall be relentless in
promoting the culture of
safety. We will do whatever
it takes to implement
safety regulations.”
Lim Chee Onn
Executive Chairman
Board Safety Committee
The Keppel Corporation Board Safety Committee augments
the Keppel Group companies’ safety initiatives by reviewing
management’s proposals in relation to their safety
management systems and assisting in the drive towards
fostering a safety culture within the Group.
In emphasising the importance of safety, Keppel has adopted
the practice of placing safety as the first item on the agenda
for board meetings for all companies under the Group.
With the Board Safety Committee facilitating a common
discussion platform for safety-related matters for all the
companies, it draws our business units together for active
knowledge sharing and cross-fertilisation of ideas that will
enable the Group to build a strong safety culture.
Safety practices and initiatives
Offshore & Marine
As a global leader in the offshore and marine industry,
Keppel Offshore & Marine (Keppel O&M) is applying the
same Can Do! spirit to ignite passion for excellence in
its Health, Safety and Environment (HSE) management.
The group also formulated a new occupational safety
and health framework in 2006 that provided continuous
improvement of its safety systems to imbue safety
consciousness in each individual employee and
subcontract worker.
The Offshore & Marine group also took the lead in 2006 by
putting in place its in-house job hazard analysis system to
help workers mitigate risk and hazards.
This was done well ahead of the Workplace Safety and
Health (Risk Management) legislation implemented by the
Ministry of Manpower on 1 September 2006.
In line with these moves, communicating the safety
message to staff formed the main part of Keppel O&M’s
major HSE initiatives in 2006. In-house training courses on
Risk Assessment were conducted for its managers and
supervisors. In addition, Keppel Shipyard also initiated a
Safety Leadership Programme emphasising pro-active
actions such as hazard identification and observation and
intervention of unsafe acts. The programme further
reinforced the importance of safety from the perspective of
its managers and supervisors as leaders coaching their
respective teams on safety leadership.
Last year, the Board Safety Committee initiated a workshop,
‘Creating a safety culture’, for the Board of Directors,
senior management and safety managers across
Keppel Group. The seminar was conducted by external
consultant, DuPont, which is reputed for its safety culture
and rigorous training.
During the year, Keppel FELS held its annual safety campaign
in July with Risk Assessment as the main theme. Keppel
Shipyard and Keppel Singmarine also held safety campaigns
in December 2006 focusing on the prevention of hand and
finger injuries.
70
Special feature
Nurturing a safety culture
Keppel Corporation Limited
Report to Shareholders 2006
We conducted a group-wide safety
seminar during the year.
Investors are briefed on the safety processes at our yards.
Keppel FELS’ focus on health and safety management
has been endorsed, with the yard having attained the
Occupational Health and Safety Assessment Series 18001
or the OHSAS 18001. This is an internationally recognised
occupational health and safety management system,
to control related risks and improve performance.
Lockton Companies (Singapore) Pte Ltd, the WSHC finalised
and implemented Keppel Land’s own safety standards to
measure and assess contractors’ safety performance. These
safety standards also serve as a measurement tool in the
evaluation of tenders during selection exercises prior to the
award of contracts.
Property
Keppel Land believes that good safety management equates
to good business sense and hence has embarked on a
journey to foster safety as a culture, which will characterise
the way the company conducts business.
As part of this effort, it formed a Workplace Safety and
Health Committee (WSHC) to spearhead initiatives on safety
and to create a safety culture in the company.
Another objective of the WSHC is to formulate policies and
guidelines to assist business units to exercise due diligence
and carry out its duties of care, including taking all reasonably
practicable measures to ensure that the workplace is safe to
employees and co-workers.
One of the key initiatives Keppel Land implemented in 2006
was the formulation of safety standards. With the assistance
of an appointed Occupational Safety and Health consultant,
The appointed occupational safety and health consultant
assessed the safety management systems of several local
contractors involved in Keppel Land’s development projects.
Where there are disparities between the contractors’ safety
standards and that of Keppel Land’s, discussions are held to
close this gap. This assessment of safety management
systems is being progressively introduced to all projects in
Singapore and overseas.
Another initiative was the implementation of independent
safety surveillance. Over and above safety checks carried
out by contractors in Singapore, Keppel Land instituted
additional third-party safety checks on construction sites
to verify contractors’ compliance with relevant regulatory
requirements and safe work practices. These checks
were carried out monthly and any shortcoming would be
highlighted to the contractors. Records were also kept for
subsequent reviews. In addition, every construction work
site in Singapore and overseas was required to collate and
Special feature
Nurturing a safety culture
Keppel Corporation Limited
Report to Shareholders 2006
71
Delivering quality homes demands a keen focus on work processes.
submit reports and statistics to the WSHC on accident
frequency and severity rates at construction sites. In an
unfortunate event of any accident, the incident would be
investigated and any lesson learned would be shared with
relevant business units to prevent recurrence.
Other safety moves undertaken by Keppel Land’s WSHC
included visiting sites to propagate the message of safety
and inviting contractors to share their experiences at
regular sessions.
While risk and safety issues faced by completed commercial
buildings differ from construction sites, elimination and
mitigation of safety and health risk is of utmost importance.
As such, the property management teams in each building
had implemented a comprehensive risk management
process to address risk at source. This entailed a risk
assessment of any work activity, control and monitoring of
such risk and communicating these risks to persons involved.
units to monitor and analyse their safety performance against
Singapore’s industrial safety standards.
In conjunction with this, budgets were allocated to provide
safety training and promotion as well as safety information
updates to all local business units.
KIE responded positively to the Ministry of Manpower’s
Workplace Safety and Health Act. It also worked with the
Ministry to create a stronger safety culture and shape
mindsets on safety. With its experience in various
construction industries, KIE is able to conduct comprehensive
Risk Assessments in method statement submission and
implement control measures to eliminate or reduce risks.
Continuous and deliberate conduct of activities in
promoting the importance of health and safety at work
are encouraged at Keppel Telecommunications &
Transportation’s wholly-owned Keppel Logistics unit.
Infrastructure
Keppel Integrated Engineering (KIE) initiated a number of
measures in 2006 to further enhance and improve its
environmental, health and safety standard. This included
integrating and consolidating all of its environmental,
health and safety standard reports by its local and overseas
business units at its headquarters every month. The complete
safety report and statistics for KIE were in turn disseminated
to all of its subsidiaries. This enabled KIE and all its business
The logistics unit has a risk management framework to
address the inherent business risks, by putting in place various
programmes and initiatives involving all levels of staff.
With the Workplace and Safety Health Act in place since
1 March 2006, Keppel Logistics has completed a programme
of Risk Assessment and Evaluation at each shop floor level
operation to identify and implement mitigating procedures to
eliminate risk.
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Special feature
Nurturing a safety culture
Keppel Corporation Limited
Report to Shareholders 2006
Chart 1: Keppel O&M’s journey to a safety culture
Natural Instincts Supervision Self Teams
Reactive
Dependent
Independent
Interdependent
s
e
t
a
r
y
r
u
n
j
I
• Safety by natural instinct
• Compliance as the goal
• Delegated to safety manager
• Lack of management involvement
• Management commitment
• Condition of employment
• Fear/discipline
• Rules/procedures
• Supervisor control, emphasis,
and goals
• Value all people
• Training
• Personal knowledge,
commitment, and standards
• Internalisation
• Personal value
• Care for self
• Practice, habits
• Individual recognition
• Help others conform
• Others’ keeper
• Networking contributor
• Care for others
• Organisational pride
Copyright © 2007 DuPont.
All rights reserved.
The company is consciously and conscientiously building a
safety culture at its workplace, such that Occupational Health
and Safety will be wholeheartedly embraced by every
individual worker, co-worker and all stakeholders.
The company’s safety committee meets monthly to discuss,
review and recommend safety-related issues and policies for
implementation at the shop floor level. Apart from the annual
fire emergency drill conducted, the unit holds ‘Safety Month’
campaigns annually to inculcate safety awareness. The
Singapore Civil Defence Force is also invited to conduct
promotions and programmes involving contractors and
occupiers of its premises. Safety inspections are conducted
regularly to ensure timely identification of unsafe work
processes and potential risk exposure.
With their focus on safety consciousness and standards,
both KIE and Keppel Logistics have been certified for their
health and safety management standards. Keppel Seghers,
Keppel FELS Cranes, Keppel FMO and Keppel Logistics have
attained OHSAS 18001.
The ultimate objective for Keppel Group is for our workers to
not only think about their own safety, but also that of
co-workers. Through such constant preoccupation with
thinking and acting safely, a behavioural safety culture will
potentially be entrenched within the entire Group.
Towards a safety culture at Keppel O&M
“Safety First” is a key practice for Keppel O&M. The group
strives for all its people to go home safe and sound every
day. In its journey towards building a safety culture,
Keppel O&M focused its strategic thrusts in four areas:
management commitment, empowerment of employees,
visibility and openness as well as incentives and penalties.
Visibility of leadership commitment is evident at
Keppel O&M. The group’s safety steering committee is
co-chaired by the Chairman/CEO and the Managing Director/
COO. In addition, a group general manager for safety has
recently been appointed to augment the efforts of the
executive directors at the business units’ level. The executive
directors are both chairmen and champions of their yards’
safety steering committee. Supported by the yards’ safety
departments, the executive directors are responsible for the
yards’ safety.
Using an illustration of the journey to a safety culture
(see Chart 1), it is notable that Keppel O&M is taking steps
towards the interdependent behaviour stage, as there is an
increasingly open channel of communication of safety issues
and concerns being shared among co-workers, cascading
from management to employees.
Special feature
Nurturing a safety culture
Keppel Corporation Limited
Report to Shareholders 2006
73
Our goal is for all ranks to internalise a safety culture.
A noteworthy milestone achieved by Keppel Shipyard’s
employees last year was the formation of the Workforce
Safety Council in November. The Council comprises entirely
employees at the workers’ level. With its “For the Workers,
By the Workers” motto, the Council’s objective is to create a
safe and healthy workplace for every person in the yard
through the provision of a communication platform for
feedback, dissemination of management’s expectations and
encouragement of positive work behaviour.
Subcontractors of Keppel Shipyard followed subsequently
the example of Keppel Shipyard with the launch of their own
HSE watch groups.
Openness towards near miss incident reporting and lessons
learnt were encouraged, resulting in a great amount of
sharing among all the Keppel O&M yards.
The HSE teams also work closely with their counterparts
and customers who provide invaluable guidance and advice.
In fact, some customers like SBM, the world’s largest
owner and operator of FPSO/FSOs, and ExxonMobil,
the world’s largest oil company, have been members of
Keppel Shipyard’s safety steering committee since
mid-2002. They are deeply involved with Keppel Shipyard’s
safety initiatives.
The watch groups augment Keppel Shipyard’s HSE efforts by
providing a communication channel between Keppel and its
more than 160 subcontracting companies. There will be one
HSE watch group for each of Keppel Shipyard’s yards at
Tuas, Gul and Benoi.
Based on the International Occupational Safety and Health
Administration (OSHA) standards, Keppel Shipyard’s
commitment to safety saw the yard’s accident frequency
rate in 2006 decline to 0.99 from 1.21 in 2005. The Accident
Frequency Rate (AFR) measures the number of reportable
accidents per million manhours worked.
74
Special feature
Nurturing a safety culture
Keppel Corporation Limited
Report to Shareholders 2006
Table 1: Keppel O&M’s safety achievements in 2006
Yard
Keppel FELS Brasil
Keppel Shipyard
Keppel FELS
Keppel Batangas
Keppel FELS
Keppel FELS
Keppel FELS
Keppel FELS
Keppel FELS
Keppel FELS
Keppel FELS
Keppel FELS
Keppel FELS
Keppel Shipyard
Keppel FELS
Keppel FELS
Keppel FELS
Project
P-51/P-52
P-53
Mærsk semi no.1
ENSCO 8500
Mærsk jackup no.1
Deep Driller 2
Deep Driller 3
West Prospero
Sedco 702
Deep Driller 5
West Atlas
West Berani
Wilcraft
FPSO Polvo
Al-Khor
Al-Zubarah
PV Drilling 1
Manhours without
Lost Time Incident
8,500,000
5,000,000
3,000,000
3,000,000
2,000,000
2,000,000
2,000,000
2,000,000
2,000,000
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
Client
Petrobras
Petrobras
Mærsk
ENSCO
Mærsk
Sinvest
Sinvest
SeaDrill
Transocean
Sinvest
SeaDrill
SeaDrill
Awilco
Prosafe
GDI
GDI
PetroVietnam
Yard safety records and performances
Despite the heavy workload in our seven yards in Singapore,
Keppel O&M maintained its good safety performance during
the year. The 10-year low AFR of 1.73 for its Singapore yards
in 2005 improved further to 1.20 in 2006 (see Chart 2).
Keppel O&M’s customers continued to recognise its
safety achievements in various projects across its yards
(see Table 1).
For the Ministry of Manpower’s Annual Safety & Health
Performance Award 2006, Keppel O&M bagged seven of
nine Silver awards in the Marine category at the inaugural
Workplace Safety and Health Awards ceremony.
Co-organised by the Ministry of Manpower and Workplace
Safety and Health Advisory Committee, the awards were
created to recognise companies for their excellent safety
performances in their respective workplaces.
Chart 2: Keppel O&M (KOM) achieves sterling
safety performance
KOM Frequency Rate (FR)
Marine Industry National FR
Annual FR Target Set by
Ministry of Manpower
frequency rate
8.11
7.90
8.00
8.92
7.30
7.00
6.60
6.10
5.50
5.41
5.25
5.10
4.60
4.10
4.05
3.80
3.40
3.19
10
9
8
7
6
5
4
3
2
1
0
3.40
3.40
3.00
3.10
2.80 2.80
2.09 1.88 1.75
2.80
2.70
1.20
1.73
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Special feature
Nurturing a safety culture
Keppel Corporation Limited
Report to Shareholders 2006
75
Advancing technology,
growing innovation
At Keppel, innovation and the need to adapt are becoming a way of
life. Technology innovation is vital to sustain and further the Group’s
long-term growth.
To succeed in meeting the needs of the marketplace, and to
enable us to grow beyond, we are committed to invest in the
research, design and development of products and processes in
our businesses.
Our financial strength and business leadership have placed us in a solid
position to invest and increase our capability and resources in R&D.
To this end, we are setting up technology centres in Keppel Offshore
& Marine (Keppel O&M) and Keppel Integrated Engineering (KIE).
We will carry out investments in these centres in a disciplined and
prudent manner to maximise returns. Research priorities at these
centres will be determined in consultation with line managers to
ensure meaningful commercial contribution to the businesses,
with the aim of creating shareholder value.
Leveraging our core businesses and global network, we are
collaborating with our business partners, academia and industrial
research institutions to exploit innovative technology to develop
new products and processes that can deliver robust results.
With the advice and guidance from our Keppel Technology Advisory
Panel (KTAP) comprising eminent business leaders, academic
professionals and industry experts, we aim to cultivate a culture of
innovation, where R&D talents are nurtured, groomed and rewarded.
Advancing technology, growing innovation
Keppel Technology Advisory Panel
From left to right:
Dr Brian Clark
Professor James Leckie
Professor Minoo Homi Patel
Dr Yeo Ning Hong
Dr Tan Gee Paw
Professor Cham Tao Soon (Chairman)
Dr Malcolm Sharples
Professor Sir Eric Ash
Professor Tom Curtis
Professor Cham Tao Soon (Chairman)
University Distinguished Professor of the
Nanyang Technological University in Singapore
He was the founding President of the Nanyang Technological
University (NTU) in 1981. He relinquished the post in 2002,
and was appointed University Distinguished Professor to
pursue areas like strategies of small and medium enterprises,
entrepreneurship and management of technology. Professor
Cham received the International Medal of the British Royal
Academy of Engineering in 2006.
Professor Sir Eric Ash
BSc and PhD, Imperial College London; CBE FREng FRS
He is presently on the Board of Ocean Power Inc and Chairman
of OPT Ltd. A past president of the IEE, he is a Foreign Member
of the US National Academy of Sciences. He was Rector of
Imperial College 1985 – 93, Vice President of the Royal Society
1997 – 2002. He has several honorary doctorates including one
from NTU Singapore.
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Special feature
Advancing technology, growing innovation
Keppel Corporation Limited
Report to Shareholders 2006
Dr Brian Clark
Schlumberger Fellow; B.S. Ohio State University; PhD,
Harvard University (1977)
He holds 45 patents related to the exploration and development
of oil and gas, primarily in wireline logging and Logging While
Drilling. He was recognised as the Outstanding Inventor of
the Year for 2002, by the Houston Intellectual Property Law
Association and as the Texas Inventor of the Year for 2002, by
the Texas State Bar Association.
Dr Yeo Ning Hong
BSc (Chemistry), First Class Honours, MSc, University of
Singapore; Master of Arts and PhD, Cambridge University (1970)
Dr Yeo is Advisor to Far East Organisation and formerly
Advisor to Temasek Holdings (Pte) Ltd and Hyflux Ltd. He is
also Chairman of SQL View Pte Ltd and Universal Gateway
International (Pte) Ltd, and serves as a Director of Singapore
Press Holdings Ltd.
Dr Yeo was a Cabinet Minister in the Singapore Government
from 1981 to 1994 holding appointments as Minister for
Communications, Information, National Development
and Defence.
Professor Minoo Homi Patel
Fellow of the Royal Academy of Engineering, the Institution
of Mechanical Engineers and the Royal Institution of Naval
Architects; Chartered Engineer; BSc (Eng) and PhD, University of
London and an Honorary Member of the Royal Corps of
Naval Constructors
He is Head of the School of Engineering at Cranfield University
and a Founder Director of the science park company BPP
Technical Services Ltd.
He also sits on the Boards of Keppel Offshore & Marine,
Cranfield Aerospace and Cranfield Engineering Innovations.
Dr Malcolm Sharples
Consulting Engineer, Offshore Risk & Technology; B. E. Sc
Engineering Science, University of Western Ontario; PhD
Structural Engineering, University of Cambridge;
Athlone Fellow
His company provides consulting on offshore-related
projects including project technical risk, financial due
diligence, regulatory advice and expediting, and business
development assistance.
He is a Director of Keppel Offshore & Marine.
Professor James Leckie
The C. L. Peck, Class of 1906 Professor of Environmental
Engineering and Applied Earth Sciences, Stanford University;
Director of the Environmental Engineering Laboratory;
Director, Pacific Rim Environmental Research Center; Director,
Stanford-China Executive Leadership Program; Co-Director,
Singapore Stanford Partnership; Chaired Professor,
Tsinghua University
He has appointments in both Civil and Environmental
Engineering, and Geological and Environmental
Sciences at Stanford. He is a member of the National
Academy of Engineering.
His areas of teaching and research are in environmental
chemistry and human exposure analysis.
Dr Tan Gee Paw
BEng (Civil), First Class Honours, University of Malaya; MSc
(Systems Engineering), University of Singapore; Doctor of
Science (Honorary), University of Westminster; Doctorate in
Engineering (Honorary), University of Sheffield.
He is the Chairman of Public Utilities Board (PUB), the water
authority of Singapore, and also the Chairman of Singapore
Utilities International, a PUB subsidiary. Mr Tan sits on the
boards of JTC Corporation, NTU-Stanford Management, Exploit
Technologies Pte Ltd, and the Singapore Millennium Foundation
Limited. Mr Tan is the Advisor for the Centre for Water
Research and Adjunct Research Professor for the Division of
Environmental Science & Engineering at the National University
of Singapore. He is also on the Advisory Panel of Nanyang
Technological University for the Clean Water Programme,
and Co-Chairman of the Environmental & Water Technologies
International Advisory Panel of Singapore’s Ministry of the
Environment & Water Resources.
Professor Tom Curtis
BSc (Hons) Microbiology, University of Leeds; M.Eng and
PhD Civil Engineering, University of Leeds.
He is a professor of Environmental Engineering of the University
of Newcastle upon Tyne, as well as a recipient of the Royal
Academy of Engineering Global Research Fellowship and
the Biotechnology and Biological Sciences Research Council
(BBSRC) Research Development Fellowship. His major areas of
research include microbiology and wastewater treatment.
Special feature
Advancing technology, growing innovation
Keppel Corporation Limited
Report to Shareholders 2006
79
We believe that technology
innovation is the key to strengthen
our business leadership and unlock
value in our core competencies.
The Prime Minister of Singapore, Mr Lee Hsien Loong,
(fourth from left) graced the inauguration of the Ulu Pandan
NEWater Plant built on Keppel Seghers’ technology. With him
are (from left) Mr Khoo Teng Chye, Chief Executive of PUB;
Mr Tan Gee Paw, Chairman of PUB; Dr Yaacob Ibrahim,
Minister for Environment and Water Resources;
Mr Lim Chee Onn, Executive Chairman of Keppel
Corporation; and Mr Chua Chee Wui, Chief Executive
Officer of Keppel Integrated Engineering.
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Special feature
Advancing technology, growing innovation
Keppel Corporation Limited
Report to Shareholders 2006
Keppel Technology Advisory Panel (KTAP)
The KTAP continues to provide strategic leadership for the
Group’s focus on technology and innovation, serving as an
expert counsel to the Group’s drive towards cultivating
an innovative environment, fostering lively cross-fertilisation
and rigorous sharing of ideas and applications across
business units.
In its role as a facilitator, KTAP provides a strategic perspective
of the myriad issues raised through discussions. The Panel
advises on technology trends and their impact on the future.
The Panel also plays the role of a mentor in advising on the
acquisition of expertise or improvements of technology
development processes that will help to sustain the Group’s
leadership position.
KTAP serves to provide:
• strategic leadership in the Group’s R&D and its
core businesses;
• support in creating a Group culture of innovation and
an environment conducive for nurturing R&D talent;
• alternative insights into industry developments and
customer needs;
• guidance for a clear process from identifying new
research areas to commercialisation of new products or
services; and
• progress reports of SBUs’ existing R&D operations.
Chaired by Prof Cham Tao Soon, the Panel, which consists of
eminent technology experts, academic professionals,
industry specialists and corporate leaders, has since grown
from seven members in 2005 to nine in 2006.
Panel members Dr Malcolm Sharples, Prof Minoo Homi Patel
and Dr Brian Clark bring with them extensive experience
and industry knowledge for offshore and marine, while
Prof James Leckie, Prof Tom Curtis, and Mr Tan Gee Paw
are academic and policy experts on environmental
engineering. Prof Cham Tao Soon, Dr Yeo Ning Hong
and Prof Sir Eric Ash, with their wealth of expertise,
will provide guidance on broad technology trends.
A disciplined process has since been instituted with the
formation of KTAP for the evaluation of R&D proposals.
This process sets out the necessary steps Keppel’s business
units have to take for initiating business and technology
evaluations, securing internal funding and exploring
partnerships with external specialists where necessary.
The Panel members also maintain active discussions and
collaborations with one another and the Group’s senior
management through a secure web portal.
To further encourage a culture of innovation in the Group,
inter-SBU meetings are organised by the KTAP secretariat.
They are held monthly for our people to share knowledge on
technologies, processes, techniques and business operations.
Sub-groups, which have been formed, have addressed topics
such as shiprepair technology, knowledge management and
process engineering. The inter-SBU meetings are also
platforms for discussions with external bodies such as
government research bodies. Avenues to test-bed and pilot
projects are also explored and initiated.
Technology centres
In 2007, we are establishing technology centres in
Keppel O&M and KIE to spearhead the growth of our
in-house competencies to conduct application R&D,
products and process development and technology foresight.
In technology foresight, we aim to build a knowledge base in
the sciences of the industry and encourage research of
medium to long-term industry trends to determine
market requirements.
Keppel Offshore & Marine Technology Centre will manage,
stimulate and perform longer-term research and product
development in the offshore and marine businesses where
we currently have strong business leadership.
Special feature
Advancing technology, growing innovation
Keppel Corporation Limited
Report to Shareholders 2006
81
Prime Minister Lee reviews Keppel Seghers’ engineering capability at the Ulu Pandan NEWater Plant.
The centre will augment Keppel O&M’s existing technology
business units, Offshore Technology Development (OTD),
Deepwater Technology Group (DTG) and Marine Technology
Development (MTD), which will continue to concentrate on
design and engineering.
Keppel Environmental Technology Centre (KETC) will drive
and direct research initiatives in environmental solutions.
It will focus research efforts on energy recovery from solid
waste and wastewater treatment, recycling and minimisation
of residual by-products from waste and wastewater
treatment, and membrane applications for producing water
from non-conventional sources.
Keppel is the only company in Singapore to possess its
proprietary solid waste treatment technology. KETC
will build upon these technologies to further augment our
portfolio of technologies to meet some of the toughest
environmental challenges.
These centres will collaborate with leading academic and
industrial institutions in Singapore and around the world to
leverage global expertise and resources while tapping on the
resources of KTAP members who will provide guidance on
macro industry and technology trends.
Environmental engineering
KIE aims to provide innovative and cost-effective
environmental solutions. In its bid to achieve this goal,
KIE announced in early 2007 its plans to set up the
KETC to drive and co-ordinate KIE’s research and
development programme.
Current R&D efforts are mostly geared towards application
development and process improvement, with a number of
projects at the pilot/demonstration stage. In Singapore,
KIE has research collaboration agreements with both
National University of Singapore and Nanyang Technological
University. Some of our global research collaborators include
Cranfield University in the UK and Netherlands Organisation
for Applied Scientific Research in Holland.
KIE’s investments in technology have begun to yield results.
In water solutions, we succeeded in the design, construction
and operation of the world’s second largest wastewater
recycling plant in Singapore and carried out the pilot run of
the promising new Memstill® desalination technology.
In solid waste solutions, the company strengthened its
portfolio of 130 intellectual properties (IPs) and trademarks in
2006 with the successful patent of three new IPs for solid
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Advancing technology, growing innovation
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Report to Shareholders 2006
Memstill® desalination pilot plant
Studies from this Memstill® desalination project in Singapore
show that the quality of the water being produced by this
technology is extremely high. Further studies have been
planned for in 2007 and 2008.
Keppel Seghers PRISM technology
waste technologies, one of which is for Keppel Seghers’
PRISM for waste-to-energy (WTE) installations. The company
also won the landmark project from the Qatar Government to
design, build and operate the first integrated waste
management facility in Qatar.
Second largest water reuse plant in the world
The project was secured in January 2005 as a Design-Build-
Own-Operate (DBOO) contract for its superior technology,
innovative design and operational excellence.
Inaugurated by Singapore’s Prime Minister Lee Hsien Loong
on 15 March 2007, the Ulu Pandan NEWater Plant supplies
up to 148,000 m3/day of NEWater, equivalent to over half of
Singapore’s NEWater needs. Occupying a footprint of
only 2.6 hectares (ha), it is also the most efficient NEWater
plant in Singapore.
The treatment process in the Ulu Pandan NEWater Plant
consists of Microfiltration, followed by Reverse Osmosis
(RO), and finally Ultraviolet Disinfection.
The Keppel Seghers Ulu Pandan NEWater Plant has a
number of innovative engineering features differentiating it
from other NEWater plants in Singapore. Modular process
design allows modifications to be made to portions of the
plant without affecting the rest of the plant. Faced with the
engineering challenge of fitting the plant into the available
space of 2.6 ha, Keppel Seghers built the RO systems on top
of the water tank and designed the RO modules in stacks of
nine instead of the usual five. This plant is equipped with
RO inter-stage energy recovery turbines, which is a first in
Singapore for NEWater plants, as well as Variable Speed
Drives (VSD) for all feed pumps that increase energy
efficiency when handling variable loads.
Pilot run of Memstill® desalination technology
Keppel Seghers, together with TNO and six other consortium
members, has developed a membrane-based distillation
concept called Memstill®.
This Memstill® technology is envisaged to offer a much more
economical alternative to the existing desalination technologies
for seawater and brackish water. It utilises low-grade waste
steam and heat of power stations, refuse incineration plants
and other heat-generating plants to produce desalinated water
using a membrane barrier. The process is driven by minor
temperature differences so relatively less energy is required.
Special feature
Advancing technology, growing innovation
Keppel Corporation Limited
Report to Shareholders 2006
83
Artist’s impression of the integrated solid waste management facility in Qatar.
Another benefit of this technology is that it does not produce
greenhouse gases since it utilises waste heat and requires
less energy than conventional desalination processes. This
could potentially attract credits for emissions reduction in
countries with relevant schemes.
Potential application for the technology includes large-scale
production of drinking water from seawater, co-generation of
electricity and water, concentration of brine and waste
streams, production of fresh water on ships and in the
offshore industry, and production of ultra-pure water and
boiler feed water. Its technology can also be used in mobile
units for water supply in emergencies and for the consumer
market. The Singapore government has funded the
Memstill® Pilot Plant project through the Innovation For
Environmental Sustainability Fund.
The plant in Singapore was the first pilot study in processing
seawater and had operated for over one year. It consistently
produced product water of very high quality (better than RO)
from seawater. A concurrent pilot study was operated by
Keppel Seghers in the Rotterdam Harbour with brackish
water as feed. Further pilot studies are being planned for in
the Netherlands and Singapore for 2007/8.
Integrated solid waste management solution for Qatar
KIE, through Keppel Seghers, has won the confidence of the
Qatar government to adopt its technological solutions for the
management of the country’s solid waste. In October 2006,
Keppel Seghers was awarded a significant contract by the
Qatari goverment to design and build an integrated domestic
solid waste management centre to handle 1,550 tonnes/day
of waste in Qatar. The project will comprise four offsite
waste transfer stations, waste sorting and recycling facilities,
landfill, composting plant and a 1,000 tonnes/day WTE
incineration plant.
The WTE plant utilising Keppel Seghers’ proprietary
water-cooled grate technology is the heart of the project.
Other proprietary technologies deployed are the DANO
DRUM system for recycling and pre-treatment of waste,
the Rotary Atomiser semi-dry system for flue gas treatment
and the UnibraneTM membrane bioreactor system for
wastewater treatment.
PRISM’s life-cycle enhancement for WTE plants
Keppel Seghers has developed and patented a secondary
air PRISM’s technology package to increase the energy
efficiency of WTE plants while enhancing the life-cycle of
these incinerators.
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Special feature
Advancing technology, growing innovation
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Report to Shareholders 2006
KFELS N Class rig design
Maximum water depth: 400 feet (ft)
Maximum wave height: 90 ft
Drilling depth:
Drilling load:
Accommodation:
35,000 ft
3,000 kips
120 crew
The OTD team combines technology innovation with
understanding of customer needs to develop the KFELS N
Class jackup rig design for new frontier offshore exploration
and production requirements.
Keppel Offshore & Marine technology strategy
Keppel Offshore & Marine technology strategy
We believe that our strategy provides a balanced approach
towards technological leadership that will sustain us in the
long run.
Keppel Professorship
R&D Activity
Key Vendor Partnership
CAD/CAE/CAM
DTG
OTD
MTD
Keppel O&M
Engineering
Houston Centre
Business Units
Construction
Process
Technology
Deepwater
Rig Design
JU Design
c h n o logy Centre
e
T
Ship Design
PROCESS
IMPROVEMENT
COMMERCIAL
VIABILITY
KNOWLEDGE
BUILDING
CUSTOMER
NEEDS
Critical
Equipment
Development
Drilling &
Production
Technology
Project & IT
Technology
Specialised
Capability/Skill
Development
& Acquisition
Technology
Foresight
Rig Systems
The PRISM technology constitutes a novel and innovative
means of increasing combustion and boiler performance,
based on the invention of a prism-shaped body in the first
empty boiler pass. The PRISM allows a highly-optimised
secondary air injection and combustion control strategy.
This leads to more homogeneous flue gas conditions at a
very early stage and is virtually independent of the heat
release profile on the grate. This not only improves
performance in new boilers, but also helps to solve the
severe corrosion problems in the radiant and superheater
sections that many existing plants are suffering from.
WTE plants in operation for a number of years face problems
as the waste that they treat has considerably higher
heat value than they were designed to handle originally.
The PRISM offers owners and operators of such plants a
cost-effective solution to deal with these problems, thus
extending the plant life, increasing plant throughput and
lowering maintenance cost. The PRISM can be retrofitted
into most incineration plants, regardless of the supplier of
the original incinerator design.
Based on performance data from a customer who had
installed the Keppel Seghers PRISM, availability of each line
was increased by 500 hours a year, and corrosion of the
boiler was decreased by a factor of 10 to 0.05 mm per 1,000
hours in the critical zones. In addition, the interval between
manual cleaning of the boiler was extended by 50%, while
the overall maintenance costs were reduced by 14%.
Offshore & Marine
Keppel O&M’s technology strategy is geared to provide
reliable and affordable solutions for its customers, with focus
on four inter-related aspects:
• Commercial Viability – Providing our shipyards with
competitive edge by offering proprietary designs of rigs
and ships that have been identified to have commercial
potential;
• Customer Needs – Adapting, customising and optimising
our designs to meet customer requirements;
• Knowledge Building – Developing and acquiring knowledge
through technology foresight and market feedback; and
• Process Improvement – Improving our business processes
through innovation and efficient use of materials.
Special feature
Advancing technology, growing innovation
Keppel Corporation Limited
Report to Shareholders 2006
85
Launched in 2000, the KFELS B Class design has gained market
acceptance with 13 units now in operation.
This strategy has achieved results for the Group in 2006,
with market acceptance of various new product designs.
The significant products include:
• the KFELS N Class jackup drilling cum production rig
created for extreme weather conditions;
• the cost-effective DSSTM 38 ultra-deepwater
semisubmersible drilling rig (semi) for the deepwater
regions of Brazil, West Africa and the Gulf of
Mexico (GOM);
• the high-specification DSSTM 51 ultra-deepwater
semi; and
• an Ice-Class Floating Storage Offloading (FSO) facility with
innovative construction methods.
In process development, Keppel O&M took one further step
in enhancing its engineering strength. The company has
synchronised its Global Engineering Management System
(GEMS) with the American Bureau of Shipping’s 02E web-
based system to expedite the review and approval of plans.
GEMS is a secure online system empowering project
members to communicate, control and share information
across geographic boundaries.
Innovative KFELS N Class for North Sea
First conceived by Offshore Technology Development (OTD),
the KFELS N Class jackup rig design would be the biggest
drilling rig ever built by Keppel FELS. It will have the
capability to operate in the most demanding climatic
conditions of the Norwegian Continental Shelf.
As the design evolved during the product development
stage, the potential for the KFELS N Class rig was
discovered. With its huge size and capacity for harsh
environments, the rig could also be used as a production
unit. This potential met the customer’s vision to launch an
innovative rig for marginal fields in the North Sea. The design
was then modified to have the flexibility to accommodate a
production module on the rig when required and to carry out
drilling and production operations simultaneously.
The modifications required creativity from the engineers of
OTD. The main challenge was to ensure that the addition of
the production facilities on board the KFELS N Class would
not compromise the required environmental ratings for the
rig. The OTD team was able to re-engineer the design and
allow for optimum usage of the production facilities, thus
meeting the owner’s needs.
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Special feature
Advancing technology, growing innovation
Keppel Corporation Limited
Report to Shareholders 2006
Rigs for Mærsk
Following the success of the Mærsk Explorer, a semi for
the Caspian Sea, Mærsk Contractors awarded Keppel FELS
contracts to design and build three MSC-DTG DSSTM 21 rigs.
These 21st century semi drilling units are created for drilling in
ultra-deepwaters.
66.5 m x 66.5 m
39,000 MT
Keppel MSC-DTG DSSTM 38 rig design
Deck size:
Displacement:
Maximum water depth: 9,000 ft
30,000 ft
Drilling depth:
5,500 tonnes
Total variable load:
2 million tonnes each
Derrick/travel block:
Accommodation:
130 crew
ABS DP 2 with 8 X 3,000 kW thrusters
Compact DSSTM 38 semi for Brazil
Brazil is today the world’s largest deepwater region after
the GOM. With its promising hydrocarbon fields lying under
thousands of feet of water, the search for Brazilian oil is
largely the province of deepwater rigs. The nation’s state-
owned oil company, Petrobras, has been boosting its
domestic reserves and production, and is in need of rigs for
its drilling programmes.
Recognising this need, Deepwater Technology Group (DTG)
has created a fifth-generation deepwater semi, the DSSTM 38,
for operations in Brazilian waters. This rig design has been
accepted and contracted by Brazilian drilling contractor
Queiroz Galvão Perfurações (QGP), which has secured a
seven-year drilling contract with Petrobras. To be built by
Keppel FELS, the rig is due for delivery in the third quarter of
2009. QGP supplies the drilling and subsea equipment while
Keppel FELS will undertake the design, engineering and
construction of the hull and supply of marine equipment.
Keppel DTG and Marine Structure Consultants. It is a
compact unit with enhanced deck load capacity, layout
and station-keeping capability. Apart from the Brazilian
deepwaters, it is also suitable for West Africa and the GOM.
High specification DSSTM 51 semi for GSF
The new DSSTM 51 design has been chosen by GlobalSantaFe
(GSF) after extensive evaluation. One unit, the Development
Driller III, is currently under construction at Keppel FELS.
GSF picked this rig for the high variable deck load of 8,500
tonnes, superior motion characteristics of the hull, high-
power generation capacity, increased safety features and
ability to meet the 100-year storm specification in GOM.
GSF will provide the drilling and subsea equipment while
Keppel FELS undertakes the design, engineering and
construction of the hull and supplies marine equipment.
It is due for delivery in early 2009.
This cost-effective DSSTM 38 design is a derivative of the
DSSTM 20, DSSTM 21 and DSSTM 51 designs, all co-designed by
The rig is suitable for operation in offshore Brazil, the GOM,
West Africa and Southeast Asia.
Special feature
Advancing technology, growing innovation
Keppel Corporation Limited
Report to Shareholders 2006
87
The MTD engineers and naval architects work with LUKoil to create the FSO design.
Singapore’s first FSO design for LUKoil
First established as the marine technology arm of
Keppel Singmarine to support the specialised shipbuilding
division with in-house capability for offshore support vessels
and tugboats, Marine Technology Development (MTD) has
been expanding its capabilities.
In 2006, it succeeded in designing a 28,000-dead weight
tonne Ice-Class FSO for LUKoil-Nizhnevolzhskneft which will
deploy the vessel in the Yuri Korchagin Field in the Russian
sector of the Caspian Sea. This MTD 13028FSO-IC design
will be the first FSO to be built here in Singapore.
The vessel is a follow-through of Keppel Singmarine’s
strategy to enhance its design and construction capabilities
and expand into related product lines to meet the demands
of the offshore logistics market.
The FSO had to be created such that its two longitudinal
hull strips could be towed through the famous but narrow
Volgo-Donskoy canal which has strict restrictions on length,
breadth and draft including the air draft.
132.8 m
32.0 m
15.7 m
10.0 m
6,500 tonnes/day
1,500 m3/hr
Principal dimensions of FSO
Length overall:
Breadth overall:
Depth:
Max. operating draft:
Crude oil capacity:
Max. cargo offloading:
Min. cargo oil temperature: +10oC
32 crew
Accommodation:
ABS +A1, FSO +AMCCU, C0
Class:
Russian
Flag:
Keppel O&M’s “Near Market, Near Customer” strategy
scored another success for the group when the owner agreed
to have the two strips of hull mated and joined at Keppel’s
Caspian Shipyard Company (CSC) in Baku, Azerbaijan.
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Special feature
Advancing technology, growing innovation
Keppel Corporation Limited
Report to Shareholders 2006
Keppel Singmarine delivered 11 offshore support vessels
(OSVs) in 2006. Through MTD, it has developed design
capabilities for such vessels. Its strategy to focus on OSVs
saw the company secure contracts to build 14 units last year.
When completed in 2009, the FSO will be moored in an
area with 60-cm thick ice and water depth of 20.5 m. It has
to withstand a maximum 2-min average wind speed of
40.6 m/sec, wave height of 8.8 m with a corresponding
wave period of 9.0 sec and surface currents of 1.84 m/sec.
The air temperature ranges from –20oC to 30oC, with
minimum water temperature of 0oC.
Increased productivity with GEMS and the
ABS 02E system
Global Engineering Management Systems (GEMS) is a
powerful tool that allows Keppel O&M engineers to work
on a common web-based platform across geographic
boundaries, without compromising security. Its features
were enhanced when Keppel O&M synchronised it with the
American Bureau of Shipping (ABS) 02E electronic plan
review system.
Keppel engineers can now release drawings directly to
ABS plan review engineers through a collaboration link.
The plans flow between the two parties as if each were
logging in and downloading from each other’s websites.
Global Engineering Management System
GEMS connects more than 800 Keppel O&M engineers with
their partners and associates around the world in an integrated
yet secure network. The system empowers these engineers and
designers to work in a seamless manner round-the-clock from
anywhere on earth.
The sovereignty and integrity of the individual systems are
maintained. Governance has also improved with the
automatic management and control of electronic copies of
reviews, responses and stamped approved drawings.
The collaboration results in faster turnaround of review and
approval of drawings leading to better customer service and
improved productivity.
Special feature
Advancing technology, growing innovation
Keppel Corporation Limited
Report to Shareholders 2006
89
Keppel Bay –
redefining waterfront living
in the 21st century
90
Keppel Corporation Limited
Report to Shareholders 2006
Keppel Corporation Limited
Report to Shareholders 2006
91
Keppel Bay
Studies have shown that in recent years, waterfront properties are
commanding a rising premium. Prices of waterfront homes in
prominent cities like London, Shanghai and Hong Kong have
increased by as much as 80% since 2002.
Against the backdrop of Singapore’s projected growth, the same
trend is already showing here. There will be similar upside potential
and price transactions are expected to match, if not, exceed
non-waterfront projects in prime districts.
According to reports from CB Richard Ellis, prices in Singapore’s
whole core central region, comprising Sentosa, Downtown Core and
districts 9, 10 and 11, have risen 24% in the last two years. Prime
waterfront properties have emerged the star performers in this core
central region, outperforming districts 9, 10 and 11.
Keppel Bay
“As the sole developer of
Keppel Bay, the Keppel Group
is committed to grow the value
of this precinct in the long term,
and what we envision is no
less than a world-class precinct
that will make Singapore the
world destination for premier
waterfront living.”
Teo Soon Hoe
Senior Executive Director and Group Finance Director
Keppel Corporation
World-class waterfront property
Keppel Bay on a 32-hectare (ha) prime waterfront site,
five minutes away from the city in the southern precinct
surrounded by Sentosa and its Integrated Resort, Singapore’s
largest entertainment and recreation hub VivoCity and the
HarbourFront, the Keppel Golf Club and Mount Faber,
Labrador and Telok Blangah Hill Parks, commands a
high premium.
The waterfront development project is 70% owned by
Keppel Corporation, with the remaining 30% by Keppel Land.
Efforts have not been spared in the master planning and
design to maximise the potential of this prime waterfront site.
Reflections at Keppel Bay
To be launched in April 2007, Reflections at Keppel Bay is
designed by world-renowned architect, Daniel Libeskind,
the master behind New York’s Freedom Tower and Berlin’s
Jewish Museum. Libeskind’s reputation is also behind the
success of residential developments such as the Museum
Residences in Denver and Aura in Sacramento which were
sell-outs after their launches.
This will be his first residential showcase in Asia, featuring
a symphony of six glass skyscrapers of 41 storeys and
24 storeys linked by sky bridges and 11 blocks of six to
eight-storey villa apartments along a 750-metre shoreline
with unparallelled views of the sea and the lush surrounds.
The 1,129 apartments in the development comprise 732 sf
studios to 2,900 sf four-bedroom apartments, 35 penthouses
from 3,500 sf to luxury ones of 13,300 sf.
Reflections at Keppel Bay has already attracted strong
interest from both Singaporean and foreign home buyers in
Hong Kong, Indonesia, the Middle East, India and China.
Marina at Keppel Bay
Snuggled on the exclusive Keppel Island, Marina at
Keppel Bay will enhance the lifestyle aspirations of the
discerning homeowners at Keppel Bay.
With world-class facilities, it can accommodate up to
170 yachts, including five mega 100 to 200-footers.
Operational by the end of 2007, it will initially house
75 wet berths and will include lifestyle facilities in a
clubhouse with a members’ lounge, gourmet restaurants,
a spa and charter services to neighbouring islands.
Homeowners in Keppel Bay can enjoy ten years of free
membership and five years’ free subscription to the Marina.
They can also benefit from the Marina’s twinning association
with Nongsa Point Marina in the Riau Islands, in which the
Keppel Group has a 56% stake.
Landmark bridge
A 245-m long cable-stayed bridge will link Marina at
Keppel Bay and future homeowners on Keppel Island to the
mainland. This new landmark in Singapore’s southern waters
will be completed in mid-2007.
The dual carriageway bridge with pedestrian walkways will
lend itself spectacularly to the surrounds, especially when it
is illuminated at night by dramatic mood lighting.
94
Special feature
Keppel Bay
Keppel Corporation Limited
Report to Shareholders 2006
Plot 3
Plot 4
Plot 2
Plot 5
Plot 6
Plot 1
Keppel Bay
Caribbean at Keppel Bay
This FIABCI Prix d’ Excellence-award winning condominium
and the first residential development in Keppel Bay has
sold all 801 launched apartments, with 168 units kept as
corporate residences.
Here, the docks of the historical Keppel Harbour were
tastefully transformed into water channels, bringing the sea
right to the doorsteps of homes.
With its distinctive waterfront lifestyle offering, Caribbean at
Keppel Bay continues to be one of the most sought-after
properties and fetches high rentals comparable to those in
prime Orchard Road.
Future developments
Three more plots totalling 88,173 sm of land are slated
for development and this is expected to yield another
642 exclusive homes.
These developments, carefully designed and prudently
phased, will further enhance Keppel Bay, in line with the
efforts by the Singapore government to develop the
Southern Islands into a first-class tourist resort for the
well-heeled.
Plot 1
(Reflections at Keppel Bay)
Plot 2
(Caribbean at Keppel Bay)
Plot 3
(adjacent to Caribbean)
Plot 4
(adjacent to Keppel Bay
Tower and a joint-venture
with Mapletree)
Plot 5
(Marina at Keppel Bay)
Plot 6
(on Keppel Island)
Land Size
(sm)
GFA
(sm)
83,591 193,400
97,494 132,780
38,822
47,380
28,676
32,000
6,211
3,000
20,675 21,000
Special feature
Keppel Bay
Keppel Corporation Limited
Report to Shareholders 2006
95
Operating & financial review
97
98
100
110
116
124
130
138
Group structure
Management discussion and analysis
Offshore & Marine
Property
Infrastructure
Investments
Financial review and outlook
Operations sustainability
The Keppel Group is in the Offshore & Marine,
Property, Infrastructure and Investments
businesses to deliver sustainable earnings
growth. With total assets of about $13.8 billion,
the Keppel Group is strategically invested in
33 countries with a global customer base.
Some of the key factors influencing our
businesses are global and regional economic
conditions, oil and gas exploration and
production activities, real estate market,
threats, currency fluctuations, capital flows,
interest rates, taxation and regulatory
legislation. As the Group’s operations consist
of providing a range of products and services
to a broad spectrum of customers in many
geographic locations, no one factor, in the
management’s opinion, determines the
Group’s financial condition or the profitability
of our operations.
In this chapter on the operating and financial
review, we seek to provide a strategic, market
and business overview of the Keppel Group’s
operations and financial performance.
This chapter describes the key activities
of our businesses and their impact on our
performance. It also discusses the challenges
in our operating environment and our strategies
in growing beyond.
The discussion and analysis is based on
the Keppel Group’s consolidated financial
statements as at 31 December 2006.
