Solutions for
Sustainable Urbanisation
Report to Shareholders 2017
Vision
Mission
Operating Principles
1 Best value propositions
to customers.
2 Tapping and developing best
talents from our global workforce.
3 Cultivating a spirit of innovation
and enterprise.
4 Executing our projects well.
5 Being financially disciplined to
earn best risk-adjusted returns.
6 Clarity of focus and operating
within our core competence.
7 Being prepared for the future.
A global company at the forefront
of our chosen industries, shaping
the future for the benefit of all our
stakeholders – Sustaining Growth,
Empowering Lives and Nurturing
Communities.
Guided by our operating principles
and core values, we will deliver
solutions for sustainable
urbanisation profitably, safely
and responsibly.
Solutions for
Sustainable
Urbanisation
Keppel is a multi-business company committed
to providing robust solutions for sustainable
urbanisation. We are driving value creation
by enhancing collaboration and harnessing
synergies within the Group.
Focused on being at the forefront of our chosen
industries, we are sharpening our competitive
edge and developing new platforms for growth.
Contents
Group Overview
Group Financial Highlights
Group at a Glance
Our Global Presence
Chairman’s Statement
Interview with the CEO
Board of Directors
Keppel Group Boards of Directors
Keppel Technology Advisory Panel
Senior Management
Investor Relations
Significant Milestones in 2017
Performance Review
Operating & Financial Review
Offshore & Marine
Property
Infrastructure
Investments
Management Discussion & Analysis
Financial Review & Outlook
Group Structure
2
4
6
8
14
20
24
26
28
30
32
34
39
42
47
51
53
61
Governance & Sustainability
Sustainability Highlights
Sustaining Growth
Corporate Governance
Risk Management
Regulatory Compliance
Environmental Performance
Product Excellence
Empowering Lives
Labour Practices & Human Rights
Safety & Health
Nurturing Communities
Our Community
Financial Report
Directors’ Statement & Financial Statements
Directors’ Statement
Independent Auditor’s Report
Balance Sheets
Consolidated Profit & Loss Account
Consolidated Statement of
Comprehensive Income
Statements of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
Significant Subsidiaries &
Associated Companies
Other Information
Interested Person Transactions
Key Executives
Major Properties
Group Five-Year Performance
Group Value-Added Statements
Share Performance
Shareholding Statistics
Notice of Annual General Meeting
& Closure of Books
Corporate Information
Financial Calendar
Proxy Form
62
64
91
94
96
97
98
99
100
102
107
114
115
116
117
120
123
171
180
181
185
190
194
195
196
197
202
203
205
Group Financial Highlights
Revenue
Net Profit
$6.0b
$217m
$836m
Decreased 12% from FY 2016's
$6.8 billion.
Including the one-off financial penalty
and related costs of $619 million^.
Excluding the one-off financial penalty
and related costs of $619 million^.
Revenue decreased mainly due to lower
revenue from the Offshore & Marine and
Property divisions, partially offset by
higher revenue from the Infrastructure
and Investments divisions.
Net profit decreased 72% from FY 2016's
$784 million.
Net profit increased 7% from FY 2016's
$784 million, mainly due to higher
contribution from the Property,
Infrastructure and Investments divisions,
partially offset by lower contribution from
the Offshore & Marine Division.
Return On Equity
Earnings Per Share
Cash Dividend Per Share
1.9%
$0.12
22.0cts
Decreased by 5.0 percentage points
from FY 2016's 6.9%.
Decreased 72% from FY 2016's $0.43
per share.
Increased 10% from FY 2016's cash
dividend of 20.0 cents per share.
Excluding the one-off financial penalty
and related costs of $619 million^,
Return on Equity was 7.0%, an increase
of 0.1 percentage points from FY 2016.
Excluding the one-off financial penalty
and related costs of $619 million^,
Earnings Per Share was $0.46, an increase
of 6% from FY 2016.
Total distribution for FY 2017 comprises a
proposed final cash dividend of 14.0 cents
per share and the interim cash dividend of
8.0 cents per share paid out in 3Q 2017.
Net Asset Value Per Share
Net Gearing Ratio
Free Cash Inflow*
$6.29
0.46x
Decreased by 2% from FY 2016's $6.42
per share.
Improved from FY 2016's net gearing
of 0.56x.
$1,802m
Increased from FY 2016's $540 million.
^ One-off financial penalty and related costs of $619 million arose from Keppel Offshore & Marine's global resolution with criminal authorities in the United States,
Brazil and Singapore, and related legal, accounting & forensics costs.
* Free cash inflow excludes expansionary acquisitions and capital expenditure, and major divestments.
2
3
Group Overview
Group Quarterly Results ($m)
Revenue
EBITDA
Operating profit
Profit/(Loss) before tax
Attributable profit/(loss)
Earnings per share (cents)
For the year ($m)
Revenue
Profit
EBITDA
Operating
Before tax
Net profit
Operating cash inflow
Free cash inflow*
Economic value added
Per share
Earnings ($)
Net assets ($)
Net tangible assets ($)
At year-end ($m)
Shareholders’ funds
Non-controlling interests
Total equity
Net debt
Net gearing ratio (times)
Return on shareholders’ funds (%)
Profit before tax
Net profit
Shareholders’ value
Distribution (cents per share)
Interim dividend
Final dividend
Total distribution
Share price ($)
Total shareholder return (%)
1Q
2Q
3Q
4Q
2017
Total
1Q
2Q
3Q
4Q
1,248
1,554
1,617
1,545
5,964
1,743
1,625
1,459
1,940
243
187
346
260
14.3
196
139
218
161
8.9
374
324
363
291
175
126
(411)^
(495)^
16.0
(27.3)^
988
776
516^
217^
11.9^
334
278
278
211
292
234
285
205
238
185
286
225
11.6
11.3
12.4
168
98
206
143
7.9
2016
Total
6,767
1,032
795
1,055
784
43.2
2017
2016
% Change
5,964
6,767
988
776
516^
217^
1,377
1,802
(834)^
0.12^
6.29
6.21
11,433
527
11,960
5,519
0.46
4.3^
1.9^
8.0
14.0
22.0
7.35
30.9
1,032
795
1,055
784
294
540
(140)
0.43
6.42
6.34
11,659
675
12,334
6,966
0.56
8.8
6.9
8.0
12.0
20.0
5.79
(6.3)
-12%
-4%
-2%
-51%
-72%
368%
234%
496%
-72%
-2%
-2%
-2%
-22%
-3%
-21%
-18%
-51%
-72%
–
17%
10%
27%
n.m.
3
2
n.m. = not meaningful
^
Includes the one-off financial penalty from the global resolution and related costs of $619 million.
* Free cash inflow excludes expansionary acquisitions and capital expenditure, and major divestments.
Keppel Corporation Limited | Report to Shareholders 2017
Group at a Glance
Keppel Corporation
Guided by our core values and operating principles, we will deliver
solutions for sustainable urbanisation profitably, safely and responsibly.
As OneKeppel, we will harness synergies across our businesses to seize
new opportunities and create enduring value.
In 2017, we continued to deliver on our multi-business strategy, entering
into new markets and establishing new vehicles and engines for growth.
Our 2017 Highlights
Our 2018/2019 Strategic Focus
Strengthen our core businesses and
collaborate on new opportunities,
unleashing synergies from Keppel’s
multi-business model to achieve our
financial, people, stakeholder and
process goals.
Build new engines for growth through
innovation and technology.
Sharpen project execution through
continuous improvements in productivity
and efficiency.
Focus on enhancing risk management,
compliance, controls and safety.
Enhance people development and
bolster bench strength through talent
management and succession planning.
Maintain strong financial discipline,
seize opportunities to recycle assets,
and deploy capital astutely for the best
risk-adjusted returns.
Delivered 10 major Offshore & Marine
projects including the world’s first floating
liquefaction vessel conversion for Golar
LNG, and secured about $1.2 billion of
non-drilling contracts.
Signed a Heads of Agreement with
Pavilion Energy and Indonesia's PLN to
develop small-scale liquefied natural gas
infrastructure.
Announced investments of about
$1.6 billion and divestments of more than
$1.0 billion in the Property Division as part
of a proactive capital recycling strategy.
Sold over 5,480 homes with a total sales
value of about $2.8 billion.
Secured a contract to design, build and
operate Hong Kong’s first Integrated Waste
Management Facility and commenced
construction of Keppel Marina East
Desalination Plant in Singapore.
Raised over US$1.5 billion of property and
data centre funds under Keppel Capital,
and listed Keppel-KBS US REIT on the
Singapore Exchange.
Established Keppel Urban Solutions as
a master developer of large-scale urban
developments.
Group Revenue ($m)
12%
$5,964m
From 2016's $6,767m
The Keppel Group leverages its
international network, resources
and talents to provide solutions
for sustainable urbanisation,
harnessing synergies across its
different businesses.
With prudent financial discipline
and a strong balance sheet,
we aim to deliver the best risk-
adjusted returns for shareholders
while investing for growth.
Offshore & Marine
Property
Infrastructure
Revenue ($m)
37%
Revenue ($m)
12%
Revenue ($m)
27%
Investments
Revenue ($m)
29%
$1,802m
From 2016's $2,854m
$1,782m
From 2016's $2,035m
$2,207m
From 2016's $1,744m
$173m
From 2016's $134m
The Offshore & Marine
Division is a global leader
in offshore rig design,
construction and repair,
shiprepair and conversion,
and specialised shipbuilding.
With the integration of key
functions in the New Builds
and Conversions & Repairs
divisions, Keppel O&M is
well positioned to provide
customers with reliable
end-to-end solutions.
As a multi-faceted property
player, Keppel Land aims to be
a developer with one of the
highest returns on equity in
Asia. To date, Keppel Land has
a landbank of about 63,000
homes and a commercial
portfolio of about 1.5 million
square metres of gross
floor area.
Keppel Land is committed
to providing quality and
innovative urban living
solutions in the core markets
of Singapore and China, and
growth markets of Vietnam
and Indonesia.
The Infrastructure Division
comprises the Group's
businesses in energy and
environmental infrastructure,
as well as logistics and
data centres.
The Investments Division
comprises Keppel Capital
and Keppel Urban Solutions,
as well as the Group’s
investments in k1 Ventures,
M1, KrisEnergy and the Sino-
Singapore Tianjin Eco-City.
In addition to developing and
operating quality infrastructure
assets, the Division is focused
on growing its recurring
income base from the
management, operation and
maintenance of these assets.
The Investments Division
serves as an incubator for
the Group’s new growth
engines, harnessing the
core capabilities of the
Keppel Group.
Group Net Profit ($m)
Net Profit ($m)
Net Profit ($m)
Net Profit ($m)
Net Profit ($m)
2013
2014
2015
2016
2017
1,846
1,885
1,525
784
217
*
2013
2014
2015
2016
2017
945
1,040
482
29
*
(835)
2013
2014
2015
2016
2017
800
469
661
620
685
2013
2014
2015
2016
2017
13
307
197
99
132
2013
2014
2015
2016
2017
* Including one-off financial penalty from the global
resolution and related costs of $619 million.
* Including one-off financial penalty from
the global resolution and related costs
of $619 million.
Group Net Profit by Division ($m)
Net Profit by Segment ($m)
Net Profit by Segment ($m)
Net Profit by Segment ($m)
Net Profit by Segment ($m)
2016
2017
Offshore & Marine
Property
Infrastructure
Investments
784
836^
2016 2017
^
29 (216)
685
132
235
620
99
36
^ Excluding one-off financial penalty from the global
resolution and related costs of $619 million.
2016
2017
29
(216)^
2016
2017
620
685
2016
2017
99
132
2016
2017
Operations
Associates
2016
(5)
34
2017
^
(213)
(3)
^ Excluding one-off financial penalty from the
global resolution and related costs.
Property Trading
Property Investment
Hotels/Resorts
REIT
2016 2017
240 395
211 212
57
11
112
67
Energy, Environmental
& Infrastructure Services
Data Centres
REIT & Trust
Logistics & Others
2016 2017
66 100
29
20
(16)
3
20
9
Asset
Management
Others
2016 2017
83
64
(28) 152
88
69
185
36
235
36
235
4
4
5
5
For more details on Offshore & Marine,
go to: pages 34–38
For more details on Property,
go to: pages 39–41
For more details on Infrastructure,
go to: pages 42–46
For more details on Investments,
go to: pages 47–50
Keppel Corporation Limited | Report to Shareholders 2017Group Overview
Our Global Presence
Total FY 2017 Revenue
$5,964m
Markets outside of Singapore contributed to
about 49% of the Group’s revenue for FY 2017.
North America
Europe
$281m
United States
$525m
Belgium
Bulgaria
Germany
Italy
Ireland
Netherlands
United Kingdom
South America
$460m
Brazil
Offshore & Marine
Property
Infrastructure
Investments
Solutions for Sustainable Urbanisation
Keppel is an eco-system
of companies working
together to meet the
world’s needs for energy,
urban living, clean
environments, reliable
infrastructure and
connectivity.
China & Hong Kong
$883m
Japan & South Korea
$184m
Rest of Asia
$376m
India
Indonesia
Malaysia
Myanmar
Philippines
Thailand
Vietnam
Australia
$77m
Singapore
$3,048m
Middle East
$130m
Azerbaijan
Qatar
United Arab Emirates
Driving Innovation
Shaping Cities of Tomorrow
Improving Lives
Building Infrastructure
Connecting the World
Transforming Logistics
Creating Quality Assets
With a full suite of innovative
designs, Keppel O&M is
meeting operators' demand
for advanced and cost-efficient
solutions.
Through Keppel Urban Solutions,
we will harness the unique
strengths of the Group to develop
smart cities of the future.
We meet the needs for
quality urban living spaces
through a pipeline of about
63,000 homes.
Drawing on our comprehensive
energy and environmental
solutions, we have the expertise
and track record for developing,
owning and operating a wide
range of infrastructure assets.
With a portfolio of 18 quality
data centres across Asia Pacific
and Europe, we are meeting
the needs of businesses for
digital connectivity.
We offer end-to-end
omnichannel logistics
solutions to tap into the fast
growing e-commerce and
urban logistics sector.
Keppel Capital connects
investors with high-grade real
assets in fast-growing sectors
fuelled by urbanisation.
6
7
Keppel Corporation Limited | Report to Shareholders 2017Group Overview
Chairman’s Statement
Lee Boon Yang
Chairman
Keppel will push ahead with our growth
strategy, harnessing Group synergies and
strengths from all our businesses. We will
also strive to become a stronger, more
disciplined and more sustainable company.
Dear Shareholders,
We live in a rapidly changing and evolving
world. People everywhere face digital
disruptions which are changing the way
they live, work, play, and interact with one
another. Companies must likewise adapt to
the changing environment to stay relevant
and ahead of competitors.
Whether it is the growing prevalence of
e-commerce, increasing shift towards
renewables, needs of ageing population or
rapid urbanisation in many countries, these
megatrends present both challenges and
opportunities that the Group can harness.
Amidst these tectonic shifts, Keppel strives
to become a stronger, more innovative,
and more sustainable company, with
different business units collaborating to
harness synergies in providing solutions for
sustainable urbanisation. Keppel continues
to deliver projects, enter new markets, seize
new opportunities, and establish vehicles
and engines for growth.
Rebuilding Trust
Last December, we closed a painful chapter
with the global resolution reached by
Keppel Offshore & Marine (Keppel O&M)
with criminal authorities in the US, Brazil
and Singapore over corruption investigations
in Brazil.
We regretted and are deeply disappointed
by the misdeeds of certain Keppel O&M
executives, which we now know to have taken
place in Brazil. We have dealt firmly with
the issues, including imposing sanctions
and separation from these executives, and
enhancing the Group's compliance regime.
Integrity is one of Keppel's core values.
We do not and will not tolerate any illegal
activity in the conduct of our business.
The past practices uncovered at Keppel
O&M do not reflect how the Keppel Group
conducts business today. We have put
in place significant enhancements to
the compliance and internal controls
systems across the Group to ensure that
such unacceptable behaviour will not
be repeated.
The Board and management are determined
to hold the Company to the highest ethical
standards and to rebuild and regain the
trust which had been lost. Keppel will win
business legally and ethically, on the merit
of our collective strengths of superior
solutions and execution.
Resilience of Our Multi-Business
Strategy
We have stayed on track with our multi-
business strategy, which continues to steady
the ship through stormy weather.
8
9
Group Overview
which improved the Division’s cash flow.
The first of the five rigs has been delivered
at the start of 2018, while the others will
be progressively delivered over the next
three years.
market for Jones Act vessels in the US,
securing a contract worth more than
US$400 million from Honolulu-based
Pasha Hawaii for the construction of two
LNG dual-fuel containerships.
Keppel O&M is actively pushing into
new markets, such as the LNG business.
With our ability to design, develop and
integrate solutions across the gas value
chain, Keppel is poised to be the gas
industry’s preferred partner and enabler.
We are proud to have delivered Hilli Episeyo,
the world's first Floating LNG (FLNG)
vessel conversion, that was completed
in partnership with Golar LNG with an
excellent safety record of close to 20 million
manhours worked without Lost Time
Incidents. The FLNG vessel has arrived in
Cameroon, and is expected to be a game
changer in the LNG industry, providing a
solution that is not only more cost effective
but also much faster to market.
Keppel O&M has also entered into a
Heads of Agreement with Pavilion Energy
and Indonesia’s state-owned PT Perusahaan
Listrik Negara to explore opportunities in the
development of small-scale LNG solutions
for West Indonesia.
Keppel AmFELS, a wholly-owned subsidiary
of Keppel O&M, made headway into the
Apart from seeking new revenue streams,
Keppel O&M is taking advantage of the
downturn to streamline and reorganise
its operations. Keppel O&M has
reorganised its operations into two
divisions – the New Builds division,
covering Offshore as well as Gas &
Specialised Vessels, and the Conversions
& Repairs division, to better leverage the
different capabilities within the Group, and
emerge more efficient and competitive.
Property
The Property Division continues to be
the largest contributor to the Group’s
bottomline. We are transforming Keppel
Land to be a multi-dimensional real estate
player, with a focus on being a real estate
company with one of the highest rates
of return in Asia.
In 2017, we received strong and positive
response to our homes across Asia,
transacting more than 5,480 units at a
total sales value of about $2.8 billion.
Of these, some 3,725 homes were sold in
China, 1,110 in Vietnam, 380 in Singapore
and 270 in Indonesia.
1.
Hilli Episeyo, the world’s
first FLNG vessel conversion,
was completed with an
excellent safety record.
For the whole of 2017, the Group achieved
a net profit of $217 million, after taking into
account the one-off financial penalty from
the global resolution of $570 million, and
$49 million of related legal, accounting and
forensics costs. Without these one-off items,
the Group would have achieved a net profit
of $836 million, an increase of 7% over
FY 2016, underpinned by earnings growth
in the Property, Infrastructure and
Investments Divisions.
The Group’s Economic Value Added for the
year was negative $834 million, while our
Return on Equity (ROE) was 1.9%. Excluding
the one-off financial penalty and related
costs, our ROE would have been 7%.
The Company has ring-fenced the financial
penalty from the global resolution and
related costs when considering the dividend
payout for the year. Taking into account the
Group’s improved performance, excluding
the one-off financial penalty from the global
resolution and related costs, our stronger
cash flow position and the lower gearing,
the Board of Directors is proposing a final
dividend of 14 cents per share. Together
with the interim cash dividend of 8 cents per
share distributed last August, we would be
paying out a total cash dividend of 22 cents
per share to shareholders for the whole of
2017, compared to 20 cents for 2016.
Offshore & Marine
While the Offshore & Marine (O&M) sector
still faces challenges, we remain confident
about Keppel O&M in the long run, given
our strong track record and capabilities.
There is growing optimism about the O&M
industry following the recovery of oil prices
and increase in offshore rig transactions.
However, the rig market continues to be
weighed down by a severe supply overhang,
and both utilisation and day rates remain
low. A quick recovery of the newbuild rig
market is thus unlikely. Nevertheless, we
continue to see opportunities in the demand
for production assets, Liquefied Natural Gas
(LNG) solutions and specialised vessels.
In 2017, Keppel O&M delivered 10 major
projects, and secured new contracts
worth about $1.2 billion, including Floating
Production Storage and Offloading
conversions, LNG containerships, LNG carriers,
dredgers and a Tension Leg Wellhead
Platform project. This is a significant increase
from the $500 million of new orders in 2016.
As at 31 December 2017, Keppel O&M’s
orderbook stood at $3.9 billion, excluding
the contracts from Sete Brasil.
8
9
Despite the challenges in the jackup
market, we continue to work closely with
customers to seek win-win outcomes.
Keppel FELS closed a deal for the novation
of five Transocean rigs to Borr Drilling,
1
Keppel Corporation Limited | Report to Shareholders 2017 Chairman’s Statement
1
With a landbank of about 63,000
residential units, Keppel Land is not under
pressure to acquire land, and will do so
very selectively. We can even choose to
monetise part of this sizeable landbank,
if there are good opportunities.
In 2017, Keppel Land announced five
divestments totalling more than $1 billion
involving projects mainly in China and
Indonesia. We also made investments
amounting to about $1.6 billion, including
the acquisition of residential sites in
Singapore, Wuxi, Ho Chi Minh City
and Bangkok, thus better positioning
the Group for long-term growth.
On the commercial front, Keppel Land
has about one and a half million square
metres of gross floor area, either completed
or under development. When fully
stabilised, this portfolio can generate an
annual net operating income of about
$300 million.
During the year, we deepened our
presence in key markets in Asia. In Shanghai,
Keppel Land China and Alpha Investment
Partners, together with a co-investor,
collaborated to acquire an office and
retail mixed-use development, Trinity Tower
(formerly known as SOHO Hongkou), for
approximately US$525 million. We also
increased our stake in the landmark mixed-
use development, Saigon Centre, in Ho Chi
Minh City, and expanded our presence in
the Junction City development in Yangon,
another market which Keppel Land has
been in for many years.
Infrastructure
2017 marked several significant
milestones for our infrastructure
business as we strengthened our
positions in energy and environmental
infrastructure, as well as data centres
and logistics. They demonstrate how
the Group is growing in our breadth
of expertise and range of solutions.
Keppel Infrastructure continues
to seek value-enhancing projects,
leveraging its project development,
engineering, and operations and
maintenance expertise. The company
began the year with the signing of the
25-year Water Purchase Agreement
with PUB, the national water agency,
for Singapore’s fourth desalination plant.
The first of its kind in Singapore, the
Keppel Marina East Desalination Plant
will be a large-scale dual-mode
desalination plant that can treat both
seawater and freshwater when it is
completed in 2020.
Keppel Infrastructure has also
concluded an agreement with the
Singapore Economic Development
Board to develop, own and operate
a state-of-the-art environmentally
sustainable gasification facility on Jurong
Island, which will be well positioned
to meet the anticipated future demands
of Singapore’s refining and chemicals
industries. Securing the agreement
is an important step in the preparation
for the final investment decision,
which will be taken at a later date.
10
11
Group Overview Beyond Singapore, Keppel Seghers and
Zhen Hua Engineering Co Ltd have secured
a $5.3 billion contract to design, build and
operate Hong Kong’s first Integrated Waste
Management Facility. Keppel will provide
its proprietary waste-to-energy technology
and participate in the EPC (Engineering,
Procurement and Construction) phase of the
contract and subsequently undertake the
operations and maintenance of the facility
for 15 years after it is completed in 2024.
Keppel Seghers also further reinforced its
position as a leading provider of waste-
to-energy solutions in China by securing
two new contracts to provide technology
solutions to plants in Beijing and Hunan.
Our data centre and logistics businesses
under Keppel Telecommunications &
Transportation are making good progress.
Over the past year, the global data centre
industry has continued expanding, bolstered
by the burgeoning growth of cloud service
providers as well as increasing storage and
processing requirements due to end-user
adoption of new technologies and data
sovereignty regulations.
Keppel Data Centres has injected its interest
in Keppel DC Singapore 4 into the Alpha
Data Centre Fund (Alpha DC Fund). It has also
invested in a US data centre start-up, Nautilus
Data Technologies, which has developed
patented water-cooling technology in
pre-fabricated facilities that present more
cost-efficient and environmentally-friendly
solutions than traditional structures.
Through the investment, we can also
explore opportunities for collaboration
and harnessing of synergies within the
Keppel Group, such as by tapping the
Group's capabilities in the O&M sector for
the development of floating water-cooled
data centres.
We are reshaping our Logistics business to
tap into fast growing market sectors, such as
e-commerce and urban logistics. In October,
Keppel Logistics launched UrbanFox,
an omnichannel logistics and channel
management solutions brand with end-to-
end capabilities from e-commerce channel
management, warehousing and inventory
management to last-mile fulfilment.
Investments
Keppel Capital actively pursues both organic
and inorganic growth opportunities for its
integrated asset management platform.
In 2017, the REITs and Trust managed by
Keppel Capital continued to deliver positive
total returns to unitholders and made several
strategic acquisitions which strengthened
their sustainable income streams. Riding
on the attractive prospects of Australia’s
office market, Keppel REIT acquired a 50%
interest in a premium office tower to be
built at 311 Spencer Street, its second asset
in Melbourne. Keppel DC REIT acquired a
90% interest in Keppel DC Singapore 3,
its third Singapore asset, and a second
data centre asset in Dublin.
Keppel-KBS US REIT was successfully listed
on the Singapore Exchange on 9 November
2017, raising about US$553 million. The US
commercial real estate investment trust,
jointly sponsored by Keppel Capital and KBS
Pacific Advisors, is part of Keppel’s efforts
to expand our asset management business
into new geographies and asset classes.
The Alpha DC Fund had closed at a total of
about US$1 billion, double the initial target
size of US$500 million. The strong interest
garnered and successful closing of the Fund
are testament to Keppel’s ability to grow
our capital platform with investments from
1.
Riding on positive market
sentiments, Keppel Land
will continue to deepen its
presence in growth markets
with projects such as
Empire City in Ho Chi Minh
City, Vietnam.
2.
When completed in 2020,
the Keppel Marina East
Desalination Plant will
contribute to the Group's
recurring income.
10
11
2
Keppel Corporation Limited | Report to Shareholders 2017 Chairman’s Statement
quality institutional investors. The Alpha
DC Fund is a prime example of how we
can collaborate across the Keppel Group
to create and capture value for different
stakeholders.
On a fully leveraged and invested basis,
Keppel Capital’s assets under management
(AUM) has grown from $25 billion in the
preceding year to $29 billion as at end-2017.
We will continue to grow our AUM, boosting
the Group’s funding capabilities and
expanding our funding base.
Large-scale Urban Developments
Keppel leads the Singapore Consortium
in the development of the Sino-Singapore
Tianjin Eco-City (Tianjin Eco-City), which is
envisaged to be a model for sustainable
urban development, which can be replicated
across other cities in China. The Tianjin
Eco-City celebrates its 10th anniversary in
2018, and with its growing maturity, we have
seen increasing demand for homes and land
in the Eco-City. We expect the project to
continue to be a long-term contributor to
the Group in the years ahead.
To leverage the Group’s capabilities and
strong track record in large-scale urban
developments, we announced the creation
of a new business unit, Keppel Urban
Solutions (KUS) in October. KUS will be an
integrator of the latest urban solutions,
bringing together the diverse capabilities
of the Group, and also collaborating with
the best-in-class technology providers,
to create vibrant and smart precincts and
cities of the future.
KUS will begin by collaborating with
Keppel Land to apply our capabilities in
the Saigon Sports City (SSC), a 64-hectare
township in the prime District 2 in Ho Chi
Minh City, Vietnam. We will develop SSC
into a bustling hub, combining modern
and sustainable urban living with vibrant
and healthy lifestyles.
Committed to Sustainability
Keppel is committed to deliver value to
all our stakeholders through Sustaining
Growth in our businesses, Empowering
Lives of people and Nurturing Communities
wherever we operate.
Even as we focus on executing our
businesses well for strong results, the board
and management pay close attention to
environmental, social and governance
issues, and take them into consideration
in the determination of the Company’s
strategy and policies. To assist the Board
in the discharge of its oversight function,
all board committees, namely the Audit,
Board Risk, Nominating, Remuneration,
and Board Safety committees, are actively
engaged and play an important role in
ensuring good corporate governance in
the Company and within the Group.
We are heartened that Keppel’s
sustainability efforts continue to be
recognised internationally, with the
Company’s inclusion in the DJSI Asia
Pacific Index and MSCI Global Sustainability
Index, among others. The Securities
Investors Association (Singapore)
also named Keppel as a winner of its
inaugural Sustainability Award.
With people as our most important
asset, we are committed to nurture
and empower a diverse, competent
and dedicated talent pool to drive
Keppel’s further growth. This year,
we invested over 500,000 hours training
Keppelites, which included leveraging
e-learning platforms for faster and
better reach.
Innovation has always been a part of
Keppel’s DNA. To support Keppel’s
mission to be a leading solutions
provider for sustainable urbanisation,
we established Keppel Technology
& Innovation (KTI) as a change agent
and innovation catalyst for the Group.
Through KTI, we aim to transform
how Keppel harnesses technology
and innovation to create value for our
stakeholders, including innovation in
business models and the way we work,
as well as how we collaborate with third
parties to accelerate change.
1.
Keppel-KBS US REIT is part
of the Group's strategy
to expand its asset
management business
into new geographies
and asset classes.
2.
Our volunteers continue
to engage children at
the Keppel Centre for Art
Education in the National
Gallery Singapore to
inspire creative and
critical thinkers.
1
12
13
Group Overview Even as we focus on
executing our businesses
well for strong results, the
board and management
pay close attention to
environmental, social
and governance issues,
and take them into
consideration in the
determination of the
Company’s strategy
and policies.
Employee Volunteerism
12,000hrs
Of community work achieved by
Keppel Volunteers.
For more information,
go to: page 100
2
We have also embarked on transformational
projects within the Company – Project
Autobots and Project HaRmony – to digitise
our infrastructure and harmonise the
Group’s finance, payroll, procurement and
human resources functions, allowing us to
increase productivity, reap efficiencies and
achieve better control in the digital economy.
Reflecting our strong focus on safety,
Keppel won 36 awards at the Singapore
Workplace Safety and Health Awards 2017,
the highest number of awards won by
a single organisation in the year. While
we have made good progress in our
safety journey, sadly, we lost three of our
colleagues during the year. We must soldier
on in our safety pledge to ensure that
everyone goes home safe, every day.
We are also focused on making a difference
in the wider community, wherever we
operate, be it with the underprivileged,
promoting education or caring for the
environment. Keppelites gave generously
of their time and effort away from the
workplace, clocking about 12,000 hours
of volunteer work in 2017, and exceeding
our target of 10,000 hours. Keppel
Volunteers brought cheer to more than
1,000 beneficiaries, including children from
challenged home fronts and home-alone
seniors as well as low-income families.
Beyond Singapore, our corporate social
responsibility efforts have positively
touched lives in China, Vietnam, Indonesia
and Brazil, among other countries.
The Keppel Discovery Wetlands at the
Singapore Botanic Gardens, restored with
Keppel’s contribution, was officially opened
by Singapore’s Prime Minister Lee Hsien
Loong in March 2017. It has attracted over
600,000 visitors so far.
Acknowledgements
In 2018, Keppel turns 50. We have been
through the best of times and the worst
of times, emerging stronger at every turn.
Today, as OneKeppel and with a distinct suite
of compelling solutions, we are pursuing
and realising opportunities in sustainable
urbanisation.
I would like to thank my fellow directors for
their invaluable advice and commitment,
as we steer Keppel through these
challenging times. I am also grateful to our
many partners and stakeholders for their
unstinting support and continued belief in
Keppel. My deep appreciation also goes
to Keppelites around the world for their
dedication and hard work.
With the support and confidence of all
our stakeholders, I am confident that the
Keppel Group will grow from strength to
strength as we progress beyond the first
50 years.
Yours sincerely,
Lee Boon Yang
Chairman
7 March 2018
12
13
Keppel Corporation Limited | Report to Shareholders 2017
Interview with the CEO
Loh Chin Hua
Chief Executive Officer
Our vision is to be a global company at
the forefront of our chosen industries.
The market has grown to appreciate the
merits of our multi-business strategy and
model for creating and capturing value
across verticals.
Q
2018 marks Keppel Corporation’s 50th
anniversary and also your fifth year as CEO.
What were some of the most significant
highlights of the past few years?
A
When I assumed the role of CEO at the start of 2014,
my focus was to make Keppel an even better and more
successful company, one that would last for generations
to come. That focus remains unchanged.
At the onset, my leadership team and I sought to rally our
diverse business units around a common purpose and
direction for the Group. This set us on a transformational
roadmap, which converged on harnessing the Group’s
synergies as OneKeppel, and building new muscles to
become an agile, better-rounded, and more sustainable
organisation in a fast-changing landscape.
Following the sharp fall in oil price from mid-2014, we found
ourselves in a perfect storm in the Offshore & Marine (O&M)
business, which was at that time the main contributor to
our bottom line. We worked hard over the next few years
rightsizing Keppel Offshore & Marine (Keppel O&M) and
reducing costs, while re-positioning it to capture new
opportunities in the gas and non-drilling sectors.
Through these efforts, Keppel O&M is now more efficient and
compact. With its business units working as an integrated
body to offer better value propositions to our customers and
partners, Keppel O&M is also in a stronger position, ready to
capture opportunities when the O&M industry finally recovers.
With the privatisation of Keppel Land in 2015, our corporate
structure was simplified, giving Keppel Corporation better
control of the Group’s key business verticals. There is now
tighter alignment across units, allowing us to strengthen
collaboration and allocate capital towards investments that
would yield the best risk-adjusted returns. Keppel Land has
contributed noticeably, particularly in recent years. It has
provided a strong pillar of earnings, which has kept the
Group on an even keel, amidst turmoil in the O&M space.
Bolstering our strength in capital management, we
integrated the Group’s asset management businesses
under Keppel Capital in 2016. Through the managed
portfolio of listed trusts and private funds, Keppel Capital
enables the Group to grow its asset management business,
recycle capital and expand its capital base with funding
from co-investors.
More recently, in 2017, we launched Keppel Urban Solutions,
our latest strategic platform aimed at melding the diverse
experience and competencies of the Keppel Group to
develop smart cities of the future, leveraging the latest
technologies.
Today, Keppel is not just a group of diverse entities that
share a common name, but an eco-system of companies
working closely together, with a common purpose to
provide compelling solutions for sustainable urbanisation.
Our vision to be a global company at the forefront of our
chosen industries has been made clear to all Keppelites.
The market has also grown to appreciate the merits of our
multi-business strategy and Keppel’s model for creating
and capturing value across its verticals.
14
15
Group Overview Q
The world is a very different place today.
How does the future look to Keppel?
A
The global economy is enjoying broad-based growth, with
improved business sentiments in both advanced economies
and emerging markets. We are excited about the many
opportunities presented by strong urbanisation trends
across our businesses.
At the same time, we are also seeing rapid change, with
new disruptive technology and business models shaking up
long-standing businesses, and threatening to derail others.
Growing digitalisation, advances in artificial intelligence (AI)
and robotics, will redefine the way we live and work, and
can also give us the very stage to make quantum leaps.
Making Keppel future-ready, in this fast-changing world
with plentiful disruptions, requires us to be agile and bold
in seizing opportunities. Business models are changing,
including those of our customers. We must be nimble,
prepared to take calculated risks, and constantly evolve
to ensure that Keppel remains relevant to our customers
and the market place.
We must dare to experiment, to be the disruptor rather than
the disrupted. Keppel must continue to retain the growth
initiative even in the face of uncertainty. Our success lies
in building resilience, staying relevant and maintaining a
growth mindset.
exercised a spirit of enterprise and taken appropriate
business risks. I encourage all Keppelites to continue
taking legitimate business risks for which we expect to be
rewarded with appropriate returns. But there are bright lines
that we must never cross.
Keppel will win business legally and ethically, based on
our collective strengths, customer-centric solutions and
good track record in execution. We look forward to continue
on our growth trajectory and build a more disciplined and
sustainable business – a Keppel that will remain trusted
and admired by all our stakeholders.
Q
How will you ensure that the Group maintains
a high standard of compliance?
A
The tone for regulatory compliance is driven from the top.
Keppel Corporation’s Board exercises oversight of regulatory
compliance and governance with the support of our Group
Risk and Compliance team. As CEO, I chair the Group’s
Regulatory Compliance Management Committee, whose
members include the heads of all business units. Each
business unit in turn has its own risk and compliance team
to drive and administer the compliance function, ensuring
that policies, measures and best practices are cascaded
down to our operations.
We are creating and capturing value in our chosen industries
in a way that only Keppel can - by defining our own playing
fields and collaborating across units to unleash the synergies
of our business model. Be they data centres, urban logistics,
the gas business or urban solutions, the new growth engines
to propel our future are being built today, even as we
continue to ramp up our existing engines.
Our core value of integrity prohibits Keppel and its employees
from engaging in any unethical practices or behaviour. This
is absolutely clear to me. Since my appointment in 2014,
the Chairman of the Board and I have sent letters to all
employees regularly, underscoring Keppel’s anti-bribery
stance and the need to embrace the Group’s Code of
Conduct and apply it in all aspects of their daily work.
Q
How has the global resolution changed the way
you look at Keppel’s businesses and operations,
particularly in emerging countries where
governance issues and corruption risks are
more prevalent?
A
Our license to operate requires us to act within clear legal
and ethical boundaries, and to contribute positively to the
community, wherever we operate. As we grow our businesses
in this increasingly complex global landscape, we need to
conduct ourselves according to the highest ethical standards,
and always do what is right, even when no one is watching.
The global resolution reached by Keppel O&M brings
closure to a painful chapter. We have put in place effective
compliance controls to ensure that this does not happen
again. Above all, Keppel’s core values of accountability
and integrity must continue to serve as the true north to
guide our people.
Some people have asked if the global resolution would
result in Keppel taking less risks in the future, especially in
emerging countries. This is not the case. Keppel has grown
to what it is today led by generations of leaders who had
Compliance, like safety, is a continuous journey. Since 2015,
we have strengthened our regulatory compliance measures
and rolled out an improved programme across the Group.
We enhanced the Employees’ Code of Conduct, which
sets out key principles to guide Keppelites in carrying out
their duties and responsibilities to the highest standards
of personal and corporate integrity. We also revised and
improved our compliance policies governing gifts and
hospitality, suppliers’ code of conduct, whistle-blowing,
as well as the processes for conducting due diligence on
appointing and making payments to third parties who
represent Keppel in business dealings.
As part of the global resolution with the criminal authorities
in the three jurisdictions, Keppel O&M has committed to
strengthen its compliance processes, obtain certification
by accredited international bodies, and report on its
corporate compliance measures annually. I am confident
that Keppel O&M will emerge from this process a more
disciplined company and a benchmark for the industry.
To further entrench the compliance culture, we ramped
up training programmes for staff, keeping them abreast
of rules and regulations, as well as the expectations
of them as employees and officers of the Company.
This includes comprehensive annual compliance-related
e-learning and attestation exercises, which have to be
completed by all Keppelites.
14
15
Keppel Corporation Limited | Report to Shareholders 2017 Interview with the CEO
Q
Optimism seems to have returned to
the O&M sector with the improvements
in oil price. How does 2018 look from
Keppel’s perspective? Is the long and
harsh winter ending?
A
The more positive market sentiments appear to
be underpinned by rising oil prices, and in general,
a more favourable global economic environment.
However, the hard times may not be over yet for
many in the industry.
As I have cautioned on several occasions, the
offshore rig market continues to be plagued by
a supply overhang, which has put a ceiling to
utilisation and day rates. It could take some more
time for demand and supply to rebalance, before
we see a return in new rig orders. On the brighter
side, the market has seen increased secondary
market activity involving companies such as
Borr Drilling.
Meanwhile, we will advance our pursuit of new
markets and top lines in the non-drilling sector.
Despite the current challenges, Keppel O&M more
than doubled its new contract wins in 2017 to
$1.2 billion, from about $500 million in 2016,
securing a majority of the FPSO conversion jobs
in the market, on top of the contracts for newbuild
dredgers and LNG dual-fuel vessels won.
We expect 2018 to be a more fruitful year.
The team is working hard to convert a pipeline
of potential jobs, many in the production and
non-drilling sectors, into new contracts.
1.
Apart from purchasing land for development, Keppel Land
can also selectively acquire newly-completed assets in prime
locations, such as Trinity Tower (formerly known as SOHO
Hongkou) in Shanghai, China.
Q
Will Keppel O&M continue to feature
prominently in the Group’s business mix
moving forward? What is being done to
prepare it to capture future opportunities?
A
I do not see a future Keppel without an O&M division.
The immediate focus for Keppel O&M in 2018 is to break
even and position itself for growth. Beyond the current
challenges, we have big plans for the Division and
I am very excited about where things are heading.
Whilst shale or unconventional oil will continue to impact
the energy sector, offshore oil is making a comeback.
Offshore oil producers have to up their game to become
more competitive against shale players. As an industry
leader, Keppel O&M will play an important role to help the
offshore oil sector become more efficient.
In response to our customers’ drive to improve
operational efficiency and lower costs across the project
life cycle, Keppel O&M is developing rigs of the future.
Our initiatives include building 'digital twins' of physical
structures, processes and systems; designing smarter rigs
using sensing technology, and providing mission critical
aftermarket services.
To execute these innovations, Keppel O&M is developing
yards of the future, by incorporating robotics and AI into
our manufacturing process. We are also collaborating
with equipment providers to see how we can extract
timely, actionable insights from the vast amount of data
generated from running a rig.
Our end-to-end gas strategy will unveil new opportunities
for the Group in the way forward, taking us beyond a
shipyard’s regular turnkey business model to become a
developer, owner and operator of floating energy
infrastructure. Our experience working with various industry
stakeholders such as governments, energy companies,
operators and financiers over the past few years, has
made apparent the gap that needs to be filled by a
competent and resourceful industry partner and enabler.
With proven cryogenic expertise and the ability to
stitch-up the entire gas value chain, Keppel O&M is well
placed to address this growing market segment. Keppel
O&M can collaborate with Keppel Infrastructure, which is
already an experienced owner, developer and operator
of onshore infrastructure projects, as well as with Keppel
Capital to secure co-investors to fund projects.
In building the future Keppel O&M, we will need to
cast our sights beyond the current playing fields.
As rapid electrification continues, electricity’s share
of total energy demand is expected to increase from
18% in 2015 to around 40% in 2050, with most of the
production coming from renewable sources.
As it is, we have seen oil and gas majors gradually shift
their business focus to renewables. They are also linking
up the value chain, from upstream to downstream,
to convert gas molecules into electrons. Keppel O&M
likewise needs to position itself for this new reality.
We are actively considering expansion into renewables,
and how we can play a part in the electrification of island
states using our proprietary floating solutions.
1
16
17
Group Overview
Q
The Property Division has been the largest
contributor to the Group’s earnings for
the past three years. What opportunities are
you seeing in Keppel Land’s key property
markets?
A
As a provider of quality homes, offices and mixed-use
developments, the Property Division is a core pillar in our
mission to provide solutions for sustainable urbanisation.
Keppel Land is in an enviable position, given its sizeable
pipeline of about 63,000 homes in Asia. Of these units,
31,000 are located in China; 20,000 in Vietnam; 8,200 in
Indonesia and some 1,200 in Singapore.
Despite the cooling measures, we believe that the
demand for good quality homes in China remains healthy.
Keppel Land will continue to deepen its presence in the
five focus cities of Beijing, Chengdu, Shanghai, Tianjin
and Wuxi, where it enjoys strong competitive advantage
and branding.
In Vietnam, long-term prospects are supported by
continued urbanisation and a growing middle class.
As a pioneer foreign developer with a prime landbank
mostly located in Ho Chi Minh City, Keppel Land is well
positioned to tap Vietnam’s vibrant property market.
Keppel Land maintains a quality portfolio in Singapore,
including the Keppel Bay precinct and the Serangoon
North development. Amidst rising land prices, we will
remain disciplined in bidding for sites. The returns must
commensurate with the risks. Meanwhile, we are also
studying the redevelopment of Keppel Towers and
Nassim Woods, which can potentially add another 500
homes in prime locations to our Singapore portfolio.
On the commercial front, rising demand for high-quality
office space in Asia is supporting rental growth in the
region. Today, Keppel Land has a total commercial
portfolio of 1.5 million square metres of gross floor
area, either completed or under development, which
can generate an annual net operating income of about
$300 million when fully stabilised. This puts the company
in prime position to ride the favourable market conditions,
and earn more recurring rental income. When stabilised,
the investment properties could be potentially monetised,
either through a sale or injection into a REIT.
Q
Investors are starting to recognise the inherent
value of the Group’s real estate business. What
is Keppel’s strategy to realise the full potential
of its Property Division?
A
We are transforming Keppel Land into a multi-
dimensional real estate player with one of the highest
returns on equity (ROE) in Asia. Our target is a through-
the-cycle ROE of about 12% for the property business.
Although returns have hovered at high single-digit
levels in the recent three years, we are reasonably
comfortable with a longer-term target of 12% considering
that Keppel Land had achieved an average ROE of
14.6% over the past decade.
In today’s context where land is expensive, we are
fortunate to have entered some markets early and
acquired land at relatively lower cost, particularly in
China and Vietnam. With about 10 years of supply
in its landbank, Keppel Land can afford to be more
selective in its land acquisition – purchasing new
sites only when the pricing makes sense.
In addition to selling homes, Keppel Land will also
continue reviewing its sizeable residential landbank
for opportunities to unlock capital that will give good
returns. A case in point is the divestment of three
residential projects in 2017, equivalent to about 4,330
units sold en bloc, which contributed immediately to
the year’s profit. The value that we unlock can then
be recycled into higher growth opportunities.
Apart from purchasing land for development, we
can also selectively acquire newly-completed assets
in prime locations. The cost of buying land in some
of these prime cities is so high today that standing
investments can be bought below their replacement
costs if we factored in the current land prices.
After acquisition, we can add value through asset
enhancements and improving the tenant mix just as
we are doing in K-Plaza and Trinity Tower (formerly
known as SOHO Hongkou) in Shanghai, China.
An advantage of buying completed assets is that
most of them are already cash flow generating.
Unlike development projects, the time-to-market for
these is also much quicker, making the investment
holding period shorter. Returns for such investments
can be attractive and there is no need to take
development risks.
I am confident that Keppel Land will be an effective,
multi-faceted property solutions provider, as we
work towards maintaining one of the highest ROEs
in the region for a real estate company.
Q
The Infrastructure Division has seen a
pickup in activity in 2017. Could you discuss
the key milestones achieved and the
business prospects in this Division?
A
2017 was a busy year for the Infrastructure Division.
The Division has not only delivered significantly
higher net profits year-on-year but was also
active in securing new projects and building
new businesses.
As an infrastructure developer, owner and operator,
Keppel Infrastructure has contributed steadily to
the Group’s recurring income. In 2017, Keppel
Infrastructure inked two major projects, namely the
Keppel Marina East Desalination Plant (KMEDP),
as well as the Hong Kong Integrated Waste Management
Facility (IWMF). The company also signed an agreement
with the Singapore Economic Development Board
to develop, own and operate a state-of-the-art
gasification facility in the petrochemical hub on Jurong
Island. This agreement is a pivotal first step towards
achieving the final investment decision.
16
17
Keppel Corporation Limited | Report to Shareholders 2017
Interview with the CEO
In 2017, Keppel Infrastructure earned about $160 million
in operations & maintenance revenues from power,
waste-to-energy, district heating and cooling as well
as water and wastewater facilities. When the KMEDP
and Hong Kong IWMF are completed, they will further
extend income visibility from infrastructure services
into 2045.
Meanwhile, Keppel Telecommunications &
Transportation (Keppel T&T) is positioning itself to ride
the digitalisation wave and meet the fast-changing
needs of its data centre and logistics customers.
Keppel T&T will continue pursuing new development
and acquisition opportunities for data centres in
Asia Pacific and Europe. The company will leverage its
partnerships with the Alpha Data Centre Fund (Alpha
DC Fund) and Keppel DC REIT, and focus on green data
centre designs and technologies to sharpen its value
proposition. In 2017, Keppel Data Centres invested
US$10 million in Nautilus Data Technologies, a
Californian startup currently developing a commercial
water-cooled data centre for deployment in 2018.
Rapid urbanisation and the proliferation of connected
mobile devices have fuelled e-commerce in Asia
at high double-digit growth rates, unearthing new
opportunities for omnichannel logistics, multi-modal
transportation, cold chain logistics and intelligent
transportation systems. Last year, we launched
UrbanFox, Keppel Logistics’ new omnichannel
logistics and channel management solutions arm,
to tap opportunities in e-commerce by offering
value-added services and solutions seamlessly
from businesses to consumers.
1.
Through the IWMF,
Keppel will contribute to
Hong Kong's sustainable
urbanisation.
2.
As its pilot project, KUS is
collaborating with Keppel
Land to develop the 64-ha
Saigon Sports City in
Ho Chi Minh City, Vietnam.
Q
The Investments Division performed well
in 2017 with a net profit of $235 million. At a
broader level, what has changed and how
does the Division fit in with the Group’s
growth plans?
A
Prior to 2016, the Investments Division had consisted
mainly of the Group’s holdings in key associates such as
M1, KrisEnergy and the Sino-Singapore Tianjin Eco-City
(Tianjin Eco-City). In the past two years, we have added
to it new operating subsidiaries – Keppel Capital and
Keppel Urban Solutions (KUS) – with the aim of growing
stable income contributions from the Division. Today,
the Investments Division also serves as an incubator of
future growth engines for the Group, as well as a driver
of synergy across our key business verticals.
Through Keppel Capital, we will be looking to create
more private funds and co-investment vehicles with
like-minded investors. This will expand our capital
base and allow us to seize more opportunities without
putting a strain on our balance sheet. By enlarging our
investment capacity with co-funding from like-minded
investors, we can give the Group even greater financial
capacity to grow.
Not all of the funds managed by Keppel Capital will be
invested in assets built by the Group. But there will be
considerable pull through for the various business units
that are engaged in developing infrastructure and other
real assets – all of which are solutions that meet the
needs of urbanisation sustainably.
As the assets under management (AUM) grow, the
requirement for operations & maintenance services will
also increase, thereby enhancing our recurring service
fees. If we add that to the recurring income from our
co-investments in the funds and trusts managed by
Keppel Capital, as well as the asset management fees
we receive, the overall quality of our earnings would
improve over time with a larger proportion of income
from recurring sources.
To further operationalise collaboration and the tapping
of synergies, we created KUS at the end of 2017. KUS will
integrate the latest urban solutions, bringing together
the Group’s capabilities and track record in energy,
property, infrastructure and connectivity, to create
sustainable, highly-liveable and digitally-connected
communities. Moreover, KUS’s open platform allows
us to partner best-in-class technology providers, such
as Microsoft, and tap the power of sensing technology
and the Internet of Things for residents as well as
operators of infrastructure and community services.
The possibilities are boundless. For a start, KUS is
collaborating with Keppel Land to develop the 64-hectare
Saigon Sports City, located in the prime District 2 of
Ho Chi Minh City. Through KUS, the Group can enhance
and capture the value of land and real estate that we
own or acquire. We will be able to enjoy multiple earnings
streams across the Group, as we develop, manage and
maintain properties and horizontal infrastructure, and
provide a host of high-quality urban services. We can
also bring in co-investors through Keppel Capital to
participate in this long-term value creation process.
1
18
19
Group Overview
Q
Keppel Capital targets to grow its AUM to
$50 billion by 2022, how will it get there?
A
Keppel Capital leverages the Group’s core competencies
to create innovative investment solutions, connecting
investors with high-grade real assets in fast-growing
sectors fuelled by sustainable urbanisation trends.
Data centres, power and desalination plants and
offshore vessels are examples of cash-generating real
assets that the Group is capable of developing and
operating, which are also attractive to many investors.
In 2017, Keppel Capital’s AUM grew to $29 billion on a
fully-leveraged and invested basis, compared to $25 billion
in 2016. This was on the back of having raised US$1 billion
for the Alpha DC Fund and US$560 million for the Alpha
Asia Macro Trends Fund III, as well as the successful
listing of the Keppel-KBS US REIT on the Singapore Stock
Exchange with about US$553 million raised.
2
Keppel Capital aims to achieve its AUM target of
$50 billion by 2022 through pursuing both organic
and inorganic growth opportunities, as well as explore
new markets and asset classes in line with the Group’s
core competencies.
The target has been set high. Keppel Capital can also
tap strategic partnerships to help it reach its goals.
Keppel Capital’s joint venture with KBS exemplifies this,
and has enabled us to enter the US commercial real
estate sector with a best-in-class partner.
Q
The Tianjin Eco-City contributed $120 million
to the Group’s net profit for FY 2017. What are
your plans for the Eco-City moving forward?
A
Our long-term investment and involvement in the
master development of the 30-square-kilometre
Tianjin Eco-City is bearing fruit. As the project matures,
we are seeing increasing demand for homes and land
in the Eco-City.
After a long gestation period, in 2016, the project
reversed cumulative losses from previous years, largely
due to the sale of two plots of residential land. In 2017,
the Eco-City continued to perform well, contributing
$120 million to the Group’s net profit, mainly through
the sale of another three land plots. Presently, slightly
more than 45% of the net land in the Eco-City has been
sold or developed, and the price of land sold by our joint
venture, the Sino-Singapore Tianjin Eco-City Investment
and Development Co., Ltd, has been rising steadily.
In 2018, Tianjin Eco-City will be celebrating 10 years of
development. The Eco-City is a long-term undertaking
and we are committed to making sure that the objectives
set by both the Singaporean and Chinese governments
at the inception of the project are achieved. Some degree
of lumpiness is to be expected, as we do not sell land
every quarter. Nevertheless, we expect the Eco-City
to be a significant contributor to Keppel’s bottom line in
the years ahead.
Q
How will the Group stay agile and innovative
to ensure that it continues to succeed in this
fast-changing environment?
A
To thrive in this fast-changing world, we need to be
entrepreneurial and innovative. Keppel has a long history of
innovating for solutions, but we need to do so at a higher speed
and scale. This does not mean that we should disregard risk
management and compliance, nor our operating principle of
being financially disciplined. Rather, we should be prepared
to experiment, and expand the bandwidth for innovation and
enterprise in the Group.
We established Keppel Technology and Innovation (KTI)
with this purpose in mind. As a change agent and innovation
catalyst for the Group, KTI aims to transform how Keppel deploys
technology and innovation to create value for our stakeholders,
imbuing an insurgent mindset that constantly challenges
the status quo.
Whether it is to develop new products and services, improve
existing ones or to innovate and enhance business models and
ways of working, KTI is a platform for all our business units and
teams to co-create and incubate ideas towards tangible outcomes.
To support our ambitious growth plans, we are grooming a new
generation of Keppelites who are committed to our core values
and operating principles, and at the same time, are innovative,
collaborative and nimble. We are harmonising our corporate and
human resources systems, which will allow us to reap efficiencies
and improve controls.
We seek to create a conducive workplace where Keppelites can
explore, develop and fulfil their professional aspirations, and
at the same time help Keppel achieve its mission to provide
solutions for sustainable urbanisation. Our goal is to have great
people working hand-in-glove at Keppel to shape the future,
improve lives and create enduring value for our stakeholders.
As we write the next chapter of the Keppel story, our response
to the challenges and opportunities ahead of us will define
the character of our present and future leaders. Guided by our
operating principles and core values, we will deliver solutions
for sustainable urbanisation profitably, safely and responsibly.
With this common mission, we can stride forward in confidence
and take Keppel into the future.
18
19
Keppel Corporation Limited | Report to Shareholders 2017
Board of Directors
Board Committees
N
Nominating Committee
A
Audit Committee
R
Remuneration Committee
B
Board Risk Committee
B
Board Safety Committee
Lee Boon Yang
age 70
Loh Chin Hua
Chairman,
N R B
Non-Executive and Independent Director
Executive Director and
Chief Executive Officer
age 56
B
Date of first appointment as a director:
1 May 2009
Date of first appointment as a director:
1 January 2014
Date of last re-election as a director:
17 April 2015
Date of last re-election as a director:
19 April 2016
Length of service as a director
(as at 31 December 2017):
8 years 8 months
Board Committee(s) served on:
Nominating Committee (Member);
Remuneration Committee (Member);
Board Safety Committee (Member)
Academic & Professional Qualification(s):
B.V.Sc Hon (2A), University of Queensland, 1971
Present Directorships (as at 1 January 2018):
Listed companies
Singapore Press Holdings Limited (Chairman)
Other principal directorships
Keppel Care Foundation Limited (Chairman);
Singapore Press Holdings Foundation Limited
(Chairman); Jilin Food Zone Pte Ltd (Chairman);
Jilin Food Zone Investment Holdings Pte. Ltd.
(Chairman)
Major Appointments (other than directorships):
Nil
Past Directorships held over the preceding
5 years (from 1 January 2013 to
31 December 2017):
Nil
Others:
Former Minister for Information,
Communications and the Arts (May 2003 to
March 2009); Former Member of Parliament
(December 1984 to April 2011)
Length of service as a director
(as at 31 December 2017):
4 years
Board Committee(s) served on:
Board Safety Committee (Member)
Academic & Professional Qualification(s):
Bachelor in Property Administration, Auckland
University; Presidential Key Executive MBA,
Pepperdine University; CFA® charterholder
Present Directorships (as at 1 January 2018):
Listed companies
Keppel Telecommunications & Transportation Ltd
(Chairman)
Other principal directorships
Keppel Offshore & Marine Ltd (Chairman);
Keppel Land Limited (Executive Chairman);
Keppel Infrastructure Holdings Pte. Ltd.
(Chairman); Keppel Capital Holdings Pte. Ltd.
(Chairman); Keppel Care Foundation Limited
Major Appointments (other than directorships):
Singapore Business Federation (Council
Member); National University of Singapore
(Member of Board of Trustees); Singapore
Economic Development Board (Board Member)
Past Directorships held over the preceding
5 years (from 1 January 2013 to
31 December 2017):
KrisEnergy Ltd; Keppel REIT Management Limited
(Manager of Keppel REIT); Keppel Energy Pte Ltd;
Keppel Land China Limited; Various fund
companies under management of Alpha
Investment Partners Limited
Others:
Nil
20
21
Group Overview
Tow Heng Tan
age 62
Alvin Yeo Khirn Hai
Non-Executive and
Non-Independent Director
N R B
Non-Executive and
Independent Director
age 56
N A
Date of first appointment as a director:
15 September 2004
Date of first appointment as a director:
1 June 2009
Date of last re-election as a director:
21 April 2017
Date of last re-election as a director:
19 April 2016
Length of service as a director
(as at 31 December 2017):
13 years 4 months
Board Committee(s) served on:
Nominating Committee (Member);
Remuneration Committee (Member);
Board Risk Committee (Member)
Length of service as a director
(as at 31 December 2017):
8 years 7 months
Board Committee(s) served on:
Nominating Committee (Member);
Audit Committee (Member)
Academic & Professional Qualification(s):
Fellow of the Association of Chartered Certified
Accountants; Fellow of the Chartered Institute
of Management Accountants; Member of the
Institute of Singapore Chartered Accountants
Present Directorships (as at 1 January 2018):
Listed companies
Nil
Other principal directorships
Pavilion Capital Holdings Pte Ltd; Pavilion Capital
International Pte Ltd; Fullerton Financial Holdings
Pte Ltd; ST Asset Management Ltd;
National Healthcare Group Pte Ltd
Major Appointments (other than directorships):
Pavilion Capital International Pte. Ltd. (CEO);
Center for Asset Management Research &
Investment, NUS (Member);
National Council of Social Services (Member of
Investment Committee)
Past Directorships held over the preceding
5 years (from 1 January 2013 to
31 December 2017):
CapitaLand Township Holdings Pte. Ltd.;
ComfortDelGro Corporation Limited
Others:
Former Chief Investment Officer of Temasek
International (Private) Ltd
Academic & Professional Qualification(s):
LLB Honours, King’s College London,
University of London; Gray’s Inn (Barrister-at-
Law); Senior Counsel, Singapore
Present Directorships (as at 1 January 2018):
Listed companies
United Industrial Corporation Limited;
United Overseas Bank Limited
Other principal directorships
Thomson Medical Pte. Ltd; Valencia C.F.
