Report to Shareholders 2007
Delivering
More
Scale &
Spread
Leveraging the collective strengths and global network
of its key businesses, Keppel Corporation is poised for
robust growth and delivering more to stakeholders.
OFFSHORE
& MARINE
$522 million
PROPERTY
$209 million
PATMI
● 2005
● 2006
● 2007
CONTENTS
OFFSHORE
& MARINE
$448 million
PROPERTY
$96 million
INFRASTRUCTURE
$27 million
OFFSHORE
& MARINE
$239 million
PROPERTY
$118 million
INFRASTRUCTURE
–$35 million
INFRASTRUCTURE
–$24 million
INVESTMENTS
$231 million
INVESTMENTS
$242 million
INVESTMENTS
$268 million
KEPPEL
CORPORATION
LIMITED
Group Financial Highlights
Chairman’s Statement
Infrastructure
Investments
Financial Review and Outlook
Group Structure
Management Discussion and Analysis
Offshore & Marine
Property
1
2
10 Key Messages: Delivering More
18 Key Figures
19 Group Strategic Directions
20 Group at a Glance
22 Keppel Around the World
24 Board of Directors
28 Keppel Group Boards of Directors
30 Keppel Technology Advisory Panel
32 Senior Management
34 Corporate Governance
56
Investor Relations
58 Awards and Accolades
60 Promoting a Green Culture
66 Sino-Singapore Tianjin Eco-City
74 Operating & Financial Review
75
76
78
90
98
106
114
122 Operations Sustainability
132 Nurturing People
138 Corporate Social Responsibility
145 Directors’ Report & Financial Statements
146 Directors’ Report
150 Balance Sheets
151 Consolidated Profi t and Loss Account
152 Statements of Changes in Equity
155 Consolidated Cashfl ow Statement
156 Notes to Consolidated Cashfl ow Statement
157 Notes to the Financial Statements
200 Signifi cant Subsidiaries and Associated Companies
210 Statement by Directors
211
212 Interested Person Transactions
213 Directors and Key Executives
221 Major Properties
224 Group Five-Year Performance
227 Group Value-Added Statements
228 Share Performance
229 Shareholding Statistics
230 Notice of Annual General Meeting and Closure of Books
234 Financial Calendar
235 Corporate Information
Independent Auditors’ Report
GROUP FINANCIAL HIGHLIGHTS
2007
2006 % change
Earnings per share (cents)
For the year ($ million)
Revenue
Profi t
EBITDA
Operating
Before tax & exceptional items
Attributable before exceptional items
Attributable after exceptional items
Operating cashfl ow
Free cashfl ow
Economic Value Added (EVA)
10,431 7,601 +37
1,176
931 +26
1,051
804 +31
1,556 1,139 +37
1,026
751 +37
1,131
751 +51
1,697 1,854
-8
1,151 1,480
-22
423 +43
604
Per share*
Earnings (cents)
Before tax & exceptional items
Attributable before exceptional items
Attributable after exceptional items
Net assets ($)
Net tangible assets ($)
81.4
64.9
71.5
3.28
3.24
61.5 +32
47.7 +36
47.7 +50
2.67 +23
2.58 +26
2006
2007
47.7
64.9
Return on Equity (%)
2006
2007
19.1
21.8
Distribution per share (cents)
At year-end ($ million)
Shareholders’ funds
Minority interests
Capital employed
Net borrowings
Net gearing (times)
5,205 4,205 +24
1,830 1,393 +31
7,035 5,598 +26
-53
-63
634 1,339
0.09
0.24
2006
2007
28.0
64.0
Return on shareholders’ funds (%)
Profi t before tax & exceptional items
Attributable profi t before exceptional items
27.4
21.8
24.7 +11
19.1 +14
Economic Value Added (EVA) ($ million)
Shareholders’ value*
Distribution (cents per share)
Interim dividend
Final dividend
Special dividend
Capital distribution
Total distribution
Share price ($)
Total Shareholder Return (%)
9.0
10.0
45.0
–
64.0
13.00
51.7
6.0 +50
8.0 +25
n.m.
–
14.0
n.m.
28.0 +129
8.80 +48
-21
65.3
2006
2007
423
604
1Q
2Q
3Q
4Q
Total
1Q
2Q
3Q
4Q
Total
2007
2006
Group quarterly results ($ million)
Revenue
EBITDA
Operating profi t
Profi t before tax & exceptional items
Attributable profi t before exceptional items
Earnings Per Share (cents)*
2,028 2,454 2,591 3,358 10,431 1,544 1,646 1,969 2,442 7,601
931
258
225
804
275 1,139
751
184
47.7
11.7
322
284
268
289
252
242
394
381
360
248
258
252
15.9 16.4 15.6
302 1,176
207
268 1,051
176
421 1,556
255
268 1,026
170
17.0 64.9 10.8
249
218
277
201
12.8
217
185
332
196
12.4
*Comparatives have been adusted for sub-division of shares in 200
n.m. not meaningful
7
Keppel Corporation Limited
Report to Shareholders 2007
Group Financial Highlights
1
CHAIRMAN’S STATEMENT
Return on Equity
21.8%
With prudent management and
sound policies, the Group is
on-track to deliver sustained growth
and enhance shareholder value.
DEAR SHAREHOLDERS,
I am pleased to report that we have
achieved another record year for Keppel.
Group Profi t After Tax And Minority
Interests (PATMI) exceeded the billion-
dollar mark for the fi rst time, an increase
of 37% compared to the previous year.
Earnings per share (EPS) grew 36% to
$0.65. This brings our CAGR for both
PATMI and EPS to about 23% over the
last seven years (2001– 2007). We
sustained consistent improvements in
Return on Equity (ROE) and Economic
Value Added (EVA), with ROE reaching
21.8%, from 19.1% in 2006; EVA
increased $181m to $604m. With a robust
balance sheet and healthy free cashfl ows,
net gearing declined to only 0.09x.
All our businesses performed better
in 2007. Offshore & Marine again
contributed more than half of our
earnings with $522m, up from $448m
the previous year. Property division
posted a 118% earnings increase to
$209m, while Infrastructure regained its
footing to fi nish the year profi tably with
$27m, reversing its previous $35m loss.
Our Investments division recorded an
11% increase in earnings, as Singapore
Petroleum Company hit a record PATMI
exceeding half-billion dollars.
2
Keppel Corporation Limited
Report to Shareholders 2007
Chairman’s Statement
In view of the sterling results, and with
this year being the 40th anniversary
of Keppel Corporation, the Board has
recommended a fi nal dividend of
10 cents per share and a special
dividend of 45 cents per share. This
brings the total payout for 2007 to
64 cents per share, representing a payout
ratio of almost 100%. Total Shareholder
Return (TSR) for the year was 52%, more
than twice the benchmark Straits Times
Index’s TSR of 21%.
DELIVERING MORE WITH
MULTIPLE GROWTH PLATFORMS
Offshore & Marine
Keppel Offshore & Marine (Keppel
O&M) continued to grow its market
reach, leveraging its extensive network
of yards worldwide to deliver more to
its customers. Global yard capacity
remained tight, with worldwide
Exploration & Production (E&P)
expenditures exceeding planned budgets
on the back of sustained high oil prices.
Riding on this strong market, Keppel
O&M’s net orderbook in 2007 grew by
16% to $12.2b, bolstered by another
record $7.4b of new contracts secured
during the year. With 43 rigs under
construction as at year-end, Keppel
O&M has already commenced accepting
orders for delivery as far ahead as 2011.
We cultivated new customers whilst
existing customers continued to entrust
us with repeat orders. Keppel O&M
was awarded by Petrobras a US$1.2b
contract to build the P-56 production
semisubmersible, a repeat of the P-51
currently being built at its Brazil yard.
Rowan also selected Keppel O&M to
build four jackups for the fi rst time,
even though their rigs are historically
built in-house. As ENSCO’s preferred
yard, Keppel O&M secured its fourth
ultra-deepwater semisubmersible
rig contract worth US$427m while
delivering their ninth premium jackup
early last year. In an operating
environment characterised by tight
labour and equipment constraints
resulting in project delays, our
customers value Keppel O&M’s
execution reliability thus ensuring that
their rig deliveries are in good time to
fulfi ll their own business commitments.
Equally signifi cant, Keppel O&M’s
spread of orders secured during the
year underscore its broad competencies
beyond just drilling jackups and
semisubmersible rigs. In particular, Keppel
O&M is well-positioned to exploit the
development and production phases of the
global E&P cycle with its comprehensive
suite of solutions. More than 30% of orders
secured by Keppel O&M in 2007 were
production rigs and FPSO conversions,
with another 18% from rigs capable
of undertaking drilling and production
concurrently, comprising its proprietary
KFELS N Class, as well as the world’s
fi rst FDPSO (fl oating-drilling-production-
storage-offl oading) conversion. Keppel
O&M also secured two accommodation
fl oatels, one of which is the fi rst for the
harsh North Sea environment in over
20 years. These fl oatels, together with
several specialised vessels, accounted for
20% of contracts secured.
Keppel O&M also added another
strategic footprint with a shipyard now
jointly under construction in Qatar’s Ras
Laffan port with Qatar Gas Transport
Company (NAKILAT). NAKILAT owns
and operates one of the largest LNG
fl eets in the world. This strategic initiative
will further entrench our participation
in the growing LNG carrier market, in
which Keppel O&M is a leading LNG
shiprepairer in Asia-Pacifi c outside Japan.
Qatar holds the third largest gas reserves
in the world and this facility, when ready
in 2010, will become a hub for the repair
and maintenance of LNG carriers. The
facility complements our existing fi ve-
year drydocking arrangements for repair
and maintenance of a fl eet of ten LNG
carriers on charter to Qatar Liquefi ed
Gas Company. It also lays yet another
important pivot for Keppel O&M’s
offshore and specialised shipbuilding
activities in the heart of the key Middle
East oil and gas production region.
Oil & Gas
Singapore Petroleum Company (SPC)
had a successful year executing its
PATMI ($ million)
2006
2007
751
1,026
$1,026m
+36.6%
PATMI improved 36.6% to
$1,026 million crossing the $1 billion
mark for the fi rst time.
Keppel Corporation Limited
Report to Shareholders 2007
Chairman’s Statement
3
CHAIRMAN’S STATEMENT
strategy to grow its upstream business,
scaling up its efforts to evolve into a
signifi cant integrated energy player in the
region. In the past year, SPC expanded
its E&P portfolio beyond Southeast Asia,
establishing beachheads into China as
well as Australia. A relatively young player
in this space, SPC made its largest
acquisition, paying US$223m for two
offshore Production Sharing Contracts
(PSCs) in China’s Bohai Bay, and
took on operatorship in an exploration
acreage in the Pearl River Mouth Basin,
China. These acquisitions enable it
to tap the potential of the booming
Chinese energy market while building up
invaluable oilfi eld operator experience
and expertise at the Pearl River Mouth
acreage. In Australia, SPC took up a
35% participating interest in Block T/47P
in the Bass Basin.
SPC now has eight PSCs and one
exploration permit in the region, namely
in Indonesia, Cambodia, Vietnam, China
and Australia. Including its 4,300 barrels
of oil per day share of the Bohai Bay
production, SPC’s production capacity
has ramped up from a single PSC
producing just 2,500 boepd (barrels
of oil equivalent per day) a year ago
to four separate PSCs yielding about
10,000 boepd currently. Over time,
SPC’s upstream drive is intended to
counterbalance the volatile nature of the
refi ning sector to provide a more stable
earnings profi le. Indeed, SPC’s operating
profi t contribution from E&P activities
has increased more than three-fold from
$14.6m in 2006 to $52.4m in 2007.
2007 proved to be an exceptionally
strong year for SPC’s refi ning activities.
Both demand and supply-side factors
pushed oil prices to record highs.
Regional refi ning capacity remained
constrained in the face of robust
demand. As a result, SPC achieved
higher average refi ning margins of
about US$7.00 per barrel, up from
about US$4.50 per barrel in 2006, and
operated at 97% capacity utilisation
despite a scheduled maintenance
shutdown. During the year, it also
actively pursued initiatives to enhance
downstream capabilities, even as it
boosted its upstream assets. With its
refi nery hydro-desulphuriser upgrade,
SPC is positioned to produce diesel
clean fuels meeting stricter standards
such as Euro-IV specifi cations as these
are introduced across the region.
Property
Keppel Land also delivered on its
regional strategic initiatives last year,
extending its geographic reach and
strengthening its residential platforms
comprising high value townships
and integrated lifestyle communities.
Its deliberate and targeted focus on
large scale, integrated and lifestyle
community homes is primed to tap the
rising demand for quality housing across
regional emerging markets, which are
witnessing unprecedented levels of
affl uence and urbanisation.
Inroads were made into the Middle East
market, with a landmark waterfront project
in Jeddah, and its footprint in China was
enlarged through another large scale
residential development in Shanghai
and a township in Shenyang. In Vietnam
alone, a total of eight new projects were
secured, raising the strong residential
pipeline there six-fold to 53 million square
feet (sf) of Gross Floor Area (GFA).
Keppel Land’s substantial landbank of
close to 100 million sf of GFA spanning
across key regional growth markets such
as China, Vietnam, India and the Middle
East, as well as other regional markets,
will underpin its drive to grow its regional
earnings contribution. In 2008 and 2009,
it will launch about 18,000 homes
compared to 2,800 overseas homes
sold last year.
In Singapore, the launch of Phase 1 of our
iconic waterfront lifestyle homes, Refl ections
at Keppel Bay, designed by world-renowned
architect Daniel Libeskind, met with strong
response with all 620 units launched sold.
Keppel Corporation owns a 70% stake
in the entire Keppel Bay development,
where our former shipyard was located,
with Keppel Land owning a 30% stake.
The Keppel Bay development will span
4
Keppel Corporation Limited
Report to Shareholders 2007
Chairman’s Statement
Total distribution (cents per share)
Economic Value Added (EVA)
33.0
15.0
18.5
20.0
23.0
28.0
2001
2002
2003
2004
2005
2006
2007
$604m
+$1,269m
64.0
EVA improved from negative $665 million
to positive $604 million over the last seven
years since 2001.
A common thread across the
Group is our capacity to leverage
the Keppel brand equity, collective
networks and competencies.
several stages. In creating more value
out of this unique premium waterfront
development, Marina at Keppel Bay was
opened in January this year to a grand
welcome fanfare for the Clipper 07-08
Round-the-World Yacht Race. Featuring
170 berths which can accommodate
boats ranging from 20 ft to mega yachts
more than 200 ft long, the marina located
on Keppel Island is connected to the
mainland and Keppel Bay development
through a new landmark cable stayed
bridge named Keppel Bay Bridge.
Keppel Land’s steady execution of its
offi ce strategy has transformed it into a
leading player in Singapore with a prime
stable of offi ce assets centred within
the Raffl es Place and New Downtown
conurbation. Its offi ce portfolio capitalised
on the robust market to lock in long-term
leases. Both DBS Bank and Standard
Chartered Bank, which will occupy over
40% of Marina Bay Financial Centre
(MBFC) when ready in 2010–2012,
have signed 12-year leases. Already
more than half of the 2.9 million sf net
lettable space in MBFC has been pre-
committed more than two years ahead
of its completion. Together with the
redevelopment of its fl agship
Ocean Building, Keppel Land has now
largely completed the makeover of its
offi ce portfolio and positioned itself
in the premium prime offi ce market
with some 5 million sf of net lettable
area, including 3.8 million sf under
development in the CBD and
New Downtown.
Our offi ce strategy is targeted at
identifying and developing premium
offi ce projects for rent, and extracting
value at the appropriate time, through
leveraging our platform in K-REIT Asia.
During the year, Keppel Land
restructured its one-third stake in
One Raffl es Quay (ORQ) through
K-REIT Asia, resulting in Keppel Land
recording a gain of $235m.
Both K-REIT Asia and Alpha Investment
Partners (Alpha), the property fund
management arm of Keppel Land,
Keppel Corporation Limited
Report to Shareholders 2007
Chairman’s Statement
5
CHAIRMAN’S STATEMENT
contributed to an almost two-thirds
increase in total assets under
management from $3.7b in 2006 to
$6.1b in 2007 (when fully invested and
leveraged). K-REIT Asia’s asset portfolio
expanded from $677m to $2.1b with the
addition of the one-third stake in ORQ,
another major step towards realising its
ambition of becoming a premier offi ce
commercial REIT. With over 40% of
K-REIT Asia’s portfolio in the core CBD
area and the rest just at the outskirts,
K-REIT Asia is poised to benefi t from
positive rental reversions, the portfolio
rental average being $6.02 psf inclusive
of income support as compared to average
prime rentals of $15 psf at end-2007.
Infrastructure
In Infrastructure, Keppel Integrated
Engineering’s (KIE) strategic focus on
building a regional presence through
large scale projects has paid off
handsomely with a second landmark
project awarded in Qatar. Last October,
it won a $1.5b project to design, build
and operate a wastewater treatment,
water reuse and sludge treatment facility
in Qatar’s Doha North, the largest such
facility in the Middle East. Back home,
the opening of Keppel Seghers Ulu
Pandan NEWater Plant in the fi rst quarter
last year marked our contribution to
enhance Singapore’s water production
capabilities. The largest water reuse
plant in East Asia and second largest in
the world, its 148,000 cubic metres per
day capacity will supply over half of the
country’s current NEWater needs.
As the world faces the realities of
escalating water, energy and
environmental challenges, these projects
underscore Keppel’s commitment to
create cost-effective and innovative
solutions that address communities’
needs for alternative water and energy
sources. This is a culmination of our
efforts over the years in developing the
requisite technical and technological
expertise to bring scalable and proven
environmental capabilities to global
markets. Harnessing our strengths
across both water and thermal treatment
technologies, we have now built the
competencies and platforms to deliver
integrated packages customised to
meet users’ long-term needs as well as
wider community interests. For example,
the Doha North facility will not only
recycle wastewater for irrigation needs.
Its sludge treatment plant, Qatar’s only
such plant, will receive and treat sludge
from water treatment plants all around
the country for use as organic fertiliser or
as supplementary green energy source.
Further, our concept proposal announced
earlier this year seeks to carve out an
irrigated green space and enhance and
transform the Doha North surroundings
into an EcoPark. This illustrates how we
constantly push beyond the boundaries
to differentiate ourselves from the
competition by creating new value
propositions for the market.
As at end-2007, KIE has grown its
orderbook to about $3.5b. A signifi cant
proportion of the orderbook comprises
long-term operation and maintenance
contracts. This will ensure a stable
recurrent income stream over the next
10–20 years following completion of the
respective projects.
On another front, Keppel Energy (KE)
planted its fl ag in the local power
generation market with its new 500 MW
Keeping at the forefront of technology
and developing leading-edge solutions
to meet or anticipate market needs
continues to be an imperative for us.
6
Keppel Corporation Limited
Report to Shareholders 2007
Chairman’s Statement
co-generation plant in the second quarter.
Due to our efforts to speedily address
the gas transport infrastructure issue with
the regulatory bodies in order to fl ow our
contracted gas supply from Malaysia,
this hurdle has now been successfully
overcome. In February 2008, KE secured
a long-term contract valued at over $3b
to supply gas to ExxonMobil’s existing
and upcoming petrochemical facilities.
This follows from our earlier initiative
back in 2005 to secure an 18-year gas
supply deal from Petronas. Yet again, this
is another illustration of our efforts
to develop new platforms and tap
adjacent opportunities.
LEVERAGING MARKETS
AND CUSTOMERS
A common thread across the Group
is our capacity to leverage the Keppel
brand equity, collective networks and
competencies. The market knowledge
and operational synergies shared by
our business units serve as a mutually-
supportive framework to penetrate
common markets such as the Middle
East, China and Vietnam. Some of our
efforts in creating growth opportunities
across common markets are now
becoming more evident.
Middle East
Let me start with the Middle East market,
a relatively new market just a few years
ago. Now, Keppel O&M, Keppel Land
and KIE have all established a presence
there. Keppel was amongst the fi rst
Singapore companies to enter this market
in the 1990s through its joint venture
shipyard, Arab Heavy Industries (AHI),
in UAE. Today, AHI is part of Keppel
O&M’s global network of 20 yards.
KIE is working on two major projects
worth $3.2b in Qatar. One will be the
largest integrated waste management
facility in Qatar and the fi rst such
environmental engineering plant in
the Middle East. The other which I
mentioned earlier will also be the largest
wastewater treatment and water reuse
facility in the Middle East. Another
unit of KIE is presently undertaking
facilities management contracts at Doha
International Airport in Qatar, while
pursuing similar prospects in the region.
Keppel Land is embarking on its fi rst
project in the Middle East with the Saudi
Economic and Development Co. Ltd. to
develop 1,000 luxury seafront apartments
along the Corniche waterfront in Jeddah
and it also successfully marketed two
blocks comprising 56 villa apartments at
Refl ections at Keppel Bay for $286m to
the Al-Nibras Islamic Real Estate Fund.
In fact, Keppel Land’s fund management
arm, Alpha, previously secured its fi rst
shariah-compliant fund mandate from
a Middle Eastern investor in 2006. The
Islamic fund is presently fully invested in
four countries with US$119m committed
equity. In addition to its AHI base in UAE,
Keppel O&M has now acquired a 20%
stake in a joint venture with NAKILAT to
operate a greenfi eld shipyard facility in
Ras Laffan port which will be completed
in 2010. Qatar Petroleum will fund and
lease the yard infrastructure to the
joint venture.
Vietnam
Vietnam is a market with which we have
maintained close ties over the past two
decades and as a result established a
strong track record and network.
Keppel Land is one of its pioneer and
largest real estate investors with over
a dozen projects in Ho Chi Minh City,
Hanoi and Dong Nai. Similarly, Keppel
O&M has actively engaged Vietnam since
the 1980s. It built Vietnam’s fi rst drilling
rig in 1988 for Vietsovpetro, a Vietnam-
Russian joint venture, and secured a
second order for its proprietary KFELS B
Class jackup from PetroVietnam last May.
This follows on the heels of Keppel O&M’s
delivery of its fi rst jackup to PetroVietnam
two months ahead of schedule in March
last year. Then, in December 2007, KIE
received in-principle approval to develop
a waste-to-energy (WTE) plant in
Ho Chi Minh City. The proposed plant
will have the capacity to treat 2,000
tonnes of waste per day, and generate
more than 20 MW of green energy. It will
be the fi rst in Vietnam, and the largest
in Southeast Asia outside Singapore.
In oil & gas exploration, SPC has PSCs
in offshore Vietnam – a 20% interest in
Blocks 102 and 106 in the Song Hong
Basin in the Gulf of Tonkin, acquired
in September 2005, and a 45% interest
in Block 101-100/04, acquired in
October 2006.
China
In the competitive Chinese market,
KIE has steadily strengthened its
market leadership for imported WTE
environmental solutions. In the past
year, it secured contracts to provide
solid waste technologies and services
in Suzhou and Zhongshan, and is
undertaking WTE projects in Changshu,
Shenzhen, Tianjin, Jiangyin and
Guangzhou. These contracts further
extend Keppel’s presence in these
markets as Keppel Land already operates
in some of these cities in addition to
Shanghai, Beijing, Chengdu, Wuxi,
Shenyang, Changzhou and Kunming.
Keppel O&M, through its Nantong
Keppel Corporation Limited
Report to Shareholders 2007
Chairman’s Statement
7
CHAIRMAN’S STATEMENT
yard located northwest of Shanghai,
is equipped to meet demand for
specialised vessels such as offshore
support vessels and tugs. As at 2007
year-end, the Nantong yard had
accumulated an orderbook of 21 vessels
under construction after adding another
eight tugs last October. As earlier
mentioned, SPC has operating interests
and production assets in Pearl River
Mouth Basin and Bohai Bay.
LEVERAGING COMPETENCIES
Another key aspect of our portfolio of
multiple businesses deserves mention.
Although the scope of our businesses
is different, the Group has positioned
itself to capture value through offering
comprehensive solutions that draw on
the complementary strengths of each
business. In particular, with the global
drive towards sustainable development,
there are complementarities in
competencies and expertise between our
different businesses such as Property
and Infrastructure which the Group is
uniquely placed to exploit. We constantly
monitor and take advantage of such
opportunities as they arise.
Sino-Singapore Tianjin Eco-City
The Sino-Singapore Tianjin Eco-City
(SSTEC) best exemplifi es the manner
in which our property and environmental
businesses are able to jointly address
new opportunities by harnessing their
collective knowledge and expertise.
To be established under the auspices of
a Framework Agreement signed between
China and Singapore last November,
SSTEC is a joint collaboration of
Singapore and Chinese private-sector
consortia supported by their respective
governments. It aims to showcase
sustainable development in terms of
environmental as well as social aspects.
It is envisioned to be a model city in which
the inhabitants live, work and play in a
balanced and healthy environment, whilst
conserving and protecting the environment
and natural resources. You can read more
about our new initiative in a separate
feature on SSTEC in this Annual Report.
As frontrunner for the Singapore
consortium, Keppel will work with
its partners to tap on Singapore’s
experience in large-scale urban
design and township planning, as
well as landscaping and environment
preservation. In this respect, Keppel is
well-placed to spearhead the partner
consortia in drawing together the
complex land and environmental design,
engineering and construction elements
to crystallise the founding vision while
implementing its distinctive features. Our
own strengths in integrated township
and lifestyle communities, together with
environmental development capabilities,
in each case backed by a solid track
record, networks and market knowledge
gained in the Chinese market, will
provide a fi rm foundation for the Group’s
efforts in helping our two governments
achieve their mutual vision for SSTEC.
Refl ecting its confi dence in the Keppel
brand, Qatar Investment Authority has
expressed its intent to participate in
the Singapore consortium under a
MOU signed in January. Again, this
testifi es to our ability as a Group to
leverage networks, bridging our distinct
business interests across operating and
geographical dimensions.
LEVERAGING INNOVATION
AND TECHNOLOGY
Keeping at the forefront of technology
and developing leading-edge solutions
to meet or anticipate market needs
continues to be an imperative for
us, our raison d’être. Our high value,
high performance offerings serve
to differentiate us and sustain our
competitive edge.
In Offshore & Marine, technological
innovation is key to addressing customers’
operational challenges in niche markets.
Global oil and gas reserves are drawing
down with limited near-term prospect of
replenishment, prompting the search for
hydrocarbons to intensify into deeper
waters and more diffi cult frontiers
such as the North Sea and Arctic
regions. Through our extensive R&D
programmes and partnerships, we have
assembled a premium suite of deepwater
and production solutions, ranging
from FPSOs, production and drilling
semisubmersibles, TLPs and SPARs to
accommodation fl oatels, a fi rst for the
North Sea in more than 20 years, the
drilling-cum-production KFELS N
Class jackup, icebreaking vessels and
Ice-Class FSO, as well as specialised
support vessels.
Two centres of excellence have been
launched to drive technology innovation
and leadership. The Keppel Offshore &
Marine Technology Centre (KOMtech)
and Keppel Environmental Technology
Centre (KETC) will augment existing
R&D initiatives in their respective
research spheres and raise these efforts
to the next level.
Keppel O&M will inject $150m seed
money into KOMtech over fi ve years
while KIE is investing $50m into KETC.
In environmental engineering, KETC will
spearhead KIE’s thrust in developing
world-class environmental solutions
based on technological innovation
and leadership, in-house expertise and
strategic partnerships. KETC intends to
focus in the immediate term on energy
recovery and by-product minimisation
from waste and wastewater treatment,
and membrane applications for
producing water from non-conventional
sources. Keppel Seghers’ proprietary
water-cooled grate technology,
DANO DRUM system which recycles
and pre-treats waste, and Rotary
Atomiser system for fl ue gas treatment
are already being applied in the Qatar
Solid Waste Management project.
In Property, Keppel Land is also
incorporating state-of-the-art green
features in its properties.
MAINTAINING SAFETY
It is appropriate for me to touch briefl y
on the premium that the Group places
on workplace safety. We recognise a
safe and healthy working environment
as one of the critical success factors
contributing to our superior business
performance. Since 2006, with the
formation of the Keppel Corporation
8
Keppel Corporation Limited
Report to Shareholders 2007
Chairman’s Statement
stronger and more resilient businesses.
Despite the challenging global economic
environment, I have great faith that
Keppelites around the world will once
again demonstrate their formidable
mettle and rise to the occasion. With
prudent management and sound policies,
we are confi dent that the Group is well
on track to deliver sustained growth and
enhance shareholder value.
I would also like to take this opportunity
to express, on behalf of the Group, my
deep appreciation to Mr Leung Chun Ying,
who stepped down from the Board in
2007, for his wise counsel and invaluable
contributions during his tenure as
independent Director and member of the
Board Remuneration Committee. We wish
him all the very best in his undertakings.
Last but not least, on behalf of
management, I thank our Board of
Directors, business partners, customers,
employees and all stakeholders for all the
guidance and support given to us during
the year. We shall continue to try to create
more stakeholders value against the
backdrop of increasing uncertainty in the
global economy.
Yours sincerely,
LIM CHEE ONN
Executive Chairman
11 March 2008
Board Safety Committee, progress has
been made in driving the safety message
down the line. Last November, the fi rst
of an annual series of safety conventions
was inaugurated to share best practices,
recognise efforts at enhancing safety
and encourage safety standards to be
raised across the Group. In the same
spirit, Keppel Land has also set up its
own Board Safety Committee last year
to oversee safety aspects within its own
business arena. I am pleased to report
that Keppel O&M has improved upon its
already strong safety record in 2007
with an Accident Frequency Rate (AFR)
of 0.37 reportable cases per million
manhours worked, its lowest since
records were kept in the 1980s and down
from an AFR of 1.2 the previous year.
This is no mean feat considering its
record-breaking orderbook and extremely
busy yard schedules last year. Not to
mention that Keppel Seghers chalked
up 1.2 million accident-free manhours
for its work on the Kallang-Paya Lebar
Expressway and the Keppel Seghers Ulu
Pandan NEWater Plant.
These favourable outcomes are only
possible because of our holistic
approach towards safety, fusing
organisational systems and processes
with an ingrained culture emphasising
substance over form, while forging safety
partnerships along the entire value chain
comprising external suppliers, vendors,
contractors and customers.
We shall continue to actively roll out
our safety initiatives across the Group
worldwide this year, with a further
increase in our fi nancial commitment of
no less than $15m this year, from $13m
last year and $10.6m the year before.
WEATHERING CHALLENGES,
DELIVERING SUSTAINED GROWTH
Looking forward, we are encouraged
to see many opportunities for us to
leverage our efforts to build sustainable
growth platforms. Our strategy to build
a core portfolio of distinct businesses
will keep us on an even keel to weather
the turbulent operating conditions as
we press on with our efforts to build
Keppel Corporation Limited
Report to Shareholders 2007
Chairman’s Statement
9
Growth
Returns
Value
With its scale and spread, Keppel Corporation is
Delivering
More
10
Keppel Corporation Limited
Report to Shareholders 2007
Delivering More
KEPPEL CORPORATION IS DELIVERING MORE GROWTH
Robust
From stable to robust growth. Drawing on the complementary
strengths and networks of each key business, we seize new opportunities
and capture real value. We stay focused on building sustainable growth
platforms in our business to ride out different market conditions.
1,026
564
356
PATMI
$ million
2007
2005
2002
Stable
KEPPEL CORPORATION IS DELIVERING MORE RETURNS
Stellar
From sterling to stellar returns. Our strategy to grow our key
businesses has consistently yielded strong results for shareholders.
We seek out new prospects and fuel earnings growth through technology
innovation and projects with good potential.
21.8
16.4
13.4
ROE
%
2007
2005
2002
Sterling
KEPPEL CORPORATION IS DELIVERING MORE VALUE
Vigilant
From diligent to vigilant stewardship. Beyond striving for strong
fi nancial results, we enhance shareholder value through prudent
management, sound policies and high standards of corporate governance.
Our commitment towards safety and environment protection boost
stakeholders’ confi dence in our leadership and operations.
604
199
(295)
EVA
$ million
2007
2005
2002
Diligent
KEY FIGURES
Revenue
Increased 37% from FY06’s $7.6 billion
Revenue surpassed $10 billion for the fi rst time
in the Group’s 40-year history with improvement
by all key divisions. Revenue from Infrastructure
was particularly strong.
PATMI
Increased 37% from FY06’s $751 million
Earnings reached a new full year high,
with PATMI crossing the billion-dollar mark.
Compounded annual growth rate for PATMI
from 2002 to 2007 was 23%. Double-digit
growth was achieved year-on-year for the
past fi ve years.
$10.4b
$1,026m
ROE
Increased 2.7% above FY06’s 19.1%
ROE has improved year-on-year for the ninth
year. It surpassed 10% since 2001, exceeded
15% in 2004 and breached 20% in 2007.
EVA
Increased $181 million from
FY06’s $423 million
Increased EVA was due to better NOPAT, partly
offset by slight increase in capital charge. EVA
at $604 million in 2007 was an improvement of
$1.3 billion over seven years.
21.8%
$604m
EPS
Increased 36% from
FY06’s 47.7 cents per share
EPS growth kept pace with PATMI growth.
No signifi cant dilution in EPS because no
major capital call was made since 1997.
Distribution
Increased 129% from
FY06’s 28.0 cents per share
Total distribution for 2007 comprises fi nal
dividend of 10 cents, special dividend of
45 cents and interim dividend of 9 cents already
paid. Total distribution to our shareholders will
be about $1 billion or almost 100% of PATMI.
64.9¢
64.0¢
Free cashfl ow
Continued to be above $1 billion
Operational cashfl ow before working capital
changes exceeded $1 billion. Working capital
changes were also positive with progress
payments received from contracts.
Gearing
Reduced from FY06’s 0.24x
Strong cashfl ow resulted in lower net gearing.
Gearing has been reduced from 1.12x in 2001
to 0.77x in 2003 to the current 0.09x. This
places the Group in a good position to further
strengthen its earnings base going forward.
$1,151m
0.09x
18
Keppel Corporation Limited
Report to Shareholders 2007
Key Figures
GROUP STRATEGIC DIRECTIONS
Keppel is delivering more value
for stakeholders by growing our
businesses through innovation,
discipline and integrity.
STRATEGIC
DIRECTIONS
Fortifying core competencies
• Underpin value creation
by investing in R&D for
long-term growth
• Foster growth by enhancing
operational competitiveness
through strategic investments
and partnerships with
trendsetters
• Nurture people to share a
common culture and a drive to
deliver more
STRATEGY IN ACTION
Example: Launch of Keppel Offshore & Marine Technology
Centre (KOMtech)
Keppel Offshore & Marine launched a technology centre to
boost its R&D edge and position the company for long-term
growth. KOMtech is an extension and strengthening of current
R&D initiatives undertaken by the company’s technology units
– Offshore Technology Development, Deepwater Technology
Group and Marine Technology Group. The Centre will also work
closely with industry partners to conceive effective solutions for
the market.
Expanding global footprint
Example: Doha North Sewage Treatment Works
• Build on 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 cashfl ow and strong
earnings return to shareholders
Building on its landmark $1.7 billion contract for a solid waste
plant in 2007, Keppel Integrated Engineering secured from the
Qatari Government another contract for the design, construction,
operation and maintenance of a wastewater treatment and water
reuse plant for $1.5 billion. The largest in the Middle East when
completed in 2010, this facility will have a peak design capacity
to treat wastewater of up to 439,000 cubic metres per day.
The contract signing was witnessed by the Heir Apparent
of Qatar, His Highness Sheikh Tamim Bin Khalifa Bin Hamad
Al-Thani and Mr Wong Kan Seng, Singapore Deputy Prime
Minister and Home Affairs Minister.
Example: Environmental Steering Committee
The Environmental Steering Committee will be formed to set out
an environmental master plan, which details the vision, policies,
directions and roadmap for the Group over the next 5–10 years.
The master plan will serve to align environmental policies and
practices across various business units, as well as to help Keppel
strengthen its operations, stay ahead of the competition, and
possibly move into new business areas.
Leveraging growth platforms
Example: Sino-Singapore Tianjin Eco-City
• Leverage the Group’s
scale and the spread of
its businesses, and their
embedded growth options,
to develop new platforms
for robust and sustainable
earnings streams
Keppel Corporation was appointed to lead the Singapore
consortium in developing the 30 sq km Sino-Singapore Tianjin
Eco-City (SSTEC) over 10 to 15 years. SSTEC is envisioned to
be a development that integrates society, the economy and the
environment harmoniously to create an optimal setting for Live,
Work and Play.
The Keppel Group will tap on its strengths and experience in
large-scale townships and robust environmental solutions to make
SSTEC a successful model for sustainable development.
Singapore Foreign Minister
George Yeo (right) launches
KOMtech on 3 December 2007.
Sealing the agreement.
(Left) Ms Grace Fu, MOS for National
Development, offi ciated a Keppel-
sponsored project to save corals.
China Premier Wen Jia Bao and Singapore
Prime Minister Lee Hsien Loong at the
SSTEC agreement signing ceremony.
Keppel Corporation Limited
Report to Shareholders 2007
Group Strategic Directions
19
GROUP AT A GLANCE
The Keppel Group is focused on
enhancing the value of
our portfolio.
KEPPEL CORPORATION
DIVISIONS
Strong governance
The Group fi rmly 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 six 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.
Offshore & Marine
To be the choice provider and solutions partner in its selected
segments of the offshore and marine industry.
Focus for 2008/2009
• Deliver value through excellent project management and execution
• Enhance R&D initiatives to strengthen group position as market
leader in selected segments
• Strengthen presence in deepwater rigs, adjacent business areas
and new markets
• Increase capacity through expansion and facility upgrading
• Focus on Health, Safety and the Environment
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,
fi nance, human resources, information services, legal, tax and treasury.
Disciplined approach
We remain steadfast in our strategy of building our key businesses of
Offshore & Marine, Property, Infrastructure and maximising the 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 trendsetters as well as cultivating a corporate
culture of integrity and the Can Do! spirit.
Collective strength
With operations spanning 34 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 whilst adhering to one another’s priorities and focus.
There is open communication between management and the Board,
and as a result, Keppel Corporation benefi ts from the counsel,
guidance and expertise of Board members.
We believe that this concerted approach to grow our businesses will
enable us to stay focused on delivering more to stakeholders amidst
an increasingly uncertain and competitive global environment.
Property
To be a leading property developer and a premier property fund
manager in Asia.
Focus for 2008/2009
• Selectively pursue residential and commercial developments in
Singapore, and capitalise on the development of Marina Bay and
Keppel Bay
• Continue to roll out townships and other residential projects in
Vietnam, China, India and Indonesia
• Expand K-REIT Asia’s property portfolio through acquisitions
• Invest in funds under management to generate good returns
Infrastructure
To build a selected portfolio of environmental engineering, power
generation, network engineering and logistics businesses.
Focus for 2008/2009
• KIE – offer sustainable energy and water solutions to communities
through recovery of energy from waste and water from wastewater
• Keppel Energy – build a strong power generation and gas
supply business
• Keppel T&T – strengthen its Logistics and Network
Engineering businesses
Investments
To maximise value of businesses and investments for shareholders.
Focus for 2008/2009
• SPC – continue to increase E&P portfolio, while developing
existing acreages
• k1 – continue to grow existing investment platforms to maximise
performance
• M1 – tap on the opportunities arising from telecom media
convergence and develop new businesses anchored on
its core competencies
20
Keppel Corporation Limited
Report to Shareholders 2007
Group at a Glance
RESULTS
Revenue ($ million)
PATMI
2005
2006
2007
4,112
5,755
7,258
Offshore & Marine continues to be the
largest contributor to Group revenue
with a 26% growth in 2007.
$522m
Earnings from the division increased by
17% in 2007 and accounted for 51% of
the Group’s PATMI.
Revenue ($ million)
PATMI
2005
2006
2007
847
1,155
1,835
Property achieved a 59% revenue growth
in 2007 on the back of robust residential
property sales.
$209m
In 2007, the division grew its earnings by
118%, which in turn accounted for 20%
of the Group’s earnings.
Revenue ($ million)
PATMI
2005
2006
2007
671
570
1,277
Infrastructure staged a full year turnaround
with a record growth of 124% due to
new projects.
$27m
Having achieved a revenue base of
over $1 billion in 2007, the division’s
contributions to Group earnings are
expected to rise gradually.
Revenue ($ million)
PATMI
2005
2006
2007
58
61
Investments’ revenue was lower in 2007
because the previous year benefi ted from
gains on sale of investments.
121
$268m
Profi t contributions by Investments grew
11% from $242 million in 2006 largely
on account of higher earnings by SPC.
Keppel Corporation Limited
Report to Shareholders 2007
Group at a Glance
21
KEPPEL AROUND THE WORLD
We have a global presence in
34 countries with overseas customers
as our earnings mainstay.
Revenue by market
Total FY07 Revenue: $10,431m
Europe
ASEAN
North America
China/HK
South America
India
Middle East
Australia/NZ
Japan/Korea/Taiwan $
$
Central America
$ 3,089m
$ 2,769m
$ 2,635m
$ 571m
$ 516m
$ 456m
$ 154m
$ 104m
70m
67m
Offshore & Marine
Azerbaijan
Brazil
Bulgaria
China
India
Indonesia
Japan
Kazakhstan
Norway
Qatar
Singapore
The Netherlands
The Philippines
United Arab Emirates
United States of America
Vietnam
Property
China
India
Indonesia
Japan
Korea
Malaysia
Myanmar
Saudi Arabia
Singapore
Thailand
The Philippines
United States of America
Vietnam
Infrastructure
Algeria
Argentina
Australia
Belgium
China/Hong Kong
Ecuador
France
Germany
Indonesia
Malaysia
Mexico
Nicaragua
Qatar
Singapore
Spain
Sweden
Thailand
The Philippines
United Kingdom
United States of America
Vietnam
Investments
Australia
Cambodia
China/Hong Kong
Indonesia
Singapore
Thailand
United States of America
Vietnam
North America
$2,635m
United States of America
Mexico
Central America
$67m
Nicaragua
Ecuador
South America
$516m
Brazil
Argentina
22
Keppel Corporation Limited
Report to Shareholders 2007
Keppel Around the World
Sweden
Norway
The Netherlands
United Kingdom
Belgium
Germany
Europe
$3,089m
France
Bulgaria
Kazakhstan
Spain
Algeria
Azerbaijan
Saudi Arabia
Qatar
United Arab Emirates
Middle East
$154m
India
$456m
India
China/HK
$571m
Myanmar
Vietnam
Thailand
Cambodia
Malaysia
Japan
Korea
China
Hong Kong
Japan/
Korea/
Taiwan
$70m
The Philippines
ASEAN
$2,769m
SINGAPORE
Indonesia
Australia
Australia/NZ
$104m
Keppel Corporation Limited
Report to Shareholders 2007
Keppel Around the World
23
BOARD OF DIRECTORS
Our Directors
bring their wealth
of experience
to the strategic
governance
of the Group.
1
1. LIM CHEE ONN, 63
Executive Chairman
Chairman, Executive Committee
Member, Board Safety Committee
24
Keppel Corporation Limited
Report to Shareholders 2007
Board of Directors
2
3
2. TONY CHEW LEONG-CHEE, 61
Lead Independent Director
Executive Chairman, Asia Resource Corporation
Member, Executive Committee
Member, Audit Committee
3. LIM HOCK SAN, 61
Independent Director
Chief Executive Offi cer, United Industrial Corporation
Chief Executive Offi cer, Singapore Land
Chairman, Audit Committee
Member, Executive Committee
Member, Board Risk Committee
4
4. SVEN BANG ULLRING, 72
Independent Director
Chairman, Board of The Fridtjof Nansen Institute, Oslo, Norway
Chairman, Nominating Committee
Chairman, Remuneration Committee
Member, Board Safety Committee
Keppel Corporation Limited
Report to Shareholders 2007
Board of Directors
25
BOARD OF DIRECTORS
5
5. TSAO YUAN MRS LEE SOO ANN, 52
Independent Director
Executive Director, SDC Consulting
Member, Nominating Committee
Member, Remuneration Committee
Member, Board Safety Committee
6
7
6. OON KUM LOON, 57
Independent Director
Chairperson, Board Risk Committee
Member, Audit Committee
Member, Executive Committee
Member, Nominating Committee
7. TOW HENG TAN, 52
Non-Independent and Non-executive Director
Chief Investment Offi cer, Temasek Holdings
Member, Executive Committee
Member, Remuneration Committee
Member, Board Risk Committee
26
Keppel Corporation Limited
Report to Shareholders 2007
Board of Directors
8
9
8. YEO WEE KIONG, 52
Independent Director
Director, Drew & Napier LLC
Chairman, Board Safety Committee
Member, Board Risk Committee
9. CHOO CHIAU BENG, 60
Senior Executive Director
Member, Executive Committee
10
10. TEO SOON HOE, 58
Senior Executive Director and Group Finance Director
Member, Executive Committee
Keppel Corporation Limited
Report to Shareholders 2007
Board of Directors
27
KEPPEL GROUP BOARDS OF DIRECTORS
KEPPEL OFFSHORE
& MARINE
Choo Chiau Beng
Chairman/Chief Executive Offi cer
Tong Chong Heong
Managing Director/
Chief Operating Offi cer
KEPPEL LAND
Lim Chee Onn
Chairman; Executive Chairman,
Keppel Corporation
Kevin Wong
Group Chief Executive Offi cer
Charles Foo Chee Lee
Managing Director (Special Projects)
Khor Poh Hwa
Senior Adviser to CPG Corporation
Sit Peng Sang
Chief Financial Offi cer
Lim Ho Kee
Chairman, Singapore Post
Bjarne Hansen
Senior Partner, Wing Partners I/S,
Denmark
Prof Tsui Kai Chong
Provost and Professor of Finance,
SIM University
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
Lee Ai Ming (Mrs)
Deputy Managing Partner,
Rodyk & Davidson
Tan Yam Pin
Former Managing Director,
Fraser and Neave Group
Prof Minoo Homi Patel
Head of School & Professor of
Engineering, School of Engineering,
Cranfi eld University, UK
Niam Chiang Meng
Permanent Secretary,
Ministry of Community Development,
Youth and Sports
Dr Malcolm Sharples
President, Offshore Risk & Technology
Consulting, USA
Heng Chiang Meng
Principal/Director,
Spear Consultancy Pte Ltd
Teo Soon Hoe
Senior Executive Director and Group
Finance Director, Keppel Corporation
Edward Lee
Former Ambassador to Indonesia
Choo Chiau Beng
Chairman/Chief Executive Offi cer,
Keppel Offshore & Marine
Teo Soon Hoe
Senior Executive Director and Group
Finance Director, Keppel Corporation
KEPPEL
TELECOMMUNICATIONS
& TRANSPORTATION
Teo Soon Hoe
Chairman; Senior Executive Director
and Group Finance Director,
Keppel Corporation
Lam Kwok Chong
Managing Director
Dr Tan Tin Wee
Associate Professor of Biochemistry,
National University of Singapore (NUS)
Prof Bernard Tan Tiong Gie
Professor of Physics, NUS
Reggie Thein
Independent Director
Wee Sin Tho
Chief Strategist, Endowment
Programme, NUS
Tan Boon Huat
Chief Executive Director,
People’s Association
KEPPEL INTEGRATED
ENGINEERING
Wong Boon Kong
Chairman
Chua Chee Wui
Chief Executive Offi cer
Lawrence Lim
Director
Luc De Ryck
Senior General Manager
Soh Chee Keong
Executive Director
Tong Chong Heong
Managing Director/Chief Operating
Offi cer, Keppel Offshore & Marine
28
Keppel Corporation Limited
Report to Shareholders 2007
Keppel Group Boards of Directors
KEPPEL ENERGY
k1 VENTURES
Lee Ai Ming (Mrs)
Deputy Managing Partner,
Rodyk & Davidson
Lim Chee Onn
Executive Chairman, Keppel Corporation
Ong Tiong Guan
Managing Director
Choo Chiau Beng
Chairman/Chief Executive Offi cer,
Keppel Offshore & Marine
Teo Soon Hoe
Senior Executive Director and Group
Finance Director, Keppel Corporation
SINGAPORE PETROLEUM
COMPANY
Choo Chiau Beng
Chairman; Chairman/Chief Executive
Offi cer, Keppel Offshore & Marine
Koh Ban Heng
Chief Executive Offi cer
Bertie Cheng Shao Shiong
Chairman, TeleChoice International
Cheng Hong Kok
Director
Dr Chin Wei-Li, Audrey Marie
Chairman, Vietnam Investing Associates
– Financials (S) Pte Ltd
Goon Kok-Loon
Chairman, Global Marine
& Port Services Pte. Ltd.
Geoffrey John King
Director, Vermilion Oil & Gas Australia
Datuk Paduka Timothy Ong
Teck Mong
Acting Chairman, Brunei Economic
Development Board
Teo Soon Hoe
Senior Executive Director and Group
Finance Director, Keppel Corporation
Steven Jay Green
Chairman/Chief Executive Offi cer;
Former US Ambassador to Singapore
Lim Poh Chuan
Director, Income Partners funds
Kamal Bahamadan
Founder and Managing Partner,
The BV Group
Dr Chin Wei-Li, Audrey Marie
Chairman, Vietnam Investing Associates
– Financials (S) Pte Ltd
Choo Chiau Beng
Chairman/Chief Executive Offi cer,
Keppel Offshore & Marine
Dr Lee Suan Yew
Medical Practitioner and Past President
of the Singapore Medical Council
Lim Chee Onn
Executive Chairman, Keppel Corporation
EVERGRO PROPERTIES
Chew Heng Ching
Chairman; Chairman, Governing Council
Singapore Institute of Directors
Kevin Wong
Non-executive Vice Chairman; Group
Chief Executive Offi cer, Keppel Land
Prof Tan Teck Meng
Professor of Accounting, Singapore
Management University
Goh Toh Sim
Chief Executive Offi cer/
Executive Director
Teo Soon Hoe
Senior Executive Director and Group
Finance Director, Keppel Corporation
Yong Pung How
Former Chief Justice,
Republic of Singapore
K-REIT ASIA MANAGEMENT
Prof Tsui Kai Chong
Chairman; Provost and Professor of
Finance, SIM University
Kevin Wong
Deputy Chairman; Group Chief Executive
Offi cer, Keppel Land
Tan Swee Yiow
Chief Executive Offi cer/Director;
Chief Executive Offi cer (Singapore
Commercial), Keppel Land
Ang Wee Gee
Executive Director and Chief Executive
Offi cer (International), Keppel Land
International
Choo Chin Teck
Director (Corporate Services), Keppel
Land International; Group Company
Secretary, Keppel Land
Chow Wing Kin Anthony
Partner, Peter C.Wong, Chow & Chow
Patrick Choy
Chairman, Global Strategy Company
Limited; Chairman, China Financial
Leasing Group
Goh Yong Hong
Chairman, Advisory Board of Raffl es
Town Club Pte Ltd
Keppel Corporation Limited
Report to Shareholders 2007
Keppel Group Boards of Directors
29
KEPPEL TECHNOLOGY ADVISORY PANEL
Cultivating a culture of innovation
guided by eminent business leaders,
professionals and industry experts.