96
Operating & financial review
Keppel Corporation
Keppel Corporation Limited
Report to Shareholders 2006
Report to Shareholders 2006
Group structure
Keppel Corporation Limited
Offshore & Marine
Property
Infrastructure
Investments
• Offshore rig design, construction,
repair and upgrading
• Ship conversions and repair
• Specialised shipbuilding
• Property development
• Property fund management
• Property trusts
• Environmental engineering
• Power generation
• Network engineering
• Logistics
• Oil and gas
Investments
•
• Telco
100% Keppel Offshore &
Marine Ltd
70%
100% Keppel Bay Pte Ltd
Environmental Engineering
45% Singapore Petroleum
Company Ltd
30%
100% Keppel FELS Ltd
53% Keppel Land Limited
100% Keppel Shipyard Ltd
31%
72% K-REIT Asia
41%
100% Keppel Integrated
Engineering Ltd
100% Keppel Seghers
Engineering
Singapore Pte Ltd
100% Keppel Singmarine Pte Ltd
100% Keppel Land
International Limited
100% Keppel Seghers
NEWater Development
Co Pte Ltd
100% Keppel Nantong Shipyard
Company Limited
China
100% K-REIT Asia
Management Limited
100% Keppel Seghers
Belgium NV
Belgium
100% Offshore Technology
Development Pte Ltd
100% Alpha Investment
Partners Ltd
100% Keppel FMO Pte Ltd
100% Deepwater Technology
Group Pte Ltd
71% Evergro Properties Ltd
Singapore/China
Power Generation
100% Marine Technology
Development Pte Ltd
45% Keppel Thai Properties
Public Co Ltd
Thailand
100% Keppel Energy Pte Ltd
38%
k1 Ventures Limited
17%* MobileOne Ltd
* Owned by Keppel
Telecommunications &
Transportation Ltd, an
81%-owned subsidiary of
the Company
100% Keppel AmFELS Inc
USA
50%
24%
74% Keppel Philippines
Properties Inc
The Philippines
100% Keppel Verolme BV
The Netherlands
100% Keppel FELS Brasil SA
Brazil
100% Keppel Norway AS
Norway
81% Keppel Philippines
Marine Inc
The Philippines
53% Caspian Shipyard
Company Ltd
Azerbaijan
33% Arab Heavy Industries
PJSC
UAE
50% Keppel Kazakhstan LLP
Kazakhstan
Group Corporate Services
100% Keppel Merlimau
Cogen Pte Ltd
100% Keppel Electric Pte Ltd
100% Corporacion Electrica
Nicaraguense SA
Nicaragua
100% Termoguayas
Generation SA
Ecuador
Network Engineering and Logistics
81% Keppel
Telecommunications
& Transportation Ltd
55% Trisilco Folec Sdn Bhd
Malaysia
100% Keppel Logistics
Pte Ltd
70% Keppel Logistics
(Foshan) Ltd
China
Control &
Accounts
Corporate
Communications
Corporate & Strategic
Development/Planning
Human
Resources
Information
Technology
Legal
Risk Management
& Audit
Tax
Treasury
The complete list of subsidiaries and significant associated companies is available on Keppel Corporation’s website www.kepcorp.com
Operating & financial review
Group structure
Keppel Corporation Limited
Report to Shareholders 2006
97
Operating & financial review
Management discussion and analysis
We expect to improve our performance
year-on-year in the next three to four years.
Group operations
Group overview
Revenue
Profit after tax and minority interests (PATMI)
Exceptional items
Attributable profit
Operating cashflow
Free cashflow
Economic Value Added (EVA)
Earnings per share (EPS)
Return on equity (ROE)
Total distribution per share to shareholders
2006
$ million
7,601
751
–
751
1,854
1,480
423
95.4 cts
19.1%
56 cts
06v05
% +/(-)
+34
+33
–
+33
+19
+113
+113
+32
+16
+22
2005
$ million
5,688
564
–
564
1,559
694
199
72.1 cts
16.4%
46 cts
05v04
% +/(-)
+44
+21
n.m.
+22
+194
+19
+469
+20
+6
+15
2004
$ million
3,963
465
(1)
464
530
583
35
59.9 cts
15.5%
40 cts
The Group had another exceptional year. A robust set of results
for the full year 2006 was achieved on new benchmarks set
for all key performance indicators.
Revenue for the year at $7,601 million was a record surpassing
the previous high set in 20001, with Offshore & Marine Division
making up more than three-quarter of Group revenue. Group
PATMI increased by $187 million or 33% in 2006, which is even
higher than the 21% increase achieved a year ago. Offshore
& Marine Division contributed significantly to earnings growth.
The compounded annual growth rate of PATMI from 2001 to
2006 is 23%.
Earnings per share (EPS) of 95.4 cents were 23.3 cents above
2005, and 35.5 cents above 2004. The EPS growth of 32% and
20% in 2006 and 2005 respectively kept pace with PATMI
growth. Return on equity scaled a new high of 19.1% and
Economic Value Added of $423 million more than doubled
that of the previous year of $199 million.
Free cashflow increased exponentially from $583 million in
2004 to $1.48 billion in 2006 due to robust operating cashflow
of $1.85 billion in 2006 and $1.56 billion in 2005 mainly from
Offshore & Marine Division’s projects. Cash outflow from
investing activities was lower in 2006 as there was less
expenditure on infrastructure and property projects compared
to 2005.
Shareholders will be rewarded with total distribution of
56 cents per share for 2006. The total payout represents
53% of Group PATMI. The payout ratio has consistently
exceeded 50%.
The Group has achieved strong growth in the first five years
of this decade. With a higher earnings base, the Group is
expected to report improving performances year-on-year in
the next three to four years.
1 Revenue in 2000 included banking and financial services unit Keppel Capital
Holdings and Singapore Petroleum Company, both subsidiaries of Keppel
Corporation at that time. Keppel Capital Holdings was divested in 2001
while Singapore Petroleum Company was deconsolidated in 2003.
98
Operating & financial review
Management discussion and analysis
Keppel Corporation Limited
Report to Shareholders 2006
Revenue
$ million
6,000
5,755
5,000
4,000
3,000
2,000
1,000
0
4,112
2,428
1,155
847
711
803671570
21
58
121
Offshore & Marine
Property
Infrastructure
Investments
PATMI
$ million
500
450
400
350
300
250
200
150
100
50
0
(50)
448
239
191
231 242
124
118 118
96
32
Offshore & Marine
Property
(24)
Infrastructure
(35)
Investments
2004
$3,963 million
2005
$5,688 million
2006
$7,601 million
2004
$465 million
2005
$564 million
2006
$751 million
Segment operations
Group revenue of $7,601 million was $1,913 million or 34%
higher than that of the previous year, and nearly doubled the
amount achieved in 2004. Compared to 2005, Offshore &
Marine Division generated revenue amounting to $5,755 million
that was $1,643 million or 40% higher, and accounted for
76% of Group revenue. Twenty-six newbuilds and conversions
were completed and delivered in the year, on time or ahead
of time and within budget. Revenue from ship and rig repairs
was also strong.
Property Division achieved revenue of $1,155 million,
$308 million or 36% above 2005. The increased revenue was
underpinned by higher sales and prices of the Group’s new
and existing trading projects both in Singapore and regionally.
Infrastructure Division reported lower revenue as no major
new network engineering contract was secured. Revenue
from electricity trading also declined as non-profitable fixed
price contracts were not renewed.
Group PATMI before exceptional items of $751 million was
$187 million or 33% above 2005, and $286 million or 62%
above 2004. The key contributors to the higher PATMI were
Offshore & Marine Division, followed by the Investments
Division. In 2006, Offshore & Marine Division, which had an
exceptionally busy year contributed significantly to the Group
earnings growth, achieving an 87% improvement in PATMI.
Property Division registered lower earnings because of lower
contribution from Keppel Bay.
Infrastructure Division returned to profitability in the fourth
quarter of 2006 with the commercial operation of the power
barges in Ecuador. However, the quarter’s profit was not
sufficient to reverse the losses in the first nine months,
resulting in losses of $35 million in 2006. Earnings from
Investments Division were higher at $242 million, with gains
from the sale of investments and much better contributions
from k1 Ventures which benefitted from the divestment of
The Gas Company, LLC. These were more than sufficient to
offset the lower contributions from SPC, which was affected
by the volatile operating environment, product write-downs
and higher taxes.
Operating & financial review
Management discussion and analysis
Keppel Corporation Limited
Report to Shareholders 2006
99
Operating & financial review
Offshore & Marine
Keppel Offshore & Marine expects yet
another exceptional year in 2007 as it meets
its commitments to deliver 33 major projects,
including nine jackups, one semisubmersible
and six offshore support vessels.
Major developments in 2006
Focus for 2007/2008
• Delivered 26 major projects
• Invest in R&D and create
Vision
Provider of Choice, Partner in Solutions
Leveraging global
network for
incremental
businesses,
enhanced cost-
effectiveness and
operational
efficiency
Replicating the
group’s proven
shipyard
management
systems in our
other “Near
Market, Near
Customers“
locations
Strengthening
presence in
promising markets
Net order book
$ billion
on or ahead of time and within
budget
• Clinched $7.3 billion of orders,
with deliveries into 2010
• Secured 10 jackups, nine
semi newbuild and upgrade
projects, 14 OSVs and seven
FPSO conversions
alliances with trend-setting
customers, designers and
vendors to develop new
products and solutions
• Deliver value through
excellent project
management and execution
• Focus on Health, Safety and
the Environment
Earnings highlights
Revenue
EBITDA
Operating profit
Profit before tax
PATMI
Manpower (number)
Manpower cost
Operating profit
$ million
Profit before tax
$ million
PATMI
$ million
2004
2005
2006
2004
2005
2006
2004
2005
2006
2006
$ million
5,755
604
539
624
448
22,352
660
318
246
247
350
2005
2004
$ million $ million
377
318
350
239
4,112 2,428
306
246
247
191
17,522 16,047
465
546
539
624
12
10
8
6
4
2
0
191
239
448
Delivering value to
customers and partners
through excellent
project management
Expanding the
knowledge and
technology
base with clear
product focus at
each of our
yards
Creating
alliances with
trend-setting
customers,
designers and
vendors to
develop new
products and
solutions
Establishing centres
of excellence that
would promote
technological and
business development
Striving for continuous
improvements
10.5
7.2
3.4
1.9
2003
2004
2005
2006
100 Operating & financial review
Offshore & Marine
Keppel Corporation
Keppel Corporation Limited
Report to Shareholders 2006
Report to Shareholders 2006
Keppel O&M delivered six jackup rigs in 2006, including Deep Driller 3, which is of the KFELS Super B Class design.
Earnings review
Offshore & Marine Division secured a record $7.3 billion of
new orders in 2006, bringing the net order book at the end
of the year to $10.5 billion. The Division’s profit before tax of
$624 million was $274 million or 78% higher than in 2005, and
$377 million or 1.5 times more than that of 2004. Revenue and
operating margins improved with higher prices and efficient
project execution. PATMI increased from $191 million in 2004
to $239 million in 2005, and increased by a further $209 million,
or 87%, to reach $448 million in 2006.
Despite the volatile oil price, offshore exploration and
production (E&P) activities remained very active in 2006.
Utilisation trends remained extremely healthy for all categories
of rigs and offshore vessels throughout the year. For jackups,
average utilisation was near 87% during the first quarter,
climbing to 89% in July before easing to 87% in November.
For the floating rig fleet consisting of semisubmersibles (semis)
and drillships, utilisation was near 85% at the start of the year.
It declined to 83% in June and July before rising back up to
85% by the end of the year.
Market review
2006 was marked by fluctuations of spot oil prices with the
price per barrel of oil moving within a wide range between
US$50 and near US$80. Oil prices started the year at around
US$60 per barrel and rose to a record price of US$78.40 per
barrel on 13 July 2006. It ended the year at around US$60
per barrel. The volatility of oil prices was set against a backdrop
of strong global demand for energy. Global oil demand was
estimated to be around 85 million barrels per day in 2006.
Day rates for rigs and offshore vessels continued to climb
higher throughout the year. The number of rigs earning at
least US$300,000 per day rose from four in January to 29
in December. Similarly, the number of rigs earning at least
US$200,000 per day increased from 25 in January to 71 in
December. During 2006, a total of nine new jackups joined
the global rig fleet, while another 27 jackups, 27 semis and
10 drillships were ordered.
Operating & financial review
Offshore & Marine
Keppel Corporation Limited
Report to Shareholders 2006
101
Operating & financial review
Offshore & Marine
Significant events#
January
Keppel Shipyard secured the world’s first Liquefied Natural
Gas (LNG) floating storage and re-gasification conversion
project in a contract with Golar LNG worth about
$90 million. (1Q 2008)
Keppel FELS secured a repeat order for an ultra-deepwater
semi drilling rig from ENSCO International (ENSCO) with a
total project value of US$338 million. (1Q 2009)
February
Keppel AmFELS received a fifth order from Scorpion Offshore
for a jackup rig valued at US$143 million. (4Q 2008)
March
Keppel AmFELS signed a US$110 million contract to build
a new jackup rig for Atwood Oceanics. (3Q 2008)
Operating review
Keppel Offshore & Marine (Keppel O&M) had an outstanding
year in 2006. It delivered all of its 26 major projects in a timely
manner and within budget. All the group segment operations
of offshore, marine and specialised shipbuilding posted
excellent performances during the year.
The Division secured a record $7.3 billion worth of new orders
for the whole of 2006, which was 12% higher than in 2005.
This contributed to its net order book of $10.5 billion at the
end of the year, with deliveries stretching into 2010.
SSP Piranema and Blackford Dolphin
GlobalSantaFe selected the proprietary semi design, DSSTM 51,
jointly developed by Keppel’s Deepwater Technology Group
and Marine Structure Consultants for its US$270 million
semi order. (1Q 2009)
Keppel Verolme’s strong track record, strategic location and
deepwater infrastructure enhance its ability to outfit SSP
Piranema, a unique cylindrical FPSO as well as the integration of
a semi drilling rig Blackford Dolphin.
Repeat customer Prosafe Production awarded Keppel
Shipyard contracts valued at approximately $130 million
for the conversion of two new FPSO facilities. (1Q 2007)
Keppel FELS received a repeat order for a third KFELS B
Class jackup rig from Awilco Offshore valued at
US$146 million. (2Q 2009)
Keppel FELS entered the Indian offshore drilling market by
securing two separate contracts totalling US$355 million to
build two KFELS B Class jackups for drilling contractor
Discovery Hydrocarbons, a Jindal Group company. (4Q 2008)
Keppel FELS secured a US$132 million contract from a
SeaDrill subsidiary for a KFELS B Class jackup rig. (2Q 2008)
April
Keppel FELS secured its first order of a KFELS B Class jackup
rig from Mercator Lines for US$180 million. (1Q 2009)
May
Keppel FELS secured a contract to build its fourth
ultra-deepwater semi drilling rig for A.P. Møller-Mærsk
for $415 million. (1Q 2010)
# Expected deliveries indicated in brackets.
102
Operating & financial review
Offshore & Marine
Keppel Corporation Limited
Report to Shareholders 2006
Among the significant projects secured were 10 jackups,
nine semi newbuilds/upgrades, 11 Anchor Handling
Tug/Supply (AHTS) vessels and seven Floating Production
Storage and Offloading (FPSO) conversions.
May
Maersk Contractors awarded Keppel Shipyard the fast-track
conversion of a tanker to a FPSO facility for approximately
$96 million. (1Q 2008)
Significant events#
Offshore
Keppel FELS achieved a sterling performance in 2006.
The Singapore yard secured a total of 13 newbuilding
contracts, of which eight were jackups and five were semis.
Seven of the newbuilding jackup contracts were of the
proprietary KFELS B Class design.
June
Keppel FELS secured its fourth order from India for a
US$182 million KFELS B Class jackup rig to be built for
Great Eastern Shipping. (4Q 2009)
July
Keppel strengthened ties with LUKOIL through $260 million
in contracts to build an auxiliary icebreaker vessel and a
multi-purpose icebreaking supply vessel for its subsidiary.
(4Q 2007 – 2Q 2008)
August
Keppel FELS secured a US$270 million contract to design
and build its first semi drilling rig for deployment in Brazilian
waters for Queiroz Galvão Perfurações. (3Q 2009)
September
Keppel FELS secured its third contract from a subsidiary
of ENSCO for an ultra-deepwater semi drilling rig valued at
approximately US$385 million. (4Q 2009)
October
Keppel O&M secured contracts totalling $210 million to
convert two FPSO facilities and to build five AHTS vessels.
(2Q 2007 – 1Q 2009)
December
Keppel FELS secured a US$371 million contract to build the
first KFELS N Class drilling-cum-production jackup rig for
ProdJack AS, a member of the Skeie Group, and took a
10% equity stake in ProdJack AS. (1Q 2010)
Keppel Singmarine secured a $135 million contract to build
its first proprietary-designed Ice-Class Floating Storage and
Offloading system for a LUKOIL subsidiary. (1Q 2009)
Keppel Verolme broke into the decommissioning market
with a 140 million contract to build the world’s first
concrete heavy lifter for MPU Offshore Lift ASA. (1Q 2009)
Keppel Shipyard completed the installation of the P-53’s turret,
one of the largest worldwide.
# Expected deliveries indicated in brackets.
Operating & financial review
Offshore & Marine
Keppel Corporation Limited
Report to Shareholders 2006
103
Operating & financial review
Offshore & Marine
Clockwise from top left: President of Brazil, His Excellency Luiz
Inácio Lula da Silva, at BrasFELS yard for tour on board the P-51
and P-52 floating production units.
Mr Lim Swee Say, Minister in Prime Minister’s Office and
Secretary-General of the National Trades Union Congress,
graces the naming ceremony of Deep Driller 2.
Mr Rahul Gandhi, Member of Parliament of India, enjoys a
hands-on experience on board a KFELS B Class jackup rig.
The company secured three contracts for its Keppel FELS
proprietary deepwater semi designs: a DSSTM 51 from
GlobalSantaFe Corporation, a DSSTM 21 from A.P. Møller–Mærsk
and a DSSTM 38 from Brazilian drilling contractor Queiroz
Galvão Perfurações. The other two semi projects are being
built for ENSCO.
In anticipation of its present and future workload, Keppel FELS
expanded its yard and fabrication facilities to increase capacity
for fabrication works and wharfage for mooring of rigs. It set
up Bintan Offshore Fabricators, a majority-owned venture,
on Bintan Island, Indonesia and leased a 9-hectare site at
Shipyard Crescent in Singapore. The Philippine yards also
upgraded their facilities to support Keppel FELS.
In the upgrade market Keppel FELS retained its lead,
commencing work on four new semi projects clinched
during the year.
In the US, Keppel AmFELS achieved a strong performance
on the back of more newbuilding projects and strong
contributions from repair and upgrade work.
Its reputation of delivering on its promise was significantly
enhanced by all seven newbuild projects completed on time
or ahead of time during the year amid an extremely busy
schedule of executing 30 major projects concurrently.
The company successfully delivered 12 projects in 2006,
with the completion of two newbuild accommodation
platforms for PEMEX and 10 repair and upgrade projects.
Safety figured strongly in the year, with seven projects attaining
two million manhours each without any lost time incidents
and seven more projects achieving one million manhours with
the same clean record. Its Accident Frequency Rate of 1.1
and severity rate of 28 per million manhours worked were
significantly lower than industry rates of 2.8 and 175 respectively.
Current newbuilding projects in Keppel AmFELS include
seven newbuild jackup drilling rigs for Scorpion Drilling,
Diamond Offshore and Atwood Oceanics, and a sludge
vessel for New York City.
Keppel FELS Brasil achieved significant milestones in 2006
with the challenging and complex mating operations for the
P-52 project and the joining of the ‘C’ sections of the lower
hull pontoon of the P-51 project in the BrasFELS Yard.
104
Operating & financial review
Offshore & Marine
Keppel Corporation Limited
Report to Shareholders 2006
Ocean Monarch is the fourth upgrade that Keppel FELS is carrying out for Diamond Offshore.
The yard has also delivered two platform support vessels to
Maersk Brasil Ltda during the year.
In the Netherlands, Keppel Verolme achieved record revenue in
2006. Its excellent execution of the world’s first circular FPSO,
the SSP Piranema, reflected the European yard’s ability to offer
real value for its customers compared to low-cost yards.
The yard also demonstrated its synergy with sister yards in
the conversion of the Blackford Dolphin for Fred Olsen Energy
by undertaking the overall integration of the structure and
modules as well as carrying out repair and maintenance work
on the semi.
Another first for Keppel Verolme was winning a project to
build the world’s first concrete heavy lifter for Norway’s MPU
Offshore Lift AS for the decommissioning market.
Major projects completed by Caspian Shipyard Company (CSC)
in 2006 included the supply of labour for the BP Shah Deniz
project and the fabrication of 1,600 tonnes of foundation steel
for Agip Kazakhstan North Caspian Operating Company
(Agip KCO). Work in progress is the fabrication of pipe racks
for Agip KCO, and this will keep the yard busy till 2008.
Keppel Kazakhstan marked a significant milestone in 2006
with the launch of the transportation barge AKKU1, built for
Agip KCO. The launch of the first offshore vessel ever built
in Kazakhstan was graced by His Excellency Nursultan A
Nazarbayev, President of the Republic of Kazakhstan. This
vessel is part of the contract for pipe racks and four barges to
support the first-phase development of the Kashagan oil field.
Ideally located in the Caspian Kazakh Sector, Keppel Kazakhstan
works with CSC to realise the full benefits of the group’s
“Near Market, Near Customer” strategy in the region.
In Norway, Keppel O&M acquired an additional 50% of the
shares in Offshore & Marine ASA in March 2006 to make it a
wholly-owned subsidiary. Additional capital was injected into
the company. The firm was subsequently re-branded and is
now Keppel Norway AS.
In the United Arab Emirates, Arab Heavy Industries achieved
yet another record performance in 2006. It repaired 222
vessels and converted the barge GTO 202 into a floating
mobile jetty.
Operating & financial review
Offshore & Marine
Keppel Corporation Limited
Report to Shareholders 2006
105
Polvo and Umuroa are two of the eight FPSO/FSO conversions that Keppel Shipyard has carried out for Prosafe Production.
Marine
Keppel Shipyard achieved record revenue in 2006, boosted
by higher-value repairs and more conversion work.
Tankers and container ships remain the main revenue
contributors. The yard completed nine LNG carrier repairs
and maintained its market-leading position in the conversion
market, having undertaken 10 FPSO/FSO conversion,
upgrading and repair projects.
Keppel Shipyard received significant bonuses which included
$1,500,000 from SBM for FPSO Capixaba, and $500,000
from Marathon Petroleum Company (Norway) in recognition
of achieving the safety performance targets for the Alvheim
FPSO project.
The offshore production market has seen strong orders for
floating production units (FPUs) in the last two years. Demand
for FPSO/FSO conversion is expected to be sustained in 2007.
Keppel Shipyard’s track record of FPSO/FSO conversion,
upgrading, and repair increased from 54 to 64. By the end
of 2006, 10 projects were completed while six FPSO/FPU
conversion projects and one FSO refurbishment were in
progress. One FPSO and one FSRU conversion project are
also on order for 2007. This is a considerable leap from four
FPSO/FSOs completed and four in progress in 2005.
During the year, Keppel Shipyard signed a Letter of Intent
with Qatar Gas Transport Company (Nakilat) to establish a
large shiprepair yard in Qatar. The agreement was finalised in
March 2007. This will extend Keppel O&M’s “Near Market,
Near Customer” reach to yet another major oil and gas
producing market.
Keppel Philippines Marine Inc (KPMI) achieved higher
profitability on the back of higher workloads in its shipyards.
In 2006, Keppel Batangas Shipyard repaired 80 vessels and
completed two 45-tonne bollard pull Azimuth Stern Drive
(ASD) harbour tugs for a Singapore customer and the lower
pontoon of a semi drilling rig for Keppel FELS. It also
commenced construction on another tugboat and the lower
pontoon sections of two semis, all of which are for export.
Wholly-owned subsidiary, Keppel Cebu Shipyard, repaired
92 vessels in 2006, up from 76 vessels in 2005. Foreign
vessels accounted for 61% of the total revenue, with 42
foreign vessels repaired during the year compared to 30 in
2005. Work started on a 45-tonne bollard pull ASD tug and
two 50-tonne bollard pull ASD tugs during the year.
Subic Shipyard & Engineering Inc, an associated company,
registered higher revenue. All 38 vessels repaired in the yard
were foreign vessels compared to the 50 serviced in 2005.
The decrease in number was attributed to longer docking
durations required by the vessels under repair. The shipyard
was also contracted by Keppel FELS for the construction of
pontoon sections for two semis.
106
Operating & financial review
Offshore & Marine
Keppel Corporation Limited
Report to Shareholders 2006
Offshore Support Vessels
In its bid to expand into promising frontiers, Keppel Singmarine
breaks into the Russian market with the construction of two
ice-breaking vessels for LUKOIL. At the same time, it continues
to serve its long-time customers, delivering two AHTS to Smit
Transport and Heavy Lift.
Specialised shipbuilding
Keppel Singmarine had a boom year in 2006, with improved
revenue due largely to the high-value projects and contributions
from Keppel Nantong Shipyard in China.
With oil and gas demand growing at a strong pace to
support global economic development, worldwide offshore
E&P spending is expected to grow, albeit at a moderate
level in 2007.
A total of 14 offshore support vessels (OSVs) and tugs were
delivered to a worldwide clientele including new customers
LUKOIL-Kaliningradmorneft and Seaways International.
It secured six units of OSV and two jackup hulls for Keppel FELS
during the year. It also acquired new capabilities in Ice-Class
vessels with the award of two units of ice-breaking vessels for
the Barents and Arctic Seas and an FSO for the Caspian Sea.
Offshore
Demand for offshore rigs remains bullish with an ageing
global rig fleet and record high fixture rates. The offshore rig
fleet is currently operating at an effective utilisation rate of
nearly 100% in every sector. Worldwide jackup demand is
expected to increase to 390 units in 2007 and 410 in 2008.
Demand for semis is expected to increase from an average
of 160 units globally in 2007 to nearly 180 in 2008.
The specialised shipbuilding yard has an order book of
22 vessels slated for delivery from the beginning of 2007 till
mid-2009. Of this, 11 are being built in Keppel Nantong.
Keppel Nantong in China launched full-scale operations in
2006 to complement Keppel Singmarine in the construction
of OSVs and tugs.
Business outlook
The outlook for the offshore and marine industry remains
strong, underpinned by sound market fundamentals.
Operating & financial review
Offshore & Marine
Keppel Corporation Limited
Report to Shareholders 2006
107
Operating & financial review
Offshore & Marine
Keppel FELS Brasil is on track with the
construction of the P-52 FPU.
Keppel Batangas fabricates the pontoons
for the ENSCO 8500 semi.
The order backlog for new FPUs is at a record 30-year high,
with over 60 units due for delivery over the next two years.
This includes nearly 50 units of FPSOs and nine production
semis. There are also close to 110 projects currently in the
bidding, design or planning stages that potentially require a
significant number of additional floating production and
storage units.
Deepwater activity will continue to grow significantly, with
almost 25% of E&P projects in the planning pipeline slated
for ultra-deepwaters exceeding 1,500 metres. Another 30%
of the planned projects are in water depths of between
1,000 m and 1,500 m.
In the North Sea, a resurgence in exploration and appraisal
(E&A) drilling in the last two years saw the highest levels of
E&A investment since the late 1980s. The increased activity
in the Arctic environment and other harsh environment looks
likely to continue. The deepwater “Golden Triangle” of West
Africa, Gulf of Mexico and Brazil will continue to account for
over 80% of global deepwater expenditure. Prospecting in
the Caspian Sea looks positive in the Russian, Azerbaijani
and Kazakh sectors and this is expected to result in additional
requirements for offshore-related infrastructure and OSVs.
In Brazil, Petrobras’ new five-year strategy to reduce its
dependency on gas, light oil and oil product imports has
pushed up overall investments in deep and ultra-deepwater
E&P. Together with the capital expenditure budgeted by other
oil companies in the region, a total order for 11 FPUs is
planned for the period between 2007 and 2011.
West Africa remains an important region for the international
oil community, as oil companies seek to diversify long-term
oil and gas supply from the Middle East and parts of Latin
America. There is also strong interest in African acreage,
particularly from Asian national oil companies seeking to
fuel their burgeoning economies. The emerging Asian and
Australian regions will also see strong growth in offshore oil
and gas activities.
The high level of E&P activities will continue to drive demand
for production facilities, particularly FPSOs and FSOs. About
30 potential FPSO and FSO projects are coming on stream,
including upgrading projects.
Keppel O&M has been able to co-invest in FPSOs and rigs
with long-time customers. It believes that the market is right
for shipyards and owners to collaborate and leverage one
another’s capabilities to offer additional value to end customers.
Keppel O&M will explore different alliances with trendsetters
to capture greater value.
108
Operating & financial review
Offshore & Marine
Keppel Corporation Limited
Report to Shareholders 2006
Global oil demand continues to grow at a strong pace
millions of barrels per day
85.9
+1.7%
84.5
+1.1%
83.6
+1.5%
82.4
86
84
82
80
78
76.8
76.2
76
75.4
79.3
77.8
74
1999
2000
2001
2002
2003
2004
2005
2006
2007
Source: IEA, Oil Market Report, November 2006
Keppel AmFELS completes two
accommodation platforms for PEMEX.
Marine
The rise in FPSO and FSO projects is taking up capacity
traditionally used for shiprepair and upgrading work, while
the continuing good shipping market is asserting pressure
on owners and ship managers to push for faster turnaround
times for shiprepair. The confluence of these factors has held
up prices for shiprepair services despite expansion of existing
and new shiprepair facilities within Asia. This augurs well for
Keppel Shipyard’s shiprepair business. Servicing tankers and
container ships remains core to the shipyard.
Prospects for tugboats remain robust with growing global
shipping, underpinned by the industrial expansion of China’s
and India’s booming trade. There is a greater need for harbour
tugs of bigger horsepower and better manoeuvrability.
Keppel Singmarine and Keppel Nantong Shipyard are ready
to grow beyond the good track records achieved in recent
years to attain new heights as they serve the needs of their
customers in the buoyant shipbuilding market.
Specialised shipbuilding
The OSV market will continue to thrive on the current high
utilisation and charter rates, providing favourable conditions
for further investment in vessels by operators. Demand for
icebreaking OSVs is expected to rise as Russia intensifies
her hydrocarbon exploration in the Russian Arctic territory.
However, competition is expected to remain keen as Norwegian
yards are lowering production cost by outsourcing their hull
construction work to East European countries and offering
liberal payment terms. Chinese and Indian yards are now also
in the fray for OSV construction.
Operating & financial review
Offshore & Marine
Keppel Corporation Limited
Report to Shareholders 2006
109
Operating & financial review
Property
Our Property Division’s growth is expected
to be underpinned by the robust office and
high-end residential sectors in Singapore.
Major developments in 2006
Focus for 2007/2008
Vision
• Sold over 1,200 residential
• Capitalise on the
units in Singapore and
about 2,500 residential
units overseas
• Completed One Raffles Quay
in October 2006. Building was
fully pre-committed prior to its
completion
• Embarked on a re-branding
exercise for Evergro Properties
Limited (formerly known as
Dragon Land Limited) after
raising its stake in the
company to 71%
• Sponsored the establishment
and listing of K-REIT Asia,
a commercial real estate
investment trust, in April 2006
development of the new
downtown and Keppel Bay
as the next phase of growth
• Selectively launch residential
and township projects in
Singapore and overseas to
meet continued demand for
quality homes
• Seek to widen its footprint in
the region and explore new
potential markets such as the
Middle East
• Continue to explore potential
acquisition of commercial
properties through K-REIT Asia
to reach its target Assets Under
Management of $2 billion
within the next few years
• Work on the launching of two
new funds in 2007 by Alpha
Investment Partners
The Division aims to be a leading property developer in the region
and a premier manager of property funds.
Earnings highlights
Revenue
EBITDA
Operating profit
Profit before tax
PATMI
Manpower (number)
Manpower cost
Operating profit
$ million
Profit before tax
$ million
PATMI
$ million
2004
2005
2006
2004
2005
2006
2004
2005
2006
2006
$ million
1,155
251
235
233
96
2,674
63
118
118
96
2005
2004
$ million $ million
847
215
195
222
118
711
194
179
194
118
2,219 2,088
37
50
179
195
194
235
222
233
110
Operating & financial review
Property
Keppel Corporation
Keppel Corporation Limited
Report to Shareholders 2006
Report to Shareholders 2006
One Raffles Quay
Earnings review
The Property Division registered a $308 million, or 36%
improvement in revenue over 2005, backed by higher sales
from both Singapore and overseas residential properties.
Rental income from investment properties was higher as a
result of the tight supply of prime office buildings in the
Singapore Central Business District. Despite lower contribution
from Keppel Bay, the Property Division posted profit before
tax of $233 million, 5% above the previous year due to the
higher revenue from trading projects and profit from the
sale of a piece of land in Tianjin and an equity interest in a
property project.
is further compounded by the reduction of over 1 million sf in
existing supply due to redevelopment plans of some offices
within the Central Business District.
The continued surge in demand, coupled with increasingly
tight supply availability, pushed up Grade A office rent by
53.2% year-on-year to $8.73 per square feet (psf) per month
as at end-2006 from $5.70 psf as at end-2005 (source: CBRE).
Based on CBRE’s Global Market Rents survey in November
2006, Singapore is still competitive relative to other key
Asian cities such as Tokyo, Hong Kong, Mumbai, New Delhi
and Seoul.
Market review
The Singapore economy grew by 7.9% in 2006, higher
than the 6.6% growth in 2005. Growth was driven mainly
by improved global economic conditions and business
sentiments, which led to positive growth in all three sectors
of manufacturing, services and construction.
Driven primarily by new and expansionary demand for prime
office space from the financial and business services sector,
the Singapore office market continued to strengthen
throughout 2006 with a take-up of 2.4 million square feet (sf),
up from 1.96 million sf for 2005 and 1.07 million sf for 2004.
According to CB Richard Ellis (CBRE), Grade A office occupancy
rose to 99.2% as at end-2006 compared with 92.5% a year ago.
In contrast to rising demand, office availability is tight, which
2006 saw residential prices increase by 10.2%, the highest
gain since 1999. Total take-up of new homes surged to
11,147 units for 2006 compared with approximately 9,000
units in 2005. Demand for high-end projects continued to
remain strong. Based on Urban Redevelopment Authority’s
statistics, new launches for high-end and luxury-end properties
in 2006 increased by 25.4% over 2005.
Strong economic growth, urbanisation, a growing middle
class and rising home aspirations continue to spur demand
for quality housing in Asia.
Operating & financial review
Property
Keppel Corporation Limited
Report to Shareholders 2006
111
Operating & financial review
Property
The Botanica, Chengdu, China
Located in the south-eastern sector of Chengdu, the 42-hectare
residential township development comprises a mix of high and
low-rise apartment blocks, commercial buildings and supporting
amenities such as a primary school, kindergartens, a clubhouse
and parks.
Despite anti-speculation measures in China’s property market,
sales of The Botanica in Chengdu continued to do well. In major
cities such as Beijing and Chengdu, home prices continued to
rise on the back of genuine demand by owner-occupiers.
China’s market potential continues to appear favourable in the
longer term, given its positive economic and demographic
factors. The government’s move to keep speculation in check
is expected to promote the development of a healthy and
sustainable housing market in the long run.
Operating review
Singapore
Demand for high-end projects continued to remain strong
as evident from Keppel Land’s launch of the Marina Bay
Residences (MBR). MBR experienced 100% sales during
its preview with an overall achieved average selling price of
approximately $1,950 psf. One of the penthouses achieved
a record price of $3,450 psf.
Similarly, sales were brisk for other high-end projects. The
Sixth Avenue Residences was sold out in two weeks from
its preview. The project achieved an average selling price of
about $1,000 psf.
Three other of the group’s existing launches – Caribbean at
Keppel Bay, The Belvedere and The Callista – also achieved
100% sales while 98% of the 393 units released at Park Infinia
at Wee Nam were sold as of end-February 2007. Urbana,
The Linc and Freesia Woods were also substantially sold.
In total, Keppel Land sold over 1,200 homes in Singapore in
2006, more than double its sales from 2005, positioning it
among the top three listed developers in residential sales
in Singapore.
per month, ORQ attracted many blue-chip tenants such as
ABN AMRO, Deutsche Bank, UBS, Ernst & Young, Barclays
Capital and Credit Suisse.
Keppel Land also commenced construction of Phase One of
Marina Bay Financial Centre (MBFC) which is jointly developed
by the same consortium partners in ORQ and designed by
internationally-renowned architects Kohn Pedersen Fox.
Scheduled to be ready in 2010, Phase One of MBFC will
provide about 1.6 million sf of net lettable office space and
428 units of luxury homes at MBR, with complementary
retail facilities.
Encouraged by the strong rebound in the office market, the
consortium exercised its option in the first quarter of 2007 to
purchase the remaining land for Phase Two of the development
with a balance gross floor area of over 2 million sf.
Overseas
Keppel Land’s overseas residential developments continued
to achieve good sales in 2006, riding on sustained demand
for quality homes in Asia’s growth cities. In 2006, the group
sold a total of about 2,500 residential units, mainly in China,
India and Vietnam.
One Raffles Quay (ORQ), which was jointly developed with
Cheung Kong (Holdings) and Hongkong Land, was 100%
pre-committed even before its completion in October 2006.
Setting a new benchmark when it achieved rental of $10 psf
In China, The Seasons in Beijing sold about 97% of the 1,775
units launched as of end-February 2007. Over at Chengdu,
The Waterfront achieved sales of about 97% for the 1,098 units
released while The Botanica sold more than 91% of the 1,150
112
Operating & financial review
Property
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Report to Shareholders 2006
Significant events
March
The final closing of Alpha Core Plus Real Estate Fund by
Alpha Investment Partners exceeded initial targets by
raising $720 million.
April
Evergro Properties sold its wholly-owned subsidiary for a
book profit of about $24.2 million to unlock greater value
from its assets.
K-REIT Asia was listed on the Main Board of the
Singapore Exchange by way of introduction.
Luxurious waterfront development in Ho Chi Minh City,
Villa Riviera was unveiled for public viewing.
June
Keppel Land broadened its foothold in India with a
joint venture to develop a 1,670-unit condominium
project in Kolkata.
July
Keppel Land increased its stake in Equity Plaza to 64.6%
to consolidate interests in its office portfolio.
October
Keppel Land divested its entire 30% stake of a joint-venture
company holding a 98% stake in Ocean Towers, Shanghai,
booking an estimated net profit of $28 million.
November
Keppel Land unlocked the value of Bugis Junction through
the divestment of its interest in Hotel InterContinental
Singapore for a profit of about $57 million.
Evergro Properties’ new corporate identity was unveiled
along with plans for its first project under the new brand –
a 1.2 million sm luxury villa and golf resort in Tianjin’s
Hangu District.
December
Marina Bay Residences was completely sold out even
before the public launch of its 428 apartments.
K-REIT Asia owns about 44% of the
strata area of Prudential Tower.
Villa Riviera, Ho Chi Minh City, Vietnam
Operating & financial review
Property
Keppel Corporation Limited
Report to Shareholders 2006
113
Elita Promenade, Bangalore, India
To be developed in two phases, Elita Promenade comprises
1,573 apartments with unit sizes ranging from 1,365 sf to
1,790 sf. Following its success in Bangalore, the group will be
launching its second condominium project Elita Horizon.
Dubbed India’s and also the world’s IT hub, Bangalore has
seen a substantial increase in real estate investment since the
government relaxed the ban on foreign direct investment in
December 2005. Foreign investment in Bangalore’s real estate is
estimated at US$2 billion in 2006 and this figure is expected to
increase further with the government’s plan for development of
large-scale satellite townships, IT parks and aerospace parks.
In total, some 4,000 Keppel homes will be released in India over
the next few years.
Serenity Cove Golf Villas, Tianjin, China
The 1.2 million sm luxury villa and golf resort, located on
the Southern Island in Tianjin, is Evergro’s first residential
showpiece. There is capacity to yield over 450 villas and other
low density up-market housing. This project has great potential
for growth and profitability as it is situated on prime real estate
within the Binhai New Area.
Furthermore, Keppel Land and Evergro Properties have
successfully acquired two adjacent plots of prime land totalling
82,987 sm in Jiangyin, Jiangsu Province to develop a flagship
urban living project. They will jointly design and develop an
integrated urban living project with residential, commercial
and retail components within the new civic and cultural district
known as the Jiangyin City Living Room.
units launched under Phase Two. As buyers of Keppel Land’s
projects are mainly locals, the anti-speculation measures have
not affected the group significantly. Keppel Land remains
optimistic about China’s market potential in the long run. It has
increased its stake of its China-focused subsidiary Evergro
Properties to 71% as an additional platform for the group’s
expansion into second-tier cities in China. With the re-branding,
Evergro Properties will be in a better position to inject more
value to grow its brand and strengthen its portfolio with choice
residential developments.
In 2006, Alpha made 18 acquisitions, bringing the total
value of assets under management (AUM) to $2 billion as
at end-2006, up from about $980 million as at end-2005.
AUM is expected to reach $4 billion when all the funds are
leveraged and fully invested.
Alpha Core Plus Real Estate Fund concluded its final closing
in March 2006 with a total equity of about $720 million,
exceeding its target of $412 million. Alpha also secured its
first Shariah compliant fund in 2006.
In India, Elita Promenade in Bangalore continued to make
favourable progress, with about 72% of the 1,263 launched
units sold as of end-February 2007.
All 101 units at Villa Riviera in Ho Chi Minh City had been
sold, helped by the recent stock market bull run in Vietnam.
With continued strong investor interest in Asian real estate,
Alpha is working on establishing local platforms and launching
new products, and has identified Australia, China and India as
potential markets to establish local platforms for fund raising
and investing. A platform in China is planned for 2007 to better
serve investment needs in this fast-growing Asian economy.
Fund management
Alpha Investment Partners (Alpha) continued to deliver good
returns to its investors and shareholders. All the funds
under Alpha’s management exceeded returns expected by
investors. This strong performance was the result of active
management to achieve higher income from its portfolio of
properties and gains from divestments, as well as appreciation
in property value.
Business outlook
Singapore
For 2007, the Ministry of Trade and Industry expects Singapore’s
economic growth to remain healthy albeit at a slower pace of
between 4.5% and 6.5%. The government’s planned increase
in the goods and services tax from 5% to 7% with effect from
1 July 2007 is not expected to add much pressure to inflation.
A cut in the corporate tax rate to 18% from 20% effective
from Year of Assessment 2008 will enhance Singapore’s
competitiveness in the region.
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Property
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Report to Shareholders 2006
The new lifestyle hub in Singapore
Part of a sprawling 32-hectare development, Reflections at
Keppel Bay will be a stunning contribution to Keppel Land’s
renewal of Singapore’s southern skyline. The southern belt is
set to become the country’s new lifestyle hub, which includes
Marina Bay, earmarked to be the island’s new downtown. With
an expanding portfolio of projects in this belt, Keppel Land is
poised to benefit from the favourable economic outlook and
influx of foreign investment and talent.
Part of a sprawling 32-ha development, the Reflections at Keppel Bay and other projects in the
pipeline will benefit from Keppel Land’s holistic approach to redefine exclusive waterfront living.
Overseas
Asia’s housing market outlook also remains favourable on
the back of robust economic growth and continuing inflow
of global funds into Asian real estate. New residential
launches in the pipeline for 2007 include a villa development
in Tianjin, China; Elita Horizon in Bangalore and a condominium
project in Kolkata, India; and the first phase of the group’s
townships in Wuxi, China; Ho Chi Minh City, Vietnam and
East Jakarta, Indonesia.
The group will continue to seek residential and township
development opportunities in Asia’s promising cities and
to further grow its assets under management to boost
fee-based income.
With continued economic growth and business expansion,
office demand is expected to remain strong going forward.
As no significant new supply is forecast between 2007 and
2009 until MBFC (Phase One) is ready in 2010, office rentals
and occupancies will continue to go up. Jones Lang LaSalle
has predicted further rental growth of 25% to 30% in 2007.
Property consultants expect the residential market to remain
positive for 2007. Prices for new projects in the high-end and
luxury-end sectors may continue to increase and will have a
spillover effect on mid-tier homes. Overall, residential property
price increase for 2007 is expected to be between 5% and 8%.
For 2007, Keppel has in its stable, one of the most awaited
residential project launches in Singapore, Reflections at
Keppel Bay. Designed by world-renowned architect Daniel
Libeskind, this 1,129-unit development will have six high-rise
glass towers of 24 storeys and 41 storeys as well as 11 villa
apartment blocks of six to eight storeys. It is part of the
Keppel Bay precinct which offers a true waterfront lifestyle
with a marina that is due to be completed in the fourth
quarter of 2007. Keppel Bay is located in the district which
encompasses Sentosa Island with its upcoming Integrated
Resort and the VivoCity retail mall in the HarbourFront
precinct. Other potential launches of the group in 2007
include Park Infinia at Wee Nam, The Tresor, and the
redevelopment of Naga Court and The Crest @ Cairnhill.
Operating & financial review
Property
Keppel Corporation Limited
Report to Shareholders 2006
115
Operating & financial review
Infrastructure
Our Infrastructure Division is poised
for growth with strategic initiatives to
develop application technologies.
Major developments in 2006
Focus for 2007/2008
Vision
• Keppel Seghers secured two
• In line with its aim of being a
contracts amounting to
$1.7 billion for the Qatar
Domestic Solid Waste
Management Centre project
• Keppel Seghers was awarded
the 25-year DBOO Tuas South
Waste-to-Energy Plant project
in Singapore
• Keppel Energy’s 150 MW
power barges commenced
operations in Ecuador on a
15-year concession contract
Earnings highlights
Revenue
EBITDA
Operating profit
Profit before tax
PATMI
Manpower (number)
Manpower cost
leading provider of innovative
cost-effective environmental
solutions, Keppel Seghers will
focus on R&D and actively
develop both water and solid
waste treatment technologies
• Keppel Energy will leverage
the Keppel Merlimau Cogen
project infrastructure to
develop its utilities business
2006
$ million
570
(19)
(65)
(24)
(35)
3,998
158
2005
2004
$ million $ million
671
(2)
(53)
(17)
(24)
803
88
12
37
32
3,724 3,530
161
166
Operating profit
$ million
2004
2005
(53)
12
Profit before tax
$ million
PATMI
$ million
2006
(65)
2004
2005
2006
2004
2005
2006
37
32
(17)
(24)
(24)
(35)
The Infrastructure Division continues to explore opportunities
in growth markets to build sustainable long-term earnings.
A constant stream of income is expected from these assets:
Ecuador
Power
Barges
150 MW
Operation: 4Q 2006
Ulu Pandan
NEWater Plant
148,000 m3 of NEWater per day
Operation: 1Q 2007
Keppel Merlimau
Cogen Plant
500 MW
Operation: 1H 2007
Qatar Domestic
Solid Waste
Management Centre
Over 1,550 tonnes
of solid waste a day
Contribution from: 4Q 2007
800 tonnes of solid waste a
day to generate more than
20 MW of green energy
Tuas South
Waste-to-
Energy Plant
Operation:
end 2009
2006
2007
2008
2009
2010
116
Operating & financial review
Infrastructure
Keppel Corporation
Keppel Corporation Limited
Report to Shareholders 2006
Report to Shareholders 2006
Integrated Domestic Solid Waste Management Centre
The Ministry of Municipal Affairs and Agriculture in Qatar
awarded Keppel Integrated Engineering contracts comprising
engineering, procurement and construction of an integrated
solid waste management facility, and the operation and
maintenance of the facility for 20 years. This $1.7 billion project
showcases the best of Keppel Seghers’ technologies and project
management capabilities. To be completed in 2009, the waste
management centre will handle and treat domestic solid waste
for the whole of Qatar.
Ulu Pandan NEWater Plant
The Keppel Seghers Ulu Pandan NEWater Plant is Singapore
and East Asia’s largest water reuse plant. It has a capacity to
produce 32 million gallons (148,000 m3) of NEWater a day.
Keppel Seghers has introduced a number of engineering
solutions that have reduced the size of the plant while
improving its operational efficiency.
Keppel Seghers’ aim of being a leading provider of innovative
cost-effective environmental solutions is in alignment with the
vision of the Ministry of Environment and Water Resources to
develop Singapore into a strong and vibrant hydro hub.
Pictured here toasting to a solution for Singapore’s water needs
were Prime Minister Lee Hsien Loong (centre), Minister of the
Environment and Water Resources Dr Yaacob Ibrahim (left) and
Keppel Corporation Executive Chairman Lim Chee Onn.
Earnings review
Revenue from the Infrastructure Division was $570 million,
a decline of 15% below 2005. This is due to fewer network
engineering contracts secured by Keppel Telecommunications
& Transportation (Keppel T&T), coupled with lower sales for
electricity trading as non-profitable fixed price contracts were
not renewed. Overall, the Division incurred losses of $35 million
compared to $24 million in 2005, as the deployment of the
power barges in Ecuador only returned to business in the
fourth quarter of 2006. However, the quarter’s profit was not
sufficient to reverse the first nine months’ losses.
Environmental engineering
Strategic direction of Keppel Integrated
Engineering Ltd (KIE)
KIE adopts a three-pronged business model of developing and
selling technology packages; designing, building, operating
and maintaining water and waste treatment plants on a turnkey
basis; and owning and operating such plants developed by KIE.
Market review
The growth of the global economies continued to fuel the need
for more efficient waste and water management systems.
Growing awareness and acceptance of climate change issues
resulted in more widespread adoption of greenhouse gas
reduction initiatives. This, coupled with the increasing amounts
of waste and the decreasing availability of land fill sites, had
led governments, especially in Europe, to pass laws designed
to discourage or prohibit landfilling of waste. During the year,
KIE’s wholly-owned environmental unit Keppel Seghers
stayed on course in building on its track record in providing
comprehensive environmental solutions for solid waste and
water/wastewater treatment. The company secured several
milestone projects in the Middle East, Europe, China and
Singapore in 2006.