Major Appointments (other than directorships):
WongPartnership LLP (Chairman and Senior
Partner); Monetary Authority of Singapore
advisory panel to advise the Minister on appeals
under various financial services legislation
(Member); The Court of the Singapore
International Arbitration Centre (Member);
The ICC Commission on Arbitration (Member);
The Singapore Medical Council’s Panel of
Disciplinary Tribunal Chairmen (Member);
Panel of Disciplinary Tribunal Chairmen,
Supreme Court of Singapore (Member);
Fellow of the Singapore Institute of Arbitrators
Past Directorships held over the preceding
5 years (from 1 January 2013 to
31 December 2017):
Singapore Land Limited; Tuas Power Ltd;
Neptune Orient Lines Limited
Others:
Past member of the Senate of the Academy of
Law; Past member of the Council of the Law
Society; Past member of the board of the Civil
Service College; Former Member of Parliament
(2006 to 2015)
20
21
Keppel Corporation Limited | Report to Shareholders 2017 Board of Directors
Tan Ek Kia
age 69
Danny Teoh
Non-Executive and
Independent Director
B
A B
Non-Executive and
Independent Director
age 62
A R B
Date of first appointment as a director:
1 October 2010
Date of first appointment as a director:
1 October 2010
Date of last re-election as a director:
19 April 2016
Date of last re-election as a director:
21 April 2017
Length of service as a director
(as at 31 December 2017):
7 years 3 months
Length of service as a director
(as at 31 December 2017):
7 years 3 months
Board Committee(s) served on:
Board Safety Committee (Chairman);
Audit Committee (Member);
Board Risk Committee (Member)
Board Committee(s) served on:
Audit Committee (Chairman);
Remuneration Committee (Member);
Board Risk Committee (Member)
Academic & Professional Qualification(s):
BSc Mechanical Engineering (First Class Hons),
Nottingham University, United Kingdom;
Management Development Programme,
International Institute for Management
Development, Lausanne, Switzerland;
Fellow of the Institute of Engineers, Malaysia;
Chartered Engineer of Engineering Council,
United Kingdom; Member of Institute of
Mechanical Engineer, United Kingdom
Present Directorships (as at 1 January 2018):
Listed companies
KrisEnergy Ltd (Chairman); PT Chandra Asri
Petrochemical Tbk; Transocean Ltd
Other principal directorships
SMRT Corporation Ltd; Keppel Offshore &
Marine Ltd; Star Energy Group Holdings Pte Ltd
(Chairman); Dialog Systems (Asia) Pte Ltd
Major Appointments (other than directorships):
Nil
Academic & Professional Qualification(s):
Member of the Institute of Chartered
Accountants in England & Wales
Present Directorships (as at 1 January 2018):
Listed companies
DBS Group Holdings Ltd; M1 Limited (Chairman)
Other principal directorships
Changi Airport Group (Singapore) Pte Ltd;
DBS Bank Ltd; DBS Bank (China) Limited;
DBS Foundation Ltd;
Ascendas-Singbridge Pte. Ltd.
Major Appointments (other than directorships):
Nil
Past Directorships held over the preceding
5 years (from 1 January 2013 to
31 December 2017):
Singapore Olympic Foundation; CapitaLand Mall
Trust Management Limited (Manager of
Capitaland Mall Trust); JTC Corporation
Past Directorships held over the preceding
5 years (from 1 January 2013 to
31 December 2017):
CitySpring Infrastructure Management Pte Ltd
(as Trustee-Manager of CitySpring
Infrastructure Trust); City Gas Pte Ltd
Others:
Former Managing Partner, KPMG LLP,
Singapore; Past member of KPMG’s
International Board and Council;
Former Head of Audit and Risk Advisory
Services and Head of Financial Services
Others:
Former Vice President (Ventures and
Developments) of Shell Chemicals, Asia Pacific
and Middle East region (based in Singapore);
Former Chairman, Shell companies in
North East Asia; Former Managing Director,
Shell Malaysia Exploration and Production
22
23
Group Overview
Tan Puay Chiang
age 70
Till Vestring
age 54
Veronica Eng
Non-Executive and
Independent Director
N
BB
Non-Executive and
Independent Director
R N
Non-Executive and
Independent Director
age 64
B A
Date of first appointment as a director:
20 June 2012
Date of first appointment as a director:
16 February 2015
Date of first appointment as a director:
1 July 2015
Date of last re-election as a director:
17 April 2015
Date of last re-election as a director:
21 April 2017
Date of last re-election as a director:
19 April 2016
Length of service as a director
(as at 31 December 2017):
5 years 7 months
Length of service as a director
(as at 31 December 2017):
2 years 11 months
Length of service as a director
(as at 31 December 2017):
2 years 6 months
Board Committee(s) served on:
Nominating Committee (Chairman);
Board Safety Committee (Member);
Board Risk Committee (Member)
Academic & Professional Qualification(s):
MBA (Distinction), New York University;
Bachelor of Science (First Class Honours),
University of Singapore
Board Committee(s) served on:
Remuneration Committee (Chairman);
Nominating Committee (Member)
Board Committee(s) served on:
Board Risk Committee (Chairman);
Audit Committee (Member)
Academic & Professional Qualification(s):
Master of Economics, University of Bonn,
Germany; Master of Business Administration,
Haas School of Business, University of California,
Berkeley
Academic & Professional Qualification(s):
Bachelor of Business Administration
(First Class Honours), University of Singapore
Present Directorships (as at 1 January 2018):
Listed companies
Nil
Other principal directorships
Keppel Capital Holdings Pte Ltd
Present Directorships (as at 1 January 2018):
Listed companies
Nil
Present Directorships (as at 1 January 2018):
Listed companies
Inchcape plc
Other principal directorships
Singapore Power Limited;
SP Services Limited (Chairman)
Major Appointments (other than directorships):
Nil
Past Directorships held over the preceding
5 years (from 1 January 2013 to
31 December 2017):
Neptune Orient Lines Limited
Other principal directorships
Singapore Chinese Orchestra Company Limited;
Leap Philanthrophy Ltd; Banteasy Srey
Development Limited
Major Appointments (other than directorships):
Advisory Partner, Bain & Company Southeast Asia
Major Appointments (other than directorships):
Professor (Practice), NUS Business School;
Centre for Asset Management Research
and Investments, NUS Business School
(Board Member); Singapore’s Diversity Action
Committee (Member)
Past Directorships held over the preceding
5 years (from 1 January 2013 to
31 December 2017):
Nil
Past Directorships held over the preceding
5 years (from 1 January 2013 to
31 December 2017):
Permira Holdings Limited
Others:
Former Chairman, ExxonMobil (China)
Investment Co. (2001 to 2007)
Others:
Nil
Others:
Founding Partner of Permira (1985 to 2015);
Former Member of the Board and Executive
Committee of Permira
22
23
Keppel Corporation Limited | Report to Shareholders 2017 Keppel Group Boards of Directors
Keppel Offshore & Marine
Keppel Infrastructure
Loh Chin Hua
Chairman
Chief Executive Officer,
Keppel Corporation
Chris Ong Leng Yeow
Chief Executive Officer
Stephen Pan Yue Kuo
Chairman,
World-Wide Shipping Agency Limited
Prof Minoo Homi Patel, FREng
Chief Executive Officer,
BPP Technical Services Group, UK
Dr Malcolm Sharples
President,
Offshore Risk & Technology Consulting Inc, USA
Po’ad Bin Shaik Abu Bakar Mattar
Independent Director,
Hong Leong Finance Limited
Tan Ek Kia
Chairman,
Star Energy Group Holdings Pte Ltd
Lim Chin Leong
Former Chairman of Asia,
Schlumberger
Robert D. Somerville
Chairman,
Maine Maritime Academy Board of Trustees
Chan Hon Chew
Chief Financial Officer,
Keppel Corporation
Kevin Kwok Khien
Independent Director,
Singapore Exchange Ltd
Loh Chin Hua
Chairman
Chief Executive Officer,
Keppel Corporation
Dr Ong Tiong Guan
Chief Executive Officer
Chan Hon Chew
Chief Financial Officer,
Keppel Corporation
Koh Ban Heng
Director
Khoo Chin Hean
Director
Louis Lim Lu-Yi
Chief Operating Officer,
Keppel Land
Keppel Infrastructure Fund
Management (Trustee-manager
of Keppel Infrastructure Trust)
Koh Ban Heng
Chairman
Thio Shen Yi
Joint Managing Director,
TSMP Law Corporation
Daniel Cuthbert Ee Hock Huat
Independent Director
Mark Andrew Yeo Kah Chong
Independent Director
Kunnasagaran Chinniah
Independent Director
Christina Tan Hua Mui
Chief Executive Officer,
Keppel Capital
Keppel Telecommunications
& Transportation
Loh Chin Hua
Chairman
Chief Executive Officer,
Keppel Corporation
Thomas Pang Thieng Hwi
Chief Executive Officer
Prof Neo Boon Siong
Canon Endowed Chair Professor of Business
and Director, Asian Business Case Centre at
Nanyang Business School, Nanyang
Technological University
Karmjit Singh
Independent Director
Lim Chin Leong
Former Chairman of Asia,
Schlumberger
Chan Hon Chew
Chief Financial Officer,
Keppel Corporation
Khor Poh Hwa
Independent Director
Lee Ai Ming (Mrs)
Senior Consultant,
Dentons Rodyk & Davidson LLP
24
25
Group Overview
Keppel REIT Management
(Manager of Keppel REIT)
Keppel DC REIT Management
(Manager of Keppel DC REIT)
Penny Goh (Mrs)
Chairman
Co-Chairman and Senior Partner,
Allen & Gledhill LLP
Tan Swee Yiow
Chief Executive Officer
Lee Chiang Huat
Independent Director
Daniel Chan Choong Seng
Managing Director,
DCG Capital Pte. Ltd.
Lor Bak Liang
Independent Director
Christina Tan Hua Mui
Chief Executive Officer,
Keppel Capital
Alan Rupert Nisbet
Principal,
Kanni Advisory
Chan Hon Chew
Chairman
Chief Financial Officer,
Keppel Corporation
Lee Chiang Huat
Independent Director
Leong Weng Chee
Independent Director
Dileep Nair
Independent Director
Teo Cheng Hiang Richard
Independent Director
Dr Tan Tin Wee
Chief Executive, National Supercomputing
Centre (NSCC), Singapore; Chairman, A*STAR
Computational Resource Centre (ACRC);
Associate Professor, Department of
Biochemistry, National University of Singapore
Thomas Pang Thieng Hwi
Chief Executive Officer,
Keppel Telecommunications & Transportation
Christina Tan Hua Mui
Chief Executive Officer,
Keppel Capital
Keppel Land
Loh Chin Hua
Executive Chairman
Chief Executive Officer,
Keppel Corporation
Tan Yam Pin
Former Managing Director,
Fraser and Neave Group
Koh-Lim Wen Gin
Former URA Chief Planner and
Deputy Chief Executive Officer
Yap Chee Meng
Former Senior Partner,
KPMG and COO of KPMG International
for Asia Pacific
Willy Shee Ping Yah
Senior Advisor and
Former Chairman,
CBRE
Chan Hon Chew
Chief Financial Officer,
Keppel Corporation
Keppel Capital
Loh Chin Hua
Chairman
Chief Executive Officer,
Keppel Corporation
Christina Tan Hua Mui
Chief Executive Officer
Chan Hon Chew
Chief Financial Officer,
Keppel Corporation
Dr Ong Tiong Guan
Chief Executive Officer,
Keppel Infrastructure
Thomas Pang Thieng Hwi
Chief Executive Officer,
Keppel Telecommunications & Transportation
Tow Heng Tan
Chief Executive Officer,
Pavilion Capital International Pte. Ltd.
Veronica Eng
Independent Director,
Keppel Corporation
24
25
Keppel Corporation Limited | Report to Shareholders 2017
Keppel Technology Advisory Panel
The Keppel Technology Advisory
Panel (KTAP) was established in
2004 as a key platform to advance
the Group’s technology leadership.
Its members include eminent
business leaders and industry
experts from across the world.
Over the years, KTAP members
have contributed to a broad range
of ideas and technology foresight
in Keppel. Besides offshore and
marine topics like drilling and subsea
technologies, KTAP has broadened
its agenda to cover more of Keppel’s
diversified businesses, with themes
like sustainable urbanisation,
wastewater technologies, solid waste
management, alternative energy
and more. This has helped Keppel
to enhance business value and to
harness synergies across the Group.
KTAP convenes once a year with key
members of Keppel Corporation’s
board and senior management.
Throughout the year, KTAP members
support and provide advice on projects
that are driven by cross-functional
teams across various business units.
Professor Ng Wun Jern
KTAP Chairman
BSc (Civil Engineering), QMC, University of
London; MSc (Water Resources) and PhD,
University of Birmingham, PE(S), FIES, FSEng.
Professor Ng is the Executive Director at the
Nanyang Environment & Water Research
Institute, and Professor of Environmental
Engineering in the School of Civil &
Environmental Engineering at Nanyang
Technological University. He has some
400 publications on water and wastewater
management, has founded spin-off companies
based on his IPs, and serves as technical
advisor to various environmental companies
across ASEAN, China and India. He also
operates his own spin-off companies which
are active in China, Indonesia and Vietnam.
Professor Chan Eng Soon
B.Eng (First Class Honours) & M.Eng,
National University of Singapore (NUS);
PhD, Masachusetts Institute of Technology.
Professor Chan, Provost's Chair Professor in
the Faculty of Engineering at the National
University of Singapore, is a Fellow of the
Singapore Academy of Engineering, Institute
of Marine Engineering, Science & Technology,
and the Institution of Engineers Singapore.
He is the CEO of the Technology Centre for
Offshore & Marine, Singapore and Programme
Director for Offshore & Marine in the Science &
Engineering Research Council of A*STAR.
Professor Chan was Vice Provost (Special
Duties) of the National University of Singapore
and Keppel Chair Professor in the Faculty of
Engineering. Prior to his Vice Provost position,
he was the Dean of the Faculty of Engineering
and Head of the Civil Engineering Department.
He was also the Executive Director of the Centre
for Offshore Research and Engineering,
National University of Singapore, and Director
of Tropical Marine Science Institute.
Professor Chan has served on the Management
Board and Board of Governors of various
institutions and research centres. He now
contributes as a member of the Singapore
Workplace Safety and Health Council and the
Board of Directors of PUB and DSO National
Laboratories. Professor Chan’s research
interests include marine hydrodynamics,
wave-structure interactions, sediment
transport and coastal processes.
Mr Peter Noble
Fellow, Land Medalist and Past-President,
Society of Naval Architects & Marine
Engineering, USA; Fellow and Vice President,
The Institute of Marine Engineering,
Science and Technology, UK; Fellow, Canadian
Academy of Engineering; Offshore Technology
Distinguished Achievement Award for
Individuals, B.Sc. Naval Architecture,
University of Glasgow.
Mr Noble is a naval architect and ocean
engineer with a wide range of expertise
and experience in the marine and offshore
industries. His career has included positions
with shipyards, ship and offshore design
consultants, offshore and marine
research and development companies,
major classification societies and as
chief naval architect with an international
oil company. He currently undertakes
consulting and advisory assignments
across a broad range of topics relating
to ocean engineering.
Mr Noble holds a number of patents
and is active on the advisory boards of a
number of universities and institutions.
Dr Liu Thai-Ker
B. Architecture (First Class Honours and
University Medal) and Doctor of Science
honoris causa, University of New South
Wales; Master in City planning with
Parson's Memorial Medal, Yale University.
Dr Liu is Founder and Head of Morrow
Architects & Planners. He is also the
Founding Chairman of Centre of Liveable
Cities since 2008. Dr Liu has served as
the Adjunct Professor of School of Design
and Environment and the Lee Kuan Yew
School of Public Policy, National University
of Singapore. He is also the Adjunct Professor
in the College of Humanities, Arts & Social
Sciences, Nanyang Technological University.
He is a member of several governmental
bodies in Singapore and planning advisor
to around 30 cities in China.
Dr Liu was Director of RSP Architects
Planners & Engineers Pte Ltd, from 1991
to 2017. He was the Architect-Planner
and CEO of the Housing & Development
Board from 1969 to 1989 and CEO and
Chief Planner of Urban Redevelopment
Authority from 1989 to 1992. Dr Liu
served as the Chairman of the National
Arts Council from 1996 to June 2005,
and Singapore Tyler Print Institute
from 2000 to 2009. He served as the
chairperson of the External Review Panel,
Arts Quality Framework appointed by the
Ministry of Education in 2009 and a founding
member of the Board of Trustees, Arts &
Culture Development Fund, Ministry of
Information, Communications and
the Arts in 2010.
Professor Jim Swithenbank
BSc, PhD, DSc, DEng, FREng, FInstE,
FIChemE, Energy and Environmental
Engineering Group.
Professor Swithenbank is a Fellow of the
Royal Academy of Engineering, Chairman
of the Sheffield University Waste Incineration
Research Centre, and a member of numerous
international combustion and energy
committees. He was the President of the
Institute of Energy from 1986 to 1987, and
served on many UK government/DTI/EPSRC
Committees. He is a prolific researcher
with over 400 refereed papers to his credit
and the holder of more than 30 patents.
Professor Swithenbank’s current work is
largely focused on energy and environmental
issues of CHP, fossil fuels, biomass, wastes
and hydrogen.
26
27
Group Overview
Seated, from left: Loh Chin Hua (CEO of Keppel Corporation), Professor Ng Wun Jern and Dr Lee Boon Yang (Chairman of Keppel Corporation).
Standing, from left: Professor Chan Eng Soon, Professor Jim Swithenbank, Professor Stefan Thomke, Peter Noble, Chua Kee Lock, Dr Liu Thai-Ker, and Professor Foong Sew Bun.
Professor Stefan Thomke
BSc (Electrical Engineering), University of
Oklahoma; MSc (Electrical & Computer
Engineering), Arizona State University;
SM (Operations Research), SM (Mgmt.), PhD
(Electrical Engineering & Mgmt.), Massachusetts
Institute of Technology; Dr. rer. oec. (Honorary),
HHL Leipzig Graduate School of Management,
AM (Honorary), Harvard University.
Professor Thomke has published widely and
is an authority on innovation management.
He is the William Barclay Harding Professor
of Business Administration at Harvard
Business School and has chaired several
of the university’s executive education
programmes. Prior to joining Harvard,
he was with McKinsey & Company in Germany.
Mr Chua Kee Lock
BSc. (Mechanical Engineering),
University of Wisconsin at Madison;
M.Eng, Stanford University.
Mr Chua is the Group President & CEO of Vertex
Venture Holdings Ltd. Prior to joining Vertex
Group, he was the President and Executive
Director of Biosensors International Group, Ltd.
From 2003 to 2006, Mr Chua was a managing
director of Walden International. Between
1987 to 1997 and 2001 to 2003, he served in
various senior roles within the NatSteel Group.
Positions he held include Vice President
of Transpac Capital, CEO of Intraco Ltd
and Deputy President of NatSteel Ltd.
Between 1998 to 2000, Mr Chua was the
Co-founder and President of MediaRing.com
Ltd, a voice-over-Internet services company
which was successfully listed in Singapore
in late-1999.
Mr Chua also serves as an independent
board member of Yongmao Holdings Ltd,
an SGX-listed company.
Professor Foong Sew Bun
Fellow, Singapore Computer Society;
Dip (Electronics and Communications Eng.)
Singapore Polytechnic; MSc. and BSc.
(Computer Science) University of Texas
at Austin.
Professor Foong is the Global Head of Digital
Transformation (Retail, Private Banking, Wealth)
for Standard Chartered Bank, responsible
for agile digital transformation, disruptive
innovation and solution architects in
global Retail, Private Banking and Wealth
Management. Prior to Standard Chartered,
Professor Foong was with IBM from 2000 to
September 2016, where he started as the first
Software Architect for IBM India and South Asia,
and eventually became the first in IBM Asia
Pacific and first Singaporean to be recognised
as an IBM Distinguished Engineer in 2007/2008
for his sustained track record of technical
leadership and innovations. As a former IBM
executive, Professor Foong led top clients of
IBM and IBM technical community as the
Chief Technology Officer for ASEAN and
Singapore, global IBM Cloud Advisor leadership
team, and Chairman of the IBM Growth
Market Unit Distinguished Engineers Board.
He served on top global IBM technical councils
including the corporate Technology Team
Advisory Council, IBM Academy of Technology
Leadership Team and the S&D Technical
Leadership Team.
Prior to IBM, Professor Foong spent 10 years
in the IT industry with healthcare, banks,
university, and led design and implementation
of top secret fighter craft simulators for
defence. He was also an Adjunct Associate
Professor with the National University of
Singapore from 2008 to 2013 and an
Adjunct Professor since 2014.
Professor Foong serves in several major
government and industry committees,
including the Services and Digital Economy
R&D Executive Committee with National
Research Foundation (NRF); Technical Advisor
under the Central Innovation and Enterprise
Office Central Gap Fund of NRF; former
member of the Institute of Singapore Chartered
Accountants CFO Committee; Singapore
Polytechnic Department of Electrical and
Electronics Advisory Committee; committees
by the Singapore Computer Society, and also
served as the former Chairman and Senior
Advisor of the National Infocomm Competency
Framework Steering Committee.
26
27
Keppel Corporation Limited | Report to Shareholders 2017 Senior Management
Keppel Corporation
Loh Chin Hua
Chief Executive Officer
Chan Hon Chew
Chief Financial Officer
Corporate Services
Robert Chong
Director
Group Human Resources
Paul Tan Poh Lee
Group Controller
Louis Lim
Director
Group Strategy & Development
(appointment till 1 Apr 2018)
Managing Director
Keppel Technology & Innovation
(effective 1 Jan 2018)
Khor Un-Hun
Director
Group Mergers & Acquisition
Cindy Lim
Director
Group Corporate Development
Managing Director
Keppel Urban Solutions
(effective 1 Jan 2018)
Lynn Koh
General Manager
Group Treasury
Caroline Chang
General Manager
Group Legal
Ho Tong Yen
General Manager
Group Corporate Communications
Tok Soo Hwa
General Manager
Group Control & Accounts
Sepalika Kulasekera
General Manager
Group Internal Audit
Kevin Chng
General Manager
Group Risk & Compliance
Jacob Tong
General Manager
Group Information Systems
Tay Guan Chew
General Manager
Group Tax
Jaggi Ramesh Kumar
General Manager
Group Health,
Safety & Environment
Eric Goh
Chief Representative, China
Linson Lim Soon Kooi
Country Representative, Vietnam
Tay Lim Heng
Chief Executive Officer
Sino-Singapore Tianjin Eco-City
Investment and Development
Offshore & Marine
Chris Ong Leng Yeow
Chief Executive Officer
Keppel Offshore & Marine
(effective 1 Jul 2017)
Managing Director (Offshore)
Keppel Offshore & Marine
(effective 5 Jun 2017)
Paul Tan Poh Lee
Chief Financial Officer
Keppel Offshore & Marine
(effective 1 Apr 2017)
Chor How Jat
Managing Director
(Conversions & Repairs)
Keppel Offshore & Marine
(effective 5 Jun 2017)
Abu Bakar Bin Mohd Nor
Managing Director
(Gas & Specialised Vessels)
Keppel Offshore & Marine
(effective 5 Jun 2017)
Property
Loh Chin Hua
Executive Chairman
Keppel Land
Ang Wee Gee
Chief Executive Officer
Keppel Land
(appointment till 31 Dec 2017)
Lim Kei Hin
Chief Financial Officer
Keppel Land
Louis Lim
Chief Operating Officer
Keppel Land
(effective 1 Jan 2018)
Ng Ooi Hooi
President, Singapore
Keppel Land
Ben Lee Siew Keong
President, China
Keppel Land
Linson Lim Soon Kooi
President, Vietnam
Keppel Land
Goh York Lin
President, Indonesia
Keppel Land
Sam Moon Thong
President, Regional Investments
Keppel Land
28
29
Group Overview
Infrastructure
Dr Ong Tiong Guan
Chief Executive Officer
Keppel Infrastructure
Lim Siew Hwa
Chief Financial Officer
Keppel Infrastructure
Tan Boon Leng
Executive Director
(Environmental Infrastructure)
Keppel Infrastructure
Nicholas Lai Garchun
Executive Director
(Energy Infrastructure)
Keppel Infrastructure
Alan Tay Teck Loon
Executive Director
(Business Development)
Keppel Infrastructure
Thomas Pang Thieng Hwi
Chief Executive Officer
Keppel Telecommunications & Transportation
Tan Eng Hwa
Chief Financial Officer
Keppel Telecommunications & Transportation
Wong Wai Meng
Chief Executive Officer
Keppel Data Centres
Desmond Gay Kah Meng
Chief Executive Officer
Keppel Logistics
Investments
Unions
Christina Tan Hua Mui
Chief Executive Officer
Keppel Capital
Managing Director
Alpha Investment Partners
(appointment till 31 Jan 2018)
Paul Tham
Chief Financial Officer
Keppel Capital
Tan Swee Yiow
Chief Executive Officer
Keppel REIT Management
(effective 20 Mar 2017)
Khor Un-Hun
Chief Executive Officer
Keppel Infrastructure Fund Management
Chua Hsien Yang
Chief Executive Officer
Keppel DC REIT Management
David Eric Snyder
Chief Executive Officer
Keppel-KBS US REIT Management
(effective 3 Nov 2017)
Alvin Mah
Chief Executive Officer
Alpha Investment Partners
(effective 1 Feb 2018)
Young Lok Kuan
Executive Director
Keppel Capital
(effective 1 Feb 2018)
Keppel FELS Employees’ Union
Vincent Ho Mun Choong
President
Atyyah Binte Hassan
General Secretary
David Lim Kin Wai
Executive Secretary
Keppel Employees’ Union
Razali Bin Maulod
President
Atan Enjah
General Secretary
Shipbuilding & Marine
Engineering Employees’ Union
Tommy Goh Hock Wah
President
Eileen Yeo Chor Gek
General Secretary
NTUC Central Committee Member
Mah Cheong Fatt
Executive Secretary
Singapore Industrial &
Services Employees’ Union
Sazali Bin Zainal
President
(effective 1 Jan 2018)
Philip Lee Soon Fatt
General Secretary
Sylvia Choo Sor Chew
Executive Secretary
Union of Power & Gas Employees
Tay Seng Chye
President
Abdul Samad Bin Abdul Wahab
General Secretary
S. Thiagarajan
Executive Secretary
28
29
Keppel Corporation Limited | Report to Shareholders 2017
Investor Relations
Shareholding by Investors (%)
We are committed to clear, timely and consistent
communication with the investment community.
Institutions
Retail
Total
57.3
42.7
100.0
Shareholding by Geography (%)
Singapore
Asia (ex Singapore)
North America
Europe
Others*
Total
35.8
4.8
10.5
9.8
39.1
100.0
* Others comprise the rest of the
world, as well as unidentified
holdings and holdings below
the analysis threshold as at
9 February 2018.
Keppel Corporation aspires to be a global
company at the forefront of its chosen
industries, shaping the future for the benefit
of all stakeholders. As the Group embarks on
its growth trajectory, investor relations (IR) is
key to providing and maintaining balanced
disclosure of our operational and financial
performance, as well as corporate strategy.
In 2017, we focused on deepening the global
investment community’s understanding
of our multi-business strategy, as well as
the Group’s business verticals which
underpin our mission to deliver solutions
for sustainable urbanisation.
Investor and Analyst Education
During the year, we held 175 meetings and
conference calls with institutional investors,
including non-deal roadshows reaching
out to investors in Canada, Hong Kong,
Japan, Malaysia and the United States (US).
We also hosted site visits to our shipyards
in Singapore, as well as tours of our
residential and commercial properties
in China and Vietnam.
Presently, 19 sell-side research houses, with
analysts based in Singapore and Malaysia,
provide coverage on Keppel Corporation.
We continue to develop and maintain close
interactions with these research analysts,
who contribute to achieving balanced and
fair valuations of the Company.
In 2017, top management hosted a briefing
for analysts on Keppel Offshore & Marine's
(Keppel O&M) gas strategy, in conjunction
with a tour of the Hilli Episeyo Floating
Liquefied Natural Gas (FLNG) vessel at
Keppel Shipyard. We also continued to
improve on disclosures as we engaged
analysts and investors, including providing
more information on the Property and
Investments divisions.
On 16 August 2017, the Securities Investors
Association (Singapore) (SIAS) hosted
Keppel Corporation’s inaugural Retail
Shareholders' Day, during which the CEO
and CFO of Keppel Corporation briefed over
200 investors on the Group’s strategy and
performance. This was part of our ongoing
efforts to engage our retail shareholders as
well as attend to their questions, feedback
and information needs. Our regular
contribution towards the SIAS Investor
Education Programme has benefitted
around 2,500 of our retail shareholders,
who as complimentary members of the
Association, enjoyed access to a wide range
of seminars, workshops and other support
services during the year.
Following the announcement of Keppel O&M's
global resolution with criminal authorities in
the US, Brazil and Singapore at the end of the
year, we actively engaged the investment
community to help them understand the
implications for Keppel Corporation, as well
as the measures put in place to strengthen
controls and compliance. We are committed
to working towards regaining the trust of
all stakeholders.
Our sustained IR efforts have contributed
to a better appreciation of Keppel’s
strategic direction and diverse businesses
by the investment community, supporting
fair market valuations. We will continue
enhancing our IR practices and disclosures
as we work towards becoming a more
disciplined and sustainable company.
IR Resources
Our mobile-friendly corporate website
www.kepcorp.com continues to be
the key resource for stock exchange
announcements, quarterly results and
annual reports, investor events, stock and
dividend information and investor presentation
slides. Contact information of our IR
personnel can also be found on the website.
To ensure fair and prompt dissemination
of information, we post all new material
announcements on our website immediately
after they are released to the Singapore
Exchange (SGX).
We hold “live” webcasts of our results briefings,
which facilitates real-time interaction with
senior management every quarter. An archive
of the quarterly webcast, together with the
presentation materials and management
speeches, is made available on our website
on the same day the results are issued to
the SGX. A transcript of the questions and
answers session from each webcast is also
posted online the following day.
Shareholder Information
As at 9 February 2018, institutions formed
57.3% of our shareholder base, while retail
investors accounted for the remaining
42.7%. Shareholders in Singapore held
approximately 35.8% of our issued capital,
while those in the rest of Asia held 4.8%,
North America 10.5% and Europe 9.8%.
1
30
31
Group Overview Investor Relations Calendar
The following key events and initiatives were organised in 2017 to engage our investors and analysts:
Q1
Q2
4Q & FY 2016 results conference and live webcast.
1Q 2017 live results webcast.
Non-deal roadshow to Tokyo hosted by CLSA.
Non-deal roadshow to San Francisco hosted
by Citi.
Annual General Meeting (AGM) for FY 2016.
Investor tour of properties in Ho Chi Minh City.
Q3
Q4
2Q & 1H 2017 results conference and live webcast.
3Q & 9M 2017 live results webcast.
Analyst briefing on Keppel’s gas strategy and
tour of the Hilli Episeyo FLNG vessel.
Non-deal roadshow to Kuala Lumpur hosted
by CIMB.
Keppel Corporation’s inaugural Retail Shareholders’
Day, hosted by SIAS.
Group visit to Keppel O&M by clients of
Credit Suisse.
Non-deal roadshows to New York and Toronto,
as well as Hong Kong, hosted by CIMB and
DBS respectively.
Presented at Pareto Securities’ 24th annual
Oil & Offshore Conference in Oslo.
Investor tour of properties in Shanghai.
Investor tour of properties in Ho Chi Minh City
and Shanghai.
30
2
3
1.
Analysts were taken on a
tour of the world’s first-of-
its-kind converted FLNG
vessel, Hilli Episeyo,
prior to its delivery.
2.
Dr Lee Boon Yang,
Chairman of Keppel
Corporation, addressing
shareholders' questions
at the Company's AGM.
3.
Mr Chan Hon Chew, CFO
of Keppel Corporation,
spoke at the Company’s
inaugural Retail
Shareholders’ Day
hosted by SIAS.
31
Keppel Corporation Limited | Report to Shareholders 2017 Significant Milestones in 2017
Q1
Q2
Q3
Offshore & Marine
Keppel Offshore & Marine
(Keppel O&M) delivered the
Floating Production Storage
and Offloading vessel (FPSO)
P-66 to Tupi BV and the FPSO
John Agyekum Kufuor to a
subsidiary of Yinson.
Property
Keppel Land announced the
divestment of its 80% interest
in a prime site in Surabaya’s
central business district (CBD).
Keppel Land also increased
its stake in Saigon Centre in
Ho Chi Minh City, Vietnam.
Keppel Land signed a
Memorandum of Understanding
with Vietnam’s State Capital
Investment Corporation to
collaborate on investment
opportunities in Vietnam.
Infrastructure
Keppel Infrastructure signed a
25-year Water Purchase Agreement
with PUB, Singapore's national
water agency, for the Keppel
Marina East Desalination Plant.
Investments
Sino-Singapore Tianjin Eco-City
sold three land parcels at
record prices for a total of about
RMB 5 billion.
Offshore & Marine
Reorganised operations
into the New Builds and
Conversions & Repairs
divisions.
Keppel FELS completed
the novation of contracts
for five jackup rigs under
construction for Transocean to
Borr Drilling for US$1.1 billion,
including a down payment
of US$275 million.
Keppel O&M secured contracts
worth a total of over $300
million, to build two Liquefied
Natural Gas (LNG) carrier vessels,
two Trailing Suction Hopper
Dredgers, and to undertake
the conversion/repair/
modification of four vessels,
as well as provide technology
and support services for the
construction of a Tension
Leg Wellhead Platform.
Keppel O&M delivered
Heydar Aliyev, the first
modern semisubmersible
to be almost completely
built in Azerbaijan.
Property
Keppel Land acquired an
additional stake in the Junction
City mixed-use development
in Yangon, Myanmar, for
about US$49 million.
Corporate
Keppel Corporation clinched
Bronze Award at the 12th
Singapore Corporate Awards
in the Best Annual Report
Category.
Keppel Land China and Alpha
Investment Partners (Alpha),
together with Allianz Real
Estate, acquired a mixed-use
development, Trinity Tower
(formerly known as SOHO
Hongkou) in China, for
approximately US$525 million.
Infrastructure
Keppel Infrastructure signed an
agreement with the Singapore
Economic Development Board
to develop, own and operate
a state-of-the-art gasification
facility on Jurong Island,
Singapore. The final investment
decision will be taken at a
later date.
Investments
Keppel REIT announced the
acquisition of a 50% stake in
a premium office tower in
Melbourne from Australia
Postal Corporation.
At the 18th Securities Investors
Association (Singapore)
Investors’ Choice Awards,
Keppel Corporation won the
inaugural Sustainability Award
and was named runner-up
in the large-cap category
for the Singapore Corporate
Governance Award.
Keppel Corporation ranked
fifth in the general category
of the Singapore Governance
and Transparency Index 2017,
and was listed as an index
component of the Dow Jones
Sustainability Indices Asia
Pacific Index for the fifth
consecutive year.
Offshore & Marine
Keppel O&M entered into a
Heads of Agreement with
Pavilion Energy and PLN to
explore opportunities in the
development of small-scale LNG
solutions for West Indonesia.
We harness synergies
across our businesses to
seize new opportunities
and create enduring value.
Jan
Jun
Over the last 10 years, the Sino-Singapore
Tianjin Eco-City has made steady progress
in realising its vision of being a model for
sustainable urbanisation. Today, more than
80,000 people live and work in the Eco-City.
Keppel Land China, Alpha and Allianz Real
Estate partnered to a mixed-use development
in Shanghai's Hongkou District.
32
33
Group Overview Keppel Land announced
the divestment of its
100% stake in Waterfront
Residences, Nantong, China
for a net gain of about
$79 million.
Infrastructure
Keppel Seghers secured
two contracts worth over
$20 million to provide
waste-to-energy technology
and services for two projects
in Beijing and Hunan, China.
Investments
The Alpha Data Centre Fund
(Alpha DC Fund) acquired a
70% stake in Keppel DC
Singapore 4.
Keppel DC REIT acquired
Keppel DC Dublin 2 (formerly
known as B10 Data Centre)
in Dublin, Ireland, for
approximately $101.3 million.
Keppel AmFELS secured a
contract worth more than
US$400 million from Pasha
Hawaii for the construction
of two dual-fuel LNG
containerships, to be built to
Keppel’s proprietary design.
FueLNG, a joint venture
between Keppel and Shell
Eastern Petroleum, achieved
the first commercial LNG
bunker transfer in Singapore.
Keppel O&M delivered
four non-drilling projects
namely three FPSOs to MTC
Engineering, MODEC and
BW Offshore, and a subsea
construction vessel to the
Shah Deniz consortium.
Property
Keppel Land and Wing Tai
Land jointly won the tender
for a prime residential site in
Serangoon North Avenue 1.
Keppel Land entered into
a conditional sales and
purchase agreement with
Bank Central Asia to acquire
a prime residential site in
Jakarta’s CBD.
Q4
Offshore & Marine
Keppel O&M secured an FPSO
conversion contract from SBM
Offshore, as well as projects
worth approximately $130 million
from repeat customers Petrobras
and SOFEC.
Keppel Singmarine delivered
the multi-purpose ice-class
vessel, MPV Everest, to Maritime
Construction Services.
Keppel Shipyard delivered
the world’s first converted
Floating Liquefaction Vessel,
Hilli Episeyo, to Golar LNG.
Keppel O&M reached a global
resolution with criminal authorities
in the US, Brazil and Singapore,
bringing closure to the corruption
investigations in Brazil.
Property
Keppel Land announced the
proposed divestment of its stake
in mixed-use development
Keppel Cove, Zhongshan City,
China, as well as a 20.5-hectare
site in West Bali’s Tanah Lot
district in Indonesia.
Keppel Land announced
the acquisition of five prime
residential sites in China,
Vietnam and Thailand.
Infrastructure
Keppel Seghers and Zhen Hua
Engineering jointly secured a
contract to design, build and
operate an Integrated Waste
Management Facility (IWMF)
off the coast of Shek Kwu Chau,
Hong Kong.
Keppel Logistics launched
UrbanFox, an omnichannel
logistics and channel
management solutions brand.
Investments
The Alpha DC Fund closed at
US$1 billion, double its initial
target size, after a commitment
from the Canada Pension Plan
Investment Board to allocate
an initial US$350 million, with
an option to invest a further
US$150 million.
Keppel-KBS US REIT was
listed on the Main Board of
the Singapore Exchange,
raising gross proceeds of about
US$553 million.
Keppel Corporation announced
the establishment of a new
business unit, Keppel Urban
Solutions, which aims to be an
end-to-end integrated master
developer of smart, sustainable
precincts in Asia.
Sep
Oct
Dec
The Heads of Agreement signed between
Keppel O&M, Pavilion Energy and PLN
will pave the way for the development
of small-scale LNG infrastructure serving
West Indonesia.
Keppel Urban Solutions will collaborate with
Keppel Land to develop Saigon Sports City
into a bustling hub in Ho Chi Minh City.
The IWMF, a landmark project to be
jointly developed by Keppel Seghers and
Zhen Hua Engineering, will play a key role in
Hong Kong’s waste management strategy.
32
33
Keppel Corporation Limited | Report to Shareholders 2017 Operating & Financial Review
Offshore & Marine
We aim to be the preferred
solutions partner in the
global offshore and
marine industry.
Revenue
$1.8b
As compared to
$2.9b for FY 2016.
Net Loss
$835m
Includes one-off
financial penalty from
the global resolution
and related costs.
Major Developments in 2017
Streamlined Keppel O&M into the New
Builds and Conversions & Repairs divisions.
Delivered 10 major projects safely, on time
and on budget, including the world’s first
FLNG vessel conversion for Golar LNG.
Secured about $1.2 billion worth of new
contracts mainly for non-drilling solutions.
Signed Heads of Agreement with Pavilion
Energy and PLN to explore small-scale LNG
solutions for West Indonesia.
Reached a global resolution with criminal
authorities in the US, Brazil and Singapore,
bringing closure to investigations on
corrupt payments made in Brazil.
Focus for 2018/2019
Continue to focus on execution excellence,
corporate governance and risk management.
Capture opportunities in new and existing
markets, leveraging synergies across
Keppel O&M and the wider Group to
build up new strengths and expand
solution offerings.
Invest in R&D to strengthen existing
capabilities and build new muscles for
long-term growth.
Continue to explore re-purposing offshore
technology for other applications.
34
Earnings Highlights ($m)
Revenue
EBITDA
Operating (Loss)/Profit
(Loss)/Profit before Tax
Net (Loss)/Profit
Average Headcount (Number)
Manpower Cost
2017
1,802
(47)
(176)
(862)*
(835)*
2016
2015
2,854
6,241
300
135
90
29
744
597
699
482
15,571
623
22,191
29,004
821
1,170
* Includes one-off financial penalty from the global resolution and related costs.
Earnings Review
In 2017, the Offshore & Marine (O&M) Division
continued to see demand for production
assets, Liquefied Natural Gas (LNG) solutions
and specialised vessels. It secured new non-
drilling contracts worth about $1.2 billion from
new and repeat customers. As at end-2017,
non-drilling solutions made up over 70% of
the Division’s $3.9 billion net orderbook.
Revenue from the Division declined 37%
year-on-year to $1.8 billion, due to the lower
volume of work and the deferment of some
projects. The Division turned in an operating
loss of $176 million for the same period,
mainly due to weaker operating results
arising from lower revenue.
The O&M Division incurred a net loss of
$835 million for FY 2017, compared to a
net profit of $29 million for FY 2016. This
was due mainly to the one-off financial
penalty of $570 million, arising from Keppel
Offshore & Marine’s (Keppel O&M) global
resolution with criminal authorities in the
US, Brazil and Singapore, and $49 million of
related legal, accounting and forensics costs,
lower operating costs and lower share of
associated companies’ profit. These were
partly offset by lower impairment provisions
and lower net interest expense. Excluding
the one-off financial penalty from the global
resolution and related costs, the Division’s
net loss would have been $216 million.
During the year, the Division also made an
additional provision of $81 million for expected
losses on the semisubmersibles being
built for Sete Brasil, as well as $54 million
in impairments on other assets.
Operating Review
2017 was an eventful year for the O&M Division.
The global resolution reached by Keppel O&M
35
Performance Review
with criminal authorities in the US, Brazil and
Singapore brought closure to the investigations
on corrupt payments made in Brazil. Keppel
O&M will continue its operations in the US,
Brazil and Singapore, and does not expect
any negative impact on its ability to bid for
contracts in these or other countries.
Effective compliance controls have been
implemented to ensure that Keppel O&M
emerges as a more disciplined and
sustainable company.
In response to the challenging business
environment, Keppel O&M continued its
rightsizing efforts to streamline operations
and reduce overheads. During the year,
Keppel O&M’s direct global staff strength
was reduced by about 25% from 2016, while
its subcontract workforce in Singapore came
down by about 23% in the same period.
As part of efforts to optimise operations
and rationalise its global network of yards,
Keppel O&M divested Keppel Verolme and
ceased operations of two supporting yards
in Singapore. In January 2018, Keppel also
announced that Caspian Shipyard Company
had commenced its members’ voluntary
liquidation, following the expiration of
the agreement made between AzerFELS
(a subsidiary of Keppel O&M), the State Oil
Company of Azerbaijan Republic (SOCAR)
and Lukoil Europe Holdings.
Keppel O&M will continue to monitor
the environment and take the necessary
measures to reduce costs, while retaining
its core capabilities, with the goal of making
the company leaner, stronger and more
competitive for the upturn.
Notwithstanding the challenging
environment, Keppel O&M secured new
orders worth about $1.2 billion in 2017,
more than double the $500 million secured
in 2016. These included two LNG dual-fuel
containerships from Pasha Hawaii; three
dredgers from Jan De Nul; two LNG carriers
from Stolt-Nielsen Gas; Floating Production
Storage and Offloading (FPSO) jobs from
SBM Offshore, BW Offshore and Petrobras,
as well as engineering and construction
management support services on a
Tension Leg Wellhead Platform (TLWP)
from PetroVietnam.
In 2017, Keppel O&M delivered 10 major
projects safely, on time and on budget.
These included an Floating Liquefied Natural
Gas (FLNG) vessel conversion for Golar LNG;
four FPSOs for Yinson, MODEC, BW Offshore
and MTC Ledang; a semisubmersible for
SOCAR; an ice-class multi-purpose vessel
for New Orient Marine, and a subsea
construction vessel (SCV) for the Shah
Deniz consortium.
The company continued to make headway
in its gas strategy. In September 2017,
Keppel O&M signed a Heads of Agreement
(HoA) with Pavilion Energy and PLN to
explore opportunities to develop small-scale
LNG infrastructure for West Indonesia.
With a comprehensive suite of solutions
for every stage of the gas value chain,
Keppel is able to provide cost effective,
end-to-end solutions for its customers.
Furthering its gas strategy in 2017,
FueLNG, Keppel O&M’s joint venture with
Shell, made progress and achieved its
first commercial LNG bunker transfer in
Singapore by completing truck-to-ship
bunkering for Hilli Episeyo. The FLNG
vessel has since been delivered to Golar
LNG in 2017 for operations in offshore Kribi,
Cameroon and is scheduled to commence
commercial operations in 1H 2018.
During the year, Keppel O&M broke into
the captive Jones Act market. The Jones Act
requires vessels carrying goods between
US ports to be built in the US, and Keppel
AmFELS is well positioned to capture
opportunities in this market. The average
age of the US-built fleet of vessels is over
30 years old, exceeding the typical operating
life of most ocean-going vessels, and new
vessels will be needed to meet the latest
safety and environmental standards.
To streamline operations and effectively
capture new opportunities, Keppel O&M
reorganised its operations into two divisions
– the New Builds division, covering Offshore
as well as Gas & Specialised Vessels, and
the Conversions & Repairs division.
The reorganisation integrated key
functions in the New Builds division,
allowing Keppel O&M to improve efficiency
and better leverage synergies and different
capabilities of Keppel FELS and Keppel
Singmarine. Keppel Shipyard can similarly
draw on the Conversions & Repairs divison's
diverse resources to undertake a wider
variety of complex projects. With its business
divisions working as an integrated body,
Keppel O&M is able to achieve greater
efficiency and provide customers with
even more competitive and reliable
end-to-end solutions.
Gas Industry Partner & Enabler
As cities continue to undergo urbanisation, the demand
for energy will grow. However, with climate change as
the priority for most governments, demand for cleaner
sources of energy such as LNG is also expected to rise.
As one of the world’s leaders in LNG vessel repair,
Keppel O&M has built up critical knowledge for
handling materials at extremely low temperatures.
This experience, coupled with a strong track record in
oil and gas projects, has enabled Keppel to achieve
many firsts in the delivery of LNG solutions.
The ability to offer end-to-end solutions has also
primed Keppel to meet rising demand for LNG in
archipelagic markets unserved by gas pipelines.
In 2017, Keppel O&M signed an HoA with Pavilion
Energy and PLN to explore the development of
small-scale LNG solutions for West Indonesia.
Keppel O&M's value proposition extends beyond a
typical engineering, procurement and construction
shipyard. With the ability to design, develop and
integrate solutions across the gas value chain,
Keppel is poised to be the gas industry’s preferred
partner and enabler.
By collaborating with Keppel Infrastructure and
Keppel Capital, Keppel O&M can also become
a co-owner and developer of floating energy
infrastructure assets, which generate long-term
recurring income.
34
35
Keppel Corporation Limited | Report to Shareholders 2017 In China, Keppel Nantong delivered a
65-tonne bollard pull Azimuth Stern Drive
(ASD) tug to an Indonesia-based client, and
continued to support Baku Shipyard in the
construction of the SCV, Khankendi. During
the year, Keppel Nantong commenced work
on three TSHDs following customer Jan De
Nul’s decision to exercise its option for a
third unit in 2017.
Keppel AmFELS in Texas, USA, broke into
the captive Jones Act market and secured a
contract worth more than US$400 million
from Pasha Hawaii for the construction of
two dual-fuel containerships to be built to
Keppel’s proprietary design. The vessels
are expected to be delivered in 2020. They
will be able to run completely on LNG fuel,
reducing their environmental impact and
increasing fuel efficiency. Energy savings
will also be achieved with a state-of-the-art
engine, an optimised hull form and
an underwater propulsion system with a
high-efficiency rudder and propeller.
Looking ahead, Keppel AmFELS will
build on its track record in Jones Act
vessels newbuilding for the US as well as
aftermarket services including repairs,
upgrades and modifications of rigs for
customers in the Gulf of Mexico.
Over in Brazil, BrasFELS completed FPSO
P-66, the first of its two Replicante projects
for Tupi BV, a consortium represented by
Petrobras. P-66 was deployed in the Lula
Sul field in Santos Basin, Brazil, where
it achieved first oil in May 2017 and is
undergoing final commissioning work in
2018. Meanwhile, BrasFELS is undertaking
integration and commissioning of the
topside modules for FPSO P-69, which is
expected to be delivered in 2018. As at end-
2017, BrasFELS also secured additional work
on P-69, which includes the installation of
equipment and cables for the hull, as well as
the commissioning of marine systems.
In 2017, BrasFELS also delivered the FPSO
Cidade de Campos dos Goytacazes MV29 to
repeat customer MODEC. The scope of work
included the fabrication and integration
of modules. The FPSO will be deployed in
the Campos Basin, off the coast of Rio de
Janeiro, Brazil.
In the Caspian Sea, Baku Shipyard
reached a significant milestone with the
successful delivery of a state-of-the-art
SCV, Khankendi. Named by the President of
Azerbaijan, H.E. Ilham Aliyev, Khankendi is
the first of such vessels to be completed in
the Caspian region. The successful delivery
of the project was a result of harnessing the
strengths across Keppel O&M, including the
Marine Technology Department's design
and Keppel Singmarine's experience in
building specialised vessels. The vessel
has since been deployed in the Shah Deniz
Phase 2 Gas field, which produces gas for
export to Europe and beyond.
Meanwhile, Caspian Shipyard Company
delivered Heydar Aliyev, the first modern
semisubmersible to be almost fully built
in Azerbaijan to Caspian Drilling Company,
a subsidiary of SOCAR. The rig was built to
Keppel FELS’ proprietary DSSTM 38M design
and customised for the Caspian Sea’s
harsh environment.
Conversions & Repairs
In 2017, Keppel FELS completed repair
and modification works on 14 rigs. These
included, amongst others, Atwood Condor,
Ensco 106, Ensco DS10, Diamond Offshore’s
Ocean Monarch, Maersk Convincer and
Seadrill’s West Vencedor.
During the year, Keppel Shipyard successfully
delivered several projects including three
FPSOs, one turret fabrication and the world’s
first FLNG conversion, the Hilli Episeyo.
Meanwhile, the yard maintained its shiprepair
volume, servicing over 380 vessels.
Operating & Financial Review
Offshore & Marine
The Division will actively
capture opportunities in the
growing gas market and
explore ways to re-purpose
its offshore technology
for other applications
including the area of
renewable energy.
Looking ahead, Keppel O&M will continue
to focus on delivering its projects well,
exploring new markets and opportunities,
investing in R&D and building new
capabilities to position itself for the upturn.
The Division will also actively capture
opportunities in the growing gas market
and explore ways to re-purpose its offshore
technology for other applications including
the area of renewable energy.
New Builds
In 2017, contracts for five jackup rigs being
constructed by Keppel FELS for Transocean
were novated to Borr Drilling. The deal includes
an upfront payment from Borr Drilling and
the bringing forward of deliveries of the first
three rigs to 2018 and 2019 from 2020.
During the year, Keppel FloaTEC secured
a contract from PetroVietnam to provide
its patented Extended TLWP technology,
engineering, and construction management
support services for the Repsol Ca Rong Do
TLWP. The TLWP will be the first in Vietnam
and the first three-column TLWP in the
offshore oil and gas industry.
Building on its engineering expertise in
offshore platforms, Keppel FELS will
actively explore opportunities and also
grow its product lines in non-drilling sectors
such as power generation vessels, as well
as offshore renewable energy and offshore
aquaculture projects.
Keppel Singmarine delivered two major
projects during the year – the ice-class
multi-purpose vessel, MPV Everest, to New
Orient Marine, as well as the SCV, Khankendi,
for Baku Shipyard. During the year, Keppel
Singmarine also secured contracts to build
two Trailing Suction Hopper Dredgers (TSHD)
from the Jan De Nul Group.
Strengthening its track record as a provider
of LNG solutions, Keppel Singmarine secured
a contract worth over $100 million to build
two LNG carrier vessels for Stolt-Nielsen Gas.
The LNG carriers, which are expected to be
completed in 2019, will be built in Keppel
Nantong, China.
1
36
37
Performance Review
The cut in E&P expenditures by oil
companies and fleet operators has led
to a drive towards greater efficiency and
productivity in the industry. From increased
automation to the digitalisation of vessels,
technology will be a key driver for the
industry moving forward.
To remain competitive in a changing
market environment, Keppel O&M has
repositioned itself and improved on existing
core products and services. Leveraging
technology, the Division has developed
innovative solutions to stay ahead of
the curve.
Notwithstanding the current challenges
in the drilling segment, there continues
to be robust demand for production assets,
LNG solutions and specialised vessels.
Keppel O&M remains confident about the
long-term potential of the O&M industry
as demand for energy remains strong,
driven by global economic growth.
Offshore Rigs
The offshore rig market is expected to
remain saturated, due to insufficient rig
retirements and a significant overhang in
jackup rig supply. It will take some time
before an equilibrium between supply
and demand is reached. 2018 will
continue to see industry consolidation
and the potential emergence of new
drilling operators.
As the cost of offshore projects normalises
and oil companies focus on sanctioning
new projects, market confidence will return
to the industry. There is increased interest
for mid-water harsh environment rigs in
the North Sea, while emerging markets
such as Brazil, Mexico and Africa are also
garnering more interest from major oil
companies focused on managing their
declining reserves.
In readying itself for the upturn,
Keppel O&M is exploring how novel
technologies can define the future of
jackup rigs by introducing new systems
and expanding rig capabilities. These rigs
of tomorrow will transform the current
operating environment to become more
efficient, ergonomic and versatile, without
compromising on safety.
In collaboration with the Group, Keppel O&M
will continue to explore opportunities to
re-purpose its offshore technology for other
applications such as floating data centres.
With an extensive suite of proprietary
solutions for the offshore drilling market
and global yard network, Keppel O&M
is well positioned to ride the upturn when
it returns.
37
2
1.
Keppel AmFELS will be
building its first two
dual-fuel LNG
containerships for the
Jones Act market.
2.
Senior management
from Keppel O&M, New
Orient Marine and Marine
Construction services
celebrated the naming of
MPV Everest, an ice-class
vessel built to Keppel's
proprietary design.
During the year, Keppel Shipyard secured
several contracts from both new and
repeat customers, including a turret
fabrication project from SOFEC, a crane
vessel conversion from Boskalis, the Liza
FPSO conversion contract from SBM
Offshore and various FPSO conversion
and upgrading projects.
In the Philippines, Keppel Batangas
completed shiprepair works for over 85
vessels and delivered a 50-tonne bollard
pull ASD tug to an Indonesia-based
client. Meanwhile, Keppel Subic Shipyard
completed 67 shiprepair jobs in 2017,
including the drydocking and repair of
two LNG carriers from Greece.
Keppel Subic Shipyard will continue to
support Keppel Shipyard on FPSO and
marine conversion projects, and explore
collaboration opportunities with other
companies within the Keppel Group
for fabrication work in the renewable
energy sector.
Over in the Americas, BrasFELS completed
several repair jobs such as Olinda Star,
Ocean Rig Mykonos and Siem Helix I.
In the Middle East, Nakilat-KOM (N-KOM)
continues to be well positioned to serve
customers in the Arabian Gulf. As one
of the most well-equipped yards in the
region, N-KOM remains focused on the
execution of repair and maintenance of
Nakilat's and other customers’ vessels,
and is also actively pursuing opportunities
in the region.
Market Review & Outlook
In early-December 2017, the Organization
of Petroleum Exporting Countries (OPEC)
and non-OPEC countries reached an
agreement to extend production cuts to
end-2018. Since the first production cuts
agreed by the two groups in December 2016,
oil prices have recovered from a low of
about US$30 per barrel in early-2016 to
over US$60 per barrel as at end-2017.
Following the recovery in oil prices, there
has been growing optimism in the O&M
industry. Final Investment Decisions (FIDs)
for new offshore projects doubled in 2017
and are expected to gather momentum in
the years ahead. However, the rig market
continues to be plagued by a supply
overhang, and both utilisation and day
rates remain low. As such, a quick recovery
is not expected in the demand for offshore
drilling rigs as oil companies take time to
restart exploration & production (E&P)
programmes.
36
Keppel Corporation Limited | Report to Shareholders 2017 Operating & Financial Review
Offshore & Marine
Shiprepair
Industry players foresee significant changes
in the shiprepair industry over the next
two years. This comes in tandem with the
Ballast Water Management Convention
in 2019 and the International Maritime
Organization’s (IMO) global sulphur cap
in 2020. Under the new regulations,
IMO 2020 requires ships to use marine
fuels with a sulphur content of no more
than 0.5%, compared to the current limit
of 3.5%. Consequently, ship owners will
have to decide between the continued
use of high sulphur fuel oil, in conjunction
with scrubbers or exhaust gas cleaning
systems, or switch to low sulphur fuel
options including distillates and LNG.
Over the longer term, the shipping
industry will also continue its drive toward
greater efficiency by reducing costs,
improving utilisation and deploying new
technologies.
Against this backdrop, Keppel O&M
is well placed to provide retrofitting
solutions to meet the changing needs
of the shiprepair industry.
Floating Production Systems
In 2017, 28 Floating Production Systems (FPS)
contracts estimated to be worth over
US$15 billion were awarded, including
the high profile contract for ENI’s Coral
South FLNG. The LNG space had also
attracted a record number of contracts
for Floating Storage & Regasification Units
(FSRU) in 2017. Meanwhile, after almost
two years with no orders, the award of
10 FPSO contracts in 2017 has signalled
a brighter 2018.
Industry players are optimistic about the
FPS market. The Energy Maritime Associates
estimates that about 125 FPS projects,
valued at over US$90 billion, are expected
to be sanctioned over the next five years.
Of these, FPSOs are expected to dominate,
constituting over 40% of new orders.
With more contracts for production assets
expected to be awarded, Keppel O&M is
in pole position to benefit. Backed by a
strong track record in executing offshore
conversion projects, Keppel O&M will
continue to monitor the pipeline of projects
available in the market and proactively
engage customers early to provide
cost-effective solutions.