1
3
2
4
5 6
8
7
9
10
11
(5th & 6th from left) Senior Executive Director
Choo Chiau Beng and Executive Chairman
Lim Chee Onn with KTAP members.
1 Dr Brian Clark
2 Dr Tan Gee Paw
3 Dr Malcolm Sharples
4 Professor Sir Eric Ash
7 Professor Minoo Homi Patel
8 Professor Cham Tao Soon (Chairman)
9 Dr Yeo Ning Hong
10 Professor James Leckie
11 Professor Tom Curtis
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
Engineering. 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.
PROFESSOR CHAM TAO SOON
Chairman
BEng (Civil), 1st Class Honours,
University of Malaya; BSc (Maths),
University of London; PhD (Fluid
Mechanics), University of Cambridge.
He was the founding President of
Nanyang Technological University
(Singapore) in 1981 and had
relinquished the post in 2002 and is
now its President (Emeritus). Presently,
he is the Chancellor and Chairman
of SIM University. He has received
several honorary doctorates and
foreign academy awards including the
International Medal of the British Royal
Academy of Engineering.
30
Keppel Corporation Limited
Report to Shareholders 2007
Keppel Technology Advisory Panel
He also sits on the Board of JTC
Corporation, NTU-Stanford Management
Board, Exploit Technologies Pte Ltd,
and the Singapore Millennium
Foundation Limited. He is the Advisor
for the Centre for Water Research and
Adjunct Research Professor for the
Division of Environmental Science &
Engineering at NUS. He is also the
Co-Chairman of the Environmental
& Water Technologies International
Advisory Panel, Ministry of the
Environment & Water Resources. He
chairs the Nominating Committee of the
Lee Kuan Yew Water Prize, Singapore
International Water Week. He is also a
member of the Committee on Strategy
for National Medical Specialisation
Centres of the Ministry of Health; a
member of the 2008 National Science
& Technology Awards Main Committee,
and Chairman of the 2008 National
Technology Award Selection Committee
of the Agency for Science, Technology
& Research.
PROFESSOR THOMAS (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 microbial
ecology, engineered biological systems
in general and wastewater treatment
in particular.
DR BRIAN CLARK
Schlumberger Fellow; B.S.
Ohio State University; PhD, Harvard
University (1977).
He holds 50 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
Hyfl ux 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 Cranfi eld University and a Founder
Director of the science park company
BPP Technical Services Ltd.
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;
Fellow of the Society of Naval
Architects; Registered
Professional Engineer.
His company provides consulting on
offshore-related projects including
project technical risk/safety cases,
fi nancial due diligence, regulatory
advice, business development
assistance, and he has been involved
as an expert witness in a number of
legal proceedings.
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,
Pacifi c Rim Environmental Research
Centre; Director, Stanford-China
Executive Leadership Programme;
Co-Director, Singapore Stanford
Partnership.
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 Sheffi eld.
He also sits on the Boards of Keppel
Offshore & Marine, Cranfi eld Aerospace
and Cranfi eld Engineering Innovations.
He is the Chairman of Public Utilities
Board (PUB), the national water agency
of Singapore since 1 April 2001.
Keppel Corporation Limited
Report to Shareholders 2007
Keppel Technology Advisory Panel
31
SENIOR MANAGEMENT &
MARINE
Our leaders provide the strategic
direction to the business units
to grow beyond today.
KEPPEL CORPORATION
Lim Chee Onn
Executive Chairman
Choo Chiau Beng
Senior Executive Director
Teo Soon Hoe
Senior Executive Director &
Group Finance Director
CORPORATE SERVICES
Chan Soo Sen
Director (Chairman’s Offi ce)
Paul Tan
Group Controller
Wang Look Fung
General Manager
(Group Corporate Communications)
Lynn Koh
General Manager
(Group Treasury)
Tan Poh Hong
Director
(Group Human Resources)
Magdeline Wong
General Manager
(Group Tax)
Tina Chin
General Manager
(Group Risk Management)
Caroline Chang
General Manager
(Group Legal)
Sim Chey Hoon
General Manager
(Corporate Development/Planning)
Sharon Lua
General Manager
(Group Human Resources)
Tan Eng Hwa
General Manager
(Group Internal Audit)
Martin Ling
Deputy General Manager
(Group Information Technology)
OFFSHORE & MARINE
Choo Chiau Beng
Chairman/Chief Executive Offi cer
Keppel Offshore & Marine
Tong Chong Heong
Managing Director/
Chief Operating Offi cer
Keppel Offshore & Marine
Sit Peng Sang
Chief Financial Offi cer
Keppel Offshore & Marine
Charles Foo Chee Lee
Managing Director
(Special Projects)
Keppel Offshore & Marine
Chee Jin Kiong
Executive Director
(Human Resources)
Keppel Offshore & Marine
Michael Chia Hock Chye
Executive Director
Keppel FELS
Wong Kok Seng
Executive Director
(Operations)
Keppel FELS
Nelson Yeo Chien Sheng
Executive Director
Keppel Shipyard
Hoe Eng Hock
Executive Director
Keppel Singmarine
PROPERTY
Kevin Wong
Group Chief Executive Offi cer
Keppel Land
Ang Wee Gee
Executive Director and
Chief Executive Offi cer (International)
Keppel Land International
Choo Chin Teck
Director (Corporate Services)
and Group Company Secretary
Keppel Land International
Lim Kei Hin
Chief Financial Offi cer
Keppel Land International
Tan Swee Yiow
Chief Executive Offi cer
(Singapore Commercial)
Keppel Land International
Chief Executive Offi cer/Director
K-REIT Asia Management
32
Keppel Corporation Limited
Report to Shareholders 2007
Senior Management
UNIONS
KEPPEL FELS EMPLOYEES UNION
Muhamad Shah
President
KEPPEL EMPLOYEES UNION
Mohd Yusop B Mansor
President
SHIPBUILDING &
MARINE ENGINEERING
EMPLOYEES UNION
Wong Weng Onn
President
Lim Chin Siew
Executive Secretary
KEPPEL SERVICE STAFF UNION
Quah Kim Boon
President
Augustine Tan
Chief Executive Offi cer
(Singapore Residential)
Keppel Land International
Loh Chin Hua
Managing Director
Alpha Investment Partners
Goh Toh Sim
Chief Executive Offi cer
Evergro Properties
INFRASTRUCTURE
Lam Kwok Chong
Managing Director
Keppel Telecommunications
& Transportation
Ong Tiong Guan
Managing Director
Keppel Energy
Chua Chee Wui
Chief Executive Offi cer
Keppel Integrated Engineering
INVESTMENTS
Koh Ban Heng
Chief Executive Offi cer
Singapore Petroleum Company
Steven Jay Green
Chairman/Chief Executive Offi cer
k1 Ventures
Neil Montefi ore
Chief Executive Offi cer
MobileOne
Keppel Corporation Limited
Report to Shareholders 2007
Senior Management
33
CORPORATE GOVERNANCE
A sound code of corporate
governance steers us towards
our goals with greater
confi dence and effi cacy.
The board and management of
Keppel Corporation Limited (“KCL”
or the “Company”) fi rmly 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 confi rm that the Company has
adhered to the principles and guidelines
of the 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
specifi c reference to the 2005 Code.
Note:
1 The Code of Corporate Governance 2005 issued by
the Ministry of Finance on 14 July 2005.
Executive Chairman Lim Chee Onn shares his
convictions that good corporate governance
strengthens the confi dence of stakeholders.
34
Keppel Corporation Limited
Report to Shareholders 2007
Corporate Governance
Code of corporate governance 2005
Specifi c principles and guidelines for disclosure
Relevant guideline or principle
Page reference in this report
Guideline 1.3
Delegation of authority, by the board to any board committee, to make decisions on certain board matters
Pages 36 and 37
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
Page 37
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
Pages 36 and 37
Page 37
Not Applicable
Page 40
Pages 40 and 41
Guideline 4.6
Key information regarding directors, which directors are executive, non-executive or considered by the
nominating committee to be independent
Pages 213 to 216
and 219
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
Pages 41, 42, 54
and 55
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
Pages 44 and 45
Guideline 9.1
Composition of remuneration committee
Guideline 9.2
Names and remuneration of each director. The disclosure of remuneration should be in bands of
$250,000. There will be a breakdown (in percentage terms) of each director’s remuneration earned
through base/fi xed salary, variable or performance-related income/bonuses, benefi ts in kind,
and stock options granted and other long-term incentives
Names and remuneration of at least the top fi ve 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
Page 43
Page 45
Page 45
Page 46
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 fi nancial, operational and compliance controls,
and risk management systems
Pages 148, 149, 167,
168 and 169
Pages 46 to 48
Pages 48 to 50
Keppel Corporation Limited
Report to Shareholders 2007
Corporate Governance
35
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
signifi cant 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
fi nancial objectives to be implemented
by management, and monitor the
performance of management;
• oversee processes for evaluating the
adequacy of internal controls, risk
management, fi nancial reporting and
compliance, and satisfy itself as to the
adequacy of such processes; and
• 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 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 2007, as well as the
attendance of each board member at
these meetings, are disclosed in Table 1.
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
fi nancial institutions by the Company,
require the approval of the Board.
With keen interest
in all aspects of
Keppel’s businesses,
board members
visit operating units
including the new
Keppel Merlimau
co-generation plant.
Directors and senior
management turned
up in full force at the
Inaugural Annual Safety
Convention 2007.
36
Keppel Corporation Limited
Report to Shareholders 2007
Corporate Governance
Board Committee Meetings
Table 1
Lim Chee Onn
Tony Chew Leong-Chee
Lim Hock San
Sven Bang Ullring
Tsao Yuan Mrs Lee Soon Ann
Leung Chun Ying1
Oon Kum Loon
Tow Heng Tan
Yeo Wee Kiong
Choo Chiau Beng
Teo Soon Hoe
No. of Meetings Held
Board
Meetings
9
8
9
7
8
2 of 7
9
8
7
8
9
9
Audit
Executive
Nominating Remuneration
Safety
–
5
5
–
–
–
5
–
–
–
–
5
–
–
–
–
–
–
–
–
–
–
–
0
–
–
–
2
2
–
2
–
–
–
–
2
–
–
–
5
5
1 of 4
–
4
–
–
–
5
3
–
–
4
3
–
–
–
4
–
–
4
Note:
1 Mr Leung Chun Ying resigned as Director with effect from 1 October 2007.
Non-executive
Directors’
Meeting
(without
presence of
Risk management)
–
–
4
–
–
–
4
4
3
–
–
4
–
5
5
5
5
1 of 3
5
4 of 5
4 of 5
–
–
5
Further, any investment of $100 million
and below but which does not have
strategic fi t 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 standalone basis, would
require specifi c board approval. Each
board member has equal responsibility
to oversee the business and affairs of
the Company. 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
fi nancial 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 judgment 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 2005 Code’s defi nition 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 2005
Code as one that would deem a
director not to be independent.
Mr Tow Heng Tan, who is Chief
Investment Offi cer, Temasek Holdings,
is therefore deemed non-independent
by the Nominating Committee.
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 9 to 11 members.
The board currently has majority
independent directors with a total of 10
directors of whom 6 are independent.
Keppel Corporation Limited
Report to Shareholders 2007
Corporate Governance
37
CORPORATE GOVERNANCE
The nature of the directors’ appointments
on the board and details of their
membership on board committees are
set out in the Appendix hereto.
The Nominating Committee is satisfi ed
that the board comprises directors who
as a group provide core competencies
such as accounting or fi nance,
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 suffi cient 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 was 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 leadership
development programme. The
Company has also made available on
the Company’s premises an offi ce
for the non-executive directors’ use
at any time to facilitate direct access
to management. Further, a Directors’
Portal was established in 2004 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 secured
Internet access.
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, succession planning and
leadership development, and the
remuneration of the Executive
Chairman and those of the other
two Executive Directors.
CHAIRMAN AND CHIEF
EXECUTIVE OFFICER
Principle 3: Chairman and Chief
Executive Offi cer 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 Offi cer of the
Company. The board confi rms 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 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; and
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) twice a year and on
other occasions when required.
In the case of KCL which is in three large
core businesses, the board is of the fi rm
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
38
Keppel Corporation Limited
Report to Shareholders 2007
Corporate Governance
directors, can have the benefi t 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 have the benefi t 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 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 fi lls
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 fl ow of the
Company’s operations.
The Executive Chairman sets guidelines
on and monitors the fl ow 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,
Mr Tony Chew (third from left), Lead Independent Director, directors and senior management
from the business units at the Securities Investors Association’s 8th Investors’ Choice Awards.
Keppel Corporation Limited
Report to Shareholders 2007
Corporate Governance
39
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 conducts formal interview of
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
Keppel’s board and management place importance in grooming talents including those in our
overseas units.
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 offi ce for
the non-executive directors’ use at
any time to facilitate direct access
to management.
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 and oversee the Company’s
succession and leadership development
plans. The Nominating Committee comprises
entirely independent directors; namely,
Mr Sven Ullring (Chairman), Tsao Yuan
Mrs Lee Soo Ann (Member) and Mrs
Oon Kum Loon (Member).
The Executive Chairman also ensures
effective communication with shareholders.
The terms of reference of the Nominating
Committee are disclosed in the
Appendix hereto.
40
Keppel Corporation Limited
Report to Shareholders 2007
Corporate Governance
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
not 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 fi nancial 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 offi ce 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.
extend the term and retain the services of
the director rather than lose the benefi t of
his contribution.
The NC is also charged with
determining the “independence”
status of the directors annually. Please
refer to page 37 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 satisfi ed that all the directors
have been able to and have adequately
carried out their duties as director
notwithstanding their multiple
board representations.
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.
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
The following key information regarding
directors are set out in the following
pages of this Annual Report:
Pages 213 to 216 and 219: Academic
and professional qualifi cations, board
committees served on (as a member
or Chairman), date of fi rst appointment
as director, date of last re-election as
director, directorships or chairmanships
both present and past held over the
preceding fi ve 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
Pages 147 to 148: 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.
In her consolidated report to the board,
the Independent Co-ordinator made
the following comments in relation to
the Company’s board processes:
“there continues to be improvement in
KCL’s board processes, and feedback
had been taken on board and addressed
by the relevant parties.”
Keppel Corporation Limited
Report to Shareholders 2007
Corporate Governance
41
CORPORATE GOVERNANCE
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.
The Company fully recognises that
the fl ow 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 fi nancial 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, fi nancial position
and prospects and consist of the
consolidated profi t and loss accounts,
analysis of sales, operating profi t, pre-tax
and attributable profi t by major divisions
compared against the budgets, together
with explanation given for signifi cant
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 fl ow to the board and
board committees, and between senior
management and the non-executive
directors, and facilitating orientation
Regular results conferences, complete with webcast, are held to ensure
timely and comprehensive disclosure of shareholders information.
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 are due for retirement at
the next annual general meeting, and
in determining whether directors with
multiple board representations are
nevertheless able to and have 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
directors may have. 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
42
Keppel Corporation Limited
Report to Shareholders 2007
Corporate Governance
Principle 9: There should be clear
disclosure of remuneration policy,
level and mix of remuneration, and
procedure for setting remuneration
Remuneration Committee
The Remuneration Committee comprises
entirely non-executive directors, 3 out of
4 of whom (including the Chairman) are
independent; namely: Mr Sven Ullring
(Chairman), Tsao Yuan Mrs Lee Soo Ann
(Member), Mr Leung Chun Ying2 (Member)
and Mr Tow Heng Tan (Member).
The Remuneration Committee is
responsible for ensuring a formal and
transparent procedure for developing
policy on executive remuneration
and for determining 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 benefi ts in kind) and the
specifi c 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 fi eld of executive
compensation outside the Company
where required.
2 Mr Leung Chung Ying resigned as member of the
Remuneration Committee with effect from 1 October 2007.
Board members interact with young managers from its worldwide
operations at an annual talent development programme.
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: The procedure for
developing policy on executive
remuneration and for fi xing
remuneration packages of
individual directors should be
formal and transparent
Principle 8: Remuneration of directors
should be adequate but not excessive
Keppel Corporation Limited
Report to Shareholders 2007
Corporate Governance
43
CORPORATE GOVERNANCE
ANNUAL REMUNERATION REPORT
Policy in respect of non-executive
directors’ remuneration
The remuneration of the non-executive
directors is paid by way of directors’ fees
in cash and/or in a fi xed number of KCL
shares as follows:
i. Cash Component: The amount
of directors’ fees payable in cash is
dependent on the respective non-
executive directors’ level of responsibility.
Each non-executive director is paid a
basic fee. In addition, non-executive
directors who perform additional
services in 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
the heavier responsibilities and more
frequent meetings required of them.
The Chairman of each Board Committee
is also paid a higher fee compared
with the members of the respective
Committees in view of the greater
responsibility carried by that offi ce.
Executive directors are not paid
directors’ fees. The framework for
determining the amount of director’s fees
payable in cash is set out in Table 2.
(ii) Share Component: At an
extraordinary general meeting of the
Company held in 2007, the shareholders
approved the board’s recommendation
to amend Article 82 of the Company’s
Articles of Association relating to
the remuneration of directors to
permit the Company to award a fi xed
number of KCL shares in the capital
of the Company, as shall from time to
time be determined by an Ordinary
Resolution of the Company, to the
non-executive directors as part of
their remuneration. The Company is
therefore able to remunerate its non-
executive directors in the form of KCL
shares by the purchase of KCL shares
from the market for delivery to the non-
executive directors. The incorporation
of an equity component in the total
remuneration of the non-executive
directors is intended to 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.
The remuneration payable to non-
executive directors is subject to
shareholders’ approval at the Company’s
annual general meetings.
Remuneration policy in respect
of executive directors and other
key executives
The Company advocates a performance-
based remuneration system that is
highly fl exible and responsive to the
market, Company’s, business unit’s and
individual employee’s performance.
The total remuneration mix comprises
3 key components; annual fi xed cash,
annual performance incentive and
long-term incentive. The annual fi xed
cash component comprises the annual
basic salary plus any other fi xed
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 to enable the Company to
stay competitive and relevant. The
Company benchmarks its annual
fi xed salary at the market median
with the variable compensation
being performance-driven. More
emphasis is placed on the ‘pay-at-risk’
compensation as an employee moves
up the corporate ladder. 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 on pages
148, 149, 167, 168 and 169.
Table 2
Non-executive director
Audit, Board Risk & Executive Committees
Remuneration, Nominating & Board Safety
Committees
–
Chairman
Member
Chairman
Member
Ratio to retainer of $40,000
$40,000 per annum
$30,000 per annum
$15,000 per annum
$15,000 per annum
$7,500 per annum
1.00
0.75
0.38
0.38
0.19
44
Keppel Corporation Limited
Report to Shareholders 2007
Corporate Governance
Level and mix of remuneration of Directors and Key Executives (who are not also Directors) for the year ended
31 December 2007
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.
Remuneration Band and Name of Director
Abv $9,000,000
Nil
Abv $8,750,000 to $9,000,000
Lim Chee Onn
Abv $6,250,000 to $8,750,000
Nil
Abv $6,000,000 to $6,250,000
Choo Chiau Beng
Abv $4,750,000 to $6,000,000
Nil
Abv $4,500,000 to $4,750,000
Teo Soon Hoe
$250,000 to $4,500,000
Nil
Below $250,000
Tony Chew Leong-Chee
Lim Hock San
Sven Bang Ullring
Tsao Yuan Mrs Lee Soo Ann
Leung Chun Ying
Oon Kum Loon
Tow Heng Tan
Yeo Wee Kiong
Variable or
Performance-
Related
Income/
Bonuses
Base/
Fixed
Salary
–
–
13%
77%
–
–
14%
76%
–
–
17%
70%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Remuneration Band and Name of Key Executive
Above $3,250,000 to $3,500,000
Tong Chong Heong
Wong Kingcheung, Kevin
Above $2,750,000 to $3,250,000
Nil
Above $2,500,000 to $2,750,000
Koh Ban Heng
Above $1,250,000 to $2,500,000
Nil
Above $1,000,000 to $1,250,000
Lam Kwok Chong
Above $750,000 to $1,000,000
Ong Tiong Guan
Chua Chee Wui
19%
23%
66%
64%
–
–
22%
30%
–
–
29%
30%
36%
28%
20%
56%
Directors’
Fees
Directors’
Allowance
Benefi ts-
in-Kind
Options Remuneration
Shares5
Granted
–
–
–
–
–
–
–
71%
77%
70%
68%
65%
78%
75%
71%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2%
3%
6%
4%
–
3%
–
2%
–
–
–
–
–
–
–
–
–
–
n.m.2
10%
–
–
n.m.2
10%
–
–
n.m.2
13%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
n.m.2
n.m.2
–
15%
13%3
–
n.m.2
48%4
–
n.m.2
n.m.2
n.m.2
–
41%
44%
16%
–
–
–
–
–
–
–
27%
20%
24%
28%
35%
19%
25%
27%
–
–
–
–
–
–
–
–
Notes:
1. A portion of the annual performance incentive is tied to EVA performance whereby one half from current year EVA and one third from accrued EVA bank is paid out, provided EVA
remains positive. The balance 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 Keppel Land Limited Share Options.
4. Received Singapore Petroleum Company Restricted Shares.
5. Estimated value based on KCL shares’ closing price of $13.00 on the last trading day of FY2007.
1
Keppel Corporation Limited
Report to Shareholders 2007
Corporate Governance
45
CORPORATE GOVERNANCE
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 fi nancial
year ended 31 December 2007.
“Immediate family member” means the
spouse, child, adopted child, step-child,
brother, sister and parent.
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 148, 149, 167, 168 and 169 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.
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 briefi ngs. 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.
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 profi t
and loss accounts, analysis of sales,
operating profi t, pre-tax and attributable
profi t by major divisions compared
against the respective budgets,
together with explanations for signifi cant
variances for the month and year-to-date.
Audit Committee
The Audit Committee comprises
the following non-executive directors,
all of whom are independent: Mr Lim
Hock San (Chairman), Mr Tony Chew
Leong-Chee (Member) and Mrs Oon
Kum Loon (Member).
Mr Lim Hock San and Mrs Oon Kum
Loon have accounting and related
fi nancial management expertise and
experience. The board considers
Mr Tony Chew as having suffi cient
fi nancial management knowledge and
experience to discharge his responsibilities
as a member of the Committee.
The board has embraced openness
and transparency in the conduct
The Audit Committee’s main role is to
assist the board to ensure integrity of
fi nancial reporting and that there is in
place sound internal control systems.
The Committee’s terms of reference are
set out on page 52 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 offi cer
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 fi ndings and recommendations to the
Audit Committee.
The Audit Committee met with the
external auditors 3 times and with the
internal auditors 5 times during the year,
and once in January 2008 without the
presence of management.
During the year, the Audit Committee
performed independent review of the
fi nancial 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 signifi cant changes made that would
have a great impact on the fi nancials.
The Audit Committee also reviewed
and approved both the Group internal
auditor’s and external auditor’s plans to
ensure that the plans covered suffi ciently
in terms of audit scope in reviewing
the signifi cant internal controls of the
Company. Such signifi cant controls
comprise fi nancial, and operational and
compliance controls. All audit fi ndings
and recommendations put up by the
46
Keppel Corporation Limited
Report to Shareholders 2007
Corporate Governance
Keppel strengthens
its risk management
processes with
regular pandemic
exercises for our
large workforce.
internal and the external auditors were
forwarded to the Audit Committee.
Signifi cant 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
confi rmed 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 satisfi ed that the team
is adequately resourced and has
appropriate standing within the Company.
The Committee has reviewed the
“Keppel: Whistle-Blower Protection
Policy” (the “Policy”) which provides for
the mechanisms by which employees and
other persons may, in confi dence, raise
concerns about possible improprieties in
fi nancial reporting or other matters, and
was satisfi ed 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, management
reported to the Audit Committee the
interested person transactions (“IPTs”)
Keppel Corporation Limited
Report to Shareholders 2007
Corporate Governance
47
CORPORATE GOVERNANCE
1
The 2007 Inaugural
Annual Safety
Convention initiated
by the Board Safety
Committee saw 22
innovative projects
Group-wide.
in accordance with the Company’s
Shareholders’ Mandate for IPT. The IPTs
were reviewed by the internal auditors.
All fi ndings 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 123 to 125
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 fi nancial,
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 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 and
risk management procedures
and was satisfi ed that the
Company’s risk management
processes and internal controls
are adequate to meet the needs
of the Company in its current
business environment.
48
Keppel Corporation Limited
Report to Shareholders 2007
Corporate Governance
Board Risk Committee
In October 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 signifi cant risks, and
discusses risk management strategies
with management. The Committee
reports to the board on material fi ndings
and recommendations in respect of
signifi cant risk matters. The detailed
terms of reference of this Committee is
disclosed on page 53 herein.
The Board Risk Committee is made
up of 3 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 Offi cer 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, has
in-depth knowledge and experience
in fi nance accountancy, business and
management and 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 business career spanning the
management consultancy, investment
banking and stock-broking industries.
Mr Tow is currently the Chief Investment
Offi cer of Temasek Holdings. The fourth
member is Mr Yeo Wee Kiong who
is a director in Drew & Napier LLC, a
leading law corporation in Singapore,
practicing in the areas of corporate
law, corporate fi nance, mergers and
acquisitions, listings on stock exchange,
venture capital, banking and securities.
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, fi nance and law.
Mr Choo Chiau Beng, Senior Executive
Director and Chairman & CEO of Keppel
O&M, shares insights with investors and
fund managers.
Keppel Corporation Limited
Report to Shareholders 2007
Corporate Governance
49
CORPORATE GOVERNANCE
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 qualifi ed 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 fi nancial, operational
and compliance controls. Audits were
carried out on all signifi cant business
units in the Company, inclusive of
limited review performed on dormant
and inactive companies. All Group
Group Finance Director Teo Soon Hoe interacts with shareholders of Keppel Corporation.
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 offi cers. In addition,
internal audit’s summary of fi ndings and
recommendations are discussed at the
Audit Committee meetings.
Company’s Group Corporate
Communications Department (with
assistance from the Group Control
& Accounts and Group Legal
Departments, when required) regularly
communicates with shareholders and
receives and attends to their queries
and concerns.
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
Material information are disclosed
in a comprehensive, accurate and
timely manner via SGXnet and the
press. To ensure a level playing
fi eld and provide confi dence 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.
50
Keppel Corporation Limited
Report to Shareholders 2007
Corporate Governance
The annual general meeting is a platform for the Board of Directors to engage shareholders.
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.
present at such Meeting to assist the
directors to address shareholders’
queries, if necessary.
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.
The Chairmen of each Board Committee
are required to be present to address
questions at the Annual General
Meeting. External auditors are also
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 offi cers. 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 offi cers informing
that the Company and its offi cers
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.
Keppel Corporation Limited
Report to Shareholders 2007
Corporate Governance
51
CORPORATE GOVERNANCE
APPENDIX
BOARD COMMITTEES
– TERMS OF REFERENCE
A. Executive Committee
1. Consider and, if deemed fi t, 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.
4. Consider and, if deemed fi t,
approve capital equipment
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 fi t, approve
performance bonds and guarantees
to be furnished by the Company or
its subsidiaries which are above
$10 million but less than $100 million.
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 fi t, approve
loans to companies within the Keppel
Group of an amount exceeding
$30 million but up to $100 million.
9. Consider and, if deemed fi t, 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 affi xation
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 foreign offi ces
of the Company.
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 fi t.
Matters arising at meetings of the
Executive Committee shall be decided by
a simple majority of votes including the
affi rmative vote of at least one member
who is an independent director.
B. Audit Committee
1. Examine the effectiveness of the Group’s
internal control system, including
fi nancial, operational and compliance
controls, to ensure that a sound system
of internal controls is maintained.
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 fi nancial statements and
formal announcements relating to
fi nancial performance, and review
signifi cant fi nancial reporting issues
and judgments contained in them, to
ensure integrity of such statements
and announcements.
4. Review the independence and objectivity
of the external auditors annually.
5. Review the nature and extent of non-
audit services performed by the auditors.
6. Meet with external auditors and
internal auditors, without the presence
of management, at least annually.
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
confi dence, raise concerns about
possible improprieties in matters of
fi nancial reporting or other matters, to
ensure that arrangements are in place
for the independent investigation
of such matters and for appropriate
follow up action.
11. Review interested person transactions.
12. Investigate any matters within the
Audit Committee’s purview, whenever
it deems necessary.
13. Report to the Board on
material matters, fi ndings and
recommendations.
14. Perform such other functions as the
Board may determine.
52
Keppel Corporation Limited
Report to Shareholders 2007
Corporate Governance
15. Sub-delegate any of its powers within
its terms of reference as listed above
from time to time as this Committee
may deem fi t.
C. Board Risk Committee
1. Review and guide the Group in
formulating its risk policies.
2. Discuss risk mitigation strategies
with management.
3. Examine the effectiveness of the
Group’s risk management system to
ensure that a robust risk management
system is maintained.
4. Review and guide in establishing a
process to effectively identify, evaluate
and manage signifi cant risks.
5. Review risk limits where applicable.
6. Review the Group’s risk
profi le periodically.
7. Provide a forum for discussion on
risk issues.
8. Report to the Board on
material matters, fi ndings 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 fi t.
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.
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.
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
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 benefi ts to be granted to him.
each director.
6. Annual assessment of the
effectiveness of the Board as a whole
and individual directors.
7. Review succession and leadership
development plans.
8. Sub-delegate any of its powers within
its terms of reference as listed above,
from time to time, as this Committee
may deem fi t.
E. Remuneration Committee
1. Recommend to the Board a
framework of remuneration for Board
members and key executives, and the
specifi c remuneration packages for
each director and the Chief Executive
Offi cer (if the Chief Executive Offi cer
is not an Executive Director).
2. Decide the early termination
compensation (if any) of directors.
3. Consider whether directors should
be eligible for benefi ts under long-
term incentive schemes (including
weighing the use of share schemes
against the other types of long-term
incentive scheme).
4. Review the terms, conditions
and remuneration of the senior
management.
5. Administer the Company’s employee
share option scheme (the “KCL Share
Option Scheme”) in accordance with
the rules of the scheme.
6. Grant share options under the
KCL Share Option Scheme as this
Committee may deem fi t.
F. Board Safety Committee
1. Review and examine the
effectiveness of the Keppel Group
companies’ safety management
system, including training and
monitoring systems, to ensure that
a robust safety management system
is maintained.
2. Review and examine the Keppel
Group companies’ safety procedures
against industry best practices, and
monitor its implementation.
3. Provide a discussion forum on
developments and best practices
in safety standards and practices,
and the feasibility of implementing
such developments and best
practices.
4. Assist in enhancing safety awareness
and culture within the Keppel Group.
5. Ensure that the safety functions
in Keppel Group Companies are
adequately resourced (in terms of
number, qualifi cation, and budget)
and has appropriate standing within
the organisation.
6. Consider management’s proposals
on safety-related matters.
7. Carry out such investigations
into safety-related matters as the
Committee deems fi t.
8. Report to the Board on
material matters, fi ndings and
recommendations.
9. Perform such other functions as the
Board may determine.
7. Sub-delegate any of its powers within
its terms of reference as listed above,
from time to time, as this Committee
may deem fi t.
10. Sub-delegate any of its powers
within its terms of reference as
listed above from time to time
as the Committee may deem fi t.
Keppel Corporation Limited
Report to Shareholders 2007
Corporate Governance
53
CORPORATE GOVERNANCE
NATURE OF CURRENT DIRECTORS’ APPOINTMENTS AND MEMBERSHIP ON BOARD COMMITTEES
Director
Board Membership
Audit
Executive
Nominating Remuneration
Risk
Safety
Committee Membership
Lim Chee Onn
Tony Chew Leong-Chee
Executive Chairman
– Chairman
Lead Independent Member Member
–
–
–
–
– Member
–
–
Director
Lim Hock San
Sven Bang Ullring
Tsao Yuan Mrs Lee Soo Ann
Leong Chun Ying1
Oon Kum Loon
Tow Heng Tan
Yeo Wee Kiong
Choo Chiau Beng
Teo Soon Hoe
Independent Chairman Member
–
Independent
–
Independent
–
Independent
Independent Member Member Member
–
– Chairman Chairman
– Member Member
– Member
–
–
– Member
– Member
–
–
–
– Chairman
–
– Member Member
– Member
Non-Independent
& Non-Executive
Independent
Executive Director
Executive Director
& Group Finance Director
– Member
–
–
– Member
– Member
–
–
–
– Member Chairman
–
–
–
–
–
–
Note
1 Mr Leung Chun Ying resigned as Director from 1 October 2007.
PROCESS FOR SELECTING
NEW DIRECTORS
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 fi ve 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.
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
Director’s assessment form and send
the form directly to the IC within fi ve
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
54
Keppel Corporation Limited
Report to Shareholders 2007
Corporate Governance
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.
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.
As for the assessment of the
performance of the NEDs, each director
(both NEDs and Executive Directors)
is required to complete the NED’s
assessment form and send the form
directly to the IC within fi ve 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 fi ve 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
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
fi nancial 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).
The individual director’s performance
criteria are categorised into 5 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 and business
knowledge, functional expertise, whether
he provides valuable inputs, his ability
to analyse, communicate and contribute
to the productivity of meetings, and his
understanding of fi nance 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
and works to further improve his own
performance, whether he listens and
discusses objectively and 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 provides the
Board with the required mix of skills
and competencies.
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.
Keppel Corporation Limited
Report to Shareholders 2007
Corporate Governance
55
INVESTOR RELATIONS
We are committed to engage and
further strengthen relationships
with our stakeholders.
2000
2001
2002
2003
2004
2005
2006
2007
Total Shareholder Return (TSR) (%)
Keppel Corporation
Straits Times Index
(18.2)
(20.0)
2.0
(13.4)
37.6
(14.5)
75.2
38.3
48.7
21.6
32.5
19.3
65.3
32.4
51.7
21.0
PROACTIVE COMMUNICATION
Clear, consistent and regular
communication is a hallmark of Keppel
Corporation’s relationship with investors
and analysts worldwide.
Our Investor Relations is guided by the
principle of achieving best practices in
corporate governance and disclosure.
Led by the management, our dedicated
Investor Relations team and heads of
business units meet institutional investors
and analysts throughout the year.
The increased level of interest in the
progress and prospects of the Company
has generated a higher level of investor-
related activities in 2007. We held
143 face-to-face investor meetings in
Singapore alone.
Through non-deal roadshows to the
US, UK, Europe, Japan and Hong Kong,
our senior management continued to
maintain relationships with our loyal
shareholders and sustain the huge
interest among overseas fund managers.
Investors and analysts gain better insights into the
offshore and marine operations through yard visits.
56
Keppel Corporation Limited
Report to Shareholders 2007
Investor Relations
We extended our outreach with meetings
in the Middle East in 2007.
Such one-on-one meetings allow us to
give investors insights into the Group’s
key developments, strategic directions
and plans for sustainable earnings growth.
To aid in the better understanding of
our business units and operations, we
facilitated meetings with management
of key subsidiaries which included tours
of the facilities. Investors from the UK,
Scandinavia, US and the Asian region
visited our shipyards for insights into our
rigbuilding operations and facilities.
Since the inauguration of the Keppel
Seghers Ulu Pandan NEWater Plant
in March 2007, a number of fund
managers have toured the water reuse
facility, familiarising themselves with the
technologies of the plant.
During the year, we continued to invite
investors and analysts to major corporate
functions, ranging from vessel-naming
ceremonies to arts and charity events
sponsored by the Group. Such events
were excellent platforms for the investing
community to interact with the senior
executives of our business units.
Our management and Investor
Relations team also engaged overseas
funds through conference calls, enabling
us to clarify issues and provide updates
on our businesses.
In August 2007, we participated in a
major oil and offshore conference, the
14th Annual Oil & Offshore Conference,
held by Pareto Securities in Norway.
Senior Executive Director Choo Chiau
Beng, who is also the Chairman/CEO
of Keppel Offshore & Marine, shared
his thoughts on the rigbuilding business
at the conference, attended by over
1,400 personnel from the global fi nancial
community and leading oil and gas
related companies.
To reach more stakeholders in a timely
and effective manner, we continued our
‘live’ webcasts of our quarterly results
Keppel Seghers Ulu Pandan NEWater Plant receives its fi rst visit from institutional fund managers.
presentations on our performance and
business outlook. These webcasts
allow viewers from around the globe to
post questions through the Internet for
management to respond to in real time.
As Keppel continues to build sustainable
businesses, we are committed to keeping
our communication channels accessible
and timely so as to serve the interests of
the investing community well.
News releases are promptly posted on
our website, www.kepcorp.com, at the
end or beginning of each market day,
in addition to the Singapore Exchange
website. Duty offi cers are readily
accessible to take queries.
SHAREHOLDER ENDORSEMENT
At the last Annual General Meeting,
shareholders gave approval to the
proposal by Keppel’s management
for the subdivision of each Keppel
Corporation Share into two. The Share
began trading on the ex-date at $10.80
and reached an all-time high of $15.30
on 8 October 2007.
Despite the overall stock market decline
as a result of uncertainties arising
from the US sub-prime fallout, Keppel
Corporation’s share price closed at a
creditable $13.00 per share at the end
of the year. This represents a share price
gain of 48% over 2006’s, outpacing the
improvement of 17% recorded by the
Straits Times Index (STI) for 2007.
Keppel Corporation’s Total Shareholder
Return (TSR) of 52% in 2007 was higher
than the STI’s TSR of 21%, its eighth
straight year of outperforming STI’s TSR.
RECOGNITION
Our proactive investor relations approach
and commitment to corporate transparency
was recognised by the investing
community and regulatory bodies.
During the year, Keppel was ranked
the best in Investor Relations at the
Singapore Corporate Awards, clinching
a Gold Award. We won the esteemed
Golden Circle Award for being the best
in transparency across all categories and
overall winner in the Most Transparent
Company category for multi-industry/
conglomerate companies at the eighth
SIAS Investors’ Choice Awards.
Executive Chairman Lim Chee Onn
was honoured with the Best Investor
Relations by a CEO Award at the
IR Magazine South East Asia Awards
while Keppel received commendation
for its efforts in investor relations.
We were ranked second for excellence in
fi nancial information disclosures by The
Business Times Corporate Transparency
Index (October 2007).
Keppel Corporation Limited
Report to Shareholders 2007
Investor Relations
57
AWARDS AND ACCOLADES
Keppel is lauded for
achievements in
business excellence.
CORPORATE GOVERNANCE
AND TRANSPARENCY
Singapore Corporate Awards
Keppel Corporation
• Gold Award, Best Managed Board
• Gold Award, Best Investor Relations
• Gold Award, Best Annual Report
– all awards won are in the category
for listed fi rms with more than $500
million market capitalisation
Securities Investors Association
of Singapore 8th Investors’
Choice Awards
Keppel Corporation
• Golden Circle Award, for being
the best in transparency across
all categories
• Winner, Most Transparent Company
Award (Multi-Industry/Conglomerate)
• Winner, Singapore Corporate
Governance Award
Keppel took triple honours at the Singapore
Corporate Awards 2007. From left,
Group Finance Director Teo Soon Hoe,
Executive Chairman Lim Chee Onn and
Group Corporate Communications
General Manager Wang Look Fung.
58
Keppel Corporation Limited
Report to Shareholders 2007
Awards and Accolades
Keppel Land garnered recognition for its
projects as follows:
Spring City Golf & Lake Resort,
Kunming, China
Ranked by Business Initiative Directions
of Spain
• Gold Winner, International Star Award
for Quality
Ranked by Asian Golf Monthly
• Winner, Best Course in Asia
• Winner, Best Course in China
Ranked by China Golf Digest
• No. 1 Golf Course in China
Ria Bintan Golf Club, Bintan,
Indonesia
Ranked by Asian Golf Monthly
• Winner, Best Course in Indonesia
• Runner-up, Best Course in Asia
Marina Bay Residences, Singapore
Awarded by Singapore’s Building
and Construction Authority
• Green Mark Award
CORPORATE CITIZENSHIP
Keppel Corporation was presented with
Singapore’s highest recognition for arts
sponsorship – the Patron of the Arts
Award, while SPC received the Associate
of the Arts Award.
Keppel Singmarine won the SHARE
Platinum Award and the 5-Year Outstanding
SHARE Award in recognition of its
patronage of the Community Chest SHARE
Programme. Keppel FELS received the
SHARE Achiever Award and the SHARE
Corporate Gold Award for matching its
employees’ contributions while Keppel
Shipyard and Keppel Logistics both won
the SHARE Gold Award.
SAFETY
National Workplace Safety and
Health Campaign
Keppel O&M
• Outstanding Contribution Award for
garnering the most pledges to its
industry’s workplace safety and health
Keppel O&M’s senior management receives the
inaugural Offshore & Marine Engineering Award 2007.
Keppel Land
• Runner-up, Most Transparent
Company Award (Property)
category in the Forbes’ Global 2000
ranking in March 2007
• Keppel Corporation, Keppel
Singapore Petroleum Company (SPC)
• Third, Singapore Corporate
Governance Award
• Runner-up, Most Transparent
Company Award (Non-Electronics
Manufacturing)
Business Times Corporate
Transparency Index (Oct 2007)
Keppel Corporation, Keppel Land
and Keppel T&T were ranked second,
fourth and sixth respectively out of 672
Singapore-listed companies for excellence
in fi nancial information disclosures.
IR Magazine South East Asia
Awards
Keppel Corporation
• Best Investor Relations by
a CEO Award
• Commendation for the Best Overall
Investor Relations, Best Corporate
Governance and Best Investor
Relations Website categories
BUSINESS EXCELLENCE
• Keppel Corporation was classed a
“global superstar” in the conglomerate
Offshore & Marine (Keppel O&M)
and Keppel FELS were ranked
sixth, seventh and sixteenth
respectively in the Singapore
International 100 Ranking, based
on 2006 overseas revenue
• Keppel O&M was conferred the
Offshore & Marine Engineering
Award 2007 for its distinguished
contributions to the industry at
the Singapore International
Maritime Awards
• Keppel O&M was elected to the
Offshore Energy Center’s Hall of
Fame as a Technology Pioneer in
the Construction – Rig Building
Shipyards category
• SPC won the Energy Company
of the Year Award at the Energy
Business Awards, Asia
• Keppel Shipyard secured Lloyd’s
List Maritime Asia Award for being
the best shiprepair yard in Asia
• Keppel Logistics was bestowed
the Best Retail Logistics Service
Provider Award (Singapore) in
the Frost & Sullivan’s 2007
ASEAN Logistics
Keppel Corporation Limited
Report to Shareholders 2007
Awards and Accolades
59
The greening of our lifestyle
at home, work and play is
crucial to the sustainability
of our environment. It also
makes business sense.
Promoting
a Green
Culture
Every effort counts when it
comes to protecting our planet
for future generations.
Global warming, pollution and loss of biodiversity have been
attributed to an increase in human activities and negligent
acts, causing harm to the environment.
The report issued in February 2007 by the United Nations
Intergovernmental Panel on Climate Change attests to this. It
stated, “Warming of the climate system is unequivocal”, and
highlighted that human activities have played a signifi cant part
in overloading the atmosphere with carbon dioxide.
These and many other environmental issues now top global agendas
as people become more aware of the effects of global warming
and its impact on their lives and on those of future generations.
Keppel is committed to pursue green strategies and processes in
our businesses and encourage our people to adopt a green lifestyle.
GREEN PRACTICES AT WORK
More than supporting the green movement, the Keppel Group
has been implementing green strategies and practices in our
business operations.
In developing property, we take great care to improve the
quality of life while minimising the ecological impact.
Keppel Land’s developments The Tresor and Marina Bay
Residences were conferred the Green Mark Gold Awards
by the Singapore Building and Construction Authority for
environment-friendly building practices and innovative
green features.
Keppel was the presenting sponsor of the telecast of documentary
Life in the Undergrowth on MediaCorp Arts Central.
61
PROMOTING A GREEN CULTURE
“Green practices are the new business
imperative. We must set a clear direction,
such as an environmental framework,
to guide the Group in taking strategic
strides to play our part in protecting the
environment and growing our businesses.”
MR LIM CHEE ONN
EXECUTIVE CHAIRMAN,
KEPPEL CORPORATION
Keppel Land is also redeveloping a
new Grade A offi ce building known as
Ocean Financial Centre on the site of
the former Ocean Building. It will be
state-of-the-art in green and environment-
friendly qualities featuring the largest
solar panel system and the fi rst hybrid
chilled water system in Singapore.
Keppel Land plans to introduce green
building technologies for all its new
property development designs and
rigorously conduct energy audits on
current buildings to better manage them
in a cost and energy-effi cient way. It also
aims to obtain ISO 14001 Environment
Management System (EMS) certifi cation
for its commercial and residential
operations by end 2008.
Keppel Integrated Engineering (KIE),
whose main business is environmental
engineering, is focusing its research
and development on energy-effi cient
recycling technologies for solid waste
and wastewater. It is committed to
reduce its carbon footprint and improve
energy and process effi ciency through
value engineering.
A signifi cant milestone achieved in
2007 was the adoption of a green
blueprint for its businesses. This was
followed up with workshops to seek
employee feedback and promote
ownership of the plan. Amidst its support
of various community sustainability
projects such as the ‘Bring Your Own
Bag Day’, the company also held the
inaugural KIE Health, Safety and
Environment (HSE) Convention in October
2007 for employees and partners.
During the year, its Environmental
Division, Keppel Seghers Engineering
Singapore, achieved certifi cation for
ISO 14001 EMS.
In 2008, as KIE presses on to cultivate
an eco-mindset in its employees, it is
also rolling out green initiatives for its
overseas operations. Another initiative
would be implementing a ‘preference
for eco-compliant vendor/supplier’
during tender evaluation.
A concept plan to irrigate and transform
the surrounding area of the Doha North
Sewage Treatment Works Plant into
an EcoPark was unveiled during the
Foundation Stone Unveiling Ceremony in
January 2008. The proposed EcoPark, if
approved, is expected to be the fi rst-of-
its-kind to provide a green space for the
local community to learn, work and play.
Keppel Offshore & Marine (Keppel
O&M), led by Keppel FELS, has
been conducting its steel blasting in
chambers since 1997. Keppel FELS
1
1
62
Keppel Corporation Limited
Report to Shareholders 2007
Promoting a Green Culture
2
1. Keppel dove in to launch Singapore’s fi rst coral nursery.
2. Personnel of Keppel Batangas Shipyard soiled their hands for the ‘Tree for Life Project’ under
the Green Philippines Programme.
and Keppel Shipyard have long been
certifi ed with Occupational Health and
Safety Assessment Series (OHSAS)
18001 and ISO 14000 EMS
respectively. Keppel FELS Brasil has
attained both certifi cations.
Keppel Shipyard took a step farther
to set up an Environmental Task Force
in June 2007 dedicated to monitor
environmental issues. In the US,
Keppel AmFELS has conformed to
Texas State Air Quality Permit and
Federal Operating Permit requirements.
FRAMEWORK FOR A
GREEN CULTURE
To further consolidate and align the
Group’s myriad of green initiatives and
provide a clear strategic direction,
Keppel Corporation is planning to set
up an Environmental Steering Committee
(ESC) aimed at developing a Group-wide
Environment Masterplan. Members of the
ESC are expected to comprise managing
directors and chief executive offi cers of
the business units as well
as Group Corporate Communications
and Group Human Resources.
SPC’s co-owned Singapore Refi ning
Company initiated a project to increase
production of ultra low sulphur diesel
or ‘clean fuels’ of Euro-IV standard by
2009. SPC’s Jalan Buroh station
offers the cleaner Compressed
Natural Gas (CNG) to motorists
with cars that can use CNG.
Currently, there are about 500 CNG
cars on Singapore roads, and the
number is expected to grow with
increasing environmental awareness.
The Environment Masterplan would set
out the Group’s green vision, policies,
directions and framework for the next fi ve
to 10 years. The framework would outline
how Keppel could create a sustainable
business culture through corporate
environmental governance and practices,
effi cient use of energy, conservation of
resources, identifi cation of new business
opportunities in environmental technologies
and involvement of employees in
environment-protection activities.
The framework would also chart
areas such as partnerships with
government agencies, Non-Government
Organisations (NGOs), vendors and
suppliers through sponsorship and
participation in environment-protection
projects and educational programmes.
Environmental compliance certifi cation
of the Group’s businesses is yet
another aspect.
A working group led by KIE and
Environmental Champions from the
various business units has been set
up. These Environmental Champions
would form taskforces to support the
units’ CEOs to educate, promote and
implement green programmes at the
business unit level.
Towards primarily educating and
raising awareness of environmental
sustainability, Keppel also supported
several key green initiatives in 2007.
Keppel Corporation Limited
Report to Shareholders 2007
Promoting a Green Culture
63
PROMOTING A GREEN CULTURE
Keppel’s green message
reached out to the heartlands,
distributing 100,000 reusable
bags in support of NEA’s
‘Bring Your Own Bag Day’.
sea and conducting monthly cleaning
and brushing of tables to remove
fouling organisms.
Another programme that Keppel
sponsored was the Corporate
Environmental Outreach (CEO) Run
held on 17 November 2007 at Pulau
Semakau. Organised by NEA, Keppel
sponsored $70,000 and participated
with several corporations in the inaugural
run event. Funds raised were channelled
to six local environmental NGOs.
Keppel was the fi rst private organisation
to buy 500 tote bags from the
Tanglin-Cairnhill Citizens Consultancy
Committee under the ‘Make Your Own
Bag’ project to help low-income families.
The materials were recycled from old
PVC event banners.