Operating review
In the environmental business, Keppel Seghers continued to
build on its position as a leading provider of comprehensive
environmental solutions ranging from consultancy, design
and engineering, technology and construction to operation
and maintenance of facilities. It clinched major projects that
are expected to bring in recurring income to sustain growth.
In 2006, the company secured two contracts amounting to
QR3.9 billion (approximately $1.7 billion) from the Ministry of
Municipal Affairs and Agriculture in Qatar. This project is the
largest environmental engineering undertaking that a
Singaporean company has won in the international market.
The two contracts, of about equal value, were for the
Engineering, Procurement and Construction (EPC) of an
integrated solid waste management facility in Qatar, and the
operation and maintenance of this facility for 20 years. The
plant is expected to be operational in 2009. This will be the
first such integrated solid waste treatment facility in the
Middle East, and one of the few in the world.
Operating & financial review
Infrastructure
Keppel Corporation Limited
Report to Shareholders 2006
117
Operating & financial review
Infrastructure
In Singapore, Keppel Seghers clinched its second public private
partnership (PPP) project, the Tuas South Waste-to-Energy
(WTE) Plant, last year. This came on the back of the first PPP
project, the Ulu Pandan NEWater Plant, that it secured in 2004.
When completed, each WTE plant will be able to treat
800 tonnes of municipal waste a day to generate 12 MW
of green energy. Both plants were repeat orders from China
Everbright International, which affirmed the strength and
reliability of Keppel Seghers’ proprietary technologies.
The WTE Plant is under a 25-year Design-Build-Own-Operate
(DBOO) contract arrangement with the National Environment
Agency (NEA). Located at Tuas South, the WTE Plant,
Singapore’s fifth, is the first incineration plant to be built
under the PPP initiative.
Overseas, Keppel Seghers made significant progress in
securing contracts in both water and WTE solutions sectors.
It secured a contract from InBev, the world’s largest
brewer, to upgrade its existing wastewater treatment plant
in Jupille, southern Belgium. Work involved the provision
of engineering services, civil works as well as supply and
installation of equipment.
The company also made further inroads with its proprietary
technology solution – UNITANK® – into Argentina with two
new contracts worth US$1.3 million from new customers.
This added on to Keppel Seghers’ track record of 20 UNITANK®
projects in the country.
In the thermal solutions market, Keppel Seghers secured a
significant breakthrough in Finland with its first WTE plant for
municipal solid waste. The Kotka Energy WTE project signified
the acceptance of WTE solutions in the country with its move
towards meeting EU’s ban on landfill through the adoption of
WTE as a viable and environment-friendly alternative.
It secured two separate contracts of approximately $13 million
each to provide technologies and services for the first WTE
plants to be built in Jiangyin and Changzhou, Jiangsu Province,
China. For both plants, Keppel Seghers will provide its state-
of-the-art equipment design and technical services for the
grate, atomiser, automation control and flue gas cleaning
components of the plant.
These projects reaffirmed the position of Keppel Seghers as
the market leader for imported WTE solutions in China where
it has 60% of the market.
Meanwhile, Keppel Seghers has completed the construction
of its Ulu Pandan NEWater DBOO project, the largest and
newest NEWater plant in Singapore, which would supply
half of Singapore’s NEWater needs. The plant was officially
opened by Singapore’s Prime Minister Lee Hsien Loong on
15 March 2007.
As for Keppel FMO Pte Ltd (Keppel FMO), the facilities
management and operations company made successful
inroads into the Middle East airport operations market with its
first maintenance project in Qatar’s Doha International Airport.
In Singapore, the firm secured maintenance contracts from
new customers Workforce Development Agency, the National
Library Board and the Supreme Court during the year. In addition,
Keppel FMO continues to retain high renewal rate of operation
and maintenance contracts from its existing clients.
FELS Cranes, a wholly-owned unit of KIE, completed the
installation and delivery of five Rubber Tyred Gantry (RTG)
cranes to Kolkata Port Trust, India’s oldest and only riverine
port, in May 2006.
Business outlook
While KIE has built and operated various plants in Europe and
Asia, the Qatar project is by far the most significant of such
projects that the group has undertaken.
The challenge ahead is for the group to leverage its expertise
and experience to secure new opportunities for environmental
engineering services. This is set against the global backdrop
of the need for more efficient waste and water management
systems, and growth potential for alternative waste disposal
methods such as WTE plants.
118
Operating & financial review
Infrastructure
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Report to Shareholders 2006
Significant events
January
Keppel Seghers signed a 25-year DBOO contract with the
National Environment Agency for a WTE plant with potential
to treat 800 tonnes of waste per day and generate 20 MW
of green energy.
April
Keppel FMO successfully made inroads into the Middle
East airport operations market with its first maintenance
project in Qatar’s Doha International Airport.
June
Keppel T&T enhanced its logistics presence in China with
the strategic acquisition of a 35% stake in Wuhu Annto
Logistics Company.
July
Keppel Seghers secured a $30 million contract to provide
technologies and services for the first WTE plant in Finland.
August
Keppel Seghers expanded its environmental footprint in
Tianjin with a $13.5 million contract to provide technologies
for a WTE plant.
September
Keppel Seghers commissioned and delivered the 1,050-
tonne per day Suzhou SuNeng Waste Incineration Power
Plant to China Everbright International.
October
Keppel Seghers formed a strategic partnership with
Passavant Impianti to address the Italian sludge
treatment market.
Keppel Seghers won two contracts totalling $1.7 billion
from the Qatar Government to design and build an
integrated solid waste management facility and to operate
and maintain the facility for 20 years.
Keppel T&T acquired a 30% stake in iCELL, an operator
of more than 400 wireless hotspots in Singapore.
December
Keppel Energy’s 150 MW power barges commenced
operations in Ecuador on a 15-year concession contract
following its previous deployment in Brazil.
Keppel Seghers is constructing Singapore’s fifth WTE plant.
Keppel Logistics invested a 35% stake in Wuhu Annto.
Keppel Energy’s floating power plant in Ecuador.
Operating & financial review
Infrastructure
Keppel Corporation Limited
Report to Shareholders 2006
119
Operating & financial review
Infrastructure
Keppel FMO clinched the maintenance contract
for Doha International Airport.
Keppel Seghers supplied equipment and
technology for the Suzhou SuNeng WTE plant.
Given also that the outlook for energy costs are expected to
remain at levels considerably higher than seen in the previous
decade, industrial producers are looking at how to safeguard
their long-term energy needs at an acceptable cost. Some of
the major energy consumers started to look into solid waste
and waste-derived fuels as an alternative for conventional
fuel for power, steam and heat generation. As a leading
supplier of WTE equipment, Keppel Seghers is positioning
itself as a reliable partner to enter into long-term contracts to
supply steam, heat or power from waste.
the variability of water reserve levels available for the
hydroelectric plants due to seasonal fluctuations, thermal
power plants like the power barges will add much needed
security to the system.
Operating review
Keppel Energy concentrated its efforts mainly on the
construction of the 500 MW cogeneration plant on Jurong
Island, Singapore and the redeployment of the 150 MW
power barges in Ecuador.
Power Generation
Strategic Direction of Keppel Energy Pte Ltd
(Keppel Energy)
Keppel Energy aims to build a strong, well-balanced and
regionally-focused power business.
Market review
The two markets in which Keppel Energy had operating
presence in 2006 included Singapore and Latin America. Both
markets recorded robust growth as economies across the
globe continued to do well.
In Ecuador, Keppel Energy’s power barges are well-positioned
to support the country’s rising power demand. Ecuador relies
on hydroelectric power plants for more than half of the country’s
generation capacity. With increasing demand for power, the
long lead time needed to install the hydroelectric plants and
Construction of the 500 MW Keppel Merlimau Cogen (KMC)
project, a combined cycle gas turbine power plant designed
with the capability to operate with natural gas or oil firing,
began in March 2005. It progressed according to schedule
during 2006. The plant commenced commissioning in October
2006 and is on schedule to start operations in 1H 2007.
In August 2006, Keppel Energy’s wholly-owned subsidiary,
Pipenet Pte Ltd (Pipenet) completed and put into operation
its service corridor on Jurong Island. Pipenet has since
signed up key customers including Ciba Speciality Chemicals
Industries (Singapore) Pte Ltd and Petrochemical Corporation
of Singapore (Private) Limited. The completion of the Pipenet
service corridor enables pipeline transfer of backup fuel/
diesel from the Singapore Refinery Company to the KMC
plant site at Tembusu. The 8-km long pipe-rack and pipe-bridge
network is strategically located mainly along Jurong Island
Highway. It has been routed to enable supply of feedstock
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Infrastructure
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Report to Shareholders 2006
Keppel Merlimau Cogen Plant
The development of Keppel Energy’s 500 MW combined
cycle power plant on Jurong Island, Singapore, is in line with
its strategy of achieving return-driven growth in the energy
business through selective development. It also provides the
platform for Keppel Energy to seek further growth options in the
Singapore electricity and gas markets, and beyond.
Keppel Electric, which is the electricity retail arm of Keppel Energy
and an early entrant to the competitive electricity retail market,
will sell its electricity generated to contestable customers.
and transfer of utilities by pipeline between existing and
potential customers from the Merbau area, through the main
chemical clusters at Sakra to the new Banyan and Tembusu
sectors on Jurong Island.
with its secured long-term supply of natural gas, will position
itself to provide an integrated service both as a shipper and
marketer of gas and electricity.
Following a successful redeployment from Brazil, the power
barges commenced generation on 1 December 2006 in Ecuador.
Under this arrangement, Termoguayas Generation S.A. (TGSA),
Keppel Energy’s wholly-owned subsidiary in Ecuador is on a
15-year concession contract with the National Council of
Electricity to operate in Esclusas, in the southern part of the
city of Guayaquil, Ecuador. TGSA receives capacity payments
in addition to revenue from selling the power into the national
grid under a competitive market. The deployment not only
enhances the value of the barge assets but Keppel Energy’s
entry into Ecuador also contributes towards enhancing the
security of power supply in the country.
In Nicaragua, Keppel Energy’s 64 MW power plant continued
to be positioned to meet the growing demand for electricity
in the country.
Business outlook
The scheduled commencement of the KMC plant operations
will be timely with Singapore’s rising demand for electricity
on the back of the robust growth of the economy. Keppel
Energy will leverage the KMC project infrastructure to
develop its utilities business such as the supply of steam,
firefighting water, cooling water and pipe corridor service to
consumers on Jurong Island. Additionally, Keppel Energy,
Keppel Energy is keen to explore further opportunities which
may arise from further liberalisation of both the gas and
electricity markets. These include the anticipated opening
of the gas market and the privatisation of Temasek-owned
generation assets in Singapore as well as opportunities in
the region.
In the Americas (Ecuador and Nicaragua), Keppel Energy will
focus on operating the plants efficiently and positioning itself
to meet the growing energy demands in those countries.
Network Engineering and Logistics
Strategic Direction of Keppel Telecommunications &
Transportation (Keppel T&T)
Keppel T&T aims to leverage core competencies to enhance
existing businesses.
Market review
Network Engineering
In the regional telecommunications market, improved economic
conditions and more user applications led to the increase in
voice and data traffic. Subscriber growth remained strong in
emerging markets like Indonesia and the Philippines, where
mobile penetration rates remained relatively low. The subscriber
growth was supported by improved economic conditions in
both markets.
Operating & financial review
Infrastructure
Keppel Corporation Limited
Report to Shareholders 2006
121
Operating & financial review
Infrastructure
iCell Networks
Keppel T&T made a strategic acquisition of a 30% stake in
iCELL Networks, extending its reach into the emerging WiFi
arena. iCELL was one of the three parties awarded the tender
by Infocomm Development Authority to install and operate
Singapore’s nation-wide network of Internet hotspots for public
wireless broadband services.
Riding on the back of this WiFi network, iCELL intends to provide
business and consumer applications on WiFi.
For more developed regional markets like Singapore and
Malaysia, the focus was on upgrading networks to support
new services and cater for growing data traffic and technology
convergence. The Singapore government launched in October
2006 a nation-wide wireless broadband network initiative
offering free WiFi connection in key public hotspots. The intent
was to promote more broadband applications and services in
the marketplace. In response, telecommunications companies
also expedited work in the area of High-Speed Downlink Packet
Access (HSDPA) to meet the expected growth in demand for
mobile connectivity.
In Europe and the US, cable operators upgraded their network
to support “triple play” services of video, voice and broadband.
Responding to keen competition from satellite television and
Internet protocol televisions (IPTVs) in their traditional cable TV
space, cable operators were increasingly bundling traditional
cable programmes with voice and broadband services to
improve the competitiveness of their service offerings. With
good cashflow generated from their traditional businesses,
cable operators were ploughing back some of the cash to
upgrade their network to support triple play. Implementation
of the upgrading process would have been speedier had the
cable operators not been partially preoccupied with the
consolidation phase that the industry went through.
In the adjacent customer segment of utility providers, which
uses the same Geographical Information System (GIS)
services as cable operators, there are growing demands to
digitise manual records of assets and migrate these records
to a GIS platform. Several tenders for such work were issued
during the year.
Logistics
Buoyant economic conditions lifted regional logistics activities.
Nonetheless, global uncertainties and fluctuations in
commodity prices translated to uncertainties for businesses.
In Singapore, market occupancy for industrial warehouses
improved in tandem with the economy. Although there was
some new warehouse supply that came to the market during
the year, the overall market occupancy across the island for
industrial warehouses averaged above 85%. Rental rates were
generally stable, with rates in the eastern part of Singapore
rising marginally. China maintained its position as a major
manufacturing powerhouse, with strong growth in exports
to major markets like North America and Europe.
Operating review
Network Engineering
The Network Engineering division was active in Singapore
and Malaysia for operations and maintenance works as well
as new areas like HSDPA. The division also directed its
resources and transferred some of its operations to emerging
markets like Indonesia and the Philippines where there have
been increased spending in upgrading networks.
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Infrastructure
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Report to Shareholders 2006
Keppel T&T participated in the emerging WiFi arena by
acquiring a strategic 30% stake in iCELL Networks in 2006.
iCELL was one of the three parties that was awarded the
tender by Infocomm Development Authority (IDA) to install
and operate a nationwide network of Internet hotspots for
public wireless broadband services. iCELL was awarded the
tender for the eastern zone of Singapore.
ECHO Broadband Gmbh (ECHO) continued to digitise and
migrate records of ish’s network infrastructure in Germany
for its new owners. In addition, it also secured similar
contracts from Cablevision in the US.
After successful extension into the adjacent customer segment
of utility providers requiring the same GIS services as cable
operators, ECHO won multi-year GIS work from EnBW, the
main utility provider for the German state of Baden Wurttenberg,
and Tenaga in Malaysia.
Logistics
Keppel Logistics Pte Ltd (Keppel Logistics) in Singapore
sustained its high occupancy rate of near 100% throughout
the year amid the improved economic climate.
The company acquired several new customers, including the
contract for Brother Singapore’s finished goods distribution.
The company also successfully expanded into the high-value
goods segment, providing total inventory management and
airfreight services of mobile phone equipment and accessories
for several new customers.
Conscious efforts to grow the delivery and distribution
business paid off. Keppel Logistics was awarded the local
distribution contract for Watsons Singapore, for which it
serves about 100 Watsons outlets across the island.
Although rental rates in the general warehousing market
have improved, rates in the western part of the island have
generally remained sluggish. As such, Keppel Logistics
continued to focus on productivity improvement.
In China, Keppel Logistics’ Foshan port operations showed
a 30% increase in cargo throughput, handling more than
150,000 TEUs in 2006 on the back of increased trade volume
in the country. The port operated at near full capacity last year.
In 2006, the division also acquired a 35% stake in Wuhu Annto
Logistics Company (Annto) to enhance its services and
footprint in China. Building on the division’s track record and
experience, the acquisition enables Keppel Logistics to leverage
Annto’s extensive network of more than 100 logistics points
and tap growth opportunities in land transportation and
warehousing needs in China.
Business outlook
Network Engineering
With most of the network infrastructure reaching a mature
phase in the developed countries, the Network Engineering
division will continue to look for project management and
engineering services in emerging markets. In GIS services, it
will continue to focus on selective customers in Europe and
the US. The Network Engineering division will also participate
in the growth in WiFi space through iCELL.
Logistics
The local logistics market is expected to face keen competition.
In response, the Logistics division will continue to focus on
tight cost management and productivity improvement. In
China, Keppel Logistics is seeking to lease additional land in
order to achieve higher throughput. The 35% stake in Annto
will also put the group in good stead to tap the strong growth
in land transportation and warehousing needs in China. The
group will also continue to look for suitable acquisitions to
grow its business in new markets in 2007.
Operating & financial review
Infrastructure
Keppel Corporation Limited
Report to Shareholders 2006
123
Operating & financial review
Investments
We are continuously adding value to our
Investments to generate maximum returns
for shareholders.
Major developments in 2006
Focus for 2007/2008
Vision
Managing portfolio to enhance the value of these investments to
bring maximum returns to shareholders.
SPC
Regional
oil and gas
company
k1
Diversified
investment
company
M1
Singapore-
based telco
Building upstream assets
Upgrading and enhancing refining assets
Scouring opportunities in the two core platforms
of energy, education/health/wellness
Expansion into third core platform of
transport leasing
Continue to drive growth in 3G services
with innovative services
Differentiate and strengthen business
through alliances
• Singapore Petroleum Company
Ltd (SPC) revamped its Residue
Catalytic Cracker (RCC) unit
in 3Q 2006 to enable the
refinery to increase the RCC
throughput and percentage of
high-value product
• SPC participated in the drilling
of six exploration wells,
achieving an exploration
success rate of 50%
• SPC will continue to increase
its E&P portfolio through
further acquisition of high
potential assets
• SPC will further strengthen
its refining capability to
achieve an optimal level of
refinery production
Earnings highlights
Revenue
EBITDA
Operating profit
Profit before tax
PATMI
Manpower (number)
Manpower cost
Operating profit
$ million
Profit before tax
$ million
PATMI
$ million
(28)
7
2004
2005
2006
2004
2005
2006
2004
2005
2006
2006
$ million
121
95
95
306
242
161
50
95
167
124
2005
2004
$ million $ million
58
9
7
270
231
160
41
21
1
(28)
167
124
521
32
270
306
231
242
124
Operating & financial review
Investments
Keppel Corporation
Keppel Corporation Limited
Report to Shareholders 2006
Report to Shareholders 2006
Singapore Refining Company
Singapore Petroleum Company’s jointly-owned refinery,
the Singapore Refining Company (SRC), successfully carried
out a major planned maintenance of the Residue Catalytic
Cracker unit. Despite the slight reduction in crude volumes
processed for the year as a result of the scheduled turnaround,
the group achieved an average refining margin of more than
US$4.50 per barrel in an environment characterised by robust
demand for refined petroleum products and tightness in
regional refining capacity.
Exploration and Production assets
Singapore Petroleum Company (SPC) continued to direct its
efforts towards the acquisition of exploration and production
(E&P) assets. The group further widened its E&P portfolio with
the acquisition of a new Petroleum Production Sharing Contract
(PSC) for Block 101-100/04 in Vietnam and the increase of its
equity interest in Block B in Cambodia. In February 2007, SPC
was awarded an exploration permit for Block T06-3 in Australia.
On asset development, the group and its partners have pushed
ahead with plans to commence oil production from the Oyong
field in the Sampang PSC in Indonesia. SPC also participated
in the drilling of a total of six exploration wells, resulting in
promising discoveries in three of these wells.
Earnings review
Revenue from Investments increased by 109% from $58 million
to $121 million mainly due to higher investment income. Despite
lower earnings from SPC as a result of the volatile operating
environment, product write-downs and higher taxes, earnings from
Investments were higher at $242 million or 5% more than
2005, and 95% higher than 2004. MobileOne Ltd (M1) showed
year-on-year improvement in performance due to higher service
revenue and handset sales. k1 Ventures Ltd (k1 Ventures)
achieved earnings of $176 million for the year ended 30 June
2006 and $11 million for the six months ended 31 December
2006. The higher profit for the year ended 30 June 2006 was
due to divestment gain of The Gas Company LLC. Overall,
Investments achieved higher PATMI with the higher
contribution from M1, k1 Ventures and investment activities.
Singapore Petroleum Company (SPC)
Market review
Demand for energy continued to be strong as global Gross
Domestic Product (GDP) registered another year of 5% growth
in 2006. Asian consumption of energy was led by China and
India whose GDP grew by 10% and 9% respectively. Oil and
refined petroleum products continued to make up the bulk of
energy consumption. Global oil demand in 2006 was estimated
to be around 85 million barrels per day.
Operating review
During the year, SPC’s jointly-owned refinery, the Singapore
Refining Company Private Limited (SRC) successfully carried
out a major planned maintenance of the Residue Catalytic
Cracker unit. Notwithstanding the slight reduction in crude
volumes processed for the year as a result of the scheduled
turnaround, the group achieved an average refining margin of
more than US$4.50 per barrel in an environment characterised
by robust demand for refined petroleum products and
tightness in regional refining capacity.
With a well-planned and co-ordinated turnaround programme
for the RCC unit, the group was able to achieve a sustained
high utilisation rate at SRC throughout the year with crude
runs maintained at 51 million barrels for the full year. The
availability of quality products from the refinery had allowed
the group’s trading and marketing divisions to turn in strong
operating performances in 2006. In the retail service station
business, the group continued to leverage its network of 39
service stations and its customer retention programme to
deepen its existing relationships with its corporate and retail
customers. In October 2006, SPC established a wholly-owned
lubricant marketing company in Guangzhou, China, to strengthen
its lubricant marketing and distribution activities in that country.
Operating & financial review
Investments
Keppel Corporation Limited
Report to Shareholders 2006
125
Operating & financial review
Investments
Sampang PSC, Indonesia
The Oyong field in the Sampang PSC, of which SPC has a 36%
working interest, is expected to produce first oil by the 2Q 2007.
An interim analysis by the operator suggests that mid-range
recoverable oil and gas volumes for the field are 6 million
barrels and 97 billion square cubic feet respectively.
Since SPC entered the E&P business in 2000, it has grown its
portfolio considerably focusing on low to moderate risk assets.
With an active drilling programme, the group has achieved an
exploration success of 50% with gas discoveries in three of its
six wells drilled. For 2006, the E&P business has achieved an
average realisation of US$58.22 per barrel. E&P contributed
strong revenue of $49.2 million to SPC and a net operating profit
of $14.6 million.
The group has continued to build up its Exploration and
Production (E&P) portfolio and currently owns interests in six
E&P assets. Its sixth E&P asset, Block T06-3 in Australia was
acquired in February 2007.
During the year, SPC also sought to increased its interests in
Block B located offshore Cambodia from 30.0% to 33.3%,
subject to the approval of the Cambodian authority. In its
pursuit to expand the group’s E&P portfolio, SPC entered
into a Memorandum of Understanding (MOU) with
PT Pertamina to further strengthen the co-operation between
the two companies in oil and gas exploration, development
and production.
Business outlook
The outlook for the group remains positive as regional refining
capacity additions are expected to be constrained by high
construction costs and the shortage of skilled manpower. The
International Monetary Fund has projected that global GDP
growth would be around 5% for 2007. Asian economies are
also projected to stay on a strong growth path led by China
and India. Demand for refined petroleum products is thus
anticipated to remain robust and this, coupled with the projected
tight refining capacity, is expected to result in continued healthy
refining margins in 2007.
In E&P, with most of the facilities and equipment already
installed, first oil production from the Oyong field is expected
in 2007. The group continues to pursue acquisition or farm-in
opportunities for new acreages and production assets to
augment the group’s E&P portfolio. In the downstream
business, the group will be looking to strengthen its refining
capabilities with further upgrading and enhancements. This
will ensure its refinery facilities remain relevant as the region’s
fuel specifications are progressively tightened in the next
few years.
k1 Ventures
Operating review
k1 Ventures achieved record profits in 2006 by realising a
substantial pre-tax profit of $170.1 million from the sale of
The Gas Company, LLC (GASCO). Consequently, k1 Ventures
made a significant capital distribution of 6 cents per share
for shareholders.
k1 Ventures also benefitted from solid performances of its
operating subsidiaries. The results of Helm Holding Corporation’s
operations, the largest independent locomotive and railcar
leasing company in North America, positively impacted
k1 Ventures’ cashflow and profit attributable to shareholders.
Mid Pac, a retail gasoline supplier in Hawaii, also contributed
positively to the financial results.
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Operating & financial review
Investments
Keppel Corporation Limited
Report to Shareholders 2006
SPC upstream assets
Block B, Cambodia
SPC’s interest: 30%
Located 250 km off the coast of Cambodia
to the east of the Thai-Cambodian
Overlapping Claims Area in the Gulf of
Thailand. Several oil and gas discoveries
have been made recently.
Activity 2006
SPC and its partners jointly exercised their
pre-emption rights to acquire the entire
10% equity interest from an existing
partner, on an equal basis. Completion of
the acquisition is conditional on the approval
of the Cambodian authority and SPC’s
interest will increase from 30.0% to 33.3%.
Activity 2007
SPC plans to acquire 600 sq km of
3D seismic survey for this block
in 2007, subject to the availability
of the seismic vessel.
Blocks 102 and 106, Vietnam
SPC’s interest: 20%
Blocks 101-100/04, Vietnam
SPC’s interest: 45%
Blocks 102 and 106 are located in the
Song Hong Basin in the Gulf of Tonkin,
Vietnam. The first exploration well,
Yentu-1X, drilled in Block 106 in 2004
made an oil and gas discovery.
Activity 2006
The Thai-Binh-1X well successfully tested
natural gas and condensate over the upper
and lower sand intervals. On a combined
basis, the well flowed at a total maximum
rate of approximately 47.4 million standard
cubic feet per day of natural gas through a
128/64” choke at an average wellhead
pressure of 524 psi. Condensate was
produced at an average rate of 2 barrels
per million cubic feet. This is the first
discovery in Block 102.
Activity 2007
SPC will continue to evaluate the Thai-Binh
gas discovery, the first in Block 102.
Located in the Gulf of Tonkin offshore
northern Vietnam, covering approximately
6,174 sq km, it is next to Blocks 102
and 106.
Activity 2006
SPC successfully entered into a Petroleum
PSC in Block 101-100/04 in the
Song Hong Basin, offshore Vietnam.
Activity 2007
Under the PSC, SPC is committed to a
three-year exploration programme. It
comprises processing and interpretation
of existing seismic lines, acquisition of
new 3D seismic surveys, and drilling of
one exploration well. The acquisition of
the 3D seismic surveys is scheduled for
the first half of 2007.
Block T06-3, Australia
SPC’s interest: 35%
Located in the Bass Basin, offshore
Southeast Australia about 200 km from
Melbourne and in water depths ranging
from 50 m to 100 m. The block contains
the existing Cormorant oil, condensate
and gas discovery and several exploration
prospects and leads.
Activity 2007
SPC was awarded an exploration permit
for Block T06-3. SPC and its partners are
committed to an initial work programme
comprising seismic acquisition and drilling
of two exploration wells.
Kakap PSC, Indonesia
SPC’s interest: 15%
Sampang PSC, Indonesia
SPC’s interest: 36%
Covering approximately 2,000 km, Kakap
PSC is located in the West Natuna Sea,
Indonesia, 486 km from Singapore. It
consists of two blocks, namely North Kakap
and South Kakap. There are currently nine
producing oil and gas fields in South Kakap.
Oil from these platforms is processed
and stored by means of a Floating,
Production, Storage and Offloading
vessel. Processed gas is then
transported via the West Natuna
Transportation System pipeline to
Singapore as part of a 22-year gas
supply contract to the Republic
commencing 2001.
Activity 2006
Production from the Kakap fields
increased by approximately 10%
following completion of work on a
series of well workover and services.
Lukah-1X successfully tested natural gas
and condensate over two sand intervals.
The two intervals flowed at a stabilised
combined rate of approximately 19.7
million standard cubic feet per day of
natural gas and 2.8 barrels of condensate
per day through a 64/64” choke.
Activity 2007
Development plans to tie-back the Lukah
gas construction to the producing platform
via a gas pipeline is expected to commence
construction in 2H 2007.
An exploration well which will be drilled in
3Q has been identified to test the structure
of the deeper formations. A development
well in an existing producing field will also
be drilled in 2007.
Sampang PSC is located offshore East Java,
Indonesia. The Sampang PSC contains
the Oyong oil and gas field, the Jeruk oil
discovery, the Wortel gas discovery, and
several exploration prospects and leads.
Activity 2006
The phase 1 oil development is 95%
completed, with the Oyong wellhead
platform installed and seven wells drilled.
Conversion of the production barge is in
progress and first oil production is
targetted for 2Q 2007.
Jeruk-3 commenced drilling in January
2006 and the test, conducted over a
48-hour period, flowed at a stabilised rate
of approximately 2,750 barrels of oil per
day. In November 2006, the operator of
the PSC announced that the analysis for
the Jeruk field is largely complete and the
recoverable oil resource is most likely to
be less than 50 million barrels.
Wortel-1 commenced drilling in August.
The well successfully tested natural gas
and condensate at a rate of 18.5 million
standard cubic feet per day through a
56/64” choke. Condensate was produced
at a rate of 4 - 5 barrels per million cubic
feet. The Wortel-2 appraisal well began
drilling in September but it failed to
encounter significant hydrocarbon and
was plugged and abandoned.
Activity 2007
SPC and partners will continue to evaluate
various scenarios for a Jeruk development.
The Wortel-3 appraisal well will also be
drilled in the second half of the year to
further appraise the discovery.
Operating & financial review
Investments
Keppel Corporation Limited
Report to Shareholders 2006
127
Operating & financial review
Investments
SPC-branded lubricant products.
Keppel T&T increases its M1 stake.
Significant events
June
k1 Ventures completed the sale of The Gas Company
(GASCO) for a gain on disposal of approximately $145 million.
September
SPC and its partners discovered natural gas and condensate
at the Wortel-1 exploration well in the Sampang Production
Sharing Contract.
October
Positioned for further growth in China, SPC incorporated
Singapore Petroleum (Guangdong) to distribute and market
SPC-branded lubricant products to the domestic automotive,
industrial and commercial sectors. A network of Speedy Care
outlets will offer one-stop convenience for car care and auto
maintenance services.
SPC acquired new acreage in Block 101-100/04 in the
Song Hong Basin, offshore Vietnam through a Petroleum
Production Sharing Contract (PSC) for a 45% participating
interest with Santos Vietnam, operator of the PSC, owning a
55% participating interest.
Keppel T&T Ltd raised its stake in M1 from 16.60% to
17.01% following a series of open market purchases of
M1’s shares.
November
SPC signed an MOU with PT Pertamina to further cooperate
in oil and gas exploration, development and production
projects, both in Indonesia and internationally as well as
to facilitate information sharing and exchanges.
SPC and its partners discovered natural gas and condensate
over two sand intervals at the Thai Binh-1X exploration
well in Blocks 102 and 106, offshore Vietnam. A second
drill-stem test successfully flowed natural gas in the upper
sand interval.
k1 Ventures is invested in early childhood education.
128
Operating & financial review
Investments
Keppel Corporation Limited
Report to Shareholders 2006
Mid Pac Petroleum
k1 Ventures’ wholly-owned operating company Mid Pac
Petroleum (Mid Pac) distributes and markets petroleum
products in Hawaii. The company has the exclusive license
for petroleum product sales to the Union 76 brand name in
Hawaii and markets products through 54 retail gas stations
and sub-marketers and resellers.
Of the 54 gas stations, Mid Pac owns 34 of these gas stations on
three islands in Hawaii and operates 18 of them. The balance of
the owned stations are run by dealers or fee-based operators,
who acquire gasoline products from Mid Pac and pay Mid Pac
rent for the use of the station. Mid Pac also operates a petroleum
product terminal on the island of Hawaii.
In addition to the gain from the sale of GASCO and positive
operating results of the operating companies, k1 Ventures
recognised a gain on the sale of investments in Savi Technology
and Biosensors. k1 Ventures is working towards the
maximisation of value of the operating companies. The firm
will continue to focus on growth and expansion, by seeking
additional investment opportunities that are accretive to
earnings and cashflow.
MobileOne (M1)
Operating review
M1 continues to be a significant contributor to Keppel T&T
both in terms of earnings and cashflow. M1 registered a net
profit growth of 2.2% from $161.0 million to $164.6 million
on the back of improved margins. During the year, Keppel
T&T received cash dividends amounting to $37.7 million
which included a special dividend of $16.9 million. Keppel
T&T acquired an additional 3% equity interest in M1 during
the year. In December 2006, M1 became the first operator
to offer a nationwide wireless broadband service that allows
new and innovative services to be launched through its
upgraded 3G network. Keppel T&T will participate in this new
space through its stake in M1.
Operating & financial review
Investments
Keppel Corporation Limited
Report to Shareholders 2006
129
Operating & financial review
Financial review and outlook
The Group operates in 33 countries across five continents.
In 2006, revenue from overseas customers was $6.35 billion
which made up 84% of total revenue. This is a significant
change from the 83% in 2005 and 74% achieved in 2004, as the
Group continues to focus on building regional and global winners.
Revenue by markets
■ ASEAN
■ Rest of Asia-Pacific
■ Middle East/India
■ Europe
■ North America
■ South America
■ Central America
■ Singapore
2005
Revenue
Singapore
Overseas
$5,688 million
– 17%
– 83%
17%
5%
9%
2006
Revenue
Singapore
Overseas
$7,601 million
– 16%
– 84%
2%
18%
4%
30%
16%
5%
8%
15%
5%
9%
21%
4%
32%
2004
Revenue
Singapore
Overseas
$3,963 million
– 26%
– 74%
26%
1%
20%
6%
10%
4%
13%
20%
130
Operating & financial review
Financial review and outlook
Keppel Corporation
Keppel Corporation Limited
Report to Shareholders 2006
Report to Shareholders 2006
Global operations
The Offshore & Marine Division’s “Near Market, Near
Customer” strategy is bolstered by a global network of
17 shipyards in Asia-Pacific, Gulf of Mexico, Brazil, the
Caspian Sea, Middle East and Europe. The strategic locations
of the Offshore & Marine Division’s global network of
shipyards offer unparalleled services with fast turnaround
time. For the year 2006, 95% of the Offshore & Marine
Division’s revenue was derived from its overseas customers.
The Property Division has landed housing, townships and
resort homes development in various parts of Asia, including
China, Indonesia and Vietnam. Property Division’s expansion
into the Indian market two years ago saw the launch of its
condominium development in Bangalore. Overseas sales
continued to progress as it expands its product range in the
global market.
The Infrastructure Division is also growing its overseas
footprint, making inroads into the Middle East and globally –
the latest being the commencement of the commercial
operation of power barges in Ecuador at the end of the year.
The $1.7 billion Qatar project clinched in 2006 is expected to
commence construction in 2007 and contribute meaningfully
to the Group.
Singapore Petroleum Company (SPC), part of Investments, is
a regional oil and gas company operating mainly in Singapore
but invests in upstream assets in Vietnam, Indonesia, Cambodia
and Australia. This is in line with its plan to grow its exploration
and production (E&P) business through asset acquisition. While
MobileOne (M1) operates and derives its revenue primarily in
Singapore, k1 Ventures’ investments are largely within the US.
Prospects
For the current year, the Group expects continued growth in
the Offshore & Marine and Property Divisions. Infrastructure
Division is expected to return to profitability. The 33% year-
on-year growth in Group earnings for 2006 was exceptional.
With a higher earnings base, a more modest double-digit
growth rate is expected for the current year.
The Offshore & Marine Division secured a record $7.3 billion
of new orders in 2006, bringing the net order book at the end
of the year to $10.5 billion. The outlook for the drilling industry
remains good. Demand for most types of rigs and other
related segments is strong and availability is tight. There is
also a growing need for more deepwater equipment and
floating production solutions as more E&P move into deeper
waters. The Offshore & Marine Division with its suite of
proprietary designs and expertise in project execution is
poised to benefit from the growing demand.
The outlook for SPC remains positive in the light of International
Monetary Fund’s GDP global growth forecast of 5% for 2007.
Asian economic growth is expected to continue. As regional
demand for refined petroleum products is expected to
remain robust and coupled with the projected tight refining
capacity, refining margins are expected to be healthy.
The prices of private residential homes in Singapore rose by an
estimated 10% in 2006, the fastest rate of growth since 1999.
Home prices are generally expected to rise in 2007 and the
residential market to remain buoyant and active. Capitalising
on the good demand for premier waterfront residences, the
group will launch the second phase of its waterfront precinct
called Reflections at Keppel Bay in April 2007. The group’s
stable of prime investment buildings in the Central Business
District (CBD) and New Downtown is expected to benefit from
the tight office supply market in Singapore.
The outlook for Asia’s housing market remains favourable on
the back of strong economic growth, rising homeownership
trends and continuing inflow of global funds into Asian real
estate. The Property Division will further strengthen its
housing and township development initiatives in the region
and progressively launch its projects in China, India, Vietnam
and Indonesia.
The Infrastructure Division has made steady progress in its
projects both domestically and globally. The power barges
re-commenced operation in December 2006. The NEWater
plant started operations in 1Q 2007, while the Cogen power
plant will commence operations in 1H 2007. These new
projects together with the existing Infrastructure businesses
should return the Division to profitability.
Operating & financial review
Financial review and outlook
Keppel Corporation Limited
Report to Shareholders 2006
131
Operating & financial review
Financial review and outlook
ROE and dividend per share
Return on equity (ROE) was 19.1%, compared to 16.4%
achieved last year. This was a new benchmark reached,
reflecting our effort to pursue higher returns for our shareholders.
For 2006, shareholders will be rewarded with dividend of
28 cents per share, and capital distribution of 28 cents per
share. The total payout of 56 cents per share is higher than
the 46 cents distributed in 2005 and 40 cents distributed in
2004. This distribution of approximately $397 million represents
53% of our PATMI, and is equivalent to a gross yield of 4% on
the Company’s volume weighted average share price for 2006.
The distribution to shareholders is paid on account of increased
profitability and strong operational cashflow. We are committed
to reward shareholders with generous payouts as we achieve
healthy year-on-year improvement in earnings growth.
%
25
20
15
10
5
0
Capital
distribution
50 cts/share
Capital
distribution
12 cts/share
Capital
distribution
18 cts/share
Capital
distribution
20 cts/share
Capital
distribution
23 cts/share
Capital
distribution
28 cts/share
Plus
Plus
Plus
Plus
Plus
Plus
28
19.1
23
16.4
20
15.5
18
13.4
19
14.0
16
10.1
cents
30
24
18
12
6
0
2001
2002
2003
2004
2005
2006
ROE
Dividend
Economic Value Added (EVA)
$ million
Profit after tax and exceptional items
Adjustment for:
Interest expense
Interest expense on non-capitalised leases
Tax effect on interest expense adjustments (Note 1)
Provisions, deferred tax, amortisation and other adjustments
Net Operating Profit After Tax (NOPAT)
2006
890
110
19
(17)
11
1,013
06v05
+/(-)
+215
+56
+3
-8
+20
+286
2005
675
54
16
(9)
(9)
727
05v04
+/(-)
+119
-3
-1
+4
+15
+134
2004
556
57
17
(13)
(24)
593
Average EVA Capital Employed (Note 2)
Weighted Average Cost of Capital (Note 3)
Capital Charge
9,082
6.50%
(590)
+239
+0.53%
-62
8,843
5.97%
(528)
+416
-0.66%
+30
8,427
6.63%
(558)
Economic Value Added
423
+224
199
+164
35
Comprising:–
EVA excluding exceptional items
EVA of exceptional items
416
7
423
+219
+5
+224
197
2
199
+161
+3
+164
36
(1)
35
Note:
1. The reported current tax is adjusted for statutory tax impact on interest expenses.
2. Average EVA Capital Employed is derived from the quarterly averages of net assets plus interest-bearing liabilities, provisions and present value of operating leases.
3. Weighted Average Cost of Capital is calculated in accordance with Keppel Group EVA Policy as follows:
(a) Cost of Equity using Capital Asset Pricing Model with market risk premium set at 6% (2005: 6%);
(b) Risk-free rate of 3.282% (2005: 2.737%) based on yield-to-maturity of Singapore Government 10-year Bonds;
(c) Unlevered beta at 0.63 (2005: 0.63); and
(d) Pre-tax Cost of Debt at 3.72% (2005: 3.07%) using 5-year Singapore Dollar Swap Offer Rate plus 75 basis points.
132
Operating & financial review
Financial review and outlook
Keppel Corporation Limited
Report to Shareholders 2006
Economic Value Added
$ million
500
400
300
200
100
0
(100)
(200)
(300)
(400)
(500)
(600)
(700)
423
+$224m
199
+$164m
35
+$160m
(125)
+$170m
(295)
+$370m
(665)
2001
2002
2003
2004
2005
2006
Since 2004, we continue to maintain a positive EVA, achieving
an amount of $423 million in 2006. The vastly improved EVA
is more than double the amount achieved last year.
This positive EVA creation was the result of our improvement
in NOPAT, coupled with an efficient capital structure, stringent
investment criteria and strong cashflow.
Our NOPAT improved due to increase in profit after tax and
exceptional items of $215 million. This is partially offset by
the larger Capital Charge due to a higher Weighted Average
Cost of Capital (WACC) of 6.5% compared to the previous
5.97%, and increase in Average EVA Capital by $239 million.
WACC was higher mainly due to increase in risk-free rate and
higher cost of debt. Average EVA Capital is higher at $9.08
billion compared to $8.84 billion largely due to development
expenditure on Property and Infrastructure projects.
The Group has achieved a total EVA growth of $388 million
over the last two years.
Total Shareholder Return
%
80
60
40
20
0
2.0
0.64
75.2
65.3
48.7
37.6
32.5
(20)
(40)
(18.2)
2000
STI
2001
2002
2003
2004
2005
2006
Keppel
0.24
Total Shareholder Return (TSR)
The Group is committed to deliver value to its shareholders
as it strives to grow its earnings. The Group continues to
identify, develop and build growth platforms for its businesses,
sharpen its strategic focus while streamlining its businesses,
launch new products, strengthen its customer relationships
and penetrate new markets.
In 2006, Keppel Corporation’s TSR was 65.3%, more than
double the benchmark Straits Times Index (STI)’s TSR of 32.5%.
Over the past five years, Keppel Corporation’s CAGR TSR of
51% was also significantly higher than STI’s TSR of 18%.
The yearly TSR of Keppel Corporation has outperformed that
of STI for the past seven years.
Operating & financial review
Financial review and outlook
Keppel Corporation Limited
Report to Shareholders 2006
133
Operating & financial review
Financial review and outlook
Cashflow
$ million
Operating profit
Depreciation, amortisation and other non-cash items
Cashflow provided by operations before
changes in working capital
Working capital changes
Interest receipt and payment and tax paid
Net cash from operating activities
Divestments
Investments and capital expenditure
Dividend income
Net cash from investing activities
Free Cashflow
2006
804
147
951
1,005
(102)
1,854
178
(759)
207
(374)
1,480
06v05
+/(-)
+337
+8
+345
+12
-62
+295
+89
+355
+47
+491
+786
2005
467
139
606
993
(40)
1,559
89
(1,114)
160
(865)
694
05v04
+/(-)
+53
-45
+8
+1,021
–
+1,029
-125
-895
+102
-918
+111
2004
414
184
598
(28)
(40)
530
214
(219)
58
53
583
Dividend paid to shareholders of the Company & subsidiaries
(410)
-86
(324)
-38
(286)
Net cash from operating activities was $1,854 million compared
to $1,559 million in 2005 and $530 million in 2004. This was
mainly contributed by the increased operating profit and
positive working capital changes, especially from progress
payments received for contracts.
Net cash used in investing activities was $374 million. The Group
spent $759 million on acquisitions, expenditure on infrastructure
projects and operational capex. This comprised principally
acquisition of additional shares in Evergro Properties Limited,
Keppel Philippines Marine, Inc, D.L. Properties Ltd, SPC and
M1, further investment in One Raffles Quay, capital expenditure
on the cogen plant and other operational capex. Divestment
and dividend income totalled $385 million.
As a result, free cashflow increased from $694 million in the
previous year to $1,480 million in 2006. This is an increase of
113% as compared to a 19% growth from 2004 to 2005.
During the year, the Group distributed an amount of
$410 million to its shareholders and minorities of its
subsidiaries. The Company’s shareholders received $338
million which is 17% higher than the $288 million distributed
in previous year. This included the final dividend of 13 cents
per share and capital distribution of 23 cents per share in
respect of 2005 and interim dividend of 12 cents per share
in respect of 2006.
Financial position
Total assets of $13.82 billion as at 31 December 2006 were
$1.23 billion or 9.7% higher than the previous year-end. Fixed
assets and investment properties were higher because of
expenditure on the cogen plant and acquisition of D.L. Properties
Ltd, which became a subsidiary. The increase in associated
companies was attributed to equity accounting for share of
profits and further investment in SPC, M1 and One Raffles
Quay. Long-term investments were higher as a result of
purchase of investments in the current year. There were more
debtors mainly due to the increased activities in the Offshore
& Marine and Infrastructure Divisions.
Shareholders’ funds increased from $3.09 billion as at
31 December 2004 to $3.65 billion as at 2005 year-end, and
with a further increase to $4.21 billion as at 31 December
2006. The increase was mainly attributed to retained profits
for the year and fair value adjustments of financial assets.
This was partly offset by payment of final dividend of
13 cents per share less tax and capital distribution of
23 cents per share in respect of financial year 2005, and
interim dividend of 12 cents per share less tax in respect of
the first half year ended 30 June 2006.
134
Operating & financial review
Financial review and outlook
Keppel Corporation Limited
Report to Shareholders 2006
Total assets owned
$ million
15,000
Total liabilities owed and capital invested
$ million
15,000
13,816
13,816
13,500
12,000
10,500
9,000
7,500
6,000
4,500
3,000
1,500
0
12,590
1,653
2,254
2,664
2,762
1,846
1,411
10,505
1,399
2,083
1,839
2,602
1,609
973
2004
2005
2006
1,741
2,446
3,113
2,777
2,120
1,619
13,500
12,000
10,500
9,000
7,500
6,000
4,500
3,000
1,500
0
4,205
1,393
12,590
3,646
1,289
5,103
3,750
10,505
3,090
1,166
2,402
3,699
148
2,957
158
3,731
174
2006
2005
2004
■ Bank balances, deposits and cash
■ Debtors and others
■ Stocks and work-in-progress
■ Investments
■ Properties
■ Fixed assets
■ Other liabilities
■ Term loans and bank overdrafts
■ Creditors
■ Minority interests
■ Shareholders’ funds
Minority interests of $1.39 billion in 2006 were slightly
higher than minority interests of $1.29 billion in 2005 and
$1.17 billion in 2004 because of the retained profits of
non wholly-owned subsidiaries.
Total liabilities of $8.22 billion at 31 December 2006 were
$564 million or 7.4% higher than the previous year. Creditors
were higher because of the higher level of activities in the
Offshore & Marine Division. Billings on work-in-progress in
excess of related costs increased due to progress billings
received from Offshore & Marine’s contracts. Amount due
to associated companies decreased due to repayment of
advances. Borrowings at $2.96 billion were a reduction of
$774 million from $3.73 billion at the previous year-end
because of strong operational cashflow from the Offshore
& Marine and Property Divisions.
Borrowings
The Group borrows from local and foreign banks in the form
of short-term and long-term loans, project loans and bonds.
At the end of 2006, 23% of Group borrowings were repayable
within one year with the balance largely payable between
two and five years. The reduction to 23% in the proportion of
short-term borrowings from 54% in 2004 and further reduction
to 36% in 2005 was because of re-financing of term loans
and strong operational cashflow.
Unsecured borrowings constituted 38% (2005: 60% and
2004: 73%) of total borrowings with the balance secured
by properties and assets. Secured borrowings are mainly
for financing investment properties and project financing loans
for property and development projects. The net book value
of properties and assets pledged/mortgaged to financial
institutions amounted to $1.19 billion (2005: $1.07 billion
and 2004: $1.16 billion).
Fixed rate borrowings constituted 16% (2005: 8% and 2004:
15%) of total borrowings with the balance at floating rates.
The Group has interest rate swap agreements with notional
amount totalling $732 million whereby it receives variable
rates equal to SIBOR and pays fixed rates of between 2.33%
and 3.14% on the notional amount. The Group also has
interest rate cap agreements to hedge the interest rate risk
exposure arising from its US$ and S$ variable rate term
loans. As at the end of the financial year, the Group has
outstanding interest rate cap agreements of $1,065 million.