Gas Solutions
The increase in demand for gas is expected
to persist, with natural gas being the fuel
of the future. In 2018, the number of LNG
projects to be sanctioned is expected to
increase, mainly due to an improving
energy market and the need to invest to
meet long-term demand.
In 2017, Keppel Shipyard delivered the
world’s first FLNG vessel conversion,
Hilli Episeyo, to Golar LNG. The successful
deployment of the vessel in offshore Kribi,
Cameroon, will put Keppel O&M ahead of
the curve as a leading solutions provider
for floating liquefaction solutions.
There are increasing numbers of LNG
carriers and oil tankers that travel the trade
routes between Australia and the Far East,
as well as between America and India and
the Far East. Moreover, there is increasing
demand for LNG within Southeast Asia,
fuelled by rapid urbanisation within the
region, as well as the increased use of gas
for transportation purposes and power
generation, and as raw materials for
petrochemical feedstock.
Meanwhile, many countries are pushing for
the use of cleaner fossil fuels such as LNG,
driving up demand for regasification assets.
In anticipation of an increase in demand
for LNG-related products including FLNGs,
FSRUs and LNG Carriers, Keppel O&M has
designed a suite of proprietary solutions
to cater to the market. With the ability to
provide end-to-end solutions across the gas
value chain, Keppel O&M is well positioned
to capture opportunities in the gas industry.
Specialised Shipbuilding
Prospects in the specialised shipbuilding
market remain robust, particularly for non-oil
related solutions such as dredgers and
containerships, as well as vessels for subsea
construction, cable lay and rock dumping.
This bodes well for Keppel O&M, which
can offer an extensive range of solutions,
leveraging its technology and construction
expertise. Keppel O&M is also primed to
capture opportunities in the Jones Act
market after securing its first contract with
Pasha Hawaii through Keppel AmFELS in
Brownsville, Texas.
Looking ahead, Keppel O&M will continue
efforts to grow its capabilities for non-drilling
and gas solutions. These capabilities
will provide the company with new
opportunities and sources of revenue,
despite continuing challenges in the
offshore drilling sector.
38
39
1.
Keppel Singmarine is
building the world’s
first EU Stage V dredger
in compliance with
stricter international
limits on emissions.
1
Performance Review
Property
We are committed to
providing quality and
innovative urban living
solutions in Asia.
Revenue
Net Profit
12%
$1.8b
10%
$685m
As compared to
$2b for FY 2016.
As compared to
$620m for FY 2016.
Major Developments in 2017
Sold about 5,480 homes in Asia, mostly in
China and Vietnam.
More than $1 billion worth of divestments
announced, including assets in China
and Indonesia.
Announced nine acquisitions worth
about $1.6 billion across Singapore, China,
Vietnam, Indonesia and Thailand.
Earnings Highlights ($m)
Revenue
EBITDA
Operating Profit
Profit before Tax
Net Profit
Average Headcount (Number)
Manpower Cost
Focus for 2018/2019
Invest strategically and opportunistically
in core and growth markets, as well as
in new and existing platforms, projects
and properties.
Capitalise on the recovery of the residential
market in Singapore and tap demand
in overseas markets with about 16,800
launch-ready homes from 2018 to 2020.
Actively scale up commercial presence and
harness the strengths of its retail management
arm to bolster its commercial portfolio.
Earnings Review
The Property Division’s revenue of $1.8 billion
for FY 2017 was $253 million or 12% lower
than FY 2016, due mainly to lower revenue
from China and Singapore, partly offset
by higher revenue from Vietnam.
The Division’s FY 2017 net profit of
$685 million was $65 million or 10%
higher than FY 2016. This was mainly
due to divestment gains of $212 million,
as well as higher fair value gains on
investment properties.
Grow co-working space value proposition
under the KLOUD brand.
Recycle capital strategically, reinvesting
for growth and higher returns.
In FY 2017, the Division contributed
82% of the Group’s net profit, excluding
Keppel Offshore & Marine's one-off
financial penalty from the global resolution
and related costs.
Operating Review
Singapore
Market sentiments in the Singapore
residential market have been improving,
2017
1,782
693
656
868
685
3,257
194
2016
2,035
533
505
759
620
3,733
199
2015
1,823
614
581
848
661
4,230
216
on the back of successful launches, a
surge in collective sales and an improved
economic outlook. In 2017, Keppel Land
sold about 380 residential units in
Singapore, similar to the sales volume for
2016. About 70% of the sales came from
The Glades and Highline Residences.
In line with strong demand for Keppel Land’s
projects in Singapore, The Glades was
fully sold out in August 2017, ahead of its
Additional Buyers Stamp Duty deadline.
Meanwhile, Highline Residences was almost
fully sold as at end-January 2018. Both
Reflections and Corals at Keppel Bay saw
healthy demand, and were 88% and 73% sold
respectively as at end-December 2017.
Overseas
Despite continued property cooling measures
in Tier-1 and Tier-2 cities, Keppel Land
achieved steady sales in China for 2017.
With rising affluence and increasing
urbanisation driving demand, Keppel Land
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38
Keppel Corporation Limited | Report to Shareholders 2017
Operating & Financial Review
Property
sold 3,725 homes in China, slightly lower
than the 3,800 homes sold in 2016. Take up
in China came mostly from Tianjin Eco-City,
V City and Park Avenue Heights in Chengdu,
as well as Waterfront Residences in Wuxi.
During the year, Keppel Land also
started selling strata-titled units in the
newly-renovated K-Plaza, located in
Shanghai, China.
Over in Vietnam, Keppel Land saw strong
demand for its residential properties in 2017.
During the year, Keppel Land launched
Tilia Residences in Phase 2 of Empire City,
which registered strong sales of 454 units
out of a total of 472. Correspondingly,
Keppel Land sold a total of about 1,110 units
in Vietnam in 2017, some 27% lower than
Total Residential Landbank
63,000 units
Total Commercial Portfolio
1.5 million sm
We are transforming Keppel Land into
a multi-dimensional property player
with one of the highest returns on
equity in Asia.
1.
Keppel Land saw
strong demand for
Tilia Residences in
Ho Chi Minh City, Vietnam,
selling 96% of units
launched in 2017.
2.
KLOUD combines the
benefits of serviced
offices and co-working
spaces.
1
the 1,520 units sold in the previous year,
due to the timing of project launches.
Keppel Land also ramped up its commercial
presence in Vietnam and Myanmar
with the completion of two mixed-use
developments. At Saigon Centre Phase 2
in Ho Chi Minh City, Vietnam, about 80%
of the office space has been leased out to
multinational corporations including AIA,
Lazada, Chanel, Country Garden and Royal
Thai. Meanwhile, Junction City Tower in
Yangon, Myanmar, secured established
tenants including Allen & Gledhill,
WongPartnership, Samsung and the
British Chamber of Commerce.
Urbanisation will continue to drive growth
in Vietnam and Myanmar. As an early
entrant into these fast-growing markets,
Keppel Land is well positioned to value add
to businesses and consumers as a provider
of high-quality homes and offices.
Capital Recycling for Higher Returns
In 2017, Keppel Land announced five
divestments worth about $1 billion, including
the sale of stakes in waterfront projects in
Zhongshan and Nantong, both in China,
as well as long-held development sites in
Surabaya and Bali, in Indonesia.
In tandem, nine acquisitions worth about
$1.6 billion were announced, including
residential sites in Singapore, China, Vietnam,
Indonesia and Thailand, as well as an
office and retail mixed-use development
in Shanghai, China.
To generate the best risk-adjusted returns,
Keppel Land will continue to explore
opportunities to unlock capital, and reinvest
by acquiring new sites as well as completed
commercial projects.
Reinvesting for Growth
During the year, Keppel Land continued to
strengthen its presence in its core markets
of Singapore and China, as well as its
growth markets of Vietnam and Indonesia.
It also expanded into Thailand through
new acquisitions. In total, Keppel Land
replenished its pipeline with over 5,710
homes in 2017.
In Singapore, Keppel Land and Wing Tai
jointly acquired a prime residential site in
Serangoon North, which will yield over
600 homes in an attractive and mature
residential estate. Overseas, Keppel Land
continued to expand its footprint across
all key cities, securing a large-scale site in
Wuxi, China; two residential sites in Saigon
South and District 9, Ho Chi Minh City,
Vietnam; a residential site in the Central
Business District (CBD) in Jakarta, Indonesia,
and two freehold sites along Sukhumvit
Road in Bangkok, Thailand.
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41
Performance Review Market Review & Outlook
Singapore
A pick up in residential and commercial
real estate sentiments accompanied
Singapore’s 3.6% economic growth in 2017.
In Singapore, new home sales reached
10,600 units, 33% higher than the year
before. Prices also rose in 3Q 2017, with
private residential prices reversing 15
quarters of decline. For the whole of 2017,
prices rose 1.1% compared to a 3.1% drop
in 2016. Over in the commercial space,
CB Richard Ellis (CBRE) reported that Grade
A office rents in the CBD rose 3.3% year-on-
year and are expected to continue rising in
tandem with Singapore's economic growth
and the absorption of existing stock.
En bloc sales have also lifted the property
market, fuelling demand for replacement
units while providing developers with
the opportunity to replenish their
landbanks. Capitalising on positive market
sentiments, Keppel Land is launching its
joint venture condominium project, The
Garden Residences, in Serangoon North
in 2018. Keppel Land is also studying the
redevelopment of Keppel Towers and
Nassim Woods to add another 500 homes
in prime locations, which will boost its
Singapore landbank to 1,700 homes.
Overseas
Rapid urbanisation and a burgeoning
middle-class population will continue to
drive demand for quality homes and prime
commercial space in Asia. Riding on these
trends, Keppel Land will continue to tap
demand with more than 15,800 overseas
launch-ready homes over the next three years.
China’s Gross Domestic Product (GDP) grew
6.9% in 2017, up from the previous year’s
6.7%. Strong domestic consumption, a robust
service sector and government infrastructure
spending continued to underpin the
economy. However, GDP growth is expected
to be slower in 2018 alongside further
property tightening measures targeted
at dampening speculation and curbing run-
away prices. Nonetheless, China’s property
market will continue to be supported by
rising affluence and demand from the
growing urban population.
In Vietnam, GDP grew at an estimated 6.8%
in 2017, with similar growth targeted for
2018. Demand outstripped supply in the
residential market, which saw about 32,900
homes sold compared with 31,100 units
launched in Ho Chi Minh City. Average
selling prices also increased by about 4%
year-on-year and the healthy demand for
homes is expected to continue. With its
sizeable landbank of 20,000 units, which
can be launched in quick succession over
the next few years, Keppel Land is poised
to meet the robust demand for homes
in the city. Office take-up in Ho Chi Minh
City was healthy, lifting Grade A rents by
4.8% even as two new Grade A buildings
totalling 61,200 square metres (sm) entered
the market. The retail market also saw
healthy growth and tight supply, with
the CBD experiencing full occupancy in
existing malls.
In Indonesia, the economy is expected
to grow above 5% per annum through
to 2020. While there is an oversupply of
condominiums, the landed residential
market in Jakarta and Greater Jakarta is
expected to remain resilient. Tangerang,
where Keppel Land’s The Riviera at Puri
project is located, will continue to be a
sought-after residential area due to its
good connectivity and amenities.
With a pipeline of about 63,000 residential
units and a total commercial footprint
of 1.5 million sm of gross floor area,
Keppel Land is well positioned to capitalise
on demand for homes, office and retail
space in its target markets.
KLOUD, a New Generation Serviced Co-Office
With rising real estate costs and smart technology
transforming the way we work, co-working spaces
have become increasingly popular globally.
Co-working provides an innovative alternative
to traditional office spaces, riding on the shared
economy.
To meet the growing demand in this niche market,
Keppel Land launched KLOUD, a new generation
serviced co-office catering to companies looking
for flexible spaces.
Keppel Land’s flagship co-office KLOUD Keppel Bay
Tower boasts 18,000 square feet (sf) of smart office
space. Since its opening, the co-working space
has attracted start-ups, small and medium-sized
enterprises, and multinational companies from
a diverse mix of industries.
KLOUD features an office-apartment concept, offering
a cosy shared-working environment.Through an
integrated smart office mobile application, users can
access KLOUD facilities around the clock and enjoy
other lifestyle offerings by Keppel Land, including
the rental of serviced residences.
To date, KLOUD has also been introduced to Vietnam
and Myanmar, bringing Keppel Land's total serviced
co-office footprint to about 60,000 sf.
Looking ahead, Keppel Land plans to operate a KLOUD
centre in each of the markets where it operates.
2
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Keppel Corporation Limited | Report to Shareholders 2017 Operating & Financial Review
Infrastructure
We will focus on growing
the Infrastructure
Division’s contributions
to the Group.
Revenue
Net Profit
27%
$2.2b
33%
$132m
As compared to
$1.7b for FY 2016.
As compared to
$99m for FY 2016.
Major Developments in 2017
Signed an agreement with EDB to develop,
own and operate a gasification facility in
Singapore, an important step towards FID.
Secured a contract together with Zhen Hua
Engineering to design, build and operate
Hong Kong's first IWMF.
Commenced construction of KMEDP and
received final takeover certificate for DNSTW.
Secured two WTE technology and services
contracts in China.
Injected KDC SGP 4 into the Alpha DC Fund.
Launched UrbanFox to offer end-to-end
omnichannel logistics solutions.
Focus for 2018/2019
Continue seeking out value-enhancing
projects, leveraging the Division’s project
development, engineering, operations
and maintenance expertise.
Harness the strength of an integrated gas,
power and district cooling platform to
pursue opportunities for growth.
Extend and develop new business-to-
consumer retail and marketing capabilities
in power, e-commerce and urban logistics.
Continue building up a portfolio of quality
data centre assets and providing higher
value services to customers.
42
Earnings Highlights ($m)
Revenue
EBITDA
Operating Profit
Profit before Tax
Net Profit
Average Headcount (Number)
Manpower Cost
2017
2,207
166
122
167
132
2,618
180
2016
2015
1,744
2,037
136
94
123
99
2,669
173
246
208
243
197
2,739
182
Earnings Review
We are a developer and operator of
quality infrastructure assets with a focus
on growing stable income from the
management, operation and maintenance
of our projects and the provision of
connectivity solutions. The Infrastructure
Division comprises the Group’s businesses
in energy, environment and infrastructure
services, as well as logistics and
data centres.
The Infrastructure Division’s revenue
of $2.2 billion was $463 million or 27%
higher than 2016, mainly driven by
stronger performance by the energy and
environmental infrastructure segments.
Through providing operations and
maintenance (O&M) services for power,
waste-to-energy (WTE), district heating
and cooling, as well as water and wastewater
assets, our growing Infrastructure Services
business contributed recurring revenue of
about $160 million for FY 2017.
The Division’s FY 2017 net profit of $132 million
was $33 million or 33% higher than 2016,
mainly due to higher profit from power
and gas businesses and progressive profit
recognition from the construction of the
Keppel Marina East Desalination Plant
(KMEDP), the gain on divestment of GE
Keppel Energy Services and fair value gain
on investment. In FY 2017, the Division
contributed 16% of the Group’s net profit,
excluding the one-off financial penalty from
Keppel Offshore & Marine’s global resolution
and related costs.
Energy Infrastructure
Operating Review
Despite challenging market conditions in
2017, Keppel Infrastructure’s integrated gas,
power, and utilities business maintained
a strong competitive advantage riding on
synergy and overall portfolio optimisation.
Keppel Infrastructure signed an agreement
with the Singapore Economic Development
Board (EDB) to develop, own and operate
43
Performance Review
a state-of-the-art gasification facility, an
important step in preparation for the final
investment decision (FID).
In 2017, Keppel Electric grew its total
customer base to about 10,000, and
increased its retail market share to 14.0% as
at end-November 2017 compared to 10.5%
as at end-2016. As the second largest private
electricity retailer in Singapore, it is well-
positioned for the full liberalisation of the
Singapore electricity market in 2018.
Keppel Merlimau Cogen launched a
multi-year plant optimisation programme
to reduce its operating costs and carbon
emissions, while Keppel Gas and Pipenet
expanded their customer bases, providing
additional streams of recurring income
for the Group.
Keppel DHCS remains the largest district
cooling services (DCS) provider in Singapore,
with an aggregate capacity of over 100,000
refrigeration tonnes in major business
and industrial parks. During the year, it
commenced supply for two new contracts.
Market Review & Outlook
Keppel Infrastructure is looking into
opportunities to enhance its
competitiveness as a key player in
Singapore's energy market.
In 2017, Singapore’s average electricity
demand grew 1.0% from the previous year,
behind forecast Gross Domestic Product
(GDP) growth of 2.0 to 3.0%, decelerating
from the 2.5% increase in 2016. Intense
competition in the electricity market
persisted due to the continued addition
of capacity and increase in the number of
electricity retail licensees.
The Energy Market Authority’s (EMA)
implementation of an open electricity
market, from the second half of 2018, will see
more than 1.3 million households becoming
contestable consumers with flexibility to
purchase electricity directly from retailers,
such as Keppel Electric.
Meanwhile, Singapore’s gas market
continues to evolve, with more liquefied
natural gas (LNG) and pipeline gas supplies,
as well as the ongoing establishment of
a secondary gas trading market. During
the year, EMA formalised its LNG import
framework and awarded two new exclusive
Gas Importer LNG licenses in October 2017
for the second tranche of LNG imports into
Singapore. It also announced the lifting
of the moratorium on piped natural gas
imports, which is expected to encourage
greater competition amongst gas suppliers.
Aggregate demand for DCS in Singapore
has continued to rise at a compounded
annual growth rate of 8% since 2010,
driven by the Government’s intensification
of land use. Keppel DHCS continues to
scale up its presence, and is working
with various government agencies and
developers on the upcoming major cluster
developments in Singapore. Keppel DHCS
is also exploring growth opportunities for
district energy in Southeast Asia to expand
its geographical reach.
Amidst a more competitive landscape, Keppel
Infrastructure will reinforce its status as a reliable
and integrated energy solutions provider.
Environmental Infrastructure
Operating Review
During the year, Keppel Seghers Hong Kong
and Zhen Hua Engineering secured
a contract worth about $5.3 billion to
design, build and operate Hong Kong’s
first Integrated Waste Management
Facility (IWMF). Upon completion in 2024,
Keppel Infrastructure Services (KIS) will
undertake the O&M of the IWMF for 15
years. Keppel Infrastructure's share of the
total contract is approximately $1.9 billion
across the Engineering, Procurement
and Construction (EPC) and O&M phases.
Through this project, Keppel Infrastructure
will contribute to Hong Kong's sustainable
urbanisation and reinforce its leadership
position as a provider of world-class
WTE technology packages and operator
of assets.
In China, Keppel Seghers continued to build
on its track record as a leading imported
WTE technology solutions provider. It
secured two contracts in 2017, bringing
its technology packages under execution
to nine projects with a total incineration
capacity of close to 16,500 tonnes per day.
Singapore Deputy Prime Minister Tharman
Shanmugaratnam also officially opened
the Sino-Singapore Tianjin Eco-City Water
Reclamation Centre during the year.
In Qatar, the Doha North Sewage Treatment
Works (DNSTW) received the final takeover
certificate from the Public Works Authority
of Qatar, and received regional accolades
including the “GCC Award for Sustainability”
and the “GCC Water Project of the Year” at
the MEED Quality Awards 2017.
42
43
1.
With its underground
treatment facilities and
an open green space
on the rooftop for
community recreation,
KMEDP's innovative
design allows the plant to
blend seamlessly into the
surrounding environment.
1
Keppel Corporation Limited | Report to Shareholders 2017
Operating & Financial Review
Infrastructure
1.
Underpinning Keppel
Infrastructure’s ability to
deliver the full value chain
of infrastructure services,
KIS aims to strengthen its
position as the preferred
long-term O&M partner.
2.
Nautilus' patented
water-cooling technology
is employed in its
pre-fabricated
facilities, which are
more cost-efficient
and environmentally
sustainable than
traditional structures and
have a lower lead-time
to production.
1
In Singapore, Keppel Seghers completed
the upgrading of the Keppel Seghers
Ulu Pandan NEWater Plant, increasing its
capacity and making it the first large-scale
plant to adopt a third-stage reverse osmosis
configuration. Meanwhile, the construction
of KMEDP, a dual-mode desalination plant,
commenced in June 2017, supported by
design and technical inputs from KIS.
When completed in 2020, it will add
30 million gallons of water per day to
Singapore’s water supply.
Market Review & Outlook
Rising public awareness of environmental
issues and focus on environmental
protection have led to policy adjustments
favouring investments into modern
infrastructure and systems. Against this
backdrop, Keppel Infrastructure will continue
to seek out value-enhancing projects,
strengthen its market position, and leverage
its project development, engineering as well
as O&M expertise across a wide range of
infrastructure solutions.
In China, the government has set strict
targets for both pollutant emission reduction
and environment quality improvement in
its 13th Five Year Plan. This includes the
goal to treat about one-third of municipal
solid waste using proven incineration
technology by 2030. The focus on green
developments and innovation presents
opportunities for Keppel Seghers to capture
new projects, as well as to expand in
China beyond the provision of WTE
technology packages.
Keppel Infrastructure is also pursuing
opportunities in India, where favourable
feed-in tariffs for green power generated
from solid waste have led to strong interests
in WTE projects, particularly in the more
developed regions.
Closer to home, economies experiencing
rapid growth and urbanisation, such as
Vietnam and Thailand, present strong markets
for environmental infrastructure. Leveraging
a combination of technology and execution
track record, Keppel Seghers and KIS are
well-placed to provide holistic solutions for
the effective treatment of water and waste.
Over in Europe, interest in WTE solutions
has picked up alongside its economic
recovery, as countries such as Poland, Spain,
Ireland and Portugal continue their efforts
to fulfil the European Union’s (EU) waste
legislation on landfill diversion. Meanwhile,
stable demand growth and the replacement
and upgrading of ageing facilities in the
EU will provide more prospects in the WTE
sector. Keppel Seghers will continue to
improve its WTE technology offerings and
seek value-enhancing projects to strengthen
its market position.
Infrastructure Services
Operating Review
With its expertise in delivering sustainable
O&M services to its clients, KIS will continue
to maintain high operating standards by
maximising availability, reliability, and
efficiency for its existing assets spanning
the power, WTE, water and district
cooling sectors.
Under KIS, Keppel Infrastructure’s operating
assets have been significant contributors
toward sustainable urbanisation. In Singapore,
contributions from the Senoko WTE plant
increased in 2017 following a capacity
upgrade. Together with the Keppel Seghers
Tuas WTE plant, Keppel Infrastructure
supports Singapore’s waste incineration
needs. Contributions from the Keppel
Seghers Ulu Pandan NEWater Plant and
Keppel Merlimau Cogen remained creditable
despite challenging market conditions faced
by the latter.
In Qatar, operational availability at the Domestic
Solid Waste Management Centre exceeded
90%, while production of treated water at
the DNSTW increased 61% year on year.
Market Review & Outlook
Urbanisation blueprints unveiled by
governments worldwide call for more efficient
and sustainable energy and environmental
management solutions. This provides exciting
opportunities for KIS, which has built up a
comprehensive range of operating expertise
in power, WTE, district heating and cooling,
as well as water and wastewater facilities.
Underpinning Keppel Infrastructure’s ability
to deliver the full value chain of infrastructure
services, KIS aims to strengthen its position as
the preferred long-term O&M partner. KIS will
continue to deliver high quality and value-
added O&M services, supporting Keppel’s
vision to build an environmentally sustainable
future for populations around the world.
Data Centres
Operating Review
2017 saw the completion of Keppel DC
Singapore 4 (KDC SGP 4) and its injection into
the Alpha Data Centre Fund (Alpha DC Fund).
KDC SGP 4 is Keppel Data Centres Holding's
(KDCH) fourth data centre development
in Singapore. Amid strong interest from
institutional investors for quality assets,
44
45
Performance Review
Projected Compound Annual
Growth Rate of Global Data
Centre Colocation Market
14.6%
The global data centre colocation
market is projected to grow at a
compound annual growth rate of
14.6% from 2017 to 2020.
During the year,
Keppel Data Centres
formed several
strategic partnerships
to advance its position
as a leading-edge
solutions provider.
Alpha DC Fund has closed at US$1 billion and
has expanded the Group’s capital base to
seize opportunities.
The PCCW Global-Keppel International
Carrier Exchange (ICX), a joint venture
between KDCH and PCCW Global, was
launched to provide faster interconnects
for businesses in Hong Kong. This is part
of a long-term collaboration between the
partners to utilise the vast submarine
cable capacity in the region as well as
leverage KDCH’s technical expertise and
operational track record and PCCW Global's
extensive global network connectivity.
During the year, KDCH formed several
strategic partnerships to advance its position
as a leading-edge solutions provider. These
included the signing of Memoranda with the
Info-communications Media Development
Authority of Singapore and Huawei on the
deployment of a high-rise energy efficient
data centre, and separately with JTC to
explore the feasibility of underground data
centres. Additionally, KDCH has partnered
with the Singapore Internet Exchange
to enhance connectivity solutions for its
customers, and is also exploring a potential
collaboration with Huawei on data centre
efficiency and sustainability.
As part of its commitment to green data
centre solutions, KCDH invested US$10 million
in Nautilus Data Technologies (Nautilus),
a data centre startup based in California.
Nautilus has successfully launched a
waterborne data centre prototype with
its patented water-cooling technology in
a pre-fabricated facility, and is currently
developing a commercial data centre for
deployment in 2018.
Market Review & Outlook
According to research consultancy
MarketsandMarkets, the global data centre
colocation segment is projected to grow
at a compound annual growth rate of 14.6%
from 2017 to 2020. This is underpinned by
the proliferation of cloud computing, big
data and digitalisation.
In Asia Pacific, growth in data centre
colocation remained strong with the surge
in data consumption, rising trend for
data centre outsourcing and a continued
focus on regional hosting by global
content providers.
In Europe, growth in data centre colocation
demand has expanded from the core hubs
of Frankfurt, London, Amsterdam and Paris
to other locations such as Milan and
Dublin. The creation of new data centre
hubs is spurred by the continued entrance
of subsea cables into these regions.
Demand for data centre colocation has
increasingly shifted from the traditional
sectors of financial services, international
enterprise and telecommunications to
cloud service providers and digital content
providers. Continued market consolidation
and new entrants are expected to increase
competition, as well as pressures to reduce
energy costs and improve efficiency.
Floating Data Centres
In September 2017, Keppel T&T
invested US$10 million in the
Series C preferred stock
funding of Nautilus, which is
engaged in the business of
developing water-cooled
data centres, including
pre-fabricated, vessel-based
facilities that can be rapidly
deployed globally.
By eliminating the need for
energy-intensive cooling,
a key part of a data centre's
operating expenditures,
water-cooled data centres
can reduce carbon emissions
and air pollution significantly
while also reducing costs.
The world’s first successful
waterborne data centre
prototype, incorporating
Nautilus’ patented
water-cooling technology,
was launched in 2015.
Together with Nautilus,
Keppel T&T will be able to expand
offerings of innovative solutions
for data centre technology.
Keppel T&T is also exploring
opportunities to collaborate
with other parts of the Group,
such as Keppel Offshore &
Marine, which brings to the
table a strong track record in
the design and production of
floating platforms.
2
44
45
Keppel Corporation Limited | Report to Shareholders 2017 Operating & Financial Review
Infrastructure
Together with Keppel DC REIT, the Group has
a total of 18 facilities spanning nine countries
and over 1.4 million sf of net lettable area.
KDCH will continue to proactively pursue
new development and acquisition
opportunities in Asia Pacific and Europe,
leveraging its partnerships with ADCF
and Keppel DC REIT, and focus on green
data centre design and technologies to
sharpen its value propositions.
Logistics
Operating Review
In 2017, Keppel Logistics launched UrbanFox
to provide omnichannel logistics and
channel management solutions, which was
formed after the acquisition of a stake in
Courex in 2016. Drawing on Keppel Logistics'
track record in third-party logistics solutions,
and Courex’s business-to-consumer
capabilities, UrbanFox won several channel
management contracts and continues to
see strong interest from both existing and
potential customers for its end-to-end
omnichannel logistics solutions.
In Vietnam and Indonesia, Keppel Logistics’
joint ventures have secured new contracts
in e-commerce logistics, providing
warehousing, inventory management and
value-added services in urban hubs. In
China, utilisation levels at the Sino-Singapore
Tianjin Eco-City distribution centre has
improved with the commencement of
freight forwarding and transportation
services to customers.
Despite intense competition, Keppel
Logistics’ river ports in China performed
better in 2017. Throughput at Sanshui Port
grew 3% year-on-year, while that of Wuhu
Sanshan Port grew 9% year-on-year driven
by an expanded customer base. Amidst
challenges posed by industrial relocation
and traffic regulations, Lanshi Port continued
to actively pursue alternative sources of
cargoes. Meanwhile, Foshan Sanshui Port
upgraded its port technology in 2017 to
improve productivity.
In August 2017, Keppel Wanjiang
International Coldchain Logistics Park in
Anhui province commenced trial operations.
On the other hand, the construction of the
Sino-Singapore Jilin Food Zone International
Logistics Park has been put on hold due
to a slow down in the development
progress of the Jilin Food Zone.
With a view to optimise and focus resources
to become the urban logistics solutions
provider of choice, Keppel T&T is currently
undertaking a strategic review of its China
logistics portfolio.
Market Review & Outlook
China registered economic growth of
6.9% as the economy continued to rebalance
towards domestic-driven consumption
and services.
Meanwhile, Southeast Asia registered
stable growth of 5% for 2017, backed by a
broad-based pick-up in external demand
and continued resilience in domestic
consumption and investment. Rapid
urbanisation, growing incomes and the
proliferation of connected mobile devices
have fuelled e-commerce in the region
at high double-digit growth rates in the
past few years. In response, the region’s
logistics sector is evolving, unearthing new
opportunities in omnichannel logistics,
multi-modal transportation, cold chain
logistics and intelligent transportation
systems in the process.
To stay ahead, Keppel Logistics will
continue to strengthen its capabilities to
deliver new solutions in target markets,
boost productivity and optimise its
capital resources.
Keppel Logistics will
continue to strengthen its
capabilities to deliver new
solutions in target markets
as it works on boosting
productivity and optimising
its capital resources.
46
47
1.
Mr Thomas Pang, CEO
of Keppel T&T, delivered
the opening speech at
the launch of UrbanFox
in October 2017.
1
Performance Review Investments
We create sustainable
value for shareholders
by investing strategically
and growing our asset
management businesses.
Revenue
Net Profit
29%
$173m
>500%
$235m
As compared to
$134m for FY 2016.
As compared to
$36m for FY 2016.
Major Developments in 2017
Established Keppel Urban Solutions, an
end-to-end master developer of urban
developments.
Keppel REIT acquired an interest in the new
office tower to be developed at 311 Spencer
Street in Melbourne, Australia.
Keppel-KBS US REIT listed on the SGX-ST
with approximately US$553 million raised.
Keppel DC REIT expanded with the
addition of two data centres in Singapore
and Dublin.
Alpha Investment Partners raised US$1 billion
for the Alpha Data Centre Fund and
US$560 million for the Alpha Asia Macro
Trends Fund III.
Focus for 2018/2019
Keppel Capital will continue to pursue
organic and inorganic growth
opportunities to grow the Group’s asset
management platform.
M1 will continue building up its capabilities
to capitalise on new opportunities.
Continue development of the Sino-Singapore
Tianjin Eco-City to realise its vision of being
a model for sustainable urbanisation in China.
Earnings Highlights ($m)
Revenue
EBITDA
Operating Profit
Profit before Tax
Net Profit
Average Headcount (Number)
Manpower Cost
2017
173
176
174
343
235
416
110
2016
134
63
61
83
36
286
89
2015
195
130
128
207
185
180
94
Earnings Review
The Investments Division comprises
Keppel Capital and the newly established
Keppel Urban Solutions, as well as the
Group’s investments in k1 Ventures,
M1 Limited, KrisEnergy and the
Sino-Singapore Tianjin Eco-City (Eco-City).
The Investments Division generated
a revenue of $173 million for FY 2017,
an increase of $39 million or 29% from
the previous year. The Division’s
pre-tax profit was $343 million, up
$260 million from FY 2016, mainly
due to increased contributions from
Keppel Capital, as well as higher share of
profit from the Eco-City and k1 Ventures,
write-back of provisions for impairment
of investments and profit on sale of
investments. These were partially offset
by share of losses from KrisEnergy
and recognition of fair value loss on
KrisEnergy warrants.
Accordingly, the Division delivered a net
profit of $235 million for FY 2017, up from
$36 million a year ago. The Investment
Division represents 28% of the Group’s
total net profit for FY 2017, excluding
Keppel Offshore & Marine's one-off financial
penalty from the global resolution and
related costs.
Keppel Capital
Operating Review
With a larger and integrated asset
management platform, Keppel Capital is
delivering stronger performance. On a fully
leveraged and invested basis, total assets
under management (AUM) reached
$29 billion as at end-2017, up from
$25 billion as at end-2016.
The listed REITs and Trust delivered
positive total Unitholder returns in 2017
and made several strategic acquisitions,
enhancing their recurring income streams.
46
47
Keppel Corporation Limited | Report to Shareholders 2017
Operating & Financial Review
Investments
1.
Keppel DC Singapore 4,
which incorporates
environmentally-friendly
features in its design, was
acquired by Alpha DC Fund
in 2017.
2.
Celebrating its 10th
anniversary in 2018, the
Sino-Singapore Tianjin
Eco-City is a practical,
scalable and replicable
model for sustainable city
development in China.
1
Meanwhile, the private funds managed by
Alpha Investment Partners (Alpha) registered
strong fundraising efforts. Collectively, the
private funds under Alpha invested in over
US$910 million worth of real estate and data
centre assets, and captured value through
the divestment of 11 assets worth over
US$880 million.
For the whole of 2017, the Group earned
asset management fees totalling $134
million, up from the $128 million earned for
FY 2016. The REITs and Trust contributed
approximately 60% of total asset
management fees, while private funds
contributed the remaining 40%.
Real Estate
Keppel REIT Management and Alpha
continued to pursue strategic acquisitions
and portfolio enhancements, including
selectively seeking acquisitions for long-term
income and capital appreciation. In July 2017,
Keppel REIT acquired a 50% interest in the
new office tower to be developed at 311
Spencer Street, Melbourne. Through Keppel
REIT Management’s proactive leasing
strategy, the committed occupancy of the
REIT’s portfolio remained high at 99.7%,
while tenant retention was 95%.
In November 2017, the Keppel-KBS US
REIT was listed on the Main Board of the
Singapore Exchange, raising gross proceeds
of approximately US$553 million. The REIT
has a portfolio of 11 quality investment
assets in key US growth markets, and drew
positive demand from institutional and retail
investors during the international placement
and public offering.
Data Centres
Keppel DC REIT Management stayed focused
on its disciplined approach of seeking quality
income-producing acquisitions in key data
centre hubs across Asia Pacific and Europe.
from its increased scale and operational
efficiencies. The company continues to
play a key role in working with the Group’s
diverse business units to develop, own and
operate real assets.
In 2017, the REIT added Keppel DC Singapore
3 and Keppel DC Dublin 2 to its portfolio,
bringing the total number of facilities under
management to 13. These strategic additions
enhanced income stability for the portfolio and
solidified the REIT’s presence in key markets.
As at end-2017, Keppel DC REIT’s portfolio
occupancy remained healthy at 92.6%.
During the year, the Alpha Data Centre
Fund closed at US$1 billion, double its initial
target size.
Infrastructure
All of Keppel Infrastructure Trust’s (KIT)
Singapore concessions and contracted
assets met their contractual performance
requirements and received full availability
payments for 2017. City Gas continued
to deliver steady growth and secured its
800,000th customer in 2017.
In Australia, Basslink met its contractual
availability during the year. KIT announced
in November 2017 that it was undertaking
a strategic review of its interests in the
Basslink interconnector in response to a
number of parties which had expressed
interest in acquiring the asset.
Looking ahead, KIT will continue its
disciplined approach of seeking acquisition
opportunities for core and core-plus
infrastructure assets.
Keppel Capital strives to be the trusted
partner for investors, and will continue to
pursue both organic and inorganic growth
opportunities to grow its AUM to the $50 billion
target by 2022, boosting the Group’s funding
capabilities and expanding its capital base.
Sino-Singapore Tianjin Eco-City
The Eco-City, which celebrates its 10th
anniversary in 2018, remains on track to
realising its vision of becoming a model for
sustainable urbanisation in China. Leading
the Singapore consortium, Keppel works
with its Chinese partner to guide the 50-50
joint venture – Sino-Singapore Tianjin
Eco-City Investment and Development Co.,
Ltd. (SSTEC) – in its role as master developer
of the Eco-City.
To date, some 80,000 people live and work
in the Eco-City, which boasts over 5,800
registered companies1, 17 schools with close
to 10,000 students, three neighbourhood
centres, four libraries, three health services
centres and a hospital among its amenities.
Construction of the new Z4 rail line is on
track for completion in 2020.
Demand for the Eco-City’s homes remained
strong in 2017, with over 4,000 homes sold
despite a series of cooling measures driving
a softening of Tianjin’s overall home sales
market. Reflecting the market’s growing
confidence in the Eco-City, during the year,
Meanwhile, the Alpha Asia Macro Trends
Fund III raised approximately US$560 million
in 2017.
Business Outlook
As an integrated asset manager, Keppel
Capital continues to draw on synergies
1 These figures include the Tourism District and
Central Fishing Port.
48
49
Performance Review three residential land parcels were sold at
record prices of around RMB 13,800 psm of
gross floor area (GFA) at a land auction in
early-2017.
With the focus of the development shifting
to the Central District, SSTEC has embarked
on a new urban design scheme for the district,
which will become the main commercial,
hotel and recreation hub of the Eco-City.
Meanwhile, work on the Sino-Singapore
Friendship Garden and Sino-Singapore
Friendship Library is on-going.
In February 2017, Singapore’s Deputy Prime
Minister Teo Chee Hean and Minister for
National Development and Second Minister
for Finance Lawrence Wong met their
Chinese counterparts in Beijing for the
Joint Steering Council meeting, affirming
the Eco-City’s progress.
The various business units of the
Keppel Group continued to contribute
towards the growth of the Eco-City by
providing solutions for urban living,
clean environment and connectivity.
In 2017, Keppel Land China sold 1,017 homes
in the Eco-City. As at end-December 2017,
Keppel’s Seasons Garden has sold 97%
of its 1,190 units, Seasons Residences has
sold over 62% of its 380 launched units,
and Seasons Heights has sold all of its 124
launched units. Meanwhile, Waterfront
Residences was almost fully sold as at
end-December 2017.
Other businesses within the Group also
contributed to the Eco-City’s development.
Keppel T&T’s logistics distribution centre in
the Eco-Industrial Park maintained its
occupancy at an average of 65% for 2017.
The Sino-Singapore Tianjin Eco-City
Water Reclamation Centre, a joint venture
between Keppel Infrastructure and Tianjin
Eco-City Investment and Development Co.,
Ltd, was officially opened by Singapore's
Deputy Prime Minister Tharman
Shanmugaratnam in June 2017. The Centre
treats wastewater effluent from an existing
wastewater treatment plant to produce
recycled water that meets China’s most
stringent standards for urban miscellaneous
water consumption.
KrisEnergy
Trading conditions based on oil price
improved for KrisEnergy in 2017 as Brent
crude futures recovered, averaging US$55
per barrel (bbl) for the year. However, oil
prices continued to be volatile, touching
three-year highs above US$70/bbl in January
2018 before skidding to its biggest weekly
loss in two years at around US$62/bbl in
February 2018. While average oil prices have
recovered, trading and financing conditions
remained turbulent. Such fluctuations have
caused significant uncertainty in the upstream
sector's ability to plan and commit to capital
expenditure, and continues to dent investor
sentiment and reduce avenues to capital.
In 2017, KrisEnergy reported revenues of
US$141 million, stable year-on-year as higher
average selling prices for both crude oil
and liquids as well as natural gas offset
lower year-on-year sales volumes. FY 2017
operating margins improved significantly,
mainly due to a focus on cost-cutting
measures and reduced depreciation,
depletion and amortisation charges. Net
losses for FY 2017 narrowed to US$139 million
from US$237 million in FY 2016, due to
improved operating margins, offset by
non-cash impairment charges and write-offs
for non-core assets as the company directed
capital and operational resources towards
the Gulf of Thailand and Bangladesh.
During the year, KrisEnergy’s working
interest production averaged 12,745 barrels
of oil equivalent per day, a decrease of 21%
from 2016. Infill drilling at the Wassana field in
the Gulf of Thailand was deferred to 4Q 2017
from 1H 2017. Also in the Gulf of Thailand, the
Tantawan field and production facilities in
licenses B8/32 and B9A permanently ceased
production. Meanwhile, natural decline and
intermittent weather disruptions curtailed
production in other fields.
As at end-December 2017, KrisEnergy’s
working interest proved plus probable (2P)
reserves were estimated at 83.5 million
barrels of oil equivalent (mmboe), a
reduction of 13.6% from 96.6 mmboe in
2016, mainly due to KrisEnergy’s reduced
working interest in the Block A Aceh
production sharing contract. This was
partially offset by a reclassification to 2P
reserves of 8.1 million barrels of oil from
contingent resources associated with the
Apsara development in Cambodia Block A.
Health, safety and the environment
remained a priority and KrisEnergy recorded
1,587,181 man-hours on its operated assets
with zero lost time injuries in FY 2017.
Financial Restructuring
In January 2017, KrisEnergy successfully
extended its debt profile to 2022 and
2023 in the case of the existing $330 million
senior unsecured notes, and issued
$139.5 million new zero coupon secured
notes (ZCNs) due 2024 combined with
detachable warrants. Keppel’s wholly-owned
subsidiary, Keppel Oil & Gas, successfully
subscribed for 107,205,985 ZCNs with
964,853,865 Warrants, pursuant to an
irrevocable undertaking.
Following the completion of its Consent
Solicitation Exercise and financial
restructuring, KrisEnergy also revised its
strategic and operational goals. In line with
its strategy of increasing production and
cash flows by focusing on existing producing
fields and near-term development projects,
KrisEnergy has divested three non-core
assets since late-2016 and ceased
development activities in the Block A Aceh
Production Sharing Contract to focus capital
resources on the strategic core area of the
Gulf of Thailand. Accordingly, total capital
expenditure for 2017 was US$68.7 million,
significantly lower compared to the mid-year
forecast of US$110.3 million, as KrisEnergy
48
49
2
Keppel Corporation Limited | Report to Shareholders 2017 Operating & Financial Review
Investments
reduced expenditures in Aceh and deferred
infill drilling in the Wassana field.
In the upstream oil and gas sector, capital
and financial management remains essential.
KrisEnergy continues to review, evaluate and
execute strategic options to further bolster
its financial position. Without compromising
health and safety, KrisEnergy remains
vigilant in extracting all possible operational
efficiencies to maximise operating free cash
flow from all its existing producing fields.
M1
As at end-2017, M1’s total customer base
grew by 2% to 2.23 million. During the year,
M1 grew its mobile customer base by 1% to
2.04 million, while fibre customers increased
by 18% to 189,000. Overall mobile market
share increased to 24.0% as at end-November
2017, compared to 23.8% as at end-2016.
With a strong focus on network quality,
customer service, innovation and value,
M1 introduced a host of new offerings
and enhanced its existing products in 2017.
This includes the introduction of Singapore’s
first unlimited data 4G mobile plan and
several innovative large-data-bundled
plans to meet consumers’ growing data
needs for social networking, and mobile
video and music streaming services.
During the year, M1 also stepped up its
financial and cyber security service offerings,
launching Asia’s first network-based mobile
malware detection solution, and a new
digital mobile remittance service.
To accelerate smart solutions innovation
and support Singapore’s transformation
into a Smart Nation, M1 launched Southeast
Asia’s first commercial nationwide NB-IoT
(Narrowband Internet of Things) network.
To date, M1 and its partners have available
IoT solutions such as smart energy
management for buildings, environmental
monitoring, asset tracking and fleet
management.
In the corporate segment, M1 launched the
world’s first symmetrical 10Gbps passive
optical network connectivity service, as well
as a next-generation unified operations
monitoring centre, and expanded its
fibre-to-the-building infrastructure with
full redundancy capability to more than
55 commercial buildings.
M1 will continue its transformative journey
to become a Smart Communications
Provider, building up information and
communications technology capabilities,
as well as a portfolio of digital solutions
enhanced with data analytics, to capitalise
on new growth opportunities.
k1 Ventures
k1 Ventures (k1) completed the disposal
of its last two investments in 2017,
comprising the divestments of interests
in KUE 3 LP and in Guggenheim Capital,
LLC (Guggenheim) for a gross cash
consideration of about US$29 million and
US$221 million respectively. Following the
completion of the Guggenheim disposal
in November 2017, k1 had disposed of
substantially all of its assets and property.
The company has since distributed its excess
cash to shareholders and commenced the
voluntary liquidation process.
Keppel Urban Solutions
services, to advance KUS' business and offerings
for integrated urban development and operations.
KUS’ capabilities will be applied in its pilot
project, Saigon Sports City (SSC), a 64-hectare
township that Keppel Land is developing in the
prime District 2 of Ho Chi Minh City, Vietnam.
SSC is envisaged to be a bustling hub, combining
high-quality urban living with modern healthy
lifestyle concepts.
1.
KUS demonstrates its
capabilities in smart urban
solutions through its pilot
project, Saigon Sports City.
Keppel Urban Solutions (KUS) was
established in 2017 to further the Group’s
objective of providing solutions for
sustainable urbanisation. KUS is an
end-to-end master developer of urban
developments, which leverages the
Group’s experience and strong track
record of over two decades in the planning
and development of large-scale projects
in the Asia Pacific.
KUS brings together the Group’s diverse
capabilities in energy, property,
infrastructure and connectivity to create
highly liveable, vibrant, digitally connected
and sustainable communities.
Through strategic partnerships and an
open platform, KUS collaborates with
best-in-class partners to create smart
infrastructure ecosystems. KUS is
partnering Microsoft to develop smart
urban applications, using sensing
technology and Internet of Things (IoT),
to efficiently manage infrastructure and
community services in projects developed
by KUS. KUS has also partnered Envision, a
global leading smart energy management
company, to leverage Envision's technologies
and expertise in IoT, as well as its global
eco-system of energy solutions and
50
51
1
Performance Review
Management Discussion
& Analysis
We are configured for
growth, building on
an institutional quality
balance sheet.
Free Cash Inflow
Earnings Per Share
$1,802m
11.9cts
As compared to
$540m for FY 2016.
Includes one-off
financial penalty from
the global resolution
and related costs.
Group Overview
Group net profit for 2017 was $217 million,
down 72% from $784 million for 2016,
due largely to the one-off financial penalty
arising from Keppel Offshore & Marine’s
(Keppel O&M) global resolution with criminal
authorities in the US, Brazil and Singapore,
and related legal, accounting and forensics
costs amounting to $619 million. This was
partly offset by earnings growth registered
by the Property, Infrastructure and
Investments divisions.
Earnings Per Share (EPS) was 11.9 cents,
down 72% from 43.2 cents for 2016. Return
On Equity (ROE) was 1.9%, compared to
6.9% for 2016. Economic Value Added
(EVA) was negative $834 million for 2017,
compared to negative $140 million for 2016.
Free cash inflow for 2017 was $1,802 million,
compared to $540 million for 2016.
Meanwhile, net gearing for 2017 was 0.46
times, compared to 0.56 times for 2016.
Total cash dividend for 2017 will be
22.0 cents per share. This comprises a
proposed final cash dividend of 14.0 cents
per share and the interim cash dividend
of 8.0 cents per share paid in the third
quarter of 2017.
Segment Operations
Group revenue of $5,964 million for 2017
was $803 million or 12% below that of 2016.
Revenue from the O&M Division declined
by $1,052 million to $1,802 million due
to lower volume of work and deferment
of some projects. Major jobs completed
and delivered in 2017 include a
semisubmersible, a subsea construction
vessel, a Floating Production Storage
and Offloading (FPSO) vessel conversion,
an FPSO topsides installation/integration,
a module fabrication & integration, a
floating liquefaction vessel conversion
and an ice-class multi-purpose vessel.
Revenue from the Property Division
decreased by $253 million to $1,782 million
due mainly to lower revenue from China
and Singapore, partly offset by higher
revenue from Vietnam. Revenue from the
Infrastructure Division grew by $463 million
to $2,207 million as a result of increased
sales in the power and gas businesses
and progressive revenue recognition
from the Keppel Marina East Desalination
Plant project.
Group net profit of $217 million was
$567 million or 72% lower than the previous
year. Loss from the O&M Division was
$835 million as compared to net profit
of $29 million in the prior year. This was
mainly due to the one-off financial penalty
from the global resolution and related costs
of $619 million, lower operating results
arising from lower revenue and lower
share of associated companies’ profits.
The negative variance was partly offset
by lower impairment provisions and
lower net interest expense.
Profit from the Property Division of
$685 million increased by $65 million
due largely to higher fair value gains
on investment properties and higher
contribution from Singapore and
50
51
Keppel Corporation Limited | Report to Shareholders 2017 Operating & Financial Review
Management Discussion & Analysis
Vietnam property trading and en bloc
sales of development projects, partly
offset by lower share of associated
companies’ profits.
Profit from the Infrastructure Division
of $132 million increased by $33 million due
largely to higher contribution from Energy
Infrastructure, the gain on divestment of
its interest in GE Keppel Energy Services,
as well as the recognition of fair value gain
on investment. These were partly offset
by lower contribution from the data centre
business, due mainly to the absence of
contribution from Keppel DC Singapore 3,
which was injected into Keppel DC REIT
in January 2017.
Profit from the Investments Division of
$235 million increased by $199 million
due mainly to higher share of profits
from Sino-Singapore Tianjin Eco-City and
k1 Ventures, higher contribution from the
asset management business, write-back
of provision for impairment of investments
and profit on sale of investments. These
were partly offset by the share of loss in
KrisEnergy and recognition of fair value
loss on KrisEnergy warrants.
Excluding the one-off financial penalty
from the global resolution and related
costs, the Property Division was the largest
contributor to Group net profit with an 82%
share. This was followed by the Investments
Division at 28% and the Infrastructure
Division at 16% while the O&M Division
contributed negative 26% to the Group’s
net profit.
Key Performance Indicators
Revenue
Net profit
Earnings Per Share
Return On Equity
Economic Value Added
Operating cash flow
Free cash flow*
2017
$ million
5,964
217^
11.9 cts^
1.9%^
(834)^
1,377
1,802
Total cash dividend per share
22.0 cts
17 vs 16
% +/(-)
2016
$ million
16 vs 15
% +/(-)
2015
$ million
-12
-72
-72
-73
+496
+368
+234
+10
6,767
784
43.2 cts
6.9%
(140)
294
540
20.0 cts
-34
-49
-49
-51
n.m.
n.m.
n.m.
-41
10,296
1,525
84.0 cts
14.2%
648
(785)
(694)
34.0 cts
^
Includes the one-off financial penalty from the global resolution and related costs of $619 million.
* Free cash flow excludes expansionary acquisitions and capital expenditure, and major divestments.
Revenue ($m)
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
2015
2016
2017
Net Profit ($m)
800
600
400
200
0
-200
-400
-600
-800
-1,000
2015
2016
2017
Offshore & Marine
Property
Infrastructure
Investments
6,241
2,854
1,802
1,823
2,035
1,782
2,037
1,744
2,207
195
134
173
Total
10,296
6,767
5,964
Offshore & Marine
Property
Infrastructure
Investments
482
29
-835^
661
620
685
197
99
132
185
36
235
Total
1,525
784
217
^
Includes the one-off financial penalty from the global resolution and related costs of $619 million.
52
53
Performance Review
Financial Review & Outlook
We will sustain value creation
through execution excellence,
technology innovation and
financial discipline.
Total Assets
4%
$28.1b
Total Cash
Dividend Per Share
10%
$0.22
Total assets
decreased by $1.1b
to $28.1b. The
decrease in current
assets was partially
offset by increase in
non-current assets.
Total distribution to
shareholders of
the Company and
non-controlling
shareholders of
subsidiaries for the year
amounted to $390m.
Prospects
The Offshore & Marine (O&M) Division’s net
order book, excluding the Sete rigs, stands
at $3.9 billion. The Division will continue
to focus on delivering its projects well,
exploring new markets and opportunities,
investing in R&D and building new
capabilities to position itself for the upturn.
The Division is also actively capturing
opportunities in production assets,
specialised vessels and the growing gas
market and exploring ways to re-purpose
its offshore technology for other uses.
The Property Division sold more than 5,480
homes in 2017, comprising about 3,725 in
China, 1,110 in Vietnam, 380 in Singapore
and 270 in Indonesia. This is 4.2% lower than
the 5,720 homes sold in 2016. In addition,
three projects, equivalent to about 4,330
homes sold en bloc, were divested in 2017.
Keppel REIT’s office buildings in Singapore
and Australia maintained a high portfolio
committed occupancy rate of 99.7% as at
end-2017. The Division will remain focused
on strengthening its presence in its core and
growth markets, while seeking opportunities
to unlock value and recycle capital.
Keppel Telecommunications & Transportation
(Keppel T&T) will continue to develop its
data centre business locally and overseas.
Besides building complementary capabilities
in the growing e-commerce business,
Keppel T&T plans to transform the logistics
business from an asset-heavy business to a
high-performing asset-light service provider
in urban logistics.
In the Investments Division, Keppel Capital
will continue to allow the Group to more
effectively recycle capital and expand
its capital base with co-investments,
giving the Group greater capacity to seize
opportunities for growth. Keppel Capital will
also create value for investors and grow the
Group’s asset management business.
The newly established Keppel Urban
Solutions will harness opportunities as
an integrated master developer of smart,
sustainable precincts, starting with Saigon
Sports City in Ho Chi Minh City, while the
Sino-Singapore Tianjin Eco-City Investment
and Development Co., Ltd will continue
to develop the Eco-City, including selling
further land parcels in 2018.
In the Infrastructure Division, Keppel
Infrastructure will continue to build on
its core competencies in energy and
environment-related infrastructure, as
well as infrastructure services businesses
to pursue promising growth areas.
The Group will continue to execute its
multi-business strategy, capturing value by
harnessing its core strengths and growing
collaboration across divisions to unleash
potential synergies, while being agile and
investing in the future.
52
53
Keppel Corporation Limited | Report to Shareholders 2017 Operating & Financial Review
Financial Review & Outlook
Shareholder Returns
Return on Equity (ROE) decreased to 1.9% in
2017 from 6.9% in the previous year, largely
due to the one-off financial penalty from
the global resolution and related costs, and
higher average total equity. Excluding the
one-off financial penalty from the global
resolution and related costs of $619 million,
ROE was 7.0% in 2017.
The Company will be distributing a total
cash dividend of 22.0 cents per share for
2017, comprising a proposed final cash
dividend of 14.0 cents per share and the
interim cash dividend of 8.0 cents per share
distributed in the third quarter of 2017. Total
cash dividend for 2017 represents 185%
of Group net profit. Excluding the one-off
financial penalty from the global resolution
and related costs of $619 million, total cash
dividend for 2017 represents 48% of Group
net profit. On a per share basis, it translates
into a gross yield of 3.0% on the Company’s
last transacted share price of $7.35 as at
31 December 2017.
Dividend
in specie
~ 9.5 cts/share
ROE & Dividend
%
25
20
15
10
5
0
cents
50
40
30
20
10
0
ROE
Full-Year Dividend
Interim Dividend
2013
19.5
40.0
10.0
2014
18.8
48.0
12.0
2015
14.2
34.0
12.0
2016
6.9
20.0
8.0
2017
1.9^
22.0
8.0
^
Includes the one-off financial penalty from the global resolution and related costs of $619 million.
EVA ($m)
2,000
1,500
1,000
500
0
-500
-1,000
^
Includes the one-off financial penalty from the global resolution and related costs of $619 million.
2012
2013
2014
1,430
1,142
1,778
2015
648
2016
2017
(140)
(834)^
EVA
Profit after tax (Note 1)
Adjustment for:
Interest expense
Interest expense on non-capitalised leases
Tax effect on interest expense adjustments (Note 2)
Provisions, deferred tax, amortisation & other adjustments
Net Operating Profit After Tax (NOPAT)
2017
$ million
2
189
26
(38)
76
255
17 vs 16
+/(-)
-764
-36
-3
+6
+79
-718
Average EVA Capital Employed (Note 3)
Weighted Average Cost of Capital (Note 4)
Capital Charge
18,936
5.75%
(1,089)
-183
-0.07%
+24
19,119
5.82%
(1,113)
+561
-0.06%
-22
2016
$ million
16 vs 15
+/(-)
2015
$ million
766
-648
1,414
225
29
(44)
(3)
973
+70
+4
-12
-180
-766
155
25
(32)
177
1,739
18,558
5.88%
(1,091)
Economic Value Added
(834)^
-694
(140)
-788
648
Notes:
1. Profit after tax excludes net revaluation gain on 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, interest-bearing liabilities, timing of provisions, present value of operating leases and
other adjustments.
4. Weighted Average Cost of Capital is calculated in accordance with the Keppel Group EVA Policy as follows:
(a) Cost of Equity using Capital Asset Pricing Model with market risk premium set at 5.0% (2016: 5.0%);
(b) Risk-free rate of 2.41% (2016: 2.50%) based on yield-to-maturity of Singapore Government 10-year Bonds;
(c) Unlevered beta at 0.75 (2016: 0.75); and
(d) Pre-tax Cost of Debt at 2.30% (2016: 2.45%) using 5-year Singapore Dollar Swap Offer Rate plus 60 basis points (2016: 45 basis points).
Includes the one-off financial penalty from the global resolution and related costs of $619 million.
^
54
55
Performance Review
Total Assets Owned ($m)
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
Fixed assets
Properties
Investments
Stocks & work-in-progress
Debtors & others
Bank balances, deposits & cash
2015
2,846
3,272
6,029
2016
2,645
3,550
6,065
10,763
10,026
4,117
1,893
4,861
2,087
2017
2,433
3,461
6,563
8,782
4,600
2,274
Total
28,920
29,234
28,113
Total Liabilities Owed and Capital Invested ($m)
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
Shareholders’ funds
Non-controlling interests
Creditors
Term loans & bank overdrafts
Other liabilities
Total
2015
2016
2017
11,096
11,659
11,433
830
8,362
8,259
373
675
7,516
9,053
331
527
8,025
7,793
335
28,920
29,234
28,113
Economic Value Added
In 2017, Economic Value Added (EVA) was
negative $834 million as compared to
negative $140 million in the previous year.
Excluding the one-off financial penalty from
the global resolution and related costs of
$619 million, EVA was negative $215 million
in 2017. This was attributable to lower net
operating profit after tax, partially offset by
lower capital charge.
Capital charge decreased by $24 million
as a result of lower Average EVA Capital
and lower Weighted Average Cost of
Capital (WACC). WACC decreased from
5.82% to 5.75% due mainly to a decrease
in equity value resulting from lower
market capitalisation, partly offset by
higher cost of debt. Average EVA Capital
decreased by $183 million from $19.12 billion
to $18.94 billion mainly because of lower
borrowings.
Financial Position
Group shareholders’ funds decreased
from $11.66 billion as at 31 December 2016
to $11.43 billion as at 31 December 2017.