At the B4E Global Business Summit
for the Environment held in April 2007,
Keppel participated as a supporting
sponsor. Hosted by the United Nations
Environment Programme and The Global
Compact, this was Asia’s fi rst major
international conference for corporations,
governments and NGOs to discuss
initiatives to create a greener future.
Keppel was the exclusive sponsor for
the telecast of Life in the Undergrowth,
a highly acclaimed fi ve-part documentary
series produced by the BBC, and
presented by world-renowned David
Attenborough. The series, which
took two years to produce, explores
CARING FOR THE ENVIRONMENT
On 6 June 2007, we became the fi rst
private organisation to support the
National Environment Agency’s (NEA)
‘Bring Your Own Bag Day’ by partnering
NTUC FairPrice to give out 100,000
reusable bags at its supermarkets.
Over a hundred Keppelites volunteered
as Green Ambassadors at various
NTUC FairPrice outlets to encourage
shoppers to use the reusable bags
for their shopping. Within the Group,
reusable bags were distributed and the
message was reinforced.
In doing our part to preserve our
environment, Keppel launched the fi rst
Coral Nursery Project in Singapore at a
site off Pulau Semakau on 30 July 2007
together with the National University of
Singapore (NUS), National Parks Board
and NEA. Ms Grace Fu, Minister of
State for National Development offi ciated
at the launch of the coral nursery.
This is Singapore’s fi rst corporate-
sponsored marine environmental
initiative, the fi rst of its kind in the region
and part of a national effort to conserve
the coral cover in Singapore. Keppel is
sponsoring $250,000 over two years
towards the project.
Keppelites with diving experiences
participated as Volunteer Divers under
the auspices of Keppel Volunteers (KV),
an employee-driven Corporate Social
Responsibility group. The Volunteer
Divers will support the efforts to
nurture and re-grow the coral fragments.
Together with the NUS, they will help
monitor the progress of the coral
nursery. Volunteer Divers have begun
deploying nursery tables into the
64
Keppel Corporation Limited
Report to Shareholders 2007
Promoting a Green Culture
1
2
the spectacular micro universe of
invertebrates and covers the forests across
the Amazon to Costa Rica, Australia,
Malaysia, Hungary and Switzerland.
Keppel Corporation is a Founding
Sponsor of the Singapore International
Water Week (SIWW) for two years.
The SIWW is a fi ve-day international
event to be held from 23 to 27 June 2008.
Government, industry representatives
and specialists would meet to discuss
the theme ‘Sustainable Water Solutions
for Cities’.
premiered on Channel NewsAsia on
23 July 2007. This series examined
the ways in which Asian countries are
addressing issues on global warming
and climate change.
Keppel Shipyard participated in NEA’s
Annual Clean & Green Week Schools
Carnival. It hosted students from Chung
Cheng High School (Main) on a tour to
showcase the green initiatives at the
yard. This is the fourth year that Keppel
Shipyard is supporting the school’s
green education for its students.
On World Environment Day, Keppel Land
held a series of green initiatives and events
to raise awareness of environment and
energy conservation for staff and tenants.
Employees were also given reusable
bags and urged to use less plastic bags.
A ‘Green Living’ exhibition was held to
emphasise the importance of going green.
SPC participated in MediaCorp’s six-part
documentary series, Saving Gaia, which
Keppel Batangas Shipyard and Keppel
Cebu Shipyard contributed to the
‘Tree for Life Project’ under the Green
Philippines Programme initiated by the
Department of Environment and Natural
Resources (DENR). The project was
aimed at planting 20 million trees all over
the archipelago from July to November
2007. Keppel Batangas gave 1,400
seedlings of various fruit and non-fruit
bearing trees to DENR while Keppel
Cebu planted 100 seedlings inside its
shipyard compound.
The two yards also participated in the
22nd Annual International Coastal
Cleanup on 15 September 2007.
Yard volunteers picked up trash along
the coastlines of Batangas and Cebu
to help preserve the local marine life.
1. The Keppel Group contributed to the fund
in aid of environmental NGOs.
2. Keppel was the fi rst private organisation to
buy 500 tote bags recycled from old PVC
event banners.
Keppel Corporation Limited
Report to Shareholders 2007
Promoting a Green Culture
65
Sino-
Singapore
Tianjin
Eco-City
The project is expected
to strengthen the earnings
platforms for Keppel’s
environmental engineering
and real estate divisions.
I
INCEPTING A LANDMARK PROJECT
n November 2007, China and Singapore signed a Framework
Agreement to co-operate in developing an eco-city in Tianjin,
China. The project was fi rst mooted in April 2007 when
Singapore’s Senior Minister Goh Chok Tong, whilst on a state
visit to China, proposed to the Chinese Premier Wen Jiabao
a strategic collaboration to develop a city in China that will be
a model for sustainable development.
The proposal was timely as it complements the Chinese
government’s strategic efforts to shift China’s rapid economic
growth onto a more sustainable trajectory. Sino-Singapore
Tianjin Eco-City (SSTEC), as it is to be called, will demonstrate
the determination of both countries to tackle global climate
changes, strengthen environmental protection and resource
conservation, and build a harmonious society.
ESTABLISHING LEADERSHIP FOR THE
SINGAPORE CONSORTIUM
The development will be jointly-owned and managed by a
Singapore consortium and a Chinese consortium. The Keppel
Group was asked by the Singapore government to lead the
Singapore consortium. We are excited to be involved in this
66
Keppel Corporation Limited
Report to Shareholders 2007
Sino-Singapore Tianjin Eco-City
will see a sustainable environment
for future generations.
SINO-SINGAPORE TIANJIN ECO-CITY
BEIJING
N
Highway
Tianjin Binhai Light Rail
Haihe River
Tianjin Binhai
New Area
Tianjin City Centre
Tianjin Economic
Development Area
TIANJIN
HEBEI
PROVINCE
Hangu
District
HEBEI
PROVINCE
Tanggu
District
Tianjin
Airport
Sino-Singapore
Tianjin Eco-City
Xinqing
District
Jinnan
District
Tianjin Port
SSTEC is strategically located
in the Tianjin Binhai New Area.
Dagang
District
Bohai Bay
milestone project, which we believe will
further strengthen our earnings platforms
for our environmental engineering and
real estate divisions. It presents a unique
opportunity for the Group to participate in
environment sustainability developments,
in which we are already offering world-class
and proven solutions in environmental
engineering, and through which we can
expand our operational footprint.
The development of SSTEC will require
us to apply our full range of experience
acquired during our participation in the
Suzhou Industrial Park (SIP), China’s
model industrial park, over the past
15 years. We will also put to good use
our experience in township development
in China and Southeast Asia.
Keppel’s role in SSTEC will
further increase our already extensive
presence in China, represented by all
our businesses – Offshore & Marine,
Oil & Gas, Property and Infrastructure.
Keppel Land’s projects in China cover
over 30 million sf gross fl oor area and
it applied its know-how and proven
track record in large-scale township
development to the region particularly
in Vietnam and Indonesia.
LAYING THE GROUND IN THE
TIANJIN BINHAI NEW AREA
As a raison d’être for its existence,
SSTEC is required to be sited in a
location that is non-agricultural and water
scarce. The challenge is to transform
such a greenfi eld site into a sustainable
city that is an attraction for people to live,
work and play. After several months of
site reviews and intensive consultations,
a site located in Tianjin Binhai New Area
was chosen.
The 30 km2 site which partly covers the
Hangu and Tanggu districts in Tianjin
was selected after careful consideration.
The site possesses the best conditions
that would facilitate a quick and
successful take-off for the project.
HEIGHTENING PUBLIC AND
PRIVATE SECTOR COLLABORATION
The project will be another Public-Private
Partnership in which the Singapore
government will share its “software”
68
Keppel Corporation Limited
Report to Shareholders 2007
Sino-Singapore Tianjin Eco-City
The knowledge
and experience of
Keppel’s senior
executives in the
Suzhou Industrial
Park will be an asset
in the development
of SSTEC.
and extensive experience in sustainable
urban development.
Authority, National Parks Board, Public
Utilities Board and others.
In particular, the Singapore government
agencies will contribute its proven
experience and know-how in large-scale
urban design and master planning,
environmental protection, resource
conservation, recycling economy,
ecological infrastructure development,
use of renewable energy, reuse of
wastewater, sustainable development
and promotion of social harmony.
As a testament to the broad scope of
expertise that SSTEC can tap upon,
the participating Singapore ministries
and agencies comprise a diverse team
that includes the Ministry of National
Development, the Ministry of the
Environment and Water Resources,
Urban Redevelopment Authority, Housing
and Development Board, Land Transport
Authority, Building and Construction
LEVERAGING TOP-LEVEL
ENDORSEMENT AND SUPPORT
Whilst SSTEC will enjoy high-level
support and endorsement from both
governments, it is jointly undertaken
on a commercial basis by the private
sector through the Chinese and
Singapore consortia.
An administrative structure has been set
up to ensure that the project is accorded
top priority and attention, and will
facilitate execution and implementation
by providing an expeditious platform
to resolve complex issues common in
projects of such scale.
Under the agreed framework for bilateral
coordination, the implementation team
will report to a Joint Working Committee
(JWC) headed by Singapore’s Minister
Keppel Corporation Limited
Report to Shareholders 2007
Sino-Singapore Tianjin Eco-City
69
SINO-SINGAPORE TIANJIN ECO-CITY
THREE HARMONIES OF THE SINO-SINGAPORE TIANJIN ECO-CITY
Work
Harmony with the economy
• Service industries and
tourism hub
• Energy-effi cient buildings
• Green commuting
• Reduced pollution
Sustainable
Development
L
i
v
e
Harmony with society
• Cultural diversity and
social stability
• Lifestyle and recreational
amenities
• Communal spaces
Harmony with the
environment
• Renewable energy sources
• Waste management and
water treatment
• Recycling and environmental
conservation
• Ecological zones and wildlife
corridors
y
Pla
for National Development and China’s
Minister of Construction. The JWC
will in turn report to the Joint Steering
Committee co-chaired by Singapore’s
Deputy Prime Minister and China’s
Vice Premier.
The fi rst meeting of the JWC took place
on 31 January 2008. An in-principle
endorsement of the Key Performance
Indicators (KPI) framework was achieved,
setting the foundation for the planning
and development of SSTEC.
PRACTISING SUSTAINABLE
DEVELOPMENT
Sustainable development, as defi ned
by the Brundtland Commission, is
“development that meets the needs of
the present without compromising the
70
Keppel Corporation Limited
Report to Shareholders 2007
Sino-Singapore Tianjin Eco-City
THREE ABILITIES OF
SINO-SINGAPORE
TIANJIN ECO-CITY
Practicable
Sino-Singapore
Tianjin Eco-City
Replicable
Scalable
SSTEC is expected to be a model for the development of other cities in China.
ability of future generations to meet their
own needs”.
SSTEC will play the role of a pilot city,
serving as a sustainable development
model to be replicated in other cities
in China. As such, the concepts and
technologies adopted have to fulfi l the
criteria of Practicability, Scalability and
Replicability – collectively known as the
Three Abilities.
Practicable, in the sense that the
technologies introduced, even if they
are cutting-edge, must be affordable
and commercially viable. Replicable
and Scalable in that the technologies
introduced are applicable both in the
localised context as well as on a larger
scale to other cities and even countries.
The intent is to develop a practical,
livable city, as opposed to a test-tube
city that cannot be replicated or is
too costly to build elsewhere. As an
example, the thrust towards low carbon
emission should necessarily be targeted
sensibly and gradually over time. Work
has commenced on the formulation of
KPIs and related technical standards for
SSTEC. It is envisaged that the long-
term target is for at least 90% of the
residents walking, using public transport
or cycling when commuting within
SSTEC.
Sustainable development traverses
beyond a state of economic vibrancy that
is in harmony with resource-effi ciency,
environmental protection and ecological
conservation. It should be a city that
is socially harmonious and stable. This
goal underscores the other core tenet
underpinning SSTEC – the Three
Harmonies, i.e. Harmony with economic
development, Harmony with the
environment, and Harmony with society.
Building a strong social fabric with
inclusive, close-knit communities
that transcend economic and social
disparities is much more diffi cult than
creating a physical environment-friendly
place. It requires complementary policies,
community enablers such as associations
and support groups, and the fostering of
a strong community spirit.
Whilst no one may claim to possess the
“right” template, our shared roots and
common cultural heritage place us in
good stead to add value. We believe
that it is when the building blocks for the
Three Harmonies are in place that a city
becomes a truly sustainable place
to live in for future generations.
RIDING ON TIANJIN’S GROWTH
In the 1980s and 1990s, China’s
central government focused its
economic thrust in the Pearl River
Delta and Yangtze River Delta. As a
result, the regions around Shenzhen
and Shanghai prospered, enjoying
unfettered economic growth.
Keppel Corporation Limited
Report to Shareholders 2007
Sino-Singapore Tianjin Eco-City
71
SINO-SINGAPORE TIANJIN ECO-CITY
1
1. Green buildings will be a feature of SSTEC.
2. Light rail trains will be one of the main
transportation.
2
and comes under the direct supervision
of the central government. It is a major
manufacturing hub, and being one of
China’s principal deepwater ports,
has historically been a key gateway
into Northern China.
Beijing has earmarked the Tianjin
Binhai New Area to catalyse growth
for the northeast region in a manner
that is consistent with holistic,
sustainable principles.
As an example, the State Council’s
blueprint for the Binhai New Area, as
set out in May 2006, envisioned it to
be a place which is resource-effi cient,
environment-friendly, and promoting
the all-round development of a
harmonious society.
To fulfi l the plan, the State Council
formally designated Binhai as a pilot
zone to experiment with “comprehensive
supporting reforms” – this means Binhai
has the autonomy to make creative
changes to achieve Beijing’s objectives,
making it a most appropriate location
to host the eco-city which is also a
pioneering experimental project.
As part of its national strategy to spread
out prosperity across China, the next
growth hub that the Chinese government
wants to create is in the Northeast
region, and the Bohai Rim has been
offi cially designated the development
zone to implement this strategy.
Tianjin is situated near the centre of
the Bohai Rim, which has a sizeable
population of 230 million. Bohai consists
of fi ve provinces and municipalities
– Beijing, Tianjin, Hebei, Shandong and
Liaoning; combined, they contribute
about 25% of China’s 2006 GDP.
As one of the four municipalities in
China, Tianjin enjoys greater autonomy
72
Keppel Corporation Limited
Report to Shareholders 2007
Sino-Singapore Tianjin Eco-City
EMBARKING ON THE VISION
SSTEC is a high-profi le project that
complements the Chinese central
government’s strategic thrusts to
promote sustainable development.
When completed, it will be a showcase
of how economic development,
environmental protection and social
harmony can be reconciled.
Master planning work has commenced
and groundbreaking is scheduled for July
2008. We are in the process of inviting
international parties to take a stake in
the Singapore consortium, with Qatar
Investment Authority recently signing a
Memorandum Of Understanding (MOU)
with Keppel Corporation to participate as
an equity investor.
Much work lies ahead to achieve our vision
of transforming a piece of non-arable and
arid land into a thriving city that is socially
harmonious, environment-friendly and
resource-effi cient, and one that will serve
as a model for sustainable development,
both in China and the world.
Signing the MOU for QIA to participate in SSTEC are Mr Hussein Ali Al-Abdullah, Board Member
of QIA (second from left) and Mr Lim Chee Onn, Executive Chairman, Keppel Corporation (right),
witnessed by HE Sheikh Yousef Hussein Kamal, Finance Minister of Qatar (left) and Senior Minister
Goh Chok Tong (centre).
Keppel Corporation Limited
Report to Shareholders 2007
Sino-Singapore Tianjin Eco-City
People will live,
work and play in a
green environment.
73
OPERATING & FINANCIAL REVIEW
The Keppel Group is in the Offshore & Marine, Property, Infrastructure and Investments
businesses to deliver sustainable earnings growth. With total assets of about $15.8 billion,
the Group is strategically invested in 34 countries with a global customer base.
Some of the key factors infl uencing our businesses are global and regional economic conditions,
oil and gas exploration and production activities, real estate markets, threats, currency
fl uctuations, capital fl ows, 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 fi nancial condition or the profi tability of our operations.
In this chapter on the operating and fi nancial review, we seek to provide a strategic, market and
business overview of the Keppel Group’s operations and fi nancial 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.
This discussion and analysis is based on the Keppel Group’s consolidated fi nancial statements
as at 31 December 2007.
CONTENTS
75 Group Structure
76 Management Discussion and Analysis
78 Offshore & Marine
90 Property
98
106 Investments
114 Financial Review and Outlook
122 Operations Sustainability
Infrastructure
74
Keppel Corporation Limited
Report to Shareholders 2007
Operating & Financial Review
GROUP STRUCTURE
KEPPEL CORPORATION
LIMITED
Offshore & Marine
• Offshore rig design, construction,
repair and upgrading
• Ship conversions and repair
• Specialised shipbuilding
Property
• Property development
• Property fund management
• Property trusts
Infrastructure
• Environmental engineering
• Power generation
• Network engineering
• Logistics
Investments
• Oil and gas
• Investments
• Telco
Keppel Offshore
& Marine Ltd
100%
70%
Keppel Bay Pte Ltd 100%
Environmental Engineering
Singapore Petroleum
Company Ltd
45%
Keppel FELS Ltd
Keppel Shipyard Ltd
Keppel Singmarine
Pte Ltd
100%
100%
100%
30%
Keppel Land Limited 53%
Keppel Integrated
Engineering Ltd
42%
31%
K-REIT Asia
73%
Keppel Seghers
Engineering
Singapore Pte Ltd
100%
100%
k1 Ventures Limited
MobileOne Ltd *
36%
20%
Keppel Land
International Limited
100%
Keppel Seghers
NEWater Development
Co Pte Ltd
100%
* Owned by Keppel
Telecommunications &
Transportation Ltd, an 80%-owned
subsidiary of the Company
Keppel Nantong Shipyard
Company Limited
China
100%
K-REIT Asia
Management Limited
100%
Offshore Technology
Development Pte Ltd 100%
Alpha Investment
Partners Ltd
100%
Keppel Seghers
Belgium NV
Belgium
Keppel FMO Pte Ltd
100%
100%
Deepwater Technology
Group Pte Ltd
100%
Evergro Properties Ltd
Singapore/China
71%
Power Generation
Marine Technology
Development Pte Ltd 100%
Keppel Thai Properties
Public Co Ltd
Thailand
45%
Keppel Energy Pte Ltd
Keppel AmFELS Inc
USA
100%
50%
30%
Keppel Philippines
Properties Inc
The Philippines
80%
Keppel Merlimau
Cogen Pte Ltd
Keppel Verolme BV
The Netherlands
100%
Keppel FELS Brasil SA
Brazil
100%
Keppel Norway AS
Norway
100%
Keppel Philippines
Marine Inc
The Philippines
Caspian Shipyard
Company Ltd
Azerbaijan
Arab Heavy Industries
PJSC
UAE
Keppel Kazakhstan
LLP
Kazakhstan
93%
45%
33%
50%
Group Corporate Services
100%
100%
100%
100%
Keppel Electric Pte Ltd
Keppel Gas Pte Ltd
Logistics and Network
Engineering
100%
Keppel
Telecommunications
& Transportation Ltd
Keppel Logistics
Pte Ltd
Keppel Logistics
(Foshan) Ltd
China
Trisilco Folec Sdn Bhd
Malaysia
80%
100%
70%
55%
Control &
Accounts
Corporate
Communications
Corporate & Strategic
Development/Planning
Human
Resources
Information
Technology
Legal
Risk
Management
Audit
Tax
Treasury
The complete list of subsidiaries and signifi cant associated companies is available on Keppel Corporation’s website www.kepcorp.com
Keppel Corporation Limited
Report to Shareholders 2007
Operating & Financial Review
Group Structure
75
OPERATING & FINANCIAL REVIEW
MANAGEMENT DISCUSSION AND ANALYSIS
Key performance indicators
of Keppel Corporation
scaled new heights in 2007.
GROUP OPERATIONS
Revenue increased by 37% to
$10.4 billion, surpassing $10 billion
for the fi rst time in the Group’s history.
PATMI crossed the billion-dollar mark
to reach $1,026 million, an increase of
37% compared with $751 million in the
previous year. The compounded annual
growth rate for PATMI from 2002 to
2007 was 23%.
Attributable profi t improved by 51%
to $1,131 million. Exceptional gains
of $105 million comprised principally
net appreciation in the value of
investment properties partially offset
by provision for impairment of non-
performing assets in Keppel Energy
and the Brazilian operations.
Earnings per share (EPS) of 64.9 cents
were 17.2 cents above 2006 and 28.8
cents above 2005. EPS growth of 36%
in 2006 and 32% in 2005 kept pace
with PATMI growth. Return on Equity
exceeded 20% to a new high of
21.8% and Economic Value Added
of $604 million was $181 million
above the previous year.
Operational cashfl ow before
changes in working capital
exceeded $1 billion. Working
capital changes were also positive
with progress payments received
from contracts. The Group utilised
half a billion dollars on investing
activities, comprising largely further
investments in Marina Bay Financial
Centre and capital expenditure on
the co-generation plant. As a result,
free cashfl ow for the year amounted
to $1.2 billion.
With the record performance, the
Company proposed to reward
shareholders with total distribution
of 64 cents per share for 2007.
This comprised a fi nal dividend
of 10 cents per share a special
dividend of 45 cents per share and the
interim dividend of 9 cents per share
paid in August 2007. The total payout
represents 98% of Group PATMI.
76
Keppel Corporation Limited
Report to Shareholders 2007
Operating & Financial Review
Management Discussion and Analysis
Group overview
Revenue
Profi t after Tax & Minority Interests (PATMI)
Exceptional items
Attributable profi t
Operating cashfl ow
Free cashfl ow
Economic Value Added (EVA)
Earnings per share (EPS)
Return on Equity (ROE)
Total distribution per share to shareholders
Revenue
$ million
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
7,258
5,755
4,112
1,835
1,155
847
1,277
671
570
Offshore & Marine
Property
Infrastructure
Investments
58
121 61
2007
$ million
07v06
% +/(-)
2006
$ million
06v05
% +/(-)
2005
$ million
10,431
1,026
105
1,131
1,697
1,151
604
64.9 cts
21.8%
64.0 cts
+37
+37
n.m.
+51
-8
-22
+43
+36
+14
+129
7,601
751
–
751
1,854
1,480
423
47.7 cts
19.1%
28.0 cts
+34
+33
–
+33
+19
+113
+113
+32
+16
+22
5,688
564
–
564
1,559
694
199
36.1 cts
16.4%
23.0 cts
PATMI
$ million
550
475
400
325
250
175
100
25
(50)
522
448
239
268
242
231
209
118
96
27
(24)
(35)
Offshore & Marine
Property
Infrastructure
Investments
2005 $5,688 million
2006 $7,601 million
2007 $10,431 million
2005 $564 million
2006 $751 million
2007 $1,026 million
SEGMENT OPERATIONS
Group revenue of $10,431 million was
$2,830 million or 37% higher than
that of the previous year. Revenue
from Offshore & Marine Division of
$7,258 million was $1,503 million or
26% higher and accounted for 70%
of Group revenue. The increased
revenue was due to healthy order
book of the division. Revenue from
Property Division of $1,835 million
was $680 million or 59% higher and
accounted for 17% of Group revenue.
The increased revenue was due to new
revenue streams from trading projects
in Singapore (Refl ections at Keppel
Bay and Sixth Avenue Residences) and
China (Villa Riviera and The Arcadia)
as well as higher revenue from current
property trading projects in Singapore
(Park Infi nia at Wee Nam, Urbana, The
Suites at Central and Belvedere), China
(The Seasons), Vietnam (Villa Riviera)
and India (Elita Promenade). Rental
income from investment properties
also increased as a result of the tight
supply of prime offi ce buildings in the
Singapore Central Business District.
Revenue from Infrastructure Division
of $1,277 million was $707 million or
124% higher and accounted for 12% of
Group revenue. The increased revenue
was due to new sources of revenue from
the co-generation power plant, NEWater
Plant and Qatar domestic solid waste
management project as well as the full
year operation of power barges.
Group PATMI of $1,026 million was
$275 million or 37% higher than that
of the previous year. PATMI from
Offshore & Marine Division of
$522 million was $74 million or 17%
higher and the division remains the
largest contributor to Group PATMI
with 51% share. PATMI from Property
Division of $209 million was $113
million or 118% higher. The division’s
contribution to Group PATMI increased
from 13% to 20% because of higher
revenue and operating margins from
trading, share of profi t of Marina
Bay Residences and release of
cost provisions no longer required
for Singapore trading projects.
Infrastructure Division reported a
profi t of $27 million compared to a
loss of $35 million for 2006. This was
largely attributable to contribution from
the operation of the power barges,
co-generation power plant, Keppel
Seghers NEWater Plant and Qatar
domestic solid waste management
project. PATMI from Investments of
$268 million was $26 million or
11% above that of 2006 due to
increased contribution from SPC.
Keppel Corporation Limited
Report to Shareholders 2007
Operating & Financial Review
Management Discussion and Analysis
77
OPERATING & FINANCIAL REVIEW
OFFSHORE & MARINE
The Offshore & Marine Division
aims to be the choice provider and
solutions partner in its selected segments
of the offshore and marine industry.
MAJOR DEVELOPMENTS
IN 2007
FOCUS FOR
2008/2009
EARNINGS
HIGHLIGHTS
• Delivered 33 major projects on time
• Deliver value through excellent project
Operating profit ($ million)
• Secured $7.4 billion of contracts with
deliveries into 2011
• Launched R&D centre KOMtech
with seed money of $150 million over
fi ve years
• Clinched landmark US$1.2 billion
contract to build a fl oating
production unit
• Made another breakthrough with
contracts to build two units of
proprietary KFELS N Class
drilling-cum-production jackup rigs
management and execution
• Enhance R&D initiatives to strengthen
group position as market leader in
selected segments
• Strengthen presence in deepwater rigs,
adjacent business areas and
new markets
• Increase capacity through expansion
and facility upgrading
• Focus on Health, Safety and the
Environment
2005
2006
2007
318
539
570
Profi t before tax
$700m
PATMI
$522m
EARNINGS HIGHLIGHTS
2007
$ million
2006
$ million
2005
$ million
Revenue
EBITDA
Operating profi t
Profi t before tax
PATMI
Manpower (number)
Manpower cost
ROE
7,258
648
570
700
522
24,448
802
604
539
624
448
5,755 4,112
377
318
351
239
22,352 17,522
546
660
46%
50%
35%
78
Keppel Corporation Limited
Report to Shareholders 2007
Operating & Financial Review
Offshore & Marine
Provider of Choice, Partner in Solutions
Delivering value to
customers and partners
through excellent project
management
Leveraging
global network
for incremental
businesses, enhanced
cost-effectiveness
and operational
effi ciency
Replicating
the group’s
proven shipyard
management
systems in our
other “Near
Market, Near
Customer”
locations
Strengthening
presence in
promising
markets
Net order book
(as at 31 December)
$ billion
15
12
9
6
3
0
12.2
10.5
7.2
3.4
1.9
2003
2004
2005
2006
2007
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
EARNINGS REVIEW
Offshore & Marine Division secured a
record $7.4 billion of new orders in 2007,
bringing the net order book at the end of
the year to $12.2 billion. The Division’s
profi t before tax of $700 million was
$76 million or 12% higher than 2006, and
$349 million or two times more than 2005.
However, operating margins were lower
because of lower margins from the Brazilian
operations. Profi t after tax increased from
$239 million in 2005 to $448 million in
2006, and increased further by 17% to
reach $522 million in 2007.
MARKET REVIEW
Overall fundamentals in the Offshore
& Marine (O&M) sector was strong
throughout 2007, underpinned by the
surging demand for energy, an imbalance
in the demand and supply of rigs and
the moving of Exploration & Production
(E&P) activities into deeper waters.
Oil prices were at record levels and went
briefl y beyond US$100/bbl for the fi rst
time in the year. Prices averaged about
US$72/bbl for 2007 [based on Energy
Information Administration (EIA) report
on West Texas Intermediate crude oil].
Rig utilisation in all categories continued
to maintain at near 100% levels and in
short supply for the semisubmersible
(semi) category. Day rates remained at
record high except for the Gulf of Mexico
which continued to weaken.
Keppel AmFELS in Brownsville, Texas,
secured contracts to build fi ve jackups and
made two deliveries in 2007.
Keppel Corporation Limited
Report to Shareholders 2007
Operating & Financial Review
Offshore & Marine
79
OPERATING & FINANCIAL REVIEW
OFFSHORE & MARINE
While the contracting industry benefi ted
from the high oil prices, it did not
translate into the proportionate profi t
margins for the industry. This was due
mainly to overall escalating costs,
shortage of manpower and tightness
in material and equipment supply. This
trend is expected to continue into 2008.
Enquiries for deepwater drilling rigs
continued unabated, in particular for the
deepwater semi drilling rigs.
OPERATING REVIEW
Keppel O&M turned in another sterling
performance in 2007 delivering 33 major
projects on time and within budget.
Return on Equity (ROE) for the
Division was 46%. All segments of the
group operations of offshore, marine
and specialised shipbuilding posted
improved net profi ts, with Keppel Shipyard
performing especially well.
The record amount of contracts secured
at $7.4 billion included eight jackups, fi ve
semis, seven FPSO-related conversion
and outfi tting projects, one drillship
outfi tting and 23 offshore support and
other specialised vessels.
The Division has invested a total of
$430 million in the last fi ve years in
yard development and expansion. It
is expected to put in another nearly
$300 million to enhance capacity to
meet its contractual obligations as well
as to boost capacity for more projects.
OFFSHORE
Keppel FELS was kept busy throughout
2007 with over 30 projects ongoing
concurrently in the yard. In addition,
seven newbuilding contracts were
secured during the year. The US yard,
Keppel AmFELS, achieved a revenue
Keppel-built FPU P-52 struck fi rst oil
for Petrobras in November 2007 and
is producing 10% of Brazil’s total oil
output of 1.8 million barrels per day.
SIGNIFICANT EVENTS
(Expected deliveries indicated in brackets)
February
Keppel FELS secured an
order for a KFELS N Class
jackup rig for US$392 million
from the Skeie Group.
(3Q 2010)
March
Keppel O&M and Qatar
Gas Transport Company Ltd
(NAKILAT) formed a 20/80 joint
venture to develop a shipyard in
the Port of Ras Laffan by 2010.
April
Keppel Shipyard secured two
Brazilian FPSO projects, while
associate Keppel Verolme
received an order for the outfi tting
of the world’s second cylindrical
FPSO. (4Q 2007–3Q 2008)
Keppel FELS received a
US$305 million order for a North
Sea accommodation semi from
Floatel International (Floatel).
(2Q 2010)
May
PetroVietnam Drilling Investment
Corp (PVD Invest) awarded
Keppel FELS a contract to
build its second jackup drilling
rig worth US$191 million.
(4Q 2009)
June
Keppel FELS secured a fourth
order for a US$427 million
ultra-deepwater semi drilling
rig from ENSCO International
(ENSCO). (3Q 2010)
1
80
2
1
Keppel Corporation Limited
Report to Shareholders 2007
Operating & Financial Review
Offshore & Marine
SIGNIFICANT EVENTS
(Expected deliveries indicated in brackets)
The Skeie Group awarded a
US$400 million KFELS N Class
jackup contract to Keppel FELS.
(4Q 2010)
August
Keppel Nantong Shipyard was
offi cially opened in Nantong,
Jiangsu province, China.
Keppel FELS won a
US$134 million contract for
a semi drilling tender (SSDT)
for Seadrill Management AS
(Seadrill). (4Q 2009)
July
Keppel Shipyard secured a
$150 million contract to install
equipment packages on a new
drillship. (4Q 2009)
Keppel Singmarine secured
contracts worth $350 million to
build six offshore support vessels
(OSV) and a derrick pipelay
vessel. (2H 2009–1H 2010)
Keppel Singmarine won a
contract to build two platform
supply vessels (PSV) for
Greatship Global Offshore
Services Pte Ltd (Greatship).
(end 2009–1Q 2010)
Mexican company Perforadora
Central SA de CV awarded
Keppel AmFELS a contract
to build a jackup rig valued at
approximately US$190 million.
(4Q 2009)
2
improvement of 27%, due mainly to an
increased number of new construction
projects. The fl oating production unit
(FPU), P-52, left our Brazilian yard,
BrasFELS, and achieved fi rst oil in
November 2007. Keppel Verolme BV in
The Netherlands performed exceptionally
well with 61% improvement in revenue
in 2007. Caspian Shipyard in Azerbaijan
continued to support Keppel Kazakhstan
in a constant stream of fabrication jobs
from Agip KCO.
MARINE
Revenue of Keppel Shipyard in 2007
increased by 30% over 2006 due
largely to higher-value repair jobs
and a larger number of FPSO/FSO
conversions and outfi tting. A total of
360 vessels were repaired, with revenue
from shiprepair enjoying a healthy 25%
increase. By year-end, it completed
seven FPSO/FSO projects with 10 more
conversion projects in progress. In the
Philippines, Keppel Philippines Marine
Inc, comprising Keppel Batangas, Keppel
Cebu and Subic Shipyard, attained
a robust increase in revenue of 73%
with newbuilding and fabrication work
accounting for 52% of the revenue. Arab
Heavy Industries, too, had a productive
year repairing 271 ships, up 22% from
the previous year.
SPECIALISED SHIPBUILDING
Keppel Singmarine chalked up another
exceptional year in 2007 with a rise of
64% in revenue over 2006. This was
achieved on the back of fi ve vessels and
two jackup hull deliveries. By the end
of 2007, Keppel Singmarine secured
an order book of 19 vessels with a total
value of $1 billion. With Keppel Nantong
working at increasing capacity, more
3
1. Singapore Minister for Trade and Industry
Mr Lim Hng Kiang (centre) graced the
naming ceremony of PV Drilling’s fi rst
jackup rig.
2. Delivering Umuroa to Prosafe, one of
the fi rst FPSO vessels for 2007, Keppel
Shipyard maintained its leadership in
shiprepair and conversion services.
3. (Fifth from left) Brunei Minister of
Energy, HE Pehin Dato Yahya, visits
Keppel Shipyard.
Keppel Corporation Limited
Report to Shareholders 2007
Operating & Financial Review
Offshore & Marine
81
OPERATING & FINANCIAL REVIEW
OFFSHORE & MARINE
SIGNIFICANT EVENTS
(Expected deliveries indicated in brackets)
September
Keppel Shipyard was awarded
two conversion contracts
worth $100 million by Prosafe
Production Pte Ltd (Prosafe) and
Shipping Logistics Incorporated.
(1Q 2008–4Q 2008)
October
Keppel Nantong clinched three
contracts worth a total of
$110 million to build eight tugs.
(1H 2010–2011)
The consortium of Keppel FELS
Brasil S/A and Technip Brasil
Engenharia, Instalacoes e Apoio
Maritimo S/A (Technip), FSTP
Pte Ltd, secured a US$1.2
billion contract to build a fl oating
production unit (FPU), P-56,
for Petrobras Netherlands BV
(PNBV). (4Q 2010)
November
Keppel AmFELS received an
order from Rowan Companies,
Inc. (Rowan) to build four jackup
rigs worth US$780 million.
(2Q 2010–2Q 2011)
Floatel awarded Keppel FELS
a US$206 million contract for
an accommodation semi vessel.
(4Q 2010)
Keppel Shipyard secured a
contract worth around $100
million to convert the world’s fi rst
Floating, Drilling, Production,
Storage and Offl oading facility
(FDPSO) for Prosafe. (4Q 2008)
The P-52 FPU was completed
for Petrobras and achieved fi rst
oil in November.
December
Keppel O&M launched
Keppel Offshore & Marine
Technology Centre (KOMtech)
to boost its R&D with $150
million seed money to be utilised
over fi ve years.
A commemorative book More
than Mettle, the Keppel Offshore
& Marine Story was launched in
conjunction with the company’s
5th anniversary celebrations.
Keppel Verolme secured two
contracts totalling $160 million
for the outfi tting of the third
cylindrical FPSO facility, Sevan
Voyageur, for Sevan and the
drydocking of Saipem 7000, a
semi crane and pipelaying DP
vessel for Saipem S.p.A. (1Q
2008–Summer 2008)
vessel contracts are expected to be
won. This expansion is poised to give
Keppel Singmarine the opportunity to
secure its position in building large
offshore support vessels.
INDUSTRY OUTLOOK
The O&M sector is expected to remain
strong in the next few years. Demand
for oil and gas continues to grow
at a strong pace to support global
economic development. Supply is
tight with global oil reserves declining
despite increased E&P activities. The
mid-year E&P survey showed that the
oil and gas companies would increase
spending by about 10%, a positive
indicator for the rig sector.
Brazil
The major underwater oil fi eld found
in 2007 by Brazil’s state-owned oil
company, Petrobras, has the potential
to turn South America’s largest country
into a net oil exporter. The Tupi fi eld
has the potential of churning out
1 million barrels per day. The current
proven reserves under Brazil stands at
12.8 billlion barrels of oil and 247 billion
m3 of natural gas. In 2007, Petrobras
also revised their investment plans for
2008–2012 to US$112.4 billion
– a 29% increase over their previous
budget. Out of this, US$65.1 billion will
be used for E&P.
With the national ambition for greater
Brazilian content and Petrobras’ aim to
be among the top fi ve integrated energy
companies by 2020, O&M players in
Brazil, including Keppel O&M, are
poised to benefi t from the very buoyant
market in the next fi ve years. According
to industry analysts, about 75% of
Brazil’s oil reserves are under at least
400m of water.
1
82
Keppel Corporation Limited
Report to Shareholders 2007
Operating & Financial Review
Offshore & Marine
2
Russia
The Russian Federation is a major player
in world energy markets. It has more
proven natural gas reserves than any
other country and is among the top ten
in proven oil reserves. Energy exports
have become a major driver of Russia’s
economic growth over the last fi ve years,
as Russian oil production rose strongly
and world oil prices improved.
In 2007, the Russian federal budget
announced it will set aside US$3.5 billion
to boost civil shipbuilding from 2008 to
2015. Russian companies’ requirement
for new ships and oil rigs is estimated
to be worth US$22.8 billion over this
time frame. This augurs well for Keppel
O&M which has gained a toehold in the
Russian market in recent years.
Mexico
Mexico is currently the largest offshore
oil producer in the world – producing
nearly 4 million barrels per day. Nearly
40% of the Mexican national budget
is linked to taxes paid by Petróleos
Mexicanos (PEMEX), Mexico’s
state-owned petroleum company.
To meet the increasing demand for oil
from both domestic and international
markets, considerable investments
in E&P activities will therefore be
necessary for PEMEX. Investment in
E&P activities for 2007 was reported
to be 43% higher than the average
of the past fi ve years. In the next fi ve
years, PEMEX requires resources in
the order of US$22 billion per year
of capital expenditure.
3
1. The addition of Keppel Nantong Shipyard
to Keppel O&M’s network of yards
complements the group’s “Near Market,
Near Customer” strategy.
2. Keppel Singmarine delivered two
Ice-Class AHTS vessels, M.V. Svetlyy
and VZMORYE, to Russian customer
LUKOIL Kaliningradmorneft.
3. The second icebreaker vessel for
Russian customer LUKOIL was launched
in January 2008.
Keppel Corporation Limited
Report to Shareholders 2007
Operating & Financial Review
Offshore & Marine
83
OPERATING & FINANCIAL REVIEW
OFFSHORE & MARINE
between 17 and 49 billion barrels.
By 2010, it is expected that production
would be between 2.9 and 3.8 million
barrels per day, exceeding annual
production from South America’s largest
oil producer, Venezuela.
Sizeable oil production growth has
come primarily from the north Caspian
states of Kazakhstan and Azerbaijan,
where Keppel O&M has a presence.
Gas reserves are also very signifi cant
with recent fi nds in the countries
surrounding the Caspian Sea. The
Caspian Sea region’s estimated proven
natural gas reserves are at 232 trillion
cubic feet (Tcf), comparable to those in
Nigeria. European countries are paying
special attention to the natural gas
resources that could lie beneath the
Caspian Sea as a way to diversify their
sources of gas imports.
Closer to home, Australasia regions
will continue to see strong interest by
national oil companies and independents
for offshore oil and gas E&P activities.
Keppel Kazakhstan completes
the delivery of four huge barges.
West Africa
Africa has about 10% of the world’s
proven oil reserves. With depletion rates
of oil fi elds outside OPEC running high,
West Africa is proving to be an exciting
alternative source notwithstanding
political instability in a good part of the
continent. The region’s oil is light and
sweet, making it easier and cheaper to
refi ne than other major sources of oil.
From a regional perspective, the ‘Golden
Triangle’ of West Africa, Gulf of Mexico
and Brazil will continue to be the focus
for deepwater projects in the next fi ve
years. West Africa is expected to retain
its status as the leader in deepwater
capital expenditure up to 2012, with
Brazil and Gulf of Mexico making up the
other major deepwater players.
Caspian Sea
According to EIA, estimated proven oil
reserves in the Caspian region range
Jackups – age profile
85% of jackup fleet is more than 20 years old.
Semisubmersibles – age profile
77% of semis fleet is more than 20 years old.
no. of units
no. of units
180
160
140
120
100
80
60
40
20
0
153
118
37
52
10
5
6
5
0-5
6-10
11-15
16-20
21-25
26-30
31-35
>35
60
50
40
30
20
10
0
55
49
27
3
0-5
6-10
0
11-15
9
5
16-20
21-25
26-30
31-35
>35
1
2005 $5,688 million
Age of jackup
2006 $7,601 million
2007 $10,431 million
2005 $5,688 million
Age of semisubmersibles
2006 $7,601 million
2007 $10,431 million
Source: ODS-Petrodata
Source: ODS-Petrodata
84
Keppel Corporation Limited
Report to Shareholders 2007
Operating & Financial Review
Offshore & Marine
Keppel FELS is buzzing with activities with
over 30 projects currently under construction.
Keppel Corporation Limited
Report to Shareholders 2007
Operating & Financial Review
Offshore & Marine
85
OPERATING & FINANCIAL REVIEW
OFFSHORE & MARINE
Deep Driller 5 (left) and West Prospero were delivered to
satisfi ed customers within a month of each other in June 2007.
86
Keppel Corporation Limited
Report to Shareholders 2007
Operating & Financial Review
Offshore & Marine
Market driver – growing industry expenditure
$ billion
200
180
160
140
120
100
80
60
40
20
0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Shallow
Deep
Sources:
• Citi Investment Research paper “Singapore Conglomerates 2008 Outlook” (dated 4th Dec 2007)
• Douglas-Westwood presentation “World Offshore Drilling Business – $62B market by 2011” (dated 4th Oct 2007)
RIG UTILISATION
AND AGEING RIGS
In view of these favourable E&P business
outlook, the drilling rig utilisation rate and
charter rate remain healthy. Furthermore,
the current jackups and semis on order
only account for 19% and 27% of the
global fl eet – levels that are manageable
considering the more advanced and
complex drilling requirements that will
favour the newer rigs.
safely in their twilight years. The need to
replace some of these old rigs continues to
drive demand for newbuilding.
According to ODS-Petrodata’s Offshore
Rig Day Rate Index, deepwater drilling rig
day rates are at record highs across rig
types and geographical locations, except
Gulf of Mexico day rates which continue
to weaken. Fleet utilisation is at or close
to 100% except for the Gulf of Mexico.
The global rig fl eet for jackups and semis
continues to age with 83% of the total
fl eet above 20 years old. Part of the fl eet
is likely to be replaced and recent news
on the dangers of these old assets may
prompt further investments to replace the
existing fl eet. According to the UK safety
watchdog, most of the UK’s North Sea oil
and gas assets are near or beyond the end
of their intended design life and not getting
the attention they need to keep operating
It is therefore not surprising that
enquiries for deepwater drilling rigs
continue to be strong, in particular for the
deepwater semi drilling rigs.
INCREASING DEMAND FOR
PRODUCTION FLOATERS AND
NON-DRILLING FACILITIES
Demand for production assets, especially
for FPSO/FSOs, is expected to increase
and we already see fi rm demand for
Keppel Corporation Limited
Report to Shareholders 2007
Operating & Financial Review
Offshore & Marine
87
OPERATING & FINANCIAL REVIEW
OFFSHORE & MARINE
Keppel Shipyard is a leader in FPSO
conversion and shiprepair.
these equipments. There are currently
69 deepwater production units under
contract and 119 production projects
either planned, at the bidding stage or
under design.
FPSOs are the dominant type of FPUs in
the market and this trend is expected to
continue over the next few years. Industry
analysts predict that over the next fi ve
years, deepwater capital expenditure will
double as compared to the previous fi ve
years. Majority of the activity will involve
the ‘Golden Triangle’ of West Africa,
Gulf of Mexico and Brazil. There are
currently about 100 projects that require
FPSO/FSOs and the number of fl oating
productions on order is expected to
remain healthy.
Keppel O&M is currently the leader in
FPSO conversions and seeks to retain
its competitive edge by continuing to
work closely with its customers and
delivering quality products and services
with its hallmark of reliability and
fl exibility. With an increase in deeper
waters exploration and the possibility of
developing Arctic reserves in the near
future, more sophisticated FPSO/FSOs
will be required to meet the harsh
exploration environment.
Other segments of the offshore industry
continue to see active enquiries for
assets such as accommodation fl oatels,
crane barges, offshore supply vessels
(OSV), and other related equipment.
The OSV market continued to
fl ourish throughout 2007 due to the
unprecedented high oil price and healthy
offshore activities. As we enter into 2008
and beyond, there is a shift of focus
towards larger sized OSVs in order to
support deepwater activities and replace
the ageing fl eet. In addition, there is
growing interest in OSVs capable of
operating in Arctic or sub-zero climatic
conditions. Keppel O&M has delivered
two Ice-Class AHTS to LUKOIL so far
and are expected to deliver more
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Offshore & Marine
Ice-Class vessels in 2008 and beyond.
With our continuing efforts in R&D in
Arctic technology, we see huge potential
in this particular niche market and expect
to play a larger role in this sector.
This macro-economic environment
would potentially pose new challenges
for shipyards. However, Keppel O&M
customers can look to the group as the
more experienced and reliable yard to
help them reduce their execution risks.
Class drilling-cum-production jackups,
icebreakers & Ice-Class vessels as well
as undertake more complex conversion
projects such as the fl oating, drilling,
production, storage & offl oading
(FDPSO) vessels.
Keppel O&M’s current product
development efforts, coupled with
the newly set up $150 million Keppel
O&M Technology Centre (KOMtech)
will put the group in strong footing to
continue to deliver products to meet
customers’ needs. It will continue to
deliver innovative products such as
new generation fl oatels, KFELS N
1. Parts of the ENSCO 8501 semi are
constructed by Keppel Batangas in
the Philippines. Plans are underway
to further expand the Philippines yards
to take on higher-value projects.
2. Keppel Verolme which outfi tted
two cylindrical FPSO facilities
for Sevan Production turned in
a sterling performance in 2007.
Keppel O&M has seen new orders for
non-drilling related rigs and vessels
increase from 20% in 2006 to 42%
in 2007. While there is a possible
slowdown in orders for shallow water
drilling assets, overall the industry
remains positive as demand for
other offshore facilities continues
to be strong.
CHALLENGES
With tightening credit (risk to customers),
a depreciating US dollar (forex impact
risk), and jittery markets due to fear
of a recession in the US, the market’s
willingness to pay for risk may be
lowered. These macro risks may lead to
a scaled-back risk appetite for some oil
and gas and O&M industry projects.
1
2
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Report to Shareholders 2007
Operating & Financial Review
Offshore & Marine
89
OPERATING & FINANCIAL REVIEW
PROPERTY
Keppel Land aims to be a leading
property developer in Asia and a
premier manager of property funds.
MAJOR DEVELOPMENTS
IN 2007
FOCUS FOR
2008/2009
• Sold more than 760 residential units in
Singapore and over 2,800 residential
units overseas
• Strengthened presence in Asia with
the acquisition of 11 new residential
township and waterfront homes in China,
Vietnam and Middle East
• Embarked on the development of Ocean
Financial Centre, which is expected to
be completed in 2011
• Selectively pursue residential and
commercial developments in Singapore,
and capitalise on the development of
Marina Bay and Keppel Bay
• Broaden and deepen the Group’s
footprint in Asia’s growth cities with more
residential townships and integrated
lifestyle developments
• Continue to unlock asset value and
recycle capital to generate higher yields
• Sale of Keppel Land’s one-third interest
in One Raffl es Quay to K-REIT Asia
• Expand K-REIT Asia’s property portfolio
through acquisitions
• Alpha Investment Partners achieved
fi nal closing of AIB Alpha Japan Fund,
a new Japan-focused fund with Allied
Irish Bank, and raised $258m.
• Alpha will continue to work on investing
funds under management to generate
good returns, besides launching
new products
EARNINGS
HIGHLIGHTS
Operating profit ($ million)
2005
2006
2007
195
235
440
Profi t before tax
$471m
PATMI
$209m
EARNINGS HIGHLIGHTS
Revenue
EBITDA
Operating profi t
Profi t before tax
PATMI
Manpower (number)
Manpower cost
ROE
2007
$ million
2006
$ million
2005
$ million
1,835
453
440
471
209
2,918
90
1,155
251
235
233
96
2,674
63
847
215
195
222
118
2,219
50
46%
12%
9.5%
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Report to Shareholders 2007
Operating & Financial Review
Property
1
EARNINGS REVIEW
The Property Division achieved revenue
of $1,835 million, $680 million or 59%
above the previous year. Higher revenue
was driven by robust sales of residential
properties both in Singapore and
overseas. Rental income from investment
properties was higher as a result of the
tight supply of prime offi ce buildings in
the Singapore Central Business District.
Earnings doubled to $471 million due to
the strong residential and offi ce markets.
MARKET REVIEW
The Singapore economy expanded 7.7%
in 2007, slightly lower than the 8.2%
growth registered in 2006, as growth
moderated in the fourth quarter of 2007
due to weaker manufacturing activity.
Despite weaker external economic
conditions due to the sub-prime fallout
and weakening of the housing market
and consumption in the US, growth in
the region remained positive in 2007, with
economies like China, India and Vietnam
sustaining a strong pace of expansion.