Details of these derivative instruments are disclosed in the
notes to the financial statements.
Singapore dollar borrowings represented 93% (2005: 73%
and 2004: 74%) and US$ borrowings represented 4% (2005:
24% and 2004: 24%) of total borrowings. The balances were
in Australian, European and other Asian currencies. Foreign
currencies borrowings were drawn to hedge against the
Group’s overseas investments and receivables, which were
denominated in foreign currencies.
Capital structure and financial resources
The Group maintains a strong balance sheet and an efficient
capital structure to maximise return for shareholders. The
strong operational cashflow of the Group and divestment
proceeds from low yielding and non-core assets will provide
resources to grow the Group’s businesses.
Every new investment will have to satisfy strict criteria for
return on investment, cashflow generation, EVA creation and
risk management. New investments will be structured with
an appropriate mix of equity and debt after careful evaluation
and management of risks.
Operating & financial review
Financial review and outlook
Keppel Corporation Limited
Report to Shareholders 2006
135
Operating & financial review
Financial review and outlook
Capital structure
Capital employed at the end of 2006 was $5.6 billion,
an increase of $663 million over 2005 and $1.34 billion over
2004. Net borrowings stood at $1.34 billion at end of 2006,
a further reduction from $2.32 billion in 2005 and $2.73 billion
in 2004. With higher capital employed and lower borrowings,
net gearing was reduced from 0.64 times in 2004 to 0.24
times in 2006.
Gearing
$ million
6,000
5,000
4,000
4,256
0.64
5,598
4,935
3,000
2,726
2,320
0.47
Interest coverage improved from 7 times in 2004 to 9.9
times in 2006. This is achieved on increasing EBIT despite
the escalating interest costs over the three years.
2,000
1,000
0
Cashflow coverage increased significantly from 6.4 times in
2004 to 16.6 times in 2005, followed by a slight decline in
2006 to 16.2 times. In spite of higher interest expense, cashflow
coverage remained healthy due to the robust operating cashflow
generated by the Group.
At the AGM in 2006, shareholders gave their approval for
mandates to issue and buy back shares. The Company did
not exercise these mandates.
Financial resources
The Group maintains sufficient cash and cash equivalents,
short-term marketable securities and an adequate amount
of standby credit facilities. Funding of our working capital
requirements and capital expenditure/investments is made
through a mix of short-term money market borrowings and
medium/long-term loans.
Due to the dynamic nature of the Group’s businesses, it
maintains flexibility in funding by ensuring that ample working
capital lines are available at any one time. At the end of 2006,
credit facilities in the form of short-term loans, bank overdrafts,
letters of credit, and other banking facilities provided by major
banks to the Group amounted to $4.97 billion of which $0.85
billion was utilised.
Financial risk management
The Group operates globally and is exposed to a variety of
financial risks, including the effect of changes in equity
market prices, foreign currency exchange rates and interest
rates. Financial risk management is carried out by the Keppel
1,339
0.24
2004
2005
2006
Net debt
Capital employed
Gearing
Interest coverage
$ million
1,200
1,000
800
600
400
200
0
686
7.0
98
2004
1,202
9.9
848
8.5
100
122
2005
2006
EBIT
Total interest cost
Interest cover
Cashflow coverage
$ million
2,000
1,500
1,000
500
0
628
6.4
98
2004
1,659
16.6
100
2005
Operating cashflow
+ interest
Total interest
cost
1,976
no. of
times
20
16.2
15
10
5
0
122
2006
Cashflow
coverage
no. of
times
1.2
1.0
0.8
0.6
0.4
0.2
0
no. of
times
12
10
8
6
4
2
0
136
Operating & financial review
Financial review and outlook
Keppel Corporation Limited
Report to Shareholders 2006
Group Treasury Department in accordance with established
policies and guidelines.
cashflows expected from the cash-generating units and an
appropriate discount rate in order to calculate the present
value of the future cashflows.
These policies and guidelines are established by the Group
Central Finance Committee and are updated to take into
account changes in the operating environment. This committee
is chaired by the Group Finance Director and comprises
Chief Financial Officers of the Group’s key operating companies
and Head Office specialists.
• The Group’s financial risk management is discussed in more
detail in the notes to the financial statements. In summary:
• The Group utilises forward foreign currency contracts and
other foreign currency hedging instruments to hedge the
Group’s exposures to specific currency risks relating to
investments, receivables, payables and other commitments;
• The Group maintains a mix of fixed and variable rate debt/
loan instruments with varying maturities. Where necessary,
the Group uses derivative financial instruments to hedge
interest rate risks. This may include interest rate swaps
and interest rate caps; and
• The Group maintains flexibility in funding by ensuring that
ample working capital lines are available at any one time; and
The Group adopts stringent procedures on extending credit
terms to customers and the monitoring of credit risk.
Critical accounting policies
The Group’s significant accounting policies are discussed in
more detail in the notes to the financial statements. The
preparation of financial statements requires management to
exercise its judgement in the process of applying the
accounting policies. It also requires the use of accounting
estimates and assumptions which affect the reported
amounts of assets, liabilities, income and expenses. Critical
accounting estimates and judgement are described below.
Impairment of fixed assets
Determining whether fixed asset value is impaired requires
an estimation of the value in use of the cash-generating
units. This requires the Group to estimate the future
Impairment of goodwill
Determining whether goodwill is impaired requires an
estimation of the value in use of the cash-generating units
to which the goodwill is allocated. This requires the Group
to estimate the future cashflows expected from the cash-
generating units and an appropriate discount rate in order
to calculate the present value of the future cashflows.
Impairment of available-for-sale investments
The Group follows the guidance of FRS 39 in determining
whether available-for-sale investments are considered
impaired. The Group evaluates, among other factors, the
duration and extent to which the fair value of an investment
is less than its cost, the financial health of and the near-term
business outlook of the investee, including factors such as
industry and sector performance, changes in technology and
operational and financial cashflow.
Revenue recognition
The Group recognises contract revenue based on the stage
of completion method which is measured by reference to the
proportion of contract work completed. Significant assumption
is required in determining the stage of completion, the extent
of the contract cost incurred, the estimated total contract
revenue and contract cost and the recoverability of the contracts.
In making the assumption, the Group evaluates by relying on
past experience and the work of specialists.
Income taxes
The Group has exposure to income taxes in numerous
jurisdictions. Significant assumptions are required in
determining the provision for income taxes. There are certain
transactions and computations for which the ultimate tax
determination is uncertain during the ordinary course of
business. The Group recognises liabilities for expected tax
issues based on estimates of whether additional taxes will
be due. Where the final tax outcome of these matters is
different from the amounts that were initially recognised,
such differences will impact the income tax and deferred tax
provisions in the period in which such determination is made.
Operating & financial review
Financial review and outlook
Keppel Corporation Limited
Report to Shareholders 2006
137
Operating & financial review
Operations sustainability
Keppel’s BrasFELS yard in Angra dois Reis, Brazil.
Over and above our financial performance, we are strategically-
focused on strengthening our business robustness so that we will
continue to set new benchmarks and sustain our market leadership
positions. We are committed to an effective risk management
system that will help us respond promptly and positively to
external volatility.
138
Operating & financial review
Operations sustainability
Keppel Corporation
Keppel Corporation Limited
Report to Shareholders 2006
Report to Shareholders 2006
Managing risks and uncertainties
Enterprise risk management (ERM) framework
We have in place a risk management framework for the
identification and management of risks with effective
oversight by the Board of Directors.
The Board is assisted by the Board Risk Committee, which
provides guidance on risk management policies and processes,
with senior management participation.
Preparing for external shocks and business crises
In a dynamic environment where new developments
constantly challenge the status quo and impact base
parameters, scenario planning serves as a useful tool in the
business process to enhance operational resilience. On-going
scenario planning augments the existing risk management
system and strengthens the Group’s strategic decision-
making processes.
The business units report risks and update the Board Risk
Committee on processes with significant risks, and to the
Board on issues of concern where appropriate.
In this respect, business units observe market trends and
address the long-term impact of possible changes to our
businesses. The perspectives drawn contribute to the
robustness of our operational planning and execution.
Strategic, investment and operational/project risks are
addressed. The impact of significant risks on the financial,
operational and reputational aspects of businesses is assessed.
Our Business Continuity Management (BCM) system
ensures processes are in place for our businesses to
respond seamlessly to contingencies and minimise
disruptions to operations.
Risk evaluation and management processes include investment
criteria, approval authority and limits, and expected returns.
Risks are evaluated based on risk assessment criteria
developed for the Group, and use of risk assessment templates.
Key risk indicators are used to enhance project progress
reporting, and risk management incorporated in strategic
planning. Standard methodology is adopted at all business
levels within the Group.
Risk management processes are embedded into internal
operational processes to ensure early detection of business
and operational risks for effective management and control.
Going forward, a key ERM focus will be on growing a risk-
centric culture in the Group.
Business continuity plans have also been developed for a
pandemic flu outbreak scenario. Key activities include the
setting up of pandemic flu committees, developing response
plans, conducting pandemic flu outbreak simulation exercises
and testing remote access procedures in office environments.
We constantly strengthen our ERM and BCM processes
to incorporate changes in the business environment.
This enables the Group to achieve its growth targets and
business objectives.
Health and safety in the workplace
Our Health, Safety and Environmental (HSE) initiatives and
practices are critical factors supporting our operational excellence.
Further details on the Group’s approach to safety are set out in
the “Nurturing a safety culture” feature of this Annual Report.
Operating & financial review
Operations sustainability
Keppel Corporation Limited
Report to Shareholders 2006
139
Operating & financial review
Pandemic planning
Operations sustainability
Keppel Corporation successfully conducted a pandemic
simulation exercise in December 2006 to ensure that business
will be as usual even in an avian flu outbreak.
In the exercise, staff were briefed on the procedures and
processes involved in detecting and responding to an outbreak.
When ‘suspect avian flu cases’ were reported to the Pandemic
Preparedness Committee, committee members immediately
swung into action. They sent out alerts and messages through
emails and mobile phones, donned their personal protection
gear, isolated the suspect cases and performed contact tracing
of persons who may have come into contact with those infected.
Staff in Keppel Corporation headquarters were also advised
to wear their masks, increase social distance and record their
temperature twice a day.
BG Junction
Keppel Land takes special care in preventing pollution to water
bodies close to its developments. For instance, a sewage
treatment plant was constructed at the retail mall, BG Junction
in Surabaya, Indonesia, to eliminate environmental pollution
from wastewater discharge. Sedona Suites in Hanoi, Vietnam,
treats sewage water before discharging it to the adjacent
West Lake.
Board Safety Committee
Clear emphasis is given by the Group on workplace safety.
The Keppel Corporation Board Safety Committee reviews the
effectiveness of the safety management system, provides a
forum for discussion on workplace safety developments and
best practices, and enhances safety awareness and culture
within the Group. The Board and Senior Management are
actively involved in efforts to inculcate a safety culture within
the Group.
HSE at Keppel Offshore & Marine (Keppel O&M)
HSE is a high priority, particularly in the offshore and marine
industry, as Keppel O&M seeks to effectively manage projects
and deliver products of immense scale and complexity, on
time and within budget.
Keppel O&M is committed to ensuring that each worker returns
home safely every day, harnessing employees’ Can Do! attitude
to ignite a passion for excellence in the management of HSE.
Its yards also ensure that activities which may affect
the environment are carried out in a thoughtful and
controlled manner.
The technology imperative
Further details on the Group’s technology focus are set out in
the “Advancing technology, growing innovation” feature of
this Annual Report.
Keppel Technology Advisory Panel (KTAP)
KTAP, established in 2004, provides strategic leadership in
our R&D efforts. It also guides and challenges the robustness
of initiatives in research, development, testing and
commercialisation of our new products and services.
Technology sharing and industry development
Keppel O&M’s active engagement in industry forums and
events not only keeps it abreast of latest technology and
innovation, but also defines its pre-eminent role in shaping
industry trends and contributing to the development of our
offshore and marine industry.
At the Jackup Asia Conference & Exhibition 2006, Keppel
O&M presented a paper on “Effective Use of a Rapid
Penetration Management System to Minimise Risk”,
prepared in collaboration with ENSCO Inc. This provided
insight on how risks associated with jackup installation at
punch-through sensitive sites could be effectively managed.
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The fourth Keppel O&M Lecture.
Ocean Building and Ocean Towers have
resource-efficient fittings.
In a lecture on “Offshore Deepwater: Deep and Getting
Deeper – The Future of Deepwater Development & Singapore
Inc Contribution” organised by National University of Singapore
(NUS) Department of Civil Engineering, Keppel O&M shared
insights on the direction of deepwater technology.
In 2006, the fourth Keppel Offshore & Marine Lecture was
jointly organised by NUS and Keppel O&M under the auspices
of the Keppel Professorship as a forum for exchange between
academia and industry. Professor Torgeir Moan, leading expert
in offshore and marine structures and the first NUS-Keppel
Professor, spoke on the challenges of designing offshore
production systems for operations in harsh ocean environments,
delving into possible design approaches.
Apart from industry forums, Keppel fosters a technology-
sharing climate that allows business units to leverage
applications or insights developed within the Group.
Environmentally-sustainable solutions
Green initiatives
Our environmental engineering business leverages its
technological capabilities to provide innovative solutions in
waste disposal, water treatment and power generation that
address environmental concerns. Key drivers include the
growing need for alternative resources, landfill pollution risks
and land constraints, as well as declining water resource
quality and availability, as industrialisation and urbanisation
gather pace.
We aim to deliver green products and services incorporating
environmental and safety best practices and processes, and
work with suppliers with good environmental practices.
Planned initiatives include:
• Participation by Keppel Seghers in ISO:14000
environment management systems and standards
certification process;
• Energy audits to improve efficiency and reduce greenhouse
gas emissions, and property designs meeting Building
and Construction Authority Green Mark award standards;
• Technological application for resource efficient products
minimising effluent discharge such as Keppel Seghers’
flue gas treatment and wastewater treatment systems;
• Alternative renewable energy resources;
• Exploring opportunities for green technology investment
and partnerships; and
• Cultivating green and workplace safety awareness through
seminars, forums, newsletters and special events
Operating & financial review
Operations sustainability
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Spring City Golf & Lake Resort, Kunming, China.
We are involved with quality infrastructure projects aligned
with environmental objectives in partnership with the local
community, generating recurring income over the mid-to-long
term. These include the Qatar Domestic Solid Waste
Management Centre, the Tuas South Waste-to-Energy Plant
and the Ulu Pandan NEWater Plant.
Redefining quality live-work-play environments
Keppel Land, as a developer of distinction, makes conscious
efforts to create quality living and working spaces with
enduring value for the community, combining aesthetics and
functionality with a keen attention to the surroundings.
We will continue with our R&D efforts to stay ahead of the
market and harness technology in developing customised
environmental solutions.
Building strategic alliances
We are growing our market presence through strategic
partnerships with industry leaders to provide state-of-the-art
environmental solutions tailored to customers’ needs.
In 2006, Keppel Seghers entered into a strategic cooperation
agreement with Passavant Impianti, a leader in water and
sludge treatment in Italy, to address the sludge treatment
market in Italy. Keppel Seghers also signed two MOUs on
strategic partnership with China National Environmental
Protection Corporation to address the biomass and sludge
treatment market in China and Tianjin Teda Environmental
Protection to jointly develop and invest in the Chinese
environmental preservation market.
Developments are carefully crafted to harmonise with
the urban and natural landscape, making environmental
preservation and enhancement of community life a design
and construction priority. In so doing, Keppel Land meets the
needs of the present without compromising resources for
future generations.
World-class waterfront living
Keppel Land continues to carve its niche in luxury waterfront
living, drawing upon the scenic beauty of our coastal
surroundings, with masterpieces such as Keppel Bay and
Marina Bay Financial Centre (MBFC). As part of Singapore’s
global city remaking, Keppel Bay and MBFC provide
unparalleled possibilities in urban live-work-play spaces with
their distinctive waterfront heritage.
Preserving water, energy and ecological resources
Striking a balance between commercial objectives and
environmental viability, Keppel Land practises value engineering
and implements resource efficiency in its developments.
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Developed for leading global businesses, One Raffles Quay
(ORQ) is designed for maximum efficiency and flexibility. Its
floor-to-ceiling windows maximise natural light and provide
spectacular views. ORQ hosts a District Cooling Plant providing
centralised and efficient air-conditioning for adjoining sites.
To minimise the building’s weight and movements, an
environment-friendly Innovative Hybrid Structural System
comprising concrete core, perimeter concrete-filled steel
tube columns, outrigger trusses and diaphragm floors was
used in its construction.
An array of resource-efficient features was incorporated into
ORQ, including devices optimising air-conditioning control
and reducing energy consumption, energy efficient light
fittings, motion sensors, recycling of condensate water for
irrigation, and air flushing system to remove foul air.
Conscious efforts are taken to preserve biodiversity in the
local environment. Our golf courses in China and Indonesia,
for instance, are sculpted along the natural contours of the
undulating landscape.
At Spring City Golf & Lake Resort, the natural and indigenous
flora situated 2,000 metres above sea-level were carefully
preserved during construction and thereafter. Original eucalyptus
trees and wildflowers were relocated and replanted as the
greens were carved out of the hills. Natural habitats of local
fauna were painstakingly recreated to ensure the ecosystem
remained balanced and intact.
The architecture of the Forest Course at Ria Bintan in Indonesia
cleverly exploits existing natural contours, showcasing and
opening wildlife corridors. The integrated design allows a
“one-with-nature” theme to permeate the entire resort.
At its commercial buildings, the use of water-flow control
devices like thimbles and recycling condensate water from
air-conditioning for irrigation has lowered water consumption,
with Ocean Building and Ocean Towers seeing a 5%
reduction in water usage.
Creating homes close to nature, meticulous landscaping with
an all-season mix of evergreens and deciduous trees and flora
allows residents at The Seasons in Beijing to enjoy nature
all-year round.
Energy-saving measures such as the use of low-energy
consumption light bulbs and timers as well as implementation
of employee awareness programmes have also resulted in
significant cost savings.
Special care has also been taken to prevent pollution to water
bodies close to Keppel Land’s properties such as BG Junction,
Sedona Suites, Spring City and Ria Bintan golf courses.
Melia Purosani Hotel in Yogyakarta, Indonesia, which achieved
significant savings in electricity consumption and diesel usage,
was the first hotel outside Bali to be awarded the prestigious
Green Globe 21 Certificate, recognising its commitment to
highest environmental standards.
At Spring City Golf & Lake Resort in Kunming, China, the use
of hollow concrete blocks instead of clay bricks in the
construction of its luxury villas not only reduces loading
requirements but also acts as insulation air space in winter,
reducing heating requirements. Use of solar heat in its staff
dormitory further reduces energy costs.
Operating & financial review
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Nurturing people
Our people are growing beyond to
realise their maximum potential.
The Keppel Group has approximately 29,000 employees of
some 40 nationalities rallying in 33 countries across the world
with one common objective: to build for all Keppel stakeholders
a vibrant and robust Group that can generate sustainable
growth against an increasingly competitive, complex and
challenging global backdrop.
series of new management and career development
programmes to maximise the potential of our employees.
The Keppel campaign
We launched an integrated branding and talent recruitment
campaign, themed “Grow Beyond”, over television, print
media and through various events and activities.
In order to succeed in achieving this objective, greater efforts
and resources are being put into developing the rich pool of
talent that we already have in the Group. While our inclusive
approach enables us to build a strong and diverse talent pool,
there is an urgent need to supplement our ranks by increasing
our talent pool as we increase our global footprint. We aim to
build an even stronger and more diverse workforce as part of
the exciting business expansion plans ahead of us.
For these reasons, we focused our human resources strategy
on attracting the best and brightest to the Group to take on
the opportunities available locally and globally. This saw the
Group making deliberate and systematic efforts in 2006 to
recruit and retain more Keppelites. We also implemented a
We consolidated our career openings in a new portal,
Careers@Keppel. This website sets out the career development
and opportunities for both existing and aspiring Keppelites.
We also sent electronic direct mailers to our target audience
of professionals, managers and executives, informing them of
the career opportunities in Keppel.
To showcase the different facets and characteristics of the
offshore and marine industry to the general population and
attract the younger generation to the industry, Keppel Offshore
& Marine (Keppel O&M) was a primary sponsor of a Mandarin
television drama entitled “The Peak” (
), in 2006.
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Jointly sponsored by the Maritime and Port Authority of
Singapore, Singapore Maritime Foundation and the Association
of Singapore Marine Industries, the 21-part serial aimed to
positively shift perception among the local population towards
the industry.
Since partnering the Singapore Management University and
FOCUS in 2005 in rolling out the Management Development
Programme (MDP) and Leadership Development Programme
(LDP), a total of four MDP and five LDP programmes had
been conducted for staff members at Keppel O&M.
We received good response for executive positions on the
back of our integrated branding and recruitment campaign,
affirming the strength of our talent attraction outreach.
In 2006, Keppel Land too focused its human capital strategy
of talent attraction and retention in support of the property
group’s rapidly growing local and overseas operations.
Keppel Group scholarships
We continued to build our pool of scholars and enhance
our talent base through scholarship schemes.
Its Regional Investments unit piloted various leadership
development programmes. The Young Managers Development
Programme was launched in January 2006 for the Regional
Investments head office in Singapore.
Under the Keppel Group Local Undergraduate Scholarship
Scheme, six young individuals with excellent academic and
co-curricular track records were offered scholarships to pursue
their undergraduate studies at local universities. To ensure
our competitiveness and ability to attract the best candidates,
the annual allowance under the terms of the scholarship
scheme was reviewed and enhanced.
In the same month, Keppel Land also launched the Local
Managers Development Programme for the overseas offices
of its Regional Investments unit. A Leadership Development
Conference was also conducted for the Regional Investments’
management team to reinforce critical leadership concepts
and people management skills.
Talent management initiatives
Talent management continued to be a focal point in the
development of our human capital.
We introduced two leadership development programmes.
The first programme was aimed at equipping our young
talents with a holistic and integrated set of competencies.
The second was designed for more experienced executives
with supervisory and managerial responsibilities, to equip
them with the skills to interact with and manage people, as
well as to improve their personal effectiveness.
In Keppel O&M, the integration of the Talent Management and
Succession Management Frameworks ensures a systematic
approach to groom a steady pool of talented employees for
succession planning.
To sharpen leadership, strategic thinking and business
development skills, a session on Management Competencies
for High Performance by Prof Neo Boon Siong, Independent
Board Director of Keppel O&M, was organised for senior and
middle management. Into its fourth run, the three-day
session was held from 17 to 19 August 2006.
Keppel Land’s human resources unit also conducted a
succession planning discussion with individual department
heads to identify proven resources and young talents to
assess the bench strength. It has also earmarked new
initiatives in 2007 to accelerate staff development and
deployment decisions to meet business needs.
At Keppel Telecommunications & Transportation (Keppel T&T),
a review of its succession planning and talent management
plans was carried out in 2006. Several new key appointments
were created and filled while its subsidiaries beefed up its
management strength.
SPC accelerated the recruitment of technical capabilities to
bolster the firm’s technical expertise. Structured training and
development programmes were mapped to enhance leadership
and business capabilities. Company employees were selected
to participate in Executive Management Programmes provided
by INSEAD and Ross School of Business at the University
of Michigan.
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Nurturing people
Nurturing people
Manpower by segments (2006)
number
161
3,998
Offshore & Marine
Property
Infrastructure
Investments
2,674
Manpower by countries (2006)
number
1,536
Singapore
China/HK
Asia
USA
Brazil
Others
7,220
888
4,590
1,297
22,352
People development
As part of our talent attraction initiatives within the Group, an
inaugural motivational talk titled ‘Triumphing Mother Nature’
was held in August 2006 for Keppelites.
As part of a Group-wide effort to align Keppel Corporation’s
business objectives with that of the leadership competencies
of its staff required in executing Group’s strategies, Group
Human Resources held a series of Performance Management
workshops for employees. The Keppel Competency Model,
developed based on leadership competencies identified by
senior management to be critical for success, was incorporated
into the performance management process in 2006.
Keppel O&M implemented a new corporate orientation
programme in 2006 to provide new employees an appreciation
and understanding of its culture and working environment.
Mentors were selected from a pool of exemplary staff
members as role models for the new Keppelites.
13,654
As part of the Keppel O&M Employees Development Scheme,
28 employees with excellent performance and high potential
were sponsored for further education at the polytechnics and
universities. These academic courses included Diploma in
Technology, Bachelor of Engineering (Mechanical, Naval
Architecture and Marine Engineering) and Master of Science
in Marine Technology.
Executives/Non-executives (2006)
number
Executives
Non-executives
5,076
24,109
In 2006, the offshore and marine group invested about
$11 million to upgrade the skills level of its employees.
A training roadmap was also launched to define the various
training phases for Keppel O&M’s industrial workers. Staff
members also benefitted from job rotations and international
assignments to strengthen their business savvy and
leadership tenacity.
Employee wellness and work-life balance
Keppel continued to promote employee wellness and
work-life balance with various activities and programmes
across the Group.
For this, the annual Keppel Group Inter-SBU Games (iSBUG)
were held for the fourth year running with active participation
by staff members in eight sporting games. Keppel FELS held
its annual Keppel FELS Active Day, while Keppel Merlimau
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The Keppel co-sponsored drama, The Peak, was filmed in
Brazil and Singapore.
‘Triumphing Mother Nature’ is the first inspirational talk in the
Grow Beyond series organised for Keppelites.
Keppel Scholars Alumni Association (KSAA) continues
to sustain a high level of activity in 2006 by leveraging
the network and camaraderie within the companies
across the Group.
Cogen participated in the seventh Jurong Island Dragon Boat
Race. Keppel T&T promoted sportsmanship and employee
teamwork through numerous sports activities, such as bowling
tournaments for its Singapore and Malaysian business units.
In the US, Keppel AmFELS held its annual picnic which saw
the gathering of more than 800 employees, families and
customers. In the Philippines, sports festivals were held at
Keppel Batangas and Keppel Cebu for employees.
Keppel Scholars Alumni Association (KSAA)
In 2006, KSAA broke new grounds at the fourth season of the
Keppel Group iSBUG themed Citius, Altius, Fortius, Latin for
‘Swifter, Higher, Stronger’. The motto not only conveyed an
athlete’s spirit to rise above himself, but also meted out a
challenge for the organising committee to outdo itself.
milestone for the committee. It had a capacity of 250 people
for the event and the committee was gratified when it received
247 registrations for the Keppel Biathlon.
KSAA’s Kepture! series continued its run in 2006 as there
was strong interest from the Group in the arts and cultural
productions introduced by the series. Genre such as movies
and Mandarin theatre were explored to much success. The
committee will continue to seek out quality and interesting
genre to develop this platform for interaction within the Group.
The 2006 Keppel Group Scholarship Award Ceremony was
held at Mount Faber overlooking the future Keppel Bay
development, mirroring the plans Keppel Group has for its
new charges.
Team Delta, which was made up of staff from Keppel
Shipyard (Benoi and Gul yards) and Keppel Singmarine,
ousted defending champions Team Beta from Keppel O&M
and Keppel FELS. Team Delta won the coveted Overall
Challenge Trophy for the first time.
The new scholars and management attending the event
were also treated to a photography exhibition, aptly titled
Interface, which showcased more than 50 photographs
of Keppelites and scholars across the Group, engaged in
activities organised by KSAA.
The games have become a staple event in our annual calendar
with many SBUs starting preparations months before the actual
event. Through the efforts of the various Team Managers,
participation in the games increased from 800 in 2005 to 850
in 2006. In particular, the Keppel Biathlon was a significant
2007 will be a year where KSAA will focus on building its
base in order to organise more interesting activities for the
Keppel Group. With more platforms for interaction, Keppelites
from different parts of the group and different disciplines will
be able to add to the colour and vibrancy of the Group.
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Corporate social responsibility
The Keppel Group is committed to
help build a better future.
Sports
“Clipper and Keppel share the same global outlook and
inclusive approach to attracting those who will rise to
the challenge to achieve personal and corporate excellence.
We want to challenge more Keppelites to grow beyond
personal limitations through the Clipper experience,” said
Keppel Corporation Executive Chairman Lim Chee Onn.
The Clipper Round the World Yacht Race is one of the world’s
most celebrated amateur sailing races. The 2005-06 race,
where Keppel Corporation was a race partner, concluded after
over 10 months of ocean-racing and 35,000 miles of adventure.
To its credit, the Singapore team secured an overall fifth placing
amongst the 10-strong international racing fleet and scored
two first positions in individual race legs.
For the Clipper Round the World Yacht Race 2007-08, Keppel
Corporation has taken the lead as a primary sponsor for the
Singapore yacht Uniquely Singapore while the Singapore
Tourism Board has come alongside as a race partner.
Keppel Corporation is also the host port sponsor for the
Singapore stopover in the race. Clipper 2007-08 will set sail
from Liverpool, UK, in September 2007.
In January 2008, the fleet of 10 Clippers, each representing
a different international city or country, will spend 10 days
in Singapore where they will be berthed at the spanking
new Marina at Keppel Bay. Having sponsored two Keppelites
as ambassadors in the last race, the next race will be no
exception as Keppelites will once again represent Keppel and
Singapore as our ambassadors.
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Yellow Ribbon Project
In support of the Yellow Ribbon Project, Keppel O&M shortlisted
23 inmates to work for the Keppel O&M group following their
release. Keppel O&M participated in the Yellow Ribbon Job Fair
held at Sembawang Prison on 22 March 2006. A brainchild of
the Community Action for the Rehabilitation of Ex-Offenders
(CARE Network), the Yellow Ribbon Project urges the general
community to give reformed offenders and their families a
chance to start life afresh.
Disaster relief
Keppel Group organised a charity golf tournament to raise
money for the Singapore Red Cross Society’s Indonesian
Disaster Relief Fund. The event, held at the Ocean Course in
Ria Bintan on 1 July 2006, raised $100,000 for the provision of
medical resources and relief assistance to the victims of the
Central Java earthquake and the Mt Merapi volcanic eruption.
It will also go towards the restoration of the Cultural Heritage
facility in Yogyakarta.
In the US, the Keppel AmFELS 2006 Charity Golf Tournament
raised a total of US$20,000 for the Children’s Museum of
Brownsville and The Child Welfare Board of Cameron County.
The bi-annual event, which was held on 29 October 2006 at
the Fort Brown Memorial Golf Course, saw members of the
Board of Directors, local and state dignitaries, Keppel AmFELS
staff members, customers, vendors and guests participating
in the tournament.
Education
At Keppel Group, we underlined our belief in the importance
of education by supporting several education institutions
through monetary donations.
We continued support of The Lee Kuan Yew School of Public
Policy as a founding member with a donation of $200,000 in
2006 as it aims to place Singapore on the world map for the
study of public policy and management.
Meanwhile, Keppel Corporation contributed $140,000
towards the St Joseph’s Institution (SJI) International Fund to
support the school’s scholarships and provide financial
assistance for SJI’s students from Singapore and the region.
As a further pledge of support, Mr Lim Chee Onn and other
prominent SJI alumni formed a Leadership Council in the
school to render assistance, advice and help.
As part of our investor outreach programme, we contributed
$100,000 towards the Securities Investors Association of
Singapore’s Investor Education Programme in 2006. The
programme educates retail investors through various seminars
and workshops so that they are able to make informed
investment decisions to grow and protect their wealth.
Keppel Offshore & Marine (Keppel O&M) gave $50,000 to
Child Aid, a concert organised by Singapore Press Holdings
in support of The Straits Times School Pocket Money Fund
and The Business Times Budding Artists Fund. These funds
went towards easing the financial burden faced by families
when providing for their children’s education as well as
supporting the development of the children’s talent.
Community
The Keppel Group sponsored $50,000 towards the 2006
National Day Parade which was held for the last time at the
National Stadium. In conjunction with the event, Keppel
Volunteers brought students from the Association of Persons
with Special Needs (APSN) to join in the celebrations.
We donated $20,000 to the VIVA Foundation for Children
with Cancer to aid its fight to improve the survival rate and
cure of children with cancer, in Singapore and the region.
The VIVA Foundation is a partnership between St Jude
Children’s Research Hospital in the US, National University
Hospital, and National University of Singapore.
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Corporate social responsibility
Keppel Volunteers lead ASPN students on an educational tour of the Old Ford Factory, a World War II historical site.
Keppel Corporation was one of the donors to the Inaugural
Corporate Social Responsibility and National Volunteerism &
Philanthropy Conference that took place on 13 and 14 July
2006. The event was organised by the National Volunteer &
Philanthropy Centre and Singapore Compact for Corporate
Social Responsibility.
After the conference, Keppel Corporation also organised a
luncheon with Ms Jana Stanfield, philanthropist and motivational
speaker/singer, as Guest of Honour, to meet with representatives
from Keppel Scholars Alumni Association and Keppel Volunteers.
Ms Stanfield had performed during the conference showcasing
The Yellow Ribbon.
Keppel Corporation staff donned the yellow ribbon in the
month of September 2006 in support of the Yellow Ribbon
Project, and contributed generously to the rehabilitation,
aftercare services and programmes for reformed offenders
and their immediate families.
Keppel O&M is the main sponsor of the Singapore Health
Foundation’s “Savemoney Savelives” campaign. Into its
second year, the campaign yielded significant results in 2006.
Launched by Dr Vivian Balakrishnan, Minister for Community
Development, Youth and Sports and Second Minister for
Trade and Industry, the campaign aims to raise funds for
biomedical projects that could translate to better quality
healthcare for patients in Singapore.
Keppel Verolme had cause for double celebration – for
achieving a safety bonus, and making good the bonus by
donating it to charity. On 21 September 2006, a cheque
of over 30,000 was presented by Mr Harold Linssen,
MD of Keppel Verolme, to Mrs De Sutter-Besters, Mayor of
Rozenburg, The Netherlands, who received it on behalf of
five local charities. Keppel Verolme was awarded the bonus
cheque by Petro-Canada for its achievement of more than
380,000 manhours worked on Terra Nova FPSO without any
lost time incidents. Committed to good corporate social
responsibility, Keppel Verolme used the bonus to benefit
the community. The community contribution will benefit a
senior citizens’ society, improve a playground for children,
a teenagers’ foundation, a scouting association and a
music foundation.
Corporate volunteerism
Keppel Volunteers had capacity attendance to most of its
activities in 2006. Its success was due to the focus placed on
having quality events that served as learning tools for APSN
students. Keppelites themselves found the events interesting
and enriching.
When the Move Your Body series of volunteer events took
place, Keppel Volunteers went for a session of rock climbing
at the indoor rock climbing facility at Keppel Towers. Such
activities allow the volunteers and APSN students to interact
at a more personal level, building social skills and increasing
their confidence to facilitate their integration into society.
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Maldives
For the first time in their lives, thousands of Maldivian students
and patients will be able to enjoy piped fresh water, thanks
to Keppel Seghers and the Public Utilities Board (PUB). After
having successfully installed and commissioned a desalination
plant on the island of Gan in Maldives in early 2005, Keppel
Seghers and PUB have now completed laying 1.2 kilometres of
water pipes, which will channel fresh water from the plant to
schools, hospitals and community halls across the island. The
portable seawater desalination plant, which has the capacity
to treat 240 cubic metres of seawater daily, was donated by
the Singapore Government in a swift response to the tsunami
disaster of 26 December 2004.
Keppel Verolme plays its part in community service.
In the coming year, Keppel Volunteers aims to build up its
portfolio of sports-related activities to help increase the students’
physical stamina and improve their health in preparation for
their workplace in the future.
Similarly, in the Do-It-Yourself series, Keppel Volunteers aimed
to impart daily skills to the APSN students so that they would
be able to engage in simple activities such as making a meal
or doing daily chores. In 2006, the students were taught how
to make the traditional Chinese New Year Lou Hei as part of
their curriculum. Keppel Volunteers hopes to incorporate more
common day-to-day activities into its activities so that the
students will gain confidence in engaging in activities like
making simple cash transactions.
The ACtivity series saw new developments in the Arts and
Culture curriculum of APSN as Keppel Volunteers pursued a
long-term partnership with the Practice Performing Arts
School. The latter, a not-for-profit organisation registered with
the Ministry of Education, is a premier arts school founded
by the late Kuo Pao Kun and Goh Lay Kuan. A pilot project,
which teaches the arts to the students of Chao Yang School,
started in 2007. It will be evaluated on a regular basis. The
new syllabus uses lessons in movement, expression and
dance to help students develop their psycho-motor and
communication skills as well as their physical fitness.
By keeping in close contact with APSN, Keppel Volunteers
has been able to customise its activities for the students.
This ensures that resources are channelled into areas where
they matter most to the schools. Keppel Volunteers will
continue to build on the relationship that it has with APSN
and work towards an even better year ahead.
The arts
Keppel Group remained dedicated in our support towards the
local arts and culture scene in 2006. Our contributions to the
promotion and development of the arts in Singapore were
recognised by the National Arts Council at the Patron of the
Arts Award, with Keppel Corporation, Keppel FELS and
Singapore Petroleum Company receiving awards.
Keppel Group stayed committed to nurturing talent through
the Keppel Music Scholarship. Inaugurated in 2003, the Group’s
commitment of $600,000 will go towards the sponsorship of
10 students over a period of five years. The students will
pursue four-year degree programmes at the Yong Siew Toh
Conservatory of Music at the National University of Singapore.
To date, six scholarships have been awarded to talented
young Vietnamese.
Keppel Corporation and Keppel Land collaborated with the
Singapore Symphony Orchestra (SSO) to showcase a world-
class act – The Gala Concert: Lorin Maazel and the SSO on
13 March 2006 at the Esplanade.
Corporate social responsibility
Keppel Corporation Limited
Report to Shareholders 2006
151
Corporate social responsibility
Maazel
Keppel continued to play its part in growing the local arts scene
by setting the stage for the celebration of artistic brilliance.
On 13 March 2006, The Gala Concert: Lorin Maazel and the
Singapore Symphony Orchestra (SSO) took place under the
aegis of Keppel. Guests were greatly impressed by the masterful
weaving of music by Maestro Maazel, world-renowned as one
of the most distinguished conductors of all time. All eyes were
also drawn to the Lady in Red – the talented and young violin
soloist Lidia. Regarded as one of the most extraordinary young
violinists on the global concert scene today, the 20 year-old
Russian won her first international competition at the tender age
of eight. All in all, it was a spectacular night both for Keppel and
for Singapore arts.
The evening presented timeless classical favourites –
Tchaikovsky and Mussorgsky’s masterpieces – by the premier
Asian orchestra and music prodigy Lidia Baich, led by world
celebrated Maestro Lorin Maazel.
A sponsor of the Singapore Arts Festival since 1994, Keppel
Group sponsored the Flemish company, Collegium Vocale
Gent, for its performance of J.S. Bach’s liturgical work Mass
in B Minor, at the Esplanade Concert Hall on 14 June 2006.
Led by Bach specialist and conductor Philippe Herreweghe
and choir master Maria van Nieukerken, the 47-strong Belgian
orchestral and choral ensemble touched the hearts of the
audience with a sincere and almost divine performance of
Bach’s mass.
Keppel O&M sponsored the performance by renowned
Brazilian musician, Chico Cesar at the World of Music,
Arts and Dance (WOMAD) Singapore 2006 festival. The
$25,000 sponsorship of the leading Brazilian songwriter
and singer was extremely well-received at the widely-
anticipated annual event featuring music, art and dance
performances from cultures across the world.
Keppel O&M was also one of the key sponsors of the
119 year-old National Museum of Singapore’s opening festival
on 8 December 2006. After three years of refurbishment,
the Museum re-opened to the public at twice its original
size with new state-of-the-art galleries.
152
Corporate social responsibility
Keppel Corporation Limited
Report to Shareholders 2006
Directors’ report & financial statements
Directors’ report
For the financial year ended 31 December 2006
The Directors present their report together with the audited consolidated financial statements of the Group and balance sheet
and statement of changes in equity of the Company for the financial year ended 31 December 2006.
1.
Directors
The Directors of the Company in office at the date of this report are:
Lim Chee Onn (Chairman)
Tony Chew Leong-Chee
Lim Hock San
Sven Bang Ullring
Tsao Yuan Mrs Lee Soo Ann
Leung Chun Ying
Oon Kum Loon (Mrs)
Tow Heng Tan
Yeo Wee Kiong
Choo Chiau Beng
Teo Soon Hoe
2.
Audit Committee
The Audit Committee of the Board of Directors comprises three independent Directors. Members of the Committee are:
Lim Hock San (Chairman)
Tony Chew Leong-Chee
Oon Kum Loon (Mrs)
The Audit Committee carried out its function in accordance with the Companies Act, including the following:
-
-
-
-
-
-
-
-
-
-
Review audit plans and reports of the Company's external auditors and internal auditors and consider effectiveness
of actions/policies taken by management on the recommendations and observations;
Review the assistance given by the Company’s officers to the auditors;
Independent review of quarterly financial reports and year-end financial statements;
Examine effectiveness of financial, operating and compliance controls;
Review the independence and objectivity of the external auditors annually;
Review the nature and extent of non-audit services performed by auditors;
Meet with external auditors and internal auditors, without the presence of management, at least annually;
Ensure that the internal audit function is adequately resourced and has appropriate standing within the Company, at
least annually;
Review interested person transactions; and
Investigate any matters within the Audit Committee’s term of reference, whenever it deems necessary.
The Audit Committee recommended to the Board of Directors the re-appointment of Deloitte & Touche as auditors of the
Company at the forthcoming Annual General Meeting.
3.
Arrangements to enable Directors to acquire shares and debentures
Neither at the end of the financial year nor at any time during the financial year did there subsist any arrangement whose
object is to enable the Directors of the Company to acquire benefits by means of the acquisition of shares or debentures
in the Company or any other body corporate other than the KCL Share Option Scheme.
154
Directors’ report
Keppel Corporation Limited
Report to Shareholders 2006
4.
Directors’ interest in shares and debentures
According to the Register of Directors' shareholdings kept by the Company for the purpose of Section 164 of the
Companies Act, none of the Directors holding office at the end of the financial year had any interest in the shares and
debentures of the Company and related corporations, except as follows:
Keppel Corporation Limited
(Ordinary shares)
Lim Chee Onn
Sven Bang Ullring
Oon Kum Loon (Mrs)
Oon Kum Loon (Mrs) (deemed interest)
Tow Heng Tan
Tow Heng Tan (deemed interest)
Choo Chiau Beng
Choo Chiau Beng (deemed interest)
Teo Soon Hoe
(Share options)
Lim Chee Onn
Choo Chiau Beng
Teo Soon Hoe
Keppel Land Limited
(Ordinary shares)
Tow Heng Tan (deemed interest)
Keppel Telecommunications & Transportation Ltd
(Ordinary shares)
Lim Chee Onn
Teo Soon Hoe
K-Reit Asia
(Units)
Tow Heng Tan
Keppel Structured Notes Pte Limited
(S$ Commodity Linked Guaranteed Note Series 1 due 2011)
Teo Soon Hoe
Keppel Philippines Holdings, Inc
(“B” shares of one Peso each)
Lim Chee Onn
Choo Chiau Beng
Teo Soon Hoe
Keppel Philippines Marine, Inc
(Shares of one Peso each)
Lim Chee Onn
Choo Chiau Beng
Teo Soon Hoe
Keppel Philippines Properties, Inc
(Shares of one Peso each)
Teo Soon Hoe
1.1.06
Holdings At
31.12.06
21.1.07
977,083
28,000
20,000
20,000
313
13,086
505,833
-
1,074,166
1,357,083
31,000
20,000
20,000
313
13,086
860,833
100,000
1,354,166
1,357,083
31,000
20,000
20,000
313
13,086
975,833
100,000
1,354,166
1,620,000
1,200,000
1,200,000
1,550,000
920,000
1,150,000
1,550,000
805,000
1,150,000
50
50
50
23,000
28,000
23,000
28,000
23,000
28,000
-
-
10
10
$100,000
$100,000
2,000
2,000
2,000
2,000
2,000
2,000
2,000
2,000
2,000
246,457
283,611
302,830
246,457
283,611
302,830
246,457
283,611
302,830
2,916
2,916
2,916
Directors’ report
Keppel Corporation Limited
Report to Shareholders 2006
155
Directors’ report
5.
6.
Directors’ receipt and entitlement to contractual benefits
Since the beginning of the financial year, no Director of the Company has received or become entitled to receive a benefit
which is required to be disclosed under Section 201(8) of the Singapore Companies Act, by reason of a contract made by
the Company or a related corporation with the Director or with a firm of which he is a member, or with a company in
which he has a substantial financial interest except as disclosed in the financial statements.
Share options of the Company
Details of share options granted under the KCL Share Option Scheme (“Scheme”) are disclosed in Note 3 to the financial
statements.
Options to take up 6,429,500 Ordinary Shares (“Shares”) were granted during the financial year. There were 4,187,500
Shares issued by virtue of exercise of options and options to take up 257,000 Shares were cancelled during the financial
year. At the end of the financial year, there were 16,232,166 Shares under option as follows:
Balance at
1.1.06 or
later date
of grant
35,000
474,000
3,000
643,000
1,265,000
788,333
1,207,500
2,046,500
2,203,500
2,603,833
2,977,500
2,966,500
3,463,000
Number of Share Options
Exercised
Lapsed or
cancelled
-
(474,000)
(3,000)
(626,000)
(550,000)
(250,000)
(545,000)
(990,500)
(722,500)
(13,000)
(10,500)
(3,000)
-
-
-
-
-
-
-
-
(12,500)
(38,500)
(55,000)
(54,000)
(65,000)
(32,000)
Date of
grant
01.11.99
18.10.00
20.04.01
27.09.01
20.12.02
11.02.03
14.08.03
13.02.04
12.08.04
11.02.05
11.08.05
09.02.06
10.08.06
Balance
at
31.12.06
35,000
-
-
17,000
715,000
538,333
662,500
1,043,500
1,442,500
2,535,833
2,913,000
2,898,500
3,431,000
Exercised
price*
$3.23
$2.11
$1.69
$1.52
$2.89
$2.93
$4.76
$6.31
$6.77
$9.12
$12.77
$13.07
$15.60
Date of
expiry
31.10.09
17.10.10
19.04.11
26.09.11
19.12.12
10.02.13
13.08.13
12.02.14
11.08.14
10.02.15
10.08.15
08.02.16
09.08.16
20,676,666
(4,187,500)
(257,000)
16,232,166
* Exercise prices are adjusted for capital distribution
The information on Directors of the Company participating in the Scheme is as follows:
Aggregate
options
granted
since
commence-
ment of the
Scheme
to the end of
financial year
Aggregate
options
exercised
since
commence-
ment of the
Scheme
to the end of
financial year
Aggregate
options
lapsed
since
commence-
ment of the
Scheme
to the end of
financial year
Aggregate
options
outstanding
as at
the end of
financial year
Options
granted
during the
financial year
310,000
230,000
230,000
3,540,000
2,970,000
2,970,000
1,416,250
1,476,250
1,246,250
573,750
573,750
573,750
1,550,000
920,000
1,150,000
Name of
Director
Lim Chee Onn
Choo Chiau Beng
Teo Soon Hoe
156
Directors’ report
Keppel Corporation Limited
Report to Shareholders 2006
No employee received 5 percent or more of the total number of options available under the Scheme.
There are no options granted to any of the Company's controlling shareholders or their associates under the Scheme.
7.
Share options of subsidiaries
The particulars of share options of subsidiaries of the Company are as follows:
(a)
(b)
Keppel Land Limited (“Keppel Land”)
At the end of the financial year, there were 49,641,026 unissued shares of Keppel Land Limited under option. This
comprised $300 million principal amount of 2.5% Convertible Bonds due 2013 at a conversion price of $6.55 per
share and 3,839,500 options under the Keppel Land Share Option Scheme. Details and terms of the options have
been disclosed in the Directors' Report of Keppel Land Limited.
Keppel Telecommunications & Transportation Ltd (“Keppel T&T”)
At the end of the financial year, there were 2,702,000 unissued shares of Keppel Telecommunications &
Transportation Ltd under option relating to the Keppel T&T Share Option Scheme. Details and terms of the options
have been disclosed in the Directors' Report of Keppel Telecommunications & Transportation Ltd.
8.
Auditors
The auditors, Deloitte & Touche, have expressed their willingness to accept re-appointment.