The decrease was mainly attributable to
payment of the final dividend of 12.0 cents
per share in respect of financial year 2016
and the interim dividend of 8.0 cents
per share in respect of the first half year
ended 30 June 2017, and foreign exchange
translation losses. This was partially offset
by retained profits for 2017 and an increase
in fair value on cash flow hedges.
Group total assets of $28.11 billion at
31 December 2017 were $1.1 billion or
4% lower than at the previous year end.
Decrease in current assets was partially
offset by increase in non-current assets.
The decrease in current assets was due
mainly to the lower stocks & work-in-progress
and debtors from the O&M and Property
divisions, partially offset by higher bank
balances, deposits and cash. The increase
in non-current assets was due mainly
to acquisition and further investment in
associated companies, partially offset by
depreciation of fixed assets.
Group total liabilities of $16.15 billion at
31 December 2017 were $0.7 billion or 4%
lower than at the previous year end. This
was mainly due to net repayment of term
loans and a reduction in derivative liabilities,
partially offset by an increase in creditors
arising from higher billings by suppliers, and
accruals for the one-off financial penalty
from the global resolution and related costs.
Group net debt of $5.52 billion was $1.4 billion
lower than that as at 31 December 2016.
This was mainly due to proceeds from the
disposal of subsidiaries in the Property
and Infrastructure divisions as well as
dividends received from investments and
55
54
Keppel Corporation Limited | Report to Shareholders 2017
Operating & Financial Review
Financial Review & Outlook
Total Shareholder Return (%)
120
100
80
60
40
20
0
(20)
(40)
(60)
(80)
Keppel
STI
Source: Bloomberg
Keppel is committed
to delivering value to
shareholders through
earnings growth.
10-year annualised TSR as at 2017
Keppel
STI
0.3%
3.1%
2008
(64.4)
(47.1)
2009
100.8
70.8
2010
47.0
13.4
2011
(6.4)
(14.0)
2012
22.9
23.3
2013
2014
2015
2016
9.0
3.2
(17.8)
9.5
(22.3)
(11.4)
(6.3)
3.8
2017
30.9
22.0
associated companies. These were offset
by dividend payments (by the Company
and its listed subsidiaries), acquisition and
further investment in associated companies,
as well as other capital expenditure cash
requirements.
Group net gearing ratio improved from 56%
at the end of 2016 to 46% at the end of 2017.
This was mainly due to decrease in group
net debt, partially offset by lower group
shareholders’ funds.
Total Shareholder Return
Keppel is committed to delivering value
to shareholders through earnings growth.
Towards achieving this, the Group will
rely on our multi-business strategy and
core strengths to build on what we have
done successfully, as well as seize new
opportunities when they arise.
Our 2017 Total Shareholder Return (TSR)
of 30.9% was 8.9 percentage points above
the benchmark Straits Times Index’s (STI)
TSR of 22.0%. Our 10-year annualised
TSR growth rate of 0.3% was lower than
STI’s 3.1%.
Cash Flow
To better reflect our operational free cash
flow, the Group had excluded expansionary
acquisitions (e.g. investment properties)
and capital expenditure (e.g. building of
new logistics or data centre facilities), meant
for long-term growth for the Group, and
major divestments.
Net cash from operating activities was
$1,377 million for 2017 as compared to
$294 million for 2016. This was due mainly
to cash inflow from working capital changes
as compared to outflow in the prior year.
After excluding expansionary acquisitions,
capital expenditure and major divestments,
net cash from investment activities was
$425 million. The Group spent $187 million
on investments and operational capital
expenditure, mainly for the O&M and
Property divisions. After taking into
account the proceeds from divestments
and dividend income of $655 million,
as well as advances to associated companies
of $43 million, the free cash inflow was
$1,802 million.
Total distribution to shareholders of the
Company and non-controlling shareholders
of subsidiaries for the year amounted to
$390 million.
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
56
57
Performance Review into account changes in the operating
environment. This committee is chaired by
the Chief Financial Officer of the Company
and includes Chief Financial Officers of
the Group’s key operating companies and
Head Office specialists.
The Group’s financial risk management is
discussed in more detail in the notes to the
financial statements. In summary:
– The Group has receivables and payables
denominated in foreign currencies with the
largest exposure arising from US dollars
and Renminbi. Foreign currency exposures
arise mainly from the exchange rate
movement of these foreign currencies
against the Singapore dollar, which is the
Group’s measurement currency. The Group
utilises forward foreign currency contracts
to hedge its exposure to specific 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 the O&M
contracts based on the expected
timing of receipts. The Group does not
engage in foreign currency trading.
– The Group hedges against price
fluctuations arising from 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 benchmark
fuel price indices of High Sulphur Fuel Oil
(HSFO) 180-CST and Dated Brent.
– The Group hedges against fluctuations
in electricity prices arising from its daily
sales of electricity. Exposure to price
fluctuations is managed via electricity
futures contracts.
– The Group maintains a mix of fixed and
variable rate debt/loan instruments with
varying maturities. Where necessary,
the Group uses derivative financial
instruments to hedge interest rate risks.
These may include cross currency swaps,
interest rate swaps and interest rate caps.
– The Group maintains flexibility in funding
by ensuring that ample working capital
lines are available at any one time.
– The Group adopts stringent procedures
on extending credit terms to customers
and the monitoring of credit risk.
Borrowings
The Group borrows from local and foreign
banks in the form of short-term and long-term
loans, project loans and bonds. Total Group
borrowings as at the end of 2017 were
$7.8 billion (2016: $9.1 billion and 2015:
$8.3 billion). At the end of 2017, 22%
(2016: 20% and 2015: 10%) of Group
borrowings were repayable within one
year with the balance largely repayable
more than three years later.
Unsecured borrowings constituted 91%
(2016: 87% and 2015: 85%) of total borrowings
with the balance secured by properties and
other assets. Secured borrowings are mainly
for financing of investment properties and
project finance loans for property development
projects. The net book value of properties
and assets pledged/mortgaged to financial
institutions amounted to $1.89 billion
(2016: $2.81 billion and 2015: $2.46 billion).
Cash Flow
Operating profit
Depreciation, amortisation & other non-cash items
Cash flow provided by operations before changes in working capital
Working capital changes
Interest receipt and payment & tax paid
Net cash from / (used in) operating activities
Investments & capital expenditure
Divestments & dividend income
Advances (to) / from associated companies
Net cash from investing activities
2017
$ million
17 vs 16
+/(-)
2016
$ million
16 vs 15
+/(-)
2015
$ million
776
(313)
463
1,290
(376)
1,377
(187)
655
(43)
425
-19
-720
-739
+1,876
-54
+1,083
-31
+195
+15
+179
795
407
1,202
(586)
(322)
294
(156)
460
(58)
246
540
-719
+569
-150
+1,215
+14
+1,079
+201
+92
-138
+155
1,514
(162)
1,352
(1,801)
(336)
(785)
(357)
368
80
91
+1,234
(694)
Free Cash Flow*
1,802
+1,262
56
57
Dividend paid to shareholders of the Company & subsidiaries
(390)
+232
(622)
+334
(956)
* Free cash flow excludes expansionary acquisitions & capital expenditure, and major divestments.
Keppel Corporation Limited | Report to Shareholders 2017 Net Cash/(Gearing)
Net Gearing = Borrowings – Cash
Total Equity
$m
15,000
10,000
5,000
0
(5,000)
(10,000)
No. of times
1.5
1.0
0.5
0
(0.5)
(1.0)
Net Cash / (Debt)
Total Equity
Net Cash / (Gearing)
2015
2016
2017
(6,366)
(6,966)
(5,519)
11,926
12,334
11,960
(0.53)
(0.56)
(0.46)
Interest Coverage
Interest Coverage = EBIT
Interest Cost
Note: EBIT = Profit before tax + Interest expense
$m
2,400
1,600
800
0
No. of times
15
10
5
0
EBIT
Total Interest Cost
Interest Cover
2015
2,152
223
9.66
2016
1,279
294
4.35
2017
705^
241
2.92
^
Includes the one-off financial penalty from the global resolution and related costs of $619 million.
Operating & Financial Review
Financial Review & Outlook
Fixed rate borrowings constituted 65%
(2016: 58% and 2015: 67%) of total
borrowings with the balance at floating
rates. The Group has cross currency swap
and interest rate swap agreements with
notional amount totalling $1,779 million
whereby it receives foreign currency fixed
rates (in the case of the cross currency
swaps) and variable rates equal to SOR and
LIBOR (in the case of interest rate swaps) and
pays fixed rates of between 1.27% and 3.62%
on the notional amount. Details of these
derivative instruments are disclosed in the
notes to the financial statements.
Singapore dollar borrowings represented
73% (2016: 69% and 2015: 65%) of total
borrowings. The balances were mainly in
US dollars and Renminbi. Foreign currency
borrowings were drawn to hedge against
the Group’s overseas investments and
receivables that were denominated in
foreign currencies.
Weighted average tenor of the loan book was
around four years at the beginning of 2017
and also around four years at the end of 2017
with an increase in average cost of funds.
Capital Structure & Financial Resources
The Group maintains a strong balance sheet
and an efficient capital structure to maximise
return for shareholders.
Every new investment will have to satisfy strict
criteria for return on investment, cash flow
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
Total equity as at the end-2017 was
$11.96 billion as compared to $12.33 billion
as at end-2016 and $11.93 billion as at end-
2015. The Group was in a net debt position
of $5,519 million as at end-2017, which was
below the $6,966 million as at end-2016 and
$6,366 million as at end-2015. The Group’s
net gearing ratio was 0.46 times as at
end-2017, compared to 0.56 times as at
end-2016.
Interest coverage was 9.66 times in 2015,
decreasing to 4.35 times in 2016 and to 2.92
times in 2017. Interest coverage in 2017 was
lower due to lower Earnings before Interest
expense and Tax (EBIT).
Cash flow coverage increased from negative
2.53 times in 2015 to 2.00 times in 2016 and
to 6.71 times in 2017. This was mainly due to
higher operational cash inflow in 2017.
At the Annual General Meeting in 2017,
shareholders gave their approval for the
mandate to buy back shares. During the
year, 2,850,000 shares were bought back
58
59
Performance Review
Cash Flow Coverage
Cash Flow Coverage = Operating Cash Flow + Interest Cost
Interest Cost
$m
1,800
1,500
1,200
900
600
300
0
(300)
(600)
No. of times
12
10
8
6
4
2
0
(2)
(4)
Total Interest Expense + Interest Capitalised
Operating Cash Flow + Interest
Cash Flow Coverage
2015
223
(563)
(2.53)
2016
294
589
2.00
2017
241
1,619
6.71
Debt Maturity ($m)
< 1 year
1 - 2 years
2 - 3 years
3 - 4 years
4 - 5 years
> 5 years
Financial Capacity
1,714 (22%)
1,404 (18%)
967 (12%)
594 (8%)
1,613 (21%)
1,501 (19%)
$ million Remarks
Cash at Corporate Treasury
527 23% of total cash of $2.27 billion
Available credit facilities to the Group
10,985 Credit facilities of $12.94 billion,
of which $1.95 billion was utilised
Total
11,512
and held as treasury shares. The Company
also transferred 5,071,722 treasury shares to
employees upon vesting of shares released
under the KCL Share Plans and Share Option
Scheme. As at the end of the year, the
Company had 10,788 treasury shares.
Except for the transfer, there was no other
sale, transfer, disposal, cancellation and/or
use of treasury shares during the year.
Financial Resources
The Group continues to be able to tap into
the debt capital market at competitive terms.
As part of its liquidity management,
the Group has built up adequate cash
reserves and short-term marketable
securities as well as sufficient undrawn
banking facilities and capital market
programs. Funding of working capital
requirements, capital expenditure and
investment needs was made through a mix
of short-term money market borrowings,
bank loans as well as medium/long term
bonds via the debt capital market.
The Group maintains flexibility in funding
by ensuring that ample working capital
lines are available at any one time.
Cash flow, debt maturity profile and
overall liquidity position are actively
reviewed on an ongoing basis.
As at end-2017, total available credit facilities,
including cash at Corporate Treasury, amounted
to $11.51 billion (2016: $8.71 billion).
Critical Accounting Policies
The Group’s significant accounting policies
are discussed in more detail in the notes to
the financial statements. The preparation of
financial statements requires management
to exercise its judgment 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 judgment are described below.
Impairment of Loans & Receivables
The Group assesses at each balance sheet
date whether there is any objective evidence
that a loan and receivable is impaired.
The Group considers factors such as the
probability of insolvency or significant financial
difficulties of the debtor and default or
significant delay in payments. When there
is objective evidence of impairment, the
amount and timing of future cash flows
are estimated based on historical loss
experience for assets with similar credit
risk characteristics. The carrying amounts
of trade, intercompany and other receivables
are disclosed in the balance sheet. As at
31 December 2017, the Group has credit
risk exposure to an external group of
companies for receivables that are past due.
59
58
Keppel Corporation Limited | Report to Shareholders 2017
Operating & Financial Review
Financial Review & Outlook
Management has considered any changes in
the credit quality of the debtors, the possibility
of discontinuance of the projects and the
cost incurred to-date when determining
the allowance for doubtful receivables and
its expected loss. Management performs
on-going assessments on the ability of its
debtors to repay the amounts owing to
the Group. These assessments include
the review of the customers’ credit-standing
and the possibility of discontinuance of
the projects.
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 cash
flows. The fair values of available-for-sale
investments are disclosed in the
balance sheet.
Impairment of Non-Financial Assets
Determining whether the carrying value
of a non-financial asset is impaired requires
an estimation of the value in use of the cash-
generating units. This requires the Group to
estimate the future cash flows expected from
the cash-generating units and an appropriate
discount rate in order to calculate the present
value of the future cash flows. The carrying
amounts of fixed assets, investments in
subsidiaries, investments in associates and
joint ventures, and intangibles are disclosed
in the balance sheet.
Revenue Recognition and
Contract Cost
The Group recognises contract revenue
and contract cost based on the percentage
of completion method. The stage of
completion is measured in accordance with
the accounting policy stated in Note 2(q).
Significant assumptions are 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 engineers.
Revenue from construction contracts
is disclosed in Note 22.
Revenue arising from additional claims
and variation orders, whether billed or
unbilled, is recognised when negotiations
have reached an advanced stage such
that it is probable that the customer will
accept the claims or approve the variation
orders, and the amount that it is probable
will be accepted by the customer can be
measured reliably.
Recoverability of Work-in-Progress
Balances in Relation to Offshore &
Marine Construction Contracts and
Stocks for Sale
Contracts with Sete Brasil (Sete)
The Group had previously entered into
contracts with Sete for the construction
of six rigs for which progress payments
from Sete had ceased since November
2014. In April 2016, Sete filed for bankruptcy
protection and its authorised representatives
had been in discussion with the Group
on the eventual completion and delivery
of some of the rigs. Management has
continually assessed the probable
outcomes of these contracts by taking
into consideration the progress and status
of the discussions and market conditions
in Brazil. During the financial year ended
31 December 2017, an expected loss
of $81 million was recognised, taking into
consideration cost of completion, cost of
discontinuance, salvage cost and unpaid
progress billings with regards to these rigs,
bringing the total loss recognised on
these rigs to $309 million.
Other Contracts
As at 31 December 2017, the Group had
several rigs/vessels that were under
construction for customers or had been
completed and were awaiting delivery
to the customers. See Note 13 on work-in-
progress balances.
During 2017, some of the Group’s customers
had requested for further deferral of
delivery dates of the rigs/vessels.
Management has assessed each deferred
construction project individually to make
judgment as to whether the customers
will be able to fulfil their contractual
obligations and take delivery of the rigs
at the revised delivery dates.
Management has also estimated the net
realisable values of rigs/vessels under
construction as stocks for sale in assessing
whether a provision for loss on work-in-
progress is necessary.
Management has further assessed if the
values of the rigs/vessels would exceed the
carrying values of work-in-progress and stocks
for sale. Management has estimated, with the
assistance of an independent professional
firm, the values of the rigs/vessels using
Discounted Cash Flow (DCF) calculations
that cover each class of rig/vessel under
construction. The most significant inputs
to the DCF calculations include day rates,
utilisation rates, forecasted oil price
movements and discount rates.
Income Taxes
The Group has exposure to income taxes
in numerous jurisdictions. Significant
assumptions are required in determining
the provision for income taxes. There are
certain transactions and computations for
which the ultimate tax determination is
uncertain during the ordinary course of
business. The Group recognises liabilities
for expected tax issues based on estimates
of whether additional taxes will be due.
Where the final tax outcome of these
matters is different from the amounts that
were initially recognised, such differences
will impact the income tax and deferred
tax provisions in the period in which such
determination is made. The carrying
amounts of taxation and deferred taxation
are disclosed in the balance sheet.
Claims, Litigations & Reviews
The Group entered into various contracts
with third parties in its ordinary course of
business and is exposed to the risk of claims,
litigations, latent defects or review from
the contractual parties and/or government
agencies. These can arise for various reasons,
including change in scope of work, delay and
disputes, defective specifications or routine
checks etc. The scope, enforceability and
validity of any claim, litigation or review may
be highly uncertain. In making its judgment
as to whether it is probable that any such
claim, litigation or review will result in a
liability and whether any such liability can
be measured reliably, Management relies
on past experience and the opinion of
legal and technical expertise.
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61
Performance Review Group Structure
KEPPEL CORPORATION LIMITED
Offshore & Marine
Property
Infrastructure
Investments
• Offshore rig design, construction,
repair and upgrading
• Ship conversion and repair
• Specialised shipbuilding
• Property development
• Investments
• Energy infrastructure
• Environmental infrastructure
• Infrastructure services
• Investments
• Logistics and data centres
• Asset management
• Master development
• Investments
KEPPEL OFFSHORE &
MARINE LTD
KEPPEL LAND LIMITED
100%
100%
KEPPEL INFRASTRUCTURE
HOLDINGS PTE LTD
Keppel FELS Limited 100%
Keppel Shipyard Limited 100%
Keppel Land
International Limited
Southeast Asia and India
Keppel Land China
China
Keppel Bay Pte Ltd
Keppel REIT 4 & 7
Keppel Singmarine Pte Ltd 100%
Keppel LeTourneau
Keppel Nantong Shipyard
Company Limited
China
Offshore Technology
Development Pte Ltd
Deepwater Technology
Group Pte Ltd
Marine Technology
Development Pte Ltd
Keppel AmFELS LLC
United States
Keppel FELS Brasil SA
Brasil
Keppel Philippines Marine Inc
The Philippines
Keppel Subic Shipyard Inc
The Philippines
Nakilat-Keppel Offshore &
Marine Ltd
Qatar
100%
100%
100%
100%
100%
100%
100%
98%
86%
20%
Dyna-Mac Holdings Limited4
24%
KEPPEL CAPITAL HOLDINGS
PTE LTD
100%
Keppel REIT Management
Limited
Alpha Investment Partners
Ltd
Keppel Infrastructure Fund
Management Pte Ltd
Keppel DC REIT
Management Pte Ltd6
Keppel-KBS US REIT
Management Pte Ltd
Keppel-KBS US REIT4
100%
100%
100%
50%
50%
7%
KEPPEL URBAN SOLUTIONS
PTE LTD
100%
KRISENERGY LTD4
Cayman Islands
40%
M1 LIMITED2 & 4
19%
100%
ENERGY INFRASTRUCTURE
Keppel Gas Pte Ltd
Keppel Electric Pte Ltd
Keppel DHCS Pte Ltd
Keppel Merlimau Cogen
Pte Ltd5
100%
100%
45%
100%
100%
100%
100%
49%
ENVIRONMENTAL INFRASTRUCTURE
Keppel Seghers Pte Ltd
100%
INFRASTRUCTURE SERVICES
Keppel Seghers Engineering
Singapore Pte Ltd
100%
INVESTMENTS
Keppel Infrastructure Trust4
18%
KEPPEL TELECOMMUNICATIONS
& TRANSPORTATION LTD4
79%
LOGISTICS & DATA CENTRES
Keppel Logistics Pte Ltd
Keppel Data Centres Holding
Pte Ltd
Keppel Logistics (Foshan)
Pte Ltd
China
100%
100%
70%
Keppel DC REIT3 & 4
35%
SINO-SINGAPORE TIANJIN ECO-CITY INVESTMENT AND DEVELOPMENT CO., LTD1
China
50%
GROUP CORPORATE SERVICES
Control & Accounts
Corporate Communications
Strategy & Development
Human Resources
Legal
Risk & Compliance
Mergers & Acquisitions/Corporate Development
Audit
Tax
Treasury
Information Systems
Health, Safety & Environment
Notes:
1 Owned by a Singapore Consortium, which is in turn 90%-owned by the Keppel Group.
2 Owned by Keppel Telecommunications & Transportation Ltd, a 79%-owned subsidiary of Keppel Corporation.
3 Owned by Keppel Telecommunications & Transportation Ltd (30%) and Keppel Land Limited (5%).
4 Public listed company.
5 Owned by Keppel Infrastructure Holdings Pte Ltd (49%) and Keppel Infrastructure Trust (51%).
6 Owned by Keppel Capital Holdings Pte Ltd (50%) and Keppel Telecommunications & Transportation Ltd (50%).
7 Owned by Keppel Land Limited (44%) and Keppel Capital Holdings Pte Ltd (1%).
Updated as at 7 March 2018. The complete list of subsidiaries and significant associated companies is available at www.kepcorp.com.
60
61
Keppel Corporation Limited | Report to Shareholders 2017
Governance & Sustainability
Governance & Sustainability
Sustainability Highlights
We place sustainability at the heart of our strategy,
delivering solutions for sustainable urbanisation
while creating enduring value for our stakeholders –
Sustaining Growth, Empowering Lives and
Nurturing Communities.
Sustainability Framework
Sustaining
Growth
Empowering
Lives
Nurturing
Communities
Our commitment to business
excellence is driven by our
unwavering focus on strong
corporate governance and
prudent risk management.
Resource efficiency is our
responsibility and makes good
business sense.
People are the cornerstone
of our businesses.
As an employer of choice,
we are committed to grow
and nurture our talent pool
through continuous training and
development to help our people
reach their full potential.
Innovation and delivering quality
products and services sharpen
our competitive edge.
We want to instil a culture of
safety so that everyone who
comes to work goes home safe.
As a global citizen, Keppel
believes that as communities
thrive, we thrive.
We engage and nurture
communities wherever we are,
with the aim of achieving a
sustainable future together.
As leaders in our businesses,
we support industry initiatives
and encourage open dialogue
to promote growth.
For more information,
go to: pages 64-97
For more information,
go to: pages 98-99
For more information,
go to: page 100
62
62
62
63
Governance & Sustainability
management and monitoring of the material
Environmental, Social and Governance (ESG)
factors of the Company, and take them into
consideration in the determination of the
Company's strategic direction and policies.
Stakeholder Engagement
Collaboration with stakeholders supports
us in addressing sustainability challenges.
We promote ongoing communication and
active engagement with our stakeholders.
Managing Sustainability
We drive our businesses to deliver solutions for sustainable urbanisation
and create shared value for our stakeholders.
Our Sustainability Framework articulates
our commitment to deliver value to all our
stakeholders through Sustaining Growth
in our businesses, Empowering Lives
of people and Nurturing Communities
wherever we operate.
Our management systems, policies and
guidelines, including our Employee Code of
Conduct; Health, Safety and Environment
Policy, and Supplier Code of Conduct, translate
our principles into practice by setting
standards both for our Company and those
whom we work with.
We publish sustainability reports annually,
and the next report will be published in
May 2018. Our sustainability reports draw
on internationally-recognised standards of
reporting, including the Global Reporting
Initiative (GRI), and are externally assured
in adherence to the AccountAbility AA1000
Assurance Standard (2008). Since 2017,
our report has been brought in line with the
new sustainability reporting requirements
by the Singapore Exchange.
This section contains a summary of our
approach on sustainability issues that are most
material to our business and stakeholders.
Management Structure
Sustainability issues are managed and
communicated at all levels of the Group. The
Keppel Corporation Board and management
regularly review as well as oversee the
Keppel Corporation Material Issues
Tier 1: Issues of Critical Importance
The Group Sustainability Steering
Committee, chaired by Keppel Corporation's
CEO Loh Chin Hua and comprising senior
management from across the Group,
provides guidance on the Group’s
sustainability strategy while the Working
Committee, comprising discipline-specific
working groups, executes and reports on
the Group’s efforts.
Material Issues
A robust process was undertaken to identify
and prioritise the Company’s material ESG
issues. The assessments were based on the
foundational principles of inclusivity and
materiality outlined in the AccountAbility
AA1000 Principles Standard (2008) as well as
the GRI Principles for Defining Report Content
– stakeholder inclusiveness, sustainability
context, materiality and completeness.
The process was supported by an independent
consultant and involved stakeholder
consultations, workshops for senior
management, an assessment of long-term
global trends and an internal review of our
businesses. The key material ESG issues for
Keppel Corporation were reviewed by the
Steering and Working Committees in 2017
and deemed to remain relevant.
Corporate
Governance
Economic
Sustainability
Safety &
Health
Product
Excellence
Environmental
Performance
Tier 2: Issues of High Importance
Labour Practices &
Human Rights
Community
Development
Supply Chain &
Responsible
Procurement
Stakeholder relations, including
engagement with customers, employees,
investors, media, government agencies
and communities where we operate, are
managed by departments at the corporate
level, as well as by functional divisions and
volunteer committees across our business
units worldwide.
We also engage with stakeholders on
broader issues through our membership
and support of multi-stakeholder initiatives.
These include Global Compact Network
Singapore to advance the United Nations
Global Compact initiative and its 10
principles, Singapore Institute of Directors
to uphold high standards of corporate
governance, as well as Workplace Safety and
Health Council to build industry capabilities
to better manage safety and health at work.
Best Practices
Keppel Corporation has been part of the
widely respected Dow Jones Sustainability
Index for five consecutive years. We participate
in the CDP (formerly Carbon Disclosure
Project) and are listed on a number of
other sustainability indices and rankings,
including MSCI Global Sustainability Index,
Euronext Vigeo Eiris Index – World 120 and
all four sustainability indices launched by the
Singapore Exchange in 2016.
Keppel Corporation was conferred the Best
Workforce award and received Special
Recognition for Strategy and Sustainability
Management at the Sustainable Business
Awards 2017. The Awards, organised by
Global Initiatives in partnership with
PwC Singapore, recognise businesses
with sustainable business practices.
Keppel Corporation was also awarded
Winner of the inaugural Sustainability
Award at the Securities Investors Association
(Singapore) 18th Investors' Choice Awards.
The Award honours companies with a
strong commitment towards corporate
responsibility.
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63
Keppel Corporation Limited | Report to Shareholders 2017 Corporate Governance
The Board and management of Keppel
Corporation Limited (“KCL” or the
“Company”) firmly believe that a genuine
commitment to good corporate governance
is essential to the sustainability of the
Company’s businesses and performance,
and are pleased to confirm that the
Company has adhered to the principles
and guidelines of the Code of Corporate
Governance 20121 (the “2012 Code”).
The following describes the Company’s
corporate governance practices with specific
reference to the 2012 Code.
Board’s Conduct of Affairs
Principle 1:
Effective board to lead and control
the Company
Principle 3:
Chairman and Chief Executive Officer should
in principle be separate persons to ensure
appropriate balance of power, increased
accountability and greater capacity of the board
for independent decision making
Governance Framework: KCL’s governance
structure is as follows:
Dr Lee Boon Yang is the non-executive and
independent Chairman of the Company.
Mr Loh Chin Hua is the CEO of the Company.
The Chairman, with the assistance of the
Company Secretaries, schedules meetings
and prepares meeting agenda to enable
the Board to perform its duties responsibly
having regard to the flow of the Company’s
operations. He sets guidelines on and
monitors the flow of information from
management to the Board to ensure that
all material information is provided in a
timely manner to the Board for the Board to
make good decisions. He also encourages
constructive relations between the Board
and management, and between the
executive and non-executive directors.
At annual general meetings and other
shareholders’ meetings, the Chairman
ensures constructive dialogue between
shareholders, the Board and management.
Governance Framework 2017
CHAIRMAN
Nominating
Committee
Audit
Committee
Internal
Audit
Remuneration
Committee
BOARD
Board Risk
Committee
Board Safety
Committee
CHIEF EXECUTIVE
OFFICER
Corporate
Functions
IMPAC
Group
Sustainability
Steering
Committee
Group Regulatory
Compliance
Management
Committee2
Management
Committees
Central Finance
Committee
IT Steering
Committee
Group
Regulatory
Compliance
Working Team2
The 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
Secretaries and management.
To assist the Board in the discharge of
its oversight function, various board
committees, namely the Audit, Board Risk,
Nominating, Remuneration, and Board
Safety Committees, have been constituted
with clear written terms of reference. All the
board committees are actively engaged
and play an important role in ensuring good
corporate governance in the Company and
within the Group. The responsibilities and
authority of the board committees are set
out in their respective terms of reference
(see Appendix for details).
The CEO, assisted by the management
team, makes strategic proposals to the
Board and after robust and constructive
board discussions, executes the agreed
strategy, manages and develops the
Group’s businesses and implements the
Board’s decisions. He is supported by
management committees that direct and
guide management on operational policies
and activities, which includes:
(1)
Investments & Major Projects Action
Committee (IMPAC), which guides the
Group to exercise the spirit of enterprise
as well as prudence to earn optimal
risk-adjusted returns on invested
capital for our chosen lines of business,
taking into consideration the risks, in a
controlled manner;
(2) Management Development Committee
(MDC), which nominates candidates
as nominee directors to the boards of
each unlisted company or entity that
the Company is invested in (“Investee
Company”) so as to safeguard the
Company’s investment. In respect of
Investee Companies that are (a) listed
on a stock exchange, (b) managers
or trustee-managers of any collective
investment schemes, business trusts
or any other trusts which are listed on a
stock exchange, or (c) parent companies
of the Company’s core businesses,
the Committee will recommend the
candidates for the approval of the
Nominating Committee. The MDC also
provides inputs, guidance and direction
on operational policies and human
resources/organisational matters;
(3) Central Finance Committee, which
reviews, guides and monitors financial
policies and activities of Group
companies;
(4) Enterprise Risk Management Committee,
which drives and coordinates the
Group’s risk management efforts,
and implements the Enterprise Risk
Management framework and processes;
64
65
Governance & Sustainability (5) Group Regulatory Compliance
Management Committee (Group
RCMC), which articulates the
Group’s commitment to regulatory
compliance, directs and supports
the development of over-arching
compliance policies and guidelines,
and facilitates the implementation
and sharing of policies and procedures
across the Group2;
(6) Group Regulatory Compliance Working
Team (Group RCWT), which supports
the Group RCMC and oversees the
development and review of over-arching
compliance policies and guidelines
for the Group, as well as reviewing
training and communication
programmes2;
(7) Keppel IT Steering Committee, which
provides strategic information
technology (IT) leadership and ensures
IT strategy alignment in achieving
business strategies; and
(8) Group Sustainability Steering Committee,
which sets the sustainability strategy and
leads performance in key focus areas.
Board Matters
Role: The principal functions of the Board
are to:
• decide on matters in relation to the
Group’s activities which are of a
significant nature, including decisions
on strategic directions and guidelines
and the approval of periodic plans and
major investments and divestments;
• oversee the business and affairs of the
Company, establish, with management,
the strategies and financial objectives
to be implemented by management,
and monitor the performance of
management;
set the Company’s values and standards
(including ethical standards);
•
• oversee processes for evaluating the
adequacy of internal controls, risk
management, financial reporting and
compliance, and satisfy itself as to the
adequacy of such processes;
• assume responsibility for corporate
•
governance; and
consider sustainability issues such
as environmental and social factors
as part of its strategic formulation.
Board Strategic Review: The Board
periodically reviews and approves the
Group’s strategic plans. In FY 2014, the
Board approved the Group’s Vision 20203
which sets out the vision, operating
principles and values of the Group, and the
roadmap4 to take the Group’s businesses
into 2020 to achieve faster growth, build
a stronger Keppel that fully captures the
significant synergies within and among its
Group companies, and fully develop the
potential of its people.
Review Process: A process is in place
to support the Board in reviewing and
monitoring the Group’s strategic plans,
including providing directors with the
necessary context and opportunity to
undertake effective and robust deliberation
and debate. In this regard, a two-day off-site
board strategy meeting is organised
annually for in-depth discussion on strategic
issues and direction of the Group. This is
followed by an update of each business
unit’s strategic plans for alignment with the
Group’s strategy. To support the Board’s
oversight of the implementation of the
strategic plans, one business unit is invited
to each quarterly Board meeting to present
on its plans and current challenges, and to
provide the Board an opportunity to perform
an in-depth review into each of the Group’s
core businesses.
Independent Judgment: All 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 directors for FY 2017, all directors have
discharged this duty consistently well.
Conflicts of Interest: Every director is
required to declare any conflict of interest
in a transaction or proposed transaction
with the Company as soon as is practicable
after the relevant facts have come to his/
her knowledge. On an annual basis, each
director is also required to submit details
of his/her associates for the purpose of
monitoring interested persons transactions.
Meetings: The Board meets six times
a year and as warranted by particular
circumstances. Board meetings are
scheduled and circulated to the directors
prior to the start of the financial year to
allow directors to plan ahead to attend such
meetings, so as to maximise participation.
Telephonic attendance and conference
via audio-visual communication at board
meetings are allowed under the Company’s
constitution. Further, the non-executive
directors meet without the presence of
management after each board meeting as
well as on a need-be basis. The number
of board and board committee meetings
held in FY 2017, as well as the attendance of
each Board member at these meetings, are
disclosed in Table 1 on page 66 of this report.
If a director were unable to attend a board
or board committee meeting, he/she would
still receive all the papers and materials for
discussion at that meeting. He/she would
review them and advise the Chairman
or board committee chairman of his/her
views and comments on the matters to be
discussed, so that they may be conveyed to
other members at the meeting.
Internal Limits of Authority: The Company
has adopted internal guidelines setting
forth matters that require board approval.
Under these guidelines, (a) new investments
or increase in investments, (b) acquisition
and disposal of assets and (c) capital
equipment purchase and/or lease, exceeding
$30 million by any Group company (not
separately listed), and all commitments to
term loans and lines of credit from banks
and financial institutions by the Company,
require the approval of the Board. 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.
Director Orientation: A formal letter is sent
to newly-appointed directors upon their
appointment explaining their duties and
obligations as a board director. All newly-
appointed directors receive a director tool-kit
and undergo a comprehensive orientation
programme which includes site visits and
management presentations on the Group’s
businesses, strategic plans and objectives.
Training: The directors are provided
with continuing education in areas such
as directors’ duties and responsibilities,
corporate governance, changes in
financial reporting standards, changes
in the Companies Act, continuing listing
obligations and industry-related matters,
so as to update and refresh them on
matters that may affect or enhance their
performance as board or board committee
1 The Code of Corporate Governance 2012 issued by the Monetary Authority of Singapore on 2 May 2012.
2 The Group RCMC and Group RCWT were set up in October 2015 and operationalised in 2016.
3 With effect from FY 2014, and following a review and update in FY 2017, the vision of the Company is to be
a global company at the forefront of its chosen industries, shaping the future for the benefit of all its
stakeholders – Sustaining Growth, Empowering Lives and Nurturing Communities. Guided by our operating
principles and core values, the Company’s mission is to deliver our solutions for sustainable urbanisation
profitably, safely and responsibly.
4 This roadmap includes four broad areas for sustainable growth: (1) Business: Setting the overarching strategies,
targets and key actions to be undertaken by the business units; (2) People: Building a robust succession
pipeline and continued strong employee satisfaction; (3) Process: Pursuing excellence in safety, productivity
and innovation; and (4) Corporate Citizenry: Formalising and further organising community outreach efforts to
positively impact communities in which the Group operates.
64
65
Keppel Corporation Limited | Report to Shareholders 2017 Corporate Governance
Table 1
Lee Boon Yang
Loh Chin Hua
Tow Heng Tan
Alvin Yeo Khirn Hai
Tan Ek Kia
Danny Teoh
Tan Puay Chiang
Till Vestring
Veronica Eng
No. of Meetings Held
members. A training programme is also
in place for directors in areas such as
accounting, finance, risk governance and
management, the roles and responsibilities
of a director of a listed company and
industry specific matters. In FY 2017,
some KCL directors attended talks on
topics relating to corporate governance
and compliance (including case studies),
sanctions, financial reporting updates and
macroeconomic trends. Site visits are also
conducted periodically for directors to
familiarise them with the operations of
the various businesses, so as to enhance
their performance as board or board
committee members.
Board Composition and
Succession Planning
Principle 2:
Strong and independent element on
the Board
Board Composition and Succession
Planning: To discharge its oversight
responsibilities, the Board must be an
effective board which can lead and control
the business of the Group. There is a process
of refreshing the Board progressively over
time so that the experience of longer serving
directors can be drawn upon, while tapping
into the new external perspectives and
insights which more recent appointees bring
to the Board’s deliberation.
Board Independence: The Nominating
Committee determines on an annual basis
whether or not a director is independent,
bearing in mind the 2012 Code’s definition of
an “independent director” and guidance as
to relationships the existence of which would
deem a director not to be independent.
The Committee carried out the review on
the independence of each non-executive
director in January 2017 based on the
respective directors’ self-declaration in the
66
Board
Meetings
Audit
Nominating
Remuneration
Safety
Risk
Board Committee Meetings
13
13
10
12
13
13
13
13
12
13
-
-
-
5
5
5
-
-
4
5
4
-
4
3
-
-
4
4
-
4
7
-
6
-
-
5
-
7
-
7
4
4
-
-
4
-
4
-
-
4
-
-
3
-
4
4
4
-
3
4
Directors’ Independence Checklist and
their actual performance on the Board
and board committees.
In this connection, the Committee (save for
Mr Alvin Yeo who abstained from deliberation
in this matter) noted that Mr Alvin Yeo is
Senior Partner of WongPartnership LLP,
which is one of the law firms providing legal
services to the Group. Mr Yeo had declared
to the Committee that he did not have a
10% or more stake in WongPartnership LLP
and did not involve himself in the selection
and appointment of legal counsels for the
Group. The Committee also took into account
Mr Yeo’s actual performance on the Board
and board committees and the outcome of
the recent self and peer Individual Director
Performance assessment, and agreed that
Mr Yeo has at all times exercised independent
judgment in the best interests of the
Company in the discharge of his director’s
duties and should therefore continue to be
deemed an independent director.
The Committee also noted that Mr Tan Ek Kia
is a non-executive and independent director
on the board of TransOcean Ltd which has
business dealings with the Keppel Offshore
& Marine Group. Mr Tan had declared to
the Committee that he was not involved
in the negotiation of contracts or business
dealings between the companies. The
Committee also took into account Mr Tan’s
actual performance on the Board and board
committees and the outcome of the recent
self and peer Individual Director Performance
assessment and agreed that Mr Tan has at
all times exercised independent judgment
in the best interests of the Company in
the discharge of his director’s duties and
should therefore continue to be deemed
an independent director.
Further, a director who is directly associated
with a 10% shareholder is deemed as
non-independent under the 2012 Code.
Mr Tow Heng Tan was previously the Chief
Investment Officer of Temasek Holdings
(Private) Limited (“Temasek”). He ceased to
be employed by Temasek since 2012 and is
currently the Chief Executive Officer of Pavilion
Capital International Pte Ltd, a wholly-owned
subsidiary of Temasek. As Mr Tow is currently
employed by a wholly-owned subsidiary of
Temasek, the Committee (save for Mr Tow
who abstained from deliberation in this
matter) continued to deem Mr Tow as a
non-independent and non-executive director.
The Board concurred with the reasons set
forth by the Nominating Committee and
was of the view that Dr Lee Boon Yang,
Mr Alvin Yeo, Mr Tan Ek Kia, Mr Danny
Teoh, Mr Tan Puay Chiang, Mr Till Vestring
and Ms Veronica Eng should be deemed
independent. None of the directors deemed
independent had served more than nine
years from date of first appointment.
Board Size: The Board, in concurrence with
the Nominating Committee, was of the view
that, taking into account the nature and
scope of the operations of the Company, the
requirements of the Company’s businesses
and the need to avoid undue disruptions
from changes to the composition of the
Board and board committees, the Board
should consist of approximately 10 to 12
members, which would facilitate effective
decision making. The Board currently
comprises majority independent directors
with a total of nine directors of whom seven
are independent. The Board is currently
sourcing for a suitable additional member.
No individual or small group of individuals
dominate the Board’s decision making.
The nature of the directors’ appointments
on the Board and details of their membership
on board committees are set out on page 80
herein.
67
Governance & Sustainability Board Competency: The Nominating
Committee is satisfied that the Board and
the board committees comprise directors
who, as a group, provide an appropriate
balance and diversity of skills, experience,
gender, knowledge of the Group, core
competencies such as accounting or finance,
business or management experience,
human resources, risk management,
technology, mergers and acquisitions,
legal, international perspective, industry
knowledge, strategic planning experience
and customer-based experience or
knowledge, required for the Board and the
board committees to be effective.
In this respect, the Nominating Committee
recognises the merits of gender diversity
in relation to the composition of the Board
and, in identifying suitable candidates for
new appointment to the Board, would
ensure that female candidates are included
for consideration. Having said that, gender
is but one aspect of diversity and new
directors will continue to be selected based
on objective criteria set as part of the
process for appointment of new directors
and Board succession planning. In FY 2017,
there was one female director out of a total
of nine directors.
Board Information: The 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 business
and affairs, and be knowledgeable about
the industry in which the businesses
operate. The Company has therefore
adopted initiatives to put in place processes
to ensure that the non-executive directors
are well supported by accurate, complete
and timely information, have unrestricted
access to management, and have sufficient
time and resources to discharge their
oversight function effectively.
These initiatives include regular informal
meetings for management to brief the
directors on prospective deals and potential
developments at an early stage before
formal board approval is sought, and
the circulation of relevant information on
business initiatives, industry developments,
and analyst and press commentaries on
matters in relation to the Company or the
industries in which it operates. A two-
day off-site board strategy meeting is
organised annually for in-depth discussion
on strategic issues and direction of the
Group, 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
so as to facilitate the Board’s review of the
Group’s succession planning and leadership
development programme.
Non-executive Directors’ Meetings:
The non-executive directors set aside time
at each scheduled quarterly meeting to
meet without the presence of management
to discuss matters such as board processes,
corporate governance initiatives, matters
which they wish to discuss during the
board off-site strategy meeting, succession
planning and leadership development,
and performance management and
remuneration matters. Such meetings
may also be scheduled on a need-be basis.
Board Membership
Principle 4:
Formal and transparent process for the
appointment and re-appointment of directors
to the Board
Nominating Committee
The Company has established a
Nominating Committee (NC) to, among
other things, make recommendations
to the Board on all board appointments
and oversee the Board and senior
management’s succession and leadership
development plans. The NC comprises
entirely of non-executive directors, four out
of five of whom (including the Chairman) are
independent, namely:
• Mr Tan Puay Chiang
Independent Chairman
• Dr Lee Boon Yang
Independent Member
• Mr Tow Heng Tan
Non-Executive and
Non-Independent Member
• Mr Alvin Yeo
Independent Member
• Mr Till Vestring
Independent Member
The responsibilities of the NC are set out on
pages 79 and 80 herein.
Process for appointment of new
directors and Board succession
planning
The NC is responsible for reviewing the
succession plans for the Board. In this
regard, it has put in place a formal process
for the renewal of the Board and the
selection of new directors. The NC leads
the process and makes recommendations
to the Board as follows:
(a) NC reviews annually the balance and
diversity of skills, experience, gender
and knowledge required by the Board
and the size of the Board which would
facilitate decision making.
(b) In the light of such review and in
consultation with management, the
NC assesses if there is any inadequate
representation in respect of any of those
attributes and if so, determines the role
and the desirable competencies for a
particular appointment.
(c) External help (for example, from
the Singapore Institute of Directors,
search consultants, or through open
advertisement) may be used to source
for potential candidates if need be.
Directors and management may also
make recommendations.
(d) NC meets with the short-listed
candidate(s) to assess suitability and to
ensure that the candidate(s) is/are aware
of the expectations and the level of
commitment required.
(e) NC makes recommendations to the
Board for approval.
The Board believes that orderly succession
and renewal is achieved as a result of
careful planning, where the appropriate
composition of the Board is continually
under review.
Criteria for Appointment
of New Directors
All new appointments are subject to the
recommendation of the NC based on the
following objective criteria:
Integrity
(1)
(2) Independent mindedness
(3) Diversity – Possess core competencies
that meet the needs of the Company
and complement the skills and
competencies of the existing directors
on the Board
(4) Able to commit time and effort to carry
out duties and responsibilities effectively
(5) Track record of making good decisions
(6) Experience in high-performing
companies
(7) Financially literate
Re-nomination of Directors
The NC 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/her peers.
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 constitution,
one-third of the directors retire from office
at the Company’s annual general meeting,
and a newly-appointed director must submit
himself/herself for re-election at the annual
general meeting immediately following his/
her appointment.
67
66
Keppel Corporation Limited | Report to Shareholders 2017
Corporate Governance
Annual Review of Board Committees
Composition
The NC reviews the composition of the
board committees on an annual basis to
ensure that they comprise members with
the necessary qualifications and skills to
discharge their responsibilities effectively.
Director” is a person who, at the request
of KCL, acts as director (whether executive
or non-executive) on the board of another
company or entity (“Investee Company”)
to oversee and monitor the activities of
the relevant Investee Company so as to
safeguard KCL’s investment in the company.
Annual Review of Directors’
Independence
The NC is also charged with determining
the “independence” status of the directors
annually. Please refer to page 66 herein on
the basis of the NC’s determination as to
whether a director should or should not be
deemed independent.
Annual Review of Directors’
Time Commitments
The NC has adopted internal guidelines
addressing competing time commitments
that are faced when directors serve on
multiple boards and/or have other principal
commitments.
The NC determines annually whether a
director with other listed company board
representations and/or other principal
commitments is able to and has been
adequately carrying out his/her duties as a
director of the Company. The NC takes into
account the results of the assessment of
the effectiveness of the individual director,
the level of commitment required of the
director’s other principal commitments,
and the respective directors’ actual conduct
and participation on the Board and board
committees, including availability and
attendance at regular scheduled meetings
and ad-hoc meetings, in making this
determination.
In respect of FY 2017, the NC was of the view
that each director has given sufficient time
and attention to the affairs of the Company
and has been able to discharge his/her
duties as director effectively. The NC noted
that based on the attendance of board and
board committee meetings during the year,
all the directors were able to participate
in at least a substantial number of such
meetings to carry out their duties. The NC
also noted that, based on the Independent
Co-ordinator’s Report on individual director
assessment for FY 2017, all the directors
performed well. The NC was therefore
satisfied that in FY 2017, where a director had
other listed company board representations
and/or other principal commitments, the
director was able and had been adequately
carrying out his/her duties as a director
of the Company.
Nominee Director Policy
At the recommendation of the NC, the
Board approved the adoption of the KCL
Nominee Director Policy in January 2009.
For the purposes of the policy, a “Nominee
68
The purpose of the policy is to highlight
certain obligations of a person while acting
in his/her capacity as a Nominee Director.
The policy also sets out the internal process
for the appointment and resignation of
a Nominee Director. The policy would be
reviewed and amended as required to take
into account current best practices and
changes in the law and stock exchange
requirements.
Key Information Regarding Directors
The following key information regarding
directors is set out in the following pages
of this Annual Report:
Pages 20 to 23: Academic and professional
qualifications, board committees
served on (as a member or Chairman),
date of first appointment as director,
date of last re-election as director,
directorships or chairmanships both
present and past held over the preceding
five years in other listed companies and
other major appointments, whether
appointment is executive or non-executive,
whether considered by the NC to be
independent; and
Pages 103 to 104: Shareholding in the
Company and its subsidiaries.
Board Performance
Principle 5:
Formal assessment of the effectiveness of
the Board and Board Committees 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 and its board
committees, the contribution by each
individual director to the effectiveness of
the Board, as well as the effectiveness of
the Chairman of the Board.
Independent Co-ordinator: 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, former Chairman, Ernst &
Young and Great Eastern Holdings Ltd, and
currently Advisor to Far East Organisation,
was appointed for this role. Mrs Fang Ai Lian
does not have business relationships or any
other connections with the Company which
may affect her independent judgment.
Formal Process and Performance Criteria:
The evaluation processes and performance
criteria are disclosed in the Appendix to
this report.
Objectives and Benefits: The board
assessment exercise provides an
opportunity to obtain constructive feedback
from each director on whether the Board’s
procedures and processes allow him/
her to discharge his/her duties effectively
and the changes which should be made
to enhance the effectiveness of the Board
and/or board committees. The assessment
exercise also helps the directors to focus
on their key responsibilities. The individual
director assessment exercise allows for peer
review, with a view to raising the quality
of board members. It also assists the NC
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 distributed to the 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. Directors are
provided with tablet devices to enable
them to access and read the board papers.
However, sensitive matters may be tabled
at the meeting itself or discussed without
any papers being distributed. Managers
who can provide additional insights into the
matters at hand would be present at the
relevant time during the board meeting.
The directors are also provided with the
names and contact details of the Company’s
senior management and the Company
Secretaries to facilitate direct access to senior
management and the Company Secretaries.
The Company fully recognises that
the flow of relevant information on an
accurate and timely basis is critical for
the Board to be effective in the discharge
of its duties. Management is therefore
expected to provide the Board with accurate
information in a timely manner concerning
the Company’s progress or shortcomings
in meeting its strategic business objectives
or financial targets, and other information
relevant to the strategic issues facing
the Company.
Management also provides the Board
members with management accounts
69
Governance & Sustainability on a monthly basis and as the Board may
require from time to time. Such reports
keep the Board informed, on a balanced
and understandable basis, of the Group’s
performance, financial position and
prospects.
The Company Secretaries administer,
attend and prepare minutes of board
proceedings. They assist the Chairman
to ensure that board procedures (including
but not limited to assisting the Chairman
to ensure timely and good information flow
to the Board and board committees,
and between senior management and
the non-executive directors, and facilitating
orientation and assisting in the professional
development of the directors) are followed
and regularly reviewed to ensure effective
functioning of the Board, and that the
Company’s constitution 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. They also assist the
Chairman and the Board to implement
and strengthen corporate governance
practices and processes with a view to
enhancing long-term shareholder value.
They are also the primary channel of
communication between the Company
and the SGX.
The appointment and removal of the
Company Secretaries 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 fixing
remuneration packages of individual directors
should be formal and transparent
Principle 8:
The level and structure of director fees are
aligned with the long-term interest of the
Company and appropriate to attract, retain
and motivate directors to provide good
stewardship of the Company
The level and structure of key management
remuneration are aligned with the long-term
interest and risk policies of the Company and
appropriate to attract, retain and motivate
key management to successfully manage
the Company
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 (RC)
comprises entirely non-executive directors,
three out of four of whom (including the
Chairman) are independent; namely:
• Mr Till Vestring
Independent Chairman
• Dr Lee Boon Yang
Independent Member
• Mr Danny Teoh
Independent Member
• Mr Tow Heng Tan
Non-Executive and
Non-Independent Member
The RC 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 RC 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 RC
recommends to the Board for endorsement a
framework of remuneration (which covers all
aspects of remuneration including directors’
fees, salaries, allowances, bonuses, grant of
shares and benefits in kind) and the specific
remuneration packages for each director
and the key management personnel. The
RC also reviews the remuneration of senior
management and administers the KCL Share
Option Scheme in respect of the outstanding
options granted prior to the termination of
the KCL Share Option Scheme in 2010, the
KCL Restricted Share Plan (the “KCL RSP”)
and the KCL Performance Share Plan
(the “KCL PSP”). In addition, the RC reviews
the Company’s obligations arising in the
event of termination of the executive
directors’ and key management personnel’s
contract of service, to ensure that such
contracts of service contain fair and
reasonable termination clauses which are
not overly generous.
The RC has access to expert advice from
external remuneration consultants where
required. In FY 2017, the RC sought views on
market practice and trends from external
remuneration consultants, Aon Hewitt. The
RC undertook a review of the independence
and objectivity of the external remuneration
consultants through discussions with the
external remuneration consultants, and has
confirmed that the external remuneration
consultants had no relationships with
the Company which would affect their
independence and objectivity.
Annual Remuneration Report
Policy in respect of Non-Executive
Directors’ Remuneration
Each non-executive director’s remuneration
comprises a basic fee and an additional
fee for services performed on board
committees. 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 office. The
non-executive directors participated
in additional ad-hoc meetings with
management during the year and are not
paid for attending such meetings. Executive
directors are not paid directors’ fees.
The RC, in consultation with Aon Hewitt,
conducted a review of the non-executive
directors’ fee structure in 2017. The review
took into account a variety of factors,
including prevailing market practices and
referencing directors’ fees against comparable
benchmarks (locally and in the region), as
well as the roles and responsibilities of the
Board and board committees. Recognising
that directors have ongoing oversight
responsibilities towards the Company,
a revised directors’ fee structure was
developed, comprising only basic fees for
the Board, as well as additional fees for
services performed on board committees.
Attendance fees were removed from the
non-executive directors’ fee structure from
2017 onwards. The 2017 total fees for
non-executive directors are lower than
2016’s total fees (before the 10% voluntary
fee reduction agreed to in 2016).
The directors’ fee structure is set out in
Table 2 on page 70 of this report.
Each of the non-executive directors
(including the Chairman) will receive 70%
of his/her total directors’ fees in cash
(“Cash Component”) and 30% in the form
of KCL shares (“Remuneration Shares”) (both
amounts subject to adjustment as described
below). The actual number of Remuneration
Shares, to be purchased from the market
on the first trading day immediately after
the date of the Annual General Meeting
(“Trading Day”) for delivery to the respective
non-executive directors, will be based on
the market price of the Company’s shares
on the SGX on the Trading Day. The actual
number of Remuneration Shares will be
rounded down to the nearest thousand
and any residual balance will be paid in
cash. Such 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 aggregate
directors’ fees for non-executive directors
is subject to shareholders’approval at the
Annual General Meeting. The Chairman
and the non-executive directors will abstain
from voting, and will procure their respective
associates to abstain from voting in respect
of this resolution.
69
68
Keppel Corporation Limited | Report to Shareholders 2017
Corporate Governance
Table 2
Board Chairman
Board Member
Audit Committee
Board Risk Committee
Remuneration Committee
Board Safety Committee
Nominating Committee
Remuneration policy in respect of
Executive Directors and other Key
Management Personnel
The Company advocates a performance-
based remuneration system that is highly
flexible and responsive to the market,
Company’s, business unit’s and individual
employee’s performance, and is aligned
with shareholders’ interests.
In designing the remuneration structure, the
RC seeks to ensure that the level and mix of
remuneration is competitive, relevant and
appropriate in finding a balance between
current versus long-term remuneration,
and between cash versus equity incentive
remuneration.
In 2016/2017, the RC undertook a
comprehensive review of the total
remuneration structure. With the assistance
of Aon Hewitt, the RC revised the total
remuneration structure to reflect the
following four key objectives:
(a) Shareholder Alignment: To incorporate
performance measures that are aligned
to shareholders’ interests
(b) Long-term Orientation: To motivate
employees to drive sustainable
long-term growth
(c) Simplicity: To ensure that the
remuneration structure is easy to
understand and communicate to
stakeholders
(d) Synergy: To facilitate talent mobility
and enhance collaboration across
businesses
The revised total remuneration structure
comprises three components; that is, annual
fixed cash, annual performance bonus,
and the KCL Share Plans. The annual fixed
cash component comprises the annual
basic salary plus any other fixed allowances,
which the Company benchmarks with the
70
Basic Fee (per annum)
$750,000 (all-in)
$108,000
Additional Fees for Membership in Board Committees (per annum)
Chairman
$67,000
$67,000
$47,000
$47,000
$40,000
Member
$36,000
$36,000
$31,000
$31,000
$24,000
relevant industry market median. The size of
the Company's annual performance bonus
pot is determined by the Group’s financial
and non-financial performance, and is
distributed to employees based on their
individual performance. The KCL Share Plans
are in the form of two share plans approved
by shareholders, the KCL RSP and the KCL PSP.
A portion of the annual performance bonus
is granted in the form of deferred shares that
are awarded under the KCL RSP. The KCL PSP
comprises performance targets determined
on an annual basis. The KCL RSP and KCL
PSP are long-term incentive plans which
vest over a longer term horizon. Executives
who have a greater ability to influence Group
outcomes have a greater proportion of their
overall remuneration at risk.
The RC exercises broad discretion and
independent judgement in ensuring that
the amount and mix of remuneration is
aligned with the interests of shareholders
and promotes the long-term success of the
Company. The mix of fixed and variable
reward is considered appropriate for the
Group and for each individual role.
The remuneration structure is directly linked
to corporate and individual performance,
both in terms of financial and non-financial
performance. This link is achieved in the
following ways:
(a) by placing a significant portion of
executives’ remuneration at risk
(“At Risk component”) and subject to
a vesting schedule;
(b) by incorporating appropriate key
performance indicators (“KPIs”) for
awarding of annual performance bonus:
(i) There are four scorecard areas
that the Company has identified as
key to measuring the performance
of the Group – (i) Financial and
Business Drivers; (ii) Process;
(iii) Stakeholders; and (iv) People.
Some of the key sub-targets within
each of the scorecard areas include
key financial indicators, safety goals,
risk management, compliance and
controls measures, corporate social
responsibilities activities, employee
engagement, talent development
and succession planning;
(ii) The four scorecard areas have been
chosen because they support how
the Group achieves its strategic
objectives. The framework provides
a link for staff to understand how
they contribute to each area of the
scorecard, and therefore to the
Company’s overall strategic
goals. This is designed to achieve
a consistent approach and
understanding across the Group.
The RC reviews and approves the
scorecard annually;
(c) by selecting performance conditions
for the KCL PSP awards, such as Total
Shareholder Return, Return on Capital
Employed and Net Profit that are
aligned with shareholder interests;
(d) by requiring those KPIs or conditions
to be met in order for the At Risk
components of remuneration to be
awarded or to vest; and
(e) by forfeiting the At Risk components
of remuneration when those KPIs
or conditions are not met at a
satisfactory level.
The RC also recognises the need for a
reasonable alignment between risk and
remuneration to discourage excessive
risk taking. Therefore, in determining the
remuneration structure, the RC had taken into
account the risk policies and risk tolerance
of the Group as well as the time horizon of
risks, and incorporated risk-adjustments into
the remuneration structure through several
initiatives, including but not limited to:
71
Governance & Sustainability (a) prudent funding of annual performance
bonus;
(b) granting a portion of the annual
performance bonus in the form of
deferred shares, to be awarded under
the KCL RSP;
(c) vesting of contingent share awards
under the KCL PSP being subject to KPIs
and/or performance conditions being
met; and
(d) potential forfeiture of variable incentives
in any year due to misconduct.
The RC is of the view that the overall level of
remuneration is not considered to be at a
level which is likely to promote behaviours
contrary to the Group’s risk profile.
In determining the actual quantum of
variable component of remuneration, the
RC had taken into account the extent to
which the performance conditions, set forth
above, have been met. The RC is therefore
of the view that remuneration is aligned to
performance during FY 2017.
In order to align the interests of the
executive director and key management
personnel with that of shareholders, the
executive director and key management
personnel are remunerated partially in the
form of shares in the Company and are
encouraged to hold such shares while they
remain in the employment of the Company.
They are also required to hold a minimum
number of shares under the share ownership
guideline which requires them to maintain a
beneficial ownership stake in the Company,
thus further aligning their interests with
shareholders.