The offi ce market in Singapore remained
strong, with take-up of 2.07 million sf
in 2007. Strong demand from fi nancial
institutions, services and oil and gas
companies, coupled with tight supply
pushed Grade A offi ce occupancy rate
to 99.8% as at end-2007 from 99.2%
in the previous year. Average Grade A
offi ce rents reached a high of $17.15 psf
per month as at end-2007, up 96.5%
from $8.73 psf at end-2006.
Total take-up of new private residential
properties reached a record 14,811
units, 32.9% more than the 11,147 new
homes sold in 2006. Overall, private
residential prices rose by 31.2% in
2007, the largest gain since 1999.
To discourage speculative activity, the
Singapore government withdrew the
use of the deferred payment scheme
for uncompleted private residential
properties from October 2007.
2
1. Marina Bay Financial Centre
is changing the skyline of
Singapore’s Central
Business District.
2. Mr Mah Bow Tan, Minister for
National Development, unveils
the Marina Bay Financial Centre.
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OPERATING & FINANCIAL REVIEW
PROPERTY
OPERATING REVIEW
Singapore
Bolstered by rising confi dence and
positive sentiments, Keppel Land sold
over 760 homes in Singapore in 2007,
positioning itself among the top three
listed developers in residential sales
in Singapore.
Refl ections at Keppel Bay was unveiled
in January amid keen interest for
world-class waterfront living from
local and foreign buyers and investors.
Designed by internationally-acclaimed
architect Daniel Libeskind, the iconic
waterfront development has fully sold
all 620 units in Phase 1.
With the strong demand for Grade A
offi ce space, Keppel Land, together with
consortium members Cheung Kong
(Holdings) and Hongkong Land, exercised
its option for Phase 2 of the Marina Bay
Financial Centre (MBFC) site. This
phase will add another 1.3 million sf of net
lettable area to the 1.6 million sf currently
under development in Phase 1, and will
comprise both Grade A offi ce space
and high-end residential homes. To date,
more than 50% of the entire MBFC
development has been pre-committed
by major fi nancial institutions including
Standard Chartered Bank and DBS Bank.
Keppel Land is re-developing the site
of Ocean Building into an iconic offi ce
building known as Ocean Financial
Centre (OFC). When completed in
2011, the 43-storey OFC will contribute
850,000 sf of prime offi ce space, with one
of the largest fl oor plates in Raffl es Place.
During the year, Keppel Land sold
its one-third stake in One Raffl es
Quay (ORQ) to K-REIT Asia. The
strategic move unlocks value in ORQ
and recycles capital into its twin core
businesses of property development
and fund management. K-REIT Asia has
proposed a fully renounceable rights
issue to raise up to $700 million. This
will be used to partially refi nance part
of the $942 million bridging loan from
Keppel Corporation for the acquisition
of the one-third interest in ORQ. Both
Keppel Corporation and Keppel Land
will take up their respective allotment
of the rights units and will undertake to
subscribe for any excess rights units not
subscribed for by minority Unitholders.
SIGNIFICANT EVENTS
January
Keppel unveiled the prestigious Refl ections
at Keppel Bay designed by master architect
Daniel Libeskind.
March
Keppel Land entered into a joint venture
(JV) to acquire and develop a 4.8-ha prime
residential development, The Estella, in Ho
Chi Minh City (HCMC), Vietnam.
April
Keppel Land made further inroads into
HCMC’s residential sector with the
acquisition of a 1.74-ha prime land to develop
waterfront condominiums by the Saigon River.
June
Keppel Land announced the joint development
of luxury condominiums on a 8.5-ha site
fronting the Ca Cam River in HCMC.
Keppel Land will develop a pipeline of mega
lifestyle precincts in Tianjin. These include
the fi rst in a series of township projects along
the new Tianjin-Binhai mass transit line; an
exclusive arrangement to plan and prepare
land for a 44.1 sq km model town in Gegu
as well as an integrated Business Process
Outsourcing park in the Xiqing Economic
& Development Area.
through the acquisition of one-third interest in
One Raffl es Quay from Keppel Land.
August
Keppel Land was awarded an initial 353 mu
(about 24-ha) site for the development of a
residential township in Shenyang’s Shenbei
New District, which can eventually yield up to
5,400 homes.
July
Keppel Land inked an agreement to develop
the second township in Vietnam comprising
about 14,000 homes, which will be on a 509-
ha site in the Dong Nai province.
Keppel Land signed Memorandums of
Understanding to develop two residential
townships in Hanoi, Vietnam.
K-REIT Asia increased its Assets Under
Management (AUM) to about $1.62 billion
September
Making its fi rst foray into Saudi Arabia, Keppel
Land signed a JV Agreement with the Saudi
Economic and Development Co. Ltd. (SEDCO)
to develop luxury residences on a 3.6-ha site
along the Corniche waterfront in Jeddah.
October
Keppel Land signed its fi fth new residential
project in Vietnam to develop waterfront
residences on a 5.1-ha site in District 2
of HCMC.
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SIGNIFICANT EVENTS
The new name and design of the 43-storey
Ocean Financial Centre, a re-development
of Ocean Building, was unveiled at a
special ceremony.
November
Keppel Land entered into two JVs with An
Phu Corporation to develop luxury villas and
condominiums in District 9 of HCMC.
Keppel Land embarked on its fourth
residential development in Shanghai, China,
through the 100% acquisition of Shanghai
Hongda Property Development Co. Ltd.,
which owns a 26.4-ha site in Xinchang Town,
Nanhui District.
A 9.7-ha site in District 9 of HCMC would be
developed into a premier waterfront enclave
of 140 luxury homes by Keppel Land.
1
Overseas
Demand for quality housing across Asia
remains robust, supported by economic
growth, home-ownership aspirations,
urbanisation and a rising middle class.
Against this backdrop, Keppel Land’s
residential launches continued to do well,
with over 2,800 homes sold overseas in
2007, mostly in China and India.
In line with its overseas strategy to tap on
the demand for quality housing in Asia’s
growth cities, Keppel Land continued
to strengthen its overseas portfolio
with waterfront housing and large-scale
integrated townships.
Capitalising on the rising Vietnam market,
Keppel Land secured a total of eight
residential sites in 2007, increasing its
landbank six-fold from 8.5 million sf to
53 million sf of gross fl oor area. These
include seven projects in Ho Chi Minh City
and a 14,000-unit waterfront township
development in Dong Nai province.
Including the earlier acquired Saigon
Sports City township, these projects will
yield a total of more than 25,000 homes,
making Keppel Land the largest property
developer in Vietnam.
In 2007, Keppel Land expanded
its presence in China with the
acquisition of new sites in Shanghai
and Shenyang.
Keppel Land’s listed subsidiary
Evergro Properties provides another
growth platform into China’s second-
tier cities with its business networks
and sizeable residential landbank in
Tianjin, Jiangyin and Changzhou.
Together with Evergro Properties,
the Keppel Land group has a total
residential landbank of 33 million sf
with a potential pipeline of 21,000
homes in China.
In the Middle East, Keppel Land has
tied up with Saudi Economic and
Development Co. Ltd. to develop
luxury residences on a 3.6-ha site
along the Corniche waterfront in
Jeddah, Saudi Arabia. Comprising
high-rise towers with about 1,000
apartments, the development will
be undertaken in phases, according
to market demand. It will target the
high-end market and is expected to be
launched in the second half of 2008.
2
1. Chairman Lim Chee Onn with the
Vietnamese Prime Minister during the
latter’s visit to Singapore in 2007.
2. K-REIT Asia’s acquisition of
one-third interest in One Raffl es Quay
brings the number of commercial offi ce
assets in its portfolio to fi ve.
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Operating & Financial Review
Property
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OPERATING & FINANCIAL REVIEW
PROPERTY
Keppel Bay is set to position Singapore as a
global destination for luxury waterfront living.
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Property
gains from asset divestments and
appreciation in property value.
Land remains cautiously optimistic
about the Singapore property market.
Keppel Bay Bridge is part of the masterplan and infrastructure in
the transformation of Keppel Bay into a premier waterfront precinct.
Fund management
Keppel Land-sponsored K-REIT
Asia achieved a distributable income
of $21.8 million in 2007, up 42.5%
from 2006. Net property income
grew by 19.6% year-on-year to reach
$28.3 million, driven mainly by higher
gross rental income from K-REIT
Asia’s properties. As a result, K-REIT
Asia’s distribution per unit increased
by 30.5% from 2006 to 8.82 cents
for 2007.
In December 2007, K-REIT Asia
completed its acquisition of a one-third
interest in ORQ for $953.6 million,
bringing the number of commercial
offi ce assets in its portfolio to fi ve. This
yield-accretive acquisition coupled with
the initial portfolio’s revaluation gains
of $433 million enlarged K-REIT Asia’s
portfolio size by 210.5% to $2.1 billion
as at end-2007 from $677 million as at
end-2006.
In 2007, Alpha closed its Japan-focused
fund with Allied Irish Bank, raising equity
of $258 million (US$172 million). The
AIB Alpha Japan Fund has since made
three investments.
Together with K-REIT Asia’s portfolio
value of $2.1 billion, the total Assets
Under Management (AUM) of the Keppel
Land group will be about $6.1 billion as
at end-2007, when the funds are fully
leveraged and fully invested.
BUSINESS OUTLOOK
Singapore
Singapore’s economy is expected
to remain healthy, albeit with a more
moderate pace of growth in 2008
due mainly to economic uncertainties.
The Ministry of Trade and Industry is
forecasting real GDP growth of 4 to 6%
for 2008.
Keppel Land’s other property fund
management vehicle Alpha Investment
Partners (Alpha) continued to deliver
higher-than-expected returns to investors
with active management of its funds,
Growth in prime offi ce rentals and
high-end home prices is also expected
to moderate in 2008 after their robust
growth in 2007. Nevertheless, Keppel
Limited offi ce supply at an average
of 1.7 million sf per annum over the
next few years and good demand
from fi nancial institutions and multi-
national corporations, which continue
to anchor and expand their presence
in Singapore, will underpin rentals
and occupancy rates for Grade A
offi ce space.
The group will continue its leasing
activity at MBFC, while construction
of the new OFC will commence soon.
Through the group’s interests in
MBFC Phase I and II, OFC and
K-REIT Asia, Keppel Land will remain
a dominant landlord in the prime
offi ce market in Singapore.
For the residential sector, market
fundamentals remain healthy with
sustained demand for private residential
housing. While high-end prices are
dependent on the outcome of the US
sub-prime problems, sales activity and
prices in the middle and mass market
are expected to move up gradually.
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Property
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OPERATING & FINANCIAL REVIEW
PROPERTY
Completed and fully sold in 2007, Villa Riviera is
Keppel Land’s fi rst residential project in Vietnam.
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Property
1
Keppel Land will be releasing more
units of Refl ections at Keppel Bay for
sale in 2008. The 221-unit Marina Bay
Suites, the second and last luxurious
residential development within MBFC
and other prime residential projects will
be progressively released.
Overseas
Following the last fi nancial crisis in
1997, Asian economies are now more
resilient and have created their own
strong domestic consumer demand. This
should ameliorate the slowdown of export
demand should the US slip into recession.
Keppel Land aims to launch about
8,200 homes for 2008. In line with
its strategy to tap on rising demand
for quality housing in Asia’s growth
cities, the group will continue to build
up its overseas property portfolio with
waterfront housing and large-scale
integrated developments in existing
and new markets.
Demand for quality housing across
Asia will continue to be driven by
economic growth, urbanisation trends,
a growing middle class and rising
home-ownership aspirations. With
Keppel Land’s reputation as a premier
developer, the group is well-positioned
to ride on such a growing trend.
1. Keppel Land’s fi rst foray into property
development in Saudi Arabia along the
Corniche waterfront in Jeddah.
2. In line with Keppel Land’s focus on
developing large-scale township homes
in Asia’s growth cities, it is launching
18,000 homes over two years. One of
these townships is Central Park City
in Wuxi, China.
2
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OPERATING & FINANCIAL REVIEW
INFRASTRUCTURE
The Infrastructure Division will continue to
build a selected portfolio of environmental
engineering, power generation, network
engineering and logistics businesses.
MAJOR DEVELOPMENTS
IN 2007
FOCUS FOR
2008/2009
• Clinched a $1.5 billion contract to
design, build and operate a wastewater
treatment, water reuse and sludge
treatment plant in Qatar
• Keppel Seghers Ulu Pandan NEWater
Plant offi cially opened in March
• 500 MW co-generation plant began
operations in April
• Setting up of Keppel Environmental
Technology Centre
• Securing an In-Principle Approval from
the People’s Committee of Ho Chi Minh
City for the fi rst large-scale WTE plant
in Vietnam
• Gas from Petronas began to fl ow
into the Singapore Gas Network for
Keppel Energy
• KIE to continue its focus on large-scale
design and build projects with long-term
operating contracts. Build recurring
income streams by investing selectively
in such projects.
• R&D of water and waste
management technologies
• KIE to participate in the Sino-Singapore
Tianjin Eco-City project
• KE to maintain its thrust to build an
integrated energy business in gas and
power in Singapore, which will be the
platform for growth in Asia
• Logistics – tap China’s growth in land
transportation and warehousing needs
• Network Engineering – expand
into emerging markets and grow
WiFi business
EARNINGS
HIGHLIGHTS
Operating profit ($ million)
2005
(53)
2006
(65)
2007
11
Profi t before tax
$51m
PATMI
$27m
EARNINGS HIGHLIGHTS
2007
$ million
2006
$ million
2005
$ million
Revenue
EBITDA
Operating profi t
Profi t before tax
PATMI
Manpower (number)
Manpower cost
1,277
45
11
51
27
4,392
180
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Infrastructure
570
(19)
(65)
(24)
(35)
671
(2)
(53)
(17)
(24)
3,998 3,724
166
158
EARNINGS REVIEW
Revenue from Infrastructure Division
more than doubled to $1,277 million
with new sources of revenue from the
co-generation power plant, the Keppel
Seghers Ulu Pandan NEWater Plant,
power barges and the contract
for the solid waste management complex
in Qatar. The Division returned fi rmly
to profi tability contributing profi t before
tax of $51 million. The turnaround was
achieved despite higher costs incurred
in completing some old contracts and
the higher gas cost to operate the
co-generation plant.
ENVIRONMENTAL ENGINEERING
Strategic direction of Keppel
Integrated Engineering (KIE)
Combining technology with project
management, KIE adopts a three-
pronged business model of developing
and selling technology packages;
designing, building, operating and
maintaining wastewater and waste
treatment plants on a turnkey basis;
and owning and operating such plants
developed by KIE.
MARKET REVIEW
China is committed to curb pollutions
and mitigate adverse climate change
1. Mr Lim Chee Onn, Executive Chairman
of Keppel Corporation (second from left)
presents Keppel’s Doha North EcoPark
concept proposal to Eng Zayed Mansour
Al-Khayarin, CEO of Ashghal (second
from right) at the stone laying ceremony
for the $1.5 billion Doha North wastewater
treatment plant. Senior Minister Goh Chok
Tong (left) and HE Sheikh Yousef Hussein
Kamal, Finance Minister of Qatar graced
the occasion.
2. The Infrastructure Division continues to
seize opportunities in growth markets to
build sustainable long-term earnings. A
constant stream of income is expected
from these assets.
1
Ecuador Power
Barges
150 MW
Operation: 4Q 2006
Keppel Seghers
Ulu Pandan
NEWater Plant
148,000 m3 of NEWater per day
Operation: 1Q 2007
Keppel Merlimau
Cogen Plant
500 MW
Operation: 1H 2007
Flow of
Petronas Gas
120 billion BTU per day
Commencement: December 2007
Tuas South
Waste-to-
Energy Plant
800 tonnes of solid waste a day to generate
more than 20 MW of green energy
Operation: 2009
Qatar Domestic
Solid Waste
Management Centre
Over 1,550
tonnes of solid
waste a day
Contribution from: 4Q 2007
Operation: 2009
Doha North
Sewage Treatment
Works project
Up to 439,000 m3
per day of treated
wastewater
Contribution
from: 2009
Operation: 2010
2006
2
2007
2008
2009
2010
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OPERATING & FINANCIAL REVIEW
INFRASTRUCTURE
while powering strong economic growth.
Several Chinese cities are currently
undertaking environmental impact
studies with the intention to construct
waste-to-energy (WTE) plants in the
near term. Others have become solar
cities under government direction.
The country has signed agreements with
Britain and Singapore to co-develop fi ve
and one eco-cities respectively. Keppel
Corporation has been selected to lead
the Singapore consortium in developing
the Sino-Singapore Tianjin Eco-City.
This offers opportunities for Keppel
Seghers, which is currently the market
leader in providing WTE solutions in
China, to participate in the planning and
development of renewable energy, waste
and water infrastructure.
In Europe where Keppel Seghers has
creditable presence, soaring fuel prices
are pushing industrial companies
to explore alternative sources of energy
including renewable energy. Keppel
Seghers is working closely with
forward-looking large chemical plants
and paper mills to generate steam
and electricity from solid waste. This
co-operation is expected to yield
contracts in 2008–2009.
offer individual and integrated solutions
for wastewater treatment, water reuse
and biosolids treatment.
REVIEW OF OPERATIONS
KIE began 2007 with the offi cial opening
of the Keppel Seghers Ulu Pandan
NEWater Plant by Singapore Prime
Minister Lee Hsien Loong in March.
The plant is the largest in Asia and the
second largest in the world, producing
148,000m3/day. The same event saw
the opening of the Keppel Environmental
Technology Centre (KETC) which is
located in the same premises as the
Keppel Seghers Ulu Pandan NEWater
Plant. KETC has an initial budget of
$50 million to develop know-how and
technologies in water treatment and
energy recovery from waste.
In China, the company secured contracts
to supply solid waste treatment
technologies to repeat customer
China Everbright International and new
customer Zhongshan Tianyi Energy
Sources Company. The company also
obtained an In-Principle Approval for the
development of the fi rst large-scale WTE
plant in Ho Chi Minh City, Vietnam. The
Water scarcity and water stress in North
Africa and the Middle East are opening
up opportunities for Keppel Seghers to
Singapore Prime Minister Lee Hsien Loong
and Minister for Environment and Water
Resources, Dr Yaacob Ibrahim, at the
opening of the KETC.
SIGNIFICANT EVENTS
February
Keppel Telecommunications &
Transportation (Keppel T&T) expanded
its data centre business into Europe with
the acquisition of a 50% stake in data
centre operator, Citadel 100 Datacenters
Limited (formerly known as Premier Data
Centres Limited).
Keppel Seghers secured a $35 million
contract to provide technologies and
services to expand an existing WTE plant
in Moerdijk, The Netherlands.
March
The 148,000m3/day Keppel Seghers
Ulu Pandan NEWater Plant was
offi cially opened by Prime Minister
Lee Hsien Loong.
Keppel Integrated Engineering (KIE)
established the Keppel Environmental
Technology Centre (KETC) with seed
money of $50 million.
Keppel Seghers secured two contracts
totalling $23 million to provide solid
waste treatment technologies and
services in Suzhou, Jiangsu province,
and Zhongshan, Guangdong province.
April
Keppel Energy’s 500 MW combined
cycle power plant, Keppel Merlimau
Cogen (KMC), commenced commercial
operations. KMC is licensed to generate
up to 1,400 MW of electricity.
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SIGNIFICANT EVENTS
September
Keppel Seghers secured a $22 million
contract to design, build and operate
a wastewater treatment and reuse plant
for Algeria.
Keppel Seghers won a landmark
Design-Build-Operate contract worth
approximately $1.5 billion from Ashghal,
the Public Works Authority in Qatar,
to build the largest greenfi eld wastewater
treatment and water reuse facility in the
Middle East.
December
Keppel FMO was awarded a $26.3 million
facility management and maintenance
contract from Republic Polytechnic.
Keppel Seghers received In-Principle
Approval for the development of the
fi rst large-scale WTE plant in Vietnam.
proposed plant will have the capacity
to treat 2,000 tonnes of waste per day
and generate more than 20 MW of
green energy. It also secured a contract
to supply technology and services to
Barwon Water in Victoria, Australia, for
its biosolids thermal drying facility. The
plant will process 54,000 tonnes of
biosolids produced in the region each
year. The residual will have ‘T1’ grade for
maximum use as a fossil fuel replacement
or fertiliser.
In the Middle East, KIE clinched a
wastewater contract worth $1.5 billion
to design, build and operate, for
10 years, what will be the largest
wastewater treatment, water reuse and
sludge treatment project in the region.
With a peak capacity to treat 439,000m3
of wastewater per day, the treated
water will be used for irrigation. It also
strengthened its presence in Algeria
securing two water treatment contracts
during the year.
In Europe, KIE received a contract to
provide technologies and services from
Afvalverbranding Zuid-Nederland NV to
expand the third largest WTE plant in
The Netherlands.
1
BUSINESS OUTLOOK
High cost of energy and concerns
about climate change are driving
both industrial and municipal users
to seek renewable sources of energy
derived from waste. Incinerators with
comprehensive fl ue gas treatments are
poised to gain from this trend in Europe
and China. Sludge management is
expected to gain importance with the
shift away from landfi lls to incineration,
agriculture and composting. Keppel
Seghers has the technologies and
capabilities to meet customers’ needs
arising from these trends.
The Middle East, which has little
access to water and wastewater
infrastructure, is seeing an increase in
government-led investments in public
infrastructure. Demand has increased
for non-conventional water sources such
2
1. Keppel Seghers harnesses its proprietary
technology and experience to build
the integrated waste management
project in Qatar.
2. The Singapore WTE plant, which will
process 800 tonnes of solid waste
a day and generate above 20 MW of
green energy, is expected to be
operational in 2009.
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OPERATING & FINANCIAL REVIEW
INFRASTRUCTURE
Keppel Energy’s 500 MW combined
cycle power plant, Keppel Merlimau
Cogen (KMC), commenced
commercial operations in April 2007.
as desalination and water reuse due to
declining costs of such technologies
as well as growing acceptance of such
water sources. Water reuse continues
to be a signifi cantly lower cost option
than desalination due to its lower energy
demand, but consumers have to be
won over to such water reuse projects.
To cater to the long-term demand for
water reuse and desalination, KIE is
actively researching on reducing the
energy quotient and thus minimising the
environment impact of both desalination
and water reuse projects.
ENERGY
Strategic direction of Keppel Energy
Keppel Energy aims to build a strong and
well-balanced power and gas business.
Operating review
2007 was a challenging but rewarding
year for Keppel Energy. The company
successfully executed its business plans
and brought its projects to fruition,
namely the commercial operation of its
wholly-owned 500 MW Keppel Merlimau
Cogen (KMC) combined cycle power
plant in Singapore and the fi rst full year
operation of Termaguayas Generation
S.A. (TGSA), the power barges that were
previously deployed in Brazil and in the
Philippines. Both companies achieved
profi table operations in 2007.
Keppel Energy’s operating businesses
are namely in Singapore and in the
Americas. The commercial operation
of its generation facilities in Singapore
and Ecuador effectively raised Keppel
Energy’s asset ownership of the three
power plants to more than 700 MW, with
more than 500 employees engaged in
power generation, electricity trading
and retail, utilities and gas marketing
and operations.
Singapore’s electricity peak demand
grew from 5,451 MW in 2006 to
5,782 MW in 2007. While the power
plant achieved commercial operation
status in April 2007, the delay in the
opening of the liberalised gas market
resulted in a delay in the KMC plant
being able to use the Petroliam Nasional
Berhad (Petronas) gas imported by
Keppel Gas. The holdup resulted in
signifi cantly higher operating costs for the
Singapore business, which was resolved
by December. Keppel Gas, a wholly-
owned subsidiary of Keppel Energy,
achieved the important milestone of
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importing natural gas under its long-term
gas supply agreement with Petronas into
the Singapore Gas Network.
Singapore are timely. They can potentially
capture part of these expected increases
in demand for electricity, gas and utilities.
Keppel Gas entered into a long-term
gas supply agreement to supply natural
gas to ExxonMobil’s facilities on Jurong
Island starting from 2009. This marked a
signifi cant milestone for Keppel Energy as it
positions itself strategically as an integrated
electricity and gas service provider.
Temasek Holdings’ decision to divest
its ownership of three large power
generation companies in Singapore
would present an opportunity for Keppel
Energy to acquire a sizeable operating
business with immediate earnings to
Keppel Corporation’s shareholders.
The two projects in the Americas
experienced challenges. Cost of power
generation rose dramatically, brought on
by record high fuel prices. Some of the
countries relied on government subsidies
to meet these increased costs rather
than pass them on to the consumers.
The change in governments in Nicaragua
and Ecuador could also lead to changes
in laws and regulations that may have
impact on operations in these countries.
Business outlook
While the power and gas industries
have many defensive characteristics,
it is not immune to potential economic
slowdowns and the effects of a
tightening credit market in 2008.
The continued economic growth in
Singapore, including commitments by
large chemical industry investments
and other undertakings such as the
spin-off benefi ts from the integrated
resorts is expected to propel electricity
demand. Keppel Energy’s investments in
Over the last decade and more,
competition was the theme that
permeated through the energy markets
in many countries, albeit at different
stages of liberalisation. The distinctive
shift over the last year has been a
particular emphasis on energy security.
Singapore is looking into diversifying
its sources of energy while demand for
effi cient clean fuels such as gas has
been growing. There may be
opportunities for Keppel Energy to
benefi t from this development in its
future growth plans.
The growing global attention to climate
change would certainly impact how
more of our electricity would be
generated. Keppel Energy would be
paying close attention to the emergence
of renewable energy as costs of such
technologies continue to decline
over time and to the impact of tighter
environmental management on our
thermal generation facilities.
Keppel Gas, a subsidiary of Keppel Energy,
will supply natural gas to ExxonMobil’s
facilities on Jurong Island from 2009.
1
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OPERATING & FINANCIAL REVIEW
INFRASTRUCTURE
Keppel Logistics operates 1.5 million sf
of warehousing space in Singapore.
LOGISTICS AND NETWORK
ENGINEERING
Strategic direction of Keppel
Telecommunications &
Transportation (Keppel T&T)
Keppel T&T aims to leverage
core competencies to enhance
existing businesses.
LOGISTICS
Market review
In Singapore, the strong domestic
economy saw a higher level of logistics
activities. Both occupancy rates and
rentals increased on the back of limited
supply of new warehouse space.
In China, overall cargo throughput at the
ports and intra-China cargo movement
grew at double-digit levels. Logistics
buying patterns are changing with MNCs
now more willing to pay for higher quality
integrated logistics solutions.
Business review & outlook
Occupancy rates at Keppel T&T’s
Singapore warehouses were close
to 100% in 2007. Its operations rented
additional warehouse space to cope
with the increased demand.
The Division continued to leverage its
strength in the Fast Moving Consumer
Goods sector with strategic wins
with Danone and Kimberly-Clark. In
the niche logistics segments, Keppel
Logistics expanded its cold-chain
facility with a custom-designed cold
room at 7 Gul Circle. It also began
providing logistics services for
equipment and steel materials.
year, it renewed its contract with Osram
International which also awarded the
company a distribution project. China
Tobacco warehousing contract was
also secured for three years.
Through Wuhu Annto Logistics
Company Limited (Annto), Keppel
Logistics entered the niche segment
of cold-chain services in China. Annto’s
newly launched cold-chain services, with
a fl eet of imported reefer trucks, attracted
quality customers who are willing to pay
a premium for consistent services.
In Malaysia, Keppel Logistics, which
manages one of the largest Central
Distribution Centres in excess of
250,000 sq ft of warehouse space,
won the Kimberly-Clark project in Kluang.
In China, Keppel Logistics (Foshan)
Limited continued to operate at maximum
capacity. Warehouse occupancy was
close to 100% and the distribution
network was strengthened by a fl eet of
new prime-movers and trucks. During the
NETWORK ENGINEERING
Market review
In Indonesia, mobile penetration rates
remained under 30% with most of the
growth centred in the populated city
areas. In the Philippines and Thailand,
penetration rates continued to be low
despite incumbent telcos completing
their intended network coverage.
The low penetration rates present
opportunities for the network
engineering division.
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Low mobile penetration in emerging markets presents
opportunities for the network engineering division.
In both Europe and the United States,
sustained growth in demand for higher
broadband speeds and usage are
challenging operators to upgrade their
networks. Some operators are also
cautiously moving into “quadruple-play”,
which includes TV services. Demand for
Geographical Information System (GIS)
services grew as utility providers made
use of such tools to better document
their network inventory and information.
Business review & outlook
Mobile Network
During the year, Keppel T&T took
advantage of the growth in in-building
and base station deployment works
provided by both incumbent and
new telcos in Indonesia. In Thailand,
it leveraged close partnerships with
major telcos and supported them in
their in-building coverage expansion
programmes. In the Philippines, it also
diversifi ed its customer base.
iCELL Network Pte Ltd continued its
roll-out of WiFi hotspots in the eastern
region of Singapore under the nation-
wide broadband wireless programme.
Wireline and GIS
ECHO Broadband (ECHO) in the US
leveraged its project with Cablevision to
digitise and migrate its network infrastructure
data. ECHO also secured a 24-month
project with COX for data capture and
digitisation of its networks. In Europe, it
carried out documentation works for Unity
Media. The company also supported Net
Cologne to carry out design and as-built
works for a Fibre-to-the-Home project.
ECHO extended its reach into the UK and
Ireland, carrying out network planning and
engineering work for NTL and Chorus.
The Division’s entry into the data centres
market in Europe also performed well
during the year. Citadel 100 Datacenters
Limited (formerly known as Premier Data
Centres Limited), which provides state-of-
the-art third-party data centre co-location
and contingency services, achieved over
95% occupancy rate and boasts blue-chip
customers such as Hewlett Packard (HP).
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Report to Shareholders 2007
Operating & Financial Review
Infrastructure
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OPERATING & FINANCIAL REVIEW
INVESTMENTS
We will continue to add value
to our investments to generate
maximum returns for shareholders.
MAJOR DEVELOPMENTS
IN 2007
FOCUS FOR
2008/2009
• SPC began oil production at the Oyong
fi eld of its Sampang PSC in Indonesia
• SPC expanded its upstream activities
to China with the acquisition of offshore
producing oilfi elds and exploration
working interests in Bohai Bay and
a PSC with China National Offshore
Oil Corporation (CNOOC) to operate
Block 26/18
• k1 Ventures’ operating subsidiary
Helm Holding Corporation (Helm)
expanded its fl eet size to 692
locomotives and 8,691 railcars
(including those owned and leased)
• SPC will continue to invest in oil and gas
production assets, while developing the
existing acreages
• k1 Ventures is assessing its rail
equipment capital improvement plans,
as well as looking for opportunities to
strategically rebalance its rail-related
inventories
• M1 will tap on the opportunities arising
from telecom media convergence and
develop new businesses anchored on
its core competencies
EARNINGS
HIGHLIGHTS
Profit before tax ($ million)
2005
2006
2007
270
306
334
Profi t before tax
$334m
PATMI
$268m
EARNINGS HIGHLIGHTS
Revenue
EBITDA
Operating profi t
Profi t before tax
PATMI
Manpower (number)
Manpower cost
2007
$ million
2006
$ million
2005
$ million
61
30
30
334
268
156
60
121
95
95
306
242
161
50
58
9
7
270
231
160
41
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Report to Shareholders 2007
Operating & Financial Review
Investments
EARNINGS REVIEW
Investments registered lower revenue
of $61 million in 2007, a decline of
50% from $121 million in 2006 due
to lower investment income. Earnings
were higher as a result of increased
contribution from SPC, which also
reported record profi ts.
SINGAPORE PETROLEUM
COMPANY (SPC)
SPC aims to be a strong integrated
oil and gas company with a premium
brand in the Asia-Pacifi c region.
MARKET REVIEW
2007 was a year of strong growth
for the global economy. In line with
this growth, crude oil demand was
estimated to be 85.7 million barrels per
day (bpd), a 1.2% increase from the
84.7 million bpd consumption in 2006.
Geopolitical tensions, supply
uncertainties and refi nery outages
combined to push crude oil prices from
around US$55.00 per barrel to a new
peak of US$99.29 per barrel for the
benchmark West Texas Intermediate
(WTI), before ending the year at
US$95.98 per barrel. Refi ning margins
were likewise volatile, moving from a
high of US$9.00 per barrel to a low of
US$5.00 per barrel. Strong demand for
refi ned petroleum products was also
seen throughout the year.
Despite 2007 being one of the
most volatile years in the oil industry,
SPC was able to achieve its best
ever performance.
OPERATING REVIEW
SPC scored signifi cant successes
in the Exploration & Production
(E&P) business in 2007.
1
2
SPC
Regional
oil and gas
company
k1 Ventures
Diversifi ed
investment
company
M1
Singapore-
based telco
Building upstream assets
Upgrading and enhancing refi ning 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
1. SPC entered into a PSC with CNOOC to operate Block 26/18
with 100% participating interest.
2. Managing our portfolio to enhance the value of these investments
to bring maximum returns to shareholders.
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Report to Shareholders 2007
Operating & Financial Review
Investments
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OPERATING & FINANCIAL REVIEW
INVESTMENTS
The SPC brand is recognised for its quality products
marketed in Singapore and across the Asia-Pacifi c region.
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Investments
It entered two new E&P markets in
Australia and China, growing its oil
and gas production to an average
of 10,000 bpd at year-end. This was
a three-fold increase from early 2007.
Since SPC’s move into the upstream
business in 2000, the E&P portfolio and
footprint has grown considerably to eight
Production Sharing Contracts (PSC) and
one exploration permit in fi ve countries.
In China, SPC made its largest overseas
investment to date by acquiring producing
fi elds in the Bohai Bay for US$223 million.
It also acquired a 100% interest in a PSC
exploration block, Block 26/18 in China,
and an exploration permit in Australia.
SPC’s producing oilfi elds are Kakap and
Oyong oilfi elds in Indonesia and Bohai
Bay in China.
SPC’s downstream business continued
to be the main revenue generator. High
crude and product prices, and tight
global refi ning capacity enabled SPC
to achieve average refi ning margins
of US$7.00 per barrel.
marketing of its fuels and lubricants
was strengthened with investments
in Indonesia and China respectively.
The fi rm demand for refi ned products
kept SPC’s 50%-owned refi nery,
SRC, running at an average utilisation
of 97% throughout the year, with
51.5 million barrels of crude processed.
SRC successfully carried out a
scheduled maintenance of the Crude
Distillation Unit No. 1 complex, a major
exercise which was completed smoothly
and safely. It initiated a US$121 million
project to increase production of
ultra-low sulphur diesel or ‘clean fuels’
of Euro-IV standard by 2009.
BUSINESS OUTLOOK
Global refi ning capacity is expected
to remain constrained by high
construction costs and skill shortages.
While volatility in global fi nancial
markets may restrain economic
activity, refi ning margins are expected
to remain relatively healthy in 2008.
This is in view of the continued lack
of meaningful spare refi ning capacity
and continuing strong demand for
petroleum products from Asia, the
Middle East and Russia.
SPC’s island-wide service station network
continued to fi nd new ways to better serve
the motoring public and expand its base
of loyal customers. SPC is the fi rst retail
network on mainland Singapore to provide
compressed natural gas in early 2008. The
SPC aims to continually upgrade the
capability of its refi ning operations
to produce cleaner fuels, including
clean motor gasoline, and to be able
to process a wider range of diffi cult
crudes that will improve its margins.
SIGNIFICANT EVENTS
January
SPC and its partners increased their participating interest
in Cambodia Block B to 33.3% each.
M1 launched MeTV, Singapore’s fi rst video sharing service
on mobile phones.
February
M1 and Hong Kong Broadband Network Ltd (HKBN) signed a
Memorandum of Understanding (MOU) to participate in Singapore’s
Next Generation National Broadband Network (NBN) project together.
SPC expanded its Exploration & Production portfolio with
new acreage in Australia through a 35% participating interest
in Block T/47P in the Bass Basin.
August
SPC entered into a PSC with CNOOC to operate Block 26/18
with 100% participating interest.
In Indonesia, SPC acquired a 60% interest in PT Solar Premium
Central (PT Solar) which will build on and expand SPC’s marketing
presence in the country.
September
SPC began oil production at the Oyong fi eld of its Sampang
PSC in Indonesia, which is expected to have a gross production
of 8,000 and 10,000 barrels of oil per day (bopd).
SPC acquired offshore producing oilfi elds and exploration working
interests in Bohai Bay, China.
October
k1 Ventures completed the sale of Mid Pac, its retail gasoline
business in Hawaii, for a total consideration of US$44 million
and US$10.4 million for working capital adjustments.
k1 Ventures’ Helm Holdings completed the sale of its investment
in Dakota, Minnesota & Eastern Railroad Corp, with PATMI contribution
expected to be about $22 million.
December
k1 Ventures announced additional investment in China Auto I
Co-Investors LLC of US$4.4 million.
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Operating & Financial Review
Investments
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OPERATING & FINANCIAL REVIEW
INVESTMENTS
Block 04/36, Bohai Bay, China
18.2% (Exploration)
8.9% (Production)
Block 05/36, China
23% (Exploration)
7.8% (Production)
% denotes SPC’s
interest in
the PSC
Block 26/18, China
100%
Block 102 & 106, Vietnam
20%
Block 101-100/04, Vietnam
45%
Kakap PSC, Indonesia
15%
Block B, Cambodia
33.3%
BLOCK B, CAMBODIA
Located 250 km off the coast
of Cambodia, Block B acreage
lies on the southeast of Khmer Basin
where a number of oil and gas
discoveries were made.
In January 2007, SPC and its joint venture
partners exercised their pre-emption rights
to acquire the entire 10% participating interest
of CE Cambodia B Ltd. As a result, SPC currently
holds a 33.3% participating interest in this block.
A 3-D seismic survey of 650 km2 was completed.
Exploration drilling is planned for second half of 2008.
Sampang PSC, Indonesia
40% (Oyong)
40% (Wortel)
21.8% (Jeruk)
BLOCK T/47P, AUSTRALIA
Located in the Bass Basin, offshore Southeast Australia
about 200 km from Melbourne and in water depths ranging
from 50 to 100m, Block T/47P contains Cormorant oil,
condensate and gas discovery and several exploration
prospects and leads.
In addition to the Cormorant discoveries, T/47P also
contains several exploration prospects and leads within its
2,890 km2 acreage. The joint venture partners are pursuing
an aggressive exploration strategy to estimate the potential
of the block. In January 2008, a 3-D seismic programme
covering 525 km2 was completed. The partners have secured
a drilling rig to conduct exploration drilling in the permit area,
commencing early 2009.
Block T/47P, Australia
35%
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Investments
BOHAI BAY, CHINA
Currently SPC’s largest producing asset, Blocks 04/36 and
05/36 are located in western Bohai Bay, 190 km east of Beijing.
Covering 3,080 km2, the blocks contain several Cao Fei Dian
producing fi elds with a total gross production of approximately
50,000 bpd. Produced gas is gathered by six platforms and
processed by a Floating Production Storage and Offl oading
(FPSO) under a long-term lease.
Blocks 04/36 and 05/36 Effective 1 July 2007, the Bohai
Bay assets contributed approximately 4,300 bpd to SPC’s
production. Ongoing infi ll drilling and well workover are being
conducted by the operator to maximise production from the fi elds.
BLOCK 26/18, CHINA
Located 150 km from shore in the Pearl River Mouth Basin,
South China Sea, Block 26/18 covers 4,961 km2 in water
depths between 85 and 200m. Block 26/18 contains the
EP-20-3-1 discovery well drilled in 1998. Commercial oil
production in the basin is centred in the Wenchang, Penyu,
Huizhou, Lufeng and Liuhua fi elds. Preliminary geological and
geophysical studies indicate several prospects. Under the
initial three-year exploration phase, SPC is responsible to carry
out an agreed work commitment on this block which includes
acquiring 2,000 km of 2-D seismic survey and the drilling of
one exploration well. Upon commercial hydrocarbon discovery,
CNOOC has the right to participate up to an interest of 51%
in the PSC.
BLOCKS 102 AND 106, VIETNAM
Blocks 102 and 106 cover approximately 14,000 km2 and are
located in the Song Hong Basin in the Gulf of Tonkin, Vietnam. The
blocks contain the Yentu-1X and Thai Binh oil and gas discoveries.
In 2007, the partners completed a 2,189 km 2-D seismic survey in
these blocks. The joint venture partners are planning to conduct
a three-well exploration/appraisal drilling programme in 2008.
BLOCKS 101-100/04, VIETNAM
Covering approximately 6,174 km2 , Block 101-100/04 is
located next to Blocks 102 and 106 in the Gulf of Tonkin,
Northern Vietnam and has gas and condensate discovery.
Under the exploration phase of the PSC term, the joint venture
partners are committed to the processing and interpretation of
existing seismic data, acquisition of new 3-D seismic surveys
and drilling of one exploration well within the fi rst three years.
To date, the 3-D seismic survey covering 689 km2 has been
completed. Exploration drilling is planned for early 2009.
KAKAP, PSC, INDONESIA
Covering approximately 2,000 km2, Kakap PSC is located in the
West Natuna Sea, Indonesia, 486 km from Singapore. There are
nine producing oil and gas fi elds integrated by four platforms and
fi ve subsea tie-backs. Produced oil is processed by a FPSO vessel
and gas is transported through the West Natuna Transportation
System pipeline to Singapore.
Floating Storage and Offl oading (FSO) vessel. Oil started
fl owing from the Oyong fi eld in September 2007. This is
SPC’s second producing asset after the Kakap PSC.
At the commencement, Oyong produced oil at
approximately 8,000 to 10,000 bpd, which equates
to 3,200 to 4,000 bpd for SPC’s 40% interest.
SPC continued to enjoy healthy and stable production from
the Kakap PSC. For 2007, the combined fi eld production was
approximately 975,000 boe for SPC’s share. During the year,
an exploration well Pancing-1X was drilled which resulted in a
non-commercial oil discovery. Continued efforts to bring additional
gas production onstream were carried out with the drilling of the
KG West-1 well. This well and the Lukah gas discovery made in
2006 are currently scheduled for tie-back to existing platforms.
The two wells will maintain the Kakap gas production for supply
to Singapore.
With the completion of the Oyong oil development,
the Sampang partners have started to monetise its gas
reserves. Front End Engineering Design (FEED) has
completed and tendering of engineering, procurement,
construction and installation (EPCI) contract is ongoing
for the second phase development. Gas production is
expected to commence in 2009. The gas to be produced
will be transported through a 55 km pipeline to an onshore
processing facility adjacent to the Grati Power Station
in East Java. A gas sales agreement was signed with PT
Indonesia Power for the entire gas reserves of the fi eld.
SAMPANG PSC, INDONESIA
Sampang PSC is located offshore East Java, Indonesia.
The Sampang PSC contains the Oyong oil and gas fi eld,
the Jeruk oil discovery, the Wortel gas discovery, and several
exploration prospects and leads.
Wortel The partners are evaluating the full potential of the
Wortel discovery located 7 km west of the Oyong fi eld.
An appraisal well Wortel-3, located east of Wortel-1 well,
is scheduled for drilling in 2008. The Wortel discovery is
planned as a tie-back to the Oyong gas production.
Oyong In 2007, the fi nal milestone in the development of
Oyong oil was completed with the successful conversion of the
production barge and subsequent tie-in with the wells and the
Jeruk The Sampang partners continue to examine
possible development scenarios to commercialise
Jeruk’s resources.
Keppel Corporation Limited
Report to Shareholders 2007
Operating & Financial Review
Investments
111
OPERATING & FINANCIAL REVIEW
INVESTMENTS
The investment in China Auto I Co-Investors LLC enables k1 Ventures to
leverage the growth in demand of passenger cars in the Chinese market.
k1 VENTURES
The company is committed to
maintaining its focus on existing
investments in an effort to increase
operating profi ts and value.
k1 Ventures recorded profi ts of
$26.2 million in 2007 due to increased
contributions from Mid Pac Petroleum,
LLC (Mid Pac) and gains from the
disposal of investments and fi xed assets.
Helm Holding Corporation (Helm),
the largest independent locomotive
and railcar leasing company in North
America, continued to contribute
positively to the fi nancial results. For the
year ended 30 June 2007, k1 Ventures
made a signifi cant capital distribution of
6 cents per share for shareholders.
Subsequent to k1 Ventures’ year ended
30 June 2007, Mid Pac was sold for a
total consideration of US$50.4 million.
k1 Ventures also recognised a gain on
the sale of Helm’s investment in Dakota,
Minnesota & Eastern Railroad Corp. of
$22 million.
k1 Ventures made two investments
totalling US$8.83 million in China Auto I
Co-Investors LLC, a company formed to
co-invest in the expansion of the existing
automobile dealership platform of the
Guanghui Group.
k1 Ventures will continue to be proactive
in its current investments of energy,
transportation leasing and investments,
and seek to enhance shareholder value.
MOBILEONE (M1)
In 2007, the Keppel Group increased its
17% equity in M1 to almost 20%.
Growth in mobile voice traffi c remains
stable while data traffi c is expected
to continue to grow strongly. Major
initiatives in Singapore to develop
fi xed line and wireless broadband
infrastructure, such as the Next
Generation National Broadband Network
(NGNBN), will provide the platform for
the growth of data intensive applications.
M1 continues to be a signifi cant
contributor to Keppel T&T’s earnings
and cashfl ow. M1’s net profi t grew
by 4.4% from $164.6 million to
$171.8 million.
112
Keppel Corporation Limited
Report to Shareholders 2007
Operating & Financial Review
Investments
M1 is a leading mobile
communications provider in
Singapore with a range of mobile
voice and data communications
services over its networks.
Helm manages a diverse fl eet of
692 locomotives and 8,691
railcars to meet customers’
specifi c operating requirements.
During the year, Keppel T&T received
$64.0 million from its investment
in M1, with $46.7 million arising from
capital reduction and $17.3 million
from dividends.
In the near future, M1 expects to see
sustained growth in data traffi c arising
from wider adoption of mobile data usage
on M1 broadband and mobile devices.
It will tap on opportunities arising from
convergence in the telecommunications
and media space to develop
new businesses anchored on
its core competencies.
This involves moving beyond
mobile voice services to offer
new services such as mobile
advertising and mobile TV.
M1 will also continue to explore
growth opportunities locally and
overseas, adopting those which
will create shareholder value.
Keppel Corporation Limited
Report to Shareholders 2007
Operating & Financial Review
Investments
113
OPERATING & FINANCIAL REVIEW
FINANCIAL REVIEW AND OUTLOOK
With 75% of its total revenue coming from
overseas customers, Keppel Group stays
focused on building regional and global winners.
REVENUE BY MARKETS IN 2007
Revenue
$10,431m
Singapore 25%
75%
Overseas
Singapore
ASEAN
Rest of Asia-Pacific
Middle East / India
Europe
North America
South America
Central America
5% 1%
25%
25%
2%
7%
6%
29%
REVENUE BY MARKETS IN 2006
REVENUE BY MARKETS IN 2005
Revenue
Revenue
$7,601m
9%
Singapore 16%
84%
Overseas
Singapore
ASEAN
Rest of Asia-Pacific
Middle East / India
Europe
North America
South America
Central America
21%
5%
16%
$5,688m
Singapore 17%
83%
Overseas
18%
2%
17%
5%
8%
4%
Singapore
ASEAN
Rest of Asia-Pacific
Middle East / India
Europe
North America
South America
Central America
15%
5%
9%
4%
32%
30%
114
Keppel Corporation Limited
Report to Shareholders 2007
Operating & Financial Review
Financial Review and Outlook
Ocean Financial Centre is developed
on the site of the former Ocean Building.
When completed in 2011, the 43-storey
Grade A environment-friendly building
will yield 850,000 sf offi ce space.
with its suite of proprietary designs,
excellent track records and expertise in
project execution is poised to benefi t
from the growing demands of different
customers in the industry.
Keppel Offshore & Marine will continue
to drive its business through its “Near
Market, Near Customer” strategy,
bolstered by a global network of 20
yards and nine engineering and R&D
centres. Keppel Offshore & Marine is
expected to augment the capacities of
its yards and operations with capital
expenditure of nearly $300 million
in 2008 to meet existing contract
obligations and in anticipation of new
contracts. Its capital expenditure in the
last fi ve years totalled $430 million.
The creation of the Keppel Offshore &
Marine Technology Centre, in addition
to its three existing technology units,
refl ects its commitment to achieve a
quantum leap in technology. It will also
move with the market into deeper water
activities by channelling resources to the
development of deepwater rig solutions
and larger specialised vessels for
operations in more diffi cult terrains.
The Property Division has landed
housing, townships and resorts homes
development in various parts of Asia,
including China, Indonesia, India and
Vietnam. Its regional thrust has yielded
results with securing more project
sites. While poised for Singapore’s
transformation as a global business,
fi nancial and lifestyle hub, Keppel Land
is making signifi cant breakthrough into
the Vietnamese and Chinese markets.
With the Keppel brand and collective
network of the Group, Keppel Land
penetrated the Middle East market with
the joint acquisition and development of
a waterfront project in Saudi Arabia. This
will enable the Division to establish a new
regional platform for the property business.
For 2008, Keppel Land plans to launch
about 8,200 homes overseas including
China, Vietnam, India, Indonesia and
Saudi Arabia. In Singapore, Phase II
of Refl ections at Keppel Bay and Marina
Bay Suites is expected to be launched
this year. The fi nancial performance of
the Property Division will be boosted by
the revenue and profi t recognition from
its pipeline of current and new trading
property projects both in Singapore and
the region. Keppel Land’s stable of prime
investment buildings in the CBD and New
Downtown in Marina South is expected
to benefi t from rental reversion in the tight
offi ce supply market in Singapore.
The contracts secured for the $1.5 billion
Doha North wastewater treatment facility
and the $1.7 billion Qatar domestic solid
waste management complex in the last
18 months have boosted Infrastructure
Division’s track record in environmental
engineering. Keppel Energy is also expected
to perform better after gaining access to
its contracted Malaysia gas supplies and
restructuring its overseas assets.
SPC, driving the Group’s oil and
gas business, is gaining ground as
an integrated regional oil and gas
company. It has successfully invested
in upstream activities in Vietnam,
Indonesia, Cambodia, Australia and
now China. M1 and k1 Ventures,
derive their respective revenues
from Singapore and USA.
PROSPECTS
For the current year, we expect continued
growth in all our key divisions. The 37%
year-on-year growth in Group earnings
for 2007 was achieved on the back of a
33% year-on-year growth in 2006. With
a signifi cantly higher earnings base and
taking into account current economic
uncertainties, a more modest growth rate
is expected for the current year.