On behalf of the Board
LIM CHEE ONN
Executive Chairman
Singapore, 13 March 2007
TEO SOON HOE
Group Finance Director
Directors’ report
Keppel Corporation Limited
Report to Shareholders 2006
157
Balance sheets
As at 31 December 2006
Share capital
Reserves
Share capital & reserves
Minority interests
Capital employed
Represented by:
Fixed assets
Investment properties
Development properties
Subsidiaries
Associated companies
Investments
Long term receivables
Intangibles
Current assets
Stocks & work-in-progress in excess of related billings
Amounts due from:
- subsidiaries
- associated companies
Debtors
Short term investments
Bank balances, deposits & cash
Current liabilities
Creditors
Billings on work-in-progress in excess of related costs
Provisions
Amounts due to:
- subsidiaries
- associated companies
Term loans
Taxation
Bank overdrafts
Net current assets
Non-current liabilities
Term loans
Deferred taxation
Note
Group
2006
$’000
2005
$’000
Company
2006
$’000
2005
$’000
3
4
5
6
7
8
9
10
11
12
972,926
3,232,170
4,205,096
1,392,591
391,903
3,254,173
3,646,076
1,288,566
972,926
2,332,232
3,305,158
-
391,903
2,490,141
2,882,044
-
5,597,687
4,934,642
3,305,158
2,882,044
1,740,808
2,249,216
197,080
-
2,410,716
275,892
160,720
135,058
7,169,490
1,653,195
2,025,501
228,022
-
2,174,200
84,341
152,769
145,248
6,463,276
5,680
-
-
3,080,896
3,074
-
300,977
-
3,390,627
5,620
-
-
2,849,511
3,074
-
300,599
-
3,158,804
13
2,777,217
2,762,328
-
-
14
14
15
16
17
18
13
19
14
14
20
21
-
307,968
1,516,259
426,714
1,618,558
6,646,716
-
280,109
1,267,211
405,638
1,410,851
6,126,137
2,380,657
2,325,319
29,961
1,859,083
1,487,246
17,604
-
93,620
681,635
273,883
3,351
5,788,426
-
200,183
1,321,982
185,738
16,817
5,088,653
410,092
87
82,013
-
520
492,712
58,885
-
-
194,718
11
-
10,182
-
263,796
963,926
99
2,519
-
570
967,114
80,304
-
-
56,420
8
781,848
5,155
-
923,735
858,290
1,037,484
228,916
43,379
20
22
2,272,152
157,941
2,430,093
2,392,042
174,076
2,566,118
300,000
14,385
314,385
300,000
20,139
320,139
Net assets
5,597,687
4,934,642
3,305,158
2,882,044
The accompanying notes form an integral part of the financial statements.
158
Balance sheets
Keppel Corporation Limited
Report to Shareholders 2006
Consolidated profit and loss account
For the financial year ended 31 December 2006
Revenue
Materials and subcontract costs
Staff costs
Depreciation and amortisation
Other operating expenses
Operating profit
Investment income
Interest income
Interest expenses
Share of results of associated companies
Profit before tax and exceptional items
Exceptional items
Profit before taxation
Taxation
Profit for the year
Attributable to:
Shareholders of the Company
Profit before exceptional items
Exceptional items
Minority interests
Earnings per ordinary share
Before exceptional items
- basic
- diluted
After exceptional items
- basic
- diluted
Gross dividend per ordinary share
Interim dividend paid
Final dividend proposed
Total
Note
2006
$’000
2005
$’000
23
24
25
26
26
26
9
27
28
27
29
30
7,600,940
(5,570,175)
(931,340)
(127,438)
(167,922)
5,688,369
(4,138,185)
(802,912)
(132,329)
(148,199)
804,065
3,777
79,758
(62,470)
314,662
466,744
1,220
58,871
(22,175)
321,509
1,139,792
7,304
826,169
1,924
1,147,096
(257,372)
828,093
(153,311)
889,724
674,782
750,832
(82)
750,750
138,974
563,685
(16)
563,669
111,113
889,724
674,782
95.4 cts
94.4 cts
95.4 cts
94.4 cts
72.1 cts
70.0 cts
72.1 cts
70.0 cts
12.0 cts
16.0 cts
28.0 cts
10.0 cts
13.0 cts
23.0 cts
The accompanying notes form an integral part of the financial statements.
Consolidated profit and loss account
Keppel Corporation Limited
Report to Shareholders 2006
159
Statements of changes in equity
For the financial year ended 31 December 2006
Attributable to equity holders of the Company
Share
Capital
$’000
Share
Premium
Account
$’000
Capital
Reserves
$’000
Foreign
Exchange
Revenue Translation
Account
Reserves
$’000
$’000
Share
Capital &
Reserves
$’000
Minority
Interests
$’000
Capital
Employed
$’000
391,903
720,229
345,761
2,192,117
(3,934)
3,646,076
1,288,566
4,934,642
Group
2006
As at 1 January
Surplus on revaluation
of investment properties
Fair value changes on
available-for-sale assets
Fair value changes on
cashflow hedges
Currency translation loss
Gain not recognised in
profit & loss account
Net profit for the year
Dividend paid
Share-based payment
Equity component of
convertible bond issued
by a subsidiary
Transfer of statutory,
capital and other reserves
to revenue reserves
Fair value gain realised
and transferred to
profit & loss account
Revaluation surplus
realised and transferred
to profit & loss account
Currency translation loss
realised and transferred
to profit & loss account
on disposal of subsidiaries
Share of capital reserves
of an associated company
Dividend paid to
minority shareholders
Cash subscribed by
minority shareholders
Acquisition of subsidiaries
Acquisition of additional
interest in subsidiaries
Set off against advance from
minority shareholders
Other adjustments
Shares issued
Capital distribution
Effect of Companies
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
16,306
(181,040)
-
-
2,764
-
24,267
73,577
148,029
-
245,873
-
-
18,868
-
-
-
-
-
-
24,267
(16,494)
7,773
73,577
(2,182)
71,395
-
(70,327)
148,029
(70,327)
(947)
(28,753)
147,082
(99,080)
-
750,750
(157,374)
-
(70,327)
-
-
-
175,546
750,750
(157,374)
18,868
(48,376)
138,974
-
842
127,170
889,724
(157,374)
19,710
16,850
-
(12,369)
12,369
-
-
-
-
-
-
16,850
15,067
31,917
-
(91,220)
(6,901)
(868)
-
-
-
-
-
-
-
-
-
-
(91,220)
(6,901)
15,305
(868)
(71,745)
(71,745)
20,058
14,925
20,058
14,925
(28,936)
(28,936)
-
34
19,070
(181,040)
65,498
(2,282)
-
-
65,498
(2,248)
19,070
(181,040)
-
-
-
-
15,305
15,305
-
-
-
-
-
-
34
-
-
-
-
-
-
-
-
-
-
-
-
-
(91,220)
(6,901)
-
(868)
-
-
-
-
-
-
-
-
(Amendment) Act 2005
745,757
(722,993)
(22,764)
As at 31 December
972,926
-
493,230
2,797,896
(58,956)
4,205,096
1,392,591
5,597,687
160
Statements of changes in equity
Keppel Corporation Limited
Report to Shareholders 2006
Attributable to equity holders of the Company
Share
Capital
$’000
Share
Premium
Account
$’000
Capital
Reserves
$’000
Foreign
Exchange
Revenue Translation
Account
Reserves
$’000
$’000
Share
Capital &
Reserves
$’000
Minority
Interests
$’000
Capital
Employed
$’000
389,386
861,593
236,750
1,769,694
(38,078)
3,219,345
1,158,607
4,377,952
2005
As at 1 January
Surplus on revaluation
of investment properties
Fair value changes on
available-for-sale assets
Fair value changes on
cashflow hedges
Currency translation gain
Gain not recognised in
profit & loss account
Net profit for the year
Dividend paid
Share-based payment
Transfer of statutory,
capital and other reserves
to revenue reserves
Fair value gain realised
and transferred to
profit & loss account
Revaluation deficit
realised and transferred
to profit & loss account
Currency translation loss
realised and transferred
to profit & loss account
on disposal of subsidiaries
Share of capital reserves
of an associated company
Dividend paid to
minority shareholders
Cash subscribed by
minority shareholders
Acquisition of subsidiaries
Acquisition of additional
interest in subsidiaries
Disposal of subsidiaries
Other adjustments
Shares issued
Capital distribution
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,517
-
-
-
-
15,027
(156,391)
(2,290)
-
-
(6,616)
-
-
-
-
-
444
-
-
7,268
110,092
(22,607)
-
94,753
-
-
12,199
-
-
-
-
-
563,669
(131,388)
-
-
-
-
29,408
29,408
-
-
-
7,268
10,640
17,908
110,092
828
110,920
(22,607)
29,408
124,161
563,669
(131,388)
12,199
190
9,018
(22,417)
38,426
20,676
111,113
-
376
144,837
674,782
(131,388)
12,575
10,521
(9,834)
(687)
-
-
-
-
(2,290)
(2,290)
-
-
-
-
-
(32,185)
(32,185)
-
5,423
5,423
(6,616)
-
-
5,423
(6,616)
-
-
-
-
-
-
(24)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(36,116)
(36,116)
28,787
41,092
28,787
41,092
-
-
420
17,544
(156,391)
(2,329)
(928)
(527)
-
-
(2,329)
(928)
(107)
17,544
(156,391)
As at 31 December
391,903
720,229
345,761
2,192,117
(3,934)
3,646,076
1,288,566
4,934,642
The accompanying notes form an integral part of the financial statements.
Statements of changes in equity
Keppel Corporation Limited
Report to Shareholders 2006
161
Statements of changes in equity
Company
2006
As at 1 January
Net profit for the year
Dividend paid
Share-based payment
Shares issued
Capital distribution
Effect of Companies (Amendment) Act 2005
As at 31 December
2005
As at 1 January
Net profit for the year
Dividend paid
Share-based payment
Shares issued
Capital distribution
As at 31 December
Share
Capital
$’000
Share
Premium
Account
$’000
Capital
Reserves
$’000
Revenue
Reserves
$’000
Total
$’000
391,903
-
-
-
16,306
(181,040)
745,757
720,229
-
-
-
2,764
-
(722,993)
37,057
-
-
15,284
-
-
(22,764)
1,732,855
727,174
(157,374)
-
-
-
-
2,882,044
727,174
(157,374)
15,284
19,070
(181,040)
-
972,926
-
29,577
2,302,655
3,305,158
389,386
-
-
-
2,517
-
861,593
-
-
-
15,027
(156,391)
28,955
-
-
8,102
-
-
1,575,836
288,407
(131,388)
-
-
-
2,855,770
288,407
(131,388)
8,102
17,544
(156,391)
391,903
720,229
37,057
1,732,855
2,882,044
The accompanying notes form an integral part of the financial statements.
162
Statements of changes in equity
Keppel Corporation Limited
Report to Shareholders 2006
Consolidated cashflow statement
For the financial year ended 31 December 2006
Operating activities
Operating profit
Adjustments:
Depreciation and amortisation
Share-based payment expenses
Profit on sale of fixed assets
Others
Operational cash flow before changes in working capital
Working capital changes:
Stocks & work-in-progress
Debtors
Creditors
Investments in bonds and shares
Advances to associated companies
Translation of foreign subsidiaries
Interest received
Interest paid
Income taxes paid
Net cash from operating activities
Investing activities
Acquisition of subsidiaries
Acquisition of additional shares in subsidiaries
Disposal of subsidiaries
Acquisition and further investment in associated companies
Acquisition of fixed assets and investment properties
Expenditure on development properties
Proceeds from disposal of associated companies
Proceeds from disposal of fixed assets
Dividend received from investments and associated companies
Net cash used in investing activities
Financing activities
Proceeds from share issues
Proceeds from minority shareholders of subsidiaries
Proceeds from term loans
Capital distribution
Repayment of term loans
Dividend paid to shareholders of the Company
Dividend paid to minority shareholders of subsidiaries
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents as at 1 January
Note
2006
$’000
2005
$’000
804,065
466,744
A
B
127,438
14,949
(3,610)
8,657
951,499
814,324
9,679
473,022
(178,976)
(134,422)
20,416
1,955,542
81,006
(69,027)
(113,637)
1,853,884
(3,159)
(28,204)
-
(282,107)
(430,348)
(15,241)
138,084
39,303
207,362
(374,310)
132,329
11,203
(10,278)
5,555
605,553
974,766
(262,190)
198,812
(57,251)
158,638
(19,411)
1,598,917
59,427
(15,689)
(83,543)
1,559,112
(137,041)
-
15,266
(520,187)
(456,178)
(1,024)
17,867
55,997
159,893
(865,407)
19,070
20,058
756,301
(181,040)
(1,643,671)
(157,374)
(71,745)
(1,258,401)
17,544
28,787
1,018,786
(156,391)
(1,012,717)
(131,388)
(36,116)
(271,495)
221,173
1,394,034
422,210
971,824
Cash and cash equivalents as at 31 December
C
1,615,207
1,394,034
The accompanying notes form an integral part of the financial statements.
Consolidated cashflow statement
Keppel Corporation Limited
Report to Shareholders 2006
163
Notes to consolidated cashflow statement
A.
Acquisition of subsidiaries
During the financial year, the fair values of net assets of subsidiaries acquired were as follows:
Fixed assets and investment properties
Development properties
Associated companies
Investments
Stocks & work-in-progress
Intangibles
Debtors
Bank balances and cash
Creditors
Loans
Minority interests
Goodwill on consolidation
Amount previously accounted for as associated companies
Purchase consideration
Less: Bank balances and cash acquired
Cash flow on acquisition net of cash acquired
B.
Disposal of subsidiaries
During the financial year, the fair values of net assets of subsidiaries disposed were as follows:
Fixed assets
Investments
Stocks & work-in-progress
Debtors
Bank balances and cash
Creditors
Minority interests
Net profit on disposal
Sale proceeds
Add: Bank balances and cash disposed
Cash flow on disposal net of cash disposed
2006
$’000
2005
$’000
220,461
-
-
16,024
3,659
1,011
11,258
20,590
(49,481)
(159,050)
(6,357)
58,115
2,677
(37,043)
23,749
(20,590)
3,159
-
-
-
-
-
-
-
-
-
-
-
-
168,774
20,561
23,551
53
52,175
-
9,122
35,627
(55,112)
(9,648)
(41,092)
204,011
-
(31,259)
172,752
(35,711)
137,041
(3,415)
(98,132)
(113)
(75,633)
(29,001)
195,905
928
(9,461)
(34,806)
(44,267)
29,001
(15,266)
C.
Cash and cash equivalents
Cash and cash equivalents consist of cash on hand and balances with banks. Cash and cash equivalents in the
consolidated cashflow statement comprise the following balance sheet amounts:
Bank balances, deposits and cash (Note 17)
Bank overdrafts
1,618,558
(3,351)
1,615,207
1,410,851
(16,817)
1,394,034
The accompanying notes form an integral part of the financial statements.
164 Notes to consolidated cashflow statement
Keppel Corporation Limited
Report to Shareholders 2006
Notes to the financial statements
For the financial year ended 31 December 2006
These notes form an integral part of and should be read in conjunction with the accompanying financial statements.
1.
General
The Company is incorporated and domiciled in Singapore and is listed on the Singapore Exchange Securities Trading
Limited. The address of its registered office is 1 HarbourFront Avenue #18-01, Keppel Bay Tower, Singapore 098632.
The Company’s principal activity is that of an investment holding and management company.
The principal activities of the companies in the Group consist of:
-
-
-
-
offshore oil-rig construction, shipbuilding & shiprepair and conversion;
property development & investment and property fund management;
network & utilities engineering services and power generation; and
investments.
There has been no significant change in the nature of these principal activities during the financial year.
The financial statements of the Group for the financial year ended 31 December 2006 and the balance sheet and
statement of changes in equity of the Company at 31 December 2006 were authorised for issue in accordance with a
resolution of the Board of Directors on 13 March 2007.
2.
Significant accounting policies
(a) Basis of preparation
The financial statements have been prepared in accordance with Singapore Financial Reporting Standards (“FRS”).
The financial statements have been prepared under the historical cost convention, except as disclosed in the
accounting policies below.
In the current year, the Group and the Company adopted the new/revised FRS and Interpretations to FRS
(“INT FRS”) that are effective for annual periods beginning on or after 1 January 2006.
The following are the FRS and INT FRS that are relevant to the Group:
FRS 19 (Amendment)
FRS 21 (Amendment)
FRS 32 (Amendment)
FRS 39 (Amendment)
INT FRS 104
Employment Benefits
The Effects of Changes in Foreign Exchange Rates
Financial Instruments: Disclosure and Presentation
Financial Instruments: Recognition and Measurement
Determining whether an Arrangement contains a Lease
The financial effects of the Amendments to FRS 39 relating to financial guarantee contracts issued by the Company
are not material to the financial statements of the Company and therefore are not recognised.
The adoption of the other new/revised FRS and INT FRS has no material effect on the financial statements of the
Group and the Company.
(b) Basis of consolidation
The consolidated financial statements include the financial statements of the Company and its subsidiaries as at the
balance sheet date.
The results of subsidiaries acquired or disposed of during the financial year are included or excluded from the
consolidated financial statements from their respective dates of acquisition or disposal. All intercompany
transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised
losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Where necessary, adjustments are made to the financial statements of subsidiaries to ensure consistency of
accounting policies with those of the Group.
Notes to the financial statements
Keppel Corporation Limited
Report to Shareholders 2006
165
Notes to the financial statements
2.
Significant accounting policies (continued)
Acquisition of subsidiaries are accounted for using the purchase method. The cost of an acquisition is measured as
the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of
exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition
date, irrespective of the extent of any minority interest. Costs directly attributable to an acquisition are included as
part of the cost of acquisition.
Any excess of the cost of business combination over the Group’s interest in the net fair value of the identifiable
assets, liabilities and contingent liabilities represents goodwill. Any excess of the Group’s interest in the net fair
value of the identifiable assets, liabilities and contingent liabilities over the cost of business combination is
recognised in the profit and loss account on the date of acquisition.
(c)
Fixed assets
Fixed assets are stated at cost less accumulated depreciation and any impairment in value. When the carrying
amount of an asset is greater than its estimated recoverable amount, it is written down to its recoverable amount.
Profits or losses on disposal of fixed assets are included in the profit and loss account.
Depreciation of fixed assets is calculated on a straight-line basis to write off the cost of the fixed assets over their
estimated useful lives. No depreciation is provided on freehold land and capital work-in-progress. The estimated
useful lives of other fixed assets are as follows:
Freehold buildings
Leasehold land & buildings
Vessels & floating docks
Plant, machinery & equipment
30 to 50 years
Over period of lease (ranging from 2 to 73 years)
10 to 20 years
1 to 30 years
The estimated useful lives, residual values and depreciation method are reviewed at each year end, with the effect
of any changes in estimate accounted for on a prospective basis.
(d)
Investment properties
Investment properties are accounted for as long term investments and stated at valuations made each year.
Surpluses arising on revaluation are credited directly to capital reserves. Revaluation deficits are taken to the profit
and loss account in the absence of or to the extent that they exceed any surpluses held in reserves relating to
previous revaluations of the same class of assets.
Profits or losses on disposal of investment properties are included in the profit and loss account. Any surpluses held
in capital reserves in respect of previous revaluations of investment properties disposed of are regarded as having
become realised and are transferred to the profit and loss account.
(e) Development properties
Development properties are stated at cost less impairment losses.
Cost includes cost of land and construction, related overhead expenditure and financing charges and other net costs
incurred during the period of development. They are considered completed and are transferred to investment
properties or fixed assets when they are ready for their intended use.
Each property under development is accounted for as a separate project. Where a project comprises more than
one component, each component is treated as a separate project, and interest and other net costs are apportioned
accordingly.
166 Notes to the financial statements
Keppel Corporation Limited
Report to Shareholders 2006
(f)
Subsidiaries
A subsidiary is an entity over which the Group has the power to govern the financial and operating policies so as to
obtain benefits from its activities. The existence and effect of potential voting rights that are currently exercisable or
convertible are considered when assessing whether the Group controls another entity.
Investments in subsidiaries are stated in the Company's financial statements at cost less any impairment losses.
On disposal of a subsidiary, the difference between net disposal proceeds and the carrying amount of the
investment is taken to profit and loss account.
(g) Associated companies
An associated company is an entity, not being a subsidiary, over which the Group has significant influence, but not
control, in the commercial and financial policy decisions.
Investments in associated companies are stated in the Company's financial statements at cost less any impairment
losses. On disposal of an associated company, the difference between net disposal proceeds and the carrying
amount of the investment is taken to profit and loss account.
Investments in associated companies are accounted for in the consolidated financial statements using the equity
method of accounting whereby the Group's share of profit or loss of the associated company is included in the
profit and loss account and the Group's share of net assets of the associated company is included in the balance
sheet.
(h)
Intangibles
Goodwill
Goodwill arising on the acquisition of a subsidiary represents the excess of the cost of the business combination
over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities. Goodwill
is initially recognised as an asset at cost and is subsequently measured at cost less any impairment losses. For the
purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units expected to
benefit from the synergies of the combination. An impairment loss is recognised in the profit and loss account
when the carrying amount of the cash-generating unit, including goodwill, exceeds the recoverable amount of the
cash-generating unit. The impairment loss is allocated first to reduce the carrying amount of goodwill allocated to
the cash-generating units and then, to reduce the carrying amount of the other assets in the unit on a pro-rata basis.
Other intangible assets
Intangible assets include development expenditure. Costs incurred which are expected to generate future
economic benefits are recognised as intangibles and amortised on a straight line basis over their useful lives,
ranging from 5 to 40 years.
(i)
Investments
Investments are classified as held for trading or available-for-sale. Investments acquired for the purpose of selling in
the short term are classified as held for trading. Other investments held by the Group are classified as available-for-
sale.
Investments are recognised and derecognised on the trade date where the purchase or sale of an investment is
under a contract whose terms required delivery of investment within the timeframe established by the market
concerned.
Investments are initially measured at fair value plus transaction costs except for investments held for trading, which
are recognised at fair value.
For investments held for trading, gains and losses arising from changes in fair value are included in the profit and
loss account.
Notes to the financial statements
Keppel Corporation Limited
Report to Shareholders 2006
167
Notes to the financial statements
2.
Significant accounting policies (continued)
For available-for-sale investments, gains and losses arising from changes in fair value are recognised directly in
equity, until the investment is disposed of or is determined to be impaired, at which time the cumulative gain or loss
previously recognised in equity is included in the profit and loss account.
The fair value of quoted investments is based on current bid prices. For investments where there is no active
market, the fair value is determined using valuation techniques. Such techniques include using recent arm’s length
transactions, reference to the underlying net asset value of the investee companies and discounted cash flow analysis.
The Group assesses at each balance sheet date whether there is objective evidence that an investment is impaired.
In the case of investment classified as available-for-sale, a significant or prolonged decline in the fair value of the
investment below its cost is considered in determining whether the investment is impaired. If any such evidence
exists for available-for-sale financial assets, the cumulative loss - measured as the difference between the acquisition
cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or
loss - is removed from equity and recognised in the profit and loss account. Impairment losses recognised in the
profit and loss account are not reversed through the profit and loss account until the investment is disposed of.
(j)
Derivative financial instruments and hedge accounting
Derivative financial instruments are initially recognised at fair value on the date a derivative contract is entered into
and are subsequently re-measured at fair value. Derivative financial instruments are carried as assets when the fair
value is positive and as liabilities when the fair value is negative.
Gains or losses arising from changes in fair value of derivative financial instruments that do not qualify for hedge
accounting are taken to the profit and loss account.
For cash flow hedges, the effective portion of the gains or losses on the hedging instrument is recognised directly
in the hedging reserve, while the ineffective portion is recognised in the profit and loss account. Amounts taken to
hedging reserve are transferred to the profit and loss account when the hedged transaction affects profit or loss.
The fair value of forward foreign currency contracts is determined using forward exchange market rates at the
balance sheet date. The fair value of interest rate caps and interest rate swaps are based on valuations provided by
the Group’s bankers.
(k)
Impairment of assets
At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to
determine whether there is any indication that these assets may be impaired. If any such indication exists, the
recoverable amount (i.e. the higher of fair value less cost to sell and value in use) of the asset is estimated to
determine the amount of impairment loss.
For the purpose of impairment testing of these assets, recoverable amount is determined on an individual asset
basis unless the asset does not generate cash flows that are largely independent of those from other assets. If this
is the case, recoverable amount is determined for cash generating unit to which the asset belongs.
If the recoverable amount of the asset is estimated to be less than its carrying amount, the carrying amount of an
asset is reduced to its recoverable amount. The impairment loss is recognised in the profit and loss account unless
the asset is carried at revalued amount, in which case, such impairment loss is treated as revaluation decrease.
An impairment loss for an asset is reversed if, and only if, there has been a change in the estimates used to
determine the asset’s recoverable amount since the last impairment loss was recognised. The carrying amount of
the asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying
amount that would have been determined had no impairment loss been recognised for the asset in prior years. A
reversal of impairment loss for an asset is recognised in the profit and loss account, unless the asset is carried at
revalued amount in which case, such reversal is treated as a revaluation increase.
168 Notes to the financial statements
Keppel Corporation Limited
Report to Shareholders 2006
(l)
Stocks & work-in-progress
Stocks, consumable materials and supplies are stated at the lower of cost and net realisable value, cost being
principally determined on the weighted average method.
Work-in-progress is stated at the lower of cost (comprising direct labour, material costs, direct expenses and an
appropriate allocation of production overheads) and net realisable value, which is arrived at after providing for
anticipated losses, if any, when the possibility of loss is ascertained.
Progress claims made against work-in-progress are offset against the cost of work-in-progress and the profits
recognised on partly completed long-term contracts less any provision required to reduce cost to estimated
realisable value.
Completed properties held for sale are stated at the lower of cost and net realisable value. Cost includes cost of
land and construction, and interest incurred during the period of construction.
Properties held for sale under development are stated at the lower of cost or net realisable value. Upon receipt of
temporary occupation permits, these are transferred to completed properties held for sale.
(m) Financial assets
Financial assets include cash and bank balances, trade, intercompany and other receivables and investments.
Trade, intercompany and other receivables are stated at their fair value as reduced by appropriate allowances for
estimated irrecoverable amounts.
(n)
(o)
Financial liabilities
Financial liabilities include trade, intercompany and other payables, bank loans and overdrafts. Trade, intercompany
and other payables are stated at their fair value. Interest-bearing bank loans and overdrafts are initially measured at
fair value and are subsequently measured at amortised cost. Any difference between the proceeds (net of
transaction costs) and the redemption value is taken to the profit and loss account over the period of the borrowings
using the effective interest method.
Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it
is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the
amount can be made.
Provision for warranties is set up upon completion of a contract to cover the estimated liability which may arise
during the warranty period. This provision is based on service history. Any surplus of provision will be written back
at the end of the warranty period while additional provisions where necessary are made when known. These
liabilities are expected to be incurred over the applicable warranty periods.
Provision for claims is made for the estimated cost of all claims notified but not settled at the balance sheet date,
less recoveries, using the information available at the time. Provision is also made for claims incurred but not
reported at the balance sheet date based on historical claims experience, modified for variations in expected future
settlement. The utilisation of provisions is dependent on the timing of claims.
(p)
Leases
When a group company is the lessee
Finance leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and
rewards of ownership to the lessee. Assets held under finance leases are recognised as assets of the Group at
their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The
corresponding liability to the lessor is included in the balance sheet as a finance lease obligation. Lease payments
Notes to the financial statements
Keppel Corporation Limited
Report to Shareholders 2006
169
Notes to the financial statements
2.
Significant accounting policies (continued)
are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of
interest on the remaining balance of the liability. Finance charges are charged directly to the profit and loss account.
Contingent rentals are recognised as expenses in the periods in which they are incurred.
Operating leases
Leases of assets in which a significant portion of the risks and rewards of ownership are retained by the lessor are
classified as operating leases. Payments made under operating leases (net of any incentive received from lessor)
are taken to the profit and loss account on a straight-line basis over the period of the lease. When an operating
lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of
penalty is recognised as an expense in the period in which termination takes place.
When a group company is the lessor
Finance leases
Amounts due from lessees under finance leases are recorded as receivables at the amount of the group’s net
investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant
periodic rate of return on the group’s net investment outstanding in respect of the leases.
Operating leases
Assets leased out under operating leases are included in investment properties and are stated at revalued amounts
and not depreciated. Rental income (net of any incentive given to lessee) is recognised on a straight-line basis over
the lease term.
(q) Revenue
Revenue consists of:
- Revenue recognised on contracts, under the percentage of completion method when the outcome of the
contract can be estimated reliably;
Invoiced value of goods and services;
-
- Rental income from investment properties; and
Investment income, interest and fee income.
-
(r)
Revenue and income recognition
Revenue from rigbuildings, shipbuildings and repairs is recognised based on the percentage of completion method
in proportion to the stage of completion, provided that the work is at least 20% complete and the outcome of such
work can be reliably estimated. For offshore rigbuildings and repairs division, the percentage of completion is
measured by reference to the percentage of the physical proportion of the contract work completed as determined
by engineers' estimates. For marine shipbuildings and repairs division, the percentage of completion is measured
by reference to the percentage of costs incurred to-date to the estimated total costs for each contract, with due
consideration made to include only those costs that reflect work performed. Provision is made where applicable for
anticipated losses on contracts in progress.
Income recognition on long term engineering contracts is based on the percentage of completion method in
proportion to the stage of completion, provided that the work is at least 20% complete and the outcome of such
work can be reliably estimated. The percentage of completion is measured by reference to the percentage of the
physical proportion of the contract work completed as determined by engineers’ estimates. Provision is made
where applicable for anticipated losses on contracts in progress.
Income recognition on partly completed properties held for sale is based on the percentage of completion method
as follows:
-
For Singapore trading properties under development, the profit recognition upon the signing of sales contracts is
20% of the total estimated profit attributable to the actual contracts signed. Subsequent recognition of profit is
based on the stage of physical completion;
170 Notes to the financial statements
Keppel Corporation Limited
Report to Shareholders 2006
-
-
For overseas trading properties under development, the profit recognition upon the signing of sales contracts is
the direct proportion of total expected project profit attributable to the actual sales contract signed, but only to
the extent that it relates to the stage of physical completion; and
In respect of large residential property projects, income recognition is applied by phases.
When losses are expected, full provision is made in the accounts after adequate allowance has been made for
estimated costs to completion. Any expenditure incurred on abortive projects is written off in the profit and loss
account.
Revenue from the sale of products is recognised upon shipment to customers and collectibility of the related
receivables is reasonably assured. Sales are stated net of goods and services tax and sales returns.
Revenue from the rendering of services including electricity supply and logistic services is recognised over the
period in which the services are rendered, by reference to completion of the specific transaction assessed on the
basis of the actual services provided as a proportion of the total services to be performed.
Dividend income from investments is recognised when the right to receive payment is established, and in the case
of fixed interest bearing investments, on a time proportion basis using the effective interest method.
Rental income from operating leases on investment properties are recognised on a straight-line basis over the lease
term.
Interest income is recognised on a time proportion basis using the effective interest method.
(s)
(t)
Borrowing costs
Borrowing costs incurred to finance the development of properties are capitalised during the period of time that is
required to complete and prepare the asset for its intended use. Other borrowing costs are taken to the profit and
loss account over the period of borrowing using the effective interest rate method.
Employee benefits
Defined contribution plan
The Group makes contributions to pension schemes as defined by the laws of the countries in which it has
operations. In particular, the Singapore companies make contributions to the Central Provident Fund in Singapore, a
defined contribution pension scheme. Contributions to pension schemes are recognised as an expense in the
period in which the related service is performed.
Employee leave entitlement
Employee entitlements to annual leave are recognised when they accrue to employees. A provision is made for the
estimated liability for leave as a result of services rendered by employees up to the balance sheet date.
Share option scheme
The Group operates an equity-settled, share-based compensation plan. The fair value of the employee services
received in exchange for the grant of the options is recognised as an expense in the profit and loss account with a
corresponding increase in the share option reserve over the vesting period. The total amount to be recognised over
the vesting period is determined by reference to the fair value of the options granted on the date of grant.
(u)
Income taxes
Current income tax liabilities (and assets) for current and prior periods are recognised at the amounts expected to
be paid to (or recovered from) the tax authorities, using the tax rates (and tax laws) that have been enacted or
substantially enacted by the balance sheet date.
Notes to the financial statements
Keppel Corporation Limited
Report to Shareholders 2006
171
Notes to the financial statements
2.
Significant accounting policies (continued)
Deferred income tax assets/liabilities are recognised for deductible/taxable temporary differences arising between
the tax bases of assets and liabilities and their carrying amounts. The principal temporary differences arise from
depreciation, unremitted offshore income and future tax benefits from certain provisions not allowed for tax
purposes until a later period. Deferred tax assets are recognised to the extent that it is probable that future taxable
profit will be available against which the temporary differences can be utilised.
(v)
Foreign currencies
Functional currency
Items included in the financial statements of each entity in the Group are measured using the currency that best
reflects the economic substance of the underlying events and circumstances relevant to that entity (“functional
currency”).
The financial statements of the Group and the balance sheet and statement of changes in equity of the Company
are presented in Singapore Dollars, which is the functional currency of the Company.
Foreign currency transactions
Transactions in foreign currencies are translated at exchange rates approximating those ruling at the transaction
dates. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at
exchange rates approximating those ruling at that date. Exchange differences arising from translation are taken to
the profit and loss account. Exchange differences on non-monetary items such as investments held for trading are
reported as part of the fair value gain or loss. Exchange differences on non-monetary items such as available-for-
sale investments are included in the fair value reserve.
Foreign currency translation
For inclusion in the Group's financial statements, the assets and liabilities of foreign subsidiaries and associated
companies that are in functional currencies other than Singapore Dollars are translated into Singapore Dollars at the
exchange rates ruling at the balance sheet date. The trading results of foreign subsidiaries and associated
companies are translated into Singapore Dollars using the average exchange rates for the financial year. Exchange
differences due to such currency translation are classified as reserves and taken directly to the foreign exchange
translation account.
Goodwill and fair value adjustments arising on acquisition of a foreign entity are treated as non-monetary foreign
currency assets and liabilities of the acquirer and recorded at the exchange rate at closing rate.
(w) Critical accounting estimates and judgements
(i)
Critical judgements in applying the Group’s accounting policies
In the process of applying the Group’s accounting policies, the management is of the opinion that there is no
instance of application of judgements which is expected to have a significant effect on the amounts
recognised in the financial statements, apart from those involving estimations described below.
(ii) Key sources of estimation uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at the balance
sheet date that have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year, are as follows:
Impairment of fixed assets
Determining whether fixed asset value is impaired requires an estimation of the value in use of the cash-
generating units. This requires the Group to estimate the future cashflows expected from the cash-
generating units and an appropriate discount rate in order to calculate the present value of the future
cashflows. The carry amount of fixed assets at the balance sheet date is disclosed in Note 5.
172 Notes to the financial statements
Keppel Corporation Limited
Report to Shareholders 2006
Impairment of goodwill
Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating
units to which the goodwill is allocated. This requires the Group to estimate the future cashflows expected
from the cash-generating units and an appropriate discount rate in order to calculate the present value of the
future cashflows. The carrying amount of goodwill at the balance sheet date is disclosed in Note 12.
Impairment of available-for-sale investments
The Group follows the guidance of FRS 39 in determining whether available-for-sale investments are
considered impaired. The Group evaluates, among other factors, the duration and extent to which the fair
value of an investment is less than its cost, the financial health of and the near-term business outlook of the
investee, including factors such as industry and sector performance, changes in technology and operational
and financing cashflow. The fair value of available-for-sale investments is disclosed in Notes 10 and 16.
Revenue recognition
The Group recognises contract revenue based on the stage of completion method. The stage of completion
is measured in accordance with the accounting policy stated in Note 2(r). Significant assumption is required in
determining the stage of completion, the extent of the contract cost incurred, the estimated total contract
revenue and contract cost and the recoverability of the contracts. In making the assumption, the Group
evaluates by relying on past experience and the work of specialists. Revenue from construction contracts is
disclosed in Note 23.
Income taxes
The Group has exposure to income taxes in numerous jurisdictions. Significant assumption is required in
determining the provision for income taxes. There are certain transactions and computations for which the
ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities
for expected tax issues based on estimates of whether additional taxes will be due. Where the final tax
outcome of these matters is different from the amounts that were initially recognised, such differences will
impact the income tax and deferred tax provisions in the period in which such determination is made. The
carrying amount of taxation and deferred taxation is disclosed in the balance sheet.
3.
Share capital
Ordinary Shares (“Shares”) issued and paid up
Balance 1 January
783,805,424 Shares
(2005: 778,772,591 Shares)
Issued during the financial year
4,187,500 Shares
(2005: 5,032,833 Shares)
Capital distribution
Effect of Companies (Amendment) Act 2005
Balance 31 December
787,992,924 Shares
(2005: 783,805,424 Shares)
Group and Company
2005
2006
$’000
$’000
391,903
389,386
16,306
(181,040)
745,757
2,517
-
-
972,926
391,903
Pursuant to the Companies (Amendment) Act 2005 effective 30 January 2006, the concept of authorised share capital
and par value has been abolished. The authorised share capital of $1,500,000,000 comprising 3,000,000,000 Shares of
$0.50 each has been removed. Amounts standing to the credit of share premium account and capital redemption reserve
(Note 4) have been transferred to the share capital account as at that date.
Notes to the financial statements
Keppel Corporation Limited
Report to Shareholders 2006
173
Notes to the financial statements
3.
Share capital (continued)
During the financial year, the Company issued 4,187,500 Shares for cash upon exercise of options under the KCL Share
Option Scheme. This comprised 470,000 Shares at $2.34 per Share, 4,000 Shares at $2.11 per Share, 3,000 Shares at
$1.69 per Share, 625,000 Shares at $1.75 per Share, 1,000 Shares at $1.52 per Share, 505,000 Shares at $3.12 per Share,
45,000 Shares at $2.89 per Share, 250,000 Shares at $3.16 per Share, 517,500 Shares at $4.99 per Share, 27,500 Shares
at $4.76 per Share, 952,000 Shares at $6.54 per Share, 38,500 Shares at $6.31 per Share, 7,500 Shares at $7.00 per
Share, 715,000 Shares at $6.77 per Share, 13,000 Shares at $9.12 per Share, 10,500 Shares at $12.77 per Share and
3,000 Shares at $13.07 per Share.
KCL Share Option Scheme
The KCL Share Option Scheme (“Scheme”), which has been approved by the shareholders of the Company, is
administered by the Remuneration Committee whose members are:
Sven Bang Ullring (Chairman)
Tsao Yuan Mrs Lee Soo Ann
Leung Chun Ying
Tow Heng Tan
Under the Scheme, an option may, except in certain special circumstances, be exercised at any time after two years but
no later than the expiry date. The two-year vesting period is intended to encourage employees to take a longer-term view
of the Company.
The Shares under option may be exercised in full or in respect of 100 Shares or a multiple thereof, on the payment of the
subscription price. The subscription price is based on the average last done prices for the Shares of the Company on the
Singapore Exchange Securities Trading Limited for the three market days preceding the date of offer. The Remuneration
Committee may at its discretion fix the subscription price at a discount not exceeding 20 percent to the above price.
None of the options offered in the financial year was granted at a discount.
To promote transparency, the Board of Directors had in 2002 resolved that the date of offer of share options under the
Scheme shall be a pre-determined date; that is, the date falling 14 days immediately after the date of announcement of
the Company’s half-year or full-year results, as the case may be. The number of Shares available under the Scheme shall
not exceed 15% of the issued share capital of the Company.
The employees to whom the options have been granted do not have the right to participate by virtue of the options in a
share issue of any other company. Certain employees who have been transferred from subsidiaries to the Company and
to whom options have been granted may also hold options granted by subsidiaries prior to their transfer to the Company,
while certain employees who have been granted options by the Company and were subsequently transferred from the
Company to subsidiaries may be entitled to options under the subsidiaries’ share option schemes.
Movements in the number of share options and their weighted average exercise prices are as follows:
Balance at 1 January
Granted
Exercised
Cancelled
Balance at 31 December
2006
2005
Weighted
average
exercise
price
^ $7.26
$14.43
$4.37
$11.20
$10.78
Number of
options
14,247,166
6,429,500
(4,187,500)
(257,000)
16,232,166
Weighted
average
exercise
price
^ $4.42
$11.29
$3.36
$9.64
$7.49
Number of
options
13,698,666
5,611,333
(5,032,833)
(30,000)
14,247,166
Exercisable at 31 December
4,577,833
$5.41
4,440,833
$3.39
^ Weighted average exercise price adjusted for capital distribution
174 Notes to the financial statements
Keppel Corporation Limited
Report to Shareholders 2006
The weighted average share price at the date of exercise for options exercised during the financial year was $13.61
(2005: $10.96). The options outstanding at the end of the financial year had a weighted average exercise price of $10.78
(2005: $7.49) and a weighted average remaining contractual life of 8.4 years (2005: 8.3 years).
On 9 February 2006 and 10 August 2006, the Company granted 2,966,500 and 3,463,000 options respectively under the
KCL Share Option Scheme. The estimated fair values of the options granted on those dates are $2.15 per share and
$2.67 per share respectively. These fair values are determined using The Black-Scholes pricing model. The significant
inputs into the model are as follows:
Date of grant
Prevailing share price at grant
Exercise price
Expected volatility
Expected life
Risk free rate
Expected dividend yield
2006
2005
9.2.2006
$13.30
$13.30
23.17%
4 years
3.09%
3.11%
10.8.2006
$15.60
$15.60
23.25%
4 years
3.18%
2.76%
11.2.2005
$9.55
$9.55
28.04%
5 years
2.26%
1.68%
11.8.2005
$13.00
$13.00
26.65%
5 years
2.38%
1.29%
The expected volatility is determined by calculating the historical volatility of the Company’s share price over the previous
4 years (2005: 5 years). The expected lives used in the model has been adjusted, based on management’s best estimate,
for the effects of non-transferability, exercise restrictions and behavioural considerations.
Details of share options granted by Keppel Land Limited and Keppel Telecommunications & Transportation Ltd,
subsidiaries of the Company are disclosed in the annual reports of the respective publicly-listed subsidiaries.
4.
Reserves
Share premium account
Capital reserves
Capital redemption reserve
Asset revaluation surplus
Share option reserve
Fair value reserve
Hedging reserve
Bonus issue by subsidiaries
Others
Group
Company
2006
$’000
2005
$’000
2006
$’000
2005
$’000
-
720,229
-
720,229
-
11,975
38,366
224,964
140,677
40,000
37,248
493,230
22,764
8,104
19,498
232,743
2,512
40,000
20,140
345,761
-
-
29,577
-
-
-
-
29,577
22,764
-
14,293
-
-
-
-
37,057
Revenue reserves
2,797,896
2,192,117
2,302,655
1,732,855
Foreign exchange translation account
(58,956)
(3,934)
-
-
3,232,170
3,254,173
2,332,232
2,490,141
Amounts standing to the credit of share premium account and capital redemption reserve have been transferred to the
share capital account (Note 3) in the current year.
Movements in reserves are set out in the statements of changes in equity.
Notes to the financial statements
Keppel Corporation Limited
Report to Shareholders 2006
175
Notes to the financial statements
5.
Fixed assets
Freehold
land &
buildings
$’000
Leasehold
land &
buildings
$’000
Plant,
Vessels & machinery
&
equipment
$’000
floating
docks
$’000
Capital
work-in-
progress
$’000
Total
$’000
76,417
4,174
(4,187)
-
-
1,122,466
13,851
(5,323)
(911)
-
251,115
15,705
(42,920)
-
-
1,027,165
83,635
(35,141)
-
5,810
-
-
-
-
-
-
-
-
-
-
-
-
341,060
290,291
-
-
-
(12,485)
(21,444)
(37,288)
2,818,223
407,656
(87,571)
(911)
5,810
(12,485)
(21,444)
(37,288)
2,770
(3,337)
75,837
48,254
(29,997)
1,148,340
2,091
(4,181)
221,810
22,746
(24,973)
1,079,242
(75,861)
(1,459)
482,814
-
(63,947)
3,008,043
17,507
3,134
-
(1,376)
-
-
367,004
30,568
42,139
(1,651)
(19)
-
107,855
14,483
-
(23,933)
-
-
672,050
77,688
4,220
(33,165)
-
5,332
261
(962)
18,564
(25,051)
(7,116)
405,874
5,714
(1,761)
102,358
19,076
(5,374)
739,827
612
-
-
-
-
-
-
-
612
1,165,028
125,873
46,359
(60,125)
(19)
5,332
-
(15,213)
1,267,235
Group
2006
Cost
At 1 January
Additions
Disposals
Write-off
Subsidiaries acquired
Reclassification
- Long term receivables
- Stocks
- Recoverable account
- To other fixed assets
categories
Exchange differences
At 31 December
Accumulated depreciation
& impairment losses
At 1 January
Depreciation charge
Impairment losses
Disposals
Write-off
Subsidiaries acquired
Reclassification
- To other fixed assets
categories
Exchange differences
At 31 December
Net book value
57,273
742,466
119,452
339,415
482,202
1,740,808
During the financial year, the Group recognised impairment losses of $46,359,000 which relates to write-down of two
hotels in Myanmar in the Property division. The carrying amounts of these assets were reduced to their recoverable
amount, which were based on the estimated future cashflow from operations discounted to present value at 12%.
176 Notes to the financial statements
Keppel Corporation Limited
Report to Shareholders 2006
Freehold
land &
buildings
$’000
Leasehold
land &
buildings
$’000
Plant,
Vessels & machinery
&
equipment
$’000
floating
docks
$’000
Capital
work-in-
progress
$’000
Total
$’000
73,187
1,047
(18,910)
-
19,907
(3,147)
1,063,679
19,399
(2,654)
(3,355)
15,126
(1,942)
244,350
23,210
(28,148)
-
-
-
975,954
41,104
(10,218)
(45)
2,254
(7,734)
61,440
370,018
(577)
(1,888)
-
-
2,418,610
454,778
(60,507)
(5,288)
37,287
(12,823)
-
-
-
-
(44,669)
(44,669)
2,745
1,588
76,417
19,077
13,136
1,122,466
10,365
1,338
251,115
15,762
10,088
1,027,165
(47,949)
4,685
341,060
-
30,835
2,818,223
16,172
2,672
-
(1,542)
-
-
(164)
321,817
33,922
9,766
(625)
(2,078)
464
(1,614)
96,165
15,400
-
(5,916)
-
-
-
585,049
79,797
13,237
(8,797)
(711)
1,242
(6,770)
612
-
-
-
-
-
-
1,019,815
131,791
23,003
(16,880)
(2,789)
1,706
(8,548)
-
369
17,507
2,786
2,566
367,004
1,500
706
107,855
(4,286)
13,289
672,050
-
-
612
-
16,930
1,165,028
2005
Cost
At 1 January
Additions
Disposals
Write-off
Subsidiaries acquired
Subsidiaries disposed
Reclassification
- Stocks
- To other fixed assets
categories
Exchange differences
At 31 December
Accumulated depreciation
& impairment losses
At 1 January
Depreciation charge
Impairment losses
Disposals
Write-off
Subsidiaries acquired
Subsidiaries disposed
Reclassification
- To other fixed assets
categories
Exchange differences
At 31 December
Net book value
58,910
755,462
143,260
355,115
340,448
1,653,195
In 2005, the Group recognised impairment losses of $23,003,000 of which $21,703,000 relates to write-down of two
hotels in Myanmar in the Property division and $1,300,000 relates to write-down of a leasehold building in the
Infrastructure division. The carrying amount of these assets were reduced to their recoverable amounts, which were
based on the estimated future cashflow from operations discounted to present value at 7.5% for the two hotels in
Myanmar and on the fair market value for the leasehold building.
Certain plant, machinery and equipment of subsidiaries are mortgaged to banks for loan facilities (Note 20).
Notes to the financial statements
Keppel Corporation Limited
Report to Shareholders 2006
177
Notes to the financial statements
5.
Fixed assets (continued)
Company
2006
Cost
At 1 January
Additions
Disposals
At 31 December
Accumulated depreciation
At 1 January
Depreciation charge
Disposals
At 31 December
Net book value
2005
Cost
At 1 January
Additions
Disposals
At 31 December
Accumulated depreciation
At 1 January
Depreciation charge
Disposals
At 31 December
Net book value
6.