The directors, the CEO and the key
management personnel (who are not
directors or the CEO) are remunerated on an
earned basis and there are no termination,
retirement and post-employment benefits
that are granted over and above what has
been disclosed.
Long-term Incentive Plans
KCL Share Plans
The KCL Share Plans are put in place to
increase the Group’s effectiveness in its
continuing efforts to reward, retain and
motivate employees to achieve superior
performance and to motivate them to
continue to strive for long-term shareholder
value. The KCL Share Plans also aim to
strengthen the Group’s competitiveness in
attracting and retaining talented key senior
management and employees. The KCL RSP
applies to a broader base of employees
while the KCL PSP applies to a selected
group of key management personnel.
The range of performance targets to be set
under the KCL PSP emphasise stretched
or strategic targets aimed at sustaining
longer-term growth.
The RC has the discretion not to award
variable incentives in any year if an executive
is directly involved in a material restatement
of financial statements, in misconduct
resulting in restatement of financial
statements, or in misconduct resulting in
financial loss to the Company. Outstanding
performance bonuses, KCL RSP and KCL PSP
are also subject to RC’s discretion before
further payment or vesting can occur.
Details of the KCL Share Plans are set out on
pages 104 to 106 and 134 to 136.
Level and mix of remuneration of
Directors and Key Management
Personnel (who are not also Directors
or the CEO) for the year ended
31 December 2017
The level and mix of each of the directors’
remuneration are set out below:
Base/Fixed
Salary
($)
Performance-Related
Cash Bonuses Earned1
($)
Directors’ Total Fees2
($)
Cash
component4
Shares
component4
Benefits-
in-Kind
($)
Contingent
awards of shares3
($)
Total
Remuneration
($)
PSP
RSP
Remuneration &
Name of Director
Loh Chin Hua5
1,082,460
1,756,567
Lee Boon Yang
Tow Heng Tan
Alvin Yeo Khirn Hai
Tan Ek Kia
Danny Teoh
Tan Puay Chiang
Till Vestring
Veronica Eng
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
525,000
139,300
117,600
158,900
169,400
150,500
125,300
147,700
–
n.m.6
1,722,600
2,113,452
6,675,0797
225,000
59,700
50,400
68,100
72,600
64,500
53,700
63,300
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
750,000
199,000
168,000
227,000
242,000
215,000
179,000
211,000
Notes:
1. The RC is satisfied that the quantum of performance-related cash bonuses earned by the executive director was fair and appropriate taking into account the extent to
which his KPIs for FY 2017 were met.
2. The 2017 directors’ total fees amount to $2,191,000, which is lower than 2016’s total fees ($2,245,497 before the 10% voluntary fee reduction). The directors’ total fees are
subject to shareholders’ approval at the Company’s Annual General Meeting.
3. Shares awarded under the KCL PSP are subject to pre-determined performance targets over a three-year performance period. As at 28 April 2017, being the grant date for
the contingent awards under the KCL PSP, the estimated value of each share was $5.22. As at 23 February 2018, being the grant date for the contingent deferred shares
award under the KCL RSP, the estimated value of each share was $7.76. For the KCL PSP, the figures are based on the value of the PSP shares at 100% of the award and the
figures may not be indicative of the actual value at vesting which can range from 0% to 150% of the award.
4. The amounts stated may be adjusted as indicated on pages 69 to 70 of this report.
5. Mr Loh Chin Hua’s monthly base salary had been reduced by 10% with effect from 1 October 2016.
6. n.m. – not material
7. Total remuneration shown above for Mr Loh Chin Hua does not include vested share of carried interests for funds created during the time he was Managing Director at
Alpha Investment Partners. These carried interests are only earned at the end of the fund life and depends entirely on the actual performance of the funds after they have
been liquidated.
70
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Keppel Corporation Limited | Report to Shareholders 2017 Corporate Governance
PSP and RSP Shares granted and vested for the Executive Director are shown below:
PSP
Awards
Vesting
Date
Contingent
Awards
of PSP
Shares
Number of
PSP Shares
Vested
Value of
PSP Shares
Vested
($)8
RSP
Awards
Vesting
Date
Contingent
Awards
of RSP
Shares
Number of
RSP Shares
Vested
Value of
RSP Shares
Vested
($)8
Name of Executive
Director
Loh Chin Hua
2014
Awards
28 Feb
2017
0 to
270,000
2015
Awards
28 Feb
2018
0 to
330,000
2016
Awards
28 Feb
2019
9
0 to
450,000
28 Feb
2022
28 Feb
2020
10
0 to
1,125,000
0 to
495,000
2017
Awards
0
–
–
–
0
–
–
–
2014
Awards
2015
Awards
2016
Awards
27 Feb 2015
26 Feb 2016
9 Mar 2017
26 Feb 2016
9 Mar 2017
28 Feb 2018
9 Mar 2017
28 Feb 2018
28 Feb 2019
150,000
150,000
180,000
50,000
50,000
50,000
50,000
50,000
–
60,000
–
–
438,000
265,500
337,500
265,500
337,500
–
405,000
–
–
2018
Awards
28 Feb 2018
28 Feb 2019
28 Feb 2020
272,352
–
–
–
–
–
–
Notes:
8. The value of the shares vested under KCL PSP and RSP is computed based on the market price of the shares when the shares are credited to the employee’s CDP account.
The RC is satisfied that the value of the shares vested under the KCL PSP and RSP to the executive director was fair and appropriate taking into account the extent to which
his KPIs and performance conditions for FY 2017 were met.
9. Refers to contingent shares awarded under the KCL PSP.
10. Refers to one-time contingent shares awarded under the KCL PSP – TIP.
The total remuneration paid to the key management personnel (who are not directors or the CEO) in FY 2017 was $14,039,417. The level and mix
of each of the key management personnel (who are not also directors or the CEO) in bands of $250,000 are set out below:
Base/Fixed
Salary
Performance-Related
Bonuses Earned11
Benefits-
in-Kind
Contingent awards of shares
PSP12
RSP
Remuneration Band & Name of
Key Management Personnel
Above $3,000,000 to $3,250,000
Chan Hon Chew
Ong Tiong Guan
Above $2,500,000 to $2,750,000
Tan Hua Mui, Christina13
Above $2,250,000 to $2,500,000
Ang Wee Gee14
Above $1,500,000 to $1,750,000
Ong Leng Yeow, Chris15
Above $1,250,000 to $1,500,000
Pang Thieng Hwi, Thomas16
20%
18%
20%
37%
22%
26%
26%
28%
27%
63%
18%
32%
n.m.
n.m.
n.m.
n.m.
n.m.
n.m.
24%
21%
22%
–
39%
12%
30%
33%
31%
–
21%
30%
Notes:
11. The RC is satisfied that the quantum of performance-related bonuses earned by the key management personnel was fair and appropriate taking into account the extent to
12.
which their KPIs for FY 2017 were met.
Included one-time performance shares awarded under the KCL PSP–TIP. As at 28 April 2017, being the grant date, the estimated value of each share granted in respect of
the contingent awards under the KCL PSP-TIP was $0.87.
13. Ms Tan Hua Mui, Christina served as CEO, Keppel Capital and Managing Director, Alpha Investment Partners concurrently in 2017. The total remuneration shown above for
Ms Tan does not include vested share of carried interests for funds created in her role as Managing Director at Alpha Investment Partners. These carried interests are only
earned at the end of the fund life and depend entirely on the actual performance of the funds after they have been liquidated.
14. Mr Ang Wee Gee ceased employment with the Company with effect from 1 January 2018.
15. Mr Ong Leng Yeow, Chris assumed the role of Acting CEO, Keppel Offshore & Marine with effect from 1 April 2017 and the role of CEO, Keppel Offshore & Marine with effect
from 1 July 2017. His full year remuneration is reported in the table above. Mr Ong succeeded Mr Chow Yew Yuen who retired with effect from 1 April 2017. For the period
from 1 January to 31 March 2017, Mr Chow earned fixed salary of below $250,000.
16. On Keppel Telecommunications & Transportation Ltd (“KTT”) share based remuneration scheme and KCL PSP–TIP. As at 28 April 2017, being the grant date, the estimated
value of each share granted in respect of the contingent awards under the KTT PSP was $1.48 respectively. As at 23 February 2018, being the grant date for the contingent
deferred shares award under the KTT RSP, the estimated value of each share was $1.54.
72
73
Governance & Sustainability
Remuneration of employees who
are immediate family members of a
Director or the Chief Executive Officer
No employee of the Company and its
subsidiaries was an immediate family
member of a director or the CEO and whose
remuneration exceeded $50,000 during
the financial year ended 31 December 2017.
“Immediate family member” means the
spouse, child, adopted child, step-child,
brother, sister and parent.
The Board, supported by the Audit
Committee (AC) and Board Risk Committee
(BRC), oversees the Company’s Keppel’s
System of Management Controls Framework
(the “Framework”), which outlines the
Company’s internal control and risk
management processes and procedures
to, among others, ensure compliance with
legislative and regulatory requirements.
Details of the Framework are set out on
pages 74 and 75 of this Annual Report.
Details of the KCL Share Plans
The KCL Share Plans, which have been
approved by shareholders of the Company,
are administered by the RC. Please refer to
pages 104 to 106 and 134 to 136 of this Annual
Report for details on the KCL Share Plans.
Accountability and Audit
Principle 10:
The Board should present a balanced and
understandable assessment of the Company’s
performance, position and prospects
Principle 12:
Establishment of Audit Committee with
written terms of reference
The Board is responsible for providing a
balanced and understandable assessment
of the Company’s and Group’s performance,
position and prospects, including interim
and other price sensitive public reports, and
reports to regulators (if required).
The Board has embraced openness
and transparency in the conduct of the
Company’s affairs, whilst preserving the
commercial interests of the Company.
Financial reports and other price
sensitive information are disseminated to
shareholders through announcements via
SGXNET, press releases, the Company’s
website, public webcast and media and
analyst briefings.
The Company’s Annual Report is accessible
on the Company’s website, and can be
viewed or downloaded from the Annual
Report microsite at www.kepcorp.
com/annualreport2017/. In line with the
Company’s drive towards sustainable
development, the Company encourages
shareholders to read the Annual Report
on the Company’s website. Shareholders
may, however, request for a physical copy
at no cost.
Management provides all members of the
Board with management accounts which
present a balanced and understandable
assessment of the Company’s and Group’s
performance, position and prospects on
a monthly basis and as the Board may
require from time to time. Such reports
keep the board members informed of the
Company’s and Group’s performance,
position and prospects.
Audit Committee
The AC comprises the following non-executive
directors, all of whom are independent:
• Mr Danny Teoh
Independent Chairman
• Mr Alvin Yeo
Independent Member
• Ms Veronica Eng
Independent Member
• Mr Tan Ek Kia
Independent Member
Mr Danny Teoh and Ms Veronica Eng have
recent and relevant accounting and related
financial management expertise and in-
depth experience. Mr Alvin Yeo has in-depth
knowledge of the responsibilities of the AC,
and practical experience and knowledge
of the issues and considerations affecting
the Committee from serving on the audit
committee of other listed companies. Mr
Tan Ek Kia, who is a seasoned executive
in the oil and gas and petrochemicals
businesses and had held senior positions in
Shell, has sufficient financial management
knowledge and experience to discharge
his responsibilities as a member of the
Committee. Mr Danny Teoh, Mr Tan Ek Kia
and Ms Veronica Eng are also members
of BRC, with Ms Veronica Eng being the
Chairman of the BRC.
None of the members of the AC were partners
or directors of the Company’s existing
external auditors within the last 12 months
and none of the members of the AC hold
any financial interest in the auditing firm.
The AC’s primary role is to assist the Board
to ensure integrity of financial reporting and
that there is in place sound internal control
systems. The Committee’s responsibilities
are set out on page 79 herein.
The AC has explicit authority to investigate
any matter within its responsibilities, full
access to and co-operation by management
and full discretion to invite any director or
executive officer to attend its meetings, and
reasonable resources (including access to
external consultants) to enable it to discharge
its functions properly. The Company has an
internal audit team, which together with the
external auditors, report their findings and
recommendations to the AC independently.
The AC met with the external auditors five
times, and with the internal auditors five
times during the year, and at least one of
these meetings was conducted without the
presence of management.
The AC reviewed and approved the Group
internal auditor’s plan to ensure that
the risk-based plan sufficiently covered
the effectiveness of controls to mitigate
the significant risks of the Company.
Such significant controls comprise
financial, operational, compliance and IT
controls. All significant audit findings and
recommendations put up by the internal
and the external auditors were forwarded
to the AC, and discussed at AC meetings.
The AC also reviewed and approved the
Group external auditor’s audit plan for the
year. The AC also undertook a review of
the independence and objectivity of the
external auditors through discussions with
the external auditors, as well as reviewing
the non-audit fees awarded to them, and
has confirmed that the non-audit services
performed by the external auditors would
not affect their independence. For details
of fees payable to the auditors in respect of
audit and non-audit services, please refer
to Note 24 of the Notes to the Financial
Statements on page 155.
The Company has complied with Rules 712,
and Rule 715 read with 716 of the SGX Listing
Manual in relation to its auditing firms.
The AC also reviewed the adequacy of
the internal audit function and is satisfied
that the team is adequately resourced
and has appropriate standing within the
Company. The internal audit team attends
the Company’s and the Group’s key strategy
sessions and executive meetings, and is
staffed with professionals with sufficient
expertise in corporate governance, risk
management, internal controls, and other
relevant disciplines. The AC also reviewed
the training costs and programs attended by
the internal audit team to ensure that their
technical knowledge and skill sets remain
current and relevant.
The AC has reviewed the “Keppel Whistle-
Blower Policy” (the “Policy”) which provides
for the mechanisms by which employees
and other persons may, in confidence, raise
concerns about possible improprieties
in business conduct, and was satisfied
that arrangements are in place for the
independent investigation of such matters
and for appropriate follow-up action. To
facilitate the management of incidences
of alleged fraud or other misconduct,
the AC is guided by a set of guidelines to
ensure proper conduct of investigations
and appropriate closure actions following
completion of the investigations, including
73
72
Keppel Corporation Limited | Report to Shareholders 2017
Corporate Governance
administrative, disciplinary, civil and/or
criminal actions, and remediation of control
weaknesses that perpetrated the fraud or
misconduct so as to prevent a recurrence.
In addition, the AC reviews the Policy yearly
to ensure that it remains current. The details
of the Policy are set out on page 82 hereto.
On a quarterly basis, management reported
to the AC the interested person transactions
(“IPTs”) in accordance with the Company’s
Shareholders’ Mandate for IPT. The IPTs
were reviewed by the internal auditors. All
findings were reported during AC meetings.
Financial Matters
Changes to accounting standards and
accounting issues which have a direct impact
on the financial statements were reported
to the AC, and highlighted by the external
auditors in their quarterly meetings with the
AC. In addition, the AC members are invited
to the Company’s annual finance seminars
where relevant changes to the accounting
standards that will impact the Keppel Group
of Companies are shared by, and discussed
with accounting practitioners from one of
the leading accounting firms.
During the year, the AC performed
independent review of the financial
statements of the Company before the
announcement of the Company’s quarterly
and full-year results. In the process,
the Committee reviewed the key areas
of management judgment applied for
adequate provisioning and disclosure, critical
accounting policies and any significant
changes made that would have a material
impact on the financials.
In its review of the financial statements of
the Group and the Company for FY 2017, the
AC reviewed the key areas of management’s
estimates and judgment applied for key
financial issues, including valuation and
assessment of impairment of assets,
recoverability of construction contracts,
global resolution with criminal authorities in
relation to corrupt payments and revenue
recognition, that might affect the integrity
of the financial statements. The AC also
considered the report from the external
auditors, including their findings on the key
audit matters as set out in the independent
auditor’s report for the financial year ended
31 December 2017.
In addition to the findings of the external
auditors, the AC took into consideration the
methodology applied in determining the
valuation and value-in-use of different asset
classes, including the reasonableness of the
estimates and key assumptions used. The AC
also reviewed management’s assessment
of recoverability of work-in-progress
balances on outstanding construction
74
contracts, including expectation of probable
outcomes, assessment on whether there
was a potential for any additional provision
in relation to the corrupt payments, as
well as estimates of the total costs and
physical proportion of work completed in
determining the percentage-of-completion.
Furthermore, external independent
valuations as well as opinions from
internal and external legal counsel, where
applicable, were considered when reviewing
management’s assessment.
from his extensive business career spanning
the management consultancy, investment
banking and stock-broking industries.
Mr Tow was previously the Chief Investment
Officer of Temasek.
The fourth member is Mr Tan Puay Chiang,
who held various executive management
roles in his 37-year career with Mobil
and later ExxonMobil, and has in-depth
knowledge and experience in the oil and gas
industry and wide international exposure.
The AC concurs with the methodology,
accounting treatment and estimates
adopted, as well as the disclosures made
in the financial statements for each of the
key audit matters set out by the external
auditors in their report.
Risk Management and
Internal Controls
Principle 11:
Sound system of risk management and
internal controls
The Board Risk Committee (BRC) comprises
the following non-executive directors, four
out of five of whom (including the Chairman)
are independent and the remaining director
being a non-executive director who is
independent of management, namely:
• Ms Veronica Eng
Independent Chairman
• Mr Danny Teoh
Independent Member
• Mr Tow Heng Tan
Non-executive and
Non-independent Member
• Mr Tan Puay Chiang
Independent Member
• Mr Tan Ek Kia
Independent Member
Ms Veronica Eng was a Founding Partner
of Permira until September 2015 and had
extensive experience in a wide range of
roles in relation to its funds’ investments
across sectors and geographies. She served
on the board of Permira and its Executive
Committee, chaired the Investment
Committee and was the Fund Minder to
various Permira funds. In addition, she
had oversight of Permira’s firm-wide risk
management as well as its operations in Asia.
Mr Danny Teoh, who is the Chairman of
the AC, is the second member of the BRC.
Mr Danny Teoh was the Managing Partner
of KPMG Singapore from October 2005
to October 2010. He was also the Head of
Audit and Risk Advisory Services practices in
Singapore as well as in Asia, and served on
its global team.
The third member is Mr Tow Heng Tan,
who has deep management experience
The fifth member is Mr Tan Ek Kia, who is
a seasoned executive in the oil and gas
and petrochemicals businesses and had
held senior positions in Shell including Vice
President (Ventures and Developments) of
Shell Chemicals, Asia Pacific and Middle East
region, Managing Director (Exploration and
Production) of Shell Malaysia, Chairman of
Shell North East Asia and Managing Director
of Shell Nanhai Ltd.
The BRC reviews and guides management
in the formulation of risk policies and
processes to effectively identify, evaluate
and manage significant risks, to safeguard
shareholders’ interests and the Group’s
assets. The Committee reports to the Board
on critical risk issues, material matters,
findings and recommendations. The
detailed responsibilities of this Committee
are disclosed on page 79 herein.
The Group’s approach to risk management
is set out in the “Risk Management” section
on pages 91 to 93 of this Annual Report.
The Group is guided by a set of Risk
Tolerance Guiding Principles, as disclosed
on page 91.
The Group also has in place a Risk
Management Assessment Framework,
which was established to facilitate the
Board’s assessment on the adequacy
and effectiveness of the Group’s risk
management system. The framework lays
out the governing policies, processes and
systems pertaining to each of the key risk
areas of the Group and assessments are
made on the adequacy and effectiveness
of the Group’s risk management system in
managing each of these key risk areas.
KCL’s Group Internal Audit also conducts
regular reviews of the adequacy and
effectiveness of the Group’s material
internal controls, including financial,
operational, compliance and IT controls,
and risk management. Any material non-
compliance or failures in internal controls
and recommendations for improvements
are reported to the AC. The AC also reviews
the effectiveness of the actions taken by
management on the recommendations
made by Group Internal Audit and the
external auditors.
75
Governance & Sustainability
Keppel's System of Management Controls
Policies
4
Board Oversight
Board of Directors
3
Assurance
Business Unit
Representation
Internal
Audit
External
Audit
s
m
e
t
s
y
S
2
1
Management &
Assurance Frameworks
Self-Assessment
Process
Enterprise Risk
Management
Regulatory
Compliance
IT Governance
Framework
Business Governance/
Rules of Governance
Core Values, Corporate & Employee Conduct
P
r
o
c
e
s
s
e
s
Policy
Management
Compliance
Governance
Operational
Governance
Financial
Governance
People
The Group also has in place Keppel’s System
of Management Controls Framework (the
“Framework”) outlining the Group’s internal
control and risk management processes
and procedures. The Framework comprises
three Lines of Defence towards ensuring
the adequacy and effectiveness of the
Group’s system of internal controls and
risk management.
Under the first Line of Defence, management
is required to ensure good corporate
governance through the implementation
and management of policies and procedures
relevant to the Group’s business scope and
environment. Such policies and procedures
govern financial, operational, information
technology and regulatory compliance
matters and are reviewed and updated
periodically. Compliance governance is
governed by the respective regulatory
compliance management committees
and working teams. Employees are also
guided by the Group’s Core Values and
expected to comply strictly with Keppel’s
Code of Conduct.
Under the second Line of Defence,
significant business units are required to
conduct a self-assessment exercise on
an annual basis. This exercise requires
such business units to assess the status of
their respective internal controls and risk
management via self-assessment. Where
required, action plans are developed to
remedy identified control gaps. Under
the Group’s Enterprise Risk Management
Framework, significant risks areas of the
Group are also identified and assessed, with
systems, policies and processes put in place
to manage and mitigate the identified risks.
Regulatory Compliance supports and works
alongside business management to ensure
relevant policies, processes and controls
are effectively designed, managed and
implemented to ensure compliance risks
and controls are effectively managed.
Under the third Line of Defence, to assist
the Group to ascertain the adequacy and
effectiveness of the Group’s internal controls,
business units are required to provide the
Group with written assurances as to the
adequacy and effectiveness of their system
of internal controls and risk management.
Such assurances are also sought from the
Group’s internal and external auditors based
on their independent assessments.
The Board, supported by the AC and BRC,
oversees the Group’s system of internal
controls and risk management.
Enhancements to Compliance
Programme
In December 2017, a wholly-owned
subsidiary, Keppel Offshore and Marine
(KOM), reached a global resolution with
the criminal authorities in the United States,
Brazil and Singapore in relation to corrupt
payments made by KOM’s former agent in
Brazil, which were made with knowledge or
approval of former KOM executives.
This section provides an overview of the
improvements and enhancements that
have been made to strengthen Keppel’s
compliance programme since 2015, following
a review of our compliance programme.
Further details of our compliance initiatives
are set out on pages 94 to 95 of this Annual
Report. The Company is committed to a
continuous review and, where necessary
and appropriate, further improvements and
enhancements to the Group’s compliance
programme will be made.
The Group has taken the following steps
since 2015 to enhance its internal controls,
policies and procedures:
(i) substantially enhanced its Code of
Conduct and implemented a compliance
governance structure through the
formation of a Regulatory Compliance
Management Committee and
Regulatory Compliance Working Team,
bringing together senior management,
compliance personnel, and other core
function leads to discuss compliance
enhancements and address compliance
issues as they arise;
74
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Keppel Corporation Limited | Report to Shareholders 2017 Corporate Governance
(ii)
improved and streamlined its due
diligence processes and procedures
with respect to intermediaries, including
examining the business justification of
the engagement;
(iii) implemented a new Agent Fees Policy
setting forth limits, guidelines and
authority for review and approval of
agent fees including specific parameters
to be applied when engaging the
services of an agent;
(iv) established a Supplier Code of Conduct
to integrate Keppel’s sustainability
principles across our supply chain, and
positively influence the environmental,
social and governance performance of
our suppliers. Suppliers of the Group
are expected to abide by the Supplier
Code of Conduct, which covers areas
pertaining to business conduct (including
specific anti-bribery provisions), labour
practices, safety and health, and
environmental management;
(v) committed to compliance, from the top
level down, through regular workshops
provided and scheduled for senior
management, improved communications
by management, and Code of Conduct,
anti-corruption and compliance
training for our employees, including
comprehensive annual compliance-
related e-learning and attestations;
(vi) ongoing recruitment of additional
professional and experienced
compliance officers in each business
unit. This dedicated independent
Group-wide compliance function has
reporting lines independent of business
divisions. The Head of the Group's
compliance function has a primary line
of reporting to the Chairman of the BRC,
with an administrative reporting line to
the CFO of the Company;
(vii) increased headcount of internal audit
personnel by more than 20% across
the Group, reduced the length of the
internal audit cycle to a three-year cycle
(resulting in more frequent audits),
strengthened our team with the
recruitment of professionals with deep
anti-corruption audit experience, and
enhanced our Whistle-Blower Policy with
centralised procedures and established
local toll-free whistle-blower hotlines for
Singapore, Brazil, China, USA, Vietnam
and Indonesia respectively;
The Group's Enhanced Compliance
Programme
The Group’s compliance programme is
and will be subjected to a periodic review
to ensure it meets the following standards,
i.e. that:
76
1. Board and Senior Management
Commitment
The Group’s senior management,
including members of the Board,
provide continuous, clear and explicit
support to the compliance programme.
2. Policies and Procedures
Group’s general guidelines or
specific authorisation; and
iv. the recorded accountability for
assets shall be compared with
the existing assets at reasonable
intervals and appropriate action
be taken with respect to any
differences.
The Group continuously implements
and communicates its corporate policy
against violations of any anti-corruption
laws. This policy has been and will
continue to be documented in writing,
include appropriate measures to
reduce the prospect of violations of
anti-corruption laws, and encourage
and support the observance of
compliance policies and procedures
by personnel at all levels of the Group.
These anti-corruption policies and
procedures apply to all directors, officers
and employees and, where necessary
and appropriate, outside parties acting
on behalf of Keppel, including but not
limited to, agents and intermediaries,
consultants, representatives, partners
and suppliers.
Individuals at all levels of Keppel comply
with Keppel’s Code of Conduct and its
compliance policies and procedures.
Such policies and procedures address,
among other areas:
a) gifts;
b) hospitality, entertainment, and
expenses;
c) agent fees;
d) political contributions;
e) charitable donations and
sponsorships; and
f) facilitation payments.
The Group ensures that:
a) books, records and accounts are in
reasonable detail, and accurately
and fairly reflect the transactions and
disposition of assets; and
b) the Group develops and maintains
a system of internal accounting
controls, sufficient to provide
reasonable assurance that:
i.
transactions are performed in
accordance with the Group’s
general guidelines or specific
authorisation;
ii. transactions are recorded
as necessary to permit
preparation of financial
statements in conformity with
generally accepted accounting
principles or any other criteria
applicable to such statements,
and to maintain accountability
for assets;
iii. access to assets shall only be
permitted in accordance with the
3. Periodic Risk-based Review
The Group continues to enhance its
compliance policies and procedures on
the basis of a periodic risk assessment
to ensure their continued effectiveness,
taking into account relevant developments
such as international and industry
standards, and addressing the individual
circumstances of the Group, and in
particular corruption risks, including
but not limited to its geographical
organisation and sectors of industrial
operation.
4. Training and Orientation
The Group continuously ensures that
its compliance policies and procedures
are communicated effectively to all
employees, including officers, directors,
and where necessary and appropriate
agents, and business partners. These
mechanisms include:
a) periodic focused ‘gate-keeper’
training for all senior management
members (including directors),
employees in positions of leadership,
and targeted training for employees
in positions otherwise exposed
to corruption risks, and where
necessary and appropriate,
compliance training for agents and
business partners; and
b) corresponding certifications by all
such senior management members
(including directors), employees,
agents and business partners,
certifying conformity with training
requirements.
5. Internal Reporting, Communication
and Investigation
The Group maintains an effective
system for the internal reporting/
communication of potential violations
of compliance policies and procedures
and applicable laws, that ensures as
far as possible confidentiality to the
whistleblower.
The Group maintains a reliable and
effective process for receiving internal
reports/communications with sufficient
resources to respond and document
allegations of violations of compliance
policies and procedures and applicable
law. When necessary, the Group
undertakes independent investigations
of the alleged violations.
77
Governance & Sustainability
6. Enforcement and Discipline
The Group maintains and, where
necessary, improves its mechanisms
designed to effectively enforce its
compliance policies and procedures
including, where appropriate, the
imposition of disciplinary measures
in the case of violations.
The Group institutes disciplinary
measures with reference to, among
other things, violations of compliance
policies and procedures, and applicable
law by its senior management (including
directors) and employees. Such
procedures should be applied consistently
and fairly, regardless of the position
held by, or the perceived importance
of the senior management member
(including directors) or employee. Where
misconduct is discovered, measures are
taken promptly to cease the misconduct
or irregularities, and remedy the harm
resulting from such misconduct.
7. Third-party Relationships
The Group continues to implement the
following procedures with reference to
its agents and business partners:
a) due diligence relating to the hiring of
third-parties;
b) appropriate oversight of third-parties;
and
c) seeking reciprocal commitments
regarding ethical conduct from
third-parties, associates and business
partners.
When necessary, the Group includes
in contracts with third-parties, agents
and business partners, anti-corruption
provisions, which may include the
following:
a) commitment to act in accordance
with applicable laws;
b) right to conduct audits of the books
and records of third-parties, agents
or business partners; and
c) right to terminate a contract due to
violations of compliance policies and
procedures or any applicable anti-
corruption law by any third-party,
agent or business partner.
8. Mergers, Acquisitions and
Corporate Restructuring
The Group implements policies and
procedures aimed at identifying
misconduct, irregularities, or the
existence of vulnerabilities in potential
new entities in the context of mergers,
acquisitions and corporate restructuring.
The Group applies its compliance codes,
policies and procedures in a speedy
and efficient manner to newly acquired
businesses or entities, and conducts
training for new employees, senior
management (including directors),
agents, and business partners.
9. Monitoring and Developments
The Group conducts continuous
monitoring of its compliance
programme to enhance its effectiveness
in preventing and detecting violations of
its compliance policies and procedures
and applicable law.
Annual Assurance
The Board has received assurance from CEO,
Mr Loh Chin Hua and Chief Financial Officer,
Mr Chan Hon Chew, that, amongst others:
(a) the financial records of the Group have
been properly maintained and the
financial statements give a true and fair
view of the operations and finances of
the Group;
(b) the internal controls of the Group are
adequate and effective to address
the financial, operational, compliance
and IT risks which the Group considers
relevant and material to its current
business scope and environment and
that they are not aware of any material
weaknesses in the system of internal
controls; and
(c) they are of the view that the Group’s
risk management system is adequate
and effective.
Based on the review of the Group’s
governing framework, systems, policies and
processes in addressing the key risks under
the Group’s Enterprise Risk Management
Framework, the monitoring and review
of the Group’s overall performance and
representation from the management, the
Board, with the concurrence of the BRC, is
of the view that, as at 31 December 2017,
the Group’s risk management system is
adequate and effective.
Based on the Group’s framework of
management control, the internal control
policies and procedures established and
maintained by the Group, and the regular
audits, monitoring and reviews performed
by the internal and external auditors, the
Board, with the concurrence of the AC, is of
the opinion that, as at 31 December 2017,
the Group’s internal controls are adequate
and effective to address the financial,
operational, compliance and IT risks which
the Group considers relevant and material to
its current business scope and environment.
The system of internal controls and risk
management established by the Group
provides reasonable, but not absolute,
assurance that the Group will not be adversely
affected by any event that can be reasonably
foreseen as it strives to achieve its business
objectives. However, the Board also notes
that no system of internal controls and risk
management can provide absolute assurance
in this regard, or absolute assurance against
the occurrence of material errors, poor
judgment in decision making, human error,
losses, fraud or other irregularities.
Internal Audit
Principle 13:
Effective and independent internal audit
function that is adequately resourced
The Company has an in-house internal
audit function that supports the Group
("Group Internal Audit"). The role of Group
Internal Audit is to provide independent
assurance to the AC to ensure that the
Company maintains a sound system of
internal controls. Group Internal Audit adopts
a risk-based approach to evaluate the
adequacy and effectiveness of key controls
and procedures when performing audits
of high-risk areas. They also undertake
investigations as directed by the AC.
Staffed by suitably qualified executives,
Group Internal Audit has direct access to
the AC and unrestricted access to all the
Group’s documents, records, properties
and personnel. The Head of Group Internal
Audit’s primary line of reporting is to the
Chairman of the AC, with an administrative
reporting line to the CEO of the Company.
The AC approves the hiring, removal,
evaluation and compensation of the Head of
Group Internal Audit.
As a member of the Institute of Internal
Auditors (“IIA”), Group Internal Audit is guided
by the Code of Ethics and the International
Standards for the Professional Practice of
Internal Auditing set by the IIA. External
quality assessment reviews are carried out
at least once every five years by qualified
professionals, with the last assessment
conducted in 2016. The results re-affirmed
that the internal audit activity conforms to
the International Standards. Group Internal
Audit staff perform a yearly declaration of
independence and confirm their adherence to
Keppel’s Code of Conduct as well as the Code
of Ethics established by the IIA, from which
the principles of objectivity, competence,
confidentiality and integrity are based.
During the year, Group Internal Audit
adopted a risk-based auditing approach
that focuses on key risks, including financial,
operational, compliance and information
technology risks. An annual audit plan is
developed using a structured risk and control
assessment framework. Audits are planned
based on the results of the assessment, with
priority given to auditing the areas of highest
77
76
Keppel Corporation Limited | Report to Shareholders 2017
Corporate Governance
risk within the Company. All Group Internal
Audit’s reports are submitted to the AC for
deliberation with copies of these reports
extended to the Chairman, CEO and relevant
senior management personnel. In addition,
Group Internal Audit’s summary of findings
and recommendations are discussed at the
AC meetings. To ensure timely and adequate
closure of audit findings, the status of
implementation of the actions agreed
by management is tracked and discussed
with the AC.
Shareholder Rights and
Communication with Shareholders
Principle 14:
Fair and equitable treatment of shareholders and
protection of shareholders’ rights
Principle 15:
Regular, effective and fair communication
with shareholders
Principle 16:
Greater shareholder participation at
Annual General Meetings
In addition to the matters mentioned above
in relation to “Access to Information”, the
Company’s Group Corporate Communications
Department (with assistance from the Group
Finance and Group Legal Departments,
when required) regularly communicates with
shareholders and receives and attends to
their queries and concerns.
The Company treats all its shareholders fairly
and equitably and keeps all its shareholders
and other stakeholders informed of its
corporate activities, including changes in
the Company or its business which would be
likely to materially affect the price or value of
its shares, on a timely basis.
The Company has in place an Investor
Relations Policy which sets out the principles
and practices that the Company applies in
order to provide shareholders and prospective
investors with information necessary to
make well-informed investment decisions
and to ensure a level playing field. The
Investor Relations Policy is published on the
Company’s website at www.kepcorp.com.
The Company employs various platforms to
effectively engage the shareholders and the
investment community, with an emphasis
on timely, accurate, fair and transparent
disclosure of information. Engagement with
shareholders and other stakeholders takes
many forms, including “live” webcasts of
quarterly results and presentations, e-mail
communications, publications and content
on the Company’s website as well as through
facility visits, where stakeholders may raise
any queries or concerns that they may have.
The Company’s mobile-friendly website is also
continually updated with the latest information
concerning the Company, such as the latest
updates on business and operations, quarterly
78
financial statements, materials provided
at analysts and media briefings, annual
reports, and notices of general meetings.
Contact details of the Investor Relations
department are also set out on the website
to facilitate any queries from investors.
In addition to shareholder meetings, senior
management meet with investors, analysts
and the media, as well as participate in
industry conferences to solicit and
understand the views of the investment
community. In FY 2017, the Company
hosted about 175 meetings and conference
calls with institutional investors, including
several facility visits to its shipyards in
Singapore, as well as to its residential
and commercial properties in China and
Vietnam. Management also traveled
widely for non-deal roadshows to meet
investors across countries. Such meetings
provide useful platforms for management
to engage with investors and analysts. In
addition, the Securities Investors Association
(Singapore) hosted the Company’s inaugural
Retail Shareholders Day during which
senior management briefed over 200 retail
shareholders on the Company’s strategy
and performance.
Material information is disclosed in a
comprehensive, accurate and timely manner
via SGXNET and the press. To ensure a level
playing field and provide confidence to
shareholders, unpublished price sensitive
information is not selectively disclosed,
and on the rare occasion when such
information is inadvertently disclosed, they
are immediately released to the public via
SGXNET and the press.
The Company ensures that shareholders have
the opportunity to participate effectively and
vote at shareholders’ meeting. In this regard,
the shareholders’ meeting are generally held
in central locations which are easily accessible
by public transportation. Shareholders are
informed of shareholders’ meetings through
notices published in the newspapers and via
SGXNET, and reports or circulars sent or made
available 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, and
vote on the resolutions at shareholders’
meetings. Such resolutions include matters of
significance to shareholders such as, where
applicable, proposed amendments to the
Company’s constitution, the authorisation
to issue additional shares, the transfer of
significant assets, and the remuneration of
non-executive directors. Shareholders are
also informed of the rules, including voting
procedures, governing such meetings.
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. Specified
intermediaries, such as banks and capital
markets services licence holders which
provide custodial services, may however
appoint more than two proxies. This will
enable indirect investors, including CPF
investors, to be appointed as proxies to
participate in shareholders’ meetings. Such
indirect investors, where so appointed, will
have the same rights as direct investors to
vote at the shareholders’ meetings.
Any payment of interim dividend or, upon
receipt of shareholders’ approval at annual
general meetings, final dividend, will be
paid to all shareholders in an equitable and
timely manner.
At shareholders’ meetings, each distinct
issue is proposed as a separate resolution.
Such resolutions include matters of
significance to shareholders such as, where
applicable, proposed amendments to the
Company’s constitution, the authorisation
to issue additional shares, the transfer of
significant assets, re-election of directors,
and the remuneration of non-executive
directors. The rationale for the resolutions to
be proposed at the meeting is set out in the
notices to the meeting or its accompanying
appendices. To ensure transparency, the
Company conducts electronic poll voting
for shareholders/proxies present at the
meeting for all the resolutions proposed
at the general meeting. A scrutineer is also
appointed to count and validate the votes
cast at the meetings. Votes cast for and
against and the respective percentages,
on each resolution will be displayed “live”
to shareholders/proxies immediately after
each poll conducted. The total number of
votes cast for or against the resolutions
and the respective percentages are also
announced in a timely manner after the
general meeting via SGXNET. Each share
is entitled to one vote.
Where possible, all directors will attend
shareholders’ meetings. The Chairmen of
the Board and each board committee are
required to be present to address questions
at general meetings of shareholders.
External auditors are also present at such
meetings 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 Secretaries prepare
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.
79
Governance & Sustainability
Securities Transactions
Insider Trading Policy
The Company has a formal Insider Trading
Policy and Guidelines on Disclosure of
Dealings in Securities on dealings in the
securities of the Company and its listed
subsidiaries and associated companies,
which sets out the implications of insider
trading and guidance on such dealings,
including the prohibition on dealings with
the Company’s securities on short-term
considerations. The policy and guidelines
have been distributed to the Group’s directors
and officers. In compliance with Rule 1207(19)
of the Listing Manual on best practices on
dealing in securities, the Company issues
circulars to its directors and officers informing
that the Company and its officers must not
deal in listed securities of the Company one
month before the release of the full-year
results and two weeks before the release of
quarterly results, and if they are in possession
of unpublished price-sensitive information.
Directors and CEO are also required to report
their dealings in the Company’s securities
within two business days.
Appendix
Board Committees – Responsibilities
A. Audit Committee
1.1 Review financial statements and formal
announcements relating to financial
performance, and review significant
financial reporting issues and judgments
contained in them, for better assurance
of the integrity of such statements and
announcements.
removal of the external auditors, and
approve the remuneration and terms of
engagement of the external auditors.
1.3 Receive and review quarterly reports from
Management on major risk exposures
and the steps taken to monitor, control
and mitigate such risks.
1.8 Review the adequacy and effectiveness
of the Company’s internal audit function,
at least annually.
1.4 Review the Group’s capability to identify
and manage new risk types.
1.9 Ensure that the internal audit function
is adequately resourced and has
appropriate standing within the
Company, at least annually.
1.10 Approve the hiring, removal evaluation
and compensation of the head of the
internal audit function, or the accounting/
auditing firm or corporation to which the
internal audit function is outsourced.
1.11 Review the policy and arrangements by
which employees of the Company and any
other persons may, in confidence, raise
concerns about possible improprieties
in matters of financial reporting or other
matters, to ensure that arrangements
are in place for such concerns to be
raised and independently investigated,
and for appropriate follow up action to
be taken.
1.12 Review interested person transactions.
1.13 Investigate any matters within the
Committee's purview, whenever it
deems necessary.
1.5 Receive and review updates from
Management to assess the adequacy and
effectiveness of the Group’s compliance
framework in line with relevant laws,
regulations and best practices.
1.6 Through interactions with the
Compliance Lead who has a direct
reporting line to the Committee, review
and oversee performance of the
Group’s implementation of compliance
programmes.
1.7 Review and monitor the Group’s approach
to ensuring compliance with regulatory
commitments, including progress of
remedial actions where applicable.
1.8 Review and monitor Management’s
responsiveness to the risks and matters
identified and recommendations of the
Group Risk and Compliance department.
1.9 Provide timely input to the Board on
critical risk and compliance issues, material
matters, findings and recommendations.
1.14 Report to the Board on material matters,
findings and recommendations.
1.10 Review the Committee’s terms of
reference annually and recommend
any proposed changes to the Board.
1.2 Review and report to the Board at
1.15 Review the Committee’s terms of
least annually the adequacy and
effectiveness of the Group’s internal
controls, including financial, operational,
compliance and information technology
controls (such review can be carried out
internally or with the assistance of any
competent third parties).
1.3 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.
1.4 Review the independence and
objectivity of the external auditors.
1.5 Review the nature and extent of
non-audit services performed by the
auditors.
1.6 Meet with external auditors and internal
auditors, without the presence of
management, at least annually.
1.7 Make recommendations to the Board
on the proposals to the shareholders on
the appointment, re-appointment and
reference annually and recommend any
proposed changes to the Board.
1.16 Perform such other functions as the
Board may determine.
1.11 Review and report to the Board annually
on the adequacy and effectiveness
of the Group’s risk management and
internal controls systems, including
financial, operational, compliance and
information technology controls.
1.17 Sub-delegate any of its powers within
1.12 Perform such other functions as the
its terms of reference as listed above
from time to time as the Audit
Committee may deem fit.
B. Board Risk Committee
1.1 Obtain recommendations on
risk tolerance and strategy from
Management, and where appropriate,
report and recommend to the Board for
its determination the nature and extent
of significant risks which the Group
overall may take in achieving its strategic
objectives and the overall Group’s levels
of risk tolerance and risk policies.
1.2 Review and discuss, as and when
appropriate, with Management the
Group’s risk governance structure and
framework including risk policies, risk
mitigation and monitoring processes
and procedures.
Board may determine.
1.13 Sub-delegate any of its powers within
its terms of reference as listed above
from time to time as the Committee
may deem fit.
C. Nominating Committee
1.1 Recommend to the Board the
appointment/re-appointment
of directors.
1.2 Annual review of balance and diversity
of skills, experience, gender and
knowledge required by the Board,
and the size of the Board which would
facilitate decision-making.
1.3 Annual review of independence of
each director, and to ensure that the
Board comprises at least one-third
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Keppel Corporation Limited | Report to Shareholders 2017 Corporate Governance
independent directors. In this connection,
the Nominating Committee should
conduct particularly rigorous review
of the independence of any director
who has served on the Board beyond
nine years from the date of his/her
first appointment.
of candidates as nominee director
(whether as chairman or member)
to the board of directors of investee
companies which are:
(i) listed on the Singapore Exchange or
any other stock exchange;
1.4 Decide, where a director has other
(ii) managers or trustee-managers of
listed company board representation
and/or other principal commitments,
whether the director is able to and has
been adequately carrying out his/her
duties as director of the Company.
any collective investment schemes,
business trusts, or any other trusts
which are listed on the Singapore
Exchange or any other stock
exchange; and
1.5 Recommend to the Board the process
for the evaluation of the performance
of the Board, the board committees
and individual directors, and propose
objective performance criteria to assess
the effectiveness of the Board as a
whole and the contribution of
each director.
(iii) parent companies of the Company’s
core businesses which are unlisted.
1.11 Report to the Board on material matters
and recommendations.
1.12 Review the Committee’s terms of
1.5 Report to the Board on material matters
reference annually and recommend
any proposed changes to the Board.
and recommendations.
1.6 Annual assessment of the effectiveness
of the Board as a whole and individual
directors.
1.13 Perform such other functions as the
Board may determine.
1.6 Review the Committee’s terms of
reference annually and recommend
any proposed changes to the Board.
1.7 Review the succession plans for the
Board (in particular, the Chairman)
and senior management (in particular,
the CEO).
its terms of reference as listed above,
from time to time as the Committee
may deem fit.
1.14 Sub-delegate any of its powers within
1.7 Perform such other functions as the
1.8 Review talent development plans.
1.9 Review the training and professional
development programs for Board
members.
1.10 Review and, if deemed fit, approve
recommendations for nomination
D. Remuneration Committee
1.1 Review and recommend to the
Board a framework of remuneration
for Board members and key
management personnel, and the
specific remuneration packages for
each director, as well as for the key
management personnel.
1.2 Review the Company’s obligations
arising in the event of termination of the
executive directors’ and key management
personnel’s contracts of service, to
ensure that such clauses are fair and
reasonable and not overly generous.
1.3 Consider whether directors should be
eligible for benefits under long-term
incentive schemes (including weighing the
use of share schemes against the other
types of long-term incentive scheme).
1.4 Administer the Company’s employee share
option scheme (the “KCL Share Option
Scheme”), and the Company’s Restricted
Share Plan and Performance Share Plan
(collectively, the “KCL Share Plans”), in
accordance with the rules of the KCL Share
Option Scheme and KCL Share Plans.
Board may determine.
1.8 Sub-delegate any of its powers within
its terms of reference as listed above,
from time to time as the Committee
may deem fit.
Save that a member of this Committee
shall not be involved in the deliberations in
respect of any remuneration, compensation,
award of shares or any form of benefits to be
granted to him/her.
Nature of Current Directors’ Appointments and Membership on Board Committees
Director
Board Membership
Audit
Nominating
Remuneration
Committee Membership
Lee Boon Yang
Chairman
Loh Chin Hua
Tow Heng Tan
Chief Executive Officer
Non-Independent & Non-Executive
Alvin Yeo Khirn Hai
Independent
Independent
Independent
Independent
Independent
Independent
Tan Ek Kia
Danny Teoh
Tan Puay Chiang
Till Vestring
Veronica Eng
80
–
–
–
Member
Member
Chairman
–
–
Member
Member
Member
–
Risk
–
–
–
Member
Member
–
–
Chairman
Member
–
Member
Member
–
–
Member
–
Chairman
–
Member
Member
Member
–
–
Chairman
Safety
Member
Member
–
–
Chairman
–
Member
–
–
81
Governance & Sustainability E. Board Safety Committee
1.1 Ensure there is a set of Group Health,
Safety and Environment (“HSE”) policies
and standards to guide HSE operation
and performance across the Group.
1.2 Monitor HSE performance of the
Group companies, analyse trends
and accident root causes, and
recommend or propose Group-wide
initiatives for improvement where
appropriate to ensure a robust HSE
management system is maintained.
1.3 Structure an audit programme of
Group companies’ HSE management
programme to verify effectiveness
and use its resources to lead the
execution of such audits, drawing
additional resources from the line
where needed.
1.4 Make greater use of its HSE staff to lead
serious accident investigations.
1.5 Review serious accident and near miss
incident investigation reports timely
to understand underlying root causes
and introduce Group-wide initiatives or
remedial measures where appropriate.
1.6 Follow up on key actions initiated by
the Committee.
1.7 Ensure that each Group company
complies with HSE legislation in the
country in which it operates as a
minimum.
1.8 Keep abreast of developments in the
HSE world, discuss such developments
and best practices and consider the
desirability of implementation in
the Group.
1.9 Introduce actions to enhance safety
awareness and culture within
the Group.
1.10 Ensure that the safety functions
in Group companies are adequately
resourced (in terms of number,
qualification and budget) and have
appropriate standing within the
organisation.
1.11 Consider management’s proposals
on safety-related matters.
1.12 Carry out such investigations into
safety-related matters as the Committee
deems fit.
1.13 Report to the Board on material matters,
findings and recommendations.
1.14 Perform such other functions as the
Board may determine.
1.15 Sub-delegate any of its powers within
its terms of reference as listed above
from time to time as the Committee
may deem fit.
Board Assessment
Evaluation Processes
Board
Each board member is required to
complete a Board Evaluation Questionnaire
and send the Questionnaire direct to the
Independent Co-ordinator (“IC”) within
five working days. An “Explanatory Note”
is attached to the Questionnaire to clarify
the background, rationale and objectives
of the various performance criteria used in
the Board Evaluation Questionnaire with
the aim of achieving consistency in the
understanding and interpretation of the
questions. Based on the returns from each of
the directors, the Independent Co-ordinator
prepares a consolidated report and briefs
the Chairman of the Nominating Committee
(“NC”) and the Board Chairman on the
report. Thereafter, the IC presents the report
to the Board 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 five working
days. It is emphasised that the purpose of
the assessment is to assess the executive
director on his performance on the Board
(as opposed to his executive performance).
The executive director is 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 NC Chairman and
Board Chairman on the report. Thereafter,
the IC presents the report to the Board
for discussion. The NC Chairman will in
consultation with the Board Chairman
thereafter meet with the executive director,
where necessary, to provide feedback to the
executive director on his board performance
with a view to improving his board
performance and shareholder value.
As for the assessment of the performance
of the NEDs, each director (both NEDs and
executive director) is required to complete
the NED’s assessment form and send the
form directly to the IC within five working
days. Each NED is also required to perform
a self-assessment in addition to a peer
assessment. Based on the returns, the IC
prepares a consolidated report and briefs the
NC Chairman and Board Chairman on the
report. Thereafter, the IC presents the report
to the Board for discussion at a meeting of the
NEDs. The NC Chairman will in consultation
with the Board Chairman thereafter meet
with the NEDs individually, where necessary,
to provide feedback to the NEDs 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 director (both non-executive and
executive) and sent directly to the IC within
five working days. Based on the returns, the
IC prepares a consolidated report and briefs
the NC Chairman and Board Chairman on
the report. Thereafter, the IC presents the
report to the Board for discussion.
Performance Criteria
The performance criteria for the board
evaluation are in respect of the board size,
board and board committee composition,
board independence, board processes,
board information and accountability,
board performance in relation to discharging
its principal functions and ensuring the
integrity and quality of financial reporting
to stakeholders and board committee
performance in relation to discharging their
responsibilities set out in their respective
terms of reference.
The individual director’s performance criteria
are categorised into four 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/she provides valuable inputs,
his/her ability to analyse, communicate and
contribute to the productivity of meetings,
and his/her understanding of finance and
accounts, are taken into consideration);
(3) director’s duties (under which factors
as to the director’s board committee work
contribution, whether the director takes his/
her role of director seriously and works to
further improve his/her own performance,
whether he/she listens and discusses
objectively and exercises independent
judgment, and meeting preparation are
taken into consideration); and (4) availability
(under which the director’s attendance at
board and board committee meetings,
whether he/she is available when needed,
and his/her informal contribution via e-mail,
telephone, written notes etc are considered).
The assessment of the Chairman of the
Board is based on, among others, 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
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Corporate Governance
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 guided discussions
effectively so that there was timely
resolution of issues, whether he ensured
that meetings were conducted in a manner
that facilitated open communication and
meaningful participation, and whether
he ensured that board committees were
formed where appropriate, with clear terms
of reference, to assist the Board in the
discharge of its duties and responsibilities.
Keppel Whistle-Blower Policy
Keppel Whistle-Blower Policy (the “Policy”)
took effect on 1 September 2004 and was
enhanced on 15 February 2017 to encourage
reporting in good faith of suspected
Reportable Conduct (as defined below) by
establishing clearly defined and centralised
processes through which such reports may
be made with confidence that employees
and other persons making such reports
will be treated fairly and, to the extent
possible, protected from reprisal.
Reportable Conduct refers to any act or
omission by an employee of the Group or
contract worker appointed by a company
within the Group, which occurred in the
course of his/her work (whether or not
the act is within the scope of his/her
employment) which in the view of a
Whistle-Blower acting in good faith, is:
(a) dishonest, including but not limited
to theft or misuse of resources within
the Group;
(b) fraudulent;
(c) corrupt;
(d) illegal;
(e) other serious improper conduct;
(f) an unsafe work practice; or
(g) any other conduct which may cause
financial or non-financial loss to the
Group or damage to the Group’s
reputation.
protected by the Policy and may be subject
to administrative and/or disciplinary action.
Similarly, a person may be subject to
administrative and/or disciplinary action if
he/she subjects (i) a person who has made
or intends to make a report in accordance
with the Policy, or (ii) a person who was
called or may be called as a witness, to
any form of reprisal which would not have
occurred if he/she did not intend to, or had
not made the report or be a witness.
own discretion or in consultation with the
other AC members, determine whether the
circumstances warrant an investigation and
if so, the appropriate investigative process to
be employed and corrective actions (if any)
to be taken. The AC Chairman will use his
best endeavours to ensure that there is no
conflict of interests on the part of any person
involved in the investigations. A Whistle-
Blower Committee assists the AC Chairman
with overseeing the investigation process
and any matters arising therefrom.
The General Manager (Internal Audit) is
the Receiving Officer for the purposes
of the Policy and is responsible for the
administration, implementation and
overseeing ongoing compliance with the
Policy. She reports directly to the Audit
Committee (AC) Chairman on all matters
arising under the Policy.
Reporting Mechanism
The Policy emphasises that the role of the
Whistle-Blower is as a reporting party, and
that Whistle-Blowers are not to investigate,
or determine the appropriate corrective or
remedial actions that may be warranted.
Employees are encouraged to report
suspected Reportable Conduct to their
respective supervisors who are responsible
for promptly informing the Receiving Officer,
who in turn is required to promptly report
to the AC Chairman, of any such report. The
supervisor must not start any investigation
in any event. If any of the persons in the
reporting line prefers not to disclose the
matter to the supervisor and/or Receiving
Officer (as the case may be), he/she may
make the report directly to the Receiving
Officer or the AC Chairman.
Other Whistle-Blowers may report a
suspected Reportable Conduct to either
the Receiving Officer or the AC Chairman.
All reports and related communications
made will be documented by the person
first receiving the report. The information
disclosed should be as precise as possible
so as to allow for proper assessment of the
nature, extent and urgency of preliminary
investigative procedures to be undertaken.
All employees have a duty to cooperate
with investigations initiated under the
Policy. An employee may be placed on
administrative leave or investigatory leave
when it is determined by the AC Chairman
that it would be in the best interests of the
employee, the Company or both. Such leave
is not to be interpreted as an accusation or
a conclusion of guilt or innocence of any
employee, including the employee on leave.
All participants in the investigation must
also refrain from discussing or disclosing the
investigation or their testimony with
anyone not connected to the investigation.
In no circumstance should such persons
discuss matters relating to the investigation
with the person(s) who is/are subject(s) of
the investigation (“Investigation Subject(s)”).
Identities of Whistle-Blower, participants
of the investigations and the Investigation
Subject(s) will be kept confidential to the
extent possible.
No Reprisal
No person will be subject to any reprisal
for having made a report in accordance
with the Policy or having participated in
the investigation.
Any reprisal suffered may be reported
to the Receiving Officer (who shall refer
the matter to the AC Chairman) or directly
to the AC Chairman. The AC Chairman
shall review the matter and determine
the appropriate actions to be taken. Any
protection does not extend to situations
where the Whistle-Blower or witness has
committed or abetted the Reportable
Conduct that is the subject of allegation.
However, the AC Chairman will take
into account the fact that he/she has
cooperated as a Whistle-Blower or a witness
in determining the suitable disciplinary
measure to be taken against him/her.
A person who files a report or provides
evidence which he/she knows to be false,
or without a reasonable belief in the truth
and accuracy of such information, will not be
Investigation
The AC Chairman will review the information
disclosed, interview the Whistle-Blower(s)
when required and, either exercising his
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Governance & Sustainability Code of Corporate Governance 2012
Guidelines for Disclosure
Guideline
General
Questions
How has the Company complied?
(a) Has the Company complied with
Yes.
all the principles and guidelines of
the Code? If not, please state the
specific deviations and the alternative
corporate governance practices
adopted by the Company in lieu of
the recommendations in the Code.
b) In what respect do these alternative
corporate governance practices
achieve the objectives of the principles
and conform to the guidelines in
the Code?
N.A.
Board Responsibility
Guideline 1.5
What are the types of material transactions
which require approval from the Board?
(a) New investments or increase in investments exceeding
$30 million by any Group company (not separately listed);
Members of the Board
Guideline 2.6
(a) What is the Board’s policy with regard
to diversity in identifying director
nominees?
(b) Please state whether the current
composition of the Board provides
diversity on each of the following
– skills, experience, gender and
knowledge of the Company, and
elaborate with numerical data
where appropriate.
(b) Acquisition and disposal of assets exceeding $30 million by
any Group company (not separately listed);
(c) Capital equipment purchase and/or lease exceeding
$30 million by any Group company (not separately listed), and
(d) All commitments to term loans and lines of credit from banks
and financial institutions by the Company.
The Nominating Committee (NC) reviews annually the balance
and diversity of skills, experience, gender and knowledge
required by the Board and the size of the Board which would
facilitate decision making. Thereafter, in consultation with
management, the NC assesses if there is any inadequate
representation in respect of any of those attributes and if so,
determines the role and the desirable competencies for a
particular appointment.
The NC is satisfied that the Board and the board committees
comprise directors who as a group provide an appropriate
balance and diversity of skills, experience, gender, knowledge
of the Group, core competencies such as accounting or finance,
business or management experience, human resource, risk
management, technology, mergers and acquisitions, legal,
international perspective, industry knowledge, strategic planning
experience and customer-based experience or knowledge,
required for the Board and the board committees to be effective.
(c) What steps has the Board taken
There is a process of refreshing the Board progressively.
to achieve the balance and diversity
necessary to maximise
its effectiveness?
See Guideline 4.6 below on process for nomination of new
directors and Board succession planning.
Guideline 4.6
Please describe the board nomination
process for the Company in the last
financial year for:
(i) selecting and appointing new directors;
and
(ii) re-electing incumbent directors.
For new directors
There were no new directors appointed in the last financial year.
However, on an annual basis:
(a) the NC will review the balance and diversity of skills,
experience, gender and knowledge required by the
Board and the size of the Board which would facilitate
decision-making;
(b) in light of such review and in consultation with management,
the NC will assess if there was any inadequate representation
in respect of any of those attributes and determined the role
and the desirable competencies for a particular appointment;
(c) NC will then meet with the short-listed candidates to assess
suitability and to ensure that the candidates are aware of the
expectations and the level of commitment required; and
(d) NC will thereafter make recommendations to the Board
for approval.
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Corporate Governance
Code of Corporate Governance 2012
Guidelines for Disclosure
Guideline
Questions
How has the Company complied?
For incumbent directors
Pursuant to the Company’s constitution, one-third of the
directors retire from office at the Company’s annual general
meeting, and a newly appointed director must submit
himself/herself for re-election at the annual general meeting
immediately following his appointment.
NC recommended the re-nomination of directors to the Board
for approval, 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/her peers.