Offshore & Marine Division secured
a record $7.4 billion of new orders in
2007, bringing the net order book at the
end of the year to an all time high of
$12.2 billion. The outlook for the offshore
and marine industry is expected to remain
buoyant. High oil prices and marginal
growth in world’s hydrocarbon reserves
are expected to sustain Exploration &
Production activities. There is also a
growing need for sophisticated solutions
as more Exploration & Production
move into deeper waters and harsher
environments. Offshore & Marine Division
Keppel Corporation Limited
Report to Shareholders 2007
Operating & Financial Review
Financial Review and Outlook
115
OPERATING & FINANCIAL REVIEW
FINANCIAL REVIEW AND OUTLOOK
ROE & dividend per share
Capital
distribution
6.0cts/share
Capital
distribution
9.0cts/share
Capital
distribution
10.0cts/share
Capital
distribution
11.5cts/share
Capital
distribution
14.0cts/share
Special
dividend
45.0cts/share
Plus
Plus
Plus
Plus
Plus
Plus
19.0cts
14.0cts
21.8%
9.0cts
9.5cts
13.4%
14.1%
10.0cts
15.5%
11.5cts
19.1%
16.4%
%
25
20
15
10
5
0
2002
2003
2004
2005
2006
2007
ROE
Dividend
cents
25
20
15
10
5
0
ROE & DIVIDEND PER SHARE
Return on Equity reached a new
high of 21.8%, refl ecting our
effort to pursue higher returns
for our shareholders.
The Company will be paying a fi nal
dividend of 10 cents per share
and a special dividend of 45 cents
per share. The special dividend
is proposed to commemorate the
Company’s 40th anniversary since
its incorporation.
Together with the interim dividend
of 9 cents per share, total payout
for 2007 is 64 cents per share.
This is higher than the 28 cents
distributed in 2006 and 23 cents
distributed in 2005.
Economic Value Added (EVA)
Profi t after tax and exceptional items (Note 1)
Adjustment for:
Interest expense
Interest expense on non-capitalised leases
Tax effect on interest expense adjustments (Note 2)
Provisions, deferred tax, amortisation and other adjustments
Net Operating Profi t After Tax (NOPAT)
Average EVA Capital Employed (Note 3)
Weighted Average Cost of Capital (Note 4)
Capital Charge
2007
$ million
07v06
+/(-)
2006
$ million
06v05
+/(-)
2005
$ million
1,062
+172
890
+215
675
134
20
(19)
32
1,229
+24
+1
-2
+21
+216
110
19
(17)
11
1,013
+56
+3
-8
+20
+286
54
16
(9)
(9)
727
8,950
6.99%
(625)
-132
+0.49%
-35
9,082
+239
6.50% +0.53%
-62
(590)
8,843
5.97%
(528)
Economic Value Added
604
+181
423
+224
199
Comprising:
EVA excluding exceptional items
EVA of exceptional items
779
(175)
604
+363
-182
+181
416
7
423
+219
+5
+224
197
2
199
Notes:
1 Profi t after tax and exceptional items excludes fair value adjustments for investment properties.
2 The reported current tax is adjusted for statutory tax impact on interest expenses.
3 Average EVA Capital Employed is derived from the quarterly averages of net assets plus interest-bearing liabilities, provision
and present value of operating leases.
4 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: 6%);
b Risk-free rate of 3.041% (2006: 3.282%, 2005: 2.737%) based on yield-to-maturity of Singapore Government 10-year Bonds;
c Unlevered beta at 0.72 (2005/6: 0.63); and
d Pre-tax Cost of Debt at 3.72% (2006: 3.72%, 2005: 3.07%) using 5-year Singapore Dollar Swap Offer Rate plus 40 basis
points (2005/6: 75 basis points).
116
Keppel Corporation Limited
Report to Shareholders 2007
Operating & Financial Review
Financial Review and Outlook
Total distribution to shareholders will be
approximately $1 billion and represents
98% of Group PATMI. This is equivalent
to a gross yield of 5.5% on the Company’s
volume weighted average share price
for 2007.
beta. Average EVA Capital decreased
by $132 million from $9.08 billion to
$8.95 billion.
In all, total EVA growth was $405
million over the last two years.
The distribution to shareholders is paid on
account of increased profi tability and strong
operational cashfl ow. We are committed
to reward shareholders with generous
payouts as we achieve healthy year-on-year
improvement in earnings growth.
ECONOMIC VALUE ADDED (EVA)
We have been reporting positive
EVA since 2004, achieving a record
$604 million in 2007.
This positive EVA was due mainly to the
improvement in Net Operating Profi t
After Tax (NOPAT), an effi cient capital
structure, stringent investment criteria
and strong cashfl ow.
The improvement in EVA by $181 million
was attributed largely to higher NOPAT
partially offset by higher Capital Charge.
NOPAT increased by $216 million due
to an increase in after-tax profi t of
$172 million. Capital Charge increased
by $35 million due to a higher Weighted
Average Cost of Capital (WACC)
partially offset by lower EVA Capital.
WACC increased from 6.5% to 6.99%
attributed largely to a higher unlevered
TOTAL SHAREHOLDER
RETURN (TSR)
Keppel is committed to deliver value
to shareholders through earnings
growth. We will continue to identify,
develop and build growth platforms for
our businesses, sharpen our strategic
focus, streamline our businesses,
launch new products, strengthen
customer relationships and penetrate
new markets. This has contributed
to an impressive value creation for
our shareholders.
Total Shareholder Return (TSR) in
2007 was 52%, 31% higher than
the benchmark Straits Times Index’s
(STI) TSR of 21%. Over the past fi ve
years, CAGR TSR of 54% was also
signifi cantly higher than STI’s TSR of
26%. The yearly TSR outperformed
STI’s for the past eight years.
CASHFLOW
Operational cashfl ow before working
capital changes exceeded $1 billion.
Working capital changes were also
positive with progress payments
received from contracts.
Economic Value Added (EVA)
Total Shareholder Return (TSR)
$ million
700
350
0
(350)
(700)
+$181m
604
423
+$224m
+$164m
199
35
+$160m
(125)
+$170m
(295)
+$370m
%
80
60
40
20
0
75.2
65.3
48.7
37.6
38.3
32.5
32.4
21.6
19.3
51.7
21.0
2.0
(18.2)
(20)
(20.0)
(13.4)
(14.5)
2000
2001
2002
2003
2004
2005
2006
2007
(665)
2001
2002
2003
2004
2005
2006
2007
Keppel
STI
Keppel Corporation Limited
Report to Shareholders 2007
Operating & Financial Review
Financial Review and Outlook
117
OPERATING & FINANCIAL REVIEW
FINANCIAL REVIEW AND OUTLOOK
Cashfl ow
Operating profi t
Depreciation, amortisation and other non-cash items
Cashfl ow 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 used in investing activities
2007
$ million
07v06
+/(-)
2006
$ million
06v05
+/(-)
2005
$ million
1,051
139
1,190
638
(131)
1,697
32
(841)
263
(546)
+247
-8
+239
-367
-29
-157
-146
-82
+56
-172
804
147
951
1,005
(102)
1,854
178
(759)
207
(374)
+337
+8
+345
+12
-62
+295
+89
+355
+47
+491
467
139
606
993
(40)
1,559
89
(1,114)
160
(865)
Free Cashfl ow
1,151
-329
1,480
+786
694
Dividend paid to shareholders of the Company & subsidiaries
(511)
-101
(410)
-86
(324)
Net cash used in investing activities was
$546 million compared to $374 million
in 2006. Acquisitions and operational
capital expenditure accounted for
$841 million. This comprised principally
further investments in Marina Bay
Financial Centre, capital expenditure
on the co-generation plant and other
operational expenses. Divestment and
dividend received totalled $295 million.
As a result, free cashfl ow for the year
amounted to $1.2 billion.
Total distribution to shareholders of the
Company and minority shareholders
of subsidiaries for the year amounted
to $511 million, an increase of 25%
compared to the previous year.
FINANCIAL POSITION
Total assets of $15.80 billion at
31 December 2007 were $1.90 billion
or 13.6% higher than the previous
year-end. Increase in investment
properties was due mainly to fair value
gains arising from valuation of the
Group’s portfolio of offi ce buildings.
Increase in associated companies was
due to equity accounting for share of
profi ts and further investments in Marina
Bay Financial Centre, MobileOne
and Citadel 100 Datacenters Limited.
Increase in investments was due to fair
value adjustments of fi nancial assets
and purchases made during the year.
Increase in debtors was due mainly to
higher operating activities in Offshore
& Marine Division and Infrastructure
Division. These were partly offset
by decrease in fi xed assets due to
depreciation charges and write-down
of certain fi xed assets net of capital
expenditure. Impairment of goodwill
resulted in decrease in intangibles.
Shareholders’ funds increased from
$4.21 billion at 31 December 2006 to
$5.21 billion at 31 December 2007.
The increase was attributed mainly to
retained profi ts for the year and fair value
adjustments of fi nancial assets. This
was partly offset by a total payout of
$463 million comprising fi nal dividend
and capital distribution in respect of
fi nancial year 2006 and interim dividend
in respect of the fi rst half year ended
30 June 2007.
Minority interests increased from
$1.39 billion at 31 December 2006
to $1.83 billion at 31 December 2007
because of higher retained profi ts of
non-wholly owned subsidiaries.
Total liabilities of $8.76 billion at
31 December 2007 were $459 million
or 5.5% higher than the previous year-
end. Increase in creditors was due mainly
to higher operating activities in Offshore
& Marine Division and Infrastructure
Division. Increase in provision for taxation
was due to higher profi ts of the Group.
118
Keppel Corporation Limited
Report to Shareholders 2007
Operating & Financial Review
Financial Review and Outlook
Increase in deferred taxation was due to
provision for deferred tax on fair value
gains of investment properties taken to
the profi t & loss account.
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 2007, 22%
(2006: 23% and 2005: 36%) of Group
borrowings were repayable within one
year with the balance largely payable
between two to fi ve years.
Unsecured borrowings constituted
70% (2006: 38% and 2005: 60%)
of total borrowings with the balance
secured by properties and assets.
Secured borrowings are mainly for
fi nancing investment properties and
project fi nancing loans for property
development projects. The net book
value of properties and assets pledged/
mortgaged to fi nancial institutions
amounted to $1.83 billion (2006:
$1.97 billion and 2005: $1.07 billion).
Fixed rate borrowings constituted 21%
(2006: 16% and 2005: 8%) of total
borrowings with the balance at fl oating
rates. The Group has interest rate swap
agreements with notional amount totalling
$626 million whereby it receives variable
rates equal to SIBOR and pays fi xed
rates of between 2.83% and 3.50% on
the notional amount. The Group also has
interest rate cap agreements to hedge
the interest rate risk exposure arising
from its US$ and S$ variable rate term
loans. As at the end of the fi nancial year,
the Group has outstanding interest rate
cap agreements of $58 million. Details of
these derivative instruments are disclosed
in the notes to the fi nancial statements.
Singapore dollars borrowings
represented 76% (2006: 93% and
2005: 73%) and US$ borrowings
represented 20% (2006: 4% and 2005:
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
& FINANCIAL RESOURCES
The Group maintains a strong balance
sheet and an effi cient capital structure
to maximise return for shareholders. The
strong operational cashfl ow 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,
cashfl ow 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.
Capital structure
Capital employed at the end of 2007
was $7.04 billion, an increase of
$1.44 billion over 2006 and $2.10 billion
over 2005. Net borrowings stood at
$634 million at end of 2007, a further
Total assets owned
Total liabilities owed and capital invested
$ million
20,000
15,000
10,000
5,000
0
$ million
20,000
15,797
15,797
12,590
1,653
2,254
2,664
2,762
1,846
1,411
13,901
1,741
2,446
3,113
2,862
2,120
1,619
1,698
3,133
4,024
2,791
2,550
1,601
15,000
13,901
5,205
12,590
10,000
1,830
4,205
1,393
5,000
0
6,139
5,188
2,234
389
2,957
158
3,646
1,289
3,750
3,731
174
2005
2006
2007
2007
2006
2005
Bank balances, deposits & cash
Debtors & others
Stocks & work-in-progress
Other liabilities
Term loans & bank overdrafts
Creditors
Investments
Properties
Fixed assets
Minority interests
Shareholders’ funds
Keppel Corporation Limited
Report to Shareholders 2007
Operating & Financial Review
Financial Review and Outlook
119
OPERATING & FINANCIAL REVIEW
FINANCIAL REVIEW AND OUTLOOK
Gearing
$ million
8,000
6,000
4,000
4,935
2,320
2,000
0.47
5,598
1,339
0.24
0
2005
2006
Interest coverage
no. of times
$ million
2.0
1,800
7,035
1.5
1,500
1,200
8.48
1.0
900
848
no. of times
1,619
13.96
1,202
9.85
0.5
634
2007
0.09
0
600
300
0
100
2005
122
2006
116
2007
15
12
9
6
3
0
Net debt
Capital employed
Gearing
EBIT
Total interest cost
Interest cover
reduction from $1.34 billion in 2006 and
$2.32 billion in 2005. With higher capital
employed and lower borrowings, net
gearing was reduced from 0.47 times in
2005 to 0.09 times in 2007.
Interest coverage improved from 8.48
times in 2005 to 13.96 times in 2007.
This was achieved on increasing EBIT
despite the escalating cost of funds.
Cashfl ow coverage decreased from
16.59 times in 2005 to 15.63 times
in 2007. Cashfl ow coverage remained
healthy due to the robust operating
cashfl ow generated by the Group.
At the AGM in 2007, shareholders gave
their approval for mandates to issue and
buy back shares. The Company did not
exercise these mandates.
Financial resources
The Group maintains suffi cient 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.
At the end of 2007, 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 $5.32 billion of
which $1.33 billion was utilised.
FINANCIAL RISK MANAGEMENT
The Group operates globally and is
exposed to a variety of fi nancial risks,
including market risk (foreign currency
exchange rates, interest rates and
commodity/equity prices), credit risk and
liquidity risk. 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 fi nancial offi cers of
the Group’s key operating companies
and Head Offi ce specialists.
The Group’s fi nancial risk management is
discussed in more detail in the notes to
the fi nancial statements. In summary:
Due to the dynamic nature of the Group’s
businesses, it maintains fl exibility in
funding by ensuring that ample working
capital lines are available at any one time.
• The Group has receivables and
payables denominated in foreign
currencies, viz US dollars, European
and other Asian currencies. Foreign
120
Keppel Corporation Limited
Report to Shareholders 2007
Operating & Financial Review
Financial Review and Outlook
Cashflow coverage
$ million
2,500
2,000
1,500
1,000
500
0
no. of times
16.59
1,659
1,976
16.20
1,813
15.63
100
2005
122
2006
116
2007
20
16
12
8
4
0
Operating cashflow + interest
Total interest cost
Cashflow coverage
currency exposures arise mainly
from the exchange rate movement
of these foreign currencies against
Singapore dollar, which is the Group’s
measurement currency. The Group
utilises forward foreign currency
contracts to hedge its exposure to
specifi c currency risks relating to
receivables and payables. The bulk
of these forward foreign currency
contracts are entered into to hedge
any excess US dollars arising from
Offshore & Marine contracts based
on the expected timing of receipts.
The Group does not engage in foreign
currency trading;
• The Group hedges against price
fl uctuations arising on purchase of
natural gas. Exposure is managed via
fuel oil forward contracts, whereby
the price of natural gas is indexed to
a benchmark fuel price index, High
Sulphur Fuel Oil (HSFO) 180-CST;
• The Group maintains a mix of
fi xed and variable rate debt/loan
instruments with varying maturities.
Where necessary, the Group uses
derivative fi nancial instruments to
hedge interest rate risks. This may
include interest rate swaps and
interest rate caps;
• The Group maintains fl exibility 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 signifi cant accounting
policies are discussed in more detail in
the notes to the fi nancial statements.
The preparation of fi nancial 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 fi xed assets
Determining whether fi xed 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 cashfl ows expected from the
cash-generating units and an appropriate
discount rate in order to calculate the
present value of the future cashfl ows.
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 cashfl ows
expected from the cash-generating units
and an appropriate discount rate in order
to calculate the present value of the
future cashfl ows.
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 fi nancial 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 fi nancing cashfl ow.
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. Signifi cant 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.
Signifi cant 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
fi nal 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.
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OPERATIONS SUSTAINABILITY
Keppel Corporation is well placed to
meet the challenges of a dynamic
business environment.
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Operations Sustainability
The Group is positioned to meet the
challenges of a dynamic business
environment and sustain its diversifi ed
operations well into the long-term, through
a framework of best practices, processes
and initiatives designed to enhance
operational resilience whilst maintaining
strategic direction.
Our strong execution capabilities are
supported by core competencies and
operational focus on risk and business
continuity management, technology,
health and occupational safety, as well as
environmental protection. This provides
a robust platform for sustainable growth
across markets while creating a compelling
value proposition for stakeholders.
MANAGING RISKS
AND UNCERTAINTIES
Cultivating a strong
risk-centric culture
The Board of Directors, assisted by
the Board Risk Committee (BRC),
has oversight of risk management
in the Group. The BRC examines
the effectiveness of the Group’s risk
management system and guides
management in the formulation of
risk policies, systems, processes
and procedures.
Our Enterprise Risk Management
(ERM) framework provides a holistic
and systematic risk management
process and approach for the Group
in terms of risk identifi cation, evaluation,
mitigation and monitoring.
Risk management tools and methodology
are widely applied to different aspects
Workers participate in a pandemic fl u
exercise at Keppel Shipyard (Tuas).
of our business. Risk management is
embedded in business processes to
ensure early risk detection for effective
management and control, and forms an
integral aspect of strategic and budget
review, project evaluation and planning,
and performance evaluation.
Maintaining clear visibility of risks is
emphasised to ensure prompt mitigation
and decision-making. Key risk issues and
signifi cant identifi ed projects are closely
monitored through regular reviews, project
meetings, discussion of key risk indicators
and issues with senior management and
highlighting of key risks in reports to
management, BRC and the Board.
Strong top level management
commitment in driving Group-wide
ERM initiatives ensures effective
implementation with dedicated
resources, standardised methodology,
established measures, clear communication
and feedback channels.
Individual business units are accountable
for and cognisant of the need to
integrate risk management into their
business operations. Group Risk
Management provides guidance,
assistance and resources to facilitate
their ERM implementation.
Risk management capabilities are
enhanced through in-house training,
including customised workshops
incorporating case studies and surveys.
Conferences and forums also crystallise
key messages. Sharing of best practices
and in-depth project post-mortem
analysis provide further learning avenues.
Preparing for external volatility
and operational disruptions
In an increasingly volatile operating
environment, the Group seeks to
enhance business resilience through
business continuity management and
scenario planning.
Business continuity management enables
our businesses to respond seamlessly
to external events while minimising
operational disruptions. For example,
the Group has developed Business
Continuity Plans (BCP) for a pandemic
fl u outbreak scenario. BCP activities
carried out include refi ning business
units’ BCPs, simulation exercises for
pandemic fl u outbreaks at local and
overseas business units and testing
remote work access procedures from
home or alternative sites. This enhances
our overall operational preparedness.
External conditions may impact the
Group’s operations and challenge key
underlying parameters. Scenario planning
is a useful tool involving long-range
scanning to draw additional perspectives
that can be incorporated into the
process of shaping the Group’s strategic
direction, meeting potential challenges
as well as business opportunities.
Ongoing scenario planning augments
the risk management system and
strengthens the Group’s strategic
decision-making processes.
Our key emphasis is to promote an
effective risk management system
across the Group, intensifying our
efforts in building a risk-centric culture
closely aligned with both near- and
long-term corporate goals.
AIMING FOR ZERO TOLERANCE
Safety issues are discussed at every
board meeting thus underscoring its
importance. Aside from the Board Safety
Committee at Keppel Corporation,
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OPERATIONS SUSTAINABILITY
Keppel Land also established its Board
Safety Committee on 1 March 2007, to
further drive home the importance of
safety management.
The Group held its Inaugural Annual
Group Safety Convention in 2007, aimed
to share best practices, recognise efforts
to enhance safety and motivate
employees to raise safety standards.
A total of 22 projects were submitted
to a panel of judges from the Ministry
of Manpower, Singapore Construction
Association and Ngee Ann Polytechnic.
Guest of Honour, Minister of State for
Manpower and Education, Mr Gan Kim
Yong, Mr Lim Chee Onn, Executive
Chairman, Keppel Corporation, and
Mr Yeo Wee Kiong, Chairman of Board
Safety Committee launched the Group’s
fi ve safety principles at the Convention.
The safety principles highlight the
Group’s philosophy towards safety
management, as well as the Group’s
passion and commitment towards
improving safety at the work place. We
have also committed no less than $15
million in 2008 to step up our efforts to
improve the Group’s safety performance.
This is an increase from $13 million in
2007 and $10.6 million in 2006.
At the Keppel O&M group, ongoing
efforts have been undertaken to imbue
a safety mindset in all employees and
subcontract workers. In 2006, Keppel
O&M achieved its lowest accident rate
since it started records in the 1980s.
In 2007, the Safety Leadership
Programme was launched to ensure
that safe work practices are built into
everyday work processes. This safety
initiative has been implemented on
projects across all three of Keppel
Shipyard’s facilities in Singapore. Our
safety standards can be attested by the
Accident Frequency Rate (AFR)
at Keppel Shipyard with its much
improved accident frequency rate
of 0.25 in 2007 compared to 1.34
in 2006. AFR measures the total
number of reportable accidents per
million manhours worked. Keppel
Seghers Engineering also achieved
1.2 million accident-free manhours
for its work on the Kallang-Paya Lebar
Expressway and Keppel Seghers
Ulu Pandan NEWater Plant.
In China, setting safety standards were
also a key priority. The project team and
main contractor of the Central Park
City (Wuxi) worksite was awarded a
recognition plaque by Keppel Land’s
Board Safety Committee (BSC) for
its exemplary safety practices. 8 Park
Avenue (Shanghai) and Central Park
City (Wuxi) have also received safety
recognition awards from the local safety
bureaus for good safety practices.
Promoting a safety culture
The HSE efforts of Keppel O&M
focus on four main thrusts, namely
communications, training, proactive
actions, rewards and recognition. Safety
initiatives are planned by the yards
throughout the year to ensure that HSE
aspects receive suffi cient coverage.
Keppel O&M continued to build a safety
culture based on “interdependent”
teamwork. The Workforce Safety Councils
in the Tuas, Benoi and Gul yards of Keppel
Shipyard and Keppel Singmarine were its
active partners. Support was also received
from Contractors HSE Watch Groups
and from customers’ project teams.
At Keppel Shipyard, client representatives
from ExxonMobil, SBM and Shell sit on
the Safety Steering Committee under the
yard’s Safety Plus Programme.
Keppel O&M participated in the inaugural
Keppel Group Annual Safety Convention
held in November 2007, with Keppel
Singmarine winning the Keppel Group
Chairman Safety Challenge Trophy.
Keppel Shipyard launched its Safety
Leadership Programme in April 2007,
aligning top management down to the
workforce to ensure safety is built into
everyday work processes. This initiative
is a tripartite effort by ExxonMobil, SBM
and Keppel Shipyard.
FIVE KEY PRINCIPLES FOR
SAFETY
•
If Safety is Expensive,
Disasters Cost More
• Value Everyone’s Safety
• Zero Tolerance for Incidents
• Recognise Safe Behaviours
• Passion for HSE Excellence
Mock exercises are carried out
at the yards to hone our security
skills and safety procedures.
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Keppel Verolme appointed Safety
Ambassadors to promote safety
awareness in the yard.
participated in the Coastal Clean Up
Day as part of the Green Philippines
Programme in September 2007.
Keppel FMO and Keppel Land’s property
management team carry out fi re drills to
ensure a smooth evacuation for tenants
of Keppel Towers.
Keppel FELS held its Annual Safety
Campaign in April 2007, emphasising
Prevention of Hand & Finger Injuries,
the highest occurrence category in its
incident records.
Protection of the environment
Our yards worldwide played their part
in ensuring that operational activities
were conducted in a responsible
manner without negative impact to the
environment and surrounding community.
Keppel AmFELS conformed to Texas
State Air Quality Permit and Federal
Operating Permit requirements.
Keppel Batangas is a member of
the Batangas Coastal Resources
Management Foundation which conducts
surveillance to ensure sea water quality
around the Batangas Bay region. Both
Keppel Batangas and Keppel Cebu also
Keppel Shipyard set up an Environmental
Task Force in June 2007 dedicated to
monitoring environmental issues.
Achieving recognition
At the last Ministry of Manpower Annual
Safety & Health Performance Award,
Keppel Singmarine won the Silver Award
for Workplace Safety & Health. Keppel
FELS won the Safety & Health Award
Recognition for Projects (SHARP) for
the Maersk B273 project while Keppel
Shipyard won the same award for the
Petrobras P-53 project.
At the 10th Convention for Workplace
Safety & Health Innovations Teams
in Marine Industry organised by the
Association of Singapore Marine
Industries, two teams from Keppel
Shipyard Gul won the Gold and
Silver Awards respectively.
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OPERATING & FINANCIAL REVIEW
OPERATIONS SUSTAINABILITY
Launching Keppel’s Five Key Safety
Principles are (from left to right) Mr Lim
Chee Onn, Executive Chairman, Keppel
Corporation, Minister of State for Manpower
and Education, Mr Gan Kim Yong and
Mr Yeo Wee Kiong, Chairman of Board
Safety Committee, Keppel Corporation.
During the year 2007, R&D projects
discussed include Keppel O&M’s
technology collaboration with
ConocoPhillips. Environmental
discussions focused on water and solid
waste related issues and technologies,
as well as alternative energy generation.
The fi rst Inter-SBU R&D project
approved under Central Innovation
& Technology Development Funding
for offshore gas-to-liquids technology
applications feasibility study was
successfully completed.
Looking ahead, KTAP will foster a vibrant
R&D culture within the Group and lead
our technology drive through the TRAM
concept – identify Trends impacting our
businesses, assist our businesses to
remain Relevant to markets, advise on
Acquisition of expertise or technology
development processes and Mentor the
Group in related R&D issues.
Offshore and marine
technology development
KOMtech was launched in December
2007, underscoring Keppel O&M’s
commitment to long-term research
driving innovation beyond its current
business and markets. An initial funding
of $150 million for fi ve years sets
the stage for its R&D activities in the
near future. The centre also received
signifi cant support from The Economic
Development Board.
KOMtech augments the work of three
existing technology units, Offshore
Technology Development, Deepwater
Technology Group, and Marine
Technology Development. They will
focus more intensively on design
and engineering, while KOMtech
concentrates on new technologies with
long-term strategic impact.
Caspian Shipyard and Keppel Kazakhstan
gained impressive safety records of
4.24 million manhours combined without
lost time incidents. Keppel Kazakhstan
was lauded by Agip KCO for achieving
1.5 million manhours without any lost time
incidents in their project.
Singapore yards continued to achieve both
impressive safety records in various projects
and receive safety rewards from customers.
SUSTAINING OUR
TECHNOLOGY EDGE
Keppel Technology Advisory Panel
Since its 2004 inauguration, the Keppel
Technology Advisory Panel (KTAP)
has convened semi-annually on eight
occasions, with active participation from
the Board, senior management and
Group companies.
Chaired by Professor Cham Tao Soon,
President Emeritus of Nanyang
Technological University and Chancellor
of UniSIM, KTAP’s current membership
comprises eight other internationally-
renowned researchers, practitioners and
industry leaders.
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New ideas and fresh perspectives will be
injected through planned staff rotation
while research working stints provide
invaluable staff development opportunities.
Research collaborations with the
National University of Singapore (NUS),
Nanyang Technological University (NTU),
and leading overseas universities in
Norway and The Netherlands, will further
sharpen our technological edge.
KOMtech fulfi ls a key technology
foresight role in spearheading Keppel
O&M’s thrust into new markets and
opportunities, leveraging its market
knowledge and developing technologies
to meet its future needs.
Keppel O&M continues to play a
prominent role in the industry, keeping
abreast of latest technology and
developments as it contributes to the
shaping of signifi cant trends and overall
development of our offshore and marine
industry. Major events during 2007
included the following:
• The 21st Chua Chor Teck Memorial
Lecture was delivered in January by
Mr Chris Horrocks, past Secretary
General of the International Chamber
of Shipping and International Shipping
Federation. He spoke on “Raising the
Profi le of the Shipping Industry”;
• Keppel O&M participated in the
•
Offshore Technology Programme
launched at NUS and signed a bilateral
agreement with its Centre of Offshore
& Research Engineering in March;
In April, Prof Andrew Palmer
succeeded Prof Torgeir Moan as
Keppel Chair Professor at NUS,
researching offshore pipelines &
engineering, geotechnics and ice;
• The 5th Keppel Lecture was delivered
by Prof Andrew Palmer, Keppel Chair
Professor at NUS, on “Arctic Offshore
Structures, Ice Engineering & Ice
Mechanics”, in June;
• Semi-sub/Floaters Asia 2007
conference took place in September.
Organised by Petromin, Deepwater
Technology Group, together with
ENSCO and Siemens, was one of
the main sponsors. A broad industry
segment presented, including design
houses, classifi cation societies,
FPSO operators, academia, model
test basins and subsea pipelines
specialists; and
• OSV Singapore 2007 was another
international conference held in
Singapore. Keppel Singmarine was
the main sponsor. The conference,
held in November, provided a forum for
open exchange of ideas on offshore
support vessels and networking.
Group business units also participated
in knowledge-sharing discussions and
presentations providing opportunities to
explore and derive insights and synergies
with the technologies, operations,
experiences and expertise of other
business units.
The Keppel Technology Advisory Panel
held its seventh meeting in Belgium.
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OPERATIONS SUSTAINABILITY
Development Council (EWI) and PUB
will supplement EDB funding.
To complement internal R&D and
augment its technology solutions
portfolio, KIE also reaches out to
external constituencies
and stakeholders:
• Research collaboration with leading
academic and industrial research
institutions around the world
including NUS, NTU, PUB, NEA,
Stanford University (US), Cranfi eld
University (UK), TNO and KIWA (The
Netherlands) and the Von Karman
Institute (Belgium), ensures direct
access to latest research programmes
and technology platforms;
• Working closely with business
partners and customers to harmonise
research efforts with market needs; and
• Tapping KTAP insights and
strategic guidance in R&D activities,
technology trends, relevancy and
technology acquisition.
Signifi cant projects carried out to meet
global environmental challenges include:
• NextGenBioWaste project
– EU integrated project in
sustainable energy production;
• Keppel Seghers Ulu Pandan
NEWater Plant;
• Keppel Seghers & TNO Memstill®
membrane distillation project;
• Keppel Seghers & KIWA Project
– industrial scale membrane
systems study;
• MEMSCAN Project – industrial
scale membrane systems study;
• Keppel Seghers & Cranfi eld
University membrane bioreactor
optimisation project; and
• Keppel Seghers membrane
bioreactor optimisation project
for Dutch city of Heenvliet.
KIE is committed to further developing
technologies in wastewater treatment.
ENVIRONMENTAL TECHNOLOGIES
FOR A CLEANER FUTURE
Our environmental business endeavours
to address global challenges of
sustainable development and contribute
to better living environments through
its resource-effi cient water and thermal
treatment capabilities. Technological
innovations are harnessed to deliver cost-
effective quality environmental solutions
while maintaining our competitive edge.
Efforts are targeted at energy effi ciency
improvements by enhancing energy
conversion or by tapping previously
unusable sources of energy such as
waste heat.
We seek to create a robust R&D
framework to support our environmental
initiatives through centres of excellence
spearheading innovation in environmental
technologies. In Europe, Keppel Seghers’
Environmental Technology Research
Centre focuses on thermal and solid
waste technologies and projects, and is
equipped to conduct small-scale trials
and pilot testing.
Keppel Seghers continues to focus
its resources on development and
commercialisation of proprietary
technologies and engineering
capabilities as part of its long-term
strategy. It aims to be a world leader in
advanced environmental technologies
for water and wastewater treatment,
solid waste management and air
pollution control.
Keppel Environmental Technology
Centre (KETC) was set up in Singapore
in 2007 to drive environmental research
initiatives. It will focus on energy
recovery and by-product minimisation
from waste and wastewater treatment,
and membrane applications for
producing water from non-conventional
sources. Project funding from
Environmental & Water Industry
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The Memstill® project seeks to develop
a novel, low cost desalination process.
Prequalifi cation and research proposals
have been submitted to EWI and
PUB for funding. A large full-scale
demonstration plant is targeted to be set
up in 36 months.
The REDOXAN project applies Keppel’s
patented process using anaerobic/aerobic
digestion to reduce sludge and improve
biogas production. A laboratory scale test
unit is being constructed to test various
combinations of mesophyllic/thermophyllic
anaerobic and aerobic operations with
or without acidogenic steps on primary
and secondary sludge to demonstrate
superiority over existing technologies.
Two membrane bioreactor pilot
projects are ongoing in collaboration
with Cranfi eld University and Asahi.
QUALITY LIVING AND
ENVIRONMENTAL PRESERVATION
Building green alliances
Keppel Land is committed to developing
properties that improve the quality of life while
minimising their ecological impact.
It joined Singapore Green Business
Alliance, which promotes awareness and
co-operation for environmental protection,
and is a member of Singapore Compact,
a national corporate social responsibility
movement in Singapore.
In June 2007 marking World Environment
Day, a series of green initiatives and
events was rolled out to promote
awareness of conservation. A ‘Green
Living’ exhibition was held at Bugis
Junction Towers. ‘Go Green with
Keppel Land’ recycle-able bags were
distributed and employees were
encouraged to pledge their commitment
to environmental protection through its
online portal.
As part of the Group-wide Environment
Masterplan, Keppel Land formed an
Environment Management Committee
to address green issues and spearhead
environmental sustainability initiatives.
A key priority is to obtain ISO 14001
certifi cation for its environmental
management system. Work is underway to
achieve certifi cation for local commercial
and residential operations by end-2008.
Keppel Land embraces environmental
and social performance transparency.
At the inaugural Singapore Green
Summit 2007 jointly organised by the
Singapore Environment Council and
Association of Chartered Certifi ed
Accountants (ACCA), it was a fi nalist in
the ACCA Singapore Environmental and
Social Reporting Awards. Since 1997,
a dedicated section in its annual report
details its environmental initiatives.
A link to the latest environment report is
included in its website.
Redefi ning waterfront living
Keppel Bay, a 32-ha waterfront precinct
astride the former Keppel Shipyard site,
is meticulously designed to optimise the
site’s rare natural attributes for exciting
seafront living.
Refl ections at Keppel Bay offers its residents
a world-class waterfront lifestyle coupled with
environment-friendly features.
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OPERATIONS SUSTAINABILITY
Keppel Land incorporates
eco-friendly features in its
developments in the pursuit
of green excellence.
Marina at Keppel Bay, located on the
exclusive Keppel Island, is a world-class
marina featuring state-of-the-art facilities
such as modern concrete fl oating berths
with capacity for 170 yachts, including
mega-yachts up to 250 feet. It is linked
to the mainland by the landmark Keppel
Bay Bridge, Singapore’s longest cable-
stayed bridge at 250 metres. Designed
by leading architects and marina
consultants, Marina at Keppel Bay sets
new standards in marina construction
and services.
Iconic Refl ections at Keppel Bay,
designed by world-renowned architect
Daniel Libeskind, has applied for Green
Mark. Green features include energy
effi cient air-conditioners, motion sensors,
automated irrigation and recycling
facilities within the development.
Caribbean at Keppel Bay, the FIABCI
Prix d’ Excellence award-winning
condominium and fi rst residential
development at Keppel Bay, boasts more
than 2,200 shrubs and 800 trees of
diverse species within its grounds.
Spearheading green developments
Harmonising with and improving the
environment is a design and development
priority. Its latest prime offi ce building,
Ocean Financial Centre, to be completed
in 2011, will showcase state-of-the-art
green and environment-friendly features.
Designed by well-known architectural
fi rm Pelli Clarke Pelli, the 43-storey
building will include green features
such as Singapore’s largest solar panel
system for offi ces, the fi rst hybrid chilled
water system in Singapore, high green
plot ratio, energy effi cient design and use
of environmental management and water
conservation systems.
One Raffl es Quay, in the New
Downtown, hosts a district cooling
plant providing centralised and effi cient
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-fi lled steel tube columns,
outrigger trusses and diaphragm fl oors
was used in its construction. Other
resource-effi cient features incorporated
in the landmark building include devices
optimising air-conditioning control,
energy effi cient light fi ttings, motion
sensors, condensate water recycling
for irrigation, and an air fl ushing system
to remove foul air.
Marina Bay Residences was conferred
the Green Mark Gold Award in 2007
in recognition of its environmentally
sustainable building practices and
innovative green features. Another
condominium project, The Tresor, also
received the same award in 2006.
These successive wins attest to Keppel
Land’s commitment and effort in making
its properties eco-friendly and affi rm its
pursuit of green excellence.
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Going green across borders
Keppel Land demonstrates similar
commitment to the environment and
sets new benchmarks for sustainable
development through its quality
overseas projects.
effl uent water for landscape irrigation
and toilet fl ushing system. Solar energy
is harvested for all external lightings at
Elita Promenade. About 40% of land
at Elita Horizon has been set aside for
green belt and landscaping.
Jakarta Garden City, a 270-ha
residential township in eastern Jakarta
to be launched in 2008, will offer a
green haven for families, with communal
gardens and parks, tree-lined walkways
and landscaped public areas.
In India, sewage treatment plants have
been set up at Elita Promenade and
Elita Horizon condominium
developments to treat and recycle
In China, 8 Park Avenue in Shanghai
has water and energy conservation
features such as solar-powered
landscape lamps, rain water recycling
system and a heat recovery pump which
conserves energy for its swimming pool.
In Beijing, The Seasons condominium
features a mix of evergreen and
deciduous trees to ensure residents
can enjoy nature’s changing scenery
through the four seasons.
The planned Sino-Singapore Tianjin
Eco-City (SSTEC) development will
incorporate the latest green technologies
and environment-friendly systems, such
as state-of-the-art water recycling and
waste treatment systems. SSTEC will
be developed by a joint venture formed
by consortia from both sides, with
Keppel Corporation playing a lead
role and Keppel Land supporting
the Group’s effort.
Jakarta Garden City is expected to
be a development that harmonises
quality homes with nature.
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NURTURING PEOPLE
Keppel Senior Management is
actively involved in the identifi cation
and development of talents.
Mr Kenny Yap (centre) of Qian Hu Corporation and Mr Adrin Loi (right) of Ya Kun International
were the speakers for 2007’s ‘Grow Beyond’ motivational series for Keppelites.
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Nurturing People
TALENT DEVELOPMENT
We continue to strive to be a
preferred employer, to existing and future
employees. Our senior management
drives the development of young talents
across the Group. They meet these young
managers quarterly for tea. This enables
interaction and exchange of views. Young
managers from our overseas offi ces
also converge annually for training,
interaction with board members and
senior executives and participation
in Group-wide programmes to build
cohesion as a larger Keppel family.
Bi-annual motivational talks are held
as part of the ‘Grow Beyond’ series.
In 2007, our speakers included Mr Khoo
Swee Chiow, a well-known Singaporean
adventurer; Mr Jack Sim, founder of
World Toilet Organisation; Mr Adrin Loi
of Ya Kun International, and Mr Kenny
Yap of Qian Hu Corporation. Some
300 Keppelites, including board
members and senior executives
attended these half-day sessions.
A key development opportunity for
our young talents is postings to our
many operations overseas, for global
exposure and grooming. Cross-
posting, for example, from China to
the Middle East or from one Strategic
Business Unit (SBU) to another is
currently being institutionalised.
Leadership training is ongoing and has
been allocated a generous Learning and
Development budget. New programmes
have been added in 2007, including
confl ict management and negotiation
skills to equip our managers to work
effectively with multi-cultural customers
and employees as we expand. Many of
our young managers also participated in
IE Singapore’s Executive Programmes
Keppelites from across the globe stepped up in unity at the
Global Young Managers Programme 2007.
Global Young Managers
Programme 2007
Hailing from Azerbaijan to China, 33 Keppelites embarked on
a fi ve-day journey of discovery during Keppel’s second Global
Young Managers Programme in September.
The leadership development programme is designed to
introduce young managers from Keppel’s overseas operations
to Group operations.
The programme included workshops that honed negotiation
skills and personal effectiveness. Visits to shipyards, the
Keppel Seghers Ulu Pandan NEWater Plant and the
developments at Keppel Bay were arranged.
To further enrich trainee experience, the programme was
structured to coincide with two other events, the Keppel
Group Orientation and the ‘Grow Beyond’ Series talk.
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133
NUrTUrING PEOPLE
under the International Business
Fellowship, and spent two weeks in
Dubai and Abu Dhabi, and Beijing and
Shanghai in China. Our SBUs also
supplement such leadership training with
their own programmes.
Manpower by segments
number
156
4,392
2,918
Offshore & Marine
Property
Infrastructure
Investments
Building Bench Strength
for Key PoSitionS
To ensure we have adequate bench
strength for key positions, both the
Board and our Senior Executive
Directors regularly review their list
of potential successors, and assess
them against a list of leadership
attributes developed in-house.
In addition, regular face-to-face
interactions with these candidates are
organised. These candidates are also
developed through executive coaching,
executive development programmes,
and leading major projects. To ensure
a deliberate and effective implementation
of succession planning, this effort
is stewarded as a Key Performance
Indicator in the supervisor’s
Balanced Scorecard.
ScholarShiPS and
internShiP ProgrammeS
Under the Keppel Group Local
Scholarship, a total of 12 scholarships
were awarded by various SBUs in 2007,
for studies in accountancy, business
administration, engineering and real
estate in universities in Singapore.
Scholarships under the auspices of
the Keppel International Scholarship,
launched since 2004, were awarded to
two students from Vietnam and China
for studies in the National University of
Singapore. In addition, four scholarships
were offered to pre-university students
from Vietnam and India to study in
St. Joseph’s Institution International.
24,448
Singapore
China/HK
Asia
USA
Brazil
Others
16,429
Manpower by countries
number
1,179
6,764
1,059
5,057
1,426
Executives/Non-Executives
number
6,774
Non-Executives
Executives
25,140
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Arab Asian Internship Exchange Programme
Asian Internship Exchange Programme is starting in 2008 to provide opportunities for Arab and Asian youths to experience
working in each other’s country, facilitate knowledge sharing and foster greater understanding. The programme is part of the
Arab Asian Task Force’s strategy and action plans to promote co-operation between Asia and the Arab world.
1
2
1. Global Action Forum Arab Asian Dialogue was held
in Singapore in April 2007.
2. Mr Moustapha Sarhank, Member of the BOD for
YAL and Honorary Chairman of Sarhank Group
and Mr Michael Chia, ED of Keppel FELS signed
the agreement for an exchange programme.
Career Fairs
A career at Keppel promises a myriad of
opportunities and experiences. This is what
graduating students from Nanyang Technological
University (NTU) and National University of
Singapore (NUS) found out at career fairs held
in early-2007. Students packed the Keppel booth
at the career fairs to enquire about job opportunities
in the Group.
Keppel’s talent attraction
campaign drew good response
from undergraduates.
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NURTURING PEOPLE
In conjunction with the Young Arab
Leaders (YAL), we launched the Arab
Asian Internship Exchange Programme
in 2007. YAL is a network of Arab men
and women with the vision of building
a prosperous environment by creating
opportunities for Arab youth in the areas
of education, leadership development
and entrepreneurship.
A group of 10 bright young men
and women from various Middle East
countries would spend three months
at Keppel offi ces as interns.
The programme will provide
opportunities for Arab and Asian youths
to experience working in each other’s
country, facilitate knowledge sharing
and foster greater understanding.
EMPLOYEE WELLNESS AND
WORK-LIFE BALANCE
Employee well-being is a key priority.
A string of activities were lined up to
promote wellness and work-life balance
for our employees.
The annual Keppel Group Inter-SBU
Games (iSBUG) were held for the fi fth
year running. Keppel O&M had its
Family Day at Siloso Beach, Sentosa
on 21 October 2007. To celebrate
the group’s fi fth anniversary, a record-
breaking chain of 18,000 helmets
were utilised to secure a place in the
Guinness World Records and the
Singapore Book of Records. Keppel
Land’s theme for 2007 was ‘Live! Work!
Play!’, which sought to create a healthy
Team Building in Qatar
1
management of life. Keppel T&T took
part in several sports and competitions.
In May, the company held the annual
Keppel T&T Bowling Tournament.
Organised by Key Media, the HRM
Awards celebrates the best Singapore-
based human resources practices
and professionals.
HRM AWARDS 2007
Keppel Corporation was nominated
for the ‘Best Employer Branding’ in
the Human Resource Manager (HRM)
Awards 2007 for building top-of-mind
recall as an employer of choice.
The ‘Best Employer Branding’ category in
the HRM Awards recognises employers
for their effective and distinctive branding
policies and strategies.
KEPPEL SCHOLARS ALUMNI
ASSOCIATION (KSAA)
KSAA was formed in August 2001 to
augment Group synergy and promote
networking across Keppel’s SBUs.
Over the years, the Association has
initiated a wide array of events and
programmes, encouraging Keppelites
to engage in corporate volunteerism
and social pursuits at Group level.
Through such activities, KSAA hopes to
As the operations of Keppel Integrated Engineering (KIE)
in Qatar grew in staff strength, a customised teambuilding
workshop was organised to promote camaraderie among the
staff. On the morning of Saturday 8 December 2007, more
than 50 KIE employees and their family members gathered for
the inaugural Team Building Workshop.
The half-day workshop kicked off with an overview of Keppel
Corporation and KIE, followed by a series of teambuilding
activities specially tailored to the international crowd of more
than 40 staff from nine countries.
KIE is creating an atmosphere of “home-away-from-home”
for its staff based in Qatar.
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increase employee interaction, nurture
camaraderie and unlock synergies across
the business units.
The highlight of 2007 for KSAA was the
organising of the iSBUG held between
June and August. For its fi fth year, iSBUG
adopted the theme, ‘Rising Beyond’,
chosen to align with the company’s
thrust for the year – ‘Grow Beyond’. Team
managers from the SBUs were appointed
to instil a sense of ownership and
responsibility towards their teams.
The Vertical Marathon was a new event
held at One Raffl es Quay on 19 August
2007. It garnered enthusiastic support
from participants.
The annual iSBUG fundraiser involving
Keppel Volunteers (KV) and students
from the Association for Persons
with Special Needs (APSN) was an
accomplishment as it succeeded in
raising the full sum of $30,000 from the
various SBUs. The games once again
reinforced management support and
encouraged Keppelites’ enthusiasm
for Group-wide activities. Participation
for iSBUG 2007 stood at 893, a 4%
increase from 862 in 2006.
KSAA kicked off 2007 with a theatre
event ‘Everything But The Brain’, the fi rst
play lined up in its quarterly series of
Kepture! art performances. Following
this well-received play, two other plays
were recommended.
1. Engaging a Can Do! gameplan on court.
2. Team Beta in high spirits after clinching
the coveted soccer challenge trophy at
the annual iSBUG.
Discounted tickets to all three plays
were snapped up by Keppelites. The
enthusiastic response spurred KSAA
to further promote greater interest in
the arts. The events also enhanced
interaction among the families and
friends of Keppelites.
KSAA continued to support Group
Human Resources in organising the
2007 Keppel Group Scholarships
Award Ceremony. A total of 12
candidates, twice the usual number,
received scholarships. Held on 3 July
at the Refl ections at Keppel Bay show
gallery, the ceremony also screened a
video produced by KSAA featuring the
12 young talents besting their element
in sports, community involvement or
the arts.
2008 will be another exciting year as
KSAA delivers more attractive initiatives
and programmes to increase interaction
among Keppelites as well as their
families and friends.
2
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137
CORPORATE SOCIAL RESPONSIBILITY
Showcasing Singapore to the world
PRESENTING THE BEST OF
SINGAPORE IN CHINA
With a growing presence of over
20 Chinese cities in 20 years,
Keppel is committed to create
avenues for meaningful exchange
and deepening relationships with
China through its key businesses.
As a presenting sponsor of
Singapore Season in China, the
Keppel Group worked in concert
with the Ministry of Information,
Communications and the Arts and
the National Arts Council to bring
the best of Singapore arts to
Chinese audiences.
Staged in Beijing and Shanghai from October to November 2007, the Season
concluded with huge success, drawing more than 165,000 people to its series
of 44 lifestyle, creative and business programmes.
Extending its support for the Season’s outreach, Keppel also sponsored the
Singapore Dance Theatre’s (SDT) additional performance in Tianjin, where the
Group is present. SDT was among 300 artistes and arts groups that performed
during the Singapore Season.
As the Group
expands into
new frontiers,
we seek to
deliver more in
corporate social
responsibility.
Corporate Social Responsibility (CSR)
is our business. We have adopted
a multi-faceted approach towards
CSR encompassing caring for the
environment, showcasing Singapore to
the world, public policy research and
education, supporting the arts, charity
and community engagements and
corporate volunteerism.
CARING FOR THE ENVIRONMENT
In 2007, we supported several major
environment-friendly initiatives while
continuing with efforts to create a cleaner
environment and greener living spaces.
Key amongst the projects to care for
our environment are our support of the
National Environment Agency’s (NEA)
‘Bring Your Own Bag Day’, sponsorship
and involvement in the conservation
of corals surrounding Singapore and
contributions to six local environmental
Non-Government Organisations (NGOs).
It is also the practice of our strategic
business units to improve the quality of
life in their communities and minimising
the ecological impact of the environment
they operate in.
Read pages 60 to 65 for more on the
Group’s green efforts.
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FRONTING THE INTERNATIONAL CLIPPER RACE
Keppel Corporation is the main sponsor of the
Uniquely Singapore yacht and the host port sponsor
for the Singapore stopover in the Clipper 07-08
Round-the-World Yacht Race. This is the second time
that Singapore is fi elding an entry in the biennial international
sailing race for amateurs.
Promoting public and private sector collaboration, the Singapore
Tourism Board came alongside Keppel as an offi cial race partner
to promote Singapore globally as a must-visit destination.
To provide added exposure and self-development opportunities
for the Group’s employees, six Keppel ambassadors were
sponsored on various legs of the current expedition, up four
from the previous 05-06 race.