Investment properties
Freehold investment properties
Leasehold investment properties
Freehold
land &
buildings
$’000
Leasehold
land &
buildings
$’000
Plant,
machinery
& equipment
$’000
6,410
135
-
6,545
1,591
40
-
1,631
4,914
6,410
-
-
6,410
1,403
188
-
1,591
4,819
484
-
-
484
52
10
-
62
422
484
-
-
484
48
4
-
52
432
Total
$’000
12,783
352
(58)
13,077
7,163
292
(58)
7,397
5,889
217
(58)
6,048
5,520
242
(58)
5,704
344
5,680
5,667
415
(193)
5,889
4,220
1,493
(193)
5,520
12,561
415
(193)
12,783
5,671
1,685
(193)
7,163
369
5,620
Group
2006
$’000
2005
$’000
458,232
1,790,984
468,366
1,557,135
2,249,216
2,025,501
178 Notes to the financial statements
Keppel Corporation Limited
Report to Shareholders 2006
The Group’s investment properties (including integral plant and machinery) are stated at directors’ valuations based on the
following valuations (open market value basis) by independent firms of professional valuers as at 31 December 2006:
- Colliers International Consultancy & Valuation (Singapore) Pte Ltd and DTZ Debenham Tie Leung (SEA) Pte Ltd for
properties in Singapore;
- Associated Properties Consultants for properties in Vietnam;
-
PT. Wilson Properti Advisindo for a property in Indonesia; and
- Agency for Real Estate Affairs for a property in Thailand.
Based on the valuations, the Group's share of net deficit below book values amounted to $4,981,000 (2005: net surplus
of $7,268,000) and has been taken direct to the asset revaluation reserve account.
Certain investment properties of subsidiaries are mortgaged to banks for loan facilities (Note 20).
7.
Development properties
Land cost
Development cost incurred to-date
8.
Subsidiaries
Quoted shares, at cost
Market value: $3,330,740,000 (2005: $1,977,910,000)
Unquoted shares, at cost
Provision for impairment
Advances from subsidiaries
Movements in the provision for impairment of subsidiaries are as follows:
At 1 January
Write-back to profit & loss account
At 31 December
Group
2006
$’000
2005
$’000
125,778
71,302
141,807
86,215
197,080
228,022
Company
2006
$’000
2005
$’000
1,329,571
1,779,925
3,109,496
(25,000)
3,084,496
(3,600)
1,332,210
2,023,101
3,355,311
(25,200)
3,330,111
(480,600)
3,080,896
2,849,511
25,200
(200)
25,200
-
25,000
25,200
Advances from subsidiaries are unsecured, interest free and are not repayable within the next 12 months.
Information relating to significant subsidiaries consolidated in the financial statements is given in Note 39.
Notes to the financial statements
Keppel Corporation Limited
Report to Shareholders 2006
179
Notes to the financial statements
9.
Associated companies
Group
Company
Quoted shares, at cost
Market value: $1,600,697,000 (2005: $1,575,877,000)
Unquoted shares, at cost
Provision for impairment
Share of reserves
Advances to associated companies
2006
$’000
2005
$’000
572,185
653,733
1,225,918
(28,258)
1,197,660
459,840
1,657,500
753,216
491,440
683,550
1,174,990
(17,090)
1,157,900
328,266
1,486,166
688,034
2,410,716
2,174,200
Movements in the provision for impairment of associated companies are as follows:
At 1 January
Exchange differences
Charge to profit & loss account
Company acquired
Amount written off/disposed
At 31 December
17,090
(987)
12,590
-
(435)
29,691
481
2,019
950
(16,051)
28,258
17,090
2006
$’000
-
3,074
3,074
-
3,074
-
3,074
-
3,074
-
-
-
-
-
-
2005
$’000
-
3,074
3,074
-
3,074
-
3,074
-
3,074
-
-
-
-
-
-
Advances to associated companies are unsecured and are not repayable within the next 12 months. Interest is charged
at rates ranging from 4.05% to 4.52% (2005: 1.75% to 3.06%) per annum on interest-bearing advances.
The share of attributable profit of associated companies for the financial year is as follows:
Share of results
Share of taxation
Share of attributable profit
The summarised financial information of associated companies is as follows:
Total assets
Total liabilities
Revenue
Attributable profit before exceptional items
Group
2006
$’000
2005
$’000
314,662
(69,000)
321,509
(43,259)
245,662
278,250
Group
2006
$’000
2005
$’000
11,302,963
6,896,781
11,982,129
780,985
13,322,057
8,750,017
10,412,292
833,043
180 Notes to the financial statements
Keppel Corporation Limited
Report to Shareholders 2006
Investments in MobileOne Limited (“M1”) and Asia Airfreight Terminal Company Limited (“AAT”) are equity accounted
for in the consolidated financial statements notwithstanding that the Group holds less than 20% of the voting power in
these companies on grounds that the Group exercises significant influence by virtue of its contractual right to appoint two
directors to the board of M1 and one director to the board of AAT.
Information relating to significant associated companies whose results are included in the financial statements is given in
Note 39.
10.
Investments
Available-for-sale investments:
Quoted equity shares
Unquoted equity shares
Unquoted property fund
11.
Long term receivables
Finance lease receivables
Staff loans
Long term trade receivables
Loan to a subsidiary
Other loans
Less: Amounts due within one year
and included in debtors (Note 15)
Provision for doubtful debts
Group
2006
$’000
2005
$’000
223,518
25,857
26,517
36,915
28,676
18,750
275,892
84,341
Group
Company
2006
$’000
96,920
3,648
60,035
-
9,561
73,244
(3,251)
69,993
(6,193)
63,800
2005
$’000
2006
$’000
2005
$’000
-
-
-
2,883
142,272
-
13,558
158,713
(3,478)
155,235
(2,466)
152,769
1,276
-
300,000
-
301,276
(299)
300,977
-
300,977
921
-
300,000
-
300,921
(322)
300,599
-
300,599
Total
160,720
152,769
300,977
300,599
Finance lease receivables arose from a 20-year contract to build and operate a water treatment plant and a 25-year
contract to build and operate a waste-to-energy plant entered into by a subsidiary of the Company.
In accordance with INT FRS 104 “Determining whether an Arrangement contains a Lease”, these arrangements contain
a lease and are classified as finance leases. As at 31 December 2006, the facilities have not commenced commercial
operations. The amount represents cost incurred in the design and construction of the 2 plants.
Notes to the financial statements
Keppel Corporation Limited
Report to Shareholders 2006
181
Notes to the financial statements
11.
Long term receivables (continued)
Other long term receivables are estimated to be receivable as follows:
Years after year-end:
After one but within two years
After two but within five years
After five years
Provision for doubtful debts
Movements in the provision for doubtful debts are as follows:
At 1 January
Exchange differences
Charge to profit & loss account
Amount written off
At 31 December
Group
Company
2006
$’000
2005
$’000
2006
$’000
2005
$’000
60,617
5,431
3,945
69,993
(6,193)
150,203
966
4,066
155,235
(2,466)
290
300,525
162
300,977
-
216
300,333
50
300,599
-
63,800
152,769
300,977
300,599
2,466
(104)
3,831
-
6,193
2,635
100
-
(269)
2,466
-
-
-
-
-
-
-
-
-
-
Included in staff loans are interest free advances to certain Directors under an approved loan scheme amounting to
$341,000 (2005: $248,000) and interest free car loans granted to directors of related corporations amounting to $580,000
(2005: $507,000).
Included in long term trade receivables are receivables of $59,583,000 (2005: $139,740,000) arising from sale of
completed properties under a deferred payment scheme. The receivables are assigned to banks for loan facilities
(Note 20).
Loan to a subsidiary is unsecured and bear interest ranging from 3.5315% to 3.8902% (2005: 2.2167% to 3.5315%) per
annum.
The fair value of other long term receivables for the Group is $66,068,000 (2005: $152,334,000). The carrying amount of
other long term receivables for the Company approximates its fair value. The fair values for the Group and Company are
based on the discounted cashflow method using a discount rate which the Directors expect would be available as at the
balance sheet date.
182
Notes to the financial statements
Keppel Corporation Limited
Report to Shareholders 2006
12.
Intangibles
Group
2006
At 1 January
Exchange differences
Additions
Amortisation
Impairment charges
Subsidiaries acquired
Reclassification
At 31 December
Cost
Accumulated amortisation
2005
At 1 January
Exchange differences
Additions
Amortisation
Adjustment to cost
Reclassification
At 31 December
Cost
Accumulated amortisation
Goodwill
$’000
Development
expenditure
$’000
Total
$’000
145,248
(5,385)
2,898
(1,565)
(2,677)
1,011
(4,472)
7,017
(165)
221
(1,565)
-
1,011
(4,472)
2,047
135,058
5,939
(3,892)
138,950
(3,892)
2,047
135,058
1,297
-
3,772
(538)
-
2,486
125,198
10,808
3,772
(538)
3,522
2,486
7,017
145,248
9,996
(2,979)
148,227
(2,979)
7,017
145,248
138,231
(5,220)
2,677
-
(2,677)
-
-
133,011
133,011
-
133,011
123,901
10,808
-
-
3,522
-
138,231
138,231
-
138,231
Goodwill is allocated to cash generating units identified according to business segment.
Goodwill allocated to Offshore & Marine division amounted to $75,833,000 (2005: $81,053,000). The recoverable amount
is determined based on value-in-use calculation using cash flow projections derived from the most recent financial
budgets approved by management for the next five years using discount rates ranging from 6.89% to 20% (2005: 6.01%
to 20%). The key assumptions are those regarding the discount rate and expected changes to selling prices and direct
costs. Management estimates discount rate using pre-tax rate that reflects current market assessment of the time value
of money and risks specific to the unit. Changes in selling prices and direct costs are based on past practices and
expectations of future changes in the market.
Goodwill allocated to Infrastructure division amounted to $57,178,000 (2005: $57,178,000). The recoverable amount is
determined based on the fair value less cost to sell using the current bid prices.
Notes to the financial statements
Keppel Corporation Limited
Report to Shareholders 2006
183
Notes to the financial statements
13.
Stocks and work-in-progress
Work-in-progress in excess of related billings
Stocks
Properties held for sale
Group
2006
$’000
2005
$’000
(a)
(c)
(d)
315,428
157,260
2,304,529
257,076
103,040
2,402,212
2,777,217
2,762,328
Billings on work-in-progress in excess of related costs
(b)
(2,325,319)
(1,487,246)
(a) Work-in-progress in excess of related billings
Costs incurred and attributable profits
Provision for loss on work-in-progress
Less: Progress billings
Movements in the provision for loss on work-in-progress are as follows:
At 1 January
Exchange differences
Charge to profit & loss account
Amount utilised
Reclassification
At 31 December
(b)
(c)
Billings on work-in-progress in excess of related costs
Costs incurred and attributable profits
Less: Progress billings
Stocks
Consumable materials and supplies
Finished products for sale
(d)
Properties held for sale
Properties under development
Land cost
Development cost incurred to date
Related overhead expenditure
Progress billing received and recognised profit
Completed properties held for sale
Provision for properties held for sale
1,577,061
(9,609)
1,567,452
(1,252,024)
1,583,891
(19,839)
1,564,052
(1,306,976)
315,428
257,076
19,839
(135)
6,033
(16,128)
-
3,985
18
14,752
(287)
1,371
9,609
19,839
5,359,945
(7,685,264)
2,021,689
(3,508,935)
(2,325,319)
(1,487,246)
108,699
48,561
59,710
43,330
157,260
103,040
2,377,485
845,120
606,849
(1,203,537)
2,625,917
7,560
2,633,477
(328,948)
2,499,725
594,432
597,096
(817,008)
2,874,245
151,565
3,025,810
(623,598)
2,304,529
2,402,212
184 Notes to the financial statements
Keppel Corporation Limited
Report to Shareholders 2006
Movements in the provision for properties held for sale are as follows:
At 1 January
Exchange differences
Write-back to profit & loss account
Amount utilised
Subsidiaries acquired
Reclassification
At 31 December
Group
2006
$’000
2005
$’000
623,598
(25)
(48,493)
(246,132)
-
-
679,658
-
(17,159)
(37,554)
442
(1,789)
328,948
623,598
Interest capitalised during the financial year amounted to $60,332,000 (2005: $78,282,000) at rates ranging from 2.75% to
16% (2005: 2.4375% to 16%) per annum.
Certain properties held for sale of subsidiaries are mortgaged to banks for loan facilities (Note 20).
14.
Amounts due from/to
Subsidiaries
Amounts due from
-
trade
- advances
Provision for doubtful debts
Amounts due to
-
trade
- advances
Company
2006
$’000
2005
$’000
7,543
406,411
413,954
(3,862)
9,267
958,521
967,788
(3,862)
410,092
963,926
37,478
157,240
8,760
47,660
194,718
56,420
Advances to and from subsidiaries are unsecured and are repayable on demand. The carrying amounts of these
advances are largely denominated in Singapore dollar. Interest is charged at rates ranging from 3.89% to 5.93%
(2005: 2.82% to 6.23%) per annum on interest-bearing advances.
Notes to the financial statements
Keppel Corporation Limited
Report to Shareholders 2006
185
Notes to the financial statements
14.
Amounts due from/to (continued)
Associated companies
Amounts due from
-
trade
- advances
Provision for doubtful debts
Amounts due to
trade
-
- advances
Movements in the provision for doubtful debts are as follows:
At 1 January
Charge/(write-back) to profit & loss account
At 31 December
Group
Company
2006
$’000
2005
$’000
2006
$’000
2005
$’000
89,780
219,282
309,062
(1,094)
38,359
242,621
280,980
(871)
307,968
280,109
11,651
81,969
7,297
192,886
93,620
200,183
871
223
9,825
(8,954)
1,094
871
87
-
87
-
87
11
-
11
-
-
-
99
-
99
-
99
8
-
8
-
-
-
Advances to and from associated companies are unsecured and are repayable on demand. The carrying amounts of
these advances are largely denominated in Singapore dollar. Interest is charged at rates ranging from 1% to 9.38%
(2005: 1% to 7.57%) per annum on interest-bearing advances.
15.
Debtors
Group
Company
2006
$’000
2005
$’000
Trade debtors
Provision for doubtful debts
Long term receivables due within one year (Note 11)
Sundry debtors
Prepaid project cost & prepayments
Derivative financial instruments (Note 35)
Tax recoverable
GST receivable
Interest receivable
Deposits paid
Recoverable accounts
Receivables not billed
Advances to subcontractors
Advances to corporations in which
the Group has investment interests
Advances to minority shareholders of subsidiaries
Provision for doubtful debts
2006
$’000
1,111,216
(25,531)
1,085,685
3,251
118,863
45,227
87,010
58,267
22,692
7,358
11,364
53,113
4,236
14,221
31,281
4,047
460,930
(30,356)
430,574
2005
$’000
888,381
(27,090)
861,291
3,478
68,627
87,864
69,712
41,594
23,983
8,606
9,688
32,294
10,524
30,681
46,086
3,532
436,669
(30,749)
405,920
-
-
-
299
407
111
80,709
-
-
-
487
-
-
-
-
-
82,013
-
82,013
Total
1,516,259
1,267,211
82,013
186 Notes to the financial statements
Keppel Corporation Limited
Report to Shareholders 2006
-
-
-
322
867
125
1,254
-
-
-
482
-
-
-
-
-
3,050
(531)
2,519
2,519
Movements in the provision for debtors are as follows:
At 1 January
Exchange differences
Charge to profit & loss account
Amount written off
Subsidiaries acquired
Subsidiaries disposed
Reclassification
At 31 December
Group
Company
2006
$’000
57,839
288
2,401
(3,468)
-
-
(1,173)
2005
$’000
48,106
1,077
19,975
(4,911)
462
(17,176)
10,306
55,887
57,839
2006
$’000
2005
$’000
531
-
-
(531)
-
-
-
-
347
-
154
(30)
-
-
60
531
The carrying amounts of total debtors are denominated in the following currencies:
Singapore dollar
United States dollar
Others
16.
Short term investments
Available-for-sale investments:
Quoted equity shares
Quoted unit trust
Total available-for-sale investments
Investments held for trading:
Quoted equity shares
Quoted unit trust
Total investments held for trading
Total short term investments
525,099
693,996
297,164
554,000
521,866
191,345
2,890
70,734
8,389
1,516,259
1,267,211
82,013
1,179
541
799
2,519
Group
2006
$’000
2005
$’000
297,235
39,627
336,862
320,941
24,803
345,744
76,573
13,279
89,852
59,894
-
59,894
426,714
405,638
Notes to the financial statements
Keppel Corporation Limited
Report to Shareholders 2006
187
Notes to the financial statements
17.
Bank balances, deposits & cash
Bank balances and cash
Fixed deposits with banks
Amounts held under escrow account
Group
Company
2006
$’000
2005
$’000
523,257
928,610
452,836
909,646
2006
$’000
520
-
-
-
2005
$’000
570
-
-
-
for payment of construction cost and liabilities
1,407
18,579
Bank balances of property subsidiaries
held under Project Account Rules 1985
165,284
29,790
Bank balances, deposits & cash are denominated in the following currencies:
1,618,558
1,410,851
520
570
Singapore dollar
United States dollar
Euro
Renminbi
Others
414,139
485,396
268,196
324,335
126,492
115,770
789,996
51,597
340,817
112,671
1,618,558
1,410,851
271
15
-
103
131
520
402
22
-
109
37
570
Fixed deposits with banks mature on varying periods mainly between 1 day to 3 months (2005: 1 month to 3 months)
from the financial year end. The interest rates of these deposits as at 31 December 2006 range from 0.25% to 9.07%
(2005: 0.61% to 12.75%) per annum.
18.
Creditors
Trade creditors
Customers’ advances and deposits
Derivative financial instruments (Note 35)
Sundry creditors
Accrued operating expenses
Advances from minority shareholders
Interest payables
Other payables
Group
Company
2006
$’000
759,072
61,828
4,622
386,024
826,064
266,408
30,015
46,624
2005
$’000
646,102
32,434
19,385
344,605
438,769
302,904
36,572
38,312
2006
$’000
68
-
12,633
7,782
37,187
-
1,215
-
2005
$’000
70
17
45,234
7,373
23,749
-
3,861
-
2,380,657
1,859,083
58,885
80,304
Advances from minority shareholders of certain subsidiaries are unsecured and are repayable on demand. Interest is
charged at rates ranging from 4.06% to 5% (2005: 4.2% to 5%) per annum on interest-bearing loans.
The carrying amounts of total creditors are denominated in the following currencies:
Singapore dollar
United States dollar
Others
1,602,243
371,836
406,578
1,053,802
468,973
336,308
46,185
1,606
11,094
37,872
32,431
10,001
2,380,657
1,859,083
58,885
80,304
188 Notes to the financial statements
Keppel Corporation Limited
Report to Shareholders 2006
19.
Provisions
Group
2006
At 1 January
Exchange differences
Charge to profit & loss account
Amount utilised
Reclassification
At 31 December
2005
At 1 January
Exchange differences
Charge/(write-back) to profit & loss account
Amount utilised
Reclassification
At 31 December
20.
Term loans
2006
Keppel Corporation Medium Term Notes
Keppel Land Medium Term Notes
Keppel Land 2.5% Convertible Bonds 2013
Keppel Structured Notes Commodity-linked Notes
K-Reit Asia Term Loans
Bank loans
- secured
- unsecured
Other loans
- unsecured
2005
(a)
Warranties
$’000
Claims
$’000
Total
$’000
17,372
318
11,840
(235)
434
29,729
15,058
(552)
3,175
(477)
168
17,372
232
(3)
3
-
-
232
5,473
8
(5,706)
-
457
17,604
315
11,843
(235)
434
29,961
20,531
(544)
(2,531)
(477)
625
232
17,604
Group
Company
Due within
one year
$’000
Due after Due within
one year
one year
$’000
$’000
Due after
one year
$’000
(a)
(b)
(c)
(d)
(e)
(f)
(g)
-
221,000
-
-
-
200,686
254,714
300,000
369,750
257,639
41,920
190,085
711,348
374,567
(h)
5,235
26,843
681,635
2,272,152
-
-
-
-
-
-
-
-
-
300,000
-
-
-
-
-
-
-
300,000
1,321,982
2,392,042
781,848
300,000
The $300,000,000 Floating Rate Notes 2010 were issued in 2005 under the US$600,000,000 Multi-Currency
Medium Term Note Programme by the Company. The notes are unsecured and were issued in tranches which will
mature five years from the date of issue. Interest is based on money market rates ranging from 3.5315% to
3.8902% (2005: 2.2167% to 3.5315%) per annum, repriced within 2 months.
Notes to the financial statements
Keppel Corporation Limited
Report to Shareholders 2006
189
Notes to the financial statements
20.
Term loans (continued)
(b)
(c)
At the end of the financial year, notes issued under the US$800,000,000 Multi-Currency Medium Term Note
Programme by Keppel Land Limited, a subsidiary of the Company, amounted to $590,750,000. The notes are
unsecured and are issued in series or tranches, and comprise (i) fixed rate notes due 2006 to 2008 of $251,000,000
and (ii) variable rate notes due 2008, 2009, 2010, 2013 and 2014 of $339,750,000. Interest payable is based on
money market rates ranging from 2.23% to 4.39% (2005: 1.26% to 4.39%) per annum, repriced within 1 to 3
months.
The $300,000,000 2.5%, 7 year convertible bonds were issued during the financial year by Keppel Land Limited.
Interest is payable semi-annually. The bonds, maturing on 23 June 2013, are convertible at the option of
bondholders to Keppel Land ordinary shares at a conversion price of $6.55 per share. Any bondholder may request
to redeem all or some of its bonds on 23 June 2011 or in the event that its shares cease to be listed or admitted to
trading on the Singapore Stock Exchange.
The convertible bonds are recognised on the balance sheet as follows:
Face value of convertible bonds issued
Equity conversion component, net of deferred tax liability
Deferred tax liability
Liability component on initial recognition
Interest expense
Interest paid
Prepaid issue expenses
Liability component at 31 December 2006
$’000
300,000
(31,917)
(7,979)
260,104
6,899
(3,914)
(5,450)
257,639
Interest expense on the convertible bonds is calculated based on the effective interest method by applying the
interest rate of 4.78% per annum for an equivalent non-convertible bond to the liability component of the
convertible bonds.
(d)
The S$23,960,000 (“Tranche A”) and US$11,565,000 (“Tranche B”) commodity-linked notes were issued during the
financial year by Keppel Structured Notes Pte Ltd (“KSN”), a subsidiary of the Company. The commodity-linked
notes, maturing on 28 November 2011, may be redeemed at par at the option of KSN, in whole, on notice, in the
event of certain changes in the tax laws of Singapore, subject to certain other conditions. The notes are unsecured
and a commodity-linked fixed interest is payable annually at a rate ranging from 6% to 13% per annum for the
period from 27 November 2006 to 28 November 2011. The notes are unconditionally and irrevocably guaranteed by
the Company. KSN has entered into a 5-year commodity-linked interest rate swap transaction relating to Tranche A
notes and a 5-year commodity-linked cross currency and interest rate swap transaction relating to the Tranche B
notes to hedge the foreign exchange and interest rate risks of the notes.
(e) During the financial year, K-Reit Asia, a subsidiary of the Company, secured two fixed rate mortgage loans totalling
$190,085,000 from a special purpose company, Blossom Assets Ltd. The loans consist of a Tranche A Mortgage
Loan amounting to $160,197,000 and a Tranche B Mortgage Loan amounting to $29,888,000, which are funded by
the proceeds of commercial mortgaged-backed securities notes issued by Blossom Assets. The loans are
repayable within 5 years commencing 17 May 2006 and are secured on the investment properties and certain
assets of K-Reit Asia. Interest is payable quarterly ranging from 3.905% to 4.055% per annum.
(f)
The secured bank loans consist of:
-
A $130,500,000 bank loan drawn down in 2000 by a subsidiary. The loan is repayable on 31 December 2007
and is secured by way of a legal mortgage of the units of completed properties held for sale and the
assignment of trade receivables of the subsidiary. Interest is based on money market rates ranging from
3.8801% to 4.17669% (2005: 2.3867%) per annum, repriced within 1 month.
190 Notes to the financial statements
Keppel Corporation Limited
Report to Shareholders 2006
-
-
-
A term loan of $323,100,000 and an equity bridge loan of $172,605,000 drawn down by a subsidiary. The
term loan is repayable over 27 semi-annual instalments commencing December 2007 and is secured by way
of assignment of all rights under the project contracts of the subsidiary. The equity bridge loan is repayable in
a single instalment before June 2008 and is secured by way of a first fixed legal charge over the power plant
of the subsidiary. Interest is based on money market rates ranging from 3.722% to 4.958% (2005: 2.33% to
3.5%) per annum, repriced within 1 month.
A term loan of $158,600,000 drawn down by a subsidiary. The term loan is repayable in 2009 and is secured
on the investment property of the subsidiary. Interest is based on money market rates ranging from 4.5617%
to 4.8067% per annum, repriced within 1 to 3 months.
Other secured bank loans totalling $127,229,000 are repayable between one and five years and are secured
on certain fixed and other assets of subsidiaries. Interest is based on money market rates ranging from
3.1027% to 12.69% (2005: 2.37% to 16.02%) per annum, repriced within 3 to 4 months.
(g)
(h)
The unsecured bank loans are repayable between one and five years. Interest is based on money market rates
ranging from 2% to 10% (2005: 1.6984% to 7.25%) per annum, repriced within 1 to 5 months.
The other unsecured loans include term loan facilities and hire purchase contracts entered into with various finance
and leasing companies for purchase of machinery and equipment. Interest range from 1.75% to 7.9% (2005:
2.63% to 10%) per annum, repriced within 1 month.
The net book value of property and assets mortgaged to the banks amounted to $1,908,005,000 (2005: $1,070,904,000).
These are securities given to the banks for loans and overdraft facilities.
The fair values of term loans for the Group and Company are $2,978,195,000 (2005: $3,710,984,000) and $300,000,000
(2005: $1,083,508,000) respectively. These fair values are computed on the discounted cashflow method using a
discount rate based upon the borrowing rate which the Directors expect would be available as at the balance sheet date.
The carrying amounts of total loans are denominated in the following currencies:
Singapore dollar
United States dollar
Others
Loans due after one year are estimated to be repayable as follows:
Years after year-end:
After one but within two years
After two but within five years
After five years
Group
Company
2006
$’000
2005
$’000
2,757,947
110,540
85,300
2,706,830
886,432
120,762
2006
$’000
300,000
-
-
2005
$’000
580,000
465,944
35,904
2,953,787
3,714,024
300,000
1,081,848
Group
Company
2006
$’000
2005
$’000
2006
$’000
2005
$’000
297,835
1,434,803
539,514
444,292
1,657,327
290,423
-
300,000
-
-
300,000
-
2,272,152
2,392,042
300,000
300,000
Notes to the financial statements
Keppel Corporation Limited
Report to Shareholders 2006
191
Notes to the financial statements
21.
Bank overdrafts
Secured
Unsecured
Group
2006
$’000
3,339
12
3,351
2005
$’000
8,485
8,332
16,817
Interest on the bank overdrafts is payable at the banks' prevailing prime rate ranging from 1.63% to 9.2% (2005: 1.6% to
8.45%) per annum. The secured bank overdrafts are secured by short term investments portfolio of a subsidiary.
22.
Deferred taxation
Deferred tax liabilities:
Accelerated tax depreciation
Offshore income & others
Deferred tax assets:
Other provisions
Unutilised tax benefits
Group
Company
2006
$’000
2005
$’000
74,226
95,322
169,548
(5,898)
(5,709)
(11,607)
82,732
103,858
186,590
(4,554)
(7,960)
(12,514)
2006
$’000
-
14,385
14,385
-
-
-
2005
$’000
-
20,139
20,139
-
-
-
Net deferred tax liabilities
157,941
174,076
14,385
20,139
Deferred tax assets are recognised for unutilised tax benefits carried forward to the extent that realisation of the related
tax benefits through future taxable profits is probable.
The Group has unutilised tax losses and capital allowances of $459,026,000 (2005: $429,615,000) for which no deferred
tax benefit is recognised in the balance sheet. These tax losses and capital allowances can be carried forward and used
to offset against future taxable income subject to meeting certain statutory requirements by those companies with
unrecognised tax losses and capital allowances in their respective countries of incorporation. The unutilised tax losses
and capital allowances do not have expiry dates.
23.
Revenue
Revenue from construction contracts
Sale of property and goods
Rental income from investment properties
Revenue from services rendered
Dividend income from quoted shares
Others
Group
2006
$’000
2005
$’000
5,764,526
1,064,761
123,701
619,178
8,950
19,824
4,178,618
811,010
98,388
565,060
12,383
22,910
7,600,940
5,688,369
192
Notes to the financial statements
Keppel Corporation Limited
Report to Shareholders 2006
24.
Staff costs
Wages and salaries
Employer’s contribution to Central Provident Fund
Share options granted to directors and employees
Other staff benefits
25.
Operating profit
Operating profit is arrived at after charging/(crediting) the following:
Auditors' remuneration
- auditors of the Company
- other auditors of subsidiaries
Fees to Directors of the Company
Contracts for services rendered by Directors
or with a company in which a Director has
a substantial financial interest
Key management’s emoluments
- short-term employee benefits
- post-employment benefits
- share options granted
Depreciation of fixed assets
Write-off of fixed assets
Amortisation of intangibles
Profit on sale of fixed assets
Profit on sale of investments
Fair value (gain)/loss on
-
-
investments held for trading
forward foreign exchange contracts
Provision/(write-back) for
- warranties
- claims
Provision/(write-back) for
- work-in-progress
- properties held for sale
Provision/(write-back) for doubtful debts
trade debts
-
receivables
-
- other debts
Group
2006
$’000
781,254
39,451
14,949
95,686
2005
$’000
650,406
33,458
11,203
107,845
931,340
802,912
Group
2006
$’000
881
2,954
610
2005
$’000
430
2,663
564
476
1,184
19,634
50
3,310
125,873
892
1,565
(3,610)
(88,132)
(15,603)
17,380
11,840
3
14,585
59
2,586
131,791
2,499
538
(10,278)
(15,540)
1,607
12,152
3,175
(5,706)
6,033
(48,493)
14,752
(17,159)
1,711
1,068
(1,318)
6,436
10,381
3,158
Notes to the financial statements
Keppel Corporation Limited
Report to Shareholders 2006
193
Notes to the financial statements
25.
Operating profit (continued)
Bad debts written off/(recovered)
trade debts
-
-
receivables
- other debts
Stocks written off
Rental expense
- operating leases
Gain on differences in foreign exchange
Non-audit fees paid to
- auditors of the Company
- other auditors of subsidiaries
Group
2006
$’000
2,844
-
(54)
2,569
2005
$’000
(763)
1,090
(63)
1,393
46,811
(6,361)
38,483
(4,157)
294
511
77
325
The Audit Committee has undertaken a review of all non-audit services provided by the auditors and in the opinion of the
Audit Committee, these services would not affect the independence of the auditors.
26.
Investment income, interest income and interest expenses
Investment income from:
Shares - quoted in Singapore
Shares - quoted outside Singapore
Shares - unquoted
Group
2005
$’000
288
50
882
1,220
2006
$’000
-
72
3,705
3,777
Interest income from:
Bonds, debentures, deposits and associated companies
79,758
58,871
Interest expenses on:
Bonds, debentures, fixed term loans and overdrafts
Fair value (loss)/gain on interest rate caps and swaps
27.
Exceptional items
Gain on disposal of subsidiaries, associated companies and investments
Share of associated company’s gain on disposal of properties
Impairment of assets
Impairment of investments and provision for claims
Cost associated with restructuring of operations
Revaluation deficit of properties
Minority share of exceptional items
Net exceptional items
(60,160)
(2,310)
(39,401)
17,226
(62,470)
(22,175)
Group
2006
$’000
81,446
-
(66,956)
(5,788)
(1,398)
-
7,304
(7,386)
2005
$’000
51,681
30,191
(35,047)
(4,495)
(237)
(40,169)
1,924
(1,940)
(82)
(16)
194
Notes to the financial statements
Keppel Corporation Limited
Report to Shareholders 2006
28.
Taxation
Tax expense comprise:
Current tax
Share of taxation of associated companies
Adjustment for prior year's tax
Others
Deferred tax movement:
Movements in temporary differences
Deferred tax movement comprise:
Accelerated tax depreciation
Offshore income & others
Other provisions
Unutilised tax benefits
Group
2006
$’000
2005
$’000
193,209
69,000
6,318
4,084
116,217
43,259
423
(1,539)
(15,239)
(5,049)
257,372
153,311
(8,492)
(3,283)
(1,142)
(2,322)
(1,983)
(991)
(211)
(1,864)
(15,239)
(5,049)
The income tax expense on the results of the Group differ from the amount of income tax expense determined by
applying the Singapore standard rate of income tax to profit before tax and exceptional items due to the following:
Profit before tax and exceptional items
1,139,792
826,169
Tax calculated at tax rate of 20% (2005: 20%)
Income not subject to tax
Expenses not deductible for tax purposes
Utilisation of previously unrecognised tax benefits
Effect of different tax rates in other countries
Adjustment for prior year’s tax
29.
Earnings per ordinary share
Net profit attributable to shareholders
before exceptional items
Adjustment for dilutive potential ordinary shares
of subsidiaries and associated companies
Adjusted net profit
before exceptional items
Exceptional items
227,958
(69,596)
63,002
(9,610)
39,300
6,318
165,234
(106,730)
76,419
(12,160)
30,125
423
257,372
153,311
Group
2006
$’000
2005
$’000
Basic
Diluted
Basic
Diluted
750,832
750,832
563,685
563,685
-
(3,378)
-
(11,875)
750,832
(82)
747,454
(82)
563,685
(16)
551,810
(16)
Adjusted net profit after exceptional items
750,750
747,372
563,669
551,794
Notes to the financial statements
Keppel Corporation Limited
Report to Shareholders 2006
195
Notes to the financial statements
29.
Earnings per ordinary share (continued)
Weighted average number of ordinary shares
Adjustment for dilutive potential ordinary shares
Weighted average number of ordinary shares
used to compute earnings per share
Earnings per ordinary share
Before exceptional items
After exceptional items
Group
2006
Number of Shares
‘000
2005
Number of Shares
’000
Basic
Diluted
Basic
Diluted
786,639
-
786,639
5,122
781,756
-
781,756
6,335
786,639
791,761
781,756
788,091
95.4 cts
95.4 cts
94.4 cts
94.4 cts
72.1 cts
72.1 cts
70.0 cts
70.0 cts
30.
Dividends/Capital distribution
The Directors are pleased to recommend a final dividend of 16 cents per share less tax (2005: final dividend of 13 cents
per share less tax) in respect of the financial year ended 31 December 2006 for approval by shareholders at the next
Annual General Meeting to be convened.
Together with the interim dividend of 12 cents per share less tax (2005: 10 cents per share less tax), total dividend paid
and proposed in respect of the financial year ended 31 December 2006 will be 28 cents per share less tax (2005: 23 cents
per share less tax).
The Directors are also proposing a capital distribution of 28 cents per share (2005: 23 cents per share) without deduction
for tax out of the Company's share capital account. The capital distribution will be subject to the approval of shareholders
and made pursuant to relevant sections of the Companies Act (Chapter 50).
During the financial year, the following dividends and capital distribution were paid:
A final dividend of 13 cents per share less tax at 20% on the issued
and fully paid ordinary shares in respect of the previous financial year
A capital distribution of 23 cents per share on the issued and fully paid ordinary shares
An interim dividend of 12 cents per share less tax at 20% on the issued
and fully paid ordinary shares in respect of the current financial year
$’000
81,809
181,040
75,565
338,414
31.
Acquisition of subsidiaries
The following subsidiaries were acquired during the financial year:
Name of
subsidiary
Gross
interest
before
acquisition acquisition
Date of
Gross
interest
Interest
acquired acquisition
after Net assets
acquired
$’000
Consideration
$’000
D.L. Properties Ltd
1.11.2006
35%
30%
65%
17,866
17,866
Keppel Norway AS
(formerly Offshore &
Marine ASA)
1.1.2006
China Canton Investments Ltd
1.1.2006
50%
46%
50%
10%
100%
56%
1,143
2,063
21,072
3,820
2,063
23,749
Losses of the acquired subsidiaries from the date of acquisition to 31 December 2006 amounted to $7,408,000. If the
acquisitions had occurred on 1 January 2006, Group revenue and attributable profit before exceptional items would have
been $7,609,754,000 and $749,940,000 respectively.
Details of net assets acquired are disclosed in the consolidated cashflow statement.
196
Notes to the financial statements
Keppel Corporation Limited
Report to Shareholders 2006
32.
Commitments
(a) Capital commitments
Capital expenditure not provided for in the financial statements:
In respect of contracts placed:
-
-
-
for purchase and construction of development properties
for purchase of other fixed assets
for purchase/subscription of shares in other companies
Amounts approved by Directors in addition to contracts placed:
for purchase and construction of development properties
-
for purchase of other fixed assets
-
for purchase/subscription of shares in other companies
-
Less: Minority shareholders’ shares
Group
2006
$’000
2005
$’000
633,365
228,801
224,115
1,016,289
326,224
84,153
2,244,828
110,603
397,980
3,839,692
(1,168,585)
1,423,068
223,683
297,627
3,371,044
(1,161,316)
2,671,107
2,209,728
There was no future capital expenditure/commitment of the Company.
(b)
Lessee’s lease commitments
The future minimum lease payable in respect of significant non-cancellable operating leases as at the end of the
financial year are as follows:
Years after year-end:
Within one year
From two to five years
After five years
Group
Company
2006
$’000
2005
$’000
43,147
149,830
588,039
39,155
141,338
561,385
781,016
741,878
2006
$’000
1,455
2,061
-
3,516
2005
$’000
545
-
-
545
(c)
Lessor’s lease commitments
The future minimum lease receivable in respect of significant non-cancellable operating leases as at the end of the
financial year are as follows:
Years after year-end:
Within one year
From two to five years
After five years
Group
Company
2006
$’000
98,927
148,958
29,754
2005
$’000
75,242
96,485
6,011
277,639
177,738
2006
$’000
2005
$’000
-
-
-
-
-
-
-
-
Some of the operating leases are subject to revision of lease rentals at periodic intervals. For the purposes of the
above, the prevailing lease rentals are used.
Notes to the financial statements
Keppel Corporation Limited
Report to Shareholders 2006
197
Notes to the financial statements
33.
Contingent liabilities (unsecured)
Group
Company
2006
$’000
2005
$’000
2006
$’000
2005
$’000
Guarantees in respect of banks and other loans granted
to subsidiaries and associated companies
20,395
97,008
512,057
230,761
Performance guarantees issued for contracts awarded
to subsidiaries and associated companies
8,500
8,000
Bank guarantees
Others
43,908
40,313
22,927
3,600
Business taxes on profits from overseas property projects
-
20,400
-
-
-
-
-
-
-
-
95,730
169,321
512,057
230,761
The Directors do not expect material losses under these guarantees.
34.
Significant related party transactions
In addition to the related party information disclosed elsewhere in the financial statements, there were the following
significant related party transactions which were carried out in the normal course of business on terms agreed between
the parties during the financial year:
Sale of residential properties to directors and their associates
Group
2006
$’000
13,360
2005
$’000
-
35.
Financial risk management
The Group operates internationally and is exposed to a variety of financial risks, including the effect of changes in debt
and equity market prices, foreign currency exchange rates and interest rates. Financial risk management is carried out by
the Keppel Group Treasury Department in accordance with established policies and guidelines. These policies and
guidelines are established by the Group Central Finance Committee and are updated to take into account changes in the
operating environment. This committee is chaired by the Group Finance Director and comprises Chief Financial Officers
of the Group’s key operating companies and Head Office specialists.
Foreign exchange risk
The Group has receivables and payables denominated in foreign currencies viz US dollars, Australian, European and other
Asian currencies. The Group's foreign currency exposures arise mainly from the exchange rate movement of these
foreign currencies against the Singapore dollar, which is the Group's measurement currency. To hedge against the
volatility of future cashflows caused by changes in foreign currency rates, the Group utilises forward foreign currency
contracts and other foreign currency hedging instruments to hedge the Group’s exposure to specific currency risks
relating to investments, receivables, payables and other commitments. Group Treasury Department monitors the current
and projected foreign currency cashflow of the Group and aims to reduce the exposure of the net position in each
currency by borrowing in foreign currency and other currency contracts where appropriate.
As at the end of the financial year, the Group has outstanding forward foreign exchange contracts with notional amounts
totalling $4,059,696,000 (2005: $2,368,829,000). The net positive fair values of forward foreign exchange contracts for
the Group are $72,147,000 (2005: $17,661,000) comprising assets of $72,970,000 (2005: $35,924,000) and liabilities of
$823,000 (2005: $18,263,000). The net positive fair values of forward foreign exchange contracts for the Company are
198
Notes to the financial statements
Keppel Corporation Limited
Report to Shareholders 2006
$68,076,000 (2005: negative fair value of $43,434,000) comprising assets of $80,709,000 (2005: $1,254,000) and liabilities
of $12,633,000 (2005: $44,688,000). These amounts are recognised as derivative financial instruments in debtors (Note
15) and creditors (Note 18).
Interest rate risk
The Group is exposed to interest rate risk for changes in interest rates primarily for debt obligations, placements in the
money market and investments in bonds. The Group policy is to maintain a mix of fixed and variable rate debt
instruments with varying maturities. Where necessary, the Group uses derivative financial instruments to hedge interest
rate risks.
The Group purchases interest rate caps to hedge the interest rate risk exposure arising from its US$ and S$ variable rate
term loans (Note 20). As at the end of the financial year, the Group has the following outstanding interest rate cap
agreements.
Notional amount
2006
$1,064,853,000
2005
$1,204,673,000
US$250,000,000
Maturity
2007 - 2011
2006 - 2011
2010
Interest rate caps
1.8% - 3%
1.49% - 5%
4.06% - 4.13%
The positive fair values of interest rate caps for the Group are $1,389,000 (2005: $32,225,000). This amount is recognised
as derivative financial instruments in debtors (Note 15).
The Group enters into interest rate swap agreements to hedge the interest rate risk exposure arising from its S$ variable
rate term loans (Note 20). As at the end of the financial year, the Group has interest rate swap agreements with notional
amount totalling $731,679,000 (2005: $951,915,000) whereby it receives variable rates equal to SIBOR (2005: SIBOR) and
pays fixed rates of between 2.33% and 3.14% (2005: 2.33% and 3.37%) on the notional amount.
The net positive fair values of interest rate swaps for the Group are $8,852,000 (2005: $441,000) comprising assets of
$12,651,000 (2005: $1,563,000) and liabilities of $3,799,000 (2005: $1,122,000). The negative fair values of interest rate
swaps for the Company are nil (2005: $546,000). These amounts are recognised as derivative financial instruments in
debtors (Note 15) and creditors (Note 18).
Liquidity risk
Prudent liquidity risk management requires the Group to maintain sufficient cash and marketable securities, internally
generated cashflows, and the availability of funding resources through an adequate amount of committed credit facilities.
Group Treasury also maintains a mix of short-term money market borrowings and medium/long term loans to fund
working capital requirements and capital expenditures/investments. Due to the dynamic nature of business, the Group
maintains flexibility in funding by ensuring that ample working capital lines are available at any one time.
Credit risk
Credit risk refers to the risk that debtors will default on their obligation to repay the amount owing to the Group. A
substantial portion of the Group’s revenue is on credit term or stage of completion. These credit terms are normally
contractual. The Group adopts stringent procedures on extending credit terms to customers and the monitoring of credit
risk. The credit policy spells out clearly the guidelines on extending credit terms to customers, including monitoring the
process and using related industry’s practices as reference. This includes assessment and valuation of customers’ credit
reliability and periodic review of their financial status to determine the credit limits to be granted. Customers are also
assessed based on their historical payment records. Where necessary, customers may also be requested to provide
security or advance payment before services are rendered. The Group’s policy does not permit non-secured credit risk to
be significantly centralised in one customer or a group of customers.
Notes to the financial statements
Keppel Corporation Limited
Report to Shareholders 2006
199
Notes to the financial statements
36.
Segment analysis
2006
Business segment
Revenue
External sales
Inter-segment sales
Total
Results
Operating profit
Net investment income &
interest income
Share of results of
Offshore
& Marine
$’000
Property
$’000
5,755,336
-
5,755,336
1,154,639
11,776
1,166,415
Infra-
structure
$’000
569,868
86,656
656,524
Investments
$’000
Elimination
$’000
Total
$’000
121,097
45,065
166,162
-
(143,497)
(143,497)
7,600,940
-
7,600,940
538,815
235,755
(65,587)
77,378
17,704
804,065
72,229
(27,207)
2,319
(8,572)
(17,704)
21,065
associated companies
13,354
24,487
39,328
237,493
Profit before tax &
exceptional items
Exceptional items
Profit before taxation
Taxation
Profit for the year
Attributable to:
Shareholders of Company
Profit before exceptional items
Exceptional items
Minority interests
Other information
Segment assets
Investment in
624,398
2,617
627,015
(149,006)
478,009
233,035
17,521
250,556
(50,379)
200,177
447,817
2,617
450,434
27,575
478,009
96,107
8,261
104,368
95,809
200,177
(23,940)
(1)
(23,941)
(1,673)
(25,614)
(34,736)
872
(33,864)
8,250
(25,614)
306,299
(12,833)
293,466
(56,314)
237,152
241,644
(11,832)
229,812
7,340
237,152
5,053,249
6,344,514
1,509,512
3,528,759
(5,030,544) 11,405,490
associated companies
Total
74,191
5,127,440
1,171,167
7,515,681
108,932
1,618,444
1,056,426
4,585,185
2,410,716
(5,030,544) 13,816,206
-
Segment liabilities
Net tax provision &
deferred taxation
Total
Net assets
3,687,448
5,190,857
1,081,464
2,857,470
(5,030,544)
7,786,695
249,545
3,936,993
151,567
5,342,424
(411)
1,081,053
31,123
2,888,593
-
(5,030,544)
1,190,447
2,173,257
537,391
1,696,592
-
-
-
-
-
-
-
-
-
-
-
314,662
1,139,792
7,304
1,147,096
(257,372)
889,724
750,832
(82)
750,750
138,974
889,724
431,824
8,218,519
5,597,687
430,348
127,438
-
-
-
Capital expenditure
Depreciation & amortisation
165,827
65,049
32,779
15,471
227,233
46,469
4,509
449
Geographical segment
External sales
Segment assets
Capital expenditure
Far East &
other ASEAN
countries
$’000
862,040
2,526,478
48,294
Singapore
$’000
4,524,852
8,143,703
332,545
America
$’000
1,724,144
1,084,261
44,964
Other
countries
$’000
489,904
393,627
4,545
200
Notes to the financial statements
Keppel Corporation Limited
Report to Shareholders 2006
Elimination
$’000
Total
$’000
-
7,600,940
(742,579) 11,405,490
430,348
-
2005
Business segment
Revenue
External sales
Inter-segment sales
Total
Results
Operating profit
Net investment income &
interest income
Share of results of
Offshore
& Marine
$’000
4,111,658
79
4,111,737
Property
$’000
847,506
7,461
854,967
Infra-
structure
$’000
671,533
52,474
724,007
Investments
$’000
Elimination
$’000
Total
$’000
57,672
48,857
106,529
-
(108,871)
(108,871)
5,688,369
-
5,688,369
318,449
194,652
(52,703)
(95)
6,441
466,744
24,525
1,176
1,995
16,661
(6,441)
37,916
associated companies
7,636
26,095
33,618
254,160
Profit before tax &
exceptional items
Exceptional items
Profit before taxation
Taxation
Profit for the year
Attributable to:
Shareholders of Company
Profit before exceptional items
Exceptional items
Minority interests
Other information
Segment assets
Investment in
350,610
(3,138)
347,472
(74,729)
272,743
221,923
(38,981)
182,942
(40,347)
142,595
238,810
(3,138)
235,672
37,071
272,743
117,706
(39,539)
78,167
64,428
142,595
(17,090)
(5,289)
(22,379)
279
(22,100)
(23,776)
(5,203)
(28,979)
6,879
(22,100)
270,726
49,332
320,058
(38,514)
281,544
230,945
47,864
278,809
2,735
281,544
-
-
-
-
-
-
-
-
-
-
-
321,509
826,169
1,924
828,093
(153,311)
674,782
563,685
(16)
563,669
111,113
674,782
3,893,052
6,367,185
1,184,061
3,894,296
(4,923,381)
10,415,213
associated companies
Total
55,878
3,948,930
1,076,263
7,443,448
93,868
1,277,929
948,191
4,842,487
2,174,200
(4,923,381) 12,589,413
-
Segment liabilities
Net tax provision &
deferred taxation
Total
Net assets
3,000,233
5,263,613
682,409
3,272,083
(4,923,381)
7,294,957
191,767
3,192,000
131,365
5,394,978
6,628
689,037
30,054
3,302,137
-
(4,923,381)
359,814
7,654,771
756,930
2,048,470
588,892
1,540,350
Capital expenditure
Depreciation & amortisation
149,037
58,419
7,506
20,285
298,079
50,695
1,556
2,930
-
-
-
4,934,642
456,178
132,329
Geographical segment
External sales
Segment assets
Capital expenditure
Far East &
other ASEAN
countries
$’000
731,891
2,569,475
23,686
Singapore
$’000
3,048,282
7,345,032
380,833
America
$’000
1,543,129
1,599,257
43,134
Other
countries
$’000
Elimination
$’000
Total
$’000
365,067
155,243
8,525
-
(1,253,794)
-
5,688,369
10,415,213
456,178
Notes to the financial statements
Keppel Corporation Limited
Report to Shareholders 2006
201
Notes to the financial statements
36.