Guideline 1.6
(a) Are new directors given formal
training? If not, please explain why.
Yes, all new directors undergo a comprehensive orientation
programme.
(b) What are the types of information and
training provided to (i) new directors
and (ii) existing directors to keep them
up-to-date?
Guideline 4.4
(a) What is the maximum number of listed
company board representations that
the Company has prescribed for its
directors? What are the reasons for
this number?
(b) If a maximum number has not been
determined, what are the reasons?
(c) What are the specific considerations in
deciding on the capacity of directors?
Board Evaluation
Guideline 5.1
(a) What was the process upon which the
Board reached the conclusion on its
performance for the financial year?
All directors are provided with continuing education in areas
such as directors’ duties and responsibilities, corporate
governance, changes in financial reporting standards, changes
in the Companies Act, continuing listing obligations and
industry-related matters.
A training programme is also in place for directors in areas such
as accounting, finance, risk governance and management, the
roles and responsibilities of a director of a listed company and
industry specific matters.
Site visits are also conducted periodically for directors to
familiarise them with the operations of the various businesses
so as to enhance their performance as board or board
committee members.
N.A.
Instead of fixing a maximum number of listed company
board representations that a director may have, the NC
assesses holistically whether a director is able to and has been
adequately carrying out his/her duties as a director of the
Company, taking into account considerations as set out below.
The NC takes into account the results of the annual assessment
of the effectiveness of the individual director, the level
of commitment required of the director’s other principal
commitments, and the respective directors’ actual conduct and
participation on the Board and board committees, including
availability and attendance at regular scheduled meetings and
ad-hoc meetings, in determining whether a director with other
listed company board representations and/or other principal
commitments is able to and has been adequately carrying out
his/her duties as a director of the Company.
An independent third party (the “Independent Co-ordinator”)
was appointed to assist in collating and analysing the returns
of the board members for the annual assessment. Based
on the returns from each of the directors, the Independent
Co-ordinator prepared a consolidated report and briefed the
Chairman of the NC and the Board Chairman on the report.
Thereafter, the Independent Co-ordinator presented the report
to the Board for discussion on the changes which should be
made to help the Board discharge its duties more effectively.
The detailed process is set out on page 81 of the Corporate
Governance Report.
(b) Has the Board met its performance
Yes.
objectives?
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Governance & Sustainability Code of Corporate Governance 2012
Guidelines for Disclosure
Guideline
Questions
How has the Company complied?
Independence of Directors
Guideline 2.1
Guideline 2.3
Does the Company comply with
the guideline on the proportion of
independent directors on the Board?
If not, please state the reasons for the
deviation and the remedial action taken
by the Company.
(a) Is there any director who is deemed
to be independent by the Board,
notwithstanding the existence of a
relationship as stated in the Code that
would otherwise deem him not to be
independent? If so, please identify
the director and specify the nature of
such relationship.
(b) What are the Board’s reasons for
considering him independent?
Please provide a detailed explanation.
Yes.
Yes.
Mr Alvin Yeo is Senior Partner of WongPartnership LLP which
is one of the law firms providing legal services to the Keppel
Group.
Mr Tan Ek Kia is a non-executive and independent director
on the board of TransOcean Ltd which has business dealings
with the Keppel Offshore & Marine Group.
Mr Alvin Yeo had declared to the NC that he did not have
a 10% or more stake in WongPartnership LLP and did not
involve himself in the selection and appointment of legal
counsels for the Group. The NC also took into account
Mr Yeo’s actual performance on the Board and board
committees and the outcome of the recent self and peer
Individual Director Performance assessment, and agreed
that Mr Yeo has at all times exercised independent judgment
in the best interests of the Company in the discharge of his
director’s duties and should therefore continue to be deemed
an independent director.
Mr Tan Ek Kia had declared to the NC that he was not involved
in the negotiation of contracts or business dealings between
the Keppel Offshore & Marine Group and TransOcean Ltd.
The NC also took into account Mr Tan’s actual performance
on the Board and board committees and the outcome of
the recent self and peer Individual Director Performance
assessment and agreed that Mr Tan has at all times exercised
independent judgment in the best interests of the Company
in the discharge of his director’s duties and should therefore
continue to be deemed an independent director.
Guideline 2.4
Disclosure on Remuneration
Guideline 9.2
No.
Yes.
Has any independent director served on
the Board for more than nine years from
the date of his first appointment? If so,
please identify the director and set out
the Board’s reasons for considering him
independent.
Has the Company disclosed each director's
and the CEO's remuneration as well as
a breakdown (in percentage or dollar
terms) into base/fixed salary, variable or
performance-related income/bonuses,
benefits in kind, stock options granted,
share-based incentives and awards, and
other long-term incentives? If not, what are
the reasons for not disclosing so?
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Code of Corporate Governance 2012
Guidelines for Disclosure
Guideline
Guideline 9.3
Questions
How has the Company complied?
(a) Has the Company disclosed each
key management personnel's
remuneration, in bands of S$250,000
or in more detail, as well as a
breakdown (in percentage or dollar
terms) into base/fixed salary, variable
or performance-related income/
bonuses, benefits in kind, stock options
granted, share-based incentives
and awards, and other long-term
incentives? If not, what are the reasons
for not disclosing so?
(b) Please disclose the aggregate
remuneration paid to the top five key
management personnel (who are not
directors or the CEO).
Yes.
Aggregate remuneration paid to top six key management
personnel: S$14,039,417
Guideline 9.4
Is there any employee who is an
immediate family member of a director
or the CEO, and whose remuneration
exceeds S$50,000 during the year? If so,
please identify the employee and specify
the relationship with the relevant director
or the CEO.
No.
Guideline 9.6
(a) Please describe how the remuneration
received by executive directors
and key management personnel
has been determined by the
performance criteria.
(b) What were the performance conditions
used to determine their entitlement
under the short-term and long-term
incentive schemes?
(c) Were all of these performance
conditions met? If not, what were
the reasons?
The total remuneration mix comprises 3 key components;
that is, annual fixed cash, annual performance bonus,
and the KCL Share Plans. The annual fixed cash component
comprises the annual basic salary plus any other fixed
allowances which the Company benchmarks with the
relevant industry market median. The annual performance
bonus is tied to the Company’s, business unit’s and individual
employee’s performance. The KCL Share Plans are in
the form of two share plans approved by shareholders,
the KCL Restricted Share Plans (“KCL RSP”) and the KCL
Performance Share Plans (“KCL PSP”). The KCL Share Plans
are long-term incentive plans.
The remuneration structure is directly linked to corporate
and individual performance, both in terms of financial
and non-financial performance. The key performance
indicators (“KPIs”) for awarding of annual performance
bonus are based on the four scorecard areas that
the Company has identified as key to measuring the
performance of the Group – (i) Financial and Business
Drivers; (ii) Process; (iii) Stakeholders; and (iv) People.
For the KCL PSP, performance conditions that are aligned
with shareholder interests such as Total Shareholder Return,
Return on Capital Employed and Net Profit are selected
for equity awards.
The Remuneration Committee is satisfied that the quantum of
performance-related bonuses and the value of shares vested
under the KCL PSP and RSP to the executive director and
key management personnel was fair and appropriate taking
into account the extent to which their KPIs and performance
conditions for FY 2017 were met.
Please refer to pages 70 to 73 of the Corporate Governance
Report for more details.
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Governance & Sustainability Code of Corporate Governance 2012
Guidelines for Disclosure
Guideline
Questions
How has the Company complied?
Risk Management
and Internal Controls
Guideline 6.1
What types of information does the
Company provide to independent
directors to enable them to understand
its business, the business and financial
environment as well as the risks faced
by the Company? How frequently is the
information provided?
The Company has adopted initiatives to put in place
processes to ensure that the non-executive directors are well
supported by accurate, complete and timely information, and
have unrestricted access to management.
These initiatives include regular informal meetings for
management to brief the directors on prospective deals
and potential developments at an early stage before formal
board approval is sought, and the circulation of relevant
information on business initiatives, industry developments
and analyst and press commentaries on matters in
relation to the Company or the industries in which
it operates.
A two-day off-site board strategy meeting is organised
annually for in-depth discussion on strategic issues and
direction of the Group, 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 so
as to facilitate the Board’s review of the Group’s succession
planning and leadership development programme.
Aside from board papers, management is also expected
to provide the Board with accurate information in a timely
manner concerning the Company’s progress or shortcomings
in meeting its strategic business objectives or financial
targets and other information relevant to the strategic
issues facing the Company.
Management also provides the Board members with
management accounts on a monthly basis and as
the Board may require from time to time. Such reports
keep the Board informed, on a balanced and understandable
basis, of the Group’s performance, financial position
and prospects.
Management surfaces key risk issues for discussion and
confers with the Board Risk Committee and the Board
regularly. The Board reviews the Group’s key risks and,
on an annual basis, assesses the adequacy and effectiveness
of the risk management system.
Guideline 13.1
Does the Company have an internal audit
function? If not, please explain why.
Yes.
Guideline 11.3
(a) In relation to the major risks faced
by the Company, including financial,
operational, compliance, information
technology and sustainability, please
state the bases for the Board’s view on
the adequacy and effectiveness of the
Company’s internal controls and risk
management systems.
The Board oversees the Group’s system of internal
controls and risk management with the support from
Audit Committee (AC) and Board Risk Committee (BRC).
Board’s view on the adequacy and effectiveness of the
Company’s internal controls is based on the Group’s
framework of management control, the internal control
policies and procedures established and maintained
by the Group, and the regular audits, monitoring and
reviews performed by the internal and external auditors.
The Audit Committee has concurred with this view.
The Board’s view on the adequacy and effectiveness of
the Company’s risk management system is based on the
review of the Group’s governing framework, systems,
policies and processes in addressing the key risks under
the Group’s Enterprise Risk Management Framework,
the monitoring and review of the Group’s overall
performance and representation from the management.
The BRC has concurred with this view.
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Code of Corporate Governance 2012
Guidelines for Disclosure
Guideline
Questions
How has the Company complied?
Guideline 12.6
(b) In respect of the past 12 months, has
the Board received assurance from the
CEO and the CFO as well as the internal
auditor that: (i) the financial records
have been properly maintained and
the financial statements give true and
fair view of the Company's operations
and finances; and (ii) the Company's
risk management and internal control
systems are effective? If not, how does
the Board assure itself of points (i) and
(ii) above?
(a) Please provide a breakdown of the fees
paid in total to the external auditors for
audit and non-audit services for the
financial year.
(b) If the external auditors have supplied
a substantial volume of non-audit
services to the Company, please state
the bases for the Audit Committee’s
view on the independence of the
external auditors.
Yes. The Board has received assurance from the CEO and the
CFO on points (i) and (ii). The Board received assurance from
the internal auditor on the adequacy and effectiveness of the
Company’s internal control systems.
The Group’s estimated audit fees payable to the external
auditors of the Company and other auditors of subsidiaries for
FY 2017 is S$4,988,000. The Group’s non audit services fees
paid to external auditors of the Company and other auditors of
subsidiaries amounted to S$264,000.
The Audit Committee undertook a review of the independence
and objectivity of the external auditors through discussions
with the external auditors as well as reviewing the non-audit
fees awarded to them, and has confirmed that the non-audit
services performed by the external auditors would not affect
their independence.
Communication
with Shareholders
Guideline 15.4
(a) Does the Company regularly
Yes.
communicate with shareholders
and attend to their questions? How
often does the Company meet with
institutional and retail investors?
In FY 2017, the Company hosted about 175 meetings and
conference calls with institutional investors, including several
facility visits to its shipyards in Singapore, as well as to its
residential and commercial properties in China and Vietnam.
Management also traveled widely for non-deal roadshows
to meet investors across countries. Such meetings provide
useful platforms for management to engage with investors
and analysts. In addition, the Securities Investors Association
(Singapore) (SIAS) hosted the Company’s inaugural Retail
Shareholders Day during which senior management briefed
over 200 retail shareholders on the Company’s strategy and
performance.
In addition to addressing the retail shareholders’ questions
over the phone and email, the Company also engaged retail
shareholders’ through its general meetings and long-term
sponsorship of SIAS's Investor Education Programme.
(b) Is this done by a dedicated investor
relations team (or equivalent)? If not,
who performs this role?
This role is performed by Group Corporate Communications
Department (with assistance from the Group Finance and Group
Legal Department, where required)
(c) How does the Company keep
shareholders informed of corporate
developments, apart from SGXNET
announcements and the annual
report?
Engagement with shareholders and other stakeholders take
many forms including “live” webcasts of quarterly results
briefings, email communications, publications and content on
the Company’s website as well as through facility visits. The
Company’s mobile-friendly website is also continually updated
with the latest information concerning the Company, such as the
latest updates on business and operations, quarterly financial
statements, materials provided at analysts and media briefings,
annual reports, and notices of general meetings. Contact details
of the investor relations department are also set out on the
website to facilitate any queries from investors.
Senior management also meets with investors, analysts and the
media, as well as participates in industry conferences to solicit
and understand the views of the investment community.
Guideline 15.5
If the Company is not paying any dividends
for the financial year, please explain why.
N.A.
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Governance & Sustainability Code of Corporate Governance 2012
Specific 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
Guideline 1.4
The number of meetings of the Board and board committees held in the year, as well as the attendance of every
board member at these meetings
Guideline 1.5
The type of material transactions that require board approval under guidelines
Guideline 1.6
The induction, orientation and training provided to new and existing
Guideline 2.3
The Board should identify in the company's Annual Report each director it considers to be independent. Where
the Board considers a director to be independent in spite of the existence of a relationship as stated in the Code
that would otherwise deem a director not to be independent, the nature of the director's relationship and the
reasons for considering him as independent should be disclosed
Guideline 2.4
Where the Board considers an independent director, who has served on the Board for more than nine years from
the date of his first appointment, to be independent, the reasons for considering him as independent should be
disclosed
Guideline 3.1
Relationship between the Chairman and the CEO where they are immediate family members
Page 64
Page 66
Page 65
Page 65
Page 66
N.A.
N.A.
Guideline 4.1
Names of the members of the NC and the key terms of reference of the NC, explaining its role and the authority
delegated to it by the Board
Pages 67, 79 and 80
Guideline 4.4
The maximum number of listed company board representations which directors may hold should be disclosed
Page 84
Guideline 4.6
Process for the selection, appointment and re-appointment of new directors to the Board, including the search
and nomination process
Guideline 4.7
Key information regarding directors, including which directors are executive, non-executive or considered by the
NC to be independent
Guideline 5.1
The Board should state in the company's Annual Report how assessment of the Board, its board committees
and each director has been conducted. If an external facilitator has been used, the Board should disclose in the
company's Annual Report whether the external facilitator has any other connection with the company or any of its
directors. This assessment process should be disclosed in the company's Annual Report
Pages 67 and 68
Pages 20 to 23
Pages 81 and 82
Guideline 7.1
Names of the members of the RC and the key terms of reference of the RC, explaining its role and the authority
delegated to it by the Board
Pages 69 and 80
Guideline 7.3
Names and firms of the remuneration consultants (if any) should be disclosed in the annual remuneration report,
including a statement on whether the remuneration consultants have any relationships with the company
Page 69
Guideline 9
Clear disclosure of remuneration policies, level and mix of remuneration, and procedure for setting remuneration
Guideline 9.1
Remuneration of directors, the CEO and at least the top five key management personnel (who are not also
directors or the CEO) of the company. The annual remuneration report should include the aggregate amount of
any termination, retirement and post-employment benefits that may be granted to directors, the CEO and the top
five key management personnel (who are not directors or the CEO)
Guideline 9.2
Fully disclose the remuneration of each individual director and the CEO on a named basis. There will be a
breakdown (in percentage or dollar terms) of each director's and the CEO's remuneration earned through base/
fixed salary, variable or performance-related income/bonuses, benefits in kind, stock options granted, share-
based incentives and awards, and other long-term incentives
Pages 69 to 73
Pages 69 to 73
Page 71
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Code of Corporate Governance 2012
Specific Principles and Guidelines for Disclosure
Relevant Guideline or Principle
Guideline 9.3
Name and disclose the remuneration of at least the top five key management personnel (who are not
directors or the CEO) in bands of S$250,000. There will be a breakdown (in percentage or dollar terms) of each
key management personnel's remuneration earned through base/fixed salary, variable or performance-related
income/bonuses, benefits in kind, stock options granted, share-based incentives and awards, and other
long-term incentives. In addition, the company should disclose in aggregate the total remuneration paid to
the top five key management personnel (who are not directors or the CEO). As best practice, companies are
also encouraged to fully disclose the remuneration of the said top five key management personnel
Page Reference in this Report
Page 72
Guideline 9.4
Details of the remuneration of employees who are immediate family members of a director or the CEO, and
whose remuneration exceeds S$50,000 during the year. This will be done on a named basis with clear indication
of the employee's relationship with the relevant director or the CEO. Disclosure of remuneration should be in
incremental bands of S$50,000
Page 73
Guideline 9.5
Details and important terms of employee share schemes
Guideline 9.6
For greater transparency, companies should disclose more information on the link between remuneration
paid to the executive directors and key management personnel, and performance. The annual remuneration
report should set out a description of performance conditions to which entitlement to short-term and
long-term incentive schemes are subject, an explanation on why such performance conditions were chosen,
and a statement of whether such performance conditions are met
Pages 104 to 106 and
134 to 136
Pages 70 to 73
Guideline 11.3
The Board should comment on the adequacy and effectiveness of the internal controls, including financial,
operational, compliance and information technology controls, and risk management systems
Pages 74 to 77
The commentary should include information needed by stakeholders to make an informed assessment of the
company's internal control and risk management systems
The Board should also comment on whether it has received assurance from the CEO and the CFO: (a) that the
financial records have been properly maintained and the financial statements give true and fair view of the
company's operations and finances; and (b) regarding the effectiveness of the company's risk management
and internal control systems.
Guideline 12.1
Names of the members of the AC and the key terms of reference of the AC, explaining its role and the authority
delegated to it by the Board
Guideline 12.6
Aggregate amount of fees paid to the external auditors for that financial year, and breakdown of fees paid in total
for audit and non-audit services respectively, or an appropriate negative statement
Guideline 12.7
The existence of a whistle-blowing policy should be disclosed in the company's Annual Report
Guideline 12.8
Summary of the AC's activities and measures taken to keep abreast of changes to accounting standards and issues
which have a direct impact on financial statements
Guideline 12.9
A former partner or director of the company's existing auditing firm or auditing corporation should not act as a
member of the company's AC: (a) within a period of 12 months commencing on the date of his ceasing to be a
partner of the auditing firm or director of the auditing corporation; and in any case (b) for as long as he has any
financial interest in the auditing firm or auditing corporation
Guideline 15.4
The steps the Board has taken to solicit and understand the views of the shareholders e.g. through analyst
briefings, investor roadshows or Investors' Day briefings
Guideline 15.5
Where dividends are not paid, companies should disclose their reasons.
Pages 73 and 79
Pages 73 and 88
Page 82
Pages 73 and 74
Page 73
Page 78
N.A.
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Governance & Sustainability Risk Management
We maintain a balanced approach to risk management, undertaking
only appropriate and well-considered risks to optimise returns for
our shareholders.
Keppel's risk management approach arises
from the philosophy of seeking sustainable
growth opportunities and creating economic
value, while ensuring only appropriate and
well-considered risks are assumed. Risk
management is an integral part of the way
in which we develop and execute our
business strategies.
Notwithstanding the challenges, we continued
a disciplined pursuit of new opportunities,
innovation and revenue streams to safeguard
shareholder’s interest and the Group’s
assets. Our robust risk-centric culture and
risk management system have enabled us
to continue to respond effectively to the
dynamic business environment, shifting
business demands and to seize new value-
added opportunities for our stakeholders.
Risk-Centric Culture
Effective risk management hinges not only
on systems and processes, but equally on
mindsets and attitudes. The Group fosters a
risk-centric culture through several aspects.
1. Leadership & Governance
Our management is fully committed to
fostering a strong risk-centric culture,
role-modelling and demonstrating strong
support for risk management in all
initiatives. Key messages encouraging
prudent risk taking in decision making
and business processes are interwoven
into major meetings, speeches and
publications.
2. Framework & Values
Supported by an established risk
management framework, our core values
of integrity, accountability, people-
centredness and safety, along with our
refreshed mission to deliver solutions
for sustainable urbanisation responsibly,
guides management and staff to
consider risks in all their daily activities.
3. Process & Methods
In applying the risk management
framework and guided by best practices,
an integral aspect of both strategic and
operational decision making includes
consideration and management of risks
at all levels of the businesses. As part of
the process, appropriate tools, techniques
and risk management methodologies
are applied along with the requisite
domain knowledge capabilities.
4. Training & Communication
Training and communication are held
regularly to enhance risk management
Ownership &
Accountability
Leadership &
Governance
Risk-Centric
Culture
Transparency &
Competency
Framework &
Values
Training &
Communication
Process &
Methods
competency across the Group.
Through various forums and in-house
publications, including different
modes of training, risk management is
reinforced as a discipline and developed
through awareness and practice.
5. Transparency & Competency
We promote transparency in information
sharing and escalation of risk-related
matters. Risk identification and
assessment are embedded in our
control processes. A Group-wide
survey is conducted periodically to
assess the level of risk awareness
amongst employees.
6. Ownership & Accountability
To maintain our standards in risk
management, we advocate ownership
and accountability of our employees
for risk management through the
performance evaluation process.
Enterprise Risk Management
Framework
Keppel’s Board is responsible for risk
governance and ensures that management
maintains a sound system of risk
management and internal controls.
Through the Board Risk Committee (BRC),
the Board provides valuable advice to
management in formulating the risk
management framework, policies and
guidelines. Our management surfaces
significant risk issues for discussion with
the BRC and the Board to keep them fully
informed in a timely manner.
The terms of reference for the BRC are
disclosed on page 79 and 80 of this report.
The Board has defined three risk tolerance
guiding principles for the Group. These
principles serve to determine the nature
and extent of the significant risks which
our Board is willing to take in achieving our
strategic objectives.
These principles are:
1. Risk taken should be carefully evaluated,
commensurate with rewards and in line
with the Group’s core strengths and
strategic objectives.
2. No risk arising from a single area of
operation, investment or undertaking
should be so huge as to endanger the
entire Group.
3. The Group does not condone safety
breaches or lapses, non-compliance
with laws and regulations, as well as acts
such as fraud, bribery and corruption.
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Keppel Corporation Limited | Report to Shareholders 2017
Risk Management
Keppel’s risk governance framework,
set out on pages 74 to 77 under Principle 11
(Risk Management and Internal Controls),
facilitates management and the BRC in
determining the adequacy and effectiveness
of the Group’s risk management system.
Risk management is an integral part of
decision making across the Group. We are
cognisant of the dynamic environment in
which the Group operates and continue
to constantly refine the framework and
systems where necessary, to ensure
strong risk governance across the Group.
Keppel’s Enterprise Risk Management
(ERM) framework, a component of Keppel’s
System of Management Controls, provides
the Group with a holistic and systematic
approach to risk management. It outlines
the reporting structure, monitoring
mechanisms, processes and tools,
as well as policies and limits, in addressing
the Group’s key risks.
Our ERM framework is constantly refined
to ensure relevance in a dynamic operating
environment and where required, tailored
to the requirements of each business unit
depending on specific industries and
objectives. The framework takes reference
from the Singapore Code of Corporate
Governance, ISO 31000, ISO 22313 and the
Guidebook for Audit Committees.
Our Risk and Compliance Committee,
comprising relevant subject matter risk
champions across the business units,
drives and coordinates Group-wide risk
management activities and initiatives.
This is bolstered by regular bilateral and
business unit level meetings to ensure that
relevant risks are identified, assessed and
mitigated in a timely manner. We keep
abreast of the latest developments and
best practices through participation in
industry seminars and interacting with risk
management practitioners.
We adopt a balanced approach to risk
management. Given not all risks can be
eliminated, we are committed to undertaking
appropriate and well-considered risks to
optimise returns for the Group.
Strategic Risks
Market & Competition
A large part of the Group’s strategic risks
comprise market driven forces, evolving
competitive landscapes, changing
customer demands and disruptive
innovation. The Group remains vulnerable
to a number of external factors including
uncertainties in the global economy,
implications from geo-political
developments and threats of disruptive
technology. These risks receive constant
high-level attention throughout the year.
Strategy meetings are held across the Group
92
to review business strategies, formulate
responses and take pre-emptive action
against these risks.
The BRC guides the Group in formulating
and reviewing risk policies and limits. These
policies and limits are subject to periodic
reviews to ensure they continue to support
business objectives and are aligned to our
risk tolerance level. Taking into consideration
the prevailing business climate and the
Group’s risk appetite, the policies aim to
address risks effectively and proactively.
Investments & Divestments
We have an established process for
evaluating investment and divestment
decisions. Investments are monitored to
ensure they are on track to meet the Group’s
strategic intent, investment objectives and
returns. These investment decisions are
guided by investment parameters set on
a Group-wide basis.
Together with the Board, the Investment
and Major Project Action Committee (IMPAC)
guides the Group to take considered risks in
a controlled manner, exercising the spirit of
enterprise, as well as prudence to earn the
best risk-adjusted returns on invested capital
across all our businesses.
Investment risk assessment involves
rigorous due diligence, feasibility studies
and sensitivity analyses of key assumptions
and variables. Some factors considered in
the assessment include alignment to Group
strategy, financial viability, country-specific
political and regulatory developments,
contractual risk implications as well as
lessons learnt. The investment portfolio
is constantly monitored to ensure that
performance is on track to meet the Group’s
strategic intent and investment returns.
Human Resources
We continue to maintain a strong emphasis
on attracting and building a deep pool of
talent. This includes nurturing employees,
maintaining good industrial relations and
fostering a conducive work environment
for our employees. The Group is focused
on strengthening succession planning
and bench strength, as well as building
organisational capabilities to drive business
growth whilst maintaining our status as an
employer of choice.
We recognise the importance of having
a risk-centric mindset and the ability to
identify, assess, develop and implement
mitigation actions, as well as monitor risks.
Keppel Leadership Institute, established
as a global centre to groom leaders and
equip them with the capabilities to drive
and support Keppel’s growth, helps to
inculcate this mindset by embedding risk
management in its key leadership courses.
Operational Risks
Project Management
From initiation through to completion,
risk management processes are an integral
part of project management activities to
facilitate early risk detection and proactive
management. The Group adopts a
systematic assessment and monitoring
process to help manage the key risks for
each project. Particular attention is given
to technically challenging and high-value
projects, including greenfield developments,
as well as those that involve new technology
or operations in a new country. Projects
are managed in accordance to the
respective country’s environmental laws
and labour practices.
At the project execution stage, we carry
out project reviews and quality assurance
programmes to address issues involving
cost, schedule and quality. Project Key Risk
Indicators are used as early warning signals.
In addition, we conduct knowledge sharing
workshops to share best practices and
lessons learnt across the Group. All these
help to ensure that projects are completed
on time and within budget, while meeting
safety and quality standards, as well as
contract obligations.
Health, Safety & Environment
Maintaining a high level of Health, Safety
and Environmental (HSE) standard is of
paramount importance to the Group.
We constantly strive to raise awareness,
maintain vigilance and foster a strong
HSE-centric culture across the Group
and particularly at the ground level.
Key initiatives include driving a zero
fatality strategy with a roadmap focused
on aligning Hazard Identification Risk
Assessment standards across our global
operations, enhancing competency of
employees performing safety-critical
tasks, strengthening operational controls,
deploying standard Root Cause Analysis
across the Group, as well as developing
more proactive and leading matrices to
monitor HSE performance. Environmental
management practices in key operating
sites are also closely monitored. As a Group,
we continue to embrace and leverage
technology to improve HSE processes
and systems. Testament to the Group’s
concerted efforts in safety, Keppel clinched
36 awards at the WSH Awards for exemplary
safety performances and implementation of
strong WSH management systems, as well
as efforts in creating solutions that improve
workplace safety.
Business & Operational Processes
We continue to streamline business
processes. We have implemented initiatives
to establish a common shared services
platform which allows us to continue to
93
Governance & Sustainability across the Group. Keppel’s System of
Management Controls framework outlines
the Group’s internal control and risk
management processes and procedures.
For more details on the framework, please
refer to page 75 of this report.
Financial Management
Financial risk management relates to our
ability to meet financial obligations and
mitigate credit, liquidity, currency and
interest rate risks. Policies and financial
authority limits are reviewed regularly to
incorporate changes in the operating and
control environment.
At Keppel, we are focused on financial
discipline, deploying our capital to
earn the best risk-adjusted returns and
maintaining a strong balance sheet to
seize new opportunities. This includes the
evaluation of counterparties and related
risks against pre-established guidelines.
For more details on the Group’s financial
risk management, please refer to page
57 and 58 of this report.
Impact assessment and stress tests are
performed to gauge the Group’s exposure
to changing market situations, allowing
for informed decision making and
implementation of prompt mitigating
actions. We regularly monitor the
concentration of exposure in the countries
where the Group operates to ensure that
our portfolio of assets, investments and
businesses are adequately safeguarded
against the systemic risks of operating in
a specific geography.
Proactive Risk Management
We remain vigilant against emerging
threats that may affect our different
businesses. Through close collaboration
with stakeholders and keeping vigilant,
we will continue to assess our risks and
review our risk management system to
ensure that our ability to manage and
respond to threats remains adequate
and effective.
achieve cost savings, improve efficiency
and productivity, as well as enhance
governance, compliance and control.
We have adopted ISO standards and
certifications to achieve standardisation of
processes and best practices. In addition,
procedures relating to defect management,
operations, project control and supply chain
management were established to improve
the quality of deliverables. We conduct
regular reviews of policies and authority
limits to ensure that they remain relevant in
meeting changing business requirements.
Business Continuity
We are committed to enhancing operational
resilience through a robust Business
Continuity Management (BCM) Plan that
will equip us to respond effectively to
business disruptions, ensuring that critical
business functions continue to operate with
minimal impact to our people, operations
and assets. As a Group, we are cognisant
of the increasing risk of natural disasters,
terrorism and cyber threats, and have
increased our efforts in reviewing and
testing our operational preparedness and
effectiveness of our BCM plans. Follow-up
actions are taken to strengthen operational
resilience with all key learning points
documented.
Crisis management and communication
procedures have also been embedded
into the Group’s BCM processes. These
procedures are constantly refined to allow
us to respond in an orderly and coordinated
way, as well as to expedite recovery.
Urbanisation and connectivity has given
rise to rapidly increasing concerns around
cyber security. The Group maintains
a close watch and keeps abreast of
techniques and threats as they evolve
in order to develop the appropriate
mitigation measures. This will remain
a key focus area for the Group. Our focus
is on building capabilities to respond to
crises effectively while safeguarding our
people, assets and the interests of our
stakeholders.
Information Technology
The Group has in place an Information
Technology (IT) security framework to
address evolving IT security threats such
as hacking, malware, mobile threats and
loss of data.
Our IT security, governance and control
have been strengthened through the
alignment of IT policies, processes and
systems, and the consolidation of servers
and storages. We have also appointed
IT security officers and implemented
guided self-assessments to identify IT
security gaps.
We have dedicated IT expertise to keep
abreast of the latest developments,
innovation and threats in technology and
assess their impact and risks at various
levels. Extensive training, including
assessment exercises, have been conducted
on user security education to heighten
awareness of IT threats. Measures and
considerations have also been taken to
safeguard against loss of information,
data security and prolonged service
disruption of critical IT systems.
Compliance Risks
Laws, Regulations & Compliance
Given the geographical diversity of
our businesses, we closely monitor
developments in the laws and regulations
of countries where the Group operates
to ensure that our businesses and
operations comply with all relevant laws
and regulations. We regularly engage
with local government authorities and
agencies to keep abreast of changes
to laws and regulations.
We recognise that non-compliance
with laws and regulations not only has
significant financial impact but potentially
detrimental reputational impact on
the Group. We are fully committed to
strengthening our regulatory compliance
framework. Our emphasis is clear and
consistently reiterated. We have zero
tolerance for fraud, bribery, corruption and
violation of laws and regulations.
During the year, we continued to make
significant progress on our regulatory
compliance initiatives, ensuring that
compliance principles are embedded
in our activities and implementing best
practices from industry leaders as we
develop and strengthen our compliance
framework. More details on the steps taken
by the Group in operationalising regulatory
compliance are set out on page 94 and 95
of this report.
Financial Risks
Fraud, Misstatement of Financial
Statements & Disclosures
We maintain a strong emphasis on
ensuring financial statements are accurate
and presented fairly in accordance with
applicable financial reporting standards
and framework.
Regular external and internal audits are
conducted to provide assurance on accuracy
of financial statements and adequacy of the
internal control framework supporting the
statements. Where required, we leverage
the expertise of the engaged auditors in
the interpretation of financial reporting
standards and changes. We hold regular
training and education programmes to
enhance competency of finance managers
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93
Keppel Corporation Limited | Report to Shareholders 2017 Regulatory Compliance
The tone for regulatory compliance is driven from the top.
Guided by our core values, we are committed to building a more
disciplined and sustainable company.
matters, over-arching compliance policies
and guidelines for the Group, as well as
reviewing training and communication
programmes.
Compliance
Resources
Culture
Compliance,
Risk
Assessment,
Review &
Monitoring
Regulatory
Compliance
Framework
Policies &
Procedures
Key Compliance
Processes
Training
& Communications
Guided by our core values and enhanced
code of conduct, we are fully committed
to ensuring that compliance is a central
pillar of our management and an integral
part of our corporate culture and business
processes. We will do business the right way
and comply with all applicable laws and
regulations wherever we operate. We strive
to achieve outstanding performance, whilst
maintaining the highest level of ethical
integrity. Our tone on regulatory compliance
is clear and consistently reiterated from
the top of the organisation. We have zero
tolerance for fraud, bribery, corruption and
violation of laws and regulations.
Strategic Objectives
Following the improvements and
enhancements to the compliance framework
and processes implemented since 2015,
we are focused on ensuring consistency
in application and effectiveness of the
compliance programme across the Group.
We want a compliance framework that
commensurates with the size, role and
activity of our businesses, including the
appropriate compliance control systems,
to be able to effectively detect and remedy
gaps. Most importantly, we are focused
on rebuilding our credibility and reputation
with our stakeholders and to build a
sustainable compliance framework to
support the Group's growth.
Governance Structure
Our Regulatory Compliance Governance
Structure is designed to strengthen our
corporate governance. The Board Risk
Committee (BRC) supports the Board in
its oversight of regulatory compliance and
is responsible for driving the Group’s focus
on implementing effective compliance
and governance systems. The Group
Risk & Compliance Department serves as
a secretariat to the BRC, assessing and
reporting on the Group’s compliance risks,
controls and mitigations.
The Group Regulatory Compliance
Management Committee (“Group RCMC”)
is chaired by Keppel Corporation’s Chief
Executive Officer (CEO) and its members
includes all business unit heads. The role
of the Group RCMC is to articulate the
Group’s commitment to regulatory
compliance, direct and support the
development of over-arching compliance
policies and guidelines, and facilitate the
effective implementation of policies and
procedures across the Group.
The Group RCMC is supported by the
Group Regulatory Compliance Working
Team (“Group RCWT”), which is chaired by
the Head of Group Risk and Compliance.
The Group RCWT oversees the development
and review of pertinent regulatory compliance
Each business unit in the Group has a
dedicated Compliance Lead, supported
by the respective risk and compliance
teams, and is responsible for driving and
administering the compliance function
and agenda for the business unit. This
includes providing support to business unit
management with subject matter expertise,
process excellence and regular reporting to
ensure that compliance risks are effectively
managed and mitigated. Across the
Group, recruitment efforts are in progress
to strengthen the Compliance team with
additional professional and experienced
compliance officers.
Under the overall direction of the Group
RCMC and Group RCWT, business units
working in partnership with their
respective risk and compliance teams
are responsible for implementing the
Group’s Code of Conduct and regulatory
compliance policies and procedures.
They are also responsible for ensuring
that risk assessments in relation to
material regulatory compliance risks
are conducted, and control measures
are adequate and effective, to mitigate
the identified risks which the business
units may face.
Regulatory Compliance Framework
As part of ongoing efforts to strengthen
our regulatory compliance framework,
we have further defined our focus
on compliance covering broadly the
following areas: culture, policies and
procedures, training and communication,
key compliance processes, compliance
risk assessment, reviews and monitoring,
and compliance resources.
One of the more important aspects of
the framework is the structure of the
compliance organisation. During the year,
we made changes to the reporting
structure of the compliance organisation
to reinforce independence of the function.
The Head of Group Risk & Compliance
now reports directly to the Chairman
of the BRC. Similarly, the compliance leads
of the business units have established
direct reporting lines to the respective
Audit or Board Risk Committees. In
addition, business unit compliance
leads report directly to the Head of
Group Risk & Compliance. This reporting
structure reinforces independence of
the function and enables senior
management, including members of
the Board, to provide continuous, clear
and explicit support to the Group’s
compliance programme.
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95
Governance & Sustainability Culture
Culture and mindset are critical in ensuring
effectiveness of the compliance programme.
Management has a key role in setting the
right tone and walking the talk. The tone
on full regulatory compliance has to cascade
through the organisation. During the year,
we implemented initiatives to continue
to foster the desired full compliance culture.
These include campaign posters on
anti-bribery, anti-corruption and reporting
mechanisms that are now exhibited in
all our offices globally to reinforce the
message; individual performance measures
to influence personal behaviour, and
periodic compliance-focused messages
delivered by business unit heads to
their employees. A Group-wide survey
was conducted to assess awareness of
compliance and to identify potential areas
requiring further emphasis.
Policies & Procedures
Employee Code of Conduct
We have a strict Code of Conduct that
applies to all employees, who are required
to acknowledge and comply with the Code.
The Code of Conduct sets out important
principles to guide employees in carrying
out their duties and responsibilities to
the highest standards of personal and
corporate integrity. It covers areas from
conduct in the workplace to business
conduct, including clear provisions on
prohibitions against bribery and corruption,
and conflicts of interests amongst others.
Appropriate disciplinary action, including
suspension or termination of employment,
will be taken in the event that an employee
is found to have violated the rules set
out in the Code of Conduct. The Code of
Conduct is also provided to all third parties
who represent Keppel in business dealings,
including joint venture partners, who are
required to acknowledge understanding
and compliance with the requirements of
the Code of Conduct.
Supplier Code of Conduct
The acknowledgement to abide by
our Supplier Code of Conduct, which
was developed to integrate Keppel’s
sustainability principles across our
supply chain, and positively influence the
environmental, social and governance
performance of our suppliers, is mandatory
for all key suppliers of the Keppel Group.
The areas covered within the Supplier
Code of Conduct includes proper business
conduct, fair labour practices, stringent
safety and health standards, and responsible
environmental management.
Whistle-Blower Policy
Keppel’s Whistle-Blower Policy encourages
the reporting of suspected bribery,
violations or misconduct through a
clearly-defined process and reporting
channel, by which reports can be made in
confidence and without fear of reprisal.
The process is reviewed regularly. During
the year, we made enhancements to ensure
that reporting channels are readily available
and we are in the process of implementing
solutions to cater to different languages and
time zone requirements globally.
Compliance Policies
The Group maintains a comprehensive list
of policies covering compliance-related
matters including gifts, hospitality, agent
fees, donations, sponsorships and insider
trading amongst others. These policies are
reviewed periodically to ensure that they
commensurate with the activities in the
jurisdictions in which the Group operates.
Group policies are applicable to all business
units and unless the jurisdictional regulatory
requirements are more stringent, the
Group policy represents the minimum
standard for the Group.
Training & Communications
Training is an essential component of
Keppel’s regulatory compliance framework.
Our programmes are tailored to specific
audiences and we leverage Group-wide
forums to reiterate key messages.
We have a comprehensive annual
e-learning training programme which is
mandatory for all directors, officers and
employees. The content of the training
covers key compliance policies, and
directors, officers and employees are
required to complete assessments at
the end of the training to successfully
mark completion. As part of the annual
training, directors, officers and employees
are also required to formally acknowledge
their understanding of policies and declare
any potential conflicts of interest.
We continue to focus on refining our
compliance training programmes and
curriculum for new and existing employees
as well as, to develop and tailor training
content depending on the target audience.
In addition to policy-related training
programmes, we conduct trainings focused
on the line manager's responsibilities
in developing the desired culture and
mindset regarding compliance. These
responsibilities include the need to establish
and maintain effective internal controls
to ensure that processes are robust and
potential gaps are identified and mitigated
in a timely manner.
Group Risk & Compliance conducts
periodic site visits, particularly to locations
susceptible to higher corruption risks,
to raise awareness of compliance risks.
In addition, we leverage opportunities at
various management conferences and
employee meetings to stress the importance
of compliance.
Key Processes
Due Diligence
We have improved our risk-based due
diligence process for all third party
associates who represent the Keppel Group
in business dealings, including our joint
venture partners, to assess the compliance
risk of the business partner. In addition
to background checks, the due diligence
process incorporates requirements for
third party associates to acknowledge
understanding and compliance with
our Code of Conduct.
Other Processes
As part of our ongoing review of policies
and procedures, we ensure compliance
oversight is embedded in key processes
including areas such as gifts and hospitality,
agent fees, donations and sponsorships,
as well as conflicts of interest.
Best Practices
We recognise the need to continually
benchmark our compliance programmes
against best practices and augment our
processes to ensure they are consistent
and robust. During the year, our compliance
framework and programmes have also
been reviewed by an external advisor
and all recommendations from the
review have been incorporated into
our compliance initiatives.
Risk Assessment, Review & Monitoring
We continue to develop our compliance
resources and framework. This will
enable the Compliance team to conduct
independent risk assessments to identify
and mitigate key compliance risks. Regular
discussions are held with all business units,
focusing on risk assessments including
specific compliance risks identified for
their respective businesses. Separately,
independent reviews of compliance
risks are carried out within the scope of
internal audits including thematic reviews
of the effectiveness of key aspects of
our compliance programmes.
Resources
We recognise the need for an experienced
compliance team to effectively support
the business in compliance advisory,
as well as to ensure that compliance
programmes and controls are effectively
implemented. Senior management,
including members of the Board, are fully
committed to ensuring that we build a
strong compliance function.
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95
Keppel Corporation Limited | Report to Shareholders 2017 Environmental Performance
We are committed to improve resource efficiency and
reduce our environmental impact.
1.
Keppel invests in
renewable energy
sources so as to reduce its
environmental footprint in
the long run.
2.
Keppel Shipyard delivered
the world’s first converted
Floating Liquefaction
Vessel, Hilli Episeyo
(pictured).
1
Keppel constantly strives to improve our
environmental performance throughout
our value chain. This includes enhancing
the environmental performance of our
activities, including eco-friendly features
in our products and services, as well as
supporting the global climate change
agenda. Business units within the Group
are also contributing in different ways
to sustainable urbanisation in the cities
where we operate.
Sustainable Design
Keppel Land developed a set of Responsible
Design Values for all its new projects in
Singapore and overseas. The guidelines
encapsulate the company's efforts to deliver
the best standards in liveability, quality,
aesthetics and sustainability.
Green Data Centres
Keppel Data Centres invested US$10 million
in data centre startup Nautilus Data
Technologies (Nautilus), which employs
patented water-cooling technology in
pre-fabricated facilities which are more
cost-efficient and environmentally
sustainable than traditional structures.
Sited on vessels or on land near large
water bodies, Nautilus’ data centres use
the naturally chilled water to cool the
facilities, recirculating the water back to
its original source with virtually zero water
consumption. This eliminates the need for
energy-intensive air-cooling equipment
and water treatment chemicals, and can
reduce operating costs by up to 30% while
increasing cooling efficiency by up to 80%.
It reduces the amount of carbon and
pollution emitted by 30%, while using
one-third the spatial footprint with up to
five times the server capacity. Through
the investment, Keppel will also explore
opportunities to tap the Group’s experience
in the offshore and marine sector for the
development of water-cooled data centres.
Harnessing Renewables
Keppel DC Dublin 1 data centre in Ireland is
now fully powered by renewable energy.
This initiative by KDCR (Ireland), a wholly-
owned entity of Keppel DC REIT, helps avoid
the emission of more than 11,000 tonnes of
carbon dioxide per year.
Keppel Offshore & Marine (Keppel O&M) and
Keppel Infrastructure are collaborating on a
solar leasing project at Keppel O&M’s yards,
where the renewable energy generated will
help offset the yards’ energy requirements.
In addition, Keppel Corporation's corporate
office will be fully powered by clean energy
through Renewable Energy Certificates
issued and retired with this initiative.
Separately, Keppel O&M entered into a
Memorandum of Understanding with
Nanyang Technological University to explore
collaboration in renewable energy and
micro-grid projects.
Driving Efficiencies
In 2017, the Huawei Cognitive Data Centre
reference site was launched as part of a
collaboration between Keppel Data Centres
and Huawei. Located at Keppel DC Singapore
4, it features technologies geared towards
providing a virtualised and energy-efficient
data centre management system.
Keppel continues to implement energy
efficiency projects across our operations.
Examples of initiatives in 2017 include the
replacement of ventilation blowers at
Keppel Shipyard with more energy-efficient
ones, as well as the installation of more
energy-efficient LED and induction lights
on vessels and machines at our yards.
Water & Waste Management
The Sino-Singapore Tianjin Eco-City Water
Reclamation Centre was officially opened
in June 2017. The Centre, a joint venture
between Keppel Infrastructure and Tianjin
Eco-City Investment and Development Co.,
Ltd., treats wastewater effluent from
an existing wastewater treatment plant
to produce recycled water that meets
China's most stringent standards for urban
miscellaneous water consumption.
In our operations, Keppel strives to minimise
waste generation, increase opportunities for
reusing and recycling, as well as treat and
dispose of waste responsibly. Scrap metals
are collected at our yards and plants for
recycling while used papers are collected
and recycled across the Group’s businesses.
Hazardous waste is handled, stored and
disposed in a manner that adheres to
best practices and meets local regulatory
requirements.
Raising Eco-Consciousness
Keppel demonstrated its support for climate
action by participating in Earth Hour 2017.
Non-essential lights at various shipyards,
plants and buildings were turned off for an
hour, and activities were organised to raise
awareness on climate change.
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97
Governance & Sustainability Product Excellence
We drive innovation and tap our businesses’ expertise and
track records to seize new opportunities.
(IWMF) off the coast of Shek Kwu Chau,
Hong Kong. The IWMF includes a
Waste-to-Energy (WTE) Plant, which will
feature Keppel Seghers’ proven WTE
technology and flue gas cleaning system.
Tapping opportunities in e-commerce
and urban logistics, Keppel Logistics,
a wholly-owned subsidiary of Keppel
Telecommunications & Transportation,
launched UrbanFox to provide
end-to-end omnichannel logistics
and channel management solutions.
Investing for Growth
Keppel-KBS US REIT was successfully listed
on the Mainboard of the Singapore Exchange
in 2017, raising about US$553 million.
The REIT is backed by Keppel Capital and
KBS Pacific Advisors, and has a distinctive
portfolio of 11 quality investments
strategically located in seven key US growth
markets that are underpinned by stable
macro fundamentals.
Driving Innovation
Keppel Technology and Innovation (KTI)
was launched to be a catalyst for change by
sharpening the Group’s focus on innovation.
KTI is a platform for co-creating and
incubating ideas. KTI leverages the strong
expertise, experience and track record
of Keppel Offshore & Marine Technology
Centre (KOMtech), which is now included
as an entity under KTI.
In 2017, KOMtech received the inaugural
National Supercomputing Centre Outstanding
High Performance Computing Industry
Application Award for its research and
commercial efforts to tap computational
power to drive innovation and raise
productivity.
Keppel O&M is exploring repurposing its
offshore technology for sustainable solutions
such as floating desalination plants, floating
data centres and offshore logistics hubs.
Customer Health & Safety
The Group exercises due care and diligence
in the design, construction and operation
of its products and services to ensure
that they are fit for use and do not pose
health or safety hazards. We monitor
and mitigate health and safety impacts
throughout the life cycles of our products
and services.
Keppel harnesses the Group’s strengths
and diverse solutions in energy, property,
infrastructure and connectivity to provide
the latest urban solutions and create
efficient and vibrant smart precincts and
cities of the future.
Building Sustainable Cities
Keppel has a strong track record in building
sustainable townships. Keppel leads the
Singapore Consortium in the development
of the Sino-Singapore Tianjin Eco-City, which
celebrates its 10th anniversary in 2018.
In 2017, Keppel Urban Solutions (KUS) was
established as a platform to integrate the
Group’s different capabilities, and work
with like-minded partners to capture
opportunities in the urbanisation megatrend
as a master developer of large-scale
projects. Solutions provided by KUS will
include masterplanning, developing and
operating efficient horizontal infrastructure
such as smart utilities and district-level
heating and cooling, providing connectivity
and urban logistics, as well as innovative
programming for engaged communities.
As a testament to Keppel’s commitment
to design, build and operate properties
that harmonise with the environment, the
Group garnered 13 awards at the Building &
Construction Authority of Singapore Awards
2017. Separately, Keppel Land was named
Overall Best Developer for Singapore,
Vietnam and Myanmar at the Euromoney
Real Estate Awards.
Keppel Shipyard delivered the world’s first
converted Floating Liquefaction Vessel, Hilli
Episeyo, one of six major project deliveries
by the yard in 2017. LNG is considered
to be the cleanest fossil fuel available
and offers significant potential to reduce
greenhouse gas emissions. In another
milestone, FueLNG, a joint venture between
Keppel Offshore & Marine (Keppel O&M)
and Shell Eastern Petroleum, achieved the
first commercial LNG bunker transfer in
Singapore for Hilli Episeyo.
KeppeI Infrastructure commenced
construction for Singapore’s first large-scale
dual-mode desalination plant, the Keppel
Marina East Desalination Plant, which is able
to treat both seawater and freshwater. Slated
for completion in 2020, the Plant will help
bolster Singapore’s water supply resilience.
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97
Contributing to Hong Kong’s goal of
sustainable urbanisation, Keppel Seghers
and Zhen Hua Engineering jointly secured
a contract to design, build and operate
an Integrated Waste Management Facility
2
Keppel Corporation Limited | Report to Shareholders 2017 Labour Practices & Human Rights
We adhere to fair employment practices, uphold human rights
principles and invest in developing the capabilities of our people.
Employee Engagement
87%
Of employees surveyed indicated
that they will ‘go beyond the norm’
to contribute to Keppel’s success.
Local Hires
66.9%
Of senior management are
hired from local communities.
Fair Employment Practices
We adopt fair employment practices
and comply with local labour laws across
our global operations. In Singapore,
Keppel adheres to the Tripartite Guidelines
on Fair Employment Practices and
endorses the Employers’ Pledge of Fair
Employment Practices.
We embrace workforce diversity and aim
to provide a work environment that fosters
mutual respect. Our Employee Code of
Conduct sets the tone in relation to the
Group’s stance against discrimination and
our hiring policies ensure equal employment
opportunities for all.
Human Rights
Keppel respects and upholds the
fundamental principles set out in the
United Nations (UN) Universal Declaration of
Human Rights and the International Labour
Organisation Declaration on Fundamental
Principles and Rights at Work. Our approach
is articulated in our Corporate Statement
on Human Rights, and is guided by general
concepts from the UN Guiding Principles
on Business and Human Rights.
We have zero tolerance for unethical
labour practices such as child labour, forced
labour, slavery and human trafficking in
any of our operations. Our suppliers are
expected to comply with the Group’s
Supplier Code of Conduct, which holds them
accountable to responsible labour practices
in their operations.
Skills Development
We develop and train our workforce to
maximise the potential of our people, and
attract and retain the best talent.
Keppel supports all employees in furthering
their education. We also invest in equipping
workers with up-to-date operational skills
and certifications.
We have various centralised platforms
that offer structured learning programmes
to nurture talents across the Group. Our
initiatives include Keppel Young Leaders,
the Emerging Leaders Programme and
management trainee programmes.
The Group partners government and
educational institutions to design industry
programmes for students. Internships are
offered to promising students, allowing
them to gain work experience before
commencing their careers.
The Keppel Leadership Institute, established
in 2015 and headquartered in Singapore,
continues to offer a diverse range of
leadership and professional development
programmes. The Institute grooms global
Keppel leaders, equipping them with the
skills to drive our businesses into the future.
Employee Engagement
We engage our employees through
feedback channels and activities that forge
stronger relationships.
Apart from the annual Global Keppelites
Forum, a Group-wide townhall, we continue
to build camaraderie among employees
through various platforms, such as the
yearly Keppel Games, a series of sports
competitions initiated by Keppelite
Recreation Club, and activities organised
by Keppel Volunteers.
In 2017, the Keppel Global Employee
Engagement Survey achieved a strong
response rate and a high employee
engagement score.
1.
Employees are encouraged
to upskill by tapping the
wide range of professional
development programmes
offered by the Group.
2.
The safety and well being
of our stakeholders is a
top priority.
1
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99
Governance & Sustainability Safety & Health
KEPPEL
Five Key
Safety Principles
1. Every incident is
preventable.
2. HSE is an integral part
of our business.
3. HSE is a line responsibility.
4. Everyone is empowered
to stop any unsafe work.
5. A strong safety culture
is achieved through
teamwork.
Safety is our core value. We are committed to provide a safe
and healthy workplace for all our stakeholders.
2
Commitment from the Top
The Keppel Corporation Board Safety
Committee, supported by the Inter-Strategic
Business Unit Safety Committee, leads
efforts to formulate strategies, implement
initiatives and improve safety performance.
At the annual Keppel Leadership Health,
Safety and Environment (HSE) Roundtable,
senior management shared insights and
exchanged ideas to improve Keppel’s safety
performance. The resultant action plan was
incorporated in the Group’s safety roadmap.
Safety Practices
We empower and train our stakeholders
to ensure that they are kept up-to-date on
best practices. Training programmes are
regularly reviewed to equip all personnel,
including workers, frontline supervisors and
managers, with the competence to handle
any situation with confidence.
To further strengthen the Group’s safety
culture and achieve our shared aspirations,
we continue to align safety systems and
processes across our global operations.
Championing Safety
The Keppel Group Safety Convention in
2017 saw the continuation of the Keppel
Group Safety Awards, which recognise
employees who have gone the extra mile to
foster safe and healthy work environments.
Employees across the Group continue to
develop innovative solutions to improve work
processes and enhance safety in their daily
work. In 2017, a total of 34 Safety Innovation
Teams submitted Safety Innovation Projects
which yielded practical solutions to address
challenges on the ground.
Safety Performance
While our Accident Frequency Rate
decreased, we suffered three fatalities
globally in 2017 despite our best efforts.
We are saddened by the loss of our
colleagues and have thoroughly investigated
the causes, stepped up efforts to prevent
recurrences, and shared the lessons learnt
across the Group.
The Group believes that every incident is
preventable, and will continue to improve
work processes and promote a culture
of safety ownership across our global
operations.
Safety Achievements
The Group was conferred 36 awards at the
Workplace Safety and Health (WSH) Awards
2017, organised by Singapore’s Ministry of
Manpower (MOM) and the WSH Council.
This is the largest number of awards won
by a single organisation in 2017.
Influencing our Supply Chain
We work closely with internal and external
stakeholders, including our contractors and
subcontractors, to maintain high safety
standards. Our subcontract workers undergo
the same safety training as direct employees.
To raise industry standards, we work closely
with customers, suppliers, regulators and
industry associations to implement initiatives
and encourage our subcontractors to attend
regular safety trainings. Keppel is also a
sponsor of annual national safety events.
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99
Keppel Corporation Limited | Report to Shareholders 2017 Our Community
We uplift communities wherever we operate through programmes
that deliver enduring socio-economic impact.
1.
Keppel Volunteers work
closely with key partners
on regular activities
that provide care for
communities.
1
Conserving Biodiversity
The Keppel Discovery Wetlands at the
Singapore Botanic Gardens was officially
opened in March 2017 by Prime Minister
of Singapore Lee Hsien Loong. Established
with a $2.08 million commitment from
Keppel, the Wetlands includes a plant
collection of over 200 species. Since
its launch, over 600,000 people have
visited the Wetlands. Keppel Volunteers
act as ambassadors for the Wetlands by
leading tours for students and seniors to
promote conservation.
Arts Advocate
In recognition of the Group’s contributions
to the arts, Singapore’s National Arts
Council presented Keppel with its 10th
consecutive Distinguished Patron of the
Arts Award in 2017.
The Keppel Centre for Art Education
at the National Gallery Singapore is the
first art education facility of its kind in
the region. Established with a $12 million
commitment from Keppel, the Centre
has benefitted over 850,000 visitors since
its launch in 2015. Guided school tours
and workshops introduce visual literacy,
analytical and interpretive skills to students.
In 2017, several key spaces at the Centre
were refreshed with new exhibits
incorporating elements that cultivate
a sense of adventure and exploration
among children.
Keppel Nights, developed in partnership
with Esplanade – Theatres on the Bay,
provides students from heartland schools
with access to world class performances
and exposure to various art and cultural
forms. Since its re-launch in 2013, the
programme has benefitted close to
20,000 students from 72 schools.
We partner organisations that share our
values and invest in programmes aligned
with Keppel’s focus areas of Protecting the
Environment, Empowering Lives through
Education and the Arts, and Caring for the
Underprivileged.
Charitable contributions by the Group’s
philanthropic arm, Keppel Care Foundation,
are complemented by employee volunteerism
led by Keppel Volunteers. The Foundation
has disbursed close to $29 million to worthy
causes to date, since its launch in 2012.
In 2017, the Group spent $4.5 million on social
investments. Meanwhile, Keppel Volunteers
achieved about 12,000 hours of community
service, exceeding the target of 10,000 hours.
Social Investment Spending by
Project Type, 2017 (%)
Education
Industry Advancement
Arts, Sports and Community
Development Projects
Care for the Underprivileged
and Healthcare
Environment
Total $4.5 million
47.0
10.7
9.3
7.6
25.4
100.0
100
Caring for Communities
Keppel continued to work with key
partners in Singapore and overseas to
organise regular activities for beneficiaries.
Beneficiaries in Singapore include children
from Care Corner and the Muscular
Dystrophy Association Singapore, senior
citizens from Thye Hua Kwan Senior
Activity Centre, as well as underprivileged
households supported by North West
Community Development Council.
Abroad, Keppel Land works with
non-governmental organisations in
China like Bless China International and
local hospitals to provide medical support
for underprivileged villagers in Yunnan.
Volunteers also regularly visit remote
villages to donate essential supplies.
BrasFELS engineers lead the Teach-It-
Forward programme in Brazil, providing
public school children and youth in
Angra dos Reis with supplementary
classes and educational visits.
Keppel’s initiatives in the Philippines
include the College Scholarship programme
that provides technical training for
out-of-school youth.
Keppel Land promotes child literacy in
Ho Chi Minh City, Vietnam, through its
sponsorship of Words on Wheels, a mobile
library programme in partnership with
Singapore International Foundation. To date,
over 3,000 students have benefitted from
the English lessons and exposure to online
resources provided under the programme.
PB
Governance & Sustainability Directors’ Statement & Financial Statements
Contents
Directors’ Statement
Independent Auditor’s Report
Balance Sheets
Consolidated Profit and Loss Account
Consolidated Statement of
Comprehensive Income
Statements of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
Significant Subsidiaries &
Associated Companies
Interested Person Transactions
Key Executives
Major Properties
Group Five-Year Performance
Group Value-Added Statements
Share Performance
Shareholding Statistics
Notice of Annual General Meeting &
Closure of Books
Corporate Information
Financial Calendar
Proxy Form
102
107
114
115
116
117
120
123
171
180
181
185
190
194
195
196
197
202
203
205
101
Keppel Corporation Limited | Report to Shareholders 2017 Directors’ Statement
For the financial year ended 31 December 2017
The Directors present their statement 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 2017.