The Uniquely Singapore yacht was launched into the Clipper
07-08 Race in May 2007 by Mr Tharman Shanmugaratnam,
Singapore’s Minister for Finance and Minister for Education
at St. Katherine’s Dock in London.
The 07-08 competition which took off from Liverpool in
September 2007 will culminate in June 2008 after traversing
seven legs and eight ports of call, over ten months.
The world sailed into Keppel Bay on 19 January 2008. Ten
international Clippers from Fremantle made an eventful nine-day
stop-over at Singapore’s new waterfront playground, Marina at
Keppel Bay, enroute to Qingdao.
Senior Minister Goh Chok Tong who opened the Marina in
conjunction with the Clippers’ arrival was present to accord the
international crew a Uniquely Singapore welcome.
Rising to the Clipper challenge are people of all ages, social
backgrounds and nationalities who despite their differences,
share a similar thirst for adventure.
On its homecoming voyage, the Uniquely Singapore Clipper
provided fertile ground for greater interaction among
the youths of Southeast Asia. The ASEAN contingent,
who sailed as crew members on the Fremantle-Qingdao
leg, was supported by the Ministry of Foreign Affairs to
commemorate ASEAN’s 40th anniversary and Singapore’s
chairmanship of the Association.
During the Singapore stop-over, families, friends and
fans of crew members from all across the globe rallied
to cheer on the Clipper fl eet at Keppel Bay. Not only has
the arrival of the Clippers added colour and excitement
to Singapore’s vibrant southern waterfront hub, it has
also generated goodwill for the local sailing fraternity
and raised public interest in the sport.
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Corporate Social Responsibility
139
CORPORATE SOCIAL RESPONSIBILITY
Pitching in for the community
CELEBRATING SINGAPORE
The Keppel Group returned for the fi fth year as a sponsor of the
National Day Parade in 2007. Joining in the celebrations were
students from Keppel’s adopted charity, the Association for Persons
with Special Needs, accompanied by the Keppel Volunteers.
In February 2008, Keppelites donated the equivalent of what
they would spend for lunch in support of the Mainly I Love Kids
(MILK) Fund’s Share-a-Meal. The sum collected was matched
dollar for dollar by the Company.
CHAMPIONING THE SINGAPORE DREAM
To inspire young Singaporeans to become agents of change,
Keppel sponsored Mr Tan Yong Soon’s book entitled Living
the Singapore Dream, which features the life experiences of
23 Singaporeans. The book was published under the auspices
of the Harvard Singapore Foundation.
Venturing the extra mile to support enterprising individuals,
Keppel sponsored adventurer Khoo Swee Chiow’s ‘World
Longest Journey on Skate’ expedition. Launched from Hanoi
in Vietnam, Khoo skated 6,088 km across fi ve countries in
94 days creating a new Guinness World Record.
Keppel was also the Platinum Sponsor of the 600-strong
National Volunteerism & Philanthropy and Corporate Social
Responsibility (CSR) Conference in 2007, organised by the
National Volunteer & Philanthropy Centre and Singapore
Compact for CSR.
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AIDING CANCER PATIENTS
In memory of the late Mr Sim Kee Boon, who passed away on
9 November 2007 at age 78, the Keppel Group and employees
made contributions to the Singapore Cancer Society. Mr Sim was
the Executive Chairman of Keppel Corporation from 1984 to 2000.
REJUVENATING COMMUNITIES IN BROWNSVILLE
Be it in Singapore or across the world, Keppel O&M’s group of
companies are mindful of their roles as responsible corporate
citizens in their respective host countries.
Keppel AmFELS was singled out by government agencies
such as the Brownsville Economic Development Council,
and various charities in Brownsville, USA for its strong support
of the community, especially in the areas of education and
welfare. Students from the University of Texas at Brownsville
(UTB) and the University of Texas at Pan American received
engineering scholarships from the company. In addition,
UTB also sent students to work as apprentices at the yard.
WALKING WITH CHARITIES
In addition to the sponsorship of the Community Chest’s
Heartstrings Walk at Marina Bay 2007, Keppel also fi elded
a contingent of Keppelites in the march for charity.
The VIVA Foundation, a partnership between St Jude Children’s
Research Hospital in the US, the National University Hospital
and the National University of Singapore, is another benefi ciary
of Keppel’s philanthropy.
By working closely with local high schools to develop and provide
welder training programmes, Keppel AmFELS also provides job
opportunities to thousands in the community each year.
RELIEVING THE LESS FORTUNATE
Whilst celebrating the company’s fi fth anniversary in 2007,
Keppel O&M raised about $1.1 million through in-house
donation drives and roadshows for various charities.
Being a major partner of the SingHealth Foundation’s Savemoney
Savelives Campaign 2007, Keppel O&M staff participated in
its public fundraising activities. It also made a cash contribution
to the Society for the Physically Disabled.
Over the last seven years, Keppel AmFELS has contributed
signifi cantly to improve the lives of families and children in
Brownsville through non-profi t volunteer organisation,
United Way of Southern Cameron County (United Way). In April
2007, Keppel AmFELS was recognised by United Way’s Million
Dollar Club for surpassing the million-dollar mark in contributions
towards its programmes. In addition to donations from
employees, the yard also consistently supplied manpower and
logistical resources to support United Way’s fundraising events.
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141
CORPORATE SOCIAL RESPONSIBILITY
Advancing platforms for business and education
PROMOTING REGIONAL DIALOGUE AND LEARNING
Keppel Corporation co-presented the three-day ASEAN Business & Investment Summit, Singapore 2007
aimed at facilitating greater dialogue between the business community and ASEAN leaders.
During the year, Keppel contributed some $1.2 million to help position Singapore as a world-class
education hub. The Company’s sponsorships have benefi ted a number of local institutions and their
students, including the Lee Kuan Yew School of Public Policy, the S Rajaratnam School of International
Studies and the St. Joseph’s Institution (SJI).
Over and above monetary support, Executive Chairman Lim Chee Onn and other prominent SJI alumni
formed a Leadership Council to assist and advise the school on its international fund for scholarships.
Keppel also supported the Securities Investors Association of Singapore in its education programmes to
help retail investors grow and protect their wealth.
CREATING FORUMS FOR ASEAN THINK TANKS
On ASEAN’s 40th anniversary, Keppel O&M sponsored the inaugural ASEAN Think Tank Forum,
co-organised by the Singapore Institute of International Affairs and the Institute of Policy Studies.
The two-day forum, themed ASEAN at 40: Achievements and Challenges, attracted 150 experts
and leaders from think tanks and academic institutions in the region.
As Main Sponsor of the 6th IISS Asia Security Summit under the auspices of The Shangri-La Dialogue,
attended by defence ministers and senior offi cials from 25 nations, Keppel supported efforts to promote
Asian defence diplomacy. The Group also contributed towards the Global Entrepolis Singapore 2007
jointly organised by the Singapore Business Federation and the Economic Development Board.
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Cultivating audiences for the arts
PREMIERING SINGAPORE ARTISTES
Keppel presented a milestone concert by Singapore’s very own
King of Swing and Cultural Medallion Holder, Jeremy Monteiro
at the Esplanade in July 2007. Coinciding with the Singapore
Arts Festival’s 30th anniversary, the concert was graced with
performances by jazz luminaries Jimmy Cobb, Jay Anderson,
Bob Sheppard and Roberta Gambarini.
DEVELOPING THE LOCAL ARTS SCENE
With unwavering support for homegrown talents, Keppel
sponsored several local arts productions during the year
namely, The Legacy of Goh Choo San: In Memory & Tribute,
the local movie Gone Shopping! as well as HSBC Education’s
Gabriel Ng @ Esplanade concert in support of Kids Fund for
needy school children.
STRIKING A CHORD WITH VIETNAMESE AUDIENCES
Keppel Group presented the Vietnam-Singapore Friendship
Concert, held at the Hanoi Opera House. Aptly themed
Chords, the classical music concert was held in conjunction
with Singapore’s 42nd National Day celebrations in Vietnam.
Performed by the Vietnam National Symphony Orchestra and
led by Singapore conductor, Adrian Tan, the concert also
featured three Keppel music scholars from the Yong Siew Toh
Conservatory — Tran Thi Tam Ngoc, Tran Duc Minh and Pham
Thi Minh — who returned to perform in their homeland.
In 2003, Keppel Group established the Keppel Music
Scholarship programme to nurture artistic talents and to
support the Yong Siew Toh Conservatory of Music at the
National University of Singapore (NUS). The Group has
committed $600,000 to sponsor 10 students over a period of
fi ve years for a music degree programme at the conservatory.
In recognition of its contributions to the local arts scene in 2007,
Keppel Corporation received the Patron of the Arts Award from
the National Arts Council. Other companies in the Group were
also lauded including MobileOne Ltd which received the Patron
of the Arts Award and SPC, the Arts Supporter Award.
As at July 2007, fi ve Keppel music scholars emerged in the fi rst
cohort of students to graduate with a Bachelor of Music degree
jointly awarded by NUS and the Peabody Institute of the John
Hopkins University in Baltimore, USA.
CELEBRATING WORLD MUSIC AT WOMAD
For the second consecutive year, Keppel O&M sponsored the
World of Music, Arts and Dance (WOMAD) Singapore festival
held at Fort Canning Park. The international festival brought
together artistes from all over the globe in celebration of
the diverse forms of music, arts and dance. As part of its
WOMAD sponsorship, Keppel O&M presented renowned
Brazilian Samba Group, Clube Do Balançoin.
SHOWCASING BRAZILIAN ARTS AND CULTURE
In October 2007, Keppel O&M brought to Singapore Brazil’s
reigning Queen of Bossa Nova, Bebel Gilberto, for another
sell-out performance at the Esplanade. Keppel O&M had
presented her Singapore debut back in 2005.
Apart from music, Keppel O&M also collaborated with Brazil’s
Ministry of External Relations to showcase the best of Brazilian design
and architecture here through the Singapore Design Festival. This
exhibition featured works of Oscar Niemeyer, who is recognised
worldwide for his contributions to modernist architecture.
The company also endorsed the Association of Capoeira’s
efforts to promote the Brazilian martial arts dance movement
in Singapore.
STEPPING UP CULTURAL EXCHANGE WITH MEXICO
In line with its support for cultural and business exchange
with Latin America, Keppel O&M presented the Tamaulipas
Folk Dance as part of the Festival Mexicano.
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Corporate Social Responsibility
143
CORPORATE SOCIAL RESPONSIBILITY
Driving corporate volunteerism
In 2007, the Keppel Group sought to do more for its
adopted charity, the Association for Persons with
Special Needs (APSN).
Executive Chairman Lim Chee Onn hosted a luncheon for
the APSN Executive Committee joined by representatives of
the Keppel Scholars Alumni Association (KSAA) and Keppel
Volunteers. Together, they explore further collaborations with
APSN. A key area was the development of the Centre for
Adults (CFA) to help boost the employability of APSN’s clients.
The fruitful session gave rise to a joint pilot project for a
hydroponics farm by Keppel Volunteers and APSN. The farm
will serve as a sheltered workshop, as well as a means to
create a revenue stream for the CFA.
The training provided at this facility will enable the clients
to acquire skills in hydroponics farming such as seeding,
transplanting, harvesting, cropping, packaging and selling
the produce, which will in turn enhance their employability.
The hydroponics farm was launched on 18 January 2008
with additional contribution by Keppel.
Keppel Volunteers also collaborated with APSN to revive a
recycling project in 2007. This project will allow CFA’s clients
to collect unwanted materials, recycle them and eventually
sell the items through the centre’s thrift shop. This project can
enhance CFA’s clients interaction skills with the public and
teamwork ethics.
1
2
In 2008, Keppel Volunteers intends to encourage more
Keppelites to be proactive in the collection of used items as
well as to assist in raising awareness of the thrift shop and
boosting its sales.
At the schools’ level, Keppel Volunteers continued to organise
activities to meet the learning needs of the students.
During the year, Keppel Volunteers embarked on a
long-term collaboration with the Practice Performing Arts
School (PPAS) to introduce arts and culture related activities
to the APSN children via a pilot Creative Arts Programme
(CAP). PPAS, a non-profi t organisation registered with the
Ministry of Education, is a premier arts school founded by the
late Kuo Pao Kun and Goh Lay Kuan.
Two CAP workshops were held. They featured performances
by the students of Chao Yang School. CAP has helped the
APSN students to develop their psycho-motor abilities as well
as to provide them with an avenue for creative expression.
Through the programme, students have improved their ability to
understand and respond to simple instructions.
As a means of preparing the students to enter the workforce,
the Move Your Body series was initiated to help improve their
physical fi tness and health. A total of 50 students from Katong,
Tanglin, Delta Senior School and CFA joined the Keppel
Volunteers to scale the 29-storey high One Raffl es Quay South
Tower on 19 August 2007 as part of a fundraising event in
Keppel’s Inter-SBU Games.
In the Do-It-Yourself series, 13 members of the ASPN,
CFA and Keppel Volunteers gathered at Funan DigiMall
over two Saturdays to learn how to make and paint their
own clay mugs. The activity provided a platform for the
APSN participants to express themselves artistically.
1. The hydroponics farm was launched in January 2008 to provide
related training that will enhance the employability of CFA’s clients.
2. Keppel Volunteers works closely with APSN and various
non-profi t organisations to enhance its existing programmes
for the intellectually-challenged youths and adults.
3. Volunteer activities throughout the year garnered substantial
employee involvement across the Group.
4. Via the Creative Arts Programme, Keppel Volunteers have helped
APSN children improve their ability to understand and respond to
simple instructions.
3
144
4
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Corporate Social Responsibility
DIRECToRS’ REPoRT & FINANCIAL STATE mENTS
contents
146 Directors’ Report
150 Balance Sheets
151 Consolidated Profit and Loss Account
152 Statements of Changes in Equity
155 Consolidated Cashflow Statement
156 Notes to Consolidated Cashflow Statement
157 Notes to the Financial Statements
200 Significant Subsidiaries and Associated Companies
210 Statement by Directors
211
212
Independent Auditors’ Report
Interested Person Transactions
213 Directors and Key Executives
221 major Properties
224 Group Five-Year Performance
227 Group Value-Added Statements
228 Share Performance
229 Shareholding Statistics
230 Notice of Annual General meeting and
Closure of Books
Financial Calendar
234
235 Corporate Information
DIRECToRS’ REPoRT
For the financial year ended 31 December 2007
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 2007.
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
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;
Independent review of quarterly financial reports and year-end financial statements;
- Review the assistance given by the Company’s officers to the auditors;
-
- 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.
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Directors’ Report
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
Tony Chew Leong-Chee
Lim Hock San
Sven Bang Ullring
Tsao Yuan Mrs Lee Soo Ann
Oon Kum Loon (Mrs)
Oon Kum Loon (Mrs) (deemed interest)
Tow Heng Tan
Tow Heng Tan (deemed interest)
Yeo Wee Kiong
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
1.1.2007
Holdings At
31.12.2007
21.1.2008
1,357,083
-
-
31,000
-
20,000
20,000
313
13,086
-
860,833
100,000
1,354,166
2,714,166
2,000
2,000
70,000
2,000
42,000
40,000
2,626
26,172
2,000
981,666
200,000
2,708,332
3,334,166
2,000
2,000
70,000
2,000
42,000
40,000
2,626
26,172
2,000
1,181,666
200,000
3,168,332
1,550,000
920,000
1,150,000
3,720,000
1,840,000
2,760,000
3,100,000
1,610,000
2,300,000
50
50
50
23,000
28,000
23,000
28,000
23,000
28,000
10
10
10
Keppel Structured Notes Pte Limited
(S$ Commodity Linked Guaranteed Note Series 1 due 2011)
Teo Soon Hoe
$100,000
$100,000
$100,000
Keppel Philippines Holdings, inc
(“B” shares of one Peso each)
Lim Chee Onn
Choo Chiau Beng
Teo Soon Hoe
2,000
2,000
2,000
2,000
2,000
2,000
2,000
2,000
2,000
Keppel Corporation Limited
Report to Shareholders 2007
Directors’ Report
147
DIRECToRS’ REPoRT
4.
Directors’ interest in shares and debentures (continued)
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
1.1.2007
Holdings At
31.12.2007
21.1.2008
246,457
283,611
302,830
246,457
283,611
302,830
246,457
283,611
302,830
2,916
2,916
2,916
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 for salaries, bonuses and other benefits in their capacity as directors of the
Company which are disclosed in the Corporate Governance Report.
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 11,379,500 Ordinary Shares (“Shares”) were granted during the financial year. There were 7,150,999
Shares issued by virtue of exercise of options and options to take up 443,000 Shares were cancelled during the financial
year. The sub-division of Shares during the financial year resulted in an adjustment of 17,750,333 Shares under option. At
the end of the financial year, there were 37,768,000 Shares under option as follows:
Number of Share Options
Balance at
1.1.2007 or
later date
of grant
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
3,496,500
7,883,000
Date of grant
01.11.99
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
13.02.07
10.08.07
Exercised
Cancelled
Adjustment*
Balance at
31.12.2007
Exercise
price^
Date of expiry
(35,000)
(17,000)
(170,000)
(244,166)
(447,500)
(732,000)
(907,500)
(2,227,333)
(2,270,500)
(44,500)
(40,500)
(15,000)
-
-
-
-
-
-
-
-
(20,000)
(57,000)
(90,000)
(134,000)
(112,000)
(30,000)
-
2,000
665,000
370,833
465,000
808,500
1,025,000
1,741,500
2,900,500
2,886,000
3,418,500
3,467,500
-
-
2,000
1,210,000
665,000
680,000
1,120,000
1,560,000
2,030,000
3,486,000
5,650,000
6,675,000
6,837,000
7,853,000
$3.23
$0.62
$1.30
$1.32
$2.24
$3.01
$3.24
$4.42
$6.24
$6.39
$7.66
$9.13
$12.95
31.10.09
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
12.02.17
09.08.17
27,611,666
(7,150,999)
(443,000)
17,750,333
37,768,000
^ Exercise prices are adjusted for capital distribution and sub-division of Shares
*
Adjustment as a result of the sub-division of Shares
148
Keppel Corporation Limited
Report to Shareholders 2007
Directors’ Report
The information on Directors of the Company participating in the Scheme is as follows:
Aggregate
options
granted since
commencement
of the Scheme
to the end of
financial year
Aggregate
options
exercised since
commencement
of the Scheme
to the end of
financial year
Aggregate
options
lapsed since
commencement
of the Scheme
to the end of
financial year
Options
granted
during the
financial year
Adjustment*
465,000
345,000
345,000
4,005,000
3,315,000
3,315,000
1,416,250
1,706,250
1,246,250
573,750
573,750
573,750
1,705,000
805,000
1,265,000
Aggregate
options
outstanding as
at the end of
financial year
3,720,000
1,840,000
2,760,000
Name of Director
Lim Chee Onn
Choo Chiau Beng
Teo Soon Hoe
* Adjustment as a result of the sub-division of Shares
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 49,803,526 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 4,002,000 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 2,051,000 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, 11 March 2008
teo soon Hoe
Group Finance Director
Keppel Corporation Limited
Report to Shareholders 2007
Directors’ Report
149
BALANCE SHEETS
As at 31 December 2007
Share capital
Reserves 4
Share capital & reserves
Minority interests
Capital employed
Represented by:
Fixed assets 5
investment properties
Development properties
Subsidiaries 8
Associated companies 9
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
3
6
7
-
10
11
12
13
14
14
15
16
17
18
13
19
14
14
20
21
20
22
Group
coMpAny
2007
$’000
2006
$’000
2007
$’000
2006
$’000
790,407
4,414,326
5,204,733
1,830,459
972,926
3,232,170
4,205,096
1,392,591
790,407
2,557,968
3,348,375
- -
972,926
2,332,232
3,305,158
7,035,192
5,597,687
3,348,375
3,305,158
1,698,231
2,960,347
172,758
3,140,594
335,849
134,857
67,823
8,510,459
1,740,808
2,249,216
197,080
-
2,410,716
275,892
160,720
135,058
7,169,490
5,668
- -
- -
2,876,962
3,074
- -
301,099
- -
3,186,803
5,680
3,080,896
3,074
300,977
3,390,627
2,790,649
2,861,960
- -
-
594,353
1,753,434
547,437
1,600,850
7,286,723
3,072,012
2,542,517
37,900
-
134,331
499,104
351,864
3,767
6,641,495
-
307,968
1,516,259
426,714
1,618,558
6,731,459
2,168,904
2,621,815
29,961
-
93,620
681,635
273,883
3,351
5,873,169
958,507
284
157,054
- -
3,884
1,119,729
75,657
- -
- -
418,887
2
134,820 -
15,305
- -
644,671
410,092
87
82,013
520
492,712
58,885
194,718
11
10,182
263,796
645,228
858,290
475,058
228,916
1,731,526
388,969
2,120,495
2,272,152
157,941
2,430,093
300,000
13,486
313,486
300,000
14,385
314,385
Net assets
7,035,192
5,597,687
3,348,375
3,305,158
The accompanying notes form an integral part of the financial statements.
150
Keppel Corporation Limited
Report to Shareholders 2007
Balance Sheets
CoNSoLIDATED PRoFIT AND L oSS ACCoUNT
For the financial year ended 31 December 2007
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
Special dividend proposed
Total annual dividend
Capital distribution
Total distribution
Note
23
24
25
26
26
26
9
27
28
27
29
30
30
Group
2007
$’000
2006
$’000
10,431,250
(8,037,393)
(1,132,125)
(125,692)
(85,391)
1,050,649
2,867
88,542
(62,710)
476,882
7,600,940
(5,570,175)
(931,340)
(127,438)
(167,922)
804,065
3,777
79,758
(62,470)
314,662
1,556,230
564,933
1,139,792
7,304
2,121,163
(468,635)
1,147,096
(257,372)
1,652,528
889,724
1,025,596
105,105
1,130,701
521,827
750,832
(82)
750,750
138,974
1,652,528
889,724
64.9 cts
64.3 cts
71.5 cts
70.4 cts
9.0 cts
10.0 cts
45.0 cts -
64.0 cts
-
64.0 cts
47.7 cts
47.2 cts
47.7 cts
47.2 cts
6.0 cts
8.0 cts
14.0 cts
14.0 cts
28.0 cts
The accompanying notes form an integral part of the financial statements.
Keppel Corporation Limited
Report to Shareholders 2007
Consolidated Profit and Loss Account
151
STATEmENTS oF CHANGES IN EQUITY
For the financial year ended 31 December 2007
Attributable to equity holders of the Company
Share
Capital
$’000
Capital
Reserves
$’000
Revenue
Reserves
$’000
Foreign
Exchange
Translation
Account
$’000
Share
Capital &
Reserves
$’000
Minority
Interests
$’000
Capital
Employed
$’000
972,926
-
493,230
(11,975)
2,797,896
11,975
(58,956) 4,205,096
-
-
1,392,591
-
5,597,687
-
-
972,926
-
481,255
(57,777)
2,752,094
-
(57,777)
(58,956) 4,147,319
(64,617)
1,327,974
(122,394)
5,475,293
-
218,270
(4,926)
131,412
(16,784)
-
-
-
-
-
-
-
-
-
218,270
4,185
222,455
-
-
(4,926)
131,412
38
(60)
(4,888)
131,352
-
(39,806)
(16,784)
(39,806)
(167)
43
(16,951)
(39,763)
41,012
41,012
20,357
61,369
327,972
-
327,972
-
21,513
-
1,130,701
1,130,701
(241,754)
-
1,206
-
1,206
-
-
329,178
1,130,701
1,459,879
(241,754)
21,513
24,396
521,827
546,223
-
1,476
353,574
1,652,528
2,006,102
(241,754)
22,989
(3,562)
3,221
341
-
-
-
-
-
393
-
-
-
-
-
-
-
(98)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(48,014)
(48,014)
(25,350)
(25,350)
25,580
4,490
25,580
4,490
-
295
38,694
(221,213)
(1,650)
(270)
-
-
(1,650)
25
38,694
(221,213)
790,407
827,571
3,644,164
(57,409) 5,204,733
1,830,459
7,035,192
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
38,694
(221,213)
Group
2007
As at 1 January
As previously reported
Effect of FRS 40
Deferred tax adjustment for
investment properties
As restated
Fair value changes on
available-for-sale assets
Fair value gain on
available-for-sale assets
realised and transferred to
profit & loss account
Fair value changes on cashflow hedges
Fair value gain on cashflow hedges
realised and transferred to
profit & loss account
Currency translation loss
Currency translation loss transferred
to profit & loss account
Net income recognised
directly in equity
Net profit for the year
Total income recognised for the year
Dividend paid
Share-based payment
Transfer of statutory, capital and
other reserves to revenue reserves
Dividend paid to
minority shareholders
Return of capital to
minority shareholders
Cash subscribed by
minority shareholders
Acquisition of subsidiaries
Acquisition of additional interest
in subsidiaries
Other adjustments
Shares issued
Capital distribution
As at 31 December
152
Keppel Corporation Limited
Report to Shareholders 2007
Statements of Changes in equity
Attributable to equity holders of the Company
Share
Capital
$’000
Share
Premium
Account
$’000
Capital
Reserves
$’000
Revenue
Reserves
$’000
Foreign
Exchange
Translation
Account
$’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
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
24,267
(6,901)
73,577
(81,356)
148,029
(9,864)
-
-
-
-
-
-
-
-
-
-
-
24,267
(16,494)
7,773
-
-
-
-
(6,901)
-
(6,901)
73,577
(2,182)
71,395
(81,356)
148,029
-
(947)
(81,356)
147,082
-
(70,327)
(9,864)
(70,327)
-
(28,753)
(9,864)
(99,080)
15,305
15,305
-
15,305
147,752
-
-
750,750
(55,022)
-
92,730
750,750
(48,376)
138,974
44,354
889,724
147,752
-
18,868
750,750
(157,374)
-
(55,022)
-
-
843,480
(157,374)
18,868
90,598
-
842
934,078
(157,374)
19,710
16,850
-
(12,369)
12,369
(868)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
34
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
16,850
15,067
31,917
-
-
-
(868)
-
-
-
-
(71,745)
20,058
14,925
(868)
(71,745)
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)
-
-
-
-
-
16,306
(181,040)
-
-
2,764
-
745,757
(722,993)
(22,764)
Group
2006
As at 1 January
Revaluation surplus
of investment properties
Revaluation surplus
of investment properties
realised and transferred
to profit & loss account
Fair value changes on
available-for-sale assets
Fair value gain on
available-for-sale assets
realised and transferred to
profit & loss account
Fair value changes on cashflow hedges
Fair value gain on cashflow hedges
realised and transferred to
profit & loss account
Currency translation loss
Currency translation loss transferred
to profit & loss account
Net income/(expense) recognised
directly in equity
Net profit for the year
Total income/(expense) recognised
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
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
(Amendment) Act 2005
As at 31 December
972,926
-
493,230
2,797,896
(58,956) 4,205,096
1,392,591
5,597,687
The accompanying notes form an integral part of the financial statements.
Keppel Corporation Limited
Report to Shareholders 2007
Statements of Changes in equity
153
STATEmENTS oF CHANGES IN EQUITY
Company
2007
As at 1 January
Net profit for the year
Dividend paid
Share-based payment
Shares issued
Capital distribution
As at 31 December
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
Share
Capital
$’000
Share
Premium
Account
$’000
Capital
Reserves
$’000
Revenue
Reserves
$’000
Total
$’000
972,926
-
-
-
38,694
(221,213)
790,407
-
-
-
-
-
-
-
29,577 2,302,655 3,305,158
449,611
449,611
(241,754)
(241,754)
17,879
-
38,694
-
(221,213)
-
-
-
17,879
-
-
47,456 2,510,512 3,348,375
391,903
-
-
-
16,306
(181,040)
745,757
720,229
-
-
-
2,764
-
(722,993)
37,057 1,732,855 2,882,044
727,174
727,174
(157,374)
(157,374)
15,284
-
-
19,070
(181,040)
-
-
-
-
-
15,284
-
-
(22,764)
As at 31 December
972,926
-
29,577 2,302,655 3,305,158
The accompanying notes form an integral part of the financial statements.
154
Keppel Corporation Limited
Report to Shareholders 2007
Statements of Changes in equity
CoNSoLIDATED CASHFLoW STATEmENT
For the financial year ended 31 December 2007
Operating activities
Operating profit
Adjustments:
Depreciation and amortisation
Share-based payment expenses
Profit on sale of fixed assets
Others
Operational cashflow 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
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 (decrease)/increase in cash and cash equivalents
Cash and cash equivalents as at 1 January
Note
2007
$’000
2006
$’000
1,050,649
804,065
A
125,692
21,307
(7,126)
(918)
1,189,604
61,750
(86,460)
827,372
53,488
(247,466)
29,560
1,827,848
79,755
(73,548)
(136,719)
1,697,336
(96,879)
(1,598)
(482,767)
(255,909)
(3,605)
14,277
16,788
263,351
(546,342)
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)
38,694
25,580
377,130
(221,213)
(1,099,541)
(241,754)
(48,014)
(1,169,118)
19,070
20,058
756,301
(181,040)
(1,643,671)
(157,374)
(71,745)
(1,258,401)
(18,124)
1,615,207
221,173
1,394,034
Cash and cash equivalents as at 31 December
B
1,597,083
1,615,207
The accompanying notes form an integral part of the financial statements.
Keppel Corporation Limited
Report to Shareholders 2007
Consolidated Cashflow Statement
155
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
Investments
Stocks & work-in-progress
Intangibles
Debtors
Bank balances and cash
Creditors
Loans
Current and deferred tax
Minority interests
Goodwill on consolidation
Amount previously accounted for as associated companies
Purchase consideration
Less: Bank balances and cash acquired
2007
$’000
2006
$’000
-
8,286
97,059
-
3
941
(23)
-
(22) -
(4,490)
101,754
-
(3,934)
97,820
(941)
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)
Cashflow on acquisition net of cash acquired
96,879
3,159
The carrying amounts of net assets of subsidiaries acquired in the acquirees’ books at the point of acquisition approximate
their fair values.
B.
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 (Note 21)
1,600,850
(3,767)
1,618,558
(3,351)
1,597,083
1,615,207
The accompanying notes form an integral part of the financial statements.
156
Keppel Corporation Limited
Report to Shareholders 2007
Notes to Consolidated Cashflow Statement
NoTES To THE FINANCIAL STATE mENTS
For the financial year ended 31 December 2007
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 principal place of business and 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;
- environmental engineering, power generation and network engineering; 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 2007 and the balance sheet and statement
of changes in equity of the Company at 31 December 2007 were authorised for issue in accordance with a resolution of the
Board of Directors on 11 March 2008.
2.
significant accounting policies
(a)
Basis of Preparation
The financial statements have been prepared in accordance with the provisions of the Singapore Companies Act and
Singapore Financial Reporting Standards (“FRS”). The financial statements have been prepared under the historical
cost convention, except as disclosed in the accounting policies below.
Adoption of New and Revised Standards
In the current year, the Group adopted the new/revised FRS and Interpretations of FRS (“INT FRS”) that are effective
for annual periods beginning on or after 1 January 2007.
The following are the new or amended FRS and INT FRS that are relevant to the Group:
Amendments to FRS 1
FRS 40
FRS 107
Presentation of Financial Statements – Capital Disclosures
Investment Property
Financial Instruments: Disclosures
Changes to the Group’s accounting policies have been made as required, in accordance with the transitional
provisions in the respective FRS and INT FRS. The adoption of these new/revised FRS and INT FRS did not result
in any substantial change to the Group’s accounting policies nor any significant impact on the financial statements,
except for the adoption of FRS 40, the effects of which are disclosed below. FRS 107 and the complementary
amended FRS 1 introduce new disclosures relating to financial instruments and capital respectively.
FRS 40 investment Property
The Group has adopted FRS 40 Investment Property on 1 January 2007, which is the effective date of the Standard.
Prior to 1 January 2007, investment properties were accounted for as long term investments and stated at valuations
performed each year. Surpluses arising on revaluation were credited directly to capital reserves. Revaluation deficits
were 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. Under FRS 40, changes in fair values of
investment properties are recognised in the profit and loss account.
Keppel Corporation Limited
Report to Shareholders 2007
Notes to the Financial Statements
157
NoTES To THE FINANCIAL STATE mENTS
2.
significant accounting policies (continued)
Prior to 1 January 2007, deferred tax liability on the revaluation surplus of investment properties was not recognised.
Upon the adoption of FRS 40, the Group has re-evaluated the requirement to account for the deferred tax liability
arising from the revaluation surplus on its investment properties and has accounted for the related deferred tax
liability on 1 January 2007.
This change in accounting policy has been accounted for prospectively from 1 January 2007 in accordance to the
transitional provision of FRS 40. The effects of adopting FRS 40 are as follows:
Consolidated Balance Sheet:
Capital reserves
Revenue reserves
Minority interests
Investment properties
Associated companies
Deferred taxation
Consolidated Profit & Loss Account:
Exceptional items
Current financial year 2007
* Before
adopting
FRS 40
$’000
After
adopting
FRS 40
$’000
477,370
-
426,232
691,444
212,158
-
-
396,190
357,912
691,444
174,435
111,777
As at
1.1.2007
$’000
(11,975)
(45,802)
(64,617)
-
(23,564)
98,830
-
396,190
-
* This shows the effects of applying the previous accounting policy under FRS 25 Accounting for Investments
The adoption of FRS 40 has resulted in an increase in basic and diluted earnings per share after exceptional items of
25.1 cts and 24.2 cts respectively for the financial year ended 31 December 2007. There is no impact on the basic
and diluted earnings per share before exceptional items for the financial year ended 31 December 2007.
Early Adoption of INT FRS 112
On 1 January 2007, the Group adopted INT FRS 112 Service Concession Arrangements for 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. INT FRS 112 which would otherwise be mandatory from 1 January
2008 was early adopted to account for the two contracts based on the latest interpretation. The effects of adopting
of INT FRS 112 are disclosed in Note 11.
(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.
Acquisition of subsidiaries is accounted for using the purchase method. The cost of an acquisition is measured at
the aggregate of 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.
158
Keppel Corporation Limited
Report to Shareholders 2007
Notes to the Financial Statements
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 65 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 initially recognised at cost and subsequently measured at fair value, determined annually by
independent professional valuers. Changes in fair value are recognised in the profit and loss account.
On disposal of an investment property, the difference between the disposal proceeds and the carrying amount is
recognised in the profit and loss account with effect from 1 January 2007.
(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.
(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.
Keppel Corporation Limited
Report to Shareholders 2007
Notes to the Financial Statements
159
NoTES To THE FINANCIAL STATE mENTS
2.
significant accounting policies (continued)
(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 operating 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.
Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets, liabilities
and contingent liabilities of the associate recognised at the date of acquisition is recognised as goodwill. The
goodwill is included within the carrying amount of the investment and is assessed for impairment as part of the
investment. Any excess of the Group’s share of the net fair value of the identifiable assets, liabilities and contingent
liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss.
(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. Cash-generating units to which goodwill has been allocated are
tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. 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. An impairment loss recognised for goodwill is not reversed
in a subsequent period.
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
15 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.
160
Keppel Corporation Limited
Report to Shareholders 2007
Notes to the Financial Statements
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 cashflow
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 cashflow 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. The fair value of High Sulphur Fuel Oil (“HSFO”) forward contracts is determined using forward
HSFO prices provided by the Group’s key counterparty.
(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 cashflows 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.
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.
Keppel Corporation Limited
Report to Shareholders 2007
Notes to the Financial Statements
161
NoTES To THE FINANCIAL STATE mENTS
2.
significant accounting policies (continued)
(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)
(n)
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.
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.
(o)
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.
162
Keppel Corporation Limited
Report to Shareholders 2007
Notes to the Financial Statements
(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
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.
Keppel Corporation Limited
Report to Shareholders 2007
Notes to the Financial Statements
163
NoTES To THE FINANCIAL STATE mENTS
2.
significant accounting policies (continued)
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;
- 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.
164
Keppel Corporation Limited
Report to Shareholders 2007
Notes to the Financial Statements
(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
substantively enacted by the balance sheet date.
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, valuation of investment properties, 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.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it
is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets
against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the
Group intends to settle its current tax assets and liabilities on a net basis.
Current and deferred tax are recognised as an expense or income in the profit and loss account, except when they
relate to items credited or debited directly to equity, in which case the tax is also recognised directly in equity, or
where they arise from the initial accounting for a business combination. In the case of a business combination, the
tax effect is taken into account in calculating goodwill or determining the excess of the acquirer’s interest in the net
fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over cost.
(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 of monetary
assets and liabilities 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 closing exchange rate.
Keppel Corporation Limited
Report to Shareholders 2007
Notes to the Financial Statements
165
NoTES To THE FINANCIAL STATE mENTS
2.
significant accounting policies (continued)
(w)
Critical Accounting estimates and Judgements
(i)
(ii)
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.
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 carrying amount of fixed assets at the balance sheet date is disclosed in Note 5.
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 values 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.
166
Keppel Corporation Limited
Report to Shareholders 2007
Notes to the Financial Statements
3.
share capital
Ordinary Shares (“Shares”)
issued and paid up:
Balance 1 January
787,992,924 Shares (2006: 783,805,424 Shares)
Issued before sub-division of Shares
1,949,333 Shares (2006: 4,187,500 Shares)
Sub-division of 1 Share into 2 Shares
789,942,257 Shares (2006: Nil)
Issued after sub-division of Shares
5,201,666 Shares (2006: Nil)
Capital distribution
Effect of Companies (Amendment) Act 2005
Balance 31 December
Group AnD coMpAny
2007
2006
$’000
$’000
972,926
391,903
13,783
16,306
- -
24,911 -
(221,213)
-
(181,040)
745,757
1,585,086,180 Shares (2006: 787,992,924 Shares)
790,407
972,926
From 1 January 2007 to 7 May 2007, the Company issued 1,949,333 Shares for cash upon exercise of options under the
KCL Share Option Scheme. This comprised 15,000 Shares at $1.52 per Share, 50,000 Shares at $2.89 per Share, 167,500
Shares at $2.93 per Share, 35,000 Shares at $3.23 per Share, 197,500 Shares at $4.76 per Share, 235,000 Shares at
$6.31 per Share, 417,500 Shares at $6.77 per Share, 794,333 Shares at $9.12 per Share, 12,500 Shares at $12.77 per
Share, 12,500 Shares at $13.07 per Share and 12,500 Shares at $15.60 per Share.
On 7 May 2007, each Share of the Company was sub-divided into two Shares. The share capital of the Company on that
date was 789,942,257 Shares. The sub-division resulted in 1,579,884,514 sub-divided Shares as at 7 May 2007.
The sub-division of Shares was effected pursuant to the approval of shareholders at an Extraordinary General Meeting held
on 27 April 2007.
Since 7 May 2007, the Company issued 5,201,666 Shares for cash upon exercise of options under the KCL Share Option
Scheme. This comprised 2,000 Shares at $0.62 per Share, 120,000 Shares at $1.30 per Share, 76,666 Shares at $1.32
per Share, 250,000 Shares at $2.24 per Share, 452,000 Shares at $3.01 per Share, 45,000 Shares at $3.15 per Share,
460,000 Shares at $3.24 per Share, 30,000 Shares at $3.38 per Share, 1,309,000 Shares at $4.42 per Share, 124,000
Shares at $4.56 per Share, 2,256,000 Shares at $6.24 per Share, 2,000 Shares at $6.38 per Share, 30,000 Shares at
$6.39 per Share, 2,000 Shares at $6.53 per Share, 26,000 Shares at $7.66 per Share, 2,000 Shares at $7.80 per Share
and 15,000 Shares at $9.13 per Share.
In 2006, pursuant to the Companies (Amendment) Act 2005, amounts standing to the credit of share premium account and
capital redemption reserve have been transferred to the share capital account as at that date.
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
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.
Keppel Corporation Limited
Report to Shareholders 2007
Notes to the Financial Statements
167
NoTES To THE FINANCIAL STATE mENTS
3.
share capital (continued)
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 before sub-division
Adjustment
Granted
Exercised
Cancelled
Balance at 31 December
2007
2006
Number of
options
16,232,166
3,496,500
(1,949,333)
(29,000)
17,750,333
17,750,333
7,883,000
(5,201,666)
(414,000)
37,768,000
Weighted
average
exercise
price
$10.78
$18.55
$7.07
$18.55
$12.71
-
$12.95
$4.79
$7.71
$7.80
Number of
options
14,247,166
6,429,500
(4,187,500)
(257,000)
16,232,166
-
-
-
-
16,232,166
Weighted
average
exercise
price
$7.26
$14.43
$4.37
$11.20
$10.78
-
-
-
-
$10.78
Exercisable at 31 December
10,765,000
$4.02
4,577,833
$5.41
The weighted average share price at the date of exercise for options exercised from 1 January 2007 to 7 May 2007 was
$18.09 (before adjustment for sub-division of Shares) and thereafter to 31 December 2007 was $12.83 (2006: $13.61).
The options outstanding at the end of the financial year had a weighted average exercise price of $7.80 (2006: $10.78) and
a weighted average remaining contractual life of 8.3 years (2006: 8.4 years).
168
Keppel Corporation Limited
Report to Shareholders 2007
Notes to the Financial Statements
On 13 February 2007 and 10 August 2007, the Company granted 3,496,500 options (before adjustment for sub-division of
Shares) and 7,883,000 options respectively under the KCL Share Option Scheme. The estimated fair values of the options
granted on those dates are $2.94 per share (before adjustment for sub-division of Shares) and $1.84 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
^ Before adjustment for capital distribution and sub-division of Shares
2007
2006
13.2.2007
^$18.55
^$18.55
24.30%
3.5 years
2.32%
2.72%
10.8.2007
$12.95
$12.95
24.35%
3.5 years
2.45%
3.73%
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%
The expected volatility is determined by calculating the historical volatility of the Company’s share price over the previous 3.5
years (2006: 4 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
Capital Reserves
Asset revaluation surplus
Share option reserve
Fair value reserve
Hedging reserve
Bonus issue by subsidiaries
Others
Revenue Reserves
Foreign Exchange
Translation Account
Group
2007
$’000
2006
$’000
coMpAny
2007
$’000
2006
$’000
-
59,879
438,308
255,305
40,000
34,079
827,571
11,975
38,366
224,964
140,677
40,000
37,248
493,230
- -
47,456
- -
- -
- -
- -
47,456
29,577
29,577
3,644,164
2,797,896
2,510,512
2,302,655
(57,409)
(58,956)
- -
4,414,326
3,232,170
2,557,968
2,332,232
Amount standing to the credit of asset revaluation surplus has been adjusted against the revenue reserves as at 1 January
2007 on transition to FRS 40 Investment Property on that date.
Movements in reserves are set out in the Statements of Changes in Equity.
Keppel Corporation Limited
Report to Shareholders 2007
Notes to the Financial Statements
169
NoTES To THE FINANCIAL STATE mENTS
5.
Fixed assets
Group
2007
Cost
At 1 January
Additions
Disposals
Write-off
Reclassification
- Stocks
- Investment properties
- Other fixed assets
categories
Exchange differences
At 31 December
Accumulated Depreciation &
impairment Losses
At 1 January
Depreciation charge
Impairment loss (Note 27)
Disposals
Write-off
Reclassification
- Stocks
- Investment properties
- Other fixed assets
categories
Exchange differences
At 31 December
Freehold
Land &
Buildings
$’000
Leasehold
Land &
Buildings
$’000
Vessels &
Floating Docks
$’000
Plant,
Machinery
& Equipment
$’000
Capital
Work-in-Progress
$’000
Total
$’000
75,837
1,953
(1,806)
-
1,148,340
18,696
(5,766)
-
221,810
5,078
(17,646)
-
1,079,242
109,238
(24,245)
(560)
482,814
111,507
(612)
-
3,008,043
246,472
(50,075)
(560)
(23,262)
-
-
(27,813)
-
-
-
(2,704)
(4,693)
-
(27,955)
(30,517)
301
1,205
54,228
37,140
(12,133)
1,158,464
-
488
209,730
448,783
(11,083)
1,598,671
(486,224)
438
103,230
-
(21,085)
3,124,323
18,564
3,204
1,598
(318)
-
405,874
33,514
31,952
(1,413)
-
102,358
15,607
-
(15,574)
-
739,827
73,058
74,407
(22,396)
(517)
(2,122)
-
-
(10,099)
-
-
-
(2,578)
1,109
(254)
21,781
21
(6,117)
453,732
-
(1,827)
100,564
(1,130)
(10,656)
850,015
612
-
-
(612)
-
-
-
-
-
-
1,267,235
125,383
107,957
(40,313)
(517)
(2,122)
(12,677)
-
(18,854)
1,426,092
Net Book Value
32,447
704,732
109,166
748,656
103,230
1,698,231
During the financial year, the Group recognised impairment losses of $107,957,000 of which $32,000,000 relates to write-
down of two hotels in Myanmar in the Property division and $75,957,000 relates to write-down of power barges and other
non-performing assets in the Infrastructure division.
The carrying amounts of the two hotels in Myanmar were reduced to their recoverable amounts determined by discounting
the estimated future cashflow from operations to present value at 14%. The carrying amounts of the power barges were
reduced to their recoverable amounts determined by discounting the estimated future cashflow from operations to present
value at 15%. The other non-performing assets were fully written down.
Certain plant, machinery and equipment of subsidiaries are mortgaged to banks for loan facilities (Note 20).
170
Keppel Corporation Limited
Report to Shareholders 2007
Notes to the Financial Statements
Group
2006
Cost
At 1 January
Additions
Disposals
Write-off
Subsidiaries acquired
Reclassification
- Long term receivables
- Stocks
- Recoverable account
- Other fixed assets
categories
Exchange differences
At 31 December
Accumulated Depreciation &
impairment Losses
At 1 January
Depreciation charge
Impairment loss (Note 27)
Disposals
Write-off
Subsidiaries acquired
Reclassification
- Other fixed assets
categories
Exchange differences
At 31 December
Freehold
Land &
Buildings
$’000
Leasehold
Land &
Buildings
$’000
Vessels &
Floating Docks
$’000
Plant,
Machinery
& Equipment
$’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
-
-
-
2,818,223
407,656
(87,571)
(911)
5,810
-
-
-
-
-
-
-
-
-
-
-
-
(12,485)
(21,444)
(37,288)
(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
Net Book Value
57,273
742,466
119,452
339,415
482,202
1,740,808
In 2006, 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 amounts determined by
discounting the estimated future cashflow from operations to present value at 12%.
Keppel Corporation Limited
Report to Shareholders 2007
Notes to the Financial Statements
171
NoTES To THE FINANCIAL STATE mENTS
5.
Fixed assets (continued)
Company
2007
Cost
At 1 January
Additions
Disposals
At 31 December
Accumulated Depreciation
At 1 January
Depreciation charge
Disposals
At 31 December
Net Book Value
2006
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
At 1 January
Improvement to buildings
Fair value gain (Note 27)
Revaluation loss included in revaluation reserve
Disposals
Reclassification
Subsidiary acquired
Exchange differences
At 31 December
Freehold
Land &
Buildings
$’000
Leasehold
Land &
Buildings
$’000
Plant,
Machinery
& Equipment
$’000
Total
$’000
6,545
-
(3)
6,542
1,631
40
-
1,671
4,871
6,410
135
-
6,545
1,591
40
-
1,631
4,914
484
-
-
484
62
10
-
72
6,048
376
(78)
6,346
5,704
335
(78)
5,961
13,077
376
(81)
13,372
7,397
385
(78)
7,704
412
385
5,668
484
-
-
484
52
10
-
62
5,889
217
(58)
6,048
5,520
242
(58)
5,704
12,783
352
(58)
13,077
7,163
292
(58)
7,397
422
344
5,680
Group
2007
$’000
2006
$’000
2,249,216
19,476
691,444 -
-
(501)
17,840
-
(17,128)
2,025,501
22,692
(44,176)
(1,300)
42,681
220,000
(16,182)
2,960,347
2,249,216
172
Keppel Corporation Limited
Report to Shareholders 2007
Notes to the Financial Statements
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 2007:
- Colliers International Consultancy & Valuation (Singapore) Pte Ltd and Knight Frank Pte Ltd for properties in Singapore;
- Associated Properties Consultants for properties in Vietnam; and
- PT. Wilson Properti Advisindo, PT. SuryaPrapta Permai and PT. Piesta Penilai for properties in Indonesia.
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: $5,336,248,000 (2006: $3,330,740,000)
Unquoted shares, at cost
Provision for impairment
Advances from subsidiaries
Movements in the provision for impairment of subsidiaries are as follows:
At 1 January
Charge/(write-back) to profit and loss account
At 31 December
Group
2007
$’000
2006
$’000
103,020
69,738
125,778
71,302
172,758
197,080
coMpAny
2007
$’000
2006
$’000
1,329,571
1,750,126
3,079,697
(199,135)
2,880,562
(3,600)
1,329,571
1,779,925
3,109,496
(25,000)
3,084,496
(3,600)
2,876,962
3,080,896
25,000
174,135
25,200
(200)
199,135
25,000
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.
Keppel Corporation Limited
Report to Shareholders 2007
Notes to the Financial Statements
173
NoTES To THE FINANCIAL STATE mENTS
9.
Associated companies
Quoted shares, at cost
Market value: $2,318,996,000
(2006: $1,600,697,000)
Unquoted shares, at cost
Provision for impairment
Share of reserves
Advances to associated companies
Group
2007
$’000
2006
$’000
coMpAny
2007
$’000
2006
$’000
640,508
694,015
1,334,523
(28,131)
1,306,392
741,074
2,047,466
1,093,128
572,185
653,733
1,225,918
(28,258)
1,197,660
459,840
1,657,500
753,216
- -
3,074
3,074
- -
3,074
- -
3,074
- -
3,074
3,074
3,074
3,074
3,140,594
2,410,716
3,074
3,074
Movements in the provision for impairment of associated companies are as follows:
At 1 January
Exchange differences
Charge to profit and loss account
Amount written off/disposed
At 31 December
28,258
(578)
451
-
17,090
(987)
12,590
(435)
28,131
28,258
- -
- -
- -
- -
- -
Advances to associated companies are unsecured and are not repayable within the next 12 months. Interest is charged at
rates ranging from 3.3% to 4.31% (2006: 4.05% to 4.52%) per annum.