Segment analysis (continued)
Notes :
(a)
Business segment
The Group’s businesses are grouped into four divisions: Offshore & Marine, Property, Infrastructure and Invest-
ments. The Investments division consists mainly of the Group's investments in SPC, k1 Ventures Ltd and
MobileOne Ltd. These four divisions are the basis on which the Group reports its primary segment information.
Keppel T&T’s Logistics business has been reclassified from Investments division to Infrastructure division. Com-
parative figures have been adjusted to conform to the changes in presentation. Pricing of inter-segment goods and
services is at fair market value. Segment assets and liabilities are those used in the operation of each division.
(b) Geographical segment
The Group operates in 33 countries. Secondary segment information is provided by geographical segment in
accordance to the above table.
37.
Subsequent event
On 30 January 2007, the Directors announced a proposed sub-division (the “Sub-Division”) of each ordinary share
(“Share”) in the capital of the Company into 2 Shares.
The Sub-Division is subject to:
(a)
the approval of the shareholders by way of a Special Resolution at an extraordinary general meeting (“EGM”) to be
convened; and
(b)
the approval from the Singapore Exchange Securities Trading Limited ("SGX-ST").
The entitlements of shareholders under the proposed final dividend and capital distribution (if approved) will be deter-
mined before the Sub-Division takes effect.
38.
New accounting standards and recommended accounting practice
Certain new accounting standards and FRS interpretations have been published that are mandatory for accounting periods
beginning on or after 1 January 2007. The Group’s assessment of those standards and interpretations that are relevant to
the Group is set out below:
(a)
FRS 40 Investment Property
The Group will adopt FRS 40 on 1 January 2007, which is the effective date of the Standard. Currently, investment
properties are accounted for in accordance with the accounting policy as set out in Note 2(d). Under FRS 40,
changes in fair values of investment properties are required to be included in the profit and loss account. On
transition to FRS 40 on 1 January 2007, the asset revaluation reserve as at 31 December 2006 will be adjusted
against the revenue reserves as at 1 January 2007.
(b)
FRS 107 Financial Instruments: Disclosures, and
a complementary Amendment to FRS 1 Presentation of Financial Statements – Capital Disclosures
The Group has adopted FRS 107 on 1 January 2007, which is the effective date of the Standard.
FRS 107 introduces new disclosures to improve the information about financial instruments. It requires the disclo-
sure of qualitative and quantitative information about exposure to risks arising from financial instruments, including
minimum disclosures about credit risk, liquidity risk and market risk (including sensitivity analysis to market risk). It
replaces the disclosure requirements in FRS 32 Financial Instruments: Disclosure and Presentation.
The amendment to FRS 1 introduces disclosures about the level of an entity’s capital and how it manages capital.
The Group has assessed the impact of FRS 107 and the amendment to FRS 1 and concluded that the main addi-
tional disclosures will be the sensitivity analysis to market risk and the capital disclosures required by the amend-
ment of FRS 1.
202
Notes to the financial statements
Keppel Corporation Limited
Report to Shareholders 2006
(c)
RAP 11 Pre-Completion Contracts for the Sale of Development Property
RAP 11 was issued by the Institute of Certified Public Accountants of Singapore in October 2005. This Statement
mentions that a property developer’s sales and purchase agreement is not a construction contract as defined in FRS
11 (Construction Contract) and the percentage of completion (“POC”) method of recognising revenue, which is
allowed under FRS 11 for construction contract, may not be applicable for property developers.
The relevant standard for revenue recognition by property developers is FRS 18 (Revenue), which addresses
revenue recognition generally for all types of entities. However, there is no clear conclusion in FRS 18 whether the
POC method or the completion of construction (“COC”) method is more appropriate for property developers. The
issue is being addressed by the International Accounting Standards Board.
The Group uses the POC method for recognising revenue from partly completed residential projects which are held
for sale. Had the COC method been adopted, the impact on the financial statements of the Group will be as
follows:
Decrease in opening revenue reserve
Decrease in revenue recognised for the year
(Decrease)/increase in profit for the year
Decrease in carrying value of property held for sale
Balance as at 1 January 2006
Balance as at 31 December 2006
(Decrease)/increase in minority interests
Balance as at 1 January 2006
Share of profit for the year
2006
$’000
2005
$’000
(38,394)
(40,035)
(619,350)
(21,414)
(43,660)
1,641
(97,134)
(195,546)
(114,085)
(97,134)
(35,552)
(46,266)
(36,117)
565
39.
Significant subsidiaries and associated companies
Information relating to significant subsidiaries consolidated in these financial statements and significant associated
companies whose results are equity accounted for is given in the following pages.
Notes to the financial statements
Keppel Corporation Limited
Report to Shareholders 2006
203
Significant subsidiaries and associated companies
For the financial year ended 31 December 2006
Gross
Interest
2006
%
Effective Equity
Interest
2006
%
2005
%
Cost of
Investment
2006
$’000
2005
$’000
Country of
Incorporation
/ Operation
Principal Activities
OFFSHORE & MARINE
Offshore
Subsidiaries
Keppel Offshore and Marine Ltd
Keppel FELS Ltd
100
100
100
100
100
100
AmFELS Offshore Ltd(6)
AzerFELS Pte Ltd
BrasFELS SA(1a)
100
70
100
100
70
100
100
70
100
Caspian Shipyard Company Ltd(3a)
75
53
53
Deepwater Technology Group
Pte Ltd
FELS Offshore Pte Ltd
FELS Setal Investments SA(1a)
FELS Setal Navegacao Ltda(1a)
Fornost Ltd(1a)
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
FSTP Brasil Ltda(1a)
75
75
75
FSTP Pte Ltd
75
75
75
Hygrove Investments Ltd(n)(6)
Keppel AmFELS Inc(5)
100
100
100
100
-
100
Keppel FELS Baltech Ltd(5)
100
100
100
Keppel FELS Brasil SA(1a)
100
100
100
Keppel FELS Offshore &
Engineering Services Mumbai
Pte Ltd(1a)
Keppel Norway A/S(formerly
Offshore & Marine A/S)(1a)
100
100
100
100
100
50
801,720
801,720
Singapore
Investment holding
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
Singapore
Construction, fabrication and repair of
offshore production facilities and drilling rigs,
power barges, specialised vessels and
other offshore production facilities
#
#
#
#
#
#
#
#
#
#
#
-
#
#
#
#
#
BVI/Mexico
Holding of long-term investments
Singapore
Holding of long-term investments
Brazil
Azerbaijan
Singapore
Engineering, construction and fabrication
of platforms for the oil and gas sector,
shipyard works and other general business
activities
Construction and repair of offshore
drilling rigs
Research and experimental
development on deepwater engineering
Singapore
Holding of long-term investments
Brazil
Brazil
HK
Brazil
Holding of long-term investments
Ship owning
Holding of long-term investments and
provision of procurement services
Procurement of equipment and materials
for the construction of offshore production
facilities
Singapore
Construction, fabrication and repair of
offshore production facilities and drilling rigs
BVI/HK
USA
Bulgaria
Brazil
Investment holding
Construction and repair of offshore drilling
rigs and offshore production facilities
Marine-related engineering and
consultancy services
Engineering, construction and fabrication of
platforms for the oil and gas sector,
shipyard works and other general business
activities
India
Provision of engineering services
Norway
Construction and repair of offshore drilling
rigs and offshore production facilities
204
Significant subsidiaries and associated companies
Keppel Corporation Limited
Report to Shareholders 2006
Gross
Interest
2006
%
Effective Equity
Interest
2006
%
2005
%
Cost of
Investment
2006
$’000
2005
$’000
Country of
Incorporation
/ Operation
Principal Activities
Keppel SLP LLC(5)
60
60
60
Keppel Verolme BV(1a)
100
100
100
KV Enterprises BV(1a)
Marine & Offshore Protection
& Preservation BV(1a)
Offshore Technology
Development Pte Ltd
100
100
100
100
100
100
100
100
100
Prismatic Services Ltd(6)
Regency Steel Japan Ltd(1a)
100
51
100
51
100
51
Associated Companies
Asian Lift Pte Ltd
Deepwater Marine Technology
LLC(6)
50
50
50
50
50
50
Keppel Kazakhstan LLP(5)
50
50
50
Marine
Subsidiaries
Keppel Shipyard Ltd
100
100
100
Keppel Philippines Marine Inc(4)
Alpine Engineering Services Pte Ltd
Blastech Abrasives Pte Ltd
Keppel Cebu Shipyard Inc(4)
Keppel Nantong Shipyard
Company Limited(5)
Keppel Singmarine Pte Ltd
Keppel Smit Towage Pte Ltd
KS Investments Pte Ltd
Maju Maritime Pte Ltd
Marine Technology Development
Pte Ltd
81
100
100
100
100
100
51
100
51
100
81
100
100
81
100
100
51
100
51
100
57+
100
100
57
100
100
51
100
51
100
#
#
#
#
#
#
#
#
#
#
#
-
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
USA
Fabrication of offshore platforms and
structures
Netherlands
Construction and repair of offshore drilling
rigs and shiprepairs
Netherlands
Hiring and leasing of barges
Netherlands
Singapore
BVI/HK
Japan
Singapore
CI
Chamber blasting services and painting and
coating works
Production of jacking systems and
provision of jacking analysis
Project procurement
Sourcing, fabricating and supply of
specialised steel
Provision of heavy-lift equipment and
related services
Acquiring and holding of intellectual
property rights relating to offshore
structures
#
Kazakhstan
Construction and repair of offshore drilling
units and structures and specialised
vessels
#
Singapore
Shiprepairing, shipbuilding and
marine construction
2,639
Philippines
Shipbuilding & repairing
#
#
#
#
#
#
#
#
#
Singapore
Marine contracting
Singapore
Marine contracting
Philippines
Shipbuilding & repairing
China
Shipbuilding & repairing
Singapore
Shipbuilding & repairing
Singapore
Provision of towage services
Singapore
Investment holding
Singapore
Provision of towage services
Singapore
Provision of technical consultancy for ship
design & engineering works
Significant subsidiaries and associated companies
Keppel Corporation Limited
Report to Shareholders 2006
205
Significant subsidiaries and associated companies
Gross
Interest
2006
%
Effective Equity
Interest
2006
%
2005
%
Cost of
Investment
2006
$’000
2005
$’000
Country of
Incorporation
/ Operation
Principal Activities
Associated Companies
Arab Heavy Industries Public
Joint Stock Company(3a)
Kejora Resources Sdn Bhd(5)
33
49
33
25
33
-
#
#
#
-
UAE
Shipbuilding & repairing
Malaysia
Operating, owning, leasing and chartering
of tug machine
Subic Shipyard & Engineering Inc(4)
46+
38+
30+
3,020
3,020
Philippines
Shipbuilding & repairing
PROPERTY
Subsidiaries
Keppel Land Ltd(3)
Evergro Properties Ltd
(formerly Dragon Land Ltd)(3)
K-Reit Asia(n)(3)
Keppel Bay Pte Ltd(2)
Keppel Philippines Properties Inc(4)
Alpha Investment Partners Ltd(3)
Avenue Park Development(n)(3)
Bayfront Development Pte Ltd(3)
BCH Office Investment Pte Ltd(3)
Beijing Kingsley Property
Development Co Ltd(3a)
Bintan Bay Resort Pte Ltd(3)
Boulevard Development Pte Ltd(3)
Bukit Timah Hill Development
Pte Ltd(3)
Chengdu Hillwest Development
Co Ltd(3a)
Devonshire Development Pte Ltd(3)
DL Properties Ltd(3)
Double Peak Holdings Ltd(6)
Duit Investments Ltd(3a)
Evansville Investment Pte Ltd(3)
Greenfield Development Pte Ltd(3)
International Centre(1a)
KeplandeHub Ltd(3)
53
931,432
931,432
Singapore
Holding, management and investment
company
53
71
72
100+
74+
53
38
53
86+
50+
30
-
86+
50+
#
#
626
493
#
-
626
493
100
52
100
100
100
90
100
100
100
60
65
100
100
100
100
79
100
53
28
53
53
53
48
53
53
53
32
34
53
53
53
53
51
53
53
-
53
53
53
48
53
53
53
32
19
53
53
53
53
51
53
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
-
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
Singapore
Property investment and development
Singapore
Real estate investment trust
Singapore
Property development
Philippines
Investment holding
Singapore
Fund management
Singapore
Property development
Singapore
Investment holding
Singapore
Investment holding
China
Property development
Singapore
Investment holding
Singapore
Investment holding
Singapore
Property development
China
Property development
Singapore
Property development
Singapore
Property investment
BVI/Myanmar
Investment holding
HK
Financial services
Singapore
Property development
Singapore
Investment holding
Vietnam
Property investment
Singapore
Investment holding
206
Significant subsidiaries and associated companies
Keppel Corporation Limited
Report to Shareholders 2006
Gross
Interest
2006
%
Effective Equity
Interest
2006
%
2005
%
Cost of
Investment
2006
$’000
2005
$’000
Keppel Land (Hong Kong) Ltd(5)
Keppel Land (Saigon Centre) Ltd(3a)
Keppel Land (Tower D) Pte Ltd(3)
Keppel Land China Holdings
Pte Ltd(3)
Keppel Land Financial Services
Pte Ltd(3)
Keppel Land International Ltd(3)
Keppel Land Properties Pte Ltd(3)
Keppel Land Realty Pte Ltd(3)
Keppel Land Watco I Co Ltd(3a)
Keppel Puravankara Development
Pvt Ltd(5)
Keppel Thai Properties
Public Co Ltd(3a)
K-Reit Asia Investment Pte Ltd
(formerly Keppel Land (Palm Gardens)
Pte Ltd)(3)
K-Reit Asia Property Management
Ltd(n)(3)
Mansfield Developments Pte Ltd(3)
Mansfield Realty Ltd(3)
Merryfield Investment Pte Ltd(3)
100
100
100
100
100
100
100
100
68
51
45
100
100
100
100
100
53
53
53
53
53
53
53
53
36
27
24
53
53
53
53
53
53
53
53
53
53
53
53
53
36
27
24
53
-
53
53
53
Ocean & Capital Properties Pte Ltd(3) 100
100
100
Ocean Properties Pte Ltd(3)
OIL (Asia) Pte Ltd(3)
Pasir Panjang Realty Pte Ltd(3)
Pembury Properties Ltd(6)
PT Kepland Investama(1a)
PT Keppel Land(3a)
PT Mitra Sindo Makmur(1a)
PT Mitra Sindo Sukses(1a)
PT Ria Bintan(1a)
PT Sentral Supel Perkasa(3a)
PT Sentral Tanjungan Perkasa(3a)
PT Straits-CM Village(1a)
76
100
100
100
100
100
51
51
100
80
80
100
40
53
53
53
53
53
27
27
24
42
42
21
40
53
53
53
53
53
27
27
24
42
42
21
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
-
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
Country of
Incorporation
/ Operation
Principal Activities
HK
HK
Investment holding
Investment holding
Singapore
Investment holding
Singapore
Investment holding
Singapore
Financial services
Singapore
Property services
Singapore
Investment holding
Singapore
Property development and investment
Vietnam
Property investment and development
India
Property development
Thailand
Property development and investment
Singapore
Investment holding
Singapore
Property fund management
Singapore
Investment holding
Singapore
Investment holding
Singapore
Investment holding
Singapore
Property and investment holding
Singapore
Property investment
Singapore
Investment holding
Singapore
Investment holding
BVI/Indonesia
Investment holding
Indonesia
Indonesia
Indonesia
Indonesia
Indonesia
Indonesia
Indonesia
Indonesia
Property investment and development
Property services and development and
investment
Property development and investment
Property development and investment
Golf course ownership and operation
Property investment and development
Property development
Hotel ownership and operations
Significant subsidiaries and associated companies
Keppel Corporation Limited
Report to Shareholders 2006
207
Significant subsidiaries and associated companies
Gross
Interest
2006
%
Effective Equity
Interest
2006
%
2005
%
Cost of
Investment
2006
$’000
2005
$’000
Quang Ba Royal Park JV Co(5)
Rochor Investment Ltd(5)
Saigon Centre Holdings Pte Ltd(3)
Saigon Riviera JV Co Ltd(3a)
Saigon Sports City(3a)
Shanghai Floraville Land Co Ltd(3a)
Shanghai Merryfield Land Co Ltd(3a)
Shanghai Pasir Panjang Land
Co Ltd(3a)
Sherwood Development Pte Ltd(3)
Spring City Resort Pte Ltd(3)
Straits Greenfield Ltd(3a)
Straits Mansfield Property
Marketing Pte Ltd(3)
Straits Properties Ltd(3)
Straits Properties Investments
Pte Ltd(3)
Straits-CM Village Hotel Pte Ltd(3)
Straits-KMP (HK) Ltd(3a)
Tianjin Merryfield Property
Development Co Ltd(6)
70
55
100
90
100
99
99
99
100
100
100
100
100
100
85
51
100
34
29
53
48
48
52
52
52
53
53
53
53
53
53
21
27
53
34
29
53
48
48
52
52
52
53
53
53
53
53
53
21
27
53
Toshmatic Pte Ltd(3)
100
100
100
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
Country of
Incorporation
/ Operation
Principal Activities
Vietnam
Mauritius
Property investment
Investment holding
Singapore
Investment holding
Vietnam
Vietnam
China
China
China
Singapore
Singapore
Myanmar
Singapore
Singapore
Singapore
Property development
Property development
Property development
Property development
Property development
Property development
Investment holding
Hotel ownership and operations
Provision of marketing services
Property development
Investment holding
Singapore
Property investment
HK
China
Investment holding
Property development
Singapore
Investment holding
Vanese International Ltd(6)
100+
67+
67+
17,639
17,639
BVI/HK
Investment holding
Ventek International Ltd(3a)
Wiseland Investment Myanmar
Ltd(3a)
Wiseland Investment Pte Ltd(3)
FELS Property Holdings Pte Ltd
Brightway Property Pte Ltd
100
100
100
100
100
67
53
53
100
100
67
53
53
100
100
FELS SES International Pte Ltd
85+
83+
83+
Petro Tower Ltd(5)
Alpha Real Estate Securities Fund
Esqin Pte Ltd(2)
Harbourfront One Pte Ltd(2)
Keppel (USA) Inc(6)
Keppel Houston Group(6)
Keppel Kunming Resort Ltd(5)
Keppel Point Pte Ltd(2)
76
98
100
70
100
100
100+
100+
63
98
100
65
100
86
63
98
100
65
100
86
100+
100+
#
#
#
#
#
#
HK
Investment holding
Myanmar
Hotel ownership and operations
Singapore
Investment holding
70,214
70,214
Singapore
Investment holding
#
7
#
#
#
7
#
#
Singapore
Singapore
Vietnam
Property investment
Investment holding
Property investment
Singapore
Investment holding
11,001
11,001
Singapore
Investment holding
#
#
Singapore
Property development
21,813
22,884
#
4
#
4
USA
USA
HK
Investment holding
Property investment
Property investment
86+
86+ 122,785
122,785
Singapore
Property development and investment
208
Significant subsidiaries and associated companies
Keppel Corporation Limited
Report to Shareholders 2006
Gross
Interest
2006
%
Effective Equity
Interest
2006
%
2005
%
Cost of
Investment
2006
$’000
2005
$’000
Country of
Incorporation
/ Operation
Principal Activities
Keppel Real Estate Investment
Pte Ltd(formerly Ta-Ching
Engineering Construction (Pte) Ltd)
Associated Companies
Asia No. 1 Property Fund Ltd(1a)
Asia Real Estate Fund
Management Ltd(3)
BFC Development Pte Ltd(3)
Bugis City Holdings Pte Ltd(3)
China World Investments Pte Ltd(3)
CityOne Township Development
Pte Ltd(3)
100
100
100
50,000
#
Singapore
Investment holding
10
50
33
31
50
50
5
27
17
16
27
27
13
27
17
16
27
27
#
#
#
#
#
#
#
#
#
#
#
#
Guernsey
Singapore
Singapore
Singapore
Singapore
Singapore
Property investment
Fund management
Property development
Property investment
Investment holding
Investment holding
Consort Land Inc(4)
33+
27+
21+
54
54
Philippines
EM Services Pte Ltd(2)
Harbourfront Three Pte Ltd(2)
Harbourfront Two Pte Ltd(2)
Kingsdale Development Pte Ltd(3)
One Raffles Quay Pte Ltd(3)
Parksville Development Pte Ltd(3)
PT Pantai Indah Tateli(3a)
PT Purimas Straits Resort(5)
PT Purosani Sri Persada(5)
Renown Property Holdings (M)
Sdn Bhd(3a)
SAFE Enterprises Pte Ltd(5)
Suzhou Property Development
Pte Ltd(5)
INFRASTRUCTURE
Utilities Engineering
Subsidiaries
Keppel Energy Pte Ltd
Corporacion Electrica Nicaraguense
SA(1a)
Dawley Developments Ltd(6)
Keppel Electric Pte Ltd
25
39
39
50
33
50
50
25
20
40
25
25
13
33
33
27
17
27
27
13
11
21
13
13
13
34
34
27
17
27
27
13
11
21
13
13
100
100
100
100
100
100
100
100
100
100
100
100
Keppel Gas Pte Ltd
100
100
100
Land holding company and
power distributor
Property management
Property development
Property development
Investment holding
Singapore
Singapore
Singapore
Singapore
Singapore
Property development
Singapore
Property investment
Indonesia
Indonesia
Indonesia
Malaysia
Singapore
Singapore
Property development
Development of holiday resort
Property investment
Property investment
Investment holding
Investment holding
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
280,914
245,914
Singapore
Investment holding
#
#
#
#
#
#
#
#
Nicaragua
Commercial power generation
BVI/HK
Singapore
Holding of long-term investments
Electricity, energy and power supply and
investment holding and general wholesale
trade
Singapore
Purchase and sale of gaseous fuels
Significant subsidiaries and associated companies
Keppel Corporation Limited
Report to Shareholders 2006
209
Significant subsidiaries and associated companies
Gross
Interest
2006
%
Effective Equity
Interest
2006
%
2005
%
Cost of
Investment
2006
$’000
2005
$’000
Country of
Incorporation
/ Operation
Principal Activities
Keppel Merlimau Cogen Pte Ltd
100
100
100
New Energy Industrial Ltd(6)
Nordeste Generation Energia Ltda(5)
Okachi Investments Ltd(6)
Rodeo Power Pte Ltd
Termoguayas Generation SA(1a)
Keppel Integrated Engineering Ltd
Keppel Seghers Engineering
Singapore Pte Ltd
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
FELS Cranes Pte Ltd
100
100
100
Keppel FMO Pte Ltd
100
100
100
Keppel Prince Engineering
Pty Ltd(3a)
100
100
100
Keppel Sea Scan Pte Ltd
100
100
100
Keppel Seghers Belgium NV(1a)
100
100
98
Keppel Seghers Holdings Pte Ltd
Keppel Seghers Hong Kong
Limited(1a)
Keppel Seghers Newater
Development Co Pte Ltd
100
100
100
100
98
100
100
100
100
Keppel Seghers Tuas
Waste-to-Energy Plant Pte Ltd(n)
100
100
-
Associated Companies
GE Keppel Energy Services Pte Ltd(3)
50
50
50
#
#
#
#
#
#
#
#
#
#
#
#
Singapore
Holding of long-term investments,
generation and supply of electricity
BVI/Ecuador
Holding of long-term investments
Brazil
BVI/HK
Commercial power generation
Holding of long-term investments
Singapore
Holding of long-term investments
Ecuador
Commercial power generation
163,574
163,574
Singapore
Investment holding
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
Singapore
Singapore
Singapore
Fabrication of steel structures, mechanical
and electrical works and engineering
services specialising in treatment plants
Fabrication of heavy cranes and provision
of marine-related equipment
Construction, project and facilities
management and operational maintenance
of industrial and commercial complexes
Australia
Metal fabrication
Singapore
#
Belgium
Trading and installation of hardware,
industrial, marine and building-related
products, leasing and provision of services
Provider of services and solutions to the
environmental industry related to solid
waste, waste-water & sludge management
#
#
#
-
Singapore
Investment holding
HK
Singapore
Singapore
Engineering contracting and investment
holding
Collection, purification and distribution of
water
Collection and treatment of solid waste to
generate green energy
#
Singapore
Precision engineering, repair, services
and agencies
Network Engineering
Subsidiaries
Keppel Telecommunications &
Transportation Ltd(3)
81
81
81
397,647
397,647
Singapore
Investment, management and
holding company
DataOne Asia Pte Ltd(3)
100
100
100
#
#
Singapore
Investment holding
210
Significant subsidiaries and associated companies
Keppel Corporation Limited
Report to Shareholders 2006
Gross
Interest
2006
%
Effective Equity
Interest
2006
%
2005
%
Cost of
Investment
2006
$’000
2005
$’000
Country of
Incorporation
/ Operation
Principal Activities
ECHO Broadband Gmbh(3a)
Keppel Communications Pte Ltd(3)
Keppel Logistics (Foshan) Ltd(5)
Keppel Logistics Pte Ltd(3)
Keppel Telecoms Pte Ltd(3)
Transware Distribution Services
Pte Ltd(3)
Trisilco Folec Sdn Bhd(3a)
Associated Companies
Advanced Research Group
Co Ltd(3a)
Asia Airfreight Terminal Company
Limited(5)
Computer Generated Solutions
Inc(3a)
100
100
70
100
100
50
55
45
10
21
Radiance Communications Pte Ltd(3)
50
SVOA Public Company Ltd(3a)
Trisilco Radiance Communication
Sdn Bhd(3a)
31
40
81
81
57
81
81
41
45
36
8
17
41
25
42
81
81
57
81
81
41
45
36
8
17
41
25
42
Wuhu Annto Logistics Company
Ltd(5)
35
28
-
INVESTMENTS
Subsidiaries
Keppel Philippines Holdings Inc(4)
53+
52+
47+
China Canton Investments Ltd
k1 eBiz Holdings Pte Ltd(2)
56
100
56
100
46
100
#
#
#
#
#
#
#
#
#
#
#
#
#
#
-
#
#
#
#
#
#
#
#
#
#
#
#
#
#
Germany
Broadband network services
Singapore
China
Trading and provision of communications
systems and accessories
Shipping operations, warehousing and
distribution
Singapore
Warehousing and distribution
Singapore
Telecommunications services and
investment holding
Singapore
Warehousing and distribution
Malaysia
Trading and provision of communications
systems and accessories
Thailand
IT publication and business information
HK
USA
Singapore
Thailand
Malaysia
Operation of air cargo handling terminal
IT consulting and outsourcing provider
Distribution and maintenance of
communications equipment and systems
Distribution of IT products and
telecommunications services
Sales, installation and maintenance of
telecommunications systems, equipment
and accessories
-
China
Warehousing and distribution
-
#
Philippines
Investment holding
Singapore
Investment holding
1,814
1,814
Singapore
Investment holding
Kep Holdings Ltd(6)
100+
100+
100+
10,480
10,480
BVI/HK
Investment company
Kephinance Investment (Mauritius)
Pte Ltd(2a)
100
100
100
#
#
Mauritius/HK
Investment holding
Kephinance Investment Pte Ltd
100
100
Kepital Holdings Pte Ltd(2)(strike-off)
-
-
100
100
90,000
90,000
Singapore
Investment holding
-
236,672
Singapore
Strike-off
Significant subsidiaries and associated companies
Keppel Corporation Limited
Report to Shareholders 2006
211
Significant subsidiaries & associated companies
Gross
Interest
2006
%
Effective Equity
Interest
2006
%
2005
%
Cost of
Investment
2006
$’000
2005
$’000
Country of
Incorporation
/ Operation
Principal Activities
Kepital Management Ltd(5)
Kepmount Shipping (Pte) Ltd(2)
Keppel Aviation Services
Pte Ltd(strike-off)
100
100
-
100
100
-
Keppel FELS Invest (HK) Ltd(5)
100
100
Keppel Markem Ltd(2)(strike-off)
Keppel Oil & Gas Services Pte Ltd
Kepventure Pte Ltd(2)
KI Investments (HK) Ltd(5)
KV Management Pte Ltd(2)
-
100
100
100
100
-
100
100
100
100
100
100
100
100
100
100
100
100
100
Steamers Containerships Holdings
Pte Ltd(3)
100+
92+
92+
Travelmore Pte Ltd(2)
100
100
100
Associated Companies
Singapore Petroleum Company
Ltd(2)
45
45
44
k1 Ventures Ltd
MobileOne Ltd(3)
The Vietnam Investment Fund
(Singapore) Ltd(2)
38
17
40
38
14
40
37
11
40
#
#
HK
Investment company
4,000
4,000
Singapore
Investment holding
-
#
-
420
Singapore
Strike-off
#
HK
Investment holding
30,013
Singapore
Strike-off
116,609
116,609
Singapore
Investment holding
16,160
76,160
Singapore
Investment holding
#
250
49
265
#
#
#
#
#
HK
Investment company
250
Singapore
Fund management
49
Singapore
Investment holding
265
Singapore
Travel agency
#
#
#
#
Singapore
Petroleum refining, marketing, distribution
and trading of crude oil and petroleum
products
Singapore
Investment holding company
Singapore
Telecommunications services
Singapore
Venture fund investment
Total
Subsidiaries
Associated Companies
3,109,496
3,355,311
3,074
3,074
Notes:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
Audited by overseas practice of Deloitte & Touche;
Audited by PricewaterhouseCoopers, Singapore;
Audited by overseas practice of PricewaterhouseCoopers;
Audited by Ernst & Young, Singapore;
Audited by overseas practice of Ernst & Young;
Audited by SyCip Gorres Velayo & Co, Philippines;
Audited by other firms of auditors (not significant associated companies and foreign subsidiaries); and
Not required to be audited by law in the country of incorporation and companies disposed, liquidated and struck off.
All the companies are audited by Deloitte & Touche, Singapore except for the following:
(1a)
(2)
(2a)
(3)
(3a)
(4)
(5)
(6)
In accordance to Rule 716 of The Singapore Exchange Securities Trading Limited – Listing Rules, the Audit Committee and Board of Directors of the Company confirmed that they are
satisfied that the appointment of different auditors for its subsidiaries and significant associated companies would not compromise the standard and effectiveness of the audit of the
Company.
+ The shareholdings of these companies are held jointly with other subsidiaries.
# The shareholdings of these companies are held by subsidiaries of Keppel Corporation Limited.
(n) These companies were incorporated during the financial year.
The subsidiaries' place of business is the same as its country of incorporation, unless otherwise specified.
Abbreviations:
British Virgin Islands (BVI)
Cayman Islands (CI)
Hong Kong (HK)
United Arab Emirates (UAE)
United States of America (USA)
212
Significant subsidiaries and associated companies
Keppel Corporation Limited
Report to Shareholders 2006
Statement by directors
For the financial year ended 31 December 2006
We, LIM CHEE ONN and TEO SOON HOE being two Directors of Keppel Corporation Limited, do hereby state that in the
opinion of the Directors, the financial statements set out on pages 158 to 212 are drawn up so as to give a true and fair view of
the state of affairs of the Group and of the Company as at 31 December 2006, and of the results, changes in equity and cash
flows of the Group and changes in equity of the Company for the financial year then ended and at the date of this statement,
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due.
On behalf of the Board
LIM CHEE ONN
Executive Chairman
Singapore, 13 March 2007
TEO SOON HOE
Group Finance Director
Statement by directors
Keppel Corporation Limited
Report to Shareholders 2006
213
Independent auditors’ report
to the members of Keppel Corporation Limited
For the financial year ended 31 December 2006
We have audited the accompanying financial statements of Keppel Corporation Limited (“Company”) and its subsidiaries
(“Group”) which comprise the balance sheets of the Group and the Company as at 31 December 2006, the profit and loss
account, statement of changes in equity and cashflow statement of the Group and the statement of changes in equity of the
Company for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on
pages 158 to 212.
The financial statements for the year ended 31 December 2005 were audited by another auditor whose report dated 21 March
2006 expressed an unqualified opinion on those statements.
Directors’ Responsibility
The Company’s directors are responsible for the preparation and fair presentation of these financial statements in accordance
with Singapore Financial Reporting Standards and the Singapore Companies Act, Cap. 50 (the “Act”). This responsibility
includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial
statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate
accounting policies; and making accounting estimates that are reasonable in the circumstances.
Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in
accordance with Singapore Standards on Auditing. Those standards require that we comply with ethical requirements and plan
and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.
The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of
the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal
control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion,
(a)
the consolidated financial statements of the Group and the balance sheet and statement of changes in equity of the
Company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards
so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2006 and of
the results, changes in equity and cash flows of the Group and changes in equity of the Company for the year ended on
that date; and
(b)
the accounting and other records required by the Act to be kept by the Company and by those subsidiaries incorporated in
Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act.
DELOITTE & TOUCHE
Certified Public Accountants
Singapore
Chaly Mah Chee Kheong
Partner
Appointed on 28 April 2006
13 March 2007
214 Independent auditors’ report
Keppel Corporation Limited
Report to Shareholders 2006
Interested person transactions
During the financial year, the following interested person transactions were entered into by the Group:
Aggregate value of all
interested person
transactions during
the financial year
under review (excluding
transactions less than
$100,000 and transactions
conducted under
shareholders’ mandate
pursuant to Rule 920)
Aggregate value of all
interested person
transactions conducted
under a shareholders'
mandate pursuant
to Rule 920 of
the SGX Listing Manual
(excluding transactions
less than $100,000)
Name of interested person
2006
$’000
2005
$’000
2006
$’000
2005
$’000
3,877
92
165
-
-
8
-
362
9,500
-
-
Transaction for the sale of goods and services
National University Hospital
PSA Corporation Group
SembCorp Marine Group
SembCorp Industries Group
Singapore Power/PowerSeraya/Senoko Power/Tuas Power Group
Singapore Airlines Group
Transaction for the purchase of goods and services
Gas Supply Pte Ltd
Mapletree Investments Pte Ltd
Singapore Power/PowerSeraya/Senoko Power/Tuas Power Group
Transaction for the acquisition of companies
Havelock Investment Pte Ltd
Hong Lim Investments Pte Ltd
Total interested person transactions
-
-
-
-
-
-
-
-
-
270
-
270
-
-
-
-
-
-
-
-
-
-
-
2,067
463
12,000
4,978
9,000
492
1,000
-
8,533
-
-
8,533
30,000
14,004
Save for the interested person transactions disclosed above, there were no other material contracts entered into by the
Company and its subsidiaries involving the interests of its chief executive officer, directors or controlling shareholders, which are
either still subsisting at the end of the financial year or, if not then subsisting, entered into since the end of the previous financial
year.
Interested person transactions
Keppel Corporation Limited
Report to Shareholders 2006
215
Directors and key executives
Directors
Lim Chee Onn, 62
Executive Chairman
Bachelor of Science (First Class Honours) in Naval Architecture, Glasgow University; Masters in Public Administration, Edward S.
Mason Fellow, Kennedy School, Harvard University; Member of the Wharton Society of Fellows, University of Pennsylvania;
Honorary Doctorate in Engineering, Glasgow University.
Executive Chairman of Keppel Corporation Limited since January 2000 (Director since 1983; date of last re-election: 29 April 2005)
and Chairman of the Executive Committee and member of the Board Safety Committee. He is also Chairman of Keppel Land Ltd,
MobileOne Ltd, and Singapore-Suzhou Township Development Pte Ltd and a Board Member of the Monetary Authority of
Singapore and k1 Ventures Ltd. Mr Lim is also the Honorary Chairman of the National Heritage Board and Deputy Chairman/
Advisory Board, Harvard Singapore Foundation.
Mr Lim started his career in the Civil Service. He was Deputy Secretary, Ministry of Communications until elected as Member of
Parliament in July 1977. He served as Political Secretary, Ministry of Science and Technology from August 1978 to September
1980. Mr Lim was Secretary-General, National Trades Union Congress from May 1979 to June 1983 and concurrently Minister
without Portfolio, Prime Minister's Office from September 1980 to July 1983, and remained as Member of Parliament until
December 1992.
In addition, Mr Lim is Co-Chairman of the Philippines-Singapore Business Council and Deputy Chairman of the Seoul International
Business Advisory Council. He is Economic Advisor to Jiangsu Provincial Government, PRC, and Consultant to the People’s
Government of Yunnan Province, PRC. He is a Member of the Singapore-US Business Council and a Member of the INSEAD
Singapore International Council. Mr Lim is also a Member of the Board of Trustees of The Conference Board and Counsellor of
The Conference Board's Global Advisory Council on Economic Issues.
Tony Chew Leong-Chee, 60
Lead Independent Director
Trained as an agronomist at Ko Plantations Berhad and Serdang Agricultural College in Malaysia from 1966 to 1970.
Appointed to the Board in 2002 (date of last re-election: 29 April 2005). An independent and non-executive Director, he is the
Company’s Lead Independent Director and member of the Company's Audit Committee and Executive Committee.
He is Executive Chairman of Asia Resource Corporation and Chairman of KFC Vietnam. He also serves on the boards of
Macondray Corporation, IES Holdings, Orangestar Investment Holdings Pte Ltd, amongst others.
From 1966, he worked at Sri Gading Estates in Malaysia, Guthrie Trading in Singapore, and the Sampoerna Group of Indonesia. In
1975 he ventured out, becoming an entrepreneur, and built a group of companies in the region which became Asia Resource
Corporation.
He plays an active role in promoting regional business, having served on the Trade Development Board, Economic Review
Sub-Committee for Entrepreneurship and Internationalisation, Regional Business Forum, and the GPC Resource Panel for Finance,
Trade and Industry. He is presently council member of the Singapore Business Federation and ASEAN Business Advisory
Council, Chairman of Network Indonesia and Chairman of the Governing Board of Duke-NUS Graduate Medical School
Singapore. He is a Public Service Award recipient.
216 Directors and key executives
Keppel Corporation Limited
Report to Shareholders 2006
Lim Hock San, 60
Independent Director
Bachelor of Accountancy, University of Singapore; Master of Science, MIT Sloan School of Management; Advanced
Management Program, Harvard Business School; Fellow, Chartered Institute of Management Accountants (UK).
Appointed to the Board in 1989 (date of last re-election: 28 April 2004), he is an independent and non-executive Director. Mr Lim
is also the Chairman of the Company’s Audit Committee and member of the Executive Committee and Board Risk Committee.
Mr Lim is the CEO of United Industrial Corporation Ltd and Singapore Land Ltd. He is also the Chairman of Mount Alvernia
Hospital Board and the National Council Against Problem Gambling, and a board member of United Test and Assembly Center
Ltd, Ascendas Pte Ltd and Interra Resources Limited. Mr Lim previously served as the Director-General of Civil Aviation (1980-
1992) and was past President of the Institute of Certified Public Accountants of Singapore.
Sven Bang Ullring, 71
Independent Director
Master of Science, Swiss Federal Institute of Technology, Zurich.
Appointed to the Board in 2000 (date of last re-election: 28 April 2006). An independent and non-executive Director and Chairman
of the Nominating Committee and the Remuneration Committee and member of the Board Safety Committee.
Mr Ullring is the Chairman of the Board of The Fridtjof Nansen Institute, Oslo, Norway. He was President and Chairman of the
Executive board of Det Norske Veritas, Oslo from 1985-2000 and President and CEO of NORCONSULT, Oslo from 1981-1985.
He worked for SKANSKA, Malmo, Sweden from 1962-1981 in Africa, Asia, Europe and the Americas; from 1972-1981 he was
Director of the International Department.
In addition, Mr Ullring is Chairman of the Maritime and Port Authority of Singapore’s Third Maritime and Research and
Development Advisory Panel Chairman; of the Board of Transparency International (Norway), , and a Director of Sustainable
Forest Management, London and the Institute for Culture and Oriental Languages University of Oslo.
Tsao Yuan Mrs Lee Soo Ann, 51
Independent Director
PhD in Economics, Harvard University; President Scholar with a First Class Honours degree in Economics and Statistics,
University of Singapore.
Appointed to the Board in 2002 (date of last re-election: 28 April 2006). An independent and non-executive Director and member
of the Nominating Committee, the Remuneration Committee and the Board Safety Committee.
Dr Lee Tsao Yuan is an Executive Director with SDC Consulting, a privately-owned Singapore-based human resources
development training, consultancy and coaching company.
An economist by training, Dr Lee has extensive experience in public policy both in Singapore and internationally. She was with
the Institute of Policy Studies (IPS), a public policy think-tank for 10 years, as Deputy Director (1990-1997), and Director (1997-
November 2000). Prior to her joining IPS, she taught at the Department of Economics and Statistics, National University of
Singapore (1982-1989).
She served as a Nominated Member of Parliament in Singapore for two terms (1994-1996 and 1997-1999).
Dr Lee sits on the Boards of various companies and organisations, including Oversea-Chinese Banking Corporation Ltd.
Directors and key executives
Keppel Corporation Limited
Report to Shareholders 2006
217
Directors and key executives
Leung Chun Ying, 52
Independent Director
Fellow of the Hong Kong Institute of Surveyors, Honorary Doctorates in Business Administration from the University of West of
England and the Hong Kong Polytechnic University.
Appointed to the Board in 2003 (date of last re-election: 28 April 2006), Mr Leung is an independent and non-executive Director
of the Company. He is also a member of the Remuneration Committee.
Mr Leung is the Chairman of Asia Pacific of DTZ Debenham Tie Leung, a leading global property services company with 200
offices in 40 countries, employing an office staff of over 10,000. He is the convenor of the Executive Council of the Hong Kong
Special Administrative Region (HKSAR), and a member of the National Standing Committee of the Chinese People's Political
Consultative Conference.
He is also the Chairman of the Coalition of Professional Services and the One Country Two Systems Research Institute, both in
the HKSAR.
Mr Leung also has extensive involvement in China's land reform and the development of real estate markets, through his various
appointments such as Honorary Advisor to the Leading Group of the Shanghai Government on Land Reform. He is also an
Honorary Consultant to the Pudong Development, Leading Board of the Shanghai Government; Honorary Advisor to the
Shenzhen Government on Land Reform; Honorary Advisor to the Tianjin Government on Land Reform, as well as an International
Economic Advisor to the People's Government of Hebei Province.
He is director of the DTZ Group of Companies, DBS Bank (Hong Kong) Ltd, DBS Group Holdings Ltd, DBS Bank Ltd, China
Homes Ltd, Global China Technology Group Ltd and Ascendas Pte Ltd.
He was the Chairman and Managing Director of CY Leung & Company Ltd between 1993-1999 and the Vice Chairman of Jones
Lang Wootton in Asia between 1977-1993.
Oon Kum Loon, 56
Independent Director
Bachelor of Business Administration (Honours) from the University of Singapore.
Appointed to the Board in 2004 (date of last re-election: 29 April 2005). An independent and non-executive Director of the
Company and Chairperson of the Company's Board Risk Committee and member of the Company’s Audit, Executive and
Nominating Committees.
Mrs Oon is a veteran banker with about 30 years of extensive experience, having held a number of management and executive
positions with the DBS Group. She was the Chief Financial Officer (CFO) of the bank until September 2003.
Prior to serving as CFO, she was the Managing Director & Head of Group Risk Management, responsible for the development
and implementation of a group-wide integrated risk management framework.
During her career with the bank, Mrs Oon was also involved with treasury and markets, corporate finance and credit
management activities.
Her other directorships include PSA International Pte Ltd; Gas Supply Pte Ltd; SP PowerGrid Ltd; CSMC Technologies
Corporation; and Schmidt Electronics Group Ltd. She is also a member of the Board Risk Management Committee of Singapore
Power Ltd.
218 Directors and key executives
Keppel Corporation Limited
Report to Shareholders 2006
Tow Heng Tan, 51
Non-Independent and Non-Executive Director
Fellow of the Association of Chartered Certified Accountants as well as the Chartered Institute of Management Accountants.
Appointed to the Board in 2004 (date of last re-election: 29 April 2005). A non-executive Director and member of the Company’s
Executive, Remuneration and Board Risk Committees.
Mr Tow has an extensive 29-year business career spanning the management consultancy, investment banking and stockbroking
industries. He is currently the Senior Managing Director, Investments, of Temasek Holdings (Pte) Ltd (Temasek Holdings).
Prior to joining Temasek Holdings in September 2002, he was Senior Director of Business Development at DBS Vickers
Securities (Singapore) Pte Ltd. From 1993 to 2001, Mr Tow was Managing Director of Lum Chang Securities Pte Ltd.
Mr Tow also sits on the Board of ComfortDelGro Corporation Limited, among others.
Yeo Wee Kiong, 51
Independent Director
LLB Honours University of London, MBA National University of Singapore, First Class Honours (Mechanical Engineering)
University of Singapore.
Appointed to the Board in 2005 (date of last re-election: 28 April 2006). An independent and non-executive Director of the
Company, Chairman of the Company’s Board Safety Committee, and member of the Company's Board Risk Committee.
Mr Yeo Wee Kiong is the managing director of Yeo Wee Kiong Law Corporation (“YWKLC”), a Singapore law corporation
practising in the areas of corporate law, corporate finance, mergers and acquisitions, listings on stock exchanges, venture capital,
banking and securities.
He started his career in 1980 as a senior industry officer with the Singapore Economic Development Board (“EDB”) where he
participated in EDB’s international drive to promote high technology investments into Singapore. He was an investment banker
with NM Rothschild & Sons Singapore between 1984 to 1989 in capital markets and corporate finance advisory services. He
started his legal career in 1989 and established YWKLC in 2003. He was previously a partner with Drew & Napier, and senior
partner, executive committee member and head of corporate and capital markets in Rajah & Tann. Drew & Napier and Rajah &
Tann are leading law firms in Singapore.
Mr Yeo is a director of three listed companies, namely, Bonvests Holdings Limited and PCA Technology Ltd which are listed on
the Singapore Exchange, and OM Holdings Limited which is listed in Australia. He is also a board member of Ascendas Pte Ltd,
Ezyhealth Holdings Pte Ltd, SPIB Holdings Pte Ltd and TIF Ventures Pte Ltd.
Directors and key executives
Keppel Corporation Limited
Report to Shareholders 2006
219
Directors and key executives
Choo Chiau Beng, 59
Senior Executive Director
Bachelor of Science (First Class Honours), University of Newcastle upon Tyne (awarded the Colombo Plan Scholarship to study
Naval Architecture); Master of Science in Naval Architecture, University of Newcastle upon Tyne; attended the Programme for
Management Development in Harvard Business School in 1982 and is a Member of the Wharton Society of Fellows, University
of Pennsylvania.
Appointed to the Board in 1983 (date of last re-election: 28 April 2006). A Senior Executive Director and member of the
Company’s Executive Committee.
Mr Choo is the Chairman and Chief Executive Officer of Keppel Offshore & Marine Ltd and is also the Chairman of Singapore
Petroleum Company Limited, Singapore Refining Company Pte Ltd and SMRT Corporation Ltd. Mr Choo sits on the Board of
Directors of Keppel Land Ltd, k1 Ventures Ltd, and is a Board Member of Singapore Maritime Foundation and Maritime and Port
Authority of Singapore. He is Chairman of the Nanyang Business School’s International Advisory Board.
Mr Choo started his career with Keppel Shipyard as a Ship Repair Management Trainee in 1971 and was appointed Executive
Director of Singapore Slipway in 1973. In 1975, when Keppel set up its shipyard in the Philippines, he was posted there to
assume the position of Executive Vice President and CEO of the company for a period of four years. He joined Keppel FELS
(formerly known as Far East Levingston Shipbuilding Ltd) in 1980 as Assistant General Manager and was appointed as Director
to the Board of the company. He was promoted to Deputy Managing Director in November 1981 and to Managing Director in
March 1983. In 1994, he was appointed Deputy Chairman and in 1997, Chairman of the company.
He is also Chairman of Det Norske Veritas South East Asia Committee and Council Member of the American Bureau of Shipping
and member of the American Bureau of Shipping's Southeast Asia Regional Committee and Special Committee on Mobile
Offshore Drilling Units. He is Singapore's Non-Resident Ambassador to Brazil.
Teo Soon Hoe, 57
Senior Executive Director and Group Finance Director
Bachelor of Business Administration, University of Singapore; Member of the Wharton Society of Fellows, University of
Pennsylvania.
Appointed to the Board in 1985 (date of last re-election: 29 April 2005). A Senior Executive Director and the Group Finance
Director and member of the Company's Executive Committee.