In the opinion of the directors, the consolidated financial statements of the Group, and the balance sheet and statement of changes in equity
of the Company as set out on pages 114 to 179, are drawn up so as to give a true and fair view of the financial position of the Group and of the
Company as at 31 December 2017, and the financial performance, changes in equity and the cash flows of the Group and changes in equity of
the Company for the financial year then ended and at the date of this statement, there are reasonable grounds to believe that the Company will
be able to pay its debts when they fall due.
1.
Directors
The Directors of the Company in office at the date of this statement are:
Lee Boon Yang (Chairman)
Loh Chin Hua (Chief Executive Officer)
Tow Heng Tan
Alvin Yeo Khirn Hai
Tan Ek Kia
Danny Teoh
Tan Puay Chiang
Till Bernhard Vestring
Veronica Eng
2.
Audit Committee
The Audit Committee of the Board of Directors comprises four independent non-executive Directors. Members of the Committee are:
Danny Teoh (Chairman)
Alvin Yeo Khirn Hai
Tan Ek Kia
Veronica Eng
The Audit Committee carried out its function in accordance with the Singapore Companies Act, including the following:
−
−
−
−
−
−
−
−
−
−
Reviewed audit scopes, plans and reports of the Company’s independent auditors and internal auditors and considered
effectiveness of actions/policies taken by management on the recommendations and observations;
Reviewed the assistance given by the Company’s officers to the auditors;
Carried out independent review of quarterly financial reports and year-end financial statements;
Examined effectiveness of financial, operational, compliance and information technology controls;
Reviewed the independence and objectivity of the independent auditors annually;
Reviewed the nature and extent of non-audit services performed by independent auditors;
Met with independent auditors and internal auditors, without the presence of management, at least annually;
Ensured that the internal audit function is adequately resourced and has appropriate standing within the Company, at least
annually;
Reviewed interested person transactions; and
Investigated any matters within the Audit Committee’s term of reference, whenever it deemed necessary.
The Audit Committee has recommended to the Board of Directors the nomination of PricewaterhouseCoopers LLP for re-appointment
as independent auditors at the forthcoming Annual General Meeting of the Company.
3.
Arrangements to enable directors to acquire shares or debentures
Neither at the end of the financial year nor at any time during the financial year did there subsist any arrangement whose object was
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 Restricted Share Plan, KCL Performance Share Plan and Remuneration Shares to Directors of the
Company.
102
Financial Report
4.
Directors’ interests in shares and debentures
According to the Register of Directors’ shareholdings kept by the Company for the purpose of Section 164 of the Singapore 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
(No. of ordinary shares)
Lee Boon Yang
Loh Chin Hua
Loh Chin Hua (deemed interest)
Tow Heng Tan
Tow Heng Tan (deemed interest)
Alvin Yeo Khirn Hai
Alvin Yeo Khirn Hai (deemed interest)
Tan Ek Kia
Danny Teoh
Tan Puay Chiang
Tan Puay Chiang (deemed interest)
Till Bernhard Vestring
Veronica Eng
(Unvested restricted shares to be delivered after 2014)
Loh Chin Hua
(Unvested restricted shares to be delivered after 2015)
Loh Chin Hua
(Unvested restricted shares to be delivered after 2016)
Loh Chin Hua
(Contingent award of performance shares issued in 2014 to be
delivered after 2016) 1
Loh Chin Hua
(Contingent award of performance shares issued in 2015 to be
delivered after 2017) 1
Loh Chin Hua
(Contingent award of performance shares issued in 2016 to be
delivered after 2018) 1
Loh Chin Hua
(Contingent award of performance shares issued in 2017 to be
delivered after 2019) 1
Loh Chin Hua
Holdings At
1.1.2017
31.12.2017
21.1.2018
234,000
534,557
38,500
40,888
28,789
32,225
42,000
26,825
56,825
42,600
7,103
61,000
4,000
264,000
694,557
38,500
48,888
28,789
38,225
42,000
34,825
65,825
50,600
7,103
68,000
12,000
264,000
694,557
38,500
48,888
28,789
38,225
42,000
34,825
65,825
50,600
7,103
68,000
12,000
50,000
-
-
100,000
50,000
50,000
180,000
120,000
120,000
180,000
-
-
220,000
220,000
220,000
300,000
300,000
300,000
-
330,000
330,000
(Contingent award of performance shares – Transformation Incentive Plan
issued in 2016 to be delivered after 2021) 1
Loh Chin Hua
(3.145% Fixed Rate Notes due 2022)
Tan Puay Chiang
750,000
750,000
750,000
$250,000
$250,000
$250,000
103
Keppel Corporation Limited | Report to Shareholders 2017
Directors’ Statement
4.
Directors’ interests in shares and debentures (continued)
Subsidiary
- Keppel Land Limited
(3.90% Fixed Rate Notes due 2024)
Tan Puay Chiang
Associated Companies
- Keppel REIT
(No. of units)
Lee Boon Yang
Loh Chin Hua
Loh Chin Hua (deemed interest)
Tow Heng Tan
Tow Heng Tan (deemed interest)
Alvin Yeo Khirn Hai
Alvin Yeo Khirn Hai (deemed interest)
Tan Ek Kia
Danny Teoh
Tan Puay Chiang
Tan Puay Chiang (deemed interest)
- Keppel DC REIT
(No. of units)
Alvin Yeo Khirn Hai
Tan Puay Chiang
Holdings At
1.1.2017
31.12.2017
21.1.2018
$250,000
$250,000
$250,000
16,118
7,000
556,160
5,568
8,070
4,303
210,663
1,939
8,911
12,000
6,000
16,989
7,000
556,160
5,568
8,070
4,303
210,663
1,939
8,911
12,000
6,000
16,989
7,000
556,160
5,568
8,070
4,303
210,663
1,939
8,911
12,000
6,000
95,550
100,000
95,550
100,000
95,550
100,000
1
Depending on the achievement of pre-determined performance targets, the actual number of shares to be released could range from zero to 150% of the
number stated.
5.
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.
No options to take up Ordinary Shares (“Shares”) were granted during the financial year. There were 632,900 Shares issued by virtue of
exercise of options and options to take up 7,304,289 Shares were cancelled during the financial year. At the end of the financial year,
there were 6,088,785 Shares under option as follows:
Date of grant
13.02.2007
10.08.2007
14.02.2008
14.08.2008
05.02.2009
06.08.2009
09.02.2010
Balance at
1.1.2017
1,166,100
4,693,759
1,873,800
2,659,530
103,800
1,624,785
1,904,200
14,025,974
Number of Share Options
Exercised
Cancelled
-
-
-
-
(15,400)
(352,500)
(265,000)
(632,900)
(1,166,100)
(4,693,759)
(429,000)
(582,530)
-
(235,500)
(197,400)
(7,304,289)
Balance at
31.12.2017
-
-
1,444,800
2,077,000
88,400
1,036,785
1,441,800
6,088,785
Exercise
price
$7.70
$11.17
$8.46
$8.73
$3.07
$6.86
$6.89
Date of
expiry
12.02.2017
09.08.2017
13.02.2018
13.08.2018
04.02.2019
05.08.2019
08.02.2020
There are no options granted to any of the Company’s controlling shareholders or their associates under the Scheme.
6.
Share plans of the Company
The KCL Performance Share Plan (“KCL PSP”) and KCL Restricted Share Plan (“KCL RSP”) were approved by the Company’s shareholders at
the Extraordinary General Meeting of the Company on 23 April 2010.
After a comprehensive review of the Group’s total remuneration structure, eligible employees will receive deferred shares under the
approved KCL RSP scheme from Year 2017 onwards. For Year 2017, the deferred shares were granted in February 2018 after taking
into consideration the Group, business units and individual performance. Subject to the fulfilment of service conditions at vesting, the
deferred shares will vest equally over three years from February 2018 onwards.
During the year, the transformation incentive plan (“KCL PSP-TIP”), which was implemented in 2016, was also updated after a review of
the Group’s long-term business plans. The performance period was extended from five years to six years, with a corresponding revision
in the absolute total shareholder’s return targets. As a result, the estimated fair value of the contingent shares granted under the KCL
PSP-TIP on 29 April 2016 was revised from $0.78 to $1.74.
104
Financial Report
Details of share plans awarded under the KCL PSP, KCL PSP-TIP and KCL RSP are disclosed in Note 3 to the financial statements and as
follows:
Contingent awards:
Date of Grant
KCL PSP
31.03.2014
31.03.2015
30.07.2015
29.04.2016
28.04.2017
KCL PSP-TIP
29.04.2016
28.04.2017
KCL RSP
29.04.2016
Balance at
1.1.2017
565,082
662,705
220,000
1,114,425
-
2,562,212
5,625,000
-
5,625,000
5,726,426
5,726,426
Number of Shares
Contingent
awards
granted
Adjustments
upon
release
Released
Cancelled
-
-
-
-
1,120,000
1,120,000
-
2,040,000
2,040,000
-
-
(565,082)
-
-
-
-
(565,082)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(257,705)
(50,000)
(284,425)
-
(592,130)
(917,509)
-
(917,509)
Balance at
31.12.2017
-
405,000
170,000
830,000
1,120,000
2,525,000
4,707,491
2,040,000
6,747,491
(5,676,157)
(5,676,157)
(50,269)
(50,269)
-
-
Awards released but not vested:
Date of Grant
KCL RSP
31.03.2014
31.03.2015
30.07.2015
29.04.2016
Balance at
1.1.2017
1,375,006
2,989,935
489,957
-
4,854,898
Number of Shares
Released
Vested
Cancelled
Other
adjustments
Balance at
31.12.2017
-
-
-
5,676,157
5,676,157
(1,266,447)
(1,462,058)
(244,200)
(1,890,117)
(4,862,822)
(103,159)
(168,486)
(15,432)
(252,791)
(539,868)
-
-
(6,000)
(20,000)
(26,000)
5,400
1,359,391
224,325
3,513,249
5,102,365
The information on Director of the Company participating in the KCL RSP, the KCL PSP and the KCL PSP-TIP who receive 5% or more of the
total number of contingent award of shares granted to date is as follows:
Contingent awards:
Name of Director
KCL RSP
Director of the Company
Loh Chin Hua
KCL PSP
Director of the Company
Loh Chin Hua
KCL PSP-TIP
Director of the Company
Loh Chin Hua
Aggregate
awards
granted since
commencement
of plans
to the end of
financial year
Aggregate other
adjustments
since
commencement
of plans
to the end of
financial year
Aggregate
awards
released since
commencement
of plans
to the end of
financial year
Aggregate
awards
not released as
at the end of
financial year
Contingent
awards granted
during the
financial year
-
644,757
-
(644,757)
-
330,000
1,200,814
(281,014)
(69,800)
850,000
-
750,000
-
-
750,000
105
Keppel Corporation Limited | Report to Shareholders 2017
Directors’ Statement
6.
Share plans of the Company (continued)
Awards released but not vested:
Name of Director
KCL RSP
Director of the Company
Loh Chin Hua
KCL PSP
Director of the Company
Loh Chin Hua
Aggregate
awards
released since
commencement
of plans
to the end of
financial year
Aggregate
awards
vested since
commencement
of plans
to the end of
financial year
Aggregate
awards
released but
not vested as
at the end of
financial year
644,757
(474,757)
170,000
69,800
(69,800)
-
No Director or employee received more than 5 percent or more of the total number of contingent award of Shares granted during the
financial year and aggregated to date, except for the following:
Name of Director
Loh Chin Hua
Contingent shares
granted during the
Aggregate
contingent shares
financial year (%) granted to date (%)
10.4%
5.4%
There are no contingent award of Shares granted to any of the Company’s controlling shareholders or their associates under the KCL RSP,
the KCL PSP and the KCL PSP-TIP.
7.
Share options and share plans of a subsidiary
The particulars of share option and share plans of a subsidiary of the Company are as follows:
Keppel Telecommunications & Transportation Ltd (“Keppel T&T”)
At the end of the financial year, there were 250,000 unissued shares of Keppel Telecommunications & Transportation Ltd under option
relating to Keppel T&T Share Option Scheme. In addition, there were 941,315 unvested shares under Keppel T&T Restricted Share Plan
and 740,000 contingent shares granted under Keppel T&T Performance Share Plan at the end of the financial year. Details and terms of
the options and share plans have been disclosed in the Directors’ Statement of Keppel Telecommunications & Transportation Ltd.
8.
Independent auditor
The independent auditor, PricewaterhouseCoopers LLP, has expressed its willingness to accept re-appointment.
On behalf of the Board
LEE BOON YANG
Chairman
Singapore, 23 February 2018
LOH CHIN HUA
Chief Executive Officer
106
Financial Report
Independent Auditor’s Report
to the Shareholders of Keppel Corporation Limited
For the financial year ended 31 December 2017
Report on the audit of the financial statements
Our Opinion
In our opinion, the accompanying consolidated financial statements of Keppel Corporation Limited (“the Company”) and its subsidiaries (“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 Companies Act, Chapter 50 (“the Act”) and Financial Reporting Standards in Singapore (“FRSs”) so as to give a true and fair view of the
consolidated financial position of the Group and the financial position of the Company as at 31 December 2017, the consolidated financial
performance, consolidated changes in equity and consolidated cash flows of the Group, and changes in equity of the Company for the financial
year ended on that date.
What we have audited
The financial statements of the Group and of the Company, comprise:
•
•
•
•
•
•
•
•
the consolidated balance sheet of the Group as at 31 December 2017;
the balance sheet of the Company as at 31 December 2017;
the consolidated profit and loss account of the Group for the year then ended;
the consolidated statement of comprehensive income of the Group for the year then ended;
the statements of changes in equity of the Group for the year then ended;
the statements of changes in equity of the Company for the year then ended;
the consolidated statement of cash flows of the Group for the year then ended; and
the notes to the financial statements, including a summary of significant accounting policies.
Basis for Opinion
We conducted our audit in accordance with Singapore Standards on Auditing (“SSAs”). Our responsibilities under those standards are further
described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the Group in accordance with the Accounting and Corporate Regulatory Authority Code of Professional Conduct and
Ethics for Public Accountants and Accounting Entities (“ACRA Code”) together with the ethical requirements that are relevant to our audit of
financial statements in Singapore, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ACRA
Code.
Our Audit Approach
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the accompanying financial
statements. In particular, we considered where management made subjective judgments; for example, in respect of significant accounting
estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also
addressed the risk of management override of internal controls, including among other matters consideration of whether there was evidence
of bias that represented a risk of material misstatement due to fraud.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements for the
financial year ended 31 December 2017. These matters were addressed in the context of our audit of the financial statements as a whole, and in
forming our opinion thereon, and we do not provide a separate opinion on these matters.
Key Audit Matter
How our audit addressed the Key Audit Matter
1. Recoverability of work-in-progress balances in relation to
Offshore & Marine construction contracts with customers
and stocks for sale
(Refer to Notes 2 (x)(ii) and 13(a) to the financial statements)
As at 31 December 2017, the Group’s work-in-progress balances of
$3,527 million comprised rigs/vessels under construction contracts
with customers, as well as stocks for sale.
Of the above, work-in-progress balances relating to Offshore &
Marine (“O&M”) construction contracts where delivery dates had
been deferred and the revised delivery dates are more than
12 months from 31 December 2017, amounted to $1,128 million. The
Group’s stocks for sale amounted to $755 million.
We reviewed management’s assessment of the risk of customers
defaulting on the contracts. We corroborated management’s
assessment against our understanding of the industry and publicly
available information that would be relevant to understanding the
financial position of the customers.
We also reviewed management’s assessment of whether the values
of each rig/vessel would exceed the carrying values of the work-in-
progress balances relating to construction contracts with customers
and stocks for sale.
107
Keppel Corporation Limited | Report to Shareholders 2017
Independent Auditor’s Report
Key Audit Matter
How our audit addressed the Key Audit Matter
We focused on this area because of the significant judgment and
assumptions required in:
• assessing whether the Group’s customers will be able to fulfil
their contractual obligations and take delivery of the rigs at the
revised delivery dates;
• estimating the values of the rigs for recovery of the work-in-
progress balances; and
• estimating the net realisable values of stocks for sale.
To assess whether the values of rigs/vessels would exceed
the carrying values of the work-in-progress balances relating
to construction contracts with customers and stocks for sale,
management performed an assessment with the assistance of an
independent professional firm, using Discounted Cash Flow (“DCF”)
calculations that cover each class of rig/vessel under construction.
The most significant inputs to the DCF calculations included day
rates, utilisation rates, forecasted oil price movements and discount
rates.
Arising from management’s assessment, no further write-down of
the balances was made in the current year.
2. Assessment of impairment of fixed assets in relation to the
Group’s O&M Division
(Refer to Note 6 to the financial statements)
As at 31 December 2017, the Group had $983 million of fixed assets
for which management performed an impairment review. Included
in these were fixed assets relating to its O&M Division, comprising
various rigbuilding, shipbuilding and repair operations around the
world.
For fixed assets in the O&M Division with indicators of impairment,
management performed an impairment review to assess the
recoverable amount of these fixed assets, with each rigbuilding,
shipbuilding and repair facility identified as an individual cash-
generating unit (“CGU”). Arising from the review, the Group
assessed that the recoverable amounts of these CGUs exceeded
their respective carrying amounts, with the exception of one CGU.
Accordingly, an impairment charge of $3.1 million was recognised
in 2017 relating to this CGU. In the prior year, an impairment charge
of $148 million was recognised relating to the fixed assets in the
Group’s O&M Division.
We focused on this area as the assessment of the recoverable
amount using value-in-use (“VIU”) models required management to
exercise significant judgment over the estimation of forecasted cash
flows and discount rates.
We reviewed the most significant inputs to the DCF calculations,
comprising day rates, utilisation rates and forecasted oil price
movements, and engaged our valuation specialists to review the
discount rates applied.
We also considered the adequacy of the disclosures in the financial
statements in respect of this matter.
Based on our procedures, we found management’s judgment
around the recovery of the work-in-progress balances on
construction contracts and stocks to be appropriate. In respect of
the independent professional firm, we found that it possessed the
requisite competency and experience to assist management in
assessment of the valuation.
We also found the disclosures in the financial statements in respect
of the critical judgment and sources of estimation uncertainty to be
adequate.
We reviewed management’s identification of the rigbuilding,
shipbuilding and repair operations which contained indicators of
impairment at 31 December 2017.
In respect of the CGUs where indicators of impairment were present,
we obtained the VIU calculations and evaluated the reasonableness
of the forecasted cash flows, considering our knowledge of the
business and our understanding of the industry. We involved our
valuation specialists to review the discount rates applied.
We also considered the adequacy of the disclosures in the financial
statements in respect of this matter.
Based on our procedures, we found management’s assessment of
the recoverable amounts of the fixed assets relating to the Group’s
rigbuilding, shipbuilding and repair operations to be appropriate.
We also found the disclosures in the financial statements in respect
of the impairment to be adequate.
108
Financial Report
Key Audit Matter
How our audit addressed the Key Audit Matter
3. Assessment of impairment of investment in KrisEnergy
(Refer to Note 9 to the financial statements)
The Group has a 40% equity interest in KrisEnergy Ltd (“KrisEnergy”),
a company listed on the Singapore Exchange. KrisEnergy is an
independent upstream company focused on the production and
development of oil and gas in the basins of Southeast Asia.
We read recent public announcements made by KrisEnergy to
obtain an understanding of the financial position of KrisEnergy and
its ability to repay its debt obligations.
At 31 December 2017, the carrying value of $256 million of the
Group’s equity interest in KrisEnergy was significantly higher than
the fair value of the investment of $60 million, based on KrisEnergy’s
share price on that date.
The existence of the above impairment indicator required
management to estimate the recoverable amount of the Group’s
investment in KrisEnergy. This assessment was done on a VIU basis
using a DCF model.
Based on this, management assessed that the recoverable amount
of the Group’s investment exceeded the carrying value of the
investment.
We focused on this area as the assessment of the recoverable
amount required management to make projections of cash
flows arising from oil reserves and to make several estimates and
assumptions such as oil prices, discount rates, production volume,
lifting costs, reserves and operating costs.
4. Financial exposure in relation to contracts with Sete Brasil
(Refer to Note 2(x)(ii) to the financial statements)
The Group’s customer, Sete Brasil (“Sete”) filed for bankruptcy
protection on 21 April 2016. Sete had previously contracted with
the Group for the construction of six rigs. Sete had stopped making
payments to the Group under these contracts since November 2014.
The Group suspended construction of these six rigs in November
2015.
The difficulties faced by Sete, as well as the uncertain economic and
political conditions in Brazil, have resulted in significant uncertainty
on the outcome of these contracts.
Since 2016, Sete’s authorised representatives have been in
discussions with the Group on the eventual completion and delivery
of some of the rigs.
We evaluated the reasonableness of the estimates and assumptions
in the DCF model, with focus on the estimates of reserves available
and estimated future oil prices of US$52 to US$70 per barrel, which
were the most sensitive inputs to the model. We also involved our
valuation specialists in the evaluation of the model and the discount
rates applied.
We considered the adequacy of the disclosures in the financial
statements in respect of this matter.
Based on our procedures, we found the estimates and assumptions
within the discounted cash flow model to be reasonable. We also
found the disclosures in the financial statements in respect of the
impairment to be adequate.
We enquired with management on their assessment of the
contracts with Sete, including their expectation of the probable
outcomes on these contracts.
We reviewed the terms of each contract and correspondences with
Sete or its authorised representatives to validate the assumptions
applied by management.
We reviewed management’s computation of the provision
recognised during the year and corroborated the inputs against
externally available information.
We visited the Group’s Brazilian operations and met with their
management to obtain an understanding of the uncertainties in the
Brazilian market.
Management has continually assessed the probable outcomes of
these contracts by taking into consideration the progress and status
of the discussions, and market conditions in Brazil.
We also considered the adequacy of the disclosures in the financial
statements in respect of this matter.
Based on the latest information available at 31 December 2017, an
expected loss of $81 million was recognised in the current year,
bringing the total expected loss recognised on these contracts to
$309 million.
Based on our procedures, we found management’s assessment
in respect of the expected loss recognised in 2017 from these
contracts to be reasonable. We also found that the disclosures in
the financial statements in respect of this matter to be adequate.
We focused on this area because of the significant judgment
required in assessing if the expected loss recognised by the Group
as at 31 December 2017 is adequate.
109
Keppel Corporation Limited | Report to Shareholders 2017
Independent Auditor’s Report
Key Audit Matter
How our audit addressed the Key Audit Matter
5. Global resolution with criminal authorities in relation to
corrupt payments
(Refer to Note 18 to the financial statements)
In December 2017, a wholly-owned subsidiary, Keppel Offshore &
Marine Ltd (“KOM”) reached a global resolution with the Corrupt
Practices Investigation Bureau (“CPIB”) in Singapore, the U.S.
Department of Justice (“DOJ”), and the Public Prosecutor’s Office
in Brazil, Ministério Público Federal (“MPF”) in relation to corrupt
payments made in Brazil by Zwi Skornicki, a former agent of certain
Keppel subsidiaries in the O&M Division.
As part of the resolution, KOM and certain KOM subsidiaries agreed
to pay a total fine of approximately $570 million (US$422 million) to
the authorities in the three jurisdictions.
Based on the information available as at the date of these financial
statements, management is of the opinion that no material claim
has arisen that would result in any additional provision in relation to
these corrupt payments.
We focused on this area because of the financial significance of the
matter to the Group and because of the management judgment
required in determining if the Group would be subject to further
material claims.
6. Revenue recognition using the percentage-of-completion
method
(Refer to Notes 2(q) and 22 to the financial statements)
During the year, the Group recognised revenue from its rigbuilding,
shipbuilding and repair, and long-term engineering contracts
(“construction projects”) based on the percentage-of-completion
(“POC”) method amounting to $1,771 million.
The POC on construction projects was measured by reference to
the percentage of the physical proportion of the contract work
completed.
We focused on this area because of the significant management
judgment required in:
•
•
the estimation of the physical proportion of the contract work
completed for the contracts; and
the estimation of total costs on the contracts, including
contingencies that could arise from variations to original
contract terms, and claims.
We discussed with the Audit Committee and met with the Group’s
investigation team, comprising internal and external legal counsel
and forensic specialists, to understand the scope, approach and
findings from the investigation. We involved our forensic specialists
in these discussions.
We reviewed the relevant agreements and letters in relation to the
investigations, including the Deferred Prosecution Agreement with
the DOJ, the Leniency Agreement with the MPF and the Conditional
Warning Letter issued by the CPIB in Singapore, and considered if
there was a potential for any additional provision in relation to the
corrupt payments.
We also assessed if the fines have been appropriately recorded in
the financial statements of the Group.
We made enquiries of appropriate personnel within the Group
and evaluated the tone set by the Board and management, and
understood the enhancements made by management to the
compliance and internal control systems across the Keppel Group.
We also considered the adequacy of the disclosures in the financial
statements in respect of this matter.
Based on our procedures and representations obtained from
management, we found management’s assessment of the matter
described to be appropriate. We also found the disclosures in the
financial statements in respect of this matter to be adequate.
In respect of construction projects, we sighted certified progress
reports from engineers, performed site visits, and obtained
confirmations from project owners to assess the appropriateness
of management’s estimates of the physical proportion of work
completed.
We evaluated the effectiveness of management’s controls over
the estimation of total costs and assessed the reasonableness of
key inputs in the cost estimation. We tested the appropriateness of
estimated costs by comparing these against actual costs incurred.
We then recomputed the revenues and costs recognised for the
current financial year based on the respective POC and traced these
to the accounting records.
We also considered the adequacy of the Group’s disclosures in
respect of this matter.
Based on our procedures, we found that assumptions made
in the estimation of the percentage of work completed and of
the total costs in relation to the Group’s construction contracts
to be reasonable. We also found the disclosures in the financial
statements to be adequate.
110
Financial Report
Key Audit Matter
How our audit addressed the Key Audit Matter
7. Valuation of properties held for sale
(Refer to Note 13(c) to the financial statements)
The Group has residential properties held for sale mainly in China,
Singapore, Indonesia and Vietnam.
The properties held for sale stated at the lower of cost and net
realisable values amounted to $5,062 million as at 31 December
2017. The determination of the estimated net realisable values of
these properties is highly dependent on the Group’s expectation
of future selling prices and the estimated cost to complete the
development project.
We found that, in making estimates of future selling prices,
management took into account macroeconomic and real estate
price trend information. They also applied their knowledge of the
business in their regular review of these estimates.
We corroborated the Group’s forecast selling prices by comparing
the forecast selling price to, where available, recently transacted
prices and prices of comparable properties located in the same
vicinity as the properties held for sale.
We focused on this area because of the significant judgment
required in making estimates of future selling prices and the
estimated cost to complete the development project. Continued
unfavourable market conditions in certain markets in which the
Group operates might exert downward pressure on transaction
volumes and residential property prices. This could lead to future
trends in these markets departing from known trends based on past
experience. There is therefore a risk that the estimates of carrying
values at the date of the financial statements exceed future selling
prices, resulting in more losses when the properties are sold.
We compared management’s budgeted total development
costs against underlying contracts with vendors and supporting
documents. We discussed with the project managers to assess the
reasonableness of estimated costs to complete and corroborated
the underlying assumptions made with our understanding of past
completed projects.
We focused on development projects with slower-than-expected
sales or with low or negative margins. For projects which are
expected to sell below cost, we assessed the reasonableness of the
provisions made.
We also considered the adequacy of the disclosures in the financial
statements in respect of this matter.
Based on our procedures, we were satisfied that management’s
estimates and assumptions were reasonable. We also found the
related disclosures in the financial statements to be adequate.
8. Valuation of investment properties
(Refer to Note 7 to the financial statements)
The Group owns a portfolio of investment properties comprising
office buildings, residential property and mixed-use development
projects, located primarily in China, Singapore, Indonesia and
Vietnam.
We evaluated the qualifications and competence of the external
valuers. We considered the valuation methodologies used against
those applied by other valuers for similar property types. We also
considered other alternative valuation methods.
At 31 December 2017, investment properties stated at fair
values amounting to $3,461 million were determined based on
independent external valuations.
We focused on this area as the valuation process involved
significant judgment in determining the appropriate valuation
methodology to be used, and in estimating the underlying
assumptions to be applied. The valuations are highly sensitive to
key assumptions applied in deriving the capitalisation rate, terminal
yield, discount rate, net initial yield, replacement cost and price of
comparable plots.
We tested the reliability of inputs of the projected cash flows
used in the valuation to supporting lease agreements and other
documents. We corroborated the inputs such as the capitalisation
rate, terminal yield, discount rate, net initial yield, replacement cost
and price of comparable plots used in the valuation methodology
by comparing them against historical rates and available industry
data, taking into consideration comparability and market factors.
Where the inputs were outside the expected range, we undertook
further procedures to understand the reasons for these and, where
necessary, held further discussions with the valuers.
We also considered the adequacy of the disclosures in the financial
statements, in describing the inherent degree of subjectivity
and key assumptions used in the estimates. This includes the
relationships between the key unobservable inputs and fair values.
The valuers are members of recognised professional bodies for
external valuers. We found the valuation methodologies used to
be in line with generally accepted market practices and the key
assumptions used were within the range of market data. We also
found the disclosures in the financial statements to be adequate.
111
Keppel Corporation Limited | Report to Shareholders 2017
Independent Auditor’s Report
Other information
Management is responsible for the other information. The other information comprises the “Directors’ Statement” and other sections of the
Keppel Corporation Limited Report to Shareholders 2017 (“Other Sections of the Annual Report”), but does not include the financial statements
and our auditor’s report thereon. We obtained the Directors’ Statement prior to the date of this auditor’s report. The Other Sections of the
Annual Report are expected to be made available to us after that date.
Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance
conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report, we conclude that
there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
When we read the Other Sections of the Annual Report, if we conclude that there is a material misstatement therein, we are required to
communicate the matter to those charged with governance and take appropriate actions in accordance with SSAs.
Responsibilities of Management and Directors for the Financial Statements
Management is responsible for the preparation of financial statements that give a true and fair view in accordance with the provisions of the Act
and FRSs, and for devising and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets
are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as
necessary to permit the preparation of true and fair financial statements and to maintain accountability of assets.
In preparing the financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing,
as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate
the Group or to cease operations, or has no realistic alternative but to do so.
The directors’ responsibilities include overseeing the Group’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but
is not a guarantee that an audit conducted in accordance with SSAs will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with SSAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We
also:
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform
audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit 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 Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made
by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to
continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report
to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group
to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial
statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to
express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the group audit.
We remain solely responsible for our audit opinion.
•
•
•
•
•
•
112
Financial Report We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings,
including any significant deficiencies in internal control that we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and
to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where
applicable, related safeguards.
From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial
statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.
Report on Other Legal and Regulatory Requirements
In our opinion, the accounting and other records required by the Act to be kept by the Company and by those subsidiary corporations
incorporated in Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act.
The engagement partner on the audit resulting in this independent auditor’s report is Sim Hwee Cher.
PricewaterhouseCoopers LLP
Public Accountants and Chartered Accountants
Singapore, 23 February 2018
113
Keppel Corporation Limited | Report to Shareholders 2017 Balance Sheets
As at 31 December 2017
Share capital
Treasury shares
Reserves
Share capital & reserves
Non-controlling interests
Total equity
Represented by:
Fixed assets
Investment properties
Subsidiaries
Associated companies
Investments
Long term assets
Intangibles
Current assets
Stocks & work-in-progress
in excess of related billings
Amounts due from:
- subsidiaries
- associated companies
Debtors
Derivative assets
Short term investments
Bank balances, deposits & cash
Current liabilities
Creditors
Derivative liabilities
Billings on work-in-progress
in excess of related costs
Provisions
Amounts due to:
- subsidiaries
- associated companies
Term loans
Taxation
Net current assets
Non-current liabilities
Term loans
Deferred taxation
Other non-current liabilities
Note
3
3
4
5
6
7
8
9
10
11
12
13
14
14
15
16
17
18
13
19
14
14
20
26
20
21
18
Group
Company
31 December
2017
$’000
1,291,310
(74)
10,141,452
11,432,688
527,746
31 December
2016
$’000
1,288,394
(15,523)
10,386,078
11,658,949
674,691
31 December
2017
$’000
31 December
2016
$’000
1,291,310
(74)
6,341,656
7,632,892
-
1,288,394
(15,523)
5,346,838
6,619,709
-
11,960,434
12,333,640
7,632,892
6,619,709
2,432,963
3,460,608
-
5,901,252
458,638
774,316
132,594
13,160,371
2,645,456
3,550,290
-
5,412,581
377,704
814,438
140,669
12,941,138
296
-
7,972,849
-
15,012
14,346
-
8,002,503
852
-
8,154,201
-
14,340
97,557
-
8,266,950
8,782,251
10,025,805
-
-
-
342,960
3,169,417
181,226
202,776
2,273,788
14,952,418
5,371,618
37,969
1,764,874
115,972
-
253,331
1,714,084
194,299
9,452,147
-
433,380
3,373,841
98,984
273,928
2,087,078
16,293,016
4,753,492
379,910
1,669,466
81,679
-
111,543
1,835,321
339,108
9,170,519
3,498,920
733
4,590
93,530
-
2,213
3,599,986
68,585
29,528
-
-
236,403
-
551,530
33,955
920,001
3,982,362
688
2,965
42,923
-
542
4,029,480
112,471
345,313
-
-
1,062,722
-
692,311
17,263
2,230,080
5,500,271
7,122,497
2,679,985
1,799,400
6,078,919
334,674
286,615
6,700,208
7,217,721
331,175
181,099
7,729,995
2,939,800
-
109,796
3,049,596
3,325,600
-
121,041
3,446,641
Net assets
11,960,434
12,333,640
7,632,892
6,619,709
The accompanying notes form an integral part of these financial statements.
114
Financial Report
Consolidated Profit and Loss Account
For the financial year ended 31 December 2017
Revenue
Materials and subcontract costs
Staff costs
Depreciation and amortisation
Other operating income/(expenses)
Operating profit
One-off financial penalty & related costs i
Investment income
Interest income
Interest expenses
Share of results of associated companies
Profit before tax
Taxation
Profit for the year
Attributable to:
Shareholders of the Company
Non-controlling interests
Earnings per ordinary share
- basic
- diluted
Note
22
23
24
25
25
25
9
26
5
27
2017
$’000
5,963,773
(3,999,053)
(1,027,019)
(212,380)
50,357
775,678
(618,722)
19,871
137,928
(189,227)
390,039
515,567
(298,388)
2016
$’000
6,767,264
(4,204,065)
(1,155,382)
(236,475)
(376,129)
795,213
-
15,179
124,093
(224,549)
344,986
1,054,922
(233,147)
217,179
821,775
216,668
511
217,179
11.9 cts
11.8 cts
783,928
37,847
821,775
43.2 cts
42.9 cts
i
One-off financial penalty and related costs arose from Keppel Offshore & Marine’s global resolution with criminal authorities in the United States, Brazil and Singapore
and related legal, accounting and forensics costs.
The accompanying notes form an integral part of these financial statements.
115
Keppel Corporation Limited | Report to Shareholders 2017
Consolidated Statement of Comprehensive Income
For the financial year ended 31 December 2017
Profit for the year
Items that may be reclassified subsequently to profit and loss account:
Available-for-sale assets
- Fair value changes arising during the year
- Realised and transferred to profit and loss account
Cash flow hedges
- Fair value changes arising during the year
- Realised and transferred to profit and loss account
Foreign exchange translation
- Exchange difference arising during the year
- Realised and transferred to profit and loss account
Share of other comprehensive income of associated companies
- Available-for-sale assets
- Cash flow hedges
- Foreign exchange translation
Other comprehensive (expense)/income for the year, net of tax
Total comprehensive income for the year
Attributable to:
Shareholders of the Company
Non-controlling interests
2017
$’000
2016
$’000
217,179
821,775
1,619
(28,815)
40,516
10,918
357,211
(49,852)
198,255
195,565
(237,715)
(30,994)
(121,569)
792
719
(8,384)
(93,232)
536
(14,352)
(40,599)
(89,443)
270,062
127,736
1,091,837
143,468
(15,732)
127,736
1,075,567
16,270
1,091,837
The accompanying notes form an integral part of these financial statements.
116
Financial Report
Attributable to owners of the Company
Share
Capital
$’000
Treasury
Shares
$’000
Capital
Reserves
$’000
Revenue
Reserves
$’000
Foreign
Exchange
Translation
Account
$’000
Share
Capital &
Reserves
$’000
Non-
controlling
Interests
$’000
Total
Equity
$’000
1,288,394
(15,523)
11,486 10,655,379
(280,787) 11,658,949
674,691 12,333,640
-
272,022
216,668
-
-
(345,222)
216,668
(73,200)
511
(16,243)
217,179
(89,443)
272,022
216,668
(345,222)
143,468
(15,732)
127,736
Statements of Changes in Equity
For the financial year ended 31 December 2017
Group
2017
As at 1 January
Total comprehensive income
for the year
Profit for the year
Other comprehensive income *
Total comprehensive income
for the year
Transactions with owners,
recognised directly in equity
Contributions by and
distributions to owners
Dividends paid (Note 28)
Share-based payment
Dividend paid to non-controlling
shareholders
Shares issued
Purchase of treasury shares
Treasury shares reissued
pursuant to share plans and
share option scheme
Transfer of statutory, capital
and other reserves to
revenue reserves
Cash subscribed by
non-controlling shareholders
Contributions to defined
benefits plans
Other adjustments
Total contributions by and
distributions to owners
Changes in ownership
interests in subsidiaries
Acquisition of additional
interest in subsidiaries
Disposal of interest in
subsidiaries
Other adjustments
Total change in ownership
interests in subsidiaries
Total transactions with owners
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
31,124
(363,531)
-
-
2,916
-
-
-
(19,428)
-
-
-
34,877
(33,503)
-
-
-
-
-
-
-
-
22,462
(22,462)
-
707
-
-
-
-
2,916
15,449
20,790
(385,993)
-
-
-
-
-
-
(22,891)
-
-
-
-
-
-
2,916
-
15,449
(22,891)
(2,101)
-
(385,993)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(363,531)
31,124
-
2,916
(19,428)
1,374
-
-
707
-
-
470
(363,531)
31,594
(26,574)
-
-
(26,574)
2,916
(19,428)
-
-
77
152
3,368
1,374
-
77
859
3,368
(346,838)
(22,507)
(369,345)
(22,891)
(43,489)
(66,380)
-
-
(69,451)
4,234
(69,451)
4,234
(22,891)
(369,729)
(108,706)
(131,213)
(131,597)
(500,942)
As at 31 December
1,291,310
(74)
281,407 10,486,054
(626,009) 11,432,688
527,746 11,960,434
*
Details of other comprehensive income have been included in the consolidated statement of comprehensive income.
The accompanying notes form an integral part of these financial statements.
117
Keppel Corporation Limited | Report to Shareholders 2017
Statements of Changes in Equity
Attributable to owners of the Company
Share
Capital
$’000
Treasury
Shares
$’000
Capital
Reserves
$’000
Revenue
Reserves
$’000
Foreign
Exchange
Translation
Account
$’000
Share
Capital &
Reserves
$’000
Non-
controlling
Interests
$’000
Total
Equity
$’000
1,288,394
(49,011)
(383,540)
10,379,320
(139,502)
11,095,661
830,198
11,925,859
-
432,924
783,928
-
-
(141,285)
783,928
291,639
37,847
(21,577)
821,775
270,062
432,924
783,928
(141,285)
1,075,567
16,270
1,091,837
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
36,031
(544,654)
-
-
(3,069)
-
-
36,557
(35,428)
-
-
-
-
-
-
(38,503)
38,503
-
9,403
109
-
-
33,488
(37,791)
(496,748)
-
-
-
-
-
-
-
-
-
-
-
(107)
-
-
-
(74)
-
(11,047)
-
33,488
(107)
(37,898)
(11,121)
(507,869)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(544,654)
36,031
-
379
(544,654)
36,410
-
(3,069)
(77,263)
-
(77,263)
(3,069)
1,129
-
-
-
1,129
-
9,403
(62,080)
(52,677)
109
49
158
(501,051)
(138,915)
(639,966)
-
514
514
(181)
(8,176)
(8,357)
-
(11,047)
(36,247)
11,047
(36,247)
-
(11,228)
(512,279)
(32,862)
(171,777)
(44,090)
(684,056)
Group
2016
As at 1 January
Total comprehensive income
for the year
Profit for the year
Other comprehensive income *
Total comprehensive income
for the year
Transactions with owners,
recognised directly in equity
Contributions by and
distributions to owners
Dividends paid
Share-based payment
Dividend paid to non-controlling
shareholders
Purchase of treasury shares
Treasury shares reissued
pursuant to share plans and
share option scheme
Transfer of statutory, capital
and other reserves to
revenue reserves
Cash subscribed by/
(return of capital to)
non-controlling shareholders
Contributions to defined
benefits plans
Total contributions by and
distributions to owners
Changes in ownership
interests in subsidiaries
Acquisition of subsidiaries
Acquisition of additional
interest in subsidiaries
Disposal of interest in
subsidiaries
Other adjustments
Total change in ownership
interests in subsidiaries
Total transactions with owners
As at 31 December
1,288,394
(15,523)
11,486
10,655,379
(280,787)
11,658,949
674,691
12,333,640
*
Details of other comprehensive income have been included in the consolidated statement of comprehensive income.
The accompanying notes form an integral part of these financial statements.
118
Financial Report
Company
2017
As at 1 January
Total comprehensive income for the year
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners, recognised
directly in equity
Dividends paid
Share-based payment
Shares issued
Purchase of treasury shares
Treasury shares reissued pursuant to
share plans and share option scheme
Total transactions with owners
Share
Capital
$’000
Treasury
Shares
$’000
Capital
Reserves
$’000
Revenue
Reserves
$’000
Total
$’000
1,288,394
(15,523)
213,116
5,133,722
6,619,709
-
-
-
-
-
2,916
-
-
2,916
-
-
-
-
672
672
1,361,959
-
1,361,959
1,361,959
672
1,362,631
-
-
-
(19,428)
34,877
15,449
-
29,221
-
-
(33,503)
(4,282)
(363,531)
-
-
-
-
(363,531)
(363,531)
29,221
2,916
(19,428)
1,374
(349,448)
As at 31 December
1,291,310
(74)
209,506
6,132,150
7,632,892
Company
2016
As at 1 January
Total comprehensive income for the year
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners, recognised
directly in equity
Dividends paid
Share-based payment
Purchase of treasury shares
Treasury shares reissued pursuant to
share plans and share option scheme
Total transactions with owners
1,288,394
(49,011)
199,713
5,408,710
6,847,806
-
-
-
-
-
-
-
-
-
-
-
-
-
(3,069)
36,557
33,488
-
14,340
14,340
-
34,491
-
(35,428)
(937)
269,666
-
269,666
269,666
14,340
284,006
(544,654)
-
-
-
(544,654)
(544,654)
34,491
(3,069)
1,129
(512,103)
As at 31 December
1,288,394
(15,523)
213,116
5,133,722
6,619,709
The accompanying notes form an integral part of these financial statements.
119
Keppel Corporation Limited | Report to Shareholders 2017
Consolidated Statement of Cash Flows
For the financial year ended 31 December 2017
Operating activities
Operating profit
Adjustments:
Depreciation and amortisation
Share-based payment expenses
Profit on sale of fixed assets
Adjustment to gain on disposal of data centres
Gain on disposal of subsidiaries
Gain on disposal of associated companies
Impairment/write-off of fixed assets
(Write-back of impairment)/impairment of investments and associated company
Fair value gain on investment properties
(Profit)/loss on sale of investments
Unrealised foreign exchange differences
Operational cash flow before changes in working capital
Working capital changes:
Stocks & work-in-progress
Debtors
Creditors
Investments
Intangibles
Amount due to/from associated companies
Interest received
Interest paid
Net income taxes paid
Net cash from operating activities
Investing activities
Acquisition of subsidiaries
Acquisition and further investment in associated companies
Acquisition of fixed assets and investment properties
Disposal of subsidiaries
Proceeds from disposal of associated companies and return of capital
Proceeds from disposal of fixed assets and investment properties
Advances to/from associated companies
Dividends received from investments and associated companies
Net cash from/(used in) investing activities
Financing activities
Acquisition of additional interest in subsidiaries
Proceeds from share issues
Proceeds from reissuance of treasury shares pursuant to
share option scheme
Proceeds from/(return of capital to) non-controlling shareholders
of subsidiaries
Proceeds from term loans
Repayment of term loans
Purchase of treasury shares
Dividend paid to shareholders of the Company
Dividend paid to non-controlling shareholders of subsidiaries
Net cash (used in)/from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents as at beginning of year
Effects of exchange rate changes on the balance of cash
held in foreign currencies
Cash and cash equivalents as at end of year
Reconciliation of liabilities arising from financing activities
Note
2017
$’000
2016
$’000
775,678
795,213
212,380
32,583
(20,142)
-
(165,293)
(61,848)
15,530
(24,862)
(177,939)
(35,294)
(87,745)
463,048
975,402
41,556
352,085
(17,549)
(731)
(60,578)
1,753,233
130,832
(184,841)
(321,729)
1,377,495
-
(291,356)
(392,991)
704,335
96,954
37,385
(42,555)
270,199
381,971
(66,380)
2,916
1,374
77
1,700,023
(2,707,102)
(19,428)
(363,531)
(26,574)
(1,478,625)
A
B
236,475
39,969
(6,170)
(26,963)
(11,853)
-
121,934
119,971
(63,745)
4,172
(6,718)
1,202,285
422,036
(781,902)
(222,216)
(12,467)
(2,401)
10,708
616,043
132,685
(231,359)
(223,020)
294,349
(137,028)
(326,304)
(466,226)
80,218
174,964
19,208
(58,423)
403,660
(309,931)
(8,357)
-
1,129
(52,677)
1,694,165
(841,134)
(3,069)
(544,654)
(77,263)
168,140
280,841
152,558
2,018,772
1,859,118
(58,165)
7,096
C
2,241,448
2,018,772
1 January 2017
$’000
Principal and
interest payments
(net of proceeds)
$’000
Non-cash changes
Disposal of
subsidiaries
$’000
Interest expense
$’000
Foreign exchange
movement
$’000
31 December 2017
$’000
Term loans
9,053,042
(1,191,920)
(138,288)
189,223
(119,054)
7,793,003
The accompanying notes form an integral part of these financial statements.
120
Financial Report
Notes to Consolidated Statement of Cash Flows
A. Acquisition of Subsidiaries
During the financial year, net assets of subsidiaries acquired at their fair values were as follows:
Fixed assets
Intangibles
Stocks and work-in-progress
Debtors and other assets
Bank balances and cash
Creditors
Borrowings
Current and deferred taxation
Total identifiable net assets at fair value
Non-controlling interests measured at non-controlling interests’
proportionate share of the net assets
Net assets acquired
Total purchase consideration
Less: Bank balances and cash acquired
Cash flow on acquisition
2017
$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2016
$’000
14,439
44,831
78,373
11,132
30
(9,790)
(235)
(1,208)
137,572
(514)
137,058
137,058
(30)
137,028
Significant acquisition of subsidiaries in the prior year mainly relates to the acquisition of 59.6% interest in Courex Pte Ltd and acquisition
of Cameron International Corporation’s (Cameron) offshore product division, which comprises the LeTourneauTM jackup rig designs, rig kit
business, as well as its aftersales and aftermarket service.
B.
Disposal of Subsidiaries
During the financial year, the book values of net assets of subsidiaries disposed were as follows:
Fixed assets
Investment properties
Long term investments
Stocks and work-in-progress
Debtors and other assets
Bank balances and cash
Creditors and other liabilities
Borrowings
Current and deferred taxation
Non-controlling interests
Amount accounted for as associated company
Net assets disposed of
Net profit on disposal
Realisation of foreign currency translation reserve and
capital reserve
Sale proceeds
Less: Bank balances and cash disposed
Less: Deferred proceeds
2017
$’000
(129,536)
(405,604)
(2,102)
(282,344)
(159,030)
(36,374)
77,431
138,288
13,280
69,451
(716,540)
73,593
(642,947)
(165,293)
28,449
(779,791)
36,374
39,082
2016
$’000
(18,512)
(74,062)
(54)
(49,047)
(63,458)
(19,095)
45,026
45,176
5,380
36,247
(92,399)
-
(92,399)
(11,853)
4,939
(99,313)
19,095
-
Cash flow on disposal
(704,335)
(80,218)
Significant disposal of subsidiaries during the year mainly relates to the sale of Keppel Lakefront (Nantong) Property Development Co
Ltd, sale of Wiseland Investment (Myanmar) Limited, sale of 80% interest in PT Sentral Tunjungan Perkasa, sale of Keppel DC Singapore
4, sale of 90% interest in Keppel DC Singapore 3, sale of Keppel Verolme and sale of Kepwealth Property Phils., Inc. In addition, the Group
lost control of some entities during the year but continued to retain significant influence. These entities were deconsolidated from the
Group’s financial statements and were accounted as associated companies using the equity method from their respective dates of
ceasing control.
Significant disposals of subsidiaries in the prior year include the sale of 60% interest in Keppel CT Developments Pte Ltd, sale of 70%
interest in Quang Ba Royal Park Joint Venture Co Ltd, sale of 45% interest in Keppel Thai Properties Public Company Ltd, sale of 95%
interest in Jiangyin Yangtze International Country Club, sale of 60% interest in Belwynn Hung Phu Joint Venture Limited Liability and sale
of 100% interest in Fernland Investment Pte Ltd.
The accompanying notes form an integral part of these financial statements.
121
Keppel Corporation Limited | Report to Shareholders 2017
Consolidated Statement of Cash Flows
Notes to Consolidated Statement of Cash Flows (continued)
C.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand and balances with banks. Cash and cash equivalents in the consolidated statement of
cash flows comprise the following balance sheet amounts:
Bank balances, deposits and cash
Amounts held under escrow accounts for overseas acquisition of land,
payment of construction cost and liabilities
2017
$’000
2016
$’000
2,273,788
2,087,078
(32,340)
2,241,448
(68,306)
2,018,772
The accompanying notes form an integral part of these financial statements.
122
Financial Report
Notes to the Financial Statements
For the financial year ended 31 December 2017
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;
environmental engineering, power generation, logistics and data centres;
property development & investment; and
investments and asset management.
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 2017 and the balance sheet and statement of changes in
equity of the Company at 31 December 2017 were authorised for issue in accordance with a resolution of the Board of Directors on
23 February 2018.
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 that are effective for annual periods beginning on or after 1 January
2017. Changes to the Group’s accounting policies have been made as required, in accordance with the transitional provisions in the
respective FRS.
The following are the new or amended FRS that are relevant to the Group:
•
•
•
Improvements to Financial Reporting Standards (December 2016)
Amendments to FRS 7 Statement of Cash Flows: Disclosure Initiative
Amendments to FRS 12 Income Taxes: Recognition of Deferred Tax Assets for Unrealised Losses
The adoption of the above new or amended FRS did not have any significant impact on the financial statements of the Group.
(b) Basis of Consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities (including structured
entities) controlled by the Company and its subsidiaries.
The financial statements of subsidiaries acquired or disposed of during the financial year are included or excluded from
the consolidated financial statements from their respective dates of obtaining control or ceasing control. 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 acquisition method. The cost of an acquisition is measured at the aggregate
of the fair value of the assets transferred, equity instruments issued, liabilities incurred or assumed at the date of exchange and
the fair values of any contingent consideration arrangement and any pre-existing equity interest in the subsidiary. Acquisition-
related costs are recognised in the profit and loss account as incurred. 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 non-controlling interests, except for deferred tax assets/liabilities, share-based related accounts and assets held for
sale.
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.
Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. The
carrying amounts of the Group’s interests and the non-controlling interests are adjusted and the difference between the change
in the carrying amounts of the non-controlling interests and the fair value of the consideration paid or received is recognised
directly in equity and attributed to owners of the Company.
123
Keppel Corporation Limited | Report to Shareholders 2017
Notes to the Financial Statements
2.
Significant accounting policies (continued)
When control of a subsidiary is lost as a result of a transaction, event or other circumstance, the Group derecognises all assets
(including any goodwill), liabilities and non-controlling interests at their carrying amounts. Amounts previously recognised in other
comprehensive income in respect of that former subsidiary are reclassified to the profit and loss account or transferred directly to
revenue reserves if required by a specific Standard. Any retained interest in the former subsidiary is recognised at its fair value at
the date control is lost, with the gain or loss arising recognised in the profit and loss account.
On a transaction-by-transaction basis, the measurement of non-controlling interests is either at fair value or at the non-controlling
interests’ share of the fair value of the identifiable net assets of the acquiree.
Contingent consideration is measured at fair value at the acquisition date; subsequent adjustments to the consideration are
recognised against goodwill only to the extent that they arise from better information about the fair value at the acquisition
date, and they occur within the ‘measurement period’ (a maximum of 12 months from the acquisition date). All other subsequent
adjustments are recognised in the profit and loss account.
Non-controlling interests are that part of the net results of operations and of net assets of a subsidiary attributable to the
interests which are not owned directly or indirectly by the owners of the Company. They are shown separately in the consolidated
statement of comprehensive income, statement of changes in equity and balance sheet. Total comprehensive income is
attributed to the non-controlling interests in a subsidiary based on their respective interests in a subsidiary, even if this results in
the non-controlling interests having a deficit balance.
(c)
Fixed Assets
Fixed assets are initially stated at cost and subsequently carried at cost less accumulated depreciation and accumulated
impairment loss, if any. The cost initially recognised includes its purchase price and any cost that is directly attributable to bringing
the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.
Subsequent expenditure is added to the carrying amount only when it is probable that future economic benefits will flow to the
entity and the cost can be measured reliably. 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:
Buildings on freehold land
Leasehold land & buildings
Vessels & floating docks
Plant, machinery & equipment
Furniture, fittings & office equipment
Cranes
Small equipment and tools
20 to 50 years
Over period of lease (ranging from 15 to 60 years)
10 to 20 years
3 to 30 years
2 to 10 years
5 to 30 years
2 to 20 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 comprise completed properties and properties under construction or re-development held to earn rental
and/or for capital appreciation. Investment properties are initially recognised at cost and subsequently measured at fair value,
determined annually based on valuations by independent professional valuers. Changes in fair value are recognised in the profit
and loss account.
The cost of major renovations or improvements is capitalised and the carrying amounts of the replaced components 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.
124
Financial Report
(e)
Subsidiaries
A subsidiary is an entity (including structured entities) over which the Group has control. The Group controls an entity when the
Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns
through its power over the entity. The Company reassesses whether or not it controls an investee if facts and circumstances
indicate that there are changes to one or more of the three elements of control listed above.
When the Company has less than a majority of the voting rights of an investee, it has power over the investee when the voting
rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Company considers
all relevant facts and circumstances in assessing whether or not the Company’s voting rights in an investee are sufficient to give it
power, including:
-
-
-
-
The size of the Company’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders;
Potential voting rights held by the Company, other vote holders or other parties;
Rights arising from other contractual arrangements; and
Any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to direct the
relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders’ meetings.
Investments in subsidiaries are stated in the financial statements of the Company at cost less accumulated impairment losses. On
disposal of a subsidiary, the difference between net disposal proceeds and carrying amount of the investment is taken to profit or
loss.
(f) Associated Companies
An associated company is an entity, not being a subsidiary, over which the Group has significant influence, but not control.
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 the profit and loss account.
Investments in associated companies are accounted for in the consolidated financial statements using the equity method of
accounting less impairment loss, if any. The Group’s share of profit or loss and other comprehensive income of the associated
company is included in the consolidated profit and loss account and other comprehensive income respectively. The Group’s share
of net assets of the associated company is included in the consolidated balance sheet.
Any excess of the cost of acquisition over the Group’s share of net identifiable assets, liabilities and contingent liabilities of the
associated company recognised at the date of acquisition measured at their fair values 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 identifiable assets, liabilities and contingent liabilities measured at their fair values over the cost of
acquisition, after reassessment, is recognised immediately in the profit and loss account as a bargain purchase gain.
(g)
Intangibles
Goodwill
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interest
in the acquiree and the fair value of the acquirer’s previously held equity interest (if any) in the entity over the net identifiable
assets acquired and the liabilities assumed measured at their fair values at acquisition date. Goodwill is initially recognised as
an asset at cost and is subsequently measured at cost less any impairment losses. If the Group’s interest in the fair value of the
acquiree’s identifiable net assets exceeds the sum of the consideration transferred, the amount of any non-controlling interests
in the acquiree and the fair value of the acquirer’s previously held equity interest in the acquiree (if any), the excess is recognised
immediately in the profit and loss account as a bargain purchase gain.
Management Rights
Management rights acquired is initially recognised at cost and subsequently carried at cost less accumulated impairment losses, if
any. The useful life of the management rights is estimated to be indefinite because management believes there is no foreseeable
limit to the period over which the management rights is expected to generate net cash inflows for the Group.
Other Intangible Assets
Intangible assets include development expenditure, customer contracts and customer relationships initially recognised at cost
and subsequently carried at cost less accumulated amortisation. 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 3 to 20 years.
125
Keppel Corporation Limited | Report to Shareholders 2017
Notes to the Financial Statements
2.
Significant accounting policies (continued)
(h)
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. Transaction costs for investments held for trading are recognised immediately as expenses. Investments
are subsequently carried at fair value. For unquoted equity investments whose fair value cannot be reliably measured using
alternative valuation methods, they are carried at cost less any impairment loss.
For investments held for trading, gains and losses arising from changes in fair value are included in the profit and loss account.
For available-for-sale investments, gains and losses arising from changes in fair value are recognised directly in other
comprehensive income and accumulated in the fair value reserve, until the investment is disposed of or is determined to be
impaired, at which time the cumulative gain or loss previously recognised in other comprehensive income is reclassified to the
profit and loss account.
The fair value of investments that are traded in active markets is based on quoted market prices at the balance sheet date. The
quoted market prices are the current bid prices. The fair value of investments that are not traded in an active market is determined
using valuation techniques. Such techniques include using recent arm’s length transactions, reference to the underlying net asset
value of the investee companies and discounted cash flow analysis.
(i)
Derivative Financial Instruments and Hedge Accounting
Derivative financial instruments are initially recognised at fair value on the date a derivative contract is entered into and are
subsequently re-measured at fair value. Derivative financial instruments are carried as assets when the fair value is positive and as
liabilities when the fair value is negative.
Gains or losses arising from changes in fair value of derivative financial instruments that do not qualify for hedge accounting are
taken to the profit and loss account.
For cash flow hedges, the effective portion of the gains or losses on the hedging instrument is recognised directly in other
comprehensive income and accumulated in the hedging reserve, while the ineffective portion is recognised in the profit and
loss account. Amounts taken to other comprehensive income are reclassified to the profit and loss account when the hedged
transaction affects the profit and loss account.
The Group documents at the inception of the transaction the relationship between the hedging instruments and hedged items,
as well as its risk management objective and strategies for undertaking various transactions. The Group also documents its
assessment, both at hedge inception and on an ongoing basis, of whether the derivatives designated as hedging instruments are
highly effective in offsetting changes in fair value or cash flows of the hedged items.