The share of attributable profit of associated companies for the financial year is as follows:
Share of profit before tax and exceptional items
Share of exceptional items (Note 27)
Share of profit before taxation
Share of taxation (Note 28)
Share of attributable profit
The summarised financial information of associated companies is as follows:
Total assets
Total liabilities
Revenue
Attributable profit before exceptional items
Attributable profit after exceptional items
Group
2007
$’000
2006
$’000
476,882
212,158
689,040
(115,462)
314,662
31,878
346,540
(69,000)
573,578
277,540
15,470,300
9,356,233
12,310,073
1,056,427
1,564,354
11,302,963
6,896,781
11,982,129
780,985
917,817
Investments in MobileOne Limited (“M1”) and Asia Airfreight Terminal Company Limited (“AAT”) are equity accounted for
in the consolidated financial statements not withstanding 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.
174
Keppel Corporation Limited
Report to Shareholders 2007
Notes to the Financial Statements
10.
Investments
Available-for-sale investments:
Quoted equity shares
Quoted bonds
Unquoted equity shares
Unquoted property fund
11.
Long term receivables
Group
2007
$’000
2006
$’000
228,891
7,373 -
53,659
45,926
223,518
25,857
26,517
335,849
275,892
Receivables from service concession arrangements
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
Movements in the provision for doubtful debts are as follows:
Group
2007
$’000
2006
$’000
coMpAny
2007
$’000
2006
$’000
134,100
3,817
387
-
7,992
146,296
96,920
3,648
60,035
-
9,561
170,164
(7,081)
139,215
(4,358)
(3,251)
166,913
(6,193)
- -
1,452
- -
300,000
- -
301,452
(353)
301,099
- -
1,276
300,000
301,276
(299)
300,977
134,857
160,720
301,099
300,977
At 1 January
Exchange differences
Charge to profit and loss account
Amount written off
At 31 December
6,193
286
-
(2,121)
2,466
(104)
3,831
-
4,358
6,193
- -
- -
- -
- -
- -
Receivables arising from service concession arrangements arose from the following:
(a)
(b)
a 20-year contract to build and operate a water treatment plant. The plant started commercial operations during the
financial year; and
a 25-year contract to build and operate a waste-to-energy plant. As at 31 December 2007, the plant is still under
construction and has not commenced operations.
The above arrangements have been classified as service concession arrangements under INT FRS 112. Under the terms of
the arrangements, the Group will receive an aggregate minimum amount of $16,300,000 yearly from the contracted parties
(grantors) in exchange for services performed by the Group when the plants are in commercial operations. Revenue and
profits arising from these arrangements for the provision of construction services amounted to $51,700,000 and $3,000,000
(2006: $Nil and $Nil) respectively. The waste-to-energy plant has been pledged to secure bank loans (Note 20).
Keppel Corporation Limited
Report to Shareholders 2007
Notes to the Financial Statements
175
NoTES To THE FINANCIAL STATE mENTS
11.
Long term receivables (continued)
Included in staff loans are interest free advances to certain Directors amounting to $264,000 (2006: $341,000) and to
directors of related corporations amounting to $684,000 (2006: $580,000) under an approved car loan scheme.
Loan to a subsidiary is unsecured and bear interest ranging from 2.79% to 3.89% (2006: 3.53% to 3.89%) per annum.
The fair value of long term receivables for the Group is $134,773,000 (2006: $162,988,000). The carrying amount of long
term receivables for the Company approximates its fair value. These fair values are computed on the discounted cashflow
method using a discount rate based upon the market-related rate for a similar instrument as at the balance sheet date.
12.
Intangibles
Group
2007
At 1 January
Exchange differences
Additions
Amortisation
Impairment loss (Note 27)
Reclassification
At 31 December
Cost
Accumulated amortisation
2006
At 1 January
Exchange differences
Additions
Amortisation
Impairment loss (Note 27)
Subsidiaries acquired
Reclassification
At 31 December
Cost
Accumulated amortisation
Goodwill
$’000
Development
Expenditure
$’000
Total
$’000
133,011
6,042
-
-
(76,664)
-
2,047
(60)
4,333
(309)
-
(577)
135,058
5,982
4,333
(309)
(76,664)
(577)
62,389
5,434
67,823
62,389
-
8,995
(3,561)
71,384
(3,561)
62,389
5,434
67,823
138,231
(5,220)
2,677
-
(2,677)
-
-
7,017
(165)
221
(1,565)
-
1,011
(4,472)
145,248
(5,385)
2,898
(1,565)
(2,677)
1,011
(4,472)
133,011
2,047
135,058
133,011
-
5,939
(3,892)
138,950
(3,892)
133,011
2,047
135,058
Goodwill is allocated to cash generating units identified according to business segment.
Goodwill allocated to Offshore & Marine division amounted to $5,211,000 (2006: $75,833,000). The recoverable amount
is determined based on value-in-use calculation using cashflow projections derived from the most recent financial budgets
approved by management for the next five years using discount rates ranging from 7.56% to 25% (2006: 6.89% 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 (2006: $57,178,000). The recoverable amount is
determined based on the fair value less cost to sell using the current bid prices.
176
Keppel Corporation Limited
Report to Shareholders 2007
Notes to the Financial Statements
13.
stocks and work-in-progress
Work-in-progress in excess of related billings
Stocks
Properties held for sale
Billings on work-in-progress in excess of related costs
(a) Work-in-Progress in excess of Related Billings
Costs incurred and attributable profits
Provision for loss on work-in-progress
Less: Progress billings
(a)
(c)
(d)
(b)
Movements in the provision for loss on work-in-progress are as follows:
At 1 January
Exchange differences
Charge to profit and loss account
Amount utilised
At 31 December
(b)
Billings on Work-in-Progress in excess of Related Costs
Costs incurred and attributable profits
Less: Progress billings
(c)
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
Group
2007
$’000
2006
$’000
356,081
204,804
2,229,764
400,171
157,260
2,304,529
2,790,649
2,861,960
(2,542,517)
(2,621,815)
2,213,340
(37,284)
2,176,056
(1,819,975)
1,489,044
(9,609)
1,479,435
(1,079,264)
356,081
400,171
9,609
(35)
28,005
(295)
19,839
(135)
6,033
(16,128)
37,284
9,609
11,881,586
(14,424,103)
4,934,762
(7,556,577)
(2,542,517)
(2,621,815)
184,243
20,561
108,699
48,561
204,804
157,260
2,138,119
1,175,759
682,911
(1,888,472)
2,108,317
237,362
2,345,679
(115,915)
2,165,507
845,120
606,849
(1,203,537)
2,413,939
219,538
2,633,477
(328,948)
2,229,764
2,304,529
Keppel Corporation Limited
Report to Shareholders 2007
Notes to the Financial Statements
177
NoTES To THE FINANCIAL STATE mENTS
13.
stocks and work-in-progress (continued)
Movements in the provision for properties held for sale are as follows:
At 1 January
Exchange differences
Write-back to profit and loss account
Amount utilised
At 31 December
Group
2007
$’000
2006
$’000
328,948
(2)
(109,414)
(103,617)
623,598
(25)
(48,493)
(246,132)
115,915
328,948
Interest capitalised during the financial year amounted to $53,429,000 (2006: $60,332,000) at rates ranging from 2.78%
to 4.44% (2006: 2.75% to 4.5%) per annum for Singapore properties and 1.62% to 10.05% (2006: 1.62% to 16%) per
annum for overseas properties.
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
Movements in the provision for doubtful debts are as follows:
At 1 January
Charge to profit and loss account
At 31 December
coMpAny
2007
$’000
2006
$’000
7,393
956,814
964,207
(5,700)
7,543
406,411
413,954
(3,862)
958,507
410,092
160,030
258,857
37,478
157,240
418,887
194,718
3,862
1,838 -
3,862
5,700
3,862
Advances to and from subsidiaries are unsecured and are repayable on demand. Interest is charged at rates ranging from
1.4% to 4.5% (2006: 3.89% to 5.93%) per annum on interest-bearing advances.
178
Keppel Corporation Limited
Report to Shareholders 2007
Notes to the Financial Statements
Group
2007
$’000
2006
$’000
coMpAny
2007
$’000
2006
$’000
Associated Companies
Amounts due from
- trade
- advances
Provision for doubtful debts
Amounts due to
- trade
- advances
70,734
524,565
595,299
(946)
89,780
219,282
309,062
(1,094)
594,353
307,968
16,851
117,480
11,651
81,969
134,331
93,620
Movements in the provision for doubtful debts are as follows:
At 1 January
(Write-back)/charge to profit and loss account
At 31 December
1,094
(148)
871
223
946
1,094
87
87
87
11
11
284
- -
284
- -
284
2
- -
2
- -
- -
- -
Advances to and from associated companies are unsecured and are repayable on demand. Interest is charged at rates
ranging from 1% to 9.72% (2006: 1% to 9.38%) per annum on interest-bearing advances.
15.
Debtors
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
Group
2007
$’000
2006
$’000
coMpAny
2007
$’000
2006
$’000
1,098,822
(20,703)
1,078,119
1,111,216
(25,531)
1,085,685
7,081
97,775
65,391
168,646
92,916
39,895
16,145
16,110
56,649
9,232
55,583
19,040
62,285
706,748
(31,433)
675,315
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
- -
- -
- -
353
382
174
155,753
- -
- -
3 -
389
- -
- -
- -
- -
- -
157,054
- -
157,054
299
407
111
80,709
487
82,013
82,013
Total
1,753,434
1,516,259
157,054
82,013
Keppel Corporation Limited
Report to Shareholders 2007
Notes to the Financial Statements
179
NoTES To THE FINANCIAL STATE mENTS
15.
Debtors (continued)
Movements in the provision for debtors are as follows:
Group
2007
$’000
2006
$’000
coMpAny
2007
$’000
At 1 January
Exchange differences
(Write-back)/charge to profit and loss account
Impairment loss (Note 27)
Amount written off
Reclassification
55,887
(24)
(6,040)
6,603
(4,753)
463
57,839
288
1,461
940
(3,468)
(1,173)
At 31 December
52,136
55,887
-
- -
- -
- -
-
- -
- -
2006
$’000
531
(531)
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
17.
Bank balances, deposits and cash
Bank balances and cash
Fixed deposits with banks
Amounts held under escrow accounts for
overseas acquisition of land,
payment of construction cost and liabilities
Bank balances of property subsidiaries held under
Group
2007
$’000
2006
$’000
328,870
1,039,231
523,257
928,610
22,149
1,407
Project Account Rules 1985
210,600
165,284
Group
2007
$’000
2006
$’000
399,663
54,561
454,224
297,235
39,627
336,862
77,494
15,719
93,213
76,573
13,279
89,852
547,437
426,714
coMpAny
2006
$’000
520
2007
$’000
3,806
78 -
- -
- -
1,600,850
1,618,558
3,884
520
Fixed deposits with banks of the Group mature on varying periods mainly between 1 day to 12 months (2006: 1 day
to 3 months). Fixed deposits with banks comprised $33,773,000 of deposits denominated in Singapore dollar and
$1,005,458,000 of foreign currency deposits. The interest rates of deposits denominated in Singapore dollar as at 31
December 2007 range from 0.33% to 3.31% (2006: 0.33% to 4.96%) per annum. The interest rates of foreign currency
deposits as at 31 December 2007 range from 0.5% to 9.25% (2006: 0.31% to 11%) per annum.
Fixed deposits with banks of the Company mature on varying periods between 1 month to 6 months. The interest rates of
these deposits as at 31 December 2007 range from 5.95% to 6.5% per annum.
180
Keppel Corporation Limited
Report to Shareholders 2007
Notes to the Financial Statements
18.
creditors
Group
2007
$’000
2006
$’000
coMpAny
2007
$’000
Trade creditors
Customers’ advances and deposits
Derivative financial instruments (Note 35)
Sundry creditors
Accrued operating expenses
Advances from minority shareholders
Interest payables
Other payables
652,457
47,530
20,422
558,434
1,474,327
245,773
19,177
53,892
547,319
61,828
4,622
386,024
826,064
266,408
30,015
46,624
137
74 -
13,952
6,995
53,646
- -
853
- -
2006
$’000
68
12,633
7,782
37,187
1,215
Advances from minority shareholders of certain subsidiaries are unsecured and are repayable on demand. Interest is
charged at rates ranging from 2.78% to 12.06% (2006: 4.06% to 5%) per annum on interest-bearing loans.
3,072,012
2,168,904
75,657
58,885
19.
provisions
Group
2007
At 1 January
Exchange differences
Charge to profit and loss account
Amount utilised
At 31 December
2006
At 1 January
Exchange differences
Charge to profit and loss account
Amount utilised
Reclassification
At 31 December
Warranties
$’000
Claims
$’000
Total
$’000
29,729
(326)
6,143
(279)
232
(13)
2,414
-
29,961
(339)
8,557
(279)
35,267
2,633
37,900
17,372
318
11,840
(235)
434
232
(3)
3
-
-
17,604
315
11,843
(235)
434
29,729
232
29,961
Keppel Corporation Limited
Report to Shareholders 2007
Notes to the Financial Statements
181
NoTES To THE FINANCIAL STATE mENTS
20.
term loans
2007
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
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
Group
coMpAny
Due within
one year
$’000
Due after
one year
$’000
Due within
one year
$’000
Due after
one year
$’000
-
192,250
-
-
-
6,085
297,342
300,000
200,000
263,488
41,920
190,085
323,480
391,760
-
-
-
-
-
300,000
-
-
-
-
-
134,820
-
-
-
3,427
20,793
-
2006
(a)
(b)
(c)
499,104
1,731,526
134,820
300,000
681,635
2,272,152
-
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 are issued in tranches which will
mature five years from the date of issue. Interest is based on money market rates ranging from 2.79% to 3.89%
(2006: 3.53% to 3.89%) per annum.
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 $392,250,000. The notes are
unsecured and are issued in series or tranches, and comprised (i) fixed rate notes due 2008 of $90,000,000 and (ii)
variable rate notes due 2008, 2009, 2010 and 2013 of $302,250,000. Interest payable is based on money markets
rates ranging from 2.3% to 4.18% (2006: 2.23% to 4.39%) per annum.
The $300,000,000 2.5%, 7 year convertible bonds were issued in 2006 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:
Balance at 1 January
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
Group
2007
$’000
2006
$’000
257,639 -
-
-
-
-
12,570
(7,500)
779
300,000
(31,917)
(7,979)
260,104
6,899
(3,914)
(5,450)
Liability component at 31 December
263,488
257,639
182
Keppel Corporation Limited
Report to Shareholders 2007
Notes to the Financial Statements
(d)
(e)
(f)
Interest expense on the convertible bonds is calculated based on the effective interest method by applying the
interest rate of 4.78% (2006: 4.78%) per annum for an equivalent non-convertible bond to the liability component of
the convertible bonds.
The S$23,960,000 (“Tranche A”) and US$11,565,000 (“Tranche B”) commodity-linked notes were issued in 2006 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. The effect of the swap transactions is that KSN pays an
interest rate based on money market rates ranging from 2.77% to 3.51% (2006: 3.51%) per annum.
K-REIT Asia, a subsidiary of the Company, secured two fixed rate mortgage loans in 2006 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 due on 17 May 2011 and
are secured on the investment properties and certain assets of K-REIT Asia. Interest is payable ranging from 3.91%
to 4.06% (2006: 3.91% to 4.06%) per annum.
The secured bank loans consist of:
- A $32,650,000 bank loan drawn down by a subsidiary during the year. The term loan is repayable in 2029 and
is secured on certain fixed assets of the subsidiary. Interest is swapped to fixed rates ranging from 3.52% to
3.63% per annum.
- 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 3.08% to 4.05%
(2006: 4.56% to 4.81%) per annum.
- Other secured bank loans totalling $138,315,000 comprised $121,914,000 of loans denominated in Singapore
dollar and $16,401,000 of foreign currency loans. They are repayable between one and five years and are
secured on certain fixed and other assets of subsidiaries. Interest on loans denominated in Singapore dollar
is based on money market rates ranging from 3.17% to 4.14% (2006: 3.1% to 5.5%) per annum. Interest on
foreign currency loans is based on money market rates ranging from 7.1% to 8% (2006: 7.7% to 12.69%) per
annum.
(g)
The unsecured bank loans of the Group totalling $689,102,000 comprised $504,820,000 of loans denominated
in Singapore dollar and $184,282,000 of foreign currency loans. They are repayable between one and five years.
Interest on loans denominated in Singapore dollar is based on money market rates ranging from 1.11% to 4.17%
(2006: 2% to 4.52%) per annum. Interest on foreign currency loans is based on money market rates ranging from
4.7% to 10.15% (2006: 3.86% to 10%) per annum.
The short-term unsecured bank loans of the Company bears interest ranging from 1.11% to 1.18% per annum.
(h)
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 3.06% to 7.74% (2006:
1.75% to 7.9%) per annum.
The net book value of property and assets mortgaged to the banks amounted to $1,834,575,000 (2006: $1,908,005,000).
These are securities given to the banks for loans and overdraft facilities.
The fair values of term loans for the Group and Company are $2,253,263,000 (2006: $2,978,195,000) and $434,820,000
(2006: $300,000,000) 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.
Keppel Corporation Limited
Report to Shareholders 2007
Notes to the Financial Statements
183
NoTES To THE FINANCIAL STATE mENTS
20.
term loans (continued)
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
21.
Bank overdrafts
Secured
Unsecured
Group
2007
$’000
2006
$’000
coMpAny
2007
$’000
2006
$’000
73,602
1,348,601
309,323
297,835
1,434,803
539,514
- -
300,000
- -
300,000
1,731,526
2,272,152
300,000
300,000
2007
$’000
1,942
1,825
3,767
Group
2006
$’000
3,339
12
3,351
Interest on the bank overdrafts is payable at the banks’ prevailing prime rates ranging from 1.66% to 10.1% (2006: 1.63%
to 9.2%) per annum. The secured bank overdrafts are secured by short term investments portfolio and fixed assets of
subsidiaries.
22.
Deferred taxation
Deferred tax liabilities:
Accelerated tax depreciation
Investment properties valuation
Offshore income & others
Deferred tax assets:
Other provisions
Unutilised tax benefits
Group
2007
$’000
2006
$’000
coMpAny
2007
$’000
2006
$’000
117,665
210,607
111,674
439,946
(31,232)
(19,745)
(50,977)
74,226
-
95,322
169,548
(5,898)
(5,709)
(11,607)
- -
- -
13,486
13,486
- -
- -
- -
14,385
14,385
Net deferred tax liabilities
388,969
157,941
13,486
14,385
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 $434,802,000 (2006: $459,026,000) 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.
184
Keppel Corporation Limited
Report to Shareholders 2007
Notes to the Financial Statements
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
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 and other remuneration to Directors of the Company
Shares granted 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 loss/(gain) on
- investments held for trading
- forward foreign exchange contracts (swap cost)
Group
2007
$’000
2006
$’000
7,593,574
1,663,686
136,042
1,002,406
8,065
27,477
5,764,526
1,064,761
123,701
619,178
8,950
19,824
10,431,250
7,600,940
Group
2007
$’000
2006
$’000
948,634
47,734
21,307
114,450
781,254
39,451
14,949
95,686
1,132,125
931,340
Group
2007
$’000
2006
$’000
950
3,131
624
262 -
881
2,954
610
39
476
25,072
54
4,029
125,383
43
309
(7,126)
(54,577)
19,634
50
3,310
125,873
892
1,565
(3,610)
(88,132)
(3,441)
81,558
(15,603)
17,380
Keppel Corporation Limited
Report to Shareholders 2007
Notes to the Financial Statements
185
NoTES To THE FINANCIAL STATE mENTS
25. operating profit (continued)
Provision 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
Bad debts written off/(recovered)
- trade debts
- other debts
Stocks written off
Rental expense
- operating leases
Direct operating expenses
- investment properties that generated rental income
- investment properties that did not generate rental income
Loss/(gain) on differences in foreign exchange
Non-audit fees paid to
- auditors of the Company
- other auditors of subsidiaries
Group
2007
$’000
2006
$’000
6,143
2,414 3
11,840
28,005
(109,414)
6,033
(48,493)
(6,678)
2,967
(2,329)
(3)
14
2,831
1,711
1,068
(1,318)
2,844
(54)
2,569
45,261
46,811
50,488
2,910
14,499
40,026
1,324
(6,361)
27
359
294
511
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
Interest income from:
Bonds, debentures, deposits and associated companies
Interest expenses on:
Bonds, debentures, fixed term loans and overdrafts
Fair value loss on interest rate caps and swaps
Group
2007
$’000
2006
$’000
1,170 -
1,532
165
2,867
72
3,705
3,777
88,542
79,758
(54,179)
(8,531)
(60,160)
(2,310)
(62,710)
(62,470)
186
Keppel Corporation Limited
Report to Shareholders 2007
Notes to the Financial Statements
27.
exceptional items
Gain on disposal of subsidiaries, associated companies and investments
Impairment loss of fixed assets (Note 5)
Impairment loss of goodwill (Note 12)
Impairment loss of debtors (Note 15)
Impairment of assets, currency translation loss
and provision for claims of certain overseas operations
Fair value gain on investment properties (Note 6)
Share of associated companies (Note 9)
Cost associated with restructuring of operations
Taxation (Note 28)
Minority interests
Group
2007
$’000
2006
$’000
2,291
(107,957)
(76,664)
(6,603)
(133,131)
691,444 -
212,158
(16,605)
564,933
(149,500) -
415,433
(310,328)
33,527
(46,359)
(2,677)
(940)
(6,727)
31,878
(1,398)
7,304
7,304
(7,386)
Attributable exceptional items
105,105
(82)
28.
taxation
Tax expense comprised:
Current tax
Adjustment for prior year’s tax
Share of taxation of associated companies (Note 9)
Others
Deferred tax movement:
Movement in temporary differences
Reduction in tax rate
Deferred tax movement comprised:
Accelerated tax depreciation
Investment properties valuation
Offshore income & others
Other provisions
Unutilised tax benefits
Group
2007
$’000
2006
$’000
222,151
(9,011)
115,462
2,286
193,209
6,318
69,000
4,084
149,683
(11,936) -
(15,239)
468,635
257,372
48,471
111,777 -
21,526
(15,821)
(16,270)
(8,492)
(3,283)
(1,142)
(2,322)
149,683
(15,239)
Keppel Corporation Limited
Report to Shareholders 2007
Notes to the Financial Statements
187
NoTES To THE FINANCIAL STATE mENTS
28.
taxation (continued)
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
Tax calculated at tax rate of 18% (2006: 20%)
Income not subject to tax
Expenses not deductible for tax purposes
Utilisation of previously unrecognised tax benefits
Effect of reduction in tax rate
Effect of different tax rates in other countries
Adjustment for prior year’s tax
Tax expense of exceptional items (Note 27)
29.
earnings per ordinary share
Net profit attributable to shareholders
before exceptional items
Adjustment for dilutive potential ordinary shares
of subsidiaries and associated companies,
before exceptional items
Adjusted net profit before exceptional items
Exceptional items
Adjustment for dilutive potential ordinary shares
of subsidiaries and associated companies,
after exceptional items
Group
2007
$’000
2006
$’000
1,556,230
1,139,792
280,121
(72,208)
117,652
(1,995)
(11,936) -
16,512
(9,011)
149,500 -
227,958
(69,596)
63,002
(9,610)
39,300
6,318
468,635
257,372
Group
2007
$’000
2006
$’000
Basic
Diluted
Basic
Diluted
1,025,596
1,025,596
750,832
750,832
-
1,025,596
105,105
(2,548)
1,023,048
105,105
-
750,832
(82)
(3,378)
747,454
(82)
-
(7,974)
-
-
Adjusted net profit after exceptional items
1,130,701
1,120,179
750,750
747,372
Number of Shares
’000
Number of Shares
’000
Weighted average number of ordinary shares
Adjustment for dilutive potential ordinary shares
Weighted average number of ordinary shares
used to compute earnings per share
1,580,786
-
1,580,786
11,199
1,573,278
-
1,573,278
10,243
1,580,786
1,591,985
1,573,278
1,583,521
Earnings per ordinary share
Before exceptional items
After exceptional items
64.9 cts
71.5 cts
64.3 cts
70.4 cts
47.7 cts
47.7 cts
47.2 cts
47.2 cts
188
Keppel Corporation Limited
Report to Shareholders 2007
Notes to the Financial Statements
30. Dividends/capital distribution
The Directors are pleased to recommend a tax exempt one-tier final dividend of 10 cents per share and a tax exempt one-
tier special dividend of 45 cents per share (2006: final dividend of 8 cents per share less tax) in respect of the financial year
ended 31 December 2007 for approval by shareholders at the next Annual General Meeting to be convened. The special
dividend is proposed to commemorate the Company’s 40th anniversary since its incorporation.
Together with the interim dividend of 9 cents per share comprising 1.5 cents per share less tax and 7.5 cents per share tax
exempt one-tier (2006: 6 cents per share less tax), total dividend paid and proposed in respect of the financial year ended
31 December 2007 will be 64 cents per share comprising 1.5 cents per share less tax and 62.5 cents per share tax exempt
one-tier (2006: 14 cents per share less tax).
During the financial year, the following dividends and capital distribution were paid:
A final dividend of 8 cents per share less tax at 18% on the issued
and fully paid ordinary shares in respect of the previous financial year
A capital distribution of 14 cents per share on the issued and fully paid
ordinary shares in respect of the previous financial year
An interim dividend of 9 cents per share comprising 1.5 cents per share
less tax at 18% and 7.5 cents per share tax exempt one-tier on the issued
and fully paid ordinary shares in respect of the current financial year
31.
Acquisition of subsidiaries
The following subsidiaries were acquired during the financial year:
$’000
103,640
221,213
138,114
462,967
Name of subsidiary
Date of
acquisition
Gross interest
before
acquisition
Interest
acquired
Gross interest
after
acquisition
Net assets
acquired
$’000
Consideration
$’000
Shanghai Hongda Property
Development Co. Ltd
The Vietnam Investment Fund
(Singapore) Ltd
15.11.2007
-
100%
100%
97,059
97,059
1.1.2007
40%
11%
51%
761
761
97,820
97,820
Profit of the acquired subsidiaries from the date of acquisition to 31 December 2007 amounted to $110,000. There is no
material impact to Group revenue and attributable profit before exceptional items if the acquisitions had occurred on
1 January 2007.
Details of net assets acquired are disclosed in the Consolidated Cashflow Statement.
Keppel Corporation Limited
Report to Shareholders 2007
Notes to the Financial Statements
189
NoTES To THE FINANCIAL STATE mENTS
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
2007
$’000
2006
$’000
1,476,307
25,765
315,916
633,365
228,801
224,115
2,824,886
175,948
227,877
5,046,699
(1,666,324)
2,244,828
110,603
397,980
3,839,692
(1,168,585)
3,380,375
2,671,107
There was no future capital expenditure/commitment of the Company.
(b)
Lessee’s lease commitments
The Group leases land and office buildings from non-related parties under non-cancellable operating lease
agreements. The leases have varying terms, escalation clauses and renewal rights. 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
2007
$’000
2006
$’000
coMpAny
2007
$’000
2006
$’000
52,087
161,839
601,713
43,147
149,830
588,039
1,452
604
- -
1,455
2,061
815,639
781,016
2,056
3,516
(c)
Lessor’s lease commitments
The Group leases out commercial space to non-related parties under non-cancellable operating leases. The future
minimum lease receivable in respect of significant non-cancellable operating leases as at the end of the financial
year are as follows:
Group
2007
$’000
2006
$’000
coMpAny
2007
$’000
2006
$’000
Years after year-end:
Within one year
From two to five years
After five years
124,224
155,594
43,802
98,927
148,958
29,754
323,620
277,639
- -
- -
- -
- -
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.
190
Keppel Corporation Limited
Report to Shareholders 2007
Notes to the Financial Statements
33.
contingent liabilities (unsecured)
Guarantees in respect of banks and other loans
granted to subsidiaries and associated companies
Performance guarantees issued for contracts
awarded to subsidiaries and associated companies
Bank guarantees
Others
Group
2007
$’000
2006
$’000
coMpAny
2007
$’000
2006
$’000
24,772
20,395
427,080
512,057
300
8,500
53,573
43,908
59,584
22,927
- -
- -
- -
138,229
95,730
427,080
512,057
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 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
2007
$’000
2006
$’000
17,447
13,360
35.
Financial risk management
The Group operates internationally and is exposed to a variety of financial risks, comprising market risk (including currency
risk, interest rate risk and price risk), credit risk and liquidity risk. 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.
Keppel Corporation Limited
Report to Shareholders 2007
Notes to the Financial Statements
191
NoTES To THE FINANCIAL STATE mENTS
35.
Financial risk management (continued)
Market Risk
(i)
Currency risk
The Group has receivables and payables denominated in foreign currencies viz US dollars, 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 presentation 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 $4,981,064,000 (2006: $4,099,049,000). The net positive fair values of forward foreign
exchange contracts is $143,828,000 (2006: $72,147,000) comprising assets of $157,845,000 (2006:
$72,970,000) and liabilities of $14,017,000 (2006: $823,000). These amounts are recognised as derivative
financial instruments in debtors (Note 15) and creditors (Note 18).
As at the end of the financial year, the Company has outstanding forward foreign exchange contracts with notional
amounts totalling $4,936,711,000 (2006: $4,059,696,000). The net positive fair values of forward foreign exchange
contracts is $141,801,000 (2006: $68,076,000) comprising assets of $155,753,000 (2006: $80,709,000) and
liabilities of $13,952,000 (2006: $12,633,000). These amounts are recognised as derivative financial instruments in
debtors (Note 15) and creditors (Note 18).
Other than the above hedged foreign currency contracts, the unhedged currency exposure of financial assets and
financial liabilities denominated in currencies other than the respective entities’ functional currencies are as follows:
USD
$’000
2007
euro
$’000
Others
$’000
USD
$’000
2006
Euro
$’000
others
$’000
Group
Financial Assets
Debtors
Investments
Bank balances, deposits & cash
Financial Liabilities
Creditors
Term loans
Company
Financial Assets
Debtors
Bank balances, deposits & cash
Financial Liabilities
Creditors
65,237
30,175
66,335
10,938
21,018
232,499
135,160
372,013
194,466
35,888
25,060
146,709
3,423
3,640
159,750
136,590
191,057
55,004
45,557
109,370
23,999
-
168,915
32,650
60,396
164,519
10,525
-
49,199
1,615
186
16
93
2,088
-
587
3,526
1,400
15
-
98
1,215
85
-
-
177
225
-
192
Keppel Corporation Limited
Report to Shareholders 2007
Notes to the Financial Statements
Sensitivity analysis for currency risk
If the relevant foreign currency change against SGD by 5% (2006: 5%) with all other variables held constant, the
effects will be as follows:
Group
USD against SGD
- Strengthened
- Weakened
Euro against SGD
- Strengthened
- Weakened
Company
USD against SGD
- Strengthened
- Weakened
Euro against SGD
- Strengthened
- Weakened
profit after tax
2007
$’000
2006
$’000
2007
$’000
equity
2006
$’000
(1,161)
1,161
123
(123)
6
(6)
105
(105)
(2,111)
2,111
2,889
(2,889)
10
(10)
4
(4)
1,510
(1,510)
956
(956)
1,254
(1,254)
10
(10)
- -
- -
- -
- -
(ii)
Interest rate risk
The Group is exposed to interest rate risk for changes in interest rates primarily for debt obligations, placements in
the money market and investments in bonds. The Group policy is to maintain a mix of fixed and variable rate debt
instruments with varying maturities. Where necessary, the Group uses derivative financial instruments to hedge
interest rate risks.
The Group purchases interest rate caps to hedge the interest rate risk exposure arising from its US$ 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.
Year
2007
2006
Notional amount
Maturity
Interest rate caps
$58,131,000
2009 - 2011
1.8% - 3%
$1,064,853,000
2007 - 2011
1.8% - 3%
The positive fair values of interest rate caps for the Group are $493,000 (2006: $1,389,000). This amount is
recognised as derivative financial instruments in debtors (Note 15).
The Group enters into interest rate swap agreements to hedge the interest rate risk exposure arising from its S$
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 $625,995,000 (2006: $731,679,000) whereby it receives variable rates equal to
SIBOR (2006: SIBOR) and pays fixed rates of between 2.83% and 3.5% (2006: 2.33% and 3.14%) on the notional
amount.
The net negative fair values of interest rate swaps for the Group are $4,113,000 (2006: net positive fair values
of $8,852,000) comprising assets of $2,292,000 (2006: $12,651,000) and liabilities of $6,405,000
(2006: $3,799,000). These amounts are recognised as derivative financial instruments in debtors (Note 15)
and creditors (Note 18).
Keppel Corporation Limited
Report to Shareholders 2007
Notes to the Financial Statements
193
NoTES To THE FINANCIAL STATE mENTS
35.
Financial risk management (continued)
Sensitivity analysis for interest rate risk
If interest rates increase/decrease by 0.5% (2006: 0.5%) with all other variables held constant, the Group’s and
Company’s profit after tax would have been lower/higher by $4,618,000 (2006: $7,140,000) and $2,174,000
(2006: $1,500,000) respectively as a result of higher/lower interest expense on floating rate loans.
(iii)
Price risk
The Group hedges against fluctuations arising on the purchase of natural gas that affect cost. Exposure to price
fluctuations is managed via fuel oil forward contracts, whereby the price of natural gas is indexed to a benchmark fuel
price index, High Sulphur Fuel Oil (HSFO) 180-CST. As at the end of the financial year, the Group has outstanding
HSFO forward contracts with notional amounts totalling $165,638,000 (2006: $Nil). The positive fair values of
HSFO forward contracts for the Group are $8,016,000 (2006: $Nil). This amount is recognised as derivative
financial instruments in debtors (Note 15).
The Group is exposed to equity securities price risk arising from equity investments classified as investments held for
trading and available-for-sale investments. To manage its price risk arising from investments in equity securities, the
Group diversifies its portfolio. Diversification of the portfolio is done in accordance with the limits set by the Group.
Sensitivity analysis for price risk
If prices for HSFO increase/decrease by 5% with all other variables held constant, the Group’s hedging reserve
in equity would have been higher/lower by $4,365,000 (2006: $Nil) as a result of fair value changes on cashflow
hedges.
If prices for quoted investments increase/decrease by 5% (2006: 5%) with all other variables held constant, the
Group’s profit after tax would have been higher/lower by $4,661,000 (2006: $4,493,000) as a result of higher/
lower fair value gains on investments held for trading, and the Group’s fair value reserve in equity would have been
higher/lower by $34,524,000 (2006: $28,019,000) as a result of higher/lower fair value gains on available-for-sale
investments.
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 terms or stage of completion. These credit terms are normally
contractual. The Group adopts stringent procedures on extending credit terms to customers and on 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.
The maximum exposure to credit risk is the carrying amount of financial assets which are mainly trade debtors and bank
balances, deposits and cash.
(i)
Financial assets that are neither past due nor impaired
Trade debtors that are neither past due nor impaired are substantially companies with good collection track record
with the Group. Bank deposits, forward foreign exchange contracts, interest rate caps and interest rate swaps are
mainly transacted with banks of high credit ratings assigned by international credit-rating agencies.
194
Keppel Corporation Limited
Report to Shareholders 2007
Notes to the Financial Statements
(ii)
Financial assets that are past due and/or impaired
The age analysis of trade debtors past due and/or impaired is as follows:
Past due 0 to 3 months
Past due 3 to 6 months
Past due over 6 months and partially impaired
Group
2007
$’000
2006
$’000
241,917
22,675
37,816
151,389
55,741
45,628
302,408
252,758
Trade debtors that are individually determined to be impaired at the balance sheet date relate to debtors that are in
significant financial difficulties and have defaulted on payments.
Information relating to the provision for doubtful debts is given in Note 15.
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.
Information relating to the maturity profile of loans is given in Note 20.
Capital Risk
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern and to
maintain an optimal capital structure so as to maximise shareholder value. In order to maintain or achieve an optimal capital
structure, the Group may adjust the amount of dividend payment, return capital to shareholders, issue new shares, obtain
new borrowings or sell assets to reduce borrowings.
Management monitors capital based on the Group net gearing (times). The Group net gearing (times) is calculated as net
borrowings divided by total capital. Net borrowings are calculated as total term loans (Note 20) plus bank overdrafts
(Note 21) less bank balances, deposits & cash (Note 17). Total capital refers to capital employed under equity.
Net borrowings
Total capital
Group net gearing (times)
Group
2007
$’000
2006
$’000
633,547
1,338,580
7,035,192
5,597,687
0.09x
0.24x
Keppel Corporation Limited
Report to Shareholders 2007
Notes to the Financial Statements
195
NoTES To THE FINANCIAL STATE mENTS
36.
segment analysis
2007
Business segment
Revenue
External sales
Inter-segment sales
Total
Results
Operating profit
Net investment income &
interest income
Share of results of
associated companies
Profit before tax &
exceptional items
Exceptional items
Profit before taxation
Taxation
Profit for the year
Offshore & Marine
$’000
Property
$’000
Infrastructure
$’000
Investments
$’000
Elimination
$’000
Total
$’000
7,258,364
-
7,258,364
1,834,886
2,540
1,837,426
1,276,929
131,762
1,408,691
61,071
52,647
113,718
- 10,431,250
(186,949)
-
(186,949) 10,431,250
570,007
440,062
10,942
13,442
16,196
1,050,649
98,476
(35,419)
(4,784)
(13,378)
(16,196)
28,699
31,662
66,840
44,940
333,440
700,145
(81,011)
619,134
(141,756)
477,378
471,483
810,121
1,281,604
(249,751)
1,031,853
51,098
(165,616)
(114,518)
(18,065)
(132,583)
333,504
1,439
334,943
(59,063)
275,880
-
-
-
-
-
-
-
-
-
-
-
476,882
1,556,230
564,933
2,121,163
(468,635)
1,652,528
1,025,596
105,105
1,130,701
521,827
1,652,528
Attributable to:
Shareholders of Company
Profit before exceptional items
Exceptional items
Minority interests
522,323
(81,011)
441,312
36,066
477,378
209,387
350,543
559,930
471,923
1,031,853
26,410
(165,866)
(139,456)
6,873
(132,583)
267,476
1,439
268,915
6,965
275,880
Other information
Segment assets
Investment in
associated companies
Total
Segment liabilities
Net tax provision &
deferred taxation
Total
Net assets
5,628,504
6,991,699
1,684,391
4,654,856
(6,302,862) 12,656,588
88,058
5,716,562
1,710,317
8,702,016
143,695
1,828,086
1,198,524
5,853,380
3,140,594
(6,302,862) 15,797,182
-
4,200,951
5,245,833
1,412,510
3,464,725
(6,302,862)
8,021,157
279,676
4,480,627
402,171
5,648,004
18,311
1,430,821
40,675
3,505,400
-
(6,302,862)
740,833
8,761,990
1,235,935
3,054,012
397,265
2,347,980
-
-
-
7,035,192
255,909
125,692
Capital expenditure
Depreciation & amortisation
193,983
78,453
25,005
12,784
36,542
33,916
379
539
Geographical segment
External sales
Segment assets
Capital expenditure
Singapore
$’000
Far East &
other ASEAN
countries
$’000
America
$’000
7,473,211
9,247,609
180,930
1,062,871
2,929,664
43,943
1,323,231
860,011
19,008
Other
countries
$’000
571,937
486,880
12,028
Elimination
$’000
Total
$’000
- 10,431,250
(867,576) 12,656,588
255,909
-
196
Keppel Corporation Limited
Report to Shareholders 2007
Notes to the Financial Statements
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
Infrastructure
$’000
Investments
$’000
Elimination
$’000
Total
$’000
5,755,336
-
5,755,336
1,154,639
11,776
1,166,415
569,868
86,656
656,524
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
624,398
2,617
627,015
(149,006)
478,009
233,035
17,521
250,556
(50,379)
200,177
(23,940)
(1)
(23,941)
(1,673)
(25,614)
306,299
(12,833)
293,466
(56,314)
237,152
447,817
2,617
450,434
27,575
478,009
96,107
8,261
104,368
95,809
200,177
(34,736)
872
(33,864)
8,250
(25,614)
241,644
(11,832)
229,812
7,340
237,152
-
-
-
-
-
-
-
-
-
-
-
314,662
1,139,792
7,304
1,147,096
(257,372)
889,724
750,832
(82)
750,750
138,974
889,724
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
5,137,992
6,344,514
1,509,512
3,528,759
(5,030,544) 11,490,233
associated companies
Total
74,191
5,212,183
1,171,167
7,515,681
108,932
1,618,444
1,056,426
4,585,185
2,410,716
(5,030,544) 13,900,949
-
Segment liabilities
Net tax provision &
deferred taxation
Total
3,772,191
5,190,857
1,081,464
2,857,470
(5,030,544)
7,871,438
249,545
4,021,736
151,567
5,342,424
(411)
1,081,053
31,123
2,888,593
-
(5,030,544)
431,824
8,303,262
Net assets
1,190,447
2,173,257
537,391
1,696,592
Capital expenditure
Depreciation & amortisation
165,827
65,049
32,779
15,471
227,233
46,469
4,509
449
-
-
-
5,597,687
430,348
127,438
Geographical segment
Singapore
$’000
Far East &
other ASEAN
countries
$’000
America
$’000
Other
countries
$’000
Elimination
$’000
Total
$’000
External sales
Segment assets
Capital expenditure
4,524,852
8,228,446
332,545
862,040
2,526,478
48,294
1,724,144
1,084,261
44,964
489,904
393,627
4,545
-
7,600,940
(742,579) 11,490,233
430,348
-
Keppel Corporation Limited
Report to Shareholders 2007
Notes to the Financial Statements
197
NoTES To THE FINANCIAL STATE mENTS
36.
segment analysis (continued)
Notes:
(a)
Business segment
The Group’s businesses are grouped into four divisions: Offshore & Marine, Property, Infrastructure and Investments.
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. 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 about 34 countries. Secondary segment information is provided by geographical segment in
accordance to the above table.
37.
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 2008. The Group’s assessment of those standards and interpretations that are relevant to
the Group is set out below:
(a)
Revised FRS 23 Borrowing Costs
The revised standard removes the option to recognise immediately as an expense borrowing costs that are
attributable to qualifying assets, except for those borrowing costs on qualifying assets that are measured at fair value
or inventories that are manufactured or produced in large quantities on a repetitive basis.
The Group will apply the revised FRS 23 from 1 January 2009. The adoption of the revised standard is not expected
to have a significant impact on the financial statements of the Group.
(b)
FRS 108 Operating Segments
FRS 108 supersedes FRS 14 Segment Reporting and requires the Group to report the financial performance of its
operating segments based on the information used internally by management for evaluating segment performance
and deciding on allocation of resources. Such information may be different from the information included in the
financial statements, and the basis of its preparation and reconciliation to the amounts recognised in the financial
statements shall be disclosed.
The Group will apply FRS 108 from 1 January 2009 and provide comparative information that conforms to the
requirements of FRS 108. The Group does not expect the new operating segments to be significantly different from
business segments currently disclosed.
(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 contracts, 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.
198
Keppel Corporation Limited
Report to Shareholders 2007
Notes to the Financial Statements
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 in profit for the year
Decrease in carrying value of property held for sale
Balance as at 1 January
Balance as at 31 December
Decrease in minority interests
Balance as at 1 January
Share of profit for the year
2007
$’000
2006
$’000
(82,054)
(38,394)
(717,910)
(619,350)
(157,519)
(43,660)
(195,546)
(98,341)
(97,134)
(195,546)
(81,818)
(132,702)
(35,552)
(46,266)
38.
comparative figures
Certain reclassifications have been made to the prior year’s financial statements of the Group to enhance comparability with
the current year’s financial statements.
The items were reclassified as follows:
Current asset
Stocks & work-in-progress in excess of related billings
Current liabilities
Creditors
Billings on work-in-progress in excess of related costs
Group
Previously
reported
2006
$’000
Reclassified
2006
$’000
2,777,217
2,861,960
2,380,657
2,325,319
2,168,904
2,621,815
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.