Mr Teo is the Chairman of Keppel Telecommunications & Transportation Ltd and Keppel Philippines Holding Inc. In addition, he is
a director of several other companies within the Keppel Group, including Keppel Land Limited, Keppel Offshore & Marine Ltd, k1
Ventures Limited and Singapore Petroleum Company Limited. He is also a director of MobileOne Ltd.
Mr Teo began his career with the Keppel Group in 1975 when he joined Keppel Shipyard. He rose through the ranks and was
seconded to various subsidiaries of the Keppel Group before assuming the position of Group Finance Director in 1985.
220 Directors and key executives
Keppel Corporation Limited
Report to Shareholders 2006
Key Executives
In addition to the Executive Chairman (Mr Lim Chee Onn) and the two Senior Executive Directors (Mr Choo Chiau Beng and Mr Teo
Soon Hoe), the following are the key executive officers (“Key Executives”) of the Company, its principal subsidiaries and Singapore
Petroleum Company Limited:
Tong Chong Heong, 60
Graduate of Management Development Programme, Harvard Business School; Stanford - NUS Executive Programme, Diploma in
Management Studies, The University of Chicago Graduate School of Business.
Mr Tong has been the Managing Director/Chief Operating Officer of Keppel Offshore & Marine Ltd since May 2002. He is also the
Managing Director of Keppel FELS and Keppel Shipyard. He was the Executive Director of Keppel Corporation from 1989-1996. He
served for 27 years and was appointed Commander of the Volunteer Special Constabulary (VSC) from 1995-2001 and was honoured
with Singapore Public Service Medal at the 1999 National Day Award. He had served as Vice President/President of Association of
Singapore Marine Industries (1993-1996), Member/Deputy Chairman of the Shipbuilding & Offshore Engineering Advisory Committee,
Ngee Ann Polytechnic (1986-1995). He is a member of Society of Naval Architects and Marine Engineers (USA), member of
Singapore Institute of Directors, member of American Bureau of Shipping and member of Nippon Kaiji Kyokai (Class NK) Singapore
Committee and Fellow of the Society of Project Managers as well as Fellow of The Royal Institute of Naval Architects (RINA) UK.
His directorships include Keppel Offshore & Marine Ltd; Keppel FELS Limited; Keppel Shipyard Ltd, Keppel Integrated Engineering
Ltd and Chairman of Keppel AmFELS, Inc.
He is the Honorary Consul (Designate) of Trinidad & Tobago in Singapore.
Kevin Wong Kingcheung, 51
Bachelor degree in Civil Engineering with First Class Honours, Imperial College, London; Masters degree, Massachusetts Institute
of Technology, USA.
Mr Wong has been Managing Director, Keppel Land Limited since January 2000. Prior to this appointment, he was Executive
Director since November 1993. He is Chairman and Director of Keppel Philippines Properties, Inc., Chairman and Director of Keppel
Thai Properties Public Co Limited, and Vice-Chairman and Director, Evergro Properties Limited. He is also a Director of K-REIT Asia
Management Pte Ltd, Prudential Assurance Company Singapore (Pte) Ltd and Singapore Hotel Association.
Prior to joining Keppel Land Limited, Mr Wong had diverse experience in the real estate industry in the UK, USA and Singapore.
Lam Kwok Chong, 52
Bachelor of Business Administration, National University of Singapore.
Mr Lam was appointed the Chief Financial Officer of Keppel T&T in July 2003 and was appointed the Managing Director and a
Director of Keppel T&T in April 2004. He holds directorships in several Keppel T&T subsidiaries and associated companies. He
began his career with the Keppel Group in 1980. Since then, he has held various senior management appointments within the
Keppel Group, including appointments such as the Chief Financial Officer of Keppel Insurance Pte Ltd, Managing Director of Keppel
Securities Pte Ltd and General Manager (Special Projects) of Keppel Corporation Limited.
Directors and key executives
Keppel Corporation Limited
Report to Shareholders 2006
221
Directors and key executives
Ong Tiong Guan, 48
Bachelor of Engineering (First Class Honours), Monash University; and Doctor of Philosophy (Ph.D.) under Monash Graduate
Scholarship, Monash University, Australia.
Dr Ong was appointed Keppel Energy Pte Ltd’s Executive Director from November 1999. He became Managing Director of Keppel
Energy Pte Ltd with effect from 1 May 2003. He is responsible for Keppel Corporation’s power generation business, which develops,
owns and operates power generation projects in Asia and in the Americas.
Dr Ong’s career spans across the energy industry from engineering and contracting to investment and ownership of energy assets.
He started with Jurong Engineering as a Design Engineer in 1987 and went on to hold senior management positions in Foster
Wheeler Eastern, the Sembawang Group, and CMS Energy Asia. Dr Ong was Chairman of SEPEC (Singapore Electricity Pool
Executive Committee) for the FY 2002/2003.
His directorships include Keppel Energy Pte Ltd, Keppel Electric Pte Ltd, Keppel Merlimau Cogen Pte Ltd, Keppel Gas Pte Ltd,
Termoguayas Generation S.A. and Corporacion Electrica Nicaraguense, S.A..
Koh Ban Heng, 58
Bachelor degree in Applied Chemistry and post-graduate diploma in Business Administration, University of Singapore.
Mr Koh is the Chief Executive Officer of Singapore Petroleum Company Limited. He joined SPC in February 1974 and held several
key positions in the company rising to the position of CEO in August 2003. The breadth of his experience spans refining operations
and planning, marketing and distribution, supply and trading, oil and gas exploration and production including the development and
establishment of new businesses.
Mr Koh has delivered exceptional results in the last three years. He was instrumental in the landmark refining and retail acquisitions
in 2004. He has also led and paved the way for several key capital investments in E&P. These have provided the strategic drive that
has led to SPC’s current success and will be the foundation for sustained growth.
Mr Koh holds directorships in several of SPC’s subsidiaries and associate companies.
Chua Chee Wui, 40
Bachelor of Engineering Science (2nd Upper Hons), Oxford University, on a Scholarship from the Singapore Government; completed
Chartered Financial Analysts (CFA) Programme in 1999; attended the Insead Executive Programme.
Mr Chua was appointed Deputy CEO of Keppel Integrated Engineering Ltd (KIE) in January 2004 and is presently CEO of KIE. KIE is
the environmental and engineering division of Keppel Corporation Limited. He is also General Manager, Group Strategic Development
in Keppel Corporation.
Prior to joining Keppel Corporation in 2000, he held various positions in ExxonMobil Singapore and in the Ministry of Defence of
Singapore.
His directorships include KIE, Keppel Seghers Engineering Singapore Pte Ltd, Seghers Keppel Technology Group NV, Keppel Seghers
Newater Development Co Pte Ltd, Keppel Seghers Tuas Waste-To-Energy Plant Pte Ltd, and Keppel FMO Pte Ltd.
222 Directors and key executives
Keppel Corporation Limited
Report to Shareholders 2006
Past Principal Directorships In The Last Five Years
Directors
Lim Chee Onn
National Heritage Board; Singapore Airlines Ltd; Glory Central Holdings Ltd; Kepital Holdings Pte Ltd; Keppel Harbour
Redevelopment Ltd; Keppel Power Systems Pte Ltd; Keppel Telecoms Pte Ltd; K1 eBiz Holdings Pte Ltd; NatSteel Ltd;
Temasek Holdings (Pte) Ltd; Parksville Development Pte Ltd.
Tony Chew Leong-Chee
Del Monte Pacific Ltd; Singapore Trade Development Board; Keppel Capital Holdings Ltd; KTB Limited (formerly Keppel TatLee
Bank Ltd & Keppel Bank of S’pore Ltd); CapitalLand Commercial Ltd (formerly DBS Land Ltd); Highsonic Enterprises Pte Ltd;
Macondray Packaging Corporation Pte Ltd; Pontirep Investments Pte Ltd; Operational Development Pte Ltd; CCL Myanmar Pte
Ltd; Myanmarcorp Pte Ltd; Juno Pacific Pte Ltd; ARC Corporate Services Pte Ltd; RHB-Cathay Securities Pte Ltd; Dohler Asia
Pte Ltd; Net Decisions Singapore Pte Ltd; Eurolife Limited; International Beverages Company; Viethai Plastic Company;
Hangzhou Hua Feng Paper Mill Ltd; Myanmar Airways International Ltd; International Beverages Trading Co., Myanmar;
Myanmar Development International Co. Ltd; Asia Net Media Ltd (BVI); Cycle & Carriage Golden Star Ltd; Del Monte Pacific
Resources Ltd; Dewey Ltd; Macondray Holdings Corporation; Alliance Resource Corporation; Opdev Investments Ltd; Surfield
Development Corporation; Yearsley, Inc.; Central American Resources Inc.
Lim Hock San
Singapore Changi Airport Enterprise Pte Ltd; Changi Airports International Pte. Ltd; Air Transport Training College Pte Ltd;
Advanced Material Technologies Pte Ltd; Silkroute E-commerce Fund I Ltd; Pasir Ris resort Pte Ltd.
Sven Bang Ullring
NORSK HYDRO ASA, Oslo; STOREBRAND ASA, Oslo; SCHLUMBERGER, New York; Det Norske Veritas, Oslo.
Tsao Yuan Mrs Lee Soo Ann
Director of Pacific Internet Limited; Chairman of the International Trade Institute of Singapore (ITIS); Deputy Chairman of the
protem exco of the eLearning Chapter of the Singapore IT Federation; Director of Keppel Capital Holdings Ltd and Keppel FELS
Energy & Infrastructure Limited; Executive Deputy Chairman of Inchone.com Pte Ltd; Governor of Singapore International
Foundation and the United World College of South East Asia.
Leung Chun Ying
Dao Heng Bank Group Ltd; Dao Heng Finance Ltd; DBS Overseas Trust Bank Ltd.
Oon Kum Loon
Intraco Limited; General Securities Investments Limited; PT Bank DBS Indonesia.
Tow Heng Tan
IE Singapore; Shangri-la Asia Limited.
Yeo Wee Kiong
China Sun Bio-Chem Technology Group Company Ltd, Ezyhealth Asia Pacific Ltd, ISG Asia Limited, Global Testing Corporation
Ltd; ASJ Ltd; Pacific Internet Ltd; Territory Iron Ltd; AEM-Evertech Holdings Ltd; Compact Metal Industries Ltd;
Choo Chiau Beng
AMFELS Inc; AzerFELS Pte Ltd; Caspian Shipyard Company Limited; EDBI Investments Pte Ltd; FELS Baku Limited; FELS
Consultancy Pte Ltd; FELS Offshore Pte Ltd; FELS Property Holdings Pte Ltd; FELS Realty (Texas) Inc; FELS SES International
Pte Ltd; FELS (USA) Inc; K1 Ebiz Holdings Private Limited; K Investment Holdings Pte Ltd; Kepital Holdings (Pte) Ltd; Kepmount
Shipping Pte Ltd; Keppel Asia Limited; Keppel FELS (China) Ltd; Keppel FELS Invest (HK) Ltd; Keppel Infrastructure Pte Ltd;
Keppel Marine Agencies Inc; Keppel Oil & Gas Services Pte Ltd; Keppel Offshore Investment Ltd; Keppel Power Systems Pte
Ltd; Keppel Regional Infrastructure Pte Ltd; Keppel Telecoms Pte Ltd; Keppel-UAE Investment Pte Ltd; Keppel Vietnam
Investment Pte Ltd; Kepventure Pte Ltd; MobileOne (Asia) Pte Ltd; Offshore CIM Engineering Projects Pte Ltd; Pacven
Investment Ltd; Pacven Walden Management Singapore Pte Ltd; Steamers Containerships Holdings Pte Ltd; Steamers
Telecommunications Pte Ltd; Travelmore Pte Ltd; Waterfront Development Consultants Pte Ltd; WIIG Global Ventures Pte Ltd.
Teo Soon Hoe
Keppel Bank Philippines Inc; Centurion Bank Limited; Southern Bank Bhd; Keppel Shipyard Limited.
Directors and key executives
Keppel Corporation Limited
Report to Shareholders 2006
223
Directors and key executives
Key Executives
Tong Chong Heong
Nil
Kevin Wong Kingcheung
HDB Corporation Pte Ltd; subsidiaries and associates of Keppel Land Limited.
Lam Kwok Chong
Keppel Global Investors Pte Ltd; Keppel Insurance Pte Ltd; Keppel Bank Philippines, Inc.; Poverest Investments Limited; Netrust
Pte Ltd; Nippon Keppel Communications Kabushiki Kaisha; Rodway Investments Ltd; Folec Holdings (M) Sdn Bhd; Steamers
Telecommunications Pte Ltd; Computer Generated Solutions (Asia) Pte Ltd; Keppel Securities Philippines Inc.; Indotel Ltd; SEM
Thong Nhuat Hotel Metropole; Societe de Development de Metropole (SDM) B.V.; Folec Communications (B) Sdn Bhd; Blue
Cherries, Inc.; Business Online Public Co Ltd; DataOne Corporation Pte Ltd.
Ong Tiong Guan
Nil
Koh Ban Heng
Changi Airport Fuel Hydrant Installation Pte. Ltd.; FST Aviation Services Limited; SPC Shipping Company Limited; Singapore
Petroleum (China) Private Limited; Singapore Petroleum (Thailand) Co. Ltd; Singapore Petroleum Trading Company Limited; SPC
Cambodia Ltd.
Chua Chee Wui
Nil
224 Directors and key executives
Keppel Corporation Limited
Report to Shareholders 2006
Major properties
Effective
Group
Interest
Location
Description and
Approximate
Land Area
Tenure
Usage
Held by
Completed properties
Ocean Properties Pte Ltd
40%
K-Reit Asia
53%
DL Properties Ltd
34%
Keppel Bay Pte Ltd
86%
Ocean Building
Collyer Quay,
Singapore
Ocean Towers
Collyer Quay,
Singapore
Prudential Tower
Cecil Street &
Church Street,
Singapore
Keppel Towers
Hoe Chiang Rd,
Singapore
GE Tower
Hoe Chiang Rd,
Singapore
Bugis Junction
Tower
Victoria Street,
Singapore
Equity Plaza
Cecil Street,
Singapore
Caribbean at
Keppel Bay,
Singapore
Land area: 6,109 sqm
29-storey office building
999 years leasehold
Commercial office building with
rentable area of 39,255 sqm
27-storey office building
30-storey office building
99 years leasehold
Commercial office building with
rentable area of 22,990 sqm
Commercial office building with
rentable area of 10,250 sqm
(retained interest)
Land area: 7,760 sqm
27-storey office building
Freehold
Commercial office building with
rentable area of 32,666 sqm
Land area: 1,367 sqm
13-storey office building
Freehold
Commercial office building with
rentable area of 7,378 sqm
15-storey office building
99 years leasehold
Commercial office building with
rentable area of 22,990 sqm
Land area: 2,345 sqm
28-storey office building
99 years leasehold
Commercial office building with
rentable area of 23,962 sqm
797 out of 969 units
have been sold.
99 years leasehold
Waterfront condominium
apartments
One Raffles Quay
17%
One Raffles Quay,
Singapore
Land area: 11,367 sqm
Two office towers
99 years leasehold
Commercial office building with
rentable area of 124,435 sqm
HarbourFront One Pte Ltd
64%
Keppel Bay Tower
HarbourFront
Avenue,
Singapore
Land area: 17,267 sqm
18-storey office building
99 years leasehold
Commercial office building with
rentable area of 36,673 sqm
HarbourFront Two Pte Ltd
33%
HarbourFront
Land area: 15,072 sqm
Tower One and Two 18-storey and 13-storey
HarbourFront
Place,
Singapore
office buildings
99 years leasehold
Commercial office buildings with
rentable area of 49,411 sqm
Major properties
Keppel Corporation Limited
Report to Shareholders 2006
225
Major properties
Held by
Effective
Group
Interest
Location
Description and
Approximate
Land Area
Tenure
Usage
PT Straits-CM Village
21%
Club Med
Ria Bintan Bintan,
Indonesia
Land area: 200,000 sqm 30 years lease
with option for
another 50 years
A 302-room beachfront hotel
PT Kepland Investama
53%
Keppel Land Watco I
Co Ltd
36%
Straits Greenfield Ltd
53%
Properties under development
BFC Development Pte Ltd
17%
Keppel Land Realty Pte Ltd 53%
Sherwood Development
Pte Ltd
53%
Keppel Bay Pte Ltd
86%
Wisma BCA
Jakarta,
Indonesia
Saigon Centre
(Phase 1 Tower)
Ho Chi Minh City,
Vietnam
Sedona Hotel
Yangon,
Myanmar
Marina Bay
Financial Centre/
Marina Bay
Residences Marina
Boulevard/Central
Boulevard,
Singapore
Park Infinia
Wee Nam/
Keng Lee Road,
Singapore
Urbana
River Valley Road,
Singapore
Reflections at
Keppel Bay,
Singapore
Keppel Bay
Plot 3,5 and 6,
Singapore
Land area: 10,444 sqm
Land area: 2,730 sqm
25-storey office, retail
cum serviced apartments
20 years lease
with option for
another 20 years
50 years lease
A prime office development with
rentable area of 38,093 sqm
Commercial building with
rentable area of 10,443 sqm office,
3,663 sqm retail, 305 sqm post
office and 89 units of serviced
apartments
Land area: 31,889 sqm
30 years BOT with
option for another
three 5-year periods
334-room hotel, 32 serviced
apartments and 30 office suites
Land area: 20,505 sqm
99 years leasehold
Integrated office/retail/residential
*(2010)
Land area: 21,733 sqm
Freehold
A 486-unit condominium
development *(2007)
Land area: 5,639 sqm
Freehold
A 126-unit condominium
development *(2007)
Land area: 83,591 sqm
99 years lease
A 1,129-unit waterfront
condominium development
Land area: 88,628 sqm
99 years lease
Waterfront condominium and
marina development
Devonshire Development
Pte Ltd (joint venture)
32%
Devonshire Road,
Singapore
Land area: 7,400 sqm
Freehold
A 157-unit luxurious condominium
development *(2008)
226 Major properties
Keppel Corporation Limited
Report to Shareholders 2006
Held by
Effective
Group
Interest
Location
Description and
Approximate
Land Area
Tenure
Usage
Shanghai Pasir Panjang
Land Co Ltd
52%
21%
53%
16%
Spring City Golf &
Lake Resort Co
(owned by Kingsdale
Development)
Shanghai Ming Hong
Property Co
CityOne Development
(Wuxi) Co (owned by
Pasir Panjang Realty
Pte Ltd)
PT Mitra Sindo Sukses/
PT Mitra Sindo Makmur
27%
Industrial properties
Keppel FELS Limited
100%
Eight Park Avenue
Shanghai,
China
Spring City Golf &
Lake Resort
Kunming,
China
Villa Riviera
Shanghai,
China
Township
Development
Wuxi,
China
Residential
Township
Jakarta,
Indonesia
Land area: 33,432 sqm
70 years lease
946-unit residential apartments
development (Plot B) *(2009/2010)
Land area: 2,157,361 sqm 70 years lease
Integrated resort comprising
golf courses, resort homes and
resort facilities *(2010)
Land area: 153,726 sqm 70 years lease
168-unit villas and landed homes
development *(2007/2008)
Land area: 352,534 sqm 70 years lease
(residential)
40 years lease
(commercial)
50 years lease
(others)
4,700-unit residential township
development with integrated
facilities to be developed in phase
Land area: 2,700,000 sqm 30 years lease with
7,000-unit residential township
option for another
20 years
Jurong, Pioneer
and Cresent Yard,
Singapore
Land area: 604,509 sqm 24-30 years leasehold
buildings, workshops,
building berths and
wharves
Oil rigs, offshore and marine
construction and repair
Keppel Shipyard Limited
100%
Benoi and
Tuas Yard,
Singapore
Land area: 775,527 sqm 30 years leasehold
buildings, workshops,
drydocks and wharves
Shiprepairing, shipbuilding and
marine construction
* Expected year of completion
Major properties
Keppel Corporation Limited
Report to Shareholders 2006
227
Group five-year performance
Selected Profit & Loss Account Data
($ million)
Revenue
Operating profit
Profit before taxation & exceptional items
Attributable profit
Before exceptional items
After exceptional items
Selected Balance Sheet Data
($ million)
Fixed assets & properties
Investments
Stocks, debtors & cash
Intangibles
Total assets
Less :
Creditors
Borrowings
Other liabilities
Net assets
Share capital & reserves
Minority interests
Capital employed
Per Share
Earnings (cents) (Note 1):
Before tax & exceptional items
Attributable profit
Before exceptional items
After exceptional items
Gross dividend (cents)
Capital distribution (net) (cents)
Total distribution (cents)
Net assets ($)
Net tangible assets ($)
Financial Ratios
Return on shareholders’ funds (%) (Note 2):
Profit before exceptional items
Before tax
Attributable profit
Dividend cover (times)
Net gearing (times)
Employees
Number
Wages & salaries ($ million)
2002
2003
2004
2005
2006
5,528
463
513
356
359
4,484
1,605
5,248
141
11,478
2,340
4,705
557
3,876
2,721
1,155
3,876
54.2
46.4
46.8
18.0
12.0
30.0
3.53
3.35
15.7
13.4
3.3
1.00
5,947
503
557
394
397
3,800
1,682
4,604
147
10,233
2,001
3,788
481
3,963
2,893
1,070
3,963
58.7
51.0
51.4
19.0
18.0
37.0
3.73
3.54
16.2
14.0
3.4
0.77
3,963
409
645
465
464
3,482
1,839
5,059
125
10,505
2,402
3,699
148
4,256
3,090
1,166
4,256
70.5
59.9
59.8
20.0
20.0
40.0
3.97
3.81
18.3
15.5
3.7
0.64
5,688
467
826
564
564
3,907
2,664
5,874
145
12,590
3,750
3,731
174
4,935
3,646
1,289
4,935
87.8
72.1
72.1
23.0
23.0
46.0
4.65
4.47
20.0
16.4
3.9
0.47
7,601
804
1,139
751
751
4,187
3,113
6,381
135
13,816
5,103
2,957
158
5,598
4,205
1,393
5,598
123.1
95.4
95.4
28.0
28.0
56.0
5.34
5.17
24.7
19.1
4.3
0.24
19,947
669
20,505
708
22,186
695
23,625
803
29,185
931
Notes:
1. Earnings per share are calculated based on the Group profit by reference to the weighted average number of shares in issue during the year.
2.
In calculating return on shareholders’ funds, average shareholders’ funds has been used.
228 Group five-year performance
Keppel Corporation Limited
Report to Shareholders 2006
2006
Group revenue of $7,601 million was $1,913 million or 34% higher than that of the previous year. Revenue from Offshore &
Marine of $5,755 million was $1,643 million or 40% higher and accounted for 76% of Group revenue. Twenty six newbuilds and
conversions were completed and delivered in the year, on time or ahead of time and within budget. Revenue from ship and rig
repairs was also strong. Property achieved revenue of $1,155 million, $308 million or 36% higher. The increased revenue was
underpinned by higher sales and prices of the Group’s new and existing trading projects both in Singapore and regionally. Rental
income from investment properties was higher as a result of the tight supply of prime office buildings in the Singapore Central
Business District. Keppel T&T reported lower revenue as no major new network engineering contract was secured. Revenue
from electricity trading also declined as non-profitable fixed price contracts were not renewed.
Group profit before tax exceeded $1 billion for the first time to $1,139 million, 38% higher than the previous year. Offshore &
Marine, which had an exceptionally busy year contributed significantly to the Group earnings growth. The division’s profit before
tax of $624 million was $273 million or 78% higher. Revenue and operating margins improved with higher prices and efficient
project execution. Property posted earnings of $233 million, 5% above the previous year due to the higher revenue from trading
projects and profit from sale of a piece of land in Tianjin and an equity interest in a property project. Infrastructure returned to
profitability in the fourth quarter with the commercial operation of the power barges in Ecuador. However, the quarter’s profit
was not sufficient to reverse the losses in the first nine months. Earnings from Investments were higher with gains from the
sale of investments and much better contributions from k1 Ventures which benefited from the divestment of The Gas Company,
LLC. These were more than sufficient to offset the lower contributions from SPC, which was affected by lower margins in the
second half year.
Group taxation expenses were higher in the year as a result of higher profits from overseas operations. After taking into account
the higher taxation charge and minority share of profit, the attributable profit to shareholders was $751 million.
2005
Group revenue of $5,688 million for the year was $1,725 million or 44% higher than that of the previous year. Revenue from
Offshore & Marine of $4,112 million was 69% higher and contributed 72% of Group revenue. The net orderbook carried over
from the previous year and the record new orders secured in the year contributed to the increased revenue of Offshore &
Marine. Revenue from Property of $848 million was $137 million or 19% higher than the previous year. The increased revenue
was due to the strong performance of the Group’s trading projects both in Singapore and overseas. The increased revenue from
Offshore & Marine and Property was partially offset by lower revenue from Infrastructure following the cessation of the power
barges contract in Brazil at the end of the previous year.
Group pre-tax profit of $826 million was 28% higher than the previous year with increased contributions from Offshore & Marine,
Property and SPC. Offshore & Marine benefited from profit recognition of completed jobs arising from its large orderbook.
Keppel Land’s earnings rose by 31% from the healthy sales of its residential developments. However, this was partially offset by
lower earnings from Caribbean at Keppel Bay. Losses were incurred by the Infrastructure because of the redeployment cost of
the power barges and losses in electricity trading. KIE returned to profitability after the restructuring efforts from the previous
year. The continuing tight refining capacity and strong growth in demand for refined products led to significantly higher earnings
at SPC.
Taking into consideration taxation and minority share of profits, the resultant profit attributable to shareholders of $564 million
was 21% higher than the previous year. Offshore & Marine remains the largest contributor to attributable earnings with 42%,
followed by SPC with 33%, Property with 21% and the rest from Keppel T&T and Investments net of the losses of
Infrastructure.
Revenue ($ billion)
8
Pre-Tax Profit ($ million)
1200
PATMI ($ million)
800
7
6
5
4
3
2
1
0
7.6
1,139
5.9
5.5
5.7
4.0
2002
2003
2004
2005
2006
1000
800
600
400
200
0
826
645
557
513
2002
2003
2004
2005
2006
700
600
500
400
300
200
100
0
751
564
465
394
356
2002
2003
2004
2005
2006
Group five-year performance
Keppel Corporation Limited
Report to Shareholders 2006
229
Group five-year performance
2004
Group revenue was below that of the previous year due mainly to the deconsolidation of SPC. If revenue of SPC were to be
excluded from previous year, there would have been a 20% increase in Group’s revenue due to a hefty increase in Offshore &
Marine’s revenue.
Group pre-tax profit of $645 million and attributable profit of $465 million were 16% and 18% above those of 2003 respectively.
The Group’s strong earnings growth was underpinned by the vastly improved performances of Offshore & Marine from a strong
order book and SPC from increased refining margins and demand for its products. Property also achieved commendable
earnings improvement in 2004 mainly from its residential development projects in China. Infrastructure’s performance was
affected by the lower than expected revenue from its investment in environmental engineering unit, Seghers Keppel Technology
(SKG), and by costs associated with the restructuring of SKG to focus on growth segments.
2003
Group revenue of $5.9 billion was 8% above that of 2002 due mainly to higher revenue from Property, Infrastructure and SPC,
partially offset by lower revenue from Offshore & Marine.
Attributable profit of $394 million exceeded those of 2002’s record earnings by 11%, despite the adverse impact from the Iraq
war and SARS in the first half year. If the one-off deferred tax adjustment of $20 million in 2002 was excluded, earnings in 2003
would have increased by 18%.
The Group’s commendable results came mainly from a full year’s earnings of the power barges, contribution from the residential
development in China and gains on quoted securities. Earnings from Offshore & Marine decreased with the lower value of
contracts secured in 2002.
2002
Group revenue of $5.5 billion was 6% lower than that of 2001, which included the revenue of Keppel Capital Holdings up to
August 2001 before it was divested. Excluding Keppel Capital Holdings, Group revenue would have increased by $470 million as
all core activities, particularly Offshore & Marine, reported higher revenue.
Group pre-tax profit of $513 million was 23% lower than 2001, due mainly to the exclusion of contributions from Keppel Capital
Holdings that was partially offset by higher earnings from the remaining businesses. Excluding Keppel Capital Holdings, Group
pre-tax profit would have exceeded that in 2001 by $166 million. However, attributable profit of $356 million, which included $20
million from the write-back of deferred taxation due to the reduction in the Singapore corporate tax rate, was $89 million or 33%
above that of 2001.
The improved performance was achieved without Keppel Capital Holdings as Offshore & Marine doubled its earnings, which
represented 51% of the Group’s earnings. Property also turned in increased earnings and SPC and Keppel T&T returned to
profitability.
Shareholders’ Funds ($ billion)
5
Capital Employed ($ billion)
6
Market Capitalisation ($ billion)
15
4
3
2
1
0
4.2
3.6
3.1
2.9
2.7
2002
2003
2004
2005
2006
5
4
3
2
1
0
5.6
4.9
3.9
4.0
4.3
2002
2003
2004
2005
2006
13.9
12
9
6
3
0
8.6
6.7
4.7
2.8
2002
2003
2004
2005
2006
230
Group five-year performance
Keppel Corporation Limited
Report to Shareholders 2006
Group value-added statements
($ million)
Value added from:
Revenue earned
Less purchases of materials and services
Gross value added from operation
In addition:
Interest and investment income
Share of associated companies’ profits
Exceptional items
Distribution of Group’s value added:
To employees in wages, salaries and benefits
To government in taxation
To providers of capital on:
Interest on borrowings
Dividends to our partners in subsidiaries
Dividends to our shareholders
Total Distribution
Balance retained in the business:
Depreciation & amortisation
Minority share of profits in subsidiaries
Retained profit for the year
Number of employees
Productivity data:
2002
2003
2004
2005
2006
5,528
(4,211)
1,317
5,947
(4,511)
1,436
37
79
3
31
89
3
1,436
1,559
669
84
66
20
144
230
983
186
52
215
453
708
64
67
28
109
204
976
223
71
289
583
3,963
(2,679)
1,284
23
253
-
1,560
695
90
41
22
124
187
972
180
68
340
588
5,688
(4,287)
1,401
60
321
-
1,782
803
153
22
36
131
189
7,601
(5,738)
1,863
83
315
-
2,261
931
258
62
73
157
292
1,145
1,481
132
73
432
637
127
60
593
780
1,436
1,559
1,560
1,782
2,261
19,947
20,505
22,186
23,625
29,185
Gross value added per employee ($’000)
Gross value added per dollar employment cost ($)
Gross value added per dollar sales ($)
66
1.97
0.24
70
2.03
0.24
58
1.85
0.32
59
1.74
0.25
64
2.00
0.25
($ million)
2500
2000
1500
1000
500
0
1,436
1,559
1,560
453
230
84
669
583
204
64
708
588
187
90
695
2,261
780
292
258
931
1,782
637
189
153
803
2002
2003
2004
2005
2006
Depreciation & Retained Profit
Interest Expense & Dividends
Taxation
Wages, Salaries & Benefits
Group value-added statements
Keppel Corporation Limited
Report to Shareholders 2006
231
Share performance
Turnover (million)
Share Prices ($)
200
180
160
140
120
100
80
60
40
20
0
20
18
16
14
12
10
8
6
4
2
0
2002
2003
2004
2005
2006
Turnover
High and Low Prices
Share price ($) (Note 1)
Last transacted
High
Low
Volume weighted average
Per share
Earnings (Note 1) (cents)
Gross dividend (cents)
Capital distribution (net) (cents)
Distribution yield (Note 2) (%)
Net price earnings ratio (Note 2)
Net assets backing ($)
2002
2003
2004
2005
2006
3.70
4.74
2.80
3.97
46.4
18.0
12.0
7.6
8.6
3.35
6.10
6.15
3.56
4.74
51.0
19.0
18.0
7.8
9.3
3.54
8.60
8.75
6.00
7.48
59.9
20.0
20.0
5.4
12.5
3.81
11.00
13.20
8.50
11.37
72.1
23.0
23.0
4.1
15.8
4.47
17.60
18.50
11.10
14.44
95.4
28.0
28.0
3.9
15.1
5.17
Notes:
1. Earnings per share are calculated based on the Group PATMI by reference to the weighted average number of shares in issue during the year.
2. Volume weighted average share price is used in calculating distribution yield and net price earnings ratio.
232 Share performance
Keppel Corporation Limited
Report to Shareholders 2006
Shareholding statistics
As at 1 March 2007
Total number of issued Shares
Issued and Fully Paid-up Capital
Class of Shares
: 789,211,757 Shares
: $981,467,646.03
: Ordinary Shares with equal voting rights
Size of Shareholdings
1 - 999
1,000 – 10,000
10,001 – 1,000,000
1,000,001 and above
Total
Twenty Largest Shareholders
Temasek Holdings (Pte) Ltd
DBS Nominees Pte Ltd
DBSN Services Pte Ltd
Citibank Nominees Singapore Pte Ltd
HSBC (Singapore) Nominees Pte Ltd
United Overseas Bank Nominees Pte Ltd
Raffles Nominees Pte Ltd
Morgan Stanley Asia (S) Securities Pte Ltd
DB Nominees (S) Pte Ltd
Shanwood Development Pte Ltd
Merrill Lynch (Singapore) Pte Ltd
OCBC Nominees Singapore Pte Ltd
Macquarie Securities (S) Pte Ltd
Lim Chee Onn
Teo Soon Hoe
The Asia Life Assurance Society Ltd - PAR Fund
Kim Eng Securities Pte Ltd
Choo Chiau Beng
DBS Vickers Securities (S) Pte Ltd
Royal Bank of Canada (Asia) Ltd
Total
Number of
Shareholders
667
8,658
844
16
%
6.55
85.00
8.29
0.16
Number of
Shares
237,537
23,670,855
35,394,789
729,908,576
%
0.03
3.00
4.48
92.49
10,185
100.00
789,211,757
100.00
Number of
Shares
168,821,951
153,647,310
115,097,263
85,452,169
83,844,807
47,516,537
45,258,738
13,544,221
3,995,342
3,200,000
2,040,544
2,001,905
1,428,540
1,357,083(i)
1,354,166(ii)
1,158,000
996,417
975,833(iii)
766,250
729,207
733,186,283
%
21.39
19.47
14.58
10.83
10.62
6.02
5.73
1.72
0.51
0.41
0.26
0.25
0.18
0.17
0.17
0.15
0.13
0.12
0.10
0.09
92.90
Note:
(i)
(ii)
(iii)
Includes 146,625 Shares held by OCBC Nominees Singapore Pte Ltd on his behalf.
Includes 20,000 Shares held by OCBC Nominees Singapore Pte Ltd on his behalf.
Includes 190,000 Shares held by DBS Nominees Pte Ltd and 200,000 Shares held by UBS AG, on his behalf.
Substantial Shareholder
Temasek Holdings (Pte) Ltd
Direct Interest
Deemed Interest
Total Interest
No. of Shares
168,821,951
%
21.39
No. of Shares
4,166,000(i)
%
0.53
No. of Shares
172,987,951
%
21.92
Note (i):-
By operation of Section 7 of the Companies Act, Temasek Holdings (Pte) Ltd is deemed to be interested in an aggregate of 4,166,000 Shares in which its
subsidiaries and associated companies have an aggregate interest.
Public Shareholders
Approximately 77% of the issued shares of the Company is held by the public and therefore, pursuant to Rules 1207 and 723 of
the Listing Manual of the Singapore Exchange Securities Trading Limited, it is confirmed that at least 10% of the ordinary shares
of the Company is at all times held by the public.
Shareholding statistics
Keppel Corporation Limited
Report to Shareholders 2006
233
Notice of annual general meeting/closure of books
eppel
Corporation
Keppel Corporation Limited
Co Reg No: 196800351N
(Incorporated in the Republic of Singapore)
NOTICE IS HEREBY GIVEN that the 39th Annual General Meeting of the ordinary shareholders of the Company will be held at
InterContinental Singapore, Ballrooms 1 & 2 (Level 2), 80 Middle Road, Singapore 188966 on Friday, 27 April 2007 at 2.30 p.m. to
transact the following business:
As ordinary business
Resolution 1
To receive and adopt the Directors’ Report and Audited Accounts for the year ended 31 December 2006.
Resolution 2
To declare a final dividend of 16 cents per share less tax for the year ended 31 December 2006 (2005: final dividend of 13 cents
per share less tax) (see Note 2).
To re-elect the following directors, each of whom will retire pursuant to Article 81B of the Company’s Articles of Association and
who, being eligible, offer themselves for re-election pursuant to Article 81C (see Note 3):
(i)
(ii)
Lim Hock San (Resolution 3)
Oon Kum Loon (Mrs) (Resolution 4)
(iii)
Tow Heng Tan (Resolution 5)
Resolution 6
To re-elect Mr Sven Bang Ullring who, having attained the age of 70 years after the last annual general meeting, will cease to be
a director at the conclusion of this annual general meeting in accordance with Section 153(2) of the Companies Act (Cap. 50), and
who, being eligible, offers himself for re-election pursuant to Section 153(6) to hold office until the next annual general meeting
of the Company (see Note 3).
Resolution 7
To approve directors’ fees of $610,000 for the year ended 31 December 2006 (2005: $564,170) (see Note 4).
Resolution 8
To re-appoint Auditors and authorise the Directors to fix their remuneration.
234 Notice of annual general meeting/closure of books
Keppel Corporation Limited
Report to Shareholders 2006
As special business
Resolution 9
To consider and if thought fit, approve, with or without modification, the following resolution, which will be proposed as an
Ordinary Resolution:
That pursuant to Section 161 of the Companies Act (Chapter 50) and Article 48A of the Company’s Articles of Association,
authority be and is hereby given to the Directors of the Company to:-
(a)
(i)
issue shares in the capital of the Company (“Shares”) whether by way of right, bonus or otherwise, and including
any capitalisation pursuant to Article 124 of the Company’s Articles of Association of any sum for the time being
standing to the credit of any of the Company’s reserve accounts or any sum standing to the credit of the profit and
loss account or otherwise available for distribution; and/or
(ii) make or grant offers, agreements or options that might or would require Shares to be issued (including but not
limited to the creation and issue of (as well as adjustments to) warrants, debentures or other instruments
convertible into Shares) (collectively, “Instruments”),
at any time and upon such terms and conditions and for such purposes and to such persons as the Directors may in their
absolute discretion deem fit; and
(b)
(notwithstanding that the authority so conferred by this Resolution may have ceased to be in force) issue Shares in
pursuance of any Instrument made or granted by the Directors while the authority was in force, provided that:-
(1)
the aggregate number of Shares to be issued pursuant to this Resolution (including Shares to be issued in
pursuance of Instruments made or granted pursuant thereto and any adjustments effected under any relevant
Instrument), does not exceed 50% of the issued Shares in the capital of the Company (as calculated in accordance
with sub-paragraph (2) below), of which the aggregate number of Shares to be issued other than on a pro rata basis
to shareholders of the Company (including Shares to be issued in pursuance of Instruments made or granted
pursuant to this Resolution and any adjustments effected under any relevant Instrument) does not exceed 20% of
the issued Shares in the capital of the Company (as calculated in accordance with sub-paragraph (2) below);
(2)
for the purpose of determining the aggregate number of Shares that may be issued under sub-paragraph (1) above,
the percentage of issued Shares shall be calculated based on the number of issued Shares in the capital of the
Company as at the date of the passing of this Resolution after adjusting for:-
(i)
new Shares arising from the conversion or exercise of convertible securities or employee share options or
vesting of share awards outstanding or subsisting as at the date of the passing of this Resolution; and
(ii)
any subsequent consolidation or sub-division of Shares;
(3)
(4)
in exercising the power to make or grant Instruments (including the making of any adjustments under the relevant
Instrument), the Company shall comply with the provisions of the listing manual of the Singapore Exchange
Securities Trading Limited (“SGX-ST”) for the time being in force (unless such compliance has been waived by the
SGX-ST) and the Articles of Association for the time being of the Company; and
(unless revoked or varied by the Company in general meeting), the authority conferred by this Resolution shall
continue in force until the conclusion of the next annual general meeting of the Company or the date by which the
next annual general meeting is required by law to be held whichever is the earlier (see Note 5).
To transact such other business which can be transacted at an Annual General Meeting of the Company.
Notice of annual general meeting/closure of books
Keppel Corporation Limited
Report to Shareholders 2006
235
Notice of annual general meeting/closure of books
NOTICE IS ALSO HEREBY GIVEN that the Transfer Books and the Register of Members of the Company will be closed on 5
May 2007, for the preparation of dividend warrants. Duly completed transfers received by the Company’s registrar, B.A.C.S. Pte
Ltd, 63 Cantonment Road, Singapore 089758 up to the close of business at 5.00 p.m. on 4 May 2007 will be registered to
determine shareholders’ entitlement to the proposed final dividend. The proposed final dividend if approved at this annual general
meeting will be paid on 15 May 2007.
BY ORDER OF THE BOARD
Caroline Chang
Company Secretary
Singapore, 27 March 2007
Notes:
1. A member of the Company is entitled to appoint a proxy to attend the meeting and vote in his stead. A proxy need not be a member of the Company.
The instrument appointing a proxy must be deposited at the registered office of the Company at 1 HarbourFront Avenue, #18-01 Keppel Bay Tower,
Singapore 098632, not less than 48 hours before the time appointed for holding the annual general meeting.
2. The Company is proposing, at an extraordinary general meeting to be held immediately following the conclusion or adjournment of this annual general meeting,
that each ordinary share (“Share”) in the capital of the Company be sub-divided into two Shares (the “Proposed Sub-Division”). In the event (i) the Proposed
Sub-Division and the proposed final dividend for the year ended 31 December 2006 are approved by shareholders, and (ii) the books closure date for the
Proposed Sub-Division and proposed final dividend fall on the same date, the entitlements of shareholders to the proposed final dividend will be determined
based on the number of Shares held by the shareholders as at 5.00 p.m. on the books closure date for the proposed final dividend, but before the Proposed
Sub-Division takes effect. Please refer to the Company’s Circular to shareholders dated 27 March 2007 for further details.
3. Detailed information about these directors can be found in the Board of Directors and Information on Directors and Key Executives sections of the Company’s
Annual Report. Mr Lim Hock San will upon re-election, continue to serve as Chairman of the Audit Committee and member of the Executive and Board Risk
Committees. Mrs Oon Kum Loon will upon re-election, continue to serve as Chairman of the Board Risk Committee and member of the Executive, Audit and
Nominating Committees. Mr Tow Heng Tan will upon re-election, continue to serve as member of the Executive, Remuneration and Board Risk Committees.
Mr Sven Ullring will upon re-election, continue to serve as Chairman of the Nominating and Remuneration Committees and member of the Board Safety
Committee. These directors (other than Mr Tow Heng Tan who is a non-executive, non-independent director) are considered by the Nominating Committee to
be independent directors.
4. The Company is proposing, at an extraordinary general meeting to be held immediately following the conclusion or adjournment of this annual general meeting
that the remuneration of its non-executive directors be made partly by way of directors’ fees in cash and partly in a fixed number of shares in the capital of the
Company. For the financial year ended 31 December 2006, the number of shares proposed to be purchased from the market for delivery to each non-executive
director is 1,000 shares. Please refer to the Company’s Circular to shareholders dated 27 March 2007 for further details.
5. Ordinary Resolution No. 9, is to empower the directors from the date of this annual general meeting until the date of the next annual general meeting to issue
further Shares and Instruments in the Company, including a bonus or rights issue. The maximum number of Shares, which the directors may issue under this
resolution shall not exceed the quantum set out in this resolution.
236 Notice of annual general meeting/closure of books
Keppel Corporation Limited
Report to Shareholders 2006
Financial calendar
FY 2006
Financial year-end
Announcement of 2006 1Q results
Announcement of 2006 2Q results
Announcement of 2006 3Q results
Announcement of 2006 full year results
Despatch of Summary Financial Report to shareholders
Despatch of Annual Report to shareholders
Annual General Meeting and Extraordinary General Meeting
2006 Proposed final dividend
Book closure date
Payment date
Proposed sub-division of shares
Book closure date
2006 Proposed capital distribution
Indicative book closure date
Indicative payment date
FY 2007
Financial year-end
Announcement of 2007 1Q results
Announcement of 2007 2Q results
Announcement of 2007 3Q results
Announcement of 2007 full year results
31 December 2006
27 April 2006
27 July 2006
26 October 2006
30 January 2007
27 March 2007
12 April 2007
27 April 2007
5.00pm, 4 May 2007
15 May 2007
5.00pm, 4 May 2007
5.00pm, 11 June 2007
20 June 2007
31 December 2007
April 2007
July 2007
October 2007
January 2008
Financial calendar
Keppel Corporation Limited
Report to Shareholders 2006
237
Corporate information
Board of Directors
Lim Chee Onn (Chairman)
Tony Chew Leong-Chee
Lim Hock San
Sven Bang Ullring
Tsao Yuan Mrs Lee Soo Ann
Leung Chun Ying
Oon Kum Loon (Mrs)
Tow Heng Tan
Yeo Wee Kiong
Choo Chiau Beng
Teo Soon Hoe
Executive Committee
Lim Chee Onn (Chairman)
Tony Chew Leong-Chee
Lim Hock San
Oon Kum Loon (Mrs)
Tow Heng Tan
Choo Chiau Beng
Teo Soon Hoe
Audit Committee
Lim Hock San (Chairman)
Tony Chew Leong-Chee
Oon Kum Loon (Mrs)
Nominating Committee
Sven Bang Ullring (Chairman)
Tsao Yuan Mrs Lee Soo Ann
Oon Kum Loon (Mrs)
Remuneration Committee
Sven Bang Ullring (Chairman)
Tsao Yuan Mrs Lee Soo Ann
Leung Chun Ying
Tow Heng Tan
Board Risk Committee
Oon Kum Loon (Mrs) (Chairman)
Lim Hock San
Tow Heng Tan
Yeo Wee Kiong
Board Safety Committee
Yeo Wee Kiong (Chairman)
Lim Chee Onn
Sven Bang Ullring
Tsao Yuan Mrs Lee Soo Ann
Company Secretary
Caroline Chang
Registered Office
1 HarbourFront Avenue
#18-01 Keppel Bay Tower
Singapore 098632
Telephone: (65) 6270 6666
Telefax: (65) 6413 6391
Email: keppelgroup@kepcorp.com
www.kepcorp.com
Registrar
B.A.C.S. Private Limited
63 Cantonment Road
Singapore 089758
Auditors
Deloitte & Touche
Certified Public Accountants
Singapore
Audit Partner: Chaly Mah Chee Kheong
(appointed in 2006)
238
Corporate information
Keppel Corporation Limited
Report to Shareholders 2006
Notes
Keppel Corporation Limited
Report to Shareholders 2006
239
Notes
Contents
1
2
10
28
29
30
32
34
38
40
42
64
66
68
76
90
96
97
98
100
110
116
124
130
138
Group financial highlights
Chairman’s statement
Grow beyond
Keppel Corporation at a glance
Group strategic directions
Group at a glance
Keppel around the world
Board of Directors
Keppel Group Boards of Directors
Senior management
Corporate governance
Investor relations
Awards and accolades
Special feature – Nurturing a safety culture
Special feature – Advancing technology,
growing innovation
Special feature – Keppel Bay
Operating and financial review
– Group structure
– Management discussion and analysis
– Offshore & Marine
– Property
– Infrastructure
– Investments
– Financial review and outlook
– Operations sustainability
144
148
153
154
158
159
160
163
164
165
204
213
214
215
216
Nurturing people
Corporate social responsibility
Directors’ report & financial statements
– Directors’ report
– Balance sheets
– Consolidated profit and loss account
– Statements of changes in equity
– Consolidated cashflow statement
– Notes to consolidated cashflow statement
– Notes to the financial statements
– Significant subsidiaries and
associated companies
– Statement by directors
– Independent auditors’ report
Interested person transactions
Directors and key executives
225 Major properties
228
231
232
233
234
237
238
Group five-year performance
Group value-added statements
Share performance
Shareholding statistics
Notice of annual general meeting/closure of books
Financial calendar
Corporate information
We leverage our core
competencies, form
value-enhancing
partnerships, develop
intellectual capital,
nurture our global
workforce and enhance
execution excellence to
realise the maximum
potential of our
key businesses.
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2
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0
6
Report to Shareholders 2006
grow
beyond...
numbers.
More than delivering strong financial numbers,
we are strengthening the sustainable growth
platforms of our key businesses to further
increase shareholder value.
Keppel Corporation Limited
(Incorporated in the Republic of Singapore)
1 HarbourFront Avenue
#18-01 Keppel Bay Tower
Singapore 098632
Tel: (65) 6270 6666
Fax: (65) 6413 6391
Email: keppelgroup@kepcorp.com
www.kepcorp.com
Co Reg No: 196800351N