Keppel Corporation Limited
Report to Shareholders 2007
Notes to the Financial Statements
199
SIGNIFICANT SUBSIDIARIES AND ASS oCIATED ComPANIES
Gross
Interest
2007
%
Effective Equity
Interest
2007
%
2006
%
Cost of Investment
2006
2007
$’000
$’000
Country of
Incorporation
/Operation
Principal Activities
oFFsHore & MArIne
Offshore
Subsidiaries
Keppel Offshore and Marine Ltd
100 100 100 801,720
801,720
Singapore
Investment holding
Keppel FELS Ltd
100 100 100
#
#
Singapore
Construction, fabrication and repair of
offshore production facilities and drilling
rigs, power barges, specialised vessels
and other offshore production facilities
AmFELS Offshore Ltd(5)
100 100 100
BrasFELS SA(1a)
100 100 100
Caspian Shipyard Company Ltd(2a)
75
45
53
Deepwater Technology Group
Pte Ltd
100 100 100
FELS Offshore Pte Ltd
100 100 100
Fornost Ltd(1a)
100 100 100
FSTP Brasil Ltda(1a)
75
75
75
FSTP Pte Ltd
75
75
75
Hygrove Investments Ltd(5)
100 100 100
Keppel AmFELS Inc(4)
100 100 100
Keppel FELS Baltech Ltd(4)
100 100 100
Keppel FELS Brasil SA(1a)
100 100 100
Keppel FELS Offshore &
Engineering Services Mumbai
Pte Ltd(1a)
100 100 100
Keppel Norway A/S(1a)
100
100
100
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
BVI/Mexico
Holding of long-term investments
Brazil
Engineering, construction and fabrication
of platforms for the oil and gas sector,
shipyard works and other general
business activities
#
Azerbaijan
Construction and repair of
offshore drilling rigs
#
Singapore
Research and experimental
development on deepwater engineering
#
#
Singapore
Holding of long-term investments
HK
Holding of long-term investments and
provision of procurement services
#
Brazil
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
Investment holding
USA
Construction and repair of offshore drilling
rigs and offshore production facilities
#
Bulgaria
#
Brazil
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
200
Keppel Corporation Limited
Report to Shareholders 2007
Significant Subsidiaries and
Associated Companies
Gross
Interest
2007
%
Effective Equity
Interest
2007
%
2006
%
Cost of Investment
2006
2007
$’000
$’000
Country of
Incorporation
/Operation
Principal Activities
Keppel SLP LLC(4)
60
60
60
Keppel Verolme BV(1a)
100 100 100
KV Enterprises BV(1a)
100 100 100
Marine & Offshore Protection &
Preservation BV(1a)
Offshore Technology Development
Pte Ltd
100
100
100
100 100 100
Regency Steel Japan Ltd(1a)
51
51
51
Associated Companies
Asian Lift Pte Ltd
50
50
50
Keppel Kazakhstan LLP(4)
50
50
50
Marine
Subsidiaries
Keppel Shipyard Ltd
100 100 100
Keppel Philippines Marine Inc(3)
83
83
81
Alpine Engineering Services Pte Ltd
100 100 100
Blastech Abrasives Pte Ltd
100 100 100
Keppel Cebu Shipyard Inc(3)
100
83
81
Keppel Nantong Shipyard
Company Limited(4)
100 100 100
Keppel Singmarine Pte Ltd
100 100 100
Keppel Smit Towage Pte Ltd
51
51
51
KS Investments Pte Ltd
100 100 100
KSI Production Pte Ltd(5)
100
100
100
Maju Maritime Pte Ltd
51
51
51
Marine Technology Development
Pte Ltd
100 100 100
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
USA
Fabrication of offshore platforms and
structures
#
Netherlands
Construction and repair of offshore
drilling rigs and shiprepairs
#
#
Netherlands
Hiring and leasing of barges
Netherlands
Chamber blasting services and painting
and coating works
#
Singapore
#
Japan
Production of jacking systems and
provision of jacking analysis
Sourcing, fabricating and supply of
specialised steel components
#
Singapore
Provision of heavy-lift equipment and
related services
#
Kazakhstan
Construction and repair of offshore
drilling units and structures and
specialised vessels
#
Singapore
Shiprepairing, shipbuilding and marine
construction
#
#
#
#
#
#
#
#
#
#
#
Philippines
Shipbuilding and repairing
Singapore
Marine contracting
Singapore
Marine contracting
Philippines
Shipbuilding and repairing
China
Shipbuilding and repairing
Singapore
Shipbuilding and repairing
Singapore
Provision of towage services
Singapore
Holding of long-term investments
BVI/Norway
Holding of long-term investments
Singapore
Provision of towage services
Singapore
Provision of technical consultancy for ship
design and engineering works
Keppel Corporation Limited
Report to Shareholders 2007
Significant Subsidiaries and
Associated Companies
201
SIGNIFICANT SUBSIDIARIES AND ASSoCIATED ComPANIES
Gross
Interest
2007
%
Effective Equity
Interest
2007
%
2006
%
Cost of Investment
2006
2007
$’000
$’000
Country of
Incorporation
/Operation
Principal Activities
Associated Companies
Arab Heavy Industries Public
Joint Stock Company(2a)
33
33
33
#
#
UAE
Shipbuilding and repairing
Consort Land Inc(3)
33+
27+
27+
54
54
Philippines
Land holding company and power
distributor
Kejora Resources Sdn Bhd(4)
49
25
25
#
# Malaysia
Chartering tugs and other marine services
Subic Shipyard & Engineering Inc(3)
46+
38+
38+
3,020
3,020
Philippines
Shipbuilding and repairing
property
Subsidiaries
Keppel Land Ltd(2)
53
53
53 931,432
931,432
Singapore
Holding, management and investment
company
K-REIT Asia(2)
Evergro Properties Ltd(2)
73
53
71
38
53
38
Keppel Bay Pte Ltd
100+
86+
86+
Keppel Philippines Properties Inc(3)
74+
50+
50+
Alpha Investment Partners Ltd(2)
100
53
53
Avenue Park Development(2)
52
28
28
Bayfront Development Pte Ltd(2)
100
53
53
BCH Office Investment Pte Ltd(2)
100
53
53
Beijing Kingsley Property
Development Co Ltd(2a)
100
53
53
Bintan Bay Resort Pte Ltd(2)
90
48
48
Boulevard Development Pte Ltd(2)
100
53
53
Bukit Timah Hill Development
Pte Ltd(2)
Changzhou Fushi Housing
Development Pte Ltd(2a)
Chengdu Hillwest Development
Co Ltd(2a)
100
53
53
100
53
53
100
53
53
Devonshire Development Pte Ltd(2)
60
32
32
DL Properties Ltd(2)
65
34
34
Double Peak Holdings Ltd(5)
100
53
53
Duit Investments Ltd(2a)
100
53
53
Evansville Investment Pte Ltd(2)
100
53
53
Greenfield Development Pte Ltd(2)
100
53
53
International Centre(1a)
79
53
51
#
#
626
493
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
Singapore
Real estate investment trust
Singapore
Property investment and development
626
Singapore
Property development
493
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
#
China
Property development
#
#
#
#
#
#
#
Singapore
Property development
Singapore
Property investment
BVI/Singapore
Investment holding
HK
Investment holding
Singapore
Property development
Singapore
Investment holding
Vietnam
Property investment
202
Keppel Corporation Limited
Report to Shareholders 2007
Significant Subsidiaries and
Associated Companies
Gross
Interest
2007
%
Effective Equity
Interest
2007
%
2006
%
Cost of Investment
2006
2007
$’000
$’000
Country of
Incorporation
/Operation
Principal Activities
KeplandeHub Ltd(2)
100
53
53
Keppel China Township
Development Pte Ltd
(formerly Toshmatic Pte Ltd)(2)
100
53
53
Keppel Land (Hong Kong) Ltd(4)
100
53
53
Keppel Land (Saigon Centre)
Ltd(2a)
100
53
53
Keppel Land (Tower D) Pte Ltd(2)
100
53
53
Keppel Land China Holdings
Pte Ltd(2)
Keppel Land Financial Services
Pte Ltd(2)
100
53
53
100
53
53
Keppel Land International Ltd(2)
100
53
53
Keppel Land Properties Pte Ltd(2)
100
53
53
Keppel Land Realty Pte Ltd(2)
100
53
53
Keppel Land Watco I Co Ltd(2a)
68
36
36
Keppel Puravankara Development
Pvt Ltd(4)
51
27
27
Keppel Thai Properties Public
Co Ltd(2a)
Keppel Township Development
(Shenyang) Co Ltd(n)(2a)
45
24
24
100
53
-
K-REIT Asia Investment Pte Ltd(2)
100
53
53
K-REIT Asia Management Ltd(2)
100
53
K-REIT Asia Property Management
Ltd(2)
100
53
53
53
Mansfield Developments Pte Ltd(2)
100
53
53
Merryfield Investment Pte Ltd(2)
100
53
53
Ocean & Capital Properties
Pte Ltd(2)
100
53
53
Ocean Properties Pte Ltd(2)
76
40
40
OIL (Asia) Pte Ltd(2)
100
53
53
Pasir Panjang Realty Pte Ltd(2)
100
53
53
Pembury Properties Ltd(5)
100
53
53
PT Kepland Investama(1a)
100
53
53
PT Keppel Land(2a)
100
53
53
PT Mitra Sindo Makmur(1a)
51
27
27
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
Singapore
Investment holding
Singapore
Investment holding
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
-
China
Property development
#
#
#
#
#
#
#
#
#
#
#
#
Singapore
Investment holding
Singapore
Property fund management
Singapore
Property management services
Singapore
Investment holding
Singapore
Investment holding
Singapore
Property and investment holding
Singapore
Property investment
Singapore
Investment holding
Singapore
Investment holding
BVI/Singapore
Investment holding
Indonesia
Property investment and development
Indonesia
Property services and development and
investment
#
Indonesia
Property development and investment
Keppel Corporation Limited
Report to Shareholders 2007
Significant Subsidiaries and
Associated Companies
203
SIGNIFICANT SUBSIDIARIES AND ASSoCIATED ComPANIES
Gross
Interest
2007
%
Effective Equity
Interest
2007
%
2006
%
Cost of Investment
2006
2007
$’000
$’000
Country of
Incorporation
/Operation
Principal Activities
PT Mitra Sindo Sukses(1a)
51
27
27
PT Ria Bintan(1a)
100
24
24
PT Sentral Supel Perkasa(2a)
80
42
42
PT Sentral Tanjungan Perkasa(2a)
80
42
42
PT Straits-CM Village(1a)
100
21
21
Quang Ba Royal Park JV Co(4)
70
34
34
Saigon Centre Holdings Pte Ltd(2)
100
53
53
Saigon Centre Investment Ltd(5)
100
53
53
Saigon Riviera JV Co Ltd(2a)
90
48
48
Saigon Sports City(2a)
100
48
48
Shanghai Floraville Land Co Ltd(2a)
99
52
52
Shanghai Merryfield Land Co Ltd(2a)
99
52
52
Shanghai Minghong Property
Co Ltd(2a)
Shanghai Pasir Panjang Land
Co Ltd(2a)
99
52
52
99
52
52
Sherwood Development Pte Ltd(2)
100
53
53
Spring City Resort Pte Ltd(2)
100
53
53
Straits Greenfield Ltd(2a)
100
53
53
Straits Properties Ltd(2)
100
53
53
Straits Property Investments
Pte Ltd(2)
100
53
53
Straits-CM Village Hotel Pte Ltd(2)
85
21
21
Straits-KMP (HK) Ltd(2a)
51
27
27
Third Dragon Development
Pte Ltd(2)
Tianjin Merryfield Property
Development Co Ltd(5)
Vanese International Ltd(5)
Waterville Investment Pte Ltd(2)
Wiseland Investment Myanmar
Ltd(2a)
100
53
53
100
53
53
100
100
67
53
67+
53
100
53
53
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
Indonesia
Property development and investment
Indonesia
Golf course ownership and operation
Indonesia
Property investment and development
Indonesia
Property development
Indonesia
Hotel ownership and operations
Vietnam
Property investment
Singapore
Investment holding
BVI/HK
Investment holding
Vietnam
Vietnam
China
China
China
Property development
Property development
Property development
Property development
Property development
#
China
Property development
#
#
Singapore
Property development
Singapore
Investment holding
# Myanmar
Hotel ownership and operations
#
#
#
#
#
Singapore
Property development
Singapore
Investment holding
Singapore
Property investment
HK
Investment holding
Singapore
Investment holding and marketing agent
#
China
Property development
17,639
BVI/HK
Investment holding
#
Singapore
Investment holding
# Myanmar
Hotel ownership and operations
FELS Property Holdings Pte Ltd
100 100 100
70,214
70,214
Singapore
Investment holding
Brightway Property Pte Ltd
100 100 100
FELS SES International Pte Ltd
100+
85+
83+
Petro Tower Ltd(4)
76
64
63
#
7
#
#
7
#
Singapore
Property investment
Singapore
Investment holding
Vietnam
Property investment
204
Keppel Corporation Limited
Report to Shareholders 2007
Significant Subsidiaries and
Associated Companies
Gross
Interest
2007
%
Effective Equity
Interest
2007
%
2006
%
Cost of Investment
2006
2007
$’000
$’000
Country of
Incorporation
/Operation
Principal Activities
Alpha Real Estate Securities Fund
98
98
98
#
#
Singapore
Investment holding
Esqin Pte Ltd
100 100 100
11,001
11,001
Singapore
Investment holding
Harbourfront One Pte Ltd
70
65
65
#
#
Singapore
Property development
Keppel (USA) Inc(5)
100 100 100
9,702
21,813
USA
Investment holding
Keppel Houston Group LLC(5)
100
86
86
Keppel Kunming Resort Ltd(4)
100+
91+ 100+
#
4
#
4
USA
HK
Property investment
Property investment
Keppel Point Pte Ltd
100+
86+
86+ 122,785
122,785
Singapore
Property development and investment
Keppel Real Estate Investment
Pte Ltd
Associated Companies
100 100
100
50,000
50,000
Singapore
Investment holding
Asia No. 1 Property Fund Ltd(1a)
10
5
5
Asia Real Estate Fund Management
Ltd(2)
50
27
27
BFC Development Pte Ltd(2)
33
17
17
Bugis City Holdings Pte Ltd(2)
31
16
16
Central Boulevard Development
Pte Ltd(n)(2)
33
17
-
China World Investments Pte Ltd(2)
50
27
27
CityOne Township Development
Pte Ltd(2)
50
27
27
EM Services Pte Ltd(4)
25
13
13
Harbourfront Three Pte Ltd(4)
39
33
33
Harbourfront Two Pte Ltd(4)
39
33
33
Kingsdale Development Pte Ltd(2)
50
27
27
One Raffles Quay Pte Ltd(2)
33
17
17
Parksville Development Pte Ltd(2)
50
27
27
PT Pantai Indah Tateli(2a)
50
27
27
PT Purimas Straits Resort(4)
25
13
13
PT Purosani Sri Persada(4)
20
11
11
Renown Property Holdings (M)
Sdn Bhd(2a)
40
21
21
SAFE Enterprises Pte Ltd(4)
25
13
13
Suzhou Property Development
Pte Ltd(4)
Wuxi Cityone Development
Co Ltd(5)
25
13
13
50
27
27
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
-
#
#
#
#
#
#
#
#
#
#
#
Guernsey
Property investment
Singapore
Fund management
Singapore
Property development
Singapore
Property investment
Singapore
Property development
Singapore
Investment holding
Singapore
Investment holding
Singapore
Property management
Singapore
Property development
Singapore
Property development
Singapore
Investment holding
Singapore
Property development
Singapore
Property investment
Indonesia
Property development
Indonesia
Development of holiday resort
Indonesia
Property investment
# Malaysia
Property investment
#
#
Singapore
Investment holding
Singapore
Investment holding
#
China
Property development
Keppel Corporation Limited
Report to Shareholders 2007
Significant Subsidiaries and
Associated Companies
205
SIGNIFICANT SUBSIDIARIES AND ASSoCIATED ComPANIES
Gross
Interest
2007
%
Effective Equity
Interest
2007
%
2006
%
Cost of Investment
2006
2007
$’000
$’000
Country of
Incorporation
/Operation
Principal Activities
InFrAstructure
Power Generation
Subsidiaries
Keppel Energy Pte Ltd
100 100 100 280,914
280,914
Singapore
Investment holding
BV Power Ltd(5)
Corporacion Electrica
Nicaraguense SA(1a)
100
100
100
100 100 100
Dawley Developments Ltd(5)
100 100 100
Keppel Electric Pte Ltd
100 100 100
Keppel Gas Pte Ltd
100 100 100
Keppel Merlimau Cogen Pte Ltd
100 100 100
New Energy Industrial Ltd(5)
100 100 100
Nordeste Generation Energia
Ltda(1a)
100 100 100
Okachi Investments Ltd(5)
100 100 100
Rodeo Power Pte Ltd
100 100 100
Termoguayas Generation SA(1a)
100 100 100
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
BVI/Philippines Holding of long-term investment
Nicaragua
Commercial power generation
BVI/HK
Holding of long-term investments
Singapore
Electricity, energy and power supply and
investment holding and general wholesale
trade
Singapore
Purchase and sale of gaseous fuels
Singapore
Holding of long-term investments,
generation and supply of electricity
BVI/Ecuador
Holding of long-term investments
Brazil
Commercial power generation
BVI/HK
Holding of long-term investments
Singapore
Holding of long-term investments
Ecuador
Commercial power generation
environmental engineering
Subsidiaries
Keppel Integrated Engineering Ltd
100 100 100 163,574
163,574
Singapore
Investment holding
Keppel Seghers Engineering
Singapore Pte Ltd
100 100 100
FELS Cranes Pte Ltd
100 100 100
Keppel FMO Pte Ltd
100 100 100
Keppel Prince Engineering
Pty Ltd(2a)
100 100 100
Keppel Sea Scan Pte Ltd
100 100 100
#
#
#
#
#
#
Singapore
Fabrication of steel structures, mechanical
and electrical works and engineering
services specialising in treatment plants
#
Singapore
Fabrication of heavy cranes and provision
of marine-related equipment
#
Singapore
Construction, project and facilities
management and operational maintenance
of industrial and commercial complexes
#
Australia
Metal fabrication
#
Singapore
Trading and installation of hardware,
industrial, marine and building-related
products, leasing and provision of services
206
Keppel Corporation Limited
Report to Shareholders 2007
Significant Subsidiaries and
Associated Companies
Gross
Interest
2007
%
Effective Equity
Interest
2007
%
2006
%
Cost of Investment
2006
2007
$’000
$’000
Country of
Incorporation
/Operation
Principal Activities
Keppel Seghers Belgium NV(1a)
100 100 100
#
#
Belgium
Provider of services and solutions to the
environmental industry related to solid
waste, waste-water and sludge
management
Keppel Seghers Holdings Pte Ltd
100 100 100
Keppel Seghers Hong Kong Ltd(1a)
100 100 100
#
#
#
#
#
#
Singapore
Investment holding
HK
Engineering contracting and
investment holding
#
Singapore
Collection, purification and distribution
of water
#
Singapore
Collection and treatment of solid waste to
generate green energy
100 100 100
100 100 100
Keppel Seghers Newater
Development Co Pte Ltd
Keppel Seghers Tuas
Waste-to-Energy Plant Pte Ltd
Associated Companies
GE Keppel Energy Services
Pte Ltd(2)
Network engineering & Logistics
Subsidiaries
Keppel Telecommunications &
Transportation Ltd(2)
DataOne Asia Pte Ltd(2)
ECHO Broadband Gmbh(2a)
50
50
50
#
#
Singapore
Precision engineering, repair, services
and agencies
80
80
81 397,647
397,647
Singapore
Investment, management and
holding company
100
100
80
80
81
81
Keppel Communications Pte Ltd(2)
100
80
81
Keppel Logistics (Foshan) Ltd(4)
70
56
57
Keppel Logistics Pte Ltd(2)
100
80
81
Keppel Telecoms Pte Ltd(2)
100
80
81
Transware Distribution Services
Pte Ltd(2)
50
40
41
Trisilco Folec Sdn Bhd(2a)
55
44
45
Associated Companies
Advanced Research Group
Co Ltd(2a)
45
36
36
Asia Airfreight Terminal Company
Ltd(4)
10
8
8
#
#
#
#
#
#
#
#
#
#
#
#
#
Singapore
Investment holding
Germany
Broadband network services
Singapore
Trading and provision of communications
systems and accessories
#
China
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
Operation of air cargo handling terminal
Keppel Corporation Limited
Report to Shareholders 2007
Significant Subsidiaries and
Associated Companies
207
SIGNIFICANT SUBSIDIARIES AND ASSoCIATED ComPANIES
Gross
Interest
2007
%
Effective Equity
Interest
2007
%
2006
%
Cost of Investment
2006
2007
$’000
$’000
Country of
Incorporation
/Operation
Principal Activities
Computer Generated Solutions
Inc(2a)
Premier Data Centres Ltd(n)(4)
Radiance Communications
Pte Ltd(2)
21
17
17
50
50
40
40
-
41
SVOA Public Company Ltd(2a)
31
25
25
Trisilco Radiance Communication
Sdn Bhd(2a)
40
32
32
Wuhu Annto Logistics Company
Ltd(4)
35
28
28
InVestMents
Subsidiaries
Keppel Philippines Holdings Inc(3)
53+
53+
52+
China Canton Investments Ltd
56
56
56
#
#
#
#
#
#
-
#
#
USA
IT consulting and outsourcing provider
-
#
Ireland
Provision of Internet Service Exchange
Singapore
Distribution and maintenance of
communications equipment and systems
#
Thailand
# Malaysia
Distribution of IT products and
telecommunications services
Sales, installation and maintenance of
telecommunications systems, equipment
and accessories
#
China
Transportation, warehousing and distribution
-
#
Philippines
Investment holding
Singapore
Investment holding
k1 eBiz Holdings Pte Ltd
100 100 100
1,814
1,814
Singapore
Investment holding
Kep Holdings Ltd(5)
100+ 100+ 100+ 10,480
10,480
BVI/HK
Investment company
Kephinance Investment (Mauritius)
Pte Ltd(4)
100 100 100
#
# Mauritius
Investment holding
Kephinance Investment Pte Ltd
100 100 100
90,000
90,000
Singapore
Investment holding
Kepital Management Ltd(4)
100 100 100
#
#
HK
Investment company
Kepmount Shipping (Pte) Ltd
100 100 100
4,000
4,000
Singapore
Investment holding
Keppel FELS Invest (HK) Ltd(4)
100 100 100
Keppel Infrastructure Pte Ltd
100
100
100
Keppel Investment Ltd
100
100
100
#
#
#
#
#
#
HK
Investment company
Singapore
Investment holding
Singapore
Investment company
Keppel Oil & Gas Services Pte Ltd
100 100 100 116,609
116,609
Singapore
Investment holding
Kepventure Pte Ltd
100
100 100
16,160
16,160
Singapore
Investment holding
KI Investments (HK) Ltd(4)
100 100 100
#
#
HK
Investment company
KV Management Pte Ltd
100 100 100
250
250
Singapore
Fund management
Steamers Containerships Holdings
Pte Ltd(2)
100
80
92+
#
49
Singapore
Investment holding
Travelmore Pte Ltd
100 100 100
265
265
Singapore
Travel agency
The Vietnam Investment Fund
(Singapore) Ltd
51
51
40
#
#
Singapore
Venture fund investment
208
Keppel Corporation Limited
Report to Shareholders 2007
Significant Subsidiaries and
Associated Companies
Gross
Interest
2007
%
Effective Equity
Interest
2007
%
2006
%
Cost of Investment
2006
2007
$’000
$’000
Country of
Incorporation
/Operation
Principal Activities
Associated Companies
Singapore Petroleum Company Ltd
45
45
45
#
#
#
#
Singapore
Petroleum refining, marketing,
distribution and trading of crude oil and
petroleum products
#
#
Singapore
Investment holding
Singapore
Telecommunications services
36
20
36
16
38
14
k1 Ventures Ltd
MobileOne Ltd(2)
Total
Subsidiaries
Associated Companies
3,079,697 3,109,496
3,074
3,074
Notes:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
All the companies are audited by Deloitte & Touche, Singapore except for the following:
(1a)
(2)
(2a)
(3)
(4)
(5)
Audited by overseas practice of Deloitte & Touche;
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.
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)
Keppel Corporation Limited
Report to Shareholders 2007
Significant Subsidiaries and
Associated Companies
209
STATEmENT BY DIRECToRS
For the financial year ended 31 December 2007
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 of the Group and the balance sheet and statement of changes in equity of the Company as
set out on pages 150 to 209 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 2007, and of the results, changes in equity and cashflows 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, 11 March 2008
teo soon Hoe
Group Finance Director
210
Keppel Corporation Limited
Report to Shareholders 2007
Statement by Directors
INDEPENDENT AUDIToRS’ REPoRT
to the Members of Keppel corporation Limited
For the financial year ended 31 December 2007
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 2007, 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 150 to 209.
Directors’ responsibility
The Company’s directors are responsible for the preparation and fair presentation of these financial statements in accordance with
the provisions of the Singapore Companies Act, Cap. 50 (the “Act”) and Singapore Financial Reporting Standards. 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 2007 and of
the results, changes in equity and cashflows 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
11 March 2008
Keppel Corporation Limited
Report to Shareholders 2007
independent Auditors’ Report
211
INTERESTED PERSoN TRANSACTIoNS
During the financial year, the following interested person transactions were entered into by the Group:
Name of interested person
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)
2007
$’000
2006
$’000
2007
$’000
2006
$’000
Transaction for the Sale of Goods and Services
PSA Corporation Group
SembCorp Marine Group
SembCorp Industries Group
Singapore Power/PowerSeraya/Senoko Power/Tuas Power Group
Singapore Airlines Group
Singapore Telecommunications Group
Gas Supply Pte Ltd
KCL Directors and their associates
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
-
-
-
-
-
-
-
17,447
-
-
-
-
Total interested Person Transactions
17,447
-
-
-
-
-
-
-
-
-
-
-
2,067
463
12,000
4,978
5,150 -
2,273
-
28,000
17,350
4,633 -
13,140 -
- -
380,000
407
-
9,000
492
1,000
270
270
- -
450,953
30,000
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.
212
Keppel Corporation Limited
Report to Shareholders 2007
interested Person Transactions
DIRECToRS AND KEY E xECUTIVES
Directors
Lim Chee Onn, 63
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. Conferred the Distinguished Service Order by the President of the Republic of
Singapore in 2007.
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
Limited, MobileOne Ltd, and Singapore-Suzhou Township Development Pte Ltd and a Board Member of the Monetary Authority of
Singapore, k1 Ventures Limited and Business China. Mr Lim is also the Honorary Chairman of the National Heritage Board, Deputy
Chairman/Advisory Board, Harvard Singapore Foundation and Alternate Member of the Council of Presidential Advisors.
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 Member of the Board of Trustees, Asia Business Council, 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, 61
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.
Mr Chew is the Executive Chairman of Asia Resource Corporation and Chairman of KFC Vietnam. He also serves on the boards of
Macondray Corporation and 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.
Keppel Corporation Limited
Report to Shareholders 2007
Directors and Key executives
213
DIRECToRS AND KEY ExECUTIVES
DIRECToRS AND KEY ExECUTIVES
Lim Hock San, 61
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: 27 April 2007), 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 Gallant Ventures Ltd
and the National Council Against Problem Gambling, and a board member of 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, 72
independent Director
Master of Science, Swiss Federal Institute of Technology, Zurich.
Appointed to the Board in 2000 (date of last re-election: 27 April 2007). 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, 52
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.
214
Keppel Corporation Limited
Report to Shareholders 2007
Directors and Key executives
Directors and Key executives
Oon Kum Loon, 57
independent Director
Bachelor of Business Administration (Honours) from the University of Singapore.
Appointed to the Board in 2004 (date of last re-election: 27 April 2007). 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; 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.
Tow Heng Tan, 52
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: 27 April 2007). A non-executive Director and member of the Company’s
Executive, Remuneration and Board Risk Committees.
Mr Tow has an extensive business career spanning the management consultancy, investment banking and stockbroking industries.
He is currently the Chief Investment Officer 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, 52
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 a director in Drew & Napier LLC, a leading law corporation in Singapore 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 with Drew & Napier in 1989, subsequently founding his own law firm. He was also previously a senior partner in Rajah
& Tann, a leading law firm in Singapore. He rejoined Drew & Napier in 2007.
Mr Yeo is an independent director of two listed companies, namely, Bonvests Holdings Limited and PCA Technology Ltd. He is also
a non-executive director and audit chairman of Ascendas Pte Ltd, which is a government group in commercial property development
and property trust management.
Keppel Corporation Limited
Report to Shareholders 2007
Directors and Key executives
Directors and Key executives
215
DIRECToRS AND KEY ExECUTIVES
Choo Chiau Beng, 60
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 Limited, k1 Ventures Limited, 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, 58
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.
216
Keppel Corporation Limited
Report to Shareholders 2007
Directors and Key executives
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, 61
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, 52
Bachelor degree in Civil Engineering with First Class Honours, Imperial College, London; Masters degree, Massachusetts Institute of
Technology, USA.
Mr Wong has been Group CEO/Managing Director, Keppel Land Limited since January 2000. Prior to this appointment, he was
Executive Director since November 1993. He is Vice-Chairman and Director, Evergro Properties Limited, Chairman and Director
of Alpha Investment Partners Ltd, and Deputy Chairman and Director of K-REIT Asia Management Pte Ltd. He is also a director of
Prudential Assurance Company Singapore (Pte) Ltd.
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, 53
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.
Keppel Corporation Limited
Report to Shareholders 2007
Directors and Key executives
217
DIRECToRS AND KEY ExECUTIVES
Ong Tiong Guan, 49
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..
Chua Chee Wui, 41
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.
Koh Ban Heng, 59
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 (SPC). 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 four 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.
218
Keppel Corporation Limited
Report to Shareholders 2007
Directors and Key executives
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 Private Limited; 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; IES Holdings.
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; United Test and Assembly Center 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.
Oon Kum Loon
Gas Supply Pte Ltd; Intraco Limited; General Securities Investments Limited; PT Bank DBS Indonesia.
Tow Heng Tan
IE Singapore; Shangri-la Asia Limited.
Yeo Wee Kiong
OM Holdings Ltd; China Sun Bio-Chem Technology Group Company Ltd; Ezyhealth Asia Pacific Ltd; City Axis Holdings Ltd (ISG
Asia Limited); Global Testing Corporation Limited; ASJ Limited; Pacific Internet Limited; Territory Iron Ltd; AEM-Evertech Holdings
Ltd; Compact Metal Industries Ltd.
Choo Chiau Beng
Caspian Shipyard Company Limited; EDBI Investments Pte Ltd; FELS Property Holdings Pte Ltd; FELS Realty (Texas) Inc; FELS
(USA) Inc; K1 eBiz Holdings Private Limited; 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; 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.
Keppel Corporation Limited
Report to Shareholders 2007
Directors and Key executives
219
DIRECToRS AND KEY ExECUTIVES
Key executives
Tong Chong Heong
Nil.
Kevin Wong Kingcheung
HDB Corporation Pte Ltd; Singapore Hotel Association; 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; Heritage (Vietnam) Investments Pte Ltd.
Ong Tiong Guan
Nil.
Chua Chee Wui
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.
220
Keppel Corporation Limited
Report to Shareholders 2007
Directors and Key executives
mAjoR PRoPERTIES
Effective
Group
Interest
Location
Description and
Approximate
Land Area
Tenure
Usage
Held By
Completed properties
K-REIT Asia
53%
30-storey office building
99 years leasehold
Commercial office building with
rentable area of 10,074 sqm
(retained interest)
Land area: 7,760 sqm
27-storey office building
Freehold
Commercial office building with
rentable area of 32,624 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
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
One Raffles Quay Pte Ltd
17%
One Raffles Quay,
Singapore
Land area: 11,367 sqm
Two office towers
99 years leasehold
Commercial office building with
rentable area of 124,078 sqm
DL Properties Ltd
34%
Ocean Properties Pte Ltd
40%
Keppel Bay Pte Ltd
86%
Harbourfront One Pte Ltd
65%
Equity Plaza
Cecil Street,
Singapore
Ocean Towers
Collyer Quay,
Singapore
Caribbean at
Keppel Bay,
Singapore
Keppel Bay Tower
HarbourFront
Avenue,
Singapore
Land area: 2,345 sqm
28-storey office building
99 years leasehold
Commercial office building with
rentable area of 23,147 sqm
Land area: 3,552 sqm
27-storey office building
999 years leasehold
Commercial office building with
rentable area of 21,319 sqm
Land area: 97,494 sqm
99 years leasehold
A 969-unit waterfront
condominium development
Land area: 17,267 sqm
18-storey office building
99 years leasehold
Commercial office building with
rentable area of 36,016 sqm
Harbourfront Two Pte Ltd
33%
HarbourFront
Land area: 15,072 sqm
Tower One and Two 18-storey and 13-storey
HarbourFront Place, office buildings
Singapore
99 years leasehold
Commercial office building with
rentable area of 48,671 sqm
PT Straits-CM Village
21%
Club Med Ria Bintan Land area: 200,000 sqm
Bintan,
Indonesia
30 years lease with
option for another
50 years
A 302-room beachfront hotel
PT Kepland Investama
53%
Wisma BCA
Jakarta,
Indonesia
Land area: 10,444 sqm
20 years lease with
option for another
20 years
A prime office development with
rentable area of 38,093 sqm
Keppel Corporation Limited
Report to Shareholders 2007
Major Properties
221
mAjoR PRoPERTIES
Held By
Effective
Group
Interest
Location
Description and
Approximate
Land Area
Tenure
Usage
Keppel Land Watco I Co Ltd 36%
Saigon Centre
(Phase 1 Tower)
Ho Chi Minh City,
Vietnam
Land area: 2,730 sqm
25-storey office, retail
cum serviced apartments
50 years lease
Commercial building with rentable
area of 10,443 sqm office,
3,663 sqm retail, 305 sqm post
office and 89 units of serviced
apartments
Properties under development
Ocean Properties Pte Ltd
40%
BFC Development Pte Ltd
17%
Central Boulevard
Development Pte Ltd
17%
Devonshire Development
Pte Ltd (joint venture)
32%
Keppel Land Realty Pte Ltd 53%
Keppel Bay Pte Ltd
86%
Ocean Financial
Centre,
Collyer Quay,
Singapore
Marina Bay
Financial Centre/
Marina Bay
Residences Marina
Boulevard/Central
Boulevard,
(Phase 1)
Singapore
Marina Bay
Financial Centre/
Marina Bay
Residences Marina
Boulevard/Central
Boulevard,
(Phase 2)
Singapore
The Suites
at Central
Devonshire Road,
Singapore
Park Infinia
Wee Nam/
Keng Lee Road,
Singapore
Reflections
at Keppel Bay,
Singapore
Keppel Bay
Plot 3 and 6,
Singapore
Land area: 2,557 sqm
999 years leasehold
Commercial building with rentable
area of 78,968 sqm *(2011)
Land area: 20,505 sqm
99 years leasehold
An integrated development
comprising office, retail and
428 condominium units *(2010)
Land area: 15,010 sqm
99 years leasehold
An integrated development
comprising office, retail and
221 condominium units *(2012)
Land area: 7,400 sqm
Freehold
A 157-unit condominium
development *(2008)
Land area: 21,733 sqm
Freehold
A 486-unit condominium
development *(2008)
Land area: 83,591 sqm
99 years leasehold
Land area: 82,619 sqm
99 years leasehold
A 1,129-unit waterfront
condominium development
*(2012)
Waterfront condominium
development
Shanghai Pasir Panjang
Land Co Ltd
52%
Eight Park Avenue
Shanghai,
China
Land area: 33,432 sqm
70 years lease
A 946-unit residential apartment
development (Plot B)
*(2009/2010)
222
Keppel Corporation Limited
Report to Shareholders 2007
Major Properties
Held By
Effective
Group
Interest
Location
Description and
Approximate
Land Area
Tenure
Usage
Shanghai Hongda Property 53%
Development Co Ltd
21%
16%
Spring City Golf &
Lake Resort Co
(owned by Kingsdale
Development Pte Ltd)
CityOne Development
(Wuxi) Co
(owned by Pasir Panjang
Realty Pte Ltd)
Residential
development
Shanghai,
China
Spring City Golf
& Lake Resort
Kunming,
China
Central Park City
Wuxi,
China
Land area: 264,090 sqm
70 years lease
(residential)
40 years lease
(commercial)
A 3,082-unit residential
development with integrated
facilities *(2012)
Land area: 2,157,361 sqm 70 years lease
Land area: 352,534 sqm
70 years lease
(residential)
40 years lease
(commercial)
50 years lease
(others)
Integrated resort comprising
golf courses, resort homes and
resort facilities *(2017)
A 4,700-unit residential township
development with integrated
facilities *(2009 Phase 1)
PT Mitra Sindo Sukses/
PT Mitra Sindo Makmur
27%
Jakarta Garden City Land area: 2,700,000 sqm 30 years lease with
Jakarta,
Indonesia
option for another
20 years
A 7,000-unit residential township
*(2009/2010)
industrial properties
Keppel FELS Limited
100%
Jurong, Pioneer,
Cresent and
Tuas South Yard,
Singapore
Land area: 704,509 sqm
buildings, workshops,
building berths and
wharves
24 - 30 years
leasehold
Keppel Shipyard Limited
100%
Benoi and
Tuas Yard,
Singapore
Land area: 775,527 sqm
buildings, workshops,
drydocks and wharves
30 years
leasehold
Oil rigs, offshore and marine
construction, repair, fabrication,
assembly and storage
Shiprepairing, shipbuilding and
marine construction
* Expected year of completion
Keppel Corporation Limited
Report to Shareholders 2007
Major Properties
223
GRoUP FIVE-YEAR PERFoRmANCE
Selected Profit & Loss Account Data
($ million)
Revenue
Operating profit
Profit before tax & 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)
2003
2004
2005
2006
2007
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
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
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
7,601
804
1,139
751
751
4,187
3,113
6,466
135
13,901
5,188
2,957
158
5,598
4,205
1,393
5,598
29.3
35.2
43.9
61.5
25.5
25.7
9.5
9.0
18.5
1.87
1.77
16.2
14.0
3.4
0.77
29.9
29.9
10.0
10.0
20.0
1.98
1.90
18.3
15.5
3.7
0.64
36.1
36.1
11.5
11.5
23.0
2.33
2.23
20.0
16.4
3.9
0.47
47.7
47.7
14.0
14.0
28.0
2.67
2.58
24.7
19.1
4.2
0.24
10,431
1,051
1,556
1,026
1,131
4,831
4,024
6,874
68
15,797
6,139
2,234
389
7,035
5,205
1,830
7,035
81.4
64.9
71.5
64.0
-
64.0
3.28
3.24
27.4
21.8
1.0
0.09
20,505
708
22,186
695
23,625
803
29,185
931
31,914
1,132
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.
3. Comparative figures have been adjusted for sub-division of shares in 2007.
In calculating return on shareholders’ funds, average shareholders’ funds has been used.
224
Keppel Corporation Limited
Report to Shareholders 2007
Group Five-Year Performance
2007
Group revenue of $10,431 million was $2,830 million or 37% higher than that of the previous year. Revenue from Offshore &
Marine Division at $7,258 million was $1,503 million or 26% higher and accounted for 70% of Group revenue. Revenue from
shipconversion and shiprepair was strong. Property Division achieved revenue of $1,835 million, $680 million or 59% higher. The
higher revenue was due to sales of Reflections at Keppel Bay, Sixth Avenue Residences and Park Infinia @ Wee Nam in Singapore,
Villa Riviera in Shanghai and Elita Promenade in Bangalore. Rental income from investment properties was higher as a result of the
tight supply of prime office buildings in the Singapore Central Business District. Revenue from Infrastructure Division more than
doubled to $1,277 million as a result of new income stream from the cogen power plant, NEWater plant, power barges and the
contract for the solid waste management complex in Qatar.
Group profit before tax was $1,556 million or 37% more than the previous year’s. Earnings from Offshore & Marine Division at
$700 million were 12% above the previous year. Production activities continued to increase at the shipyards, however operating
margins were lower because of lower margins from its Brazilian operations. Earnings from Property Division more than doubled to
$471 million due to the higher revenue and operating margins from trading projects, and share of profit of Marina Bay Residences.
In addition, cost provisions no longer required for Singapore trading projects were released in the year. Infrastructure Division
returned firmly to profitability contributing $51 million or 3% of Group pre-tax profit. This was mainly derived from new projects and
the initial contribution from the contract in Qatar. The turnaround was achieved despite higher costs incurred in completing some
old contracts and the higher gas cost to operate the cogen plant. The share of results of associated companies from Investments
was significantly higher due mainly to increased contribution from SPC, which also reported record profits.
Group taxation expenses were higher in the year as a result of write-back of deferred tax amounting to $18 million from the
reduction in the Singapore corporate tax rate from 20% to 18%. After taking into account the higher taxation charge and minority
share of profit, the attributable profit before exceptional items was $1,026 million.
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
repair 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 $751 million.
Revenue ($ billion)
12
Pre-Tax Profit ($ million)
2000
PATMI ($ million)
1200
10
8
6
4
2
0
10.4
7.6
5.9
5.7
4.0
2003
2004
2005
2006
2007
1,556
1000
1,026
1500
1000
500
0
1,139
826
645
557
2003
2004
2005
2006
2007
800
600
400
200
0
751
564
465
394
2003
2004
2005
2006
2007
Keppel Corporation Limited
Report to Shareholders 2007
Group Five-Year Performance
225
GRoUP FIVE-YEAR PERFoRmANCE
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.
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 $20 million in 2002 was excluded, earnings in 2003 would
have increased by 18%.
The Group’s commendable results came mainly from a full year’s earnings of the power barges, contribution from the residential
development in China and gains on quoted securities. Earnings from Offshore & Marine decreased with the lower value of contracts
secured in 2002.
Shareholders’ Funds ($ billion)
6
Capital Employed ($ billion)
8
Market Capitalisation ($ billion)
25
5.2
4.2
3.6
2.9
3.1
2003
2004
2005
2006
2007
5
4
3
2
1
0
7
6
5
4
3
2
1
0
7.0
5.6
4.9
4.3
4.0
2003
2004
2005
2006
2007
20
15
10
5
0
20.6
13.9
8.6
6.7
4.7
2003
2004
2005
2006
2007
226
Keppel Corporation Limited
Report to Shareholders 2007
Group Five-Year Performance
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
2003
2004
2005
2006
2007
5,947
(4,511)
1,436
3,963
(2,679)
1,284
5,688
(4,287)
1,401
7,601
(5,738)
1,863
10,431
(8,123)
2,308
31
89
3
1,559
708
64
67
28
109
204
23
253
-
1,560
60
321
-
1,782
83
315
-
2,261
695
90
41
22
124
187
803
153
22
36
131
189
931
258
62
73
157
292
91
477
565
3,441
1,132
469
63
46
242
351
Total Distribution
976
972
1,145
1,481
1,952
Balance retained in the business:
Depreciation & amortisation
Minority share of profits in subsidiaries
Retained profit for the year
223
71
289
583
180
68
340
588
132
73
432
637
127
60
593
780
126
474
889
1,489
1,559
1,560
1,782
2,261
3,441
Number of employees
20,505
22,186
23,625
29,185
31,914
Productivity data:
Gross value added per employee ($’000)
Gross value added per dollar employment cost ($)
Gross value added per dollar sales ($)
70
2.03
0.24
58
1.85
0.32
59
1.74
0.25
64
2.00
0.25
72
2.04
0.22
($ million)
3500
3000
2500
2000
1500
1000
500
0
Depreciation & Retained Profit
Interest Expense & Dividends
Taxation
Wages, Salaries & Benefits
1,559
1,560
583
204
64
708
588
187
90
695
1,782
637
189
153
803
3,441
1,489
351
469
1,132
2,261
780
292
258
931
2003
2004
2005
2006
2007
Keppel Corporation Limited
Report to Shareholders 2007
Group Value-Added Statements
227
SHARE PERFoRmANCE
Turnover (million)
Share Prices ($)
200
180
160
140
120
100
80
60
40
20
0
20
18
16
14
12
10
8
6
4
2
0
2003
2004
2005
2006
2007
Turnover
High and Low Prices
Share Price ($) (Note 1)
Last transacted
High
Low
Volume weighted average
Per Share
Earnings (Note 1) (cents)
Gross dividend (Note 1) (cents)
Capital distribution (Note 1) (net) (cents)
Distribution yield (Note 2) (%)
Net price earnings ratio (Note 2)
Net assets backing ($) (Note 1)
2003
2004
2005
2006
2007
3.05
3.08
1.78
2.37
25.5
9.5
9.0
7.8
9.3
1.77
4.30
4.38
3.00
3.74
29.9
10.0
10.0
5.4
12.5
1.90
5.50
6.60
4.25
5.69
36.1
11.5
11.5
4.1
15.8
2.23
8.80
9.25
5.55
7.22
47.7
14.0
14.0
3.9
15.1
2.58
13.00
15.30
8.30
11.56
64.9
64.0
-
5.5
17.8
3.24
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.
3. Comparative figures have been adjusted for sub-division of shares in 2007.
228
Keppel Corporation Limited
Report to Shareholders 2007
Share Performance
SHAREHoLDING STATISTICS
As at 29 February 2008
Total no. of issued shares
Issued and Fully Paid-up Capital : $800,791,373.19
Class of Shares
: 1,588,106,180
: 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
DBS Nominees Pte Ltd
Temasek Holdings (Pte) Ltd
Citibank Nominees Singapore Pte Ltd
HSBC (Singapore) Nominees Pte Ltd
DBSN Services Pte Ltd
United Overseas Bank Nominees Pte Ltd
Raffles Nominees Pte Ltd
DB Nominees (S) Pte Ltd
Shanwood Development Pte Ltd
Merrill Lynch (Singapore) Pte Ltd
Morgan Stanley Asia (Singpore) Securities Pte Ltd
Societe Generale S’pore Branch
TM Asia Life Singapore Ltd - PAR Fund
OCBC Nominees Singapore Pte Ltd
Lim Chee Onn
Oversea Chinese Bank Nominees Pte Ltd
Teo Soon Hoe
Amex Nominees (S) Pte Ltd
Royal Bank of Canada (Asia) Ltd
UOB Kay Hian Pte Ltd
Number of
Shareholders
463
14,189
1,950
28
%
2.78
85.32
11.73
0.17
Number of
Shares
210,980
44,425,323
73,639,406
1,469,830,471
%
0.01
2.80
4.64
92.55
16,630
100.00
1,588,106,180
100.00
Number of
Shares
382,728,694
337,643,902
198,606,949
173,065,734
168,487,531
105,402,933
41,763,851
8,276,153
6,400,000
5,783,685
4,243,063
4,215,059
3,789,000
3,425,832
3,334,166(i)
3,303,150
3,168,332(ii)
3,106,131
2,281,414
1,951,500
%
24.10
21.26
12.51
10.90
10.61
6.64
2.63
0.52
0.40
0.36
0.27
0.26
0.24
0.22
0.21
0.21
0.20
0.20
0.14
0.12
Total
1,460,977,079
92.00
Note:
(i)
(ii)
Includes 293,250 shares held by OCBC Nominees Singapore Pte Ltd on his behalf.
Includes 40,000 shares held by OCBC Nominees Singapore Pte Ltd on his behalf.
substantial shareholder
Direct Interest
Deemed Interest
Total Interest
No. of shares
%
No. of shares
%
No. of shares
%
Temasek Holdings (Pte) Ltd
337,643,902
21.26
12,426,269(i)
0.78
350,070,171
22.04
Note (i):-
By operation of Section 7 of the Companies Act, Temasek Holdings (Pte) Ltd is deemed to be interested in an aggregate of 12,426,269 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.
Keppel Corporation Limited
Report to Shareholders 2007
Shareholding Statistics
229
NoTICE oF ANNUAL GENERAL mEETING AND CLoSURE oF BooKS
eppel
Corporation
Keppel corporation Limited
Co Reg No. 196800351N
(Incorporated in the Republic of Singapore)
NOTiCe iS HeReBY GiVeN that the 40th Annual General Meeting of the ordinary shareholders of the Company which will be
held at Four Seasons Hotel, Four Seasons Ballroom (Level 2), 190 Orchard Boulevard, Singapore 248646 on Friday, 25 April 2008
at 2.30 p.m. to transact the following business:
As ordinary business
1.
To receive and adopt the Directors’ Report and Audited Accounts for the year ended 31 December 2007. Resolution 1
2.
3.
4.
5.
To declare a final dividend of 10 cents per share tax exempt one-tier and a special dividend of 45 cents Resolution 2
per share tax exempt one-tier for the year ended 31 December 2007 (2006: final dividend of 8 cents
per share less tax).
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 2):
(i)
Lim Chee Onn
(ii)
Tony Chew Leong-Chee
(iii)
Teo Soon Hoe
Resolution 3
Resolution 4
Resolution 5
To re-elect Mr Sven Bang Ullring who, being over the age of 70 years, will cease to be a director at the Resolution 6
conclusion of this annual general meeting, and who, being eligible, offers himself for re-election
pursuant to Section 153(6) of the Companies Act (Cap. 50) to hold office until the conclusion of the
next annual general meeting of the Company (see Note 2).
To approve the remuneration of the non-executive directors of the Company for the financial year
ended 31 December 2007, comprising the following:
Resolution 7
(a)
the payment of directors’ fees of an aggregate amount of $600,625 in cash
(2006: $610,000); and
(b) (1)
the award of an aggregate number of 15,500 existing ordinary shares in the capital of
the Company (the “Remuneration Shares”) to Mr Tony Chew Leong-Chee, Mr Lim Hock San,
Mr Sven Bang Ullring, Tsao Yuan Mrs Lee Soo Ann, Mr Leung Chun Ying, Mrs Oon Kum Loon,
Mr Tow Heng Tan and Mr Yeo Wee Kiong (together, the “Non-Executive Directors”) as payment
in part of their respective remuneration for the financial year ended 31 December 2007
as follows:
(i)
2,000 Remuneration Shares to Mr Tony Chew Leong-Chee;
(ii)
2,000 Remuneration Shares to Mr Lim Hock San;
(iii)
2,000 Remuneration Shares to Mr Sven Bang Ullring;
230
Keppel Corporation Limited
Report to Shareholders 2007
Notice of Annual General Meeting and
Closure of Books
(iv)
2,000 Remuneration Shares to Tsao Yuan Mrs Lee Soo Ann;
(v)
1,500 Remuneration Shares to Mr Leung Chun Ying*;
(vi)
2,000 Remuneration Shares to Mrs Oon Kum Loon;
(vii)
2,000 Remuneration Shares to Mr Tow Heng Tan; and
(viii)
2,000 Remuneration Shares to Mr Yeo Wee Kiong.
(2)
the directors of the Company be and are hereby authorised to instruct a third party agency to
purchase from the market 15,500 existing shares at such price as the Directors may deem fit
and deliver the Remuneration Shares to each Non-Executive Director in the manner as set out
in (1) above; and
(3) any director or the Secretary be authorised to do all things necessary or desirable to give effect
to the above (see Note 3).
6.
To re-appoint the Auditors and authorise the directors to fix their remuneration.
Resolution 8
As special business
7.
To consider and, if thought fit, approve with or without modification, the following resolution which will be Resolution 9
proposed as an Ordinary Resolution:
That pursuant to Section 161 of the Companies Act, Cap. 50 of Singapore, 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
Keppel Corporation Limited
Report to Shareholders 2007
Notice of Annual General Meeting and
Closure of Books
231
(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 share 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 15% of the issued
Shares in the capital of the Company (as calculated in accordance with sub-paragraph
(2) below);
(2)
(subject to such manner of calculation as may be prescribed by the Singapore Exchange
Securities Trading Limited (“SGX-ST”)) 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 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 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 4).
To transact such other business which can be transacted at the Annual General Meeting of the Company.
232
Keppel Corporation Limited
Report to Shareholders 2007
Notice of Annual General Meeting and
Closure of Books
NOTiCe iS ALSO HeReBY GiVeN that the Transfer Books and the Register of Members of the Company will be closed on
3 May 2008, for the preparation of dividend warrants. Duly completed transfers received by the Company’s registrar, B.A.C.S.
Private Limited, 63 Cantonment Road, Singapore 089758 up to the close of business at 5.00 p.m. on 2 May 2008 will be registered
to determine shareholders’ entitlement to the proposed final and special dividends. The proposed final and special dividends if
approved at this annual general meeting will be paid on 13 May 2008.
BY ORDER OF THE BOARD
caroline chang
Company Secretary
Singapore, 27 March 2008
Notes:
1. A Member is entitled to appoint one proxy or two proxies to attend and vote in his place. 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. 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 Chee Onn will upon re-election continue to serve as Executive Chairman, Chairman of the Executive Committee, and member of the Board Safety Committee. Mr Tony
Chew Leong-Chee will upon re-election continue to serve as member of the Audit Committee and Executive Committee. Mr Teo Soon Hoe will upon re-election continue to serve
as member of the Executive Committee. Mr Sven Bang Ullring will upon re-election continue to serve as Chairman of the Nominating Committee, Chairman of the Remuneration
Committee and member of the Board Safety Committee. These directors (other than Messrs Lim Chee Onn and Teo Soon Hoe) are considered by the Nominating Committee to
be independent directors.
3. The proposed award of Remuneration Shares to the Non-Executive Directors forms part of the ordinary remuneration of the Non-Executive Directors for the financial year ended
31 December 2007, and is in addition to the proposed directors’ fees in cash referred to in Resolution 7. The Remuneration Shares to be awarded to the Non-Executive Directors
will rank pari passu with the then existing issued Shares at the time of the award. The Non-Executive Directors (except Mr Leung Chun Ying) will each, subject to Shareholders’
approval, be awarded 2,000 Shares as part of their remuneration for the financial year ended 31 December 2007. Mr Leung Chun Ying will, subject to Shareholders’ approval,
be awarded 1,500 Shares as part of his remuneration for his service on the Board from 1 January 2007 to 30 September 2007. The Non-Executive Directors will abstain from
voting, and will procure their respective associates to abstain from voting, in respect of this Resolution 7.
4. Resolution 9 is to empower the directors from the date of the Annual General Meeting until the date of the next Annual General Meeting to issue further Shares and Instruments
in the Company, up to a number not exceeding in total 50 per cent. of the issued Shares in the capital of the Company, with a sub-limit of 15 per cent. for issues other than on a
pro rata basis to shareholders. The 15 per cent sub-limit for non-pro rata issue is lower than the 20 per cent sub-limit allowed under the Listing Manual of the SGX-ST and the
Articles of Association of the Company. For the purpose of determining the aggregate number of Shares that may be issued, the percentage of issued shares shall be based
on the number of issued shares in the capital of the Company at the time that Resolution 9 is passed, after adjusting for (a) new Shares arising from the conversion or exercise
of any convertible securities or share options or vesting of share awards which are outstanding or subsisting at the time that Resolution 9 is passed, and (b) any subsequent
consolidation or sub-division of Shares.
* Mr Leung Chun Ying resigned from the Board with effect from 1 October 2007.
Keppel Corporation Limited
Report to Shareholders 2007
Notice of Annual General Meeting and
Closure of Books
233
FINANCIAL CALENDAR
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
Despatch of Summary Financial Report to Shareholders
Despatch of Annual Report to Shareholders
Annual General meeting
2007 Proposed final and special dividends
Books closure date
Payment date
Fy 2008
Financial year-end
Announcement of 2008 1Q results
Announcement of 2008 2Q results
Announcement of 2008 3Q results
Announcement of 2008 full year results
31 December 2007
26 April 2007
26 july 2007
25 october 2007
31 january 2008
27 march 2008
10 April 2008
25 April 2008
5.00 p.m., 2 may 2008
13 may 2008
31 December 2008
April 2008
july 2008
october 2008
january 2009
234
Keppel Corporation Limited
Report to Shareholders 2007
Financial Calendar
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
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)
reMunerAtIon coMMIttee
Sven Bang Ullring (Chairman)
Tsao Yuan mrs Lee Soo Ann
Tow Heng Tan
noMInAtInG coMMIttee
Sven Bang Ullring (Chairman)
Tsao Yuan mrs Lee Soo Ann
oon Kum Loon (mrs)
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
sHAre 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
Year appointed: 2006
Keppel Corporation Limited
Report to Shareholders 2007
Corporate information
235
NoTES
Designed by
greymatter williams and phoa (asia)
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
This annual report is printed on recycled paper