The fair value of forward foreign currency contracts is determined using forward exchange market rates at the balance sheet date.
The fair value of High Sulphur Fuel Oil (“HSFO”) and Dated Brent forward contracts is determined using forward HSFO and Dated
Brent prices provided by the Group’s key counterparty. The fair value of electricity future contracts is determined based on the
Uniform Singapore Energy Price quarterly base load electricity futures prices quoted on the Singapore Exchange. The fair value of
interest rate caps and interest rate swaps are based on valuations provided by the Group’s bankers.
(j) Financial Assets
Financial assets include cash and bank balances, trade, intercompany and other receivables and investments. Trade,
intercompany and other receivables are stated initially at fair value and subsequently at amortised cost as reduced by appropriate
allowances for estimated irrecoverable amounts.
For the purpose of the consolidated statement of cash flows, cash and cash equivalents comprise cash on hand and bank deposits
and are subject to an insignificant risk of changes in value. For cash subjected to restriction, assessment is made on the economic
substance of the restriction and whether they meet the definition of cash and cash equivalents.
Financial assets and financial liabilities are offset and the net amount presented in the balance sheet when the Company and the
Group has a legally enforceable right to set off the recognised amounts; and intends either to settle on a net basis, or to realise
the asset and settle the liability simultaneously. A right to set-off must be available today rather than being contingent on a future
event and must be exercisable by any of the counterparties, both in the normal course of business and in the event of default,
insolvency or bankruptcy.
126
Financial Report
(k)
Stocks & Work-in-Progress
Stocks (including work-in-progress), consumable materials and supplies are stated at the lower of cost and net realisable value,
cost being principally determined on the weighted average method. Net realisable value is the estimated selling price in the
ordinary course of business, less the estimated costs of completion and applicable variable selling expenses.
For work-in-progress in relation to construction contract, when contract costs incurred to date plus recognised profits less
recognised losses exceed progress billings, the surplus is shown as amounts due from customers for contract work. For contracts
where progress billings exceed contract costs incurred to date plus recognised profits less recognised losses, the surplus is shown
as work-in-progress (billings in excess of costs). Amounts received before the related work is performed are included in the
statement of financial position, as a liability, as work-in-progress (billings in excess of costs). Amounts billed for work performed
but not yet paid by the customer are included in the balance sheet under debtors. When it is probable that total contract costs will
exceed total contract revenue, the expected loss is recognised as an expense immediately.
Completed properties held for sale are stated at the lower of cost and net realisable value. Cost includes cost of land and
construction, related overhead expenditure, financing charges and other net costs incurred during the period of development.
Properties held for sale are stated at the lower of cost and net realisable value. Cost includes cost of land and construction, related
overheads expenditure, and financing charges incurred during the period of development. Net realisable value represents the
estimated selling price less costs to be incurred in selling the property. Upon completion of construction, they are transferred to
completed properties held for sale.
Each property under development is accounted for as a separate project. Where a project comprises more than one component
or phase with a separate temporary occupation permit, each component or phase is treated as a separate project, and interest
and other net costs are apportioned accordingly.
(l)
Impairment of Assets
Financial Assets
The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial
assets is impaired and recognises an allowance for impairment when such evidence exists.
Loans and receivables
Significant financial difficulties of the debtor and default or significant delay in payments are objective evidence that the financial
assets are impaired. The carrying amount of these assets is reduced through the use of an allowance account and the loss is
recognised in the profit and loss account. When the asset becomes uncollectible, the carrying amount is written off against the
allowance account. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be objectively
measured, the previously recognised impairment loss is reversed to the extent that the carrying amount does not exceed the
amortised cost had no impairment been recognised in the prior periods. The amount of reversal is recognised in the profit and
loss account.
Investments
In addition to the objective evidence of impairment described in the preceding paragraph, 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 the profit and loss account - is removed
from equity and recognised in the profit and loss account. For available-for-sale equity investments, impairment losses previously
recognised in the profit and loss account are not reversed through the profit and loss account in a subsequent period.
Goodwill
Goodwill is tested for impairment annually and whenever there is an indication that the goodwill may be impaired. Goodwill
included in the carrying amount of an associated company is tested for impairment as part of the investment.
For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units (“CGU”s) expected to
benefit from the synergies of the combination.
An impairment loss is recognised in the profit and loss account when the carrying amount of the CGU, including goodwill, exceeds
the recoverable amount of the CGU. The recoverable amount of a CGU is the higher of the CGU’s fair value less cost to sell and
value-in-use. The impairment loss is allocated first to reduce the carrying amount of goodwill allocated to the CGU 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.
127
Keppel Corporation Limited | Report to Shareholders 2017
Notes to the Financial Statements
2.
Significant accounting policies (continued)
Other Non-Financial Assets
Tangible and intangible assets are tested for impairment whenever there is any indication that these assets may be impaired.
Management rights are tested for impairment annually and whenever there is an indication that the management rights may be
impaired.
For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-
in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of
those from other assets. If this is the case, recoverable amount is determined for CGU to which the asset belongs.
If the recoverable amount of the asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the
asset (or CGU) is reduced to its recoverable amount. The difference between the carrying amount and recoverable amount is
recognised as impairment loss 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.
(m) Financial Liabilities and Equity Instruments
Financial liabilities include trade, intercompany and other payables, bank loans and overdrafts. Trade, intercompany and other
payables are stated initially at fair value and subsequently carried at amortised cost. Interest-bearing bank loans and overdrafts
are initially measured at fair value and are subsequently measured at amortised cost. Interest expense calculated using the
effective interest method is recognised over the term of the borrowings in accordance with the Group’s accounting policy for
borrowing costs (see below).
An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.
Equity instruments are recorded at the proceeds received, net of direct issue costs.
(n) 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.
Provisions are not recognised for future operating losses.
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.
(o)
Leases
When a group company is the lessee
Operating leases
Leases of assets in which the Group does not transfer substantially all the risks and rewards of ownership of the assets 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
Operating leases
Assets leased out under operating leases are included in investment properties and are stated at fair values. Rental income (net of
any incentive given to lessee) is recognised on a straight-line basis over the lease term.
(p) Assets classified as held for sale
Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through
a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and
the asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale,
which should be expected to qualify for recognition as a completed sale within one year from the date of classification.
When the Group is committed to a sale plan involving loss of control of a subsidiary, all of the assets and liabilities of that
subsidiary are classified as held for sale when the criteria described above are met, regardless of whether the Group will retain a
non-controlling interest in its former subsidiary after the sale.
Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their previous carrying amount
and fair value less costs to sell.
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Financial Report
(q) Revenue
Revenue consists of:
-
-
Revenue recognised on contracts, under the completion of construction method;
Revenue recognised on contracts, under the percentage of completion method when the outcome of the contract can be
estimated reliably;
Sale of goods and services;
Rental income from investment properties;
Investment and fee income; and
Dividend income.
-
-
-
-
Revenue recognition
Revenue from rigbuilding, shipbuilding and repairs, and long term engineering contracts is recognised based on the percentage
of completion method in proportion to the stage of completion and provided 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. Where applicable, anticipated losses on contracts in progress are recognised
in the profit and loss account.
Revenue recognition on partly completed properties, which are held for sale is based on the following methods:
-
-
-
For Singapore trading properties under progressive payment scheme, revenue and profit are recognised on the
percentage-of-completion method to reflect the continuous transfer of significant risks and rewards of the ownership of
the properties to the purchasers as construction progresses. The percentage of work completion is measured based on the
construction and related costs incurred to date as a proportion of the estimated total construction and related costs;
For overseas trading properties, profit recognition is recognised upon the transfer of significant risks and rewards of
ownership to the purchasers under the completion of construction method; and
Where a project comprises more than one component or phase with a separate temporary occupation permit, each
component or phase is treated as a separate project.
When losses are expected, they are recognised in full in the accounts after adequate allowance has been made for estimated
costs to completion including cost of discontinuance and salvage cost. Any expenditure incurred on abortive projects is written
off in the profit and loss account.
Revenue from the sale of products is recognised when all the following conditions are satisfied:
-
-
-
-
-
The Group has transferred to the buyer the significant risks and rewards of ownership of the goods;
The Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective
control over the goods sold;
The amount of revenue can be measured reliably;
It is probable that the economic benefits associated with the transaction will flow to the entity; and
The costs incurred or to be incurred in respect of the transaction can be measured reliably.
Sales are stated net of goods and services tax, sales returns, rebates and discounts, and after eliminating sales within the Group.
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.
Rental income from operating leases on investment properties are recognised on a straight-line basis over the lease term.
Dividend income is recognised in the profit and loss account 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.
Interest income is recognised on a time proportion basis using the effective interest method.
(r)
Borrowing Costs
Borrowing costs incurred to finance the development of properties and acquisition of fixed assets 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.
129
Keppel Corporation Limited | Report to Shareholders 2017
Notes to the Financial Statements
2.
Significant accounting policies (continued)
(s)
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 and Share Plans
The Group operates share-based compensation plans. The fair value of the employee services received in exchange for the
grant of options, restricted shares and performance shares is recognised as an expense in the profit and loss account with a
corresponding increase in the share option and share plan reserve over the vesting period. The total amount to be recognised
over the vesting period is determined by reference to the fair values of the options, restricted shares and performance shares
granted on the respective dates of grant.
At each balance sheet date, the Group revises its estimates of the number of options that are expected to become exercisable and
share plan awards that are expected to vest on the vesting dates, and recognises the impact of the revision of the estimates in the
profit and loss account, with a corresponding adjustment to the share option and share plan reserve over the remaining vesting
period.
No expense is recognised for options or share plan awards that do not ultimately vest, except for options or share plan awards
where vesting is conditional upon a market condition, which are treated as vested irrespective of whether or not the market
condition is satisfied, provided that all other performance and/or service conditions are satisfied.
The proceeds received from the exercise of options are credited to share capital when the options are exercised. When share
plan awards are released, the share plan reserve is transferred to share capital if new shares are issued, or to the treasury shares
account when treasury shares are reissued to the employee.
(t)
Income Taxes
Current income tax is 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.
Deferred income tax is measured at the tax rates that are expected to apply when the related deferred income tax asset/liability is
realised/settled, based on the tax rates and tax laws that have been enacted or substantively enacted by the balance sheets date,
and based on the tax consequence that will follow from the manner in which the Group expects, at the balance sheet date, to
recover or settle the carrying amounts of its assets and liabilities.
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.
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Financial Report
(u)
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. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates
prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a
foreign currency are not retranslated.
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. Profit or loss of foreign subsidiaries and associated companies are translated into Singapore Dollars using
the average exchange rates for the financial year. Goodwill and fair value adjustments arising on acquisition of a foreign entity are
treated as assets and liabilities of the foreign subsidiaries and associated companies. Exchange differences due to such currency
translation are recognised in other comprehensive income and accumulated in Foreign Exchange Translation Account until
disposed.
Disposal or partial disposal of a foreign operation
On the disposal of a foreign operation (i.e. a disposal of the Group’s entire interest in a foreign operation, or a disposal involving
loss of control over a subsidiary that includes a foreign operation, loss of joint control over a jointly controlled entity that includes
a foreign operation, or loss of significant influence over an associate that includes a foreign operation), all of the accumulated
exchange differences in respect of that operation attributable to the Group are reclassified from equity to profit or loss. Any
exchange differences that have previously been attributed to non-controlling interests are derecognised, but they are not
reclassified to profit or loss.
In the case of a partial disposal (i.e. no loss of control) of a subsidiary that includes a foreign operation, the proportionate share of
accumulated exchange differences are re-attributed to non-controlling interests and are not recognised in profit or loss. For all
other partial disposals (i.e. of associates or jointly controlled entities that do not result in the Group losing significant influence or
joint control), the proportionate share of the accumulated exchange differences is reclassified to profit or loss.
(v)
Share Capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of new ordinary shares are
deducted against the share capital account.
When shares are reacquired by the Company, the amount of consideration paid and any directly attributable transaction cost is
recognised directly in equity. Reacquired shares are classified as treasury shares and presented as a deduction from total equity.
When treasury shares are subsequently sold or reissued, the cost of treasury shares is reversed from the treasury shares account
and the realised gain or loss on sale or reissue, net of any directly attributable incremental transaction costs, is recognised in non-
distributable capital reserve. Voting rights related to treasury shares are nullified for the Group and no dividends are allocated to
them respectively.
(w) Segment Reporting
The Group has four reportable segments, namely Offshore & Marine, Property, Infrastructure and Investments. Management
monitors the results of each of these operating segments for the purpose of making decisions on resource allocation and
performance assessment.
(x)
Critical Accounting Estimates and Judgments
(i)
Critical judgments 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 judgments which is expected to have a significant effect on the amounts recognised in the financial
statements, apart from those involving estimations and as follows:
Control over Keppel REIT
The Group has approximately 45% (2016: approximately 45%) gross ownership interest of units in Keppel REIT as at 31
December 2017. Keppel REIT is managed by Keppel REIT Management Limited (“KRML”), a wholly-owned subsidiary of the
Group. The Group has provided an undertaking to the trustee of Keppel REIT to grant the other unitholders the right to
endorse or re-endorse the appointment of directors of KRML at the annual general meetings of Keppel REIT. The Group has
determined that it does not have control over Keppel REIT but continues to have significant influence over the investment.
131
Keppel Corporation Limited | Report to Shareholders 2017
Notes to the Financial Statements
2.
Significant accounting policies (continued)
Control over KrisEnergy
The Group has approximately 40% (2016: approximately 40%) gross ownership interest of shares in KrisEnergy Limited
(“KrisEnergy”) as at 31 December 2017. The management assessed whether or not the Group has control over KrisEnergy
based on whether it has the practical ability to direct the relevant activities of KrisEnergy. In exercising its judgment,
management considers the relative size and dispersion of the shareholdings owned by the other shareholders. Taking into
consideration the approximately 26% (2016: approximately 37%) interest held by another single shareholder of KrisEnergy,
management concluded that the Group does not have sufficient dominant vesting interest to exert control over KrisEnergy
but continues to have significant influence over the investment.
(ii)
Key sources of estimation uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date that
have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next
financial year, are as follows:
Impairment of loans and receivables
The Group assesses at each balance sheet date whether there is any objective evidence that a loan and receivable is
impaired. The Group considers factors such as the probability of insolvency or significant financial difficulties of the debtor
and default or significant delay in payments. When there is objective evidence of impairment, the amount and timing of
future cash flows are estimated based on historical loss experience for assets with similar credit risk characteristics. The
carrying amounts of trade, intercompany and other receivables are disclosed in the balance sheet. As at 31 December 2017,
the Group has credit risk exposure to an external group of companies for receivables that are past due. Management has
considered any changes in the credit quality of the debtors, the possibility of discontinuance of the projects and the cost
incurred to-date when determining the allowance for doubtful receivables and its expected loss. Management performs
on-going assessments on the ability of its debtors to repay the amounts owing to the Group. These assessments include
the review of the customers’ credit-standing and the possibility of discontinuance of the projects.
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 cash flows. The fair values of available-for-sale
investments are disclosed in the balance sheet.
Impairment of non-financial assets
Determining whether the carrying value of a non-financial asset is impaired requires an estimation of the value in use of
the CGUs. This requires the Group to estimate the future cash flows expected from the CGUs and an appropriate discount
rate in order to calculate the present value of the future cash flows. The carrying amounts of fixed assets, investments in
subsidiaries, investment in associates and joint ventures, and intangibles are disclosed in the balance sheet. Management
performed impairment tests on these non-financial assets as at 31 December 2017. Refer to Note 6, 8, 9 and 12 for more
details.
Revenue recognition and contract cost
The Group recognises contract revenue and contract cost based on the percentage of completion method. The stage of
completion is measured in accordance with the accounting policy stated in Note 2(q). Significant assumptions are 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 engineers. Revenue from construction contracts is disclosed in Note 22.
Revenue arising from additional claims and variation orders, whether billed or unbilled, is recognised when negotiations
have reached an advanced stage such that it is probable that the customer will accept the claims or approve the variation
orders, and the amount that it is probable will be accepted by the customer can be measured reliably.
Recoverability of work-in-progress balances in relation to Offshore & Marine construction contracts and stocks for sale
Contracts with Sete Brasil (“Sete”)
The Group had previously entered into contracts with Sete for the construction of six rigs for which progress payments from
Sete had ceased since November 2014. In April 2016, Sete filed for bankruptcy protection and its authorised representatives
had been in discussion with the Group on the eventual completion and delivery of some of the rigs. Management has
continually assessed the probable outcomes of these contracts by taking into consideration the progress and status of
the discussions and market conditions in Brazil. During the financial year ended 31 December 2017, an expected loss of
$81,000,000 was recognised, taking into consideration cost of completion, cost of discontinuance, salvage cost and unpaid
progress billings with regards to these rigs, bringing the total loss recognised on these rigs to $309,000,000.
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Financial Report
Other contracts
As at 31 December 2017, the Group had several rigs/vessels that were under construction for customers or had been
completed and were awaiting delivery to the customers. See Note 13 on work-in-progress balances.
During 2017, some of the Group’s customers had requested for further deferral of delivery dates of the rigs/vessels.
Management has assessed each deferred construction project individually to make judgment as to whether the customers
will be able to fulfil their contractual obligations and take delivery of the rigs at the revised delivery dates.
Management has also estimated the net realisable values of rigs/vessels under construction as stocks for sale in assessing
whether a provision for loss on work-in-progress is necessary.
Management has further assessed if the values of the rigs/vessels would exceed the carrying values of work-in-progress
and stocks for sale. Management has estimated, with the assistance of an independent professional firm, the values of
the rigs/vessels using Discounted Cash Flow (“DCF”) calculations that cover each class of rig/vessel under construction.
The most significant inputs to the DCF calculations include day rates, utilisation rates, forecasted oil price movements and
discount rates.
Income taxes
The Group has exposure to income taxes in numerous jurisdictions. Significant assumptions are required in determining
the provision for income taxes. There are certain transactions and computations for which the ultimate tax determination is
uncertain during the ordinary course of business. The Group recognises liabilities for expected tax issues based on estimates
of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that
were initially recognised, such differences will impact the income tax and deferred tax provisions in the period in which such
determination is made. The carrying amounts of taxation and deferred taxation are disclosed in the balance sheet.
Claims, litigations and reviews
The Group entered into various contracts with third parties in its ordinary course of business and is exposed to the risk of
claims, litigations, latent defects or review from the contractual parties and/or government agencies. These can arise for
various reasons, including change in scope of work, delay and disputes, defective specifications or routine checks etc. The
scope, enforceability and validity of any claim, litigation or review may be highly uncertain. In making its judgment as to
whether it is probable that any such claim, litigation or review will result in a liability and whether any such liability can be
measured reliably, management relies on past experience and the opinion of legal and technical expertise.
3.
Share capital
Group and Company
Number of Ordinary Shares (“Shares”)
Issued Share Capital
Treasury Shares
2017
2016
2017
2016
Balance at 1 January
Issue of shares under the share option scheme
Treasury shares transferred pursuant to
share option scheme
Treasury shares transferred pursuant to KCL PSP
Treasury shares transferred pursuant to KCL RSP
Treasury shares purchased
Balance at 31 December
1,817,910,180
424,000
1,817,910,180
-
-
-
-
-
1,818,334,180
-
-
-
-
1,817,910,180
(2,232,510)
-
208,900
-
4,862,822
(2,850,000)
(10,788)
Balance at 1 January
Issue of shares under the share option scheme
Treasury shares transferred pursuant to
share option scheme
Treasury shares transferred pursuant to KCL PSP
Treasury shares transferred pursuant to KCL RSP
Treasury shares purchased
Balance at 31 December
Issued Share Capital
Treasury Shares
Amount ($’000)
2017
2016
1,288,394
2,916
-
-
-
-
1,291,310
1,288,394
-
-
-
-
-
1,288,394
2017
(15,523)
-
1,437
-
33,440
(19,428)
(74)
(6,762,980)
-
367,500
122,600
4,630,370
(590,000)
(2,232,510)
2016
(49,011)
-
2,555
877
33,125
(3,069)
(15,523)
Fully paid ordinary shares, which have no par value, carry one vote per share and carry a right to dividends declared by the Company.
During the financial year, the Company issued 424,000 (2016: nil) Shares at an average weighted price of $6.88 (2016: nil) per Share for
cash upon exercise of options under the KCL Share Option Scheme.
During the financial year, 4,862,822 (2016: 4,630,370) Shares under the KCL Restricted Share Plan (“KCL RSP”) were vested. In the prior
year, 122,600 Shares under the KCL Performance Share Plan (“KCL PSP”) were vested.
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Keppel Corporation Limited | Report to Shareholders 2017
Notes to the Financial Statements
3.
Share capital (continued)
During the financial year, the Company transferred 5,071,722 (2016: 5,120,470) treasury shares to employees under vesting of shares
released under the KCL Share Option Scheme and KCL Share Plans. The Company also purchased 2,850,000 (2016: 590,000) treasury
shares in the Company in the open market during the financial year. The total amount paid was $19,428,000 (2016: $3,069,000). Except
for the transfer, there was no other sale, disposal, cancellation and/or use of treasury shares during the financial year.
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:
Till Bernhard Vestring (Chairman)
Lee Boon Yang
Danny Teoh
Tow Heng Tan
At the Extraordinary General Meeting of the Company held on 23 April 2010, the Company’s shareholders approved the adoption of
two new share plans, with effect from the date of termination of the Scheme. The Scheme was terminated on 30 June 2010. Options
granted and outstanding prior to the termination will continue to be valid and subject to the terms and conditions of the Scheme.
Under the Scheme, an option may, except in certain special circumstances, be exercised at any time after two years but no later than the
expiry date. The two-year vesting period is intended to encourage employees to take a longer-term view of the Company.
The Shares under option may be exercised in full or in respect of 100 Shares or a multiple thereof, on the payment of the subscription
price. The subscription price is based on the average last done prices for the Shares of the Company on the Singapore Exchange
Securities Trading Limited for the three market days preceding the date of offer. The 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.
Movements in the number of share options and their weighted average exercise prices are as follows:
Balance at 1 January
Exercised
Cancelled
Balance at 31 December
2017
2016
Number of
options
14,025,974
(632,900)
(7,304,289)
6,088,785
Weighted
average
exercise
price
$8.92
$6.78
$10.01
$7.83
Number of
options
17,821,474
(367,500)
(3,428,000)
14,025,974
Exercisable at 31 December
6,088,785
$7.83
14,025,974
Weighted
average
exercise
price
$8.81
$3.07
$8.97
$8.92
$8.92
The weighted average share price at the date of exercise for options exercised during the financial year was $7.58 (2016: $5.87). The
options outstanding at the end of the financial year had a weighted average exercise price of $7.83 (2016: $8.92) and a weighted average
remaining contractual life of 1.0 year (2016: 1.4 years).
KCL Share Plans
The KCL Restricted Share Plan (“KCL RSP”) and KCL Performance Share Plan (“KCL PSP”) were approved by the Company’s shareholders
at the Extraordinary General Meeting of the Company on 23 April 2010. The two share plans are administered by the Remuneration
Committee.
After a comprehensive review of the Group’s total remuneration structure, eligible employees will receive deferred shares under the
approved KCL RSP scheme (“KCL RSP-Deferred Shares”) from Year 2017 onwards. For Year 2017, the deferred shares were granted in
February 2018 after taking into consideration the Group, business units and individual performance. Subject to the fulfilment of service
conditions at vesting, the deferred shares will vest equally over three years from February 2018 onwards.
During the year, the transformation incentive plan (“KCL PSP-TIP”), which was implemented in 2016, was also updated after a review
of the Group’s long term business plans. The performance period was extended from five years to six years (i.e. to Year 2021), with a
corresponding revision in the absolute total shareholder’s return targets. As a result, the estimated fair value of the contingent shares
granted under the KCL PSP-TIP on 29 April 2016 was revised from $0.78 to $1.74.
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Financial Report
Details of the KCL RSP, the KCL RSP-Deferred Shares, the KCL PSP and the KCL PSP-TIP are as follows:
KCL RSP
KCL RSP-Deferred Shares
KCL PSP
KCL PSP-TIP
Plan
Description
Award of fully-paid
ordinary shares of the
Company, conditional
on achievement of
pre-determined targets
at the end of a one-year
performance period
Award of fully-paid ordinary
shares of the Company
Performance
Conditions
Return on Equity
(2015 and 2016 awards)
-
Award of fully-paid
ordinary shares of the
Company, conditional
on achievement of pre-
determined targets over
a three-year performance
period
Award of fully-paid
ordinary shares of the
Company, conditional
on achievement of pre-
determined targets over
a six-year performance
period
(a) Economic Value Added
(b) Absolute Total
Shareholder’s Return
(a) Absolute Total
Shareholder’s Return
(b) Corporate Scorecard
Achievement
comprising pre-
determined stretched
financial and non-
financial targets for the
Group
Individual Performance
Achievement
(c)
(c) Relative Total
Shareholder’s Return
to MSCI Asia Pacific
Ex-Japan Industrials
Index (MXAPJIN)
(2015 and 2016 awards)
(a) Absolute Total
Shareholder’s Return
(b) Return on Capital
Employed
(c) Net Profit
(2017 award)
Final Award
0% to 100% of the
contingent award granted,
depending on achievement
of pre-determined targets
100% of the awards granted
Vesting
Condition
and Schedule
If pre-determined targets
are achieved, awards will
vest equally over three
years subject to fulfilment
of service requirements
Awards will vest equally
over three years subject
to fulfilment of service
requirements.
0% to 150% of the
contingent award
granted, depending on
achievement of
pre-determined targets
0% to 150% of the
contingent award
granted, depending on
achievement of pre-
determined targets
If pre-determined targets
are achieved, awards will
vest at the end of the
three-year performance
period subject to fulfilment
of service requirements
If pre-determined targets
are achieved, awards will
vest at the end of the six-
year performance period
subject to fulfilment of
service requirements
Movements in the number of shares under the KCL RSP, the KCL PSP and the KCL PSP-TIP are as follows:
2017
2016
KCL RSP
KCL PSP
KCL PSP-TIP
KCL RSP
KCL PSP
KCL PSP-TIP
Contingent awards
Balance at 1 January
Granted
Adjustments upon released
Released
Cancelled
Balance at 31 December
5,726,426
-
-
(5,676,157)
(50,269)
-
2,562,212
1,120,000
(565,082)
-
(592,130)
2,525,000
5,625,000
2,040,000
-
-
(917,509)
6,747,491
Awards released but not vested
Balance at 1 January
Released
Vested
Cancelled
Other adjustments
Balance at 31 December
5,521,483
5,825,645
-
(5,448,278)
(172,424)
5,726,426
2017
KCL RSP
4,854,898
5,676,157
(4,862,822)
(539,868)
(26,000)
5,102,365
2,052,119
1,185,000
(421,619)
(133,100)
(120,188)
2,562,212
-
5,625,000
-
-
-
5,625,000
2016
KCL RSP
KCL PSP
4,193,125
5,448,278
(4,630,370)
(125,328)
(30,807)
4,854,898
-
133,100
(122,600)
-
(10,500)
-
Executive Directors who are eligible for the KCL Share Plans are required to hold a minimum number of shares under the share ownership
guideline which requires them to maintain a beneficial ownership stake in the Company, thus further aligning their interests with
shareholders.
135
Keppel Corporation Limited | Report to Shareholders 2017
Notes to the Financial Statements
3.
Share capital (continued)
As at 31 December 2017, there were 5,102,365 (2016: 4,854,898) shares under the KCL RSP that were released but not vested. At the end
of the financial year, the number of contingent Shares granted but not released was nil (2016: 5,726,426) under the KCL RSP, 2,525,000
(2016: 2,562,212) under the KCL PSP and 6,747,491 (2016: 5,625,000) under the KCL PSP-TIP. Depending on the achievement of pre-
determined performance targets, the actual number of Shares to be released could range from zero to a maximum of 3,787,500 under
the KCL PSP and zero to a maximum of 10,121,237 under the KCL PSP-TIP.
The fair values of the contingent award of shares under the KCL RSP and the KCL PSP are determined at the grant date using Monte Carlo
simulation method which involves projection of future outcomes using statistical distributions of key random variables including share
price and volatility.
On 28 April 2017 (2016: 29 April 2016), the Company granted contingent awards of 1,120,000 (2016: 1,185,000) Shares under the KCL PSP
and 2,040,000 (2016: 5,625,000) Shares under the KCL PSP-TIP. The estimated fair value of the shares granted amounts to $5.22
(2016: $3.05) under the KCL PSP and $1.74 (2016: $0.78) under the KCL PSP-TIP. In the prior year, the Company granted contingent awards
of 5,825,645 Shares under the KCL RSP on 29 April 2016 and the estimated fair value of the shares granted amounts to $4.85.
The significant inputs into the model are as follows:
Date of grant
Prevailing share price at date of grant
Expected volatility of the Company
Expected term
Risk free rate
Expected dividend yield
Date of grant
Prevailing share price at date of grant
Expected volatility:
Company
MXAPJIN
Correlation with MXAPJIN
Expected term
Risk free rate
Expected dividend yield
2017
KCL PSP
KCL PSP-TIP
28.04.2017
$6.51
23.47%
2.83 years
1.35%
*
2016
28.04.2017
$6.51
23.47%
4.83 years
1.64%
*
KCL RSP
KCL PSP
KCL PSP -TIP
29.04.2016
$5.40
29.04.2016
$5.40
29.04.2016
$5.40
21.89%
#
#
0.83 – 2.83 years
0.81% - 1.15%
*
21.89%
14.96%
68.0%
2.83 years
1.15%
*
21.89%
#
#
5.83 years
1.55%
*
#
*
This input is not required for the valuation of shares granted under the KCL RSP and KCL PSP-TIP.
Expected dividend yield is based on management’s forecast.
The expected volatilities are based on the historical volatilities of the Company’s share price and the MXAPJIN price over the previous
36 months immediately preceding the grant date. The expected term used in the model is based on the grant date and the end of the
performance period.
Share option and share plans of a subsidiary
Keppel Telecommunications & Transportation Ltd (“Keppel T&T”)
Details of share option and share plans granted by Keppel T&T are disclosed in its annual report.
4.
Reserves
Capital Reserves
Share option and share plan reserve
Fair value reserve
Hedging reserve
Bonus issue by subsidiaries
Others
Revenue Reserves
Foreign Exchange
Translation Account
Group
2017
$’000
2016
$’000
Company
2017
$’000
2016
$’000
202,048
99,169
(111,930)
40,000
52,120
281,407
10,486,054
207,139
126,014
(410,797)
40,000
49,130
11,486
10,655,379
(626,009)
10,141,452
(280,787)
10,386,078
177,599
15,012
-
-
16,895
209,506
6,132,150
-
6,341,656
184,593
14,340
-
-
14,183
213,116
5,133,722
-
5,346,838
Movements in the Group’s and the Company’s reserves are set out in the Statements of Changes in Equity.
136
Financial Report
5.
Non-controlling interests
The Group’s subsidiaries that have material non-controlling interests (“NCI”) are as follows:
Beijing Aether Property Development
Limited
Keppel Telecommunications &
Transportation Ltd
Other subsidiaries with immaterial NCI
NCI percentage of
ownership interest and
voting interest
2017
$’000
49%
21%
2016
$’000
49%
20%
Carrying amount of NCI
Profit after tax
allocated to NCI
2017
$’000
2016
$’000
2017
$’000
2016
$’000
199,716
202,855
2,150
3,641
172,434
155,596
163,173
308,663
10,473
(12,112)
9,750
24,456
Total
527,746
674,691
511
37,847
Summarised financial information before inter-group elimination
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Less: NCI
Net assets
Revenue
Profit for the year
Total comprehensive income
Beijing Aether Property
Development Limited
Keppel Telecommunications &
Transportation Ltd
2017
$’000
934,671
2,001
139,547
389,542
407,583
-
407,583
-
4,387
(36,347)
2016
$’000
928,471
3,405
136,606
381,280
413,990
-
413,990
2017
$’000
1,264,383
272,816
366,009
222,985
948,205
(113,499)
834,706
-
7,431
(24,320)
176,988
55,917
64,203
2016
$’000
1,240,751
482,115
477,548
337,291
908,027
(111,363)
796,664
194,622
113,323
97,455
Net cash flow (used in)/from operations
(8,909)
(4,625)
9,736
48,935
Total comprehensive income allocated to NCI
(17,810)
(11,917)
12,247
Dividends paid to NCI
-
-
6,495
7,085
5,357
During the financial year, the Group acquired additional interest in certain subsidiaries of the Company from its non-controlling interests.
The following summarises the effect of the change in the Group’s ownership interest on the equity attributable to owners of the
Company:
Amounts paid on changes in ownership interest in subsidiaries
Non-controlling interest acquired
Total amount recognised in equity reserves
2017
$’000
(66,380)
43,489
(22,891)
2016
$’000
(8,357)
8,176
(181)
137
Keppel Corporation Limited | Report to Shareholders 2017
Notes to the Financial Statements
6.
Fixed assets
Group
2017
Cost
At 1 January
Additions
Disposals
Write-off
Subsidiaries disposed
Reclassification
- Stocks and other assets
- Investment properties (Note 7)
- Other fixed assets categories
Exchange differences
Freehold
Land &
Buildings
$’000
Leasehold
Land &
Buildings
$’000
Vessels &
Floating Docks
$’000
Plant,
Machinery,
Equipment
& Others (1)
$’000
Capital
Work-in-
Progress
$’000
121,640
173
(606)
-
(4)
-
-
1,356
(6,848)
2,150,487
9,775
(22,319)
-
(49,646)
(775)
-
7,636
(26,563)
516,442
1,334
(45,837)
-
(172,064)
(46)
-
2,211
(9,358)
2,075,836
51,108
(57,415)
(12,305)
(55,406)
82
(1,376)
60,273
(45,310)
311,979
149,079
-
(10)
(16,320)
(1,370)
-
(71,476)
(3,381)
Total
$’000
5,176,384
211,469
(126,177)
(12,315)
(293,440)
(2,109)
(1,376)
-
(91,460)
At 31 December
115,711
2,068,595
292,682
2,015,487
368,501
4,860,976
Accumulated Depreciation &
Impairment Losses
At 1 January
Depreciation charge
Disposals
Impairment loss
Write-off
Subsidiaries disposed
Reclassification
- Stocks and other assets
- Other fixed assets categories
Exchange differences
At 31 December
Net Book Value
59,736
3,776
(526)
-
-
(4)
-
690
(3,595)
850,850
56,206
(16,752)
9,242
26
(24,745)
(1,791)
(690)
(7,102)
255,130
20,318
(40,756)
10
-
(91,352)
-
(4)
(3,946)
1,304,783
127,073
(47,304)
6,002
(12,114)
(47,803)
(152)
4
(26,984)
60,429
-
-
49
-
-
-
-
(691)
2,530,928
207,373
(105,338)
15,303
(12,088)
(163,904)
(1,943)
-
(42,318)
60,077
865,244
139,400
1,303,505
59,787
2,428,013
55,634
1,203,351
153,282
711,982
308,714
2,432,963
Included in freehold land & buildings are freehold land amounting to $8,726,000 (2016: $8,758,000).
Certain fixed assets with carrying amount of $155,748,000 (2016: $273,363,000) are mortgaged to banks for loan facilities (Note 20).
Interest capitalised during the financial year amounted to $1,460,000 (2016: $4,956,000).
The Group has $983,000,000 of fixed assets as at 31 December 2017 where management performed an impairment review.
The Group recognised impairment losses amounting to $3,102,000 (2016: $148,043,000) relating to the Offshore & Marine Division’s
assets. Each rigbuilding, shipbuilding and repair facilities has been identified as individual cash generating units (“CGUs”). The
recoverable amounts of these CGUs were determined using value-in-use models that incorporated cash flow projections based on
financial forecasts approved by management. Management had determined the forecasted cash flows based on past performance and
its current expectations of market development. These cash flows were discounted at discount rates ranging from 6% to 13% (2016: 6% to
14%) per annum, depending on the location of the facilities.
The Group recognised impairment losses amounting to $3,700,000 (2016: $35,672,000) relating to the Infrastructure Division’s assets
in China. The group estimated the recoverable amount of the relevant assets on the basis of their value in use. The discount rate used
in measuring the value in use was 9.0% (2016: 9.3%). In 2016, the impairment losses recognised included $26,972,000 relating to certain
land and buildings. Sustained losses as a result of weaker economic outlook had adversely affected the fair values and expected
returns on these assets. The recoverable amounts of these fixed assets are assessed based on fair value less costs to sell using direct
comparison method based on certain estimates and assumptions, such as price of comparable land plots ranging from $33 to $175 per
square metre, gross development value and total development cost. The fair value is within Level 3 of the fair value hierarchy.
The Group also recognised an impairment loss of $8,501,000 (2016: $nil) relating to the Property Division’s assets in China, which was
based on the difference between the recoverable amount and the net book value of the fixed assets. The recoverable amount of the
fixed assets was based on fair value determined using the income approach.
138
Financial Report
Group
2016
Cost
At 1 January
Additions
Disposals
Write-off
Subsidiaries acquired
Subsidiaries disposed
Reclassification
- Stocks and other assets
- Investment properties (Note 7)
- Other fixed assets categories
Exchange differences
Freehold
Land &
Buildings
$’000
Leasehold
Land &
Buildings
$’000
Vessels &
Floating Docks
$’000
Plant,
Machinery,
Equipment
& Others (1)
$’000
Capital
Work-in-
Progress
$’000
122,438
478
(1,057)
-
-
-
-
-
702
(921)
2,108,739
25,251
(3,771)
(5,229)
-
(22,056)
(157)
(77,661)
149,951
(24,580)
466,254
3,206
(22,685)
(2,679)
-
-
-
-
68,196
4,150
1,959,971
26,388
(21,810)
(14,153)
14,439
(7,096)
(754)
-
105,016
13,835
464,747
153,038
(220)
(1,193)
-
(20)
-
-
(323,865)
19,492
Total
$’000
5,122,149
208,361
(49,543)
(23,254)
14,439
(29,172)
(911)
(77,661)
-
11,976
At 31 December
121,640
2,150,487
516,442
2,075,836
311,979
5,176,384
Accumulated Depreciation
& Impairment Losses
At 1 January
Depreciation charge
Disposals
Write-back of impairment loss
Impairment loss
Write-off
Subsidiaries disposed
Reclassification
- Stocks and other assets
- Investment properties (Note 7)
- Other fixed assets categories
Exchange differences
At 31 December
Net Book Value
55,515
4,755
-
-
-
-
-
-
-
-
(534)
847,556
55,229
(707)
(54,886)
46,955
(552)
(4,362)
(82)
(27,621)
(291)
(10,389)
207,121
25,784
(14,577)
-
37,153
(2,679)
-
-
-
-
2,328
1,166,410
144,319
(20,331)
(14,539)
39,503
(12,379)
(6,298)
429
-
291
7,378
-
-
-
-
60,104
-
-
-
-
-
325
2,276,602
230,087
(35,615)
(69,425)
183,715
(15,610)
(10,660)
347
(27,621)
-
(892)
59,736
850,850
255,130
1,304,783
60,429
2,530,928
61,904
1,299,637
261,312
771,053
251,550
2,645,456
(1) Others comprise furniture, fittings and office equipment, cranes and small equipment and tools.
139
Keppel Corporation Limited | Report to Shareholders 2017
Freehold
Land &
Buildings
$’000
Plant,
Machinery,
Equipment
& Others (2)
$’000
1,233
-
-
8,570
177
(54)
Total
$’000
9,803
177
(54)
1,233
8,693
9,926
1,220
11
-
7,731
722
(54)
8,951
733
(54)
1,231
8,399
9,630
2
294
296
1,233
-
-
1,233
1,141
79
-
1,220
8,490
443
(363)
9,723
443
(363)
8,570
9,803
7,301
793
(363)
8,442
872
(363)
7,731
8,951
13
839
852
Notes to the Financial Statements
6.
Fixed assets (continued)
Company
2017
Cost
At 1 January
Additions
Disposals
At 31 December
Accumulated Depreciation
At 1 January
Depreciation charge
Disposals
At 31 December
Net Book Value
2016
Cost
At 1 January
Additions
Disposals
At 31 December
Accumulated Depreciation
At 1 January
Depreciation charge
Disposals
At 31 December
Net Book Value
(2) Others comprise furniture, fittings and office equipment.
140
Financial Report
7.
Investment properties
At 1 January
Development expenditure
Fair value gain
- Attributable to the Group (Note 24)
- Attributable to third parties under a contractual agreement
Subsidiary disposed
Reclassification
- Stocks and work-in-progress
- Fixed assets (Note 6)
Exchange differences
At 31 December
Group
2017
$’000
3,550,290
181,522
177,939
4,814
(405,604)
-
1,376
(49,729)
2016
$’000
3,272,112
257,865
63,745
6,673
(74,062)
89,131
50,040
(115,214)
3,460,608
3,550,290
The Group’s investment properties (including integral plant and machinery) are stated at Management’s assessments based on the
following valuations (open market value basis), performed on an annual basis, by independent firms of professional valuers as at
31 December 2017:
-
-
-
-
-
-
Colliers International Consultancy & Valuation (Singapore) Pte Ltd and Savills Valuation and Professional Services (S) Pte Ltd for
properties in Singapore;
Colliers International (Hong Kong) Limited for properties in China;
Savills Vietnam Co. Ltd for a property in Vietnam;
CBRE Limited for a property in the Netherlands;
Knight Frank LLP for a property in the United Kingdom; and
KJPP Willson dan Rekan (an affiliate of Knight Frank) for properties in Indonesia.
Based on valuations performed by the independent valuers, management has analysed the appropriateness of the fair value changes.
Interest capitalised during the financial year amounted to $6,777,000 (2016: $12,143,000).
The Group has mortgaged certain investment properties of up to an aggregate amount of $552,684,000 (2016: $517,726,000) to banks
for loan facilities (Note 20).
During the year, the Group reclassified $1,376,000 from fixed assets (2016: $89,131,000 from property held for sale and $50,040,000
from fixed assets) to investment properties as there is a change in use of the properties arising from the commencement of operating
leases to another party.
8.
Subsidiaries
Quoted shares, at cost
Market value: $701,714,000 (2016: $766,654,000)
Unquoted shares, at cost
Provision for impairment
Movements in the provision for impairment of subsidiaries are as follows:
At 1 January
Charge to profit and loss account
At 31 December
Company
2017
$’000
2016
$’000
398,140
7,821,594
8,219,734
(246,885)
398,140
7,919,131
8,317,271
(163,070)
7,972,849
8,154,201
Company
2017
$’000
163,070
83,815
246,885
2016
$’000
31,070
132,000
163,070
Impairment of $83,815,000 (2016: $132,000,000) made during the year mainly relates to an investment holding subsidiary that holds
equity investments in the Oil & Gas segment. Due to the economic downturn in that segment, recoverable amount of the equity
investments, based on a value-in-use (“VIU”) calculation, was projected to be below the Company’s cost of investment. Cash flows in the
VIU calculation was discounted at 10% per annum.
Information relating to significant subsidiaries consolidated in the financial statements is given in Note 36.
141
Keppel Corporation Limited | Report to Shareholders 2017
Notes to the Financial Statements
9.
Associated companies
Quoted shares, at cost
Market value: $3,525,749,000
(2016: $2,978,817,000)
Unquoted shares, at cost
Provision for impairment
Share of reserves
Carrying amount of equity interest
Notes issued by associated companies
Advances to associated companies
Group
2017
$’000
2016
$’000
3,105,919
1,784,809
4,890,728
(100,297)
4,790,431
514,057
5,304,488
310,242
286,522
3,080,800
1,640,502
4,721,302
(150,845)
4,570,457
499,621
5,070,078
245,000
97,503
5,901,252
5,412,581
Notes issued by associated companies are unsecured and mature between 2024 and 2040. Interest is charged at rates ranging from 0%
to 17.5% (2016: 17.5%) per annum.
Advances to associated companies are unsecured and are not repayable with the next 12 months. Interest is charged at rates ranging
from 3.0% to 7.0% (2016: 6.0%) per annum on interest-bearing advances.
Movements in the provision for impairment of associated companies are as follows:
At 1 January
(Write-back of impairment loss)/impairment loss
Disposal
Exchange differences
At 31 December
Group
2017
$’000
150,845
(39,192)
(9,873)
(1,483)
2016
$’000
83,871
66,504
-
470
100,297
150,845
Write-back of impairment losses during the year mainly relates to the excess of recoverable amount of an associated company over the
carrying amount of the investment which includes share of losses recognised by the Group in 2017.
Impairment loss made in the prior year mainly relates to the shortfall between the carrying amount of the costs of investment and the
recoverable amount of certain associated companies.
The Group’s share of net profit of associated companies is as follows:
Share of profit before tax
Share of taxation (Note 26)
Share of net profit
Group
2017
$’000
2016
$’000
390,039
(95,990)
344,986
(72,361)
294,049
272,625
The carrying amount of the Group’s material associated companies, all of which are equity accounted for and whose activities are
strategic to the Group’s activities, are as follows:
Keppel REIT
Keppel Infrastructure Trust
KrisEnergy Limited
Keppel DC REIT
Other associated companies
142
2017
$’000
1,850,409
267,169
321,562
396,152
3,065,960
5,901,252
2016
$’000
1,844,738
284,320
347,397
392,834
2,543,292
5,412,581
Financial Report
The summarised financial information of the material associated companies, not adjusted for the Group’s proportionate share, based on
its FRS financial statements and a reconciliation with the carrying amount of the investment in the consolidated financial statements are
as follows:
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Less: Non-controlling interests
Proportion of the Group’s ownership
Group’s share of net assets
Other adjustments
Carrying amount of equity interest
Revenue
Profit after tax
Other comprehensive (loss)/income
Total comprehensive income/(loss)
Fair value of ownership interest (if listed) **
Dividends received
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Less: Non-controlling interests
Proportion of the Group’s ownership
Group’s share of net assets
Other adjustments
Carrying amount of equity interest
Revenue
(Loss)/profit after tax
Other comprehensive income/(loss)
Total comprehensive (loss)/income
Fair value of ownership interest (if listed) **
Dividends received
Keppel REIT
Keppel Infrastructure Trust
2017
$’000
208,307
7,395,981
7,604,288
492,865
2,196,165
2,689,030
4,915,258
(151,834)
4,763,424
45%
2,146,723
(296,314)
1,850,409
164,516
180,154
(49,789)
130,365
1,914,043
80,011
2016
$’000
290,193
7,245,132
7,535,325
59,869
2,576,898
2,636,767
4,898,558
(151,841)
4,746,717
45%
2,128,798
(284,060)
1,844,738
161,252
257,787
9,217
267,004
1,505,741
90,922
2017
$’000
488,154
3,468,262
3,956,416
919,010
1,725,512
2,644,522
1,311,894
(158,959)
1,152,935
18%
209,949
57,220
267,169
632,476
13,776
(10,051)
3,725
403,858
26,126
2016
$’000
516,723
3,601,919
4,118,642
937,324
1,727,348
2,664,672
1,453,970
(198,580)
1,255,390
18%
228,607
55,713
284,320
581,117
6,121
(6,695)
(574)
333,622
26,128
KrisEnergy Limited *
Keppel DC REIT
2017
$’000
191,987
869,374
1,061,361
74,604
653,172
727,776
333,585
-
333,585
40%
133,067
123,253
256,320
196,612
(293,277)
32
(293,245)
60,425
-
2016
$’000
183,440
1,236,024
1,419,464
273,951
546,346
820,297
599,167
-
599,167
40%
239,607
107,790
347,397
182,474
(262,322)
300
(262,022)
110,679
-
2017
$’000
178,078
1,585,204
1,763,282
53,224
593,556
646,780
1,116,502
(26,786)
1,089,716
35%
380,617
15,535
396,152
139,050
70,274
21,044
91,318
562,990
20,958
2016
$’000
338,312
1,244,687
1,582,999
35,144
473,987
509,131
1,073,868
(343)
1,073,525
35%
375,841
16,993
392,834
99,139
50,943
(7,656)
43,287
466,534
17,595
*
As at the date of approval of these financial statements, the most recent available financial information on which equity accounting for the current year can be
practically applied are those financial information from October of the preceding year to September of the current year. The difference in reporting period has no
material impact on the Group’s consolidated financial statements. The Group also holds notes amounting to $65,242,000 issued by KrisEnergy Limited in 2017.
** Based on the quoted market price at 31 December (Level 1 in the fair value hierarchy).
143
Keppel Corporation Limited | Report to Shareholders 2017
Notes to the Financial Statements
9.
Associated companies (continued)
For the investment in KrisEnergy Limited (“KrisEnergy”), management performed an assessment on the recoverable amount using a
discounted cash flow model based on a cash flow projection from 2018 to 2036 applying certain estimates and assumptions, such as oil
prices, discount rates, production volume, lifting costs, reserves and operating costs. The assumption for oil prices, ranging from US$52
to US$70 per barrel for 2018 to 2036 (2016: US$59 to US$76 per barrel for 2017 to 2032), is determined by taking reference from external
information sources. The discount rate used is 10% (2016: 10%). The Group has recognised a write-back of impairment of $46,000,000
(2016: impairment charge of $46,000,000) during the financial year. The write-back was primarily due to equity accounting for the
Group’s share of loss in 2017 amounting to $118,995,000. This share of loss recognised by the Group in 2017 included impairment loss
recorded by KrisEnergy on its exploration assets which the Group had taken into consideration when performing the impairment
review in 2016. The estimates and assumptions used are subject to risk and uncertainty. Therefore, there is a possibility that changes in
circumstances will impact these projections, which may impact the recoverable amount of the investment in KrisEnergy. If the estimated
oil prices applied to the discounted cash flows had been 10% (2016: 10%) lower than management’s estimates, the Group would have
recognised a write-back of impairment amounting to $22,000,000 (2016: further impairment charge of $40,000,000).
In addition, the Group carried out a review of the recoverable amount of an associated company held by its Offshore & Marine Division,
in consideration of the fact that the fair value of the investment is significantly below its carrying amount as at the balance sheet date.
The recoverable amount of the associated company was determined based on a value-in-use calculation where cash flow projections
were based on financial forecasts by management. Management had determined the forecasted cash flows based on past performance
and their current expectations of market development. Cash inflows were based on revenue projections from existing order books with
an estimate of the terminal growth rate of 2.2% (2016: 2.0%) and a discount rate of 7.9% (2016: 7.6%) per annum on the cash flows. An
impairment charge of $8,000,000 (2016: $21,640,000) was recognised in the profit and loss account within other operating expense as a
result of the above review.
Aggregate information about the Group’s investments in other associated companies are as follows:
Share of profit before tax
Share of taxation
Share of other comprehensive loss
Share of total comprehensive income
2017
$’000
381,642
(78,505)
(65,443)
237,694
2016
$’000
287,995
(50,309)
(62,221)
175,465
Information relating to significant associated companies, including information on principal activities, country of operation/incorporation
and proportion of ownership interest, and whose results are included in the financial statements is given in Note 36.
10.
Investments
Available-for-sale investments:
Carried at fair value
- Quoted equity shares
- Unquoted equity shares
- Unquoted property funds
- Unquoted - others
Total – Carried at fair value
Carried at cost
- Unquoted equity shares
- Unquoted - others
Total – Carried at cost
Total available-for-sale investments
Investments at fair value through profit or loss:
- Quoted warrants
- Unquoted equity shares
Total investments at fair value through profit or loss
Group
2017
$’000
2016
$’000
Company
2017
$’000
8,854
53,419
185,187
-
247,460
102,183
3,285
105,468
352,928
31,647
74,063
105,710
12,878
47,736
174,154
11,788
246,556
116,446
5,729
122,175
368,731
-
8,973
8,973
2016
$’000
-
14,340
-
-
14,340
-
-
-
-
15,012
-
-
15,012
-
-
-
15,012
14,340
-
-
-
-
-
-
Total investments
458,638
377,704
15,012
14,340
Unquoted investments included a bond amounting to $39,256,000 (2016: $41,700,000) bearing interest at 4% (2016: 4%) per annum
which is maturing in 2027. In prior year, an impairment loss of $35,971,000 was recorded based on cash flow projections using financial
forecasts approved by the management.
During the financial year, the Group recognised an impairment loss of $14,330,000 (2016: $17,496,000) for certain unquoted equity
securities in which the Group does not expect to recover its cost of investment.
144
Financial Report
11.
Long term assets
Staff loans
Derivative assets
Call option
Long term receivables and others
Less: Amounts due within one year and
included in debtors (Note 15)
Group
Company
2017
$’000
933
26,780
137,200
651,597
816,510
2016
$’000
1,395
125,508
120,600
569,334
816,837
2017
$’000
386
14,101
-
-
14,487
2016
$’000
504
97,199
-
-
97,703
(42,194)
(2,399)
(141)
(146)
774,316
814,438
14,346
97,557
Included in staff loans are interest-free advances to directors of related corporations amounting to $179,000 (2016: $221,000) under an
approved car loan scheme.
The call option granted to the Group is in connection with the disposal of its 87.51% equity interest in Ocean Properties Pte. Ltd. that
was held by a subsidiary to an associated company in 2011. As at 31 December 2017, the fair value was determined by reference to
the difference in valuations obtained from an independent professional valuer for the underlying investment property based on the
remaining 844-year leasehold and 93-year leasehold (2016: based on the remaining 845-year leasehold and 94-year leasehold). The
details of the valuation techniques and inputs used for the call option are disclosed in Note 32.
Long term receivables are unsecured, largely repayable after five years (2016: five years) and bears effective interest ranging from 2.00%
to 6.00% (2016: 2.00% to 11.00%) per annum.
The carrying amounts of the long term receivables of the Group approximate their fair values.
Included in the long term receivables is an interest-bearing US$ loan amounting to $279,004,000 (2016: $285,167,000) which is repayable
on 2025 by an associated company. The loan is secured and cross-secured over several vessels together with other borrowings of the
associated company. Upon initial recognition in 2016, this loan was recorded at its fair value which was determined using the future
cash flows of the instrument discounted at a market borrowing rate of 3.64%. In the prior year, a loss of $42,656,000, representing the
difference between the fair value and principal of the loan on initial recognition, was recognised in the profit and loss account and
presented within interest expense.
12.
Intangibles
Group
2017
At 1 January
Additions
Amortisation
Reversal
Exchange differences
Goodwill
$’000
Development
Expenditure
$’000
Management
Rights
$’000
Customer
Contracts
$’000
Customer
Relationships
$’000
Total
$’000
59,270
-
-
-
-
20,779
731
(1,646)
-
(791)
16,757
-
-
-
-
14,694
-
(1,467)
-
-
29,169
-
(1,894)
(1,195)
(1,813)
140,669
731
(5,007)
(1,195)
(2,604)
At 31 December
59,270
19,073
16,757
13,227
24,267
132,594
Cost
Accumulated amortisation
59,270
-
38,122
(19,049)
16,757
-
24,963
(11,736)
27,775
(3,508)
166,887
(34,293)
59,270
19,073
16,757
13,227
24,267
132,594
2016
At 1 January
Additions
Amortisation
Subsidiary acquired
Reclassification
- Other intangible assets categories
59,270
-
-
-
7,145
838
(3,232)
15,533
16,757
-
-
-
16,653
-
(1,464)
-
-
1,563
(1,692)
29,298
99,825
2,401
(6,388)
44,831
-
495
-
(495)
-
-
At 31 December
59,270
20,779
16,757
14,694
29,169
140,669
Cost
Accumulated amortisation
59,270
-
38,274
(17,495)
16,757
-
24,963
(10,269)
30,937
(1,768)
170,201
(29,532)
59,270
20,779
16,757
14,694
29,169
140,669
145
Keppel Corporation Limited | Report to Shareholders 2017
Notes to the Financial Statements
12.
Intangibles (continued)
For the purpose of impairment testing, goodwill is allocated to CGUs.
Out of the total goodwill of $59,270,000, goodwill allocated to a CGU in the Infrastructure Division amounted to $57,178,000
(2016: $57,178,000). The recoverable amount of the CGU at the balance sheet date is based on current bid prices of the quoted shares of
the CGU.
The recoverable amount of management rights is determined based on cash flow projections from the provision of asset management
services using a pre-tax discount rate of 5.0% (2016: 6.5%). The key assumptions are those regarding the discount rate and expected
changes to assets under management and net property income of these assets.
13.
Stocks & work-in-progress
Work-in-progress:
- Construction contracts
- Stocks
Consumable materials and supplies
Finished products for sale
Properties held for sale
Construction contracts
Group
2017
$’000
2,772,373
754,704
3,527,077
115,135
78,225
5,061,814
(a)
(c)
2016
$’000
3,316,559
727,092
4,043,651
125,727
85,889
5,770,538
8,782,251
10,025,805
- Billings on work-in-progress in excess of related costs
(b)
(1,764,874)
(1,669,466)
(a) Work-in-progress
Costs incurred and attributable profits (less foreseeable losses)
Provision for loss on work-in-progress (stocks)
Less: Progress billings
13,373,971
(53,118)
13,320,853
(9,793,776)
14,529,093
(59,839)
14,469,254
(10,425,603)
3,527,077
4,043,651
Included in the balance above is an amount of $1,127,566,000 (2016: $868,535,000) relating to certain rig building contracts where
the scheduled delivery dates of the rigs had been deferred and the revised delivery dates are more than twelve months from
31 December 2017.
Movements in the provision for loss on work-in-progress (stocks) are as follows:
At 1 January
(Credit)/charge to profit and loss account
Exchange differences
Amount written off
Reclassification
At 31 December
Group
2017
$’000
59,839
(2,264)
(320)
(4,137)
-
53,118
2016
$’000
4,498
54,106
(29)
(361)
1,625
59,839
During the financial year ended 31 December 2017, there was a write-back of $2,264,000 (2016: write-down of $54,106,000) on
work-in-progress (stocks).
(b)
Billings on work-in-progress in excess of related costs
Costs incurred and attributable profits
Less: Progress billings
Group
2017
$’000
2016
$’000
13,780,023
(15,544,897)
15,425,636
(17,095,102)
(1,764,874)
(1,669,466)
During the financial year ended 31 December 2017, an expected loss of $81,000,000 (2016: $nil) was recognised in the billings on
work-in-progress in excess of related costs with regards to certain rigbuilding contracts.
146
Financial Report
(c)
Properties held for sale
Properties under development
Land cost
Development cost incurred to date
Related overhead expenditure and recognised profits
Progress billings
Completed properties held for sale
Provision for properties held for sale
Movements in the provision for properties held for sale are as follows:
At 1 January
Charge to profit and loss account
Exchange differences
Amount written off
Subsidiary disposed
At 31 December
Group
2017
$’000
2,848,223
1,006,820
323,043
(362,922)
3,815,164
1,284,426
5,099,590
(37,776)
2016
$’000
3,039,080
842,811
282,593
(189,417)
3,975,067
1,867,887
5,842,954
(72,416)
5,061,814
5,770,538
72,416
-
(383)
(28,866)
(5,391)
83,959
19,008
(400)
(15,155)
(14,996)
37,776
72,416
The provision for properties held for sale is estimated taking into account estimated selling prices and estimated total construction
costs. The estimated selling prices are based on recent selling prices for the development project or comparable projects and
the prevailing market conditions. The estimated total construction costs include contracted amounts plus estimated costs to be
incurred based on historical trends. The provision is progressively reversed for those residential units sold above their carrying
amounts.
The following table provides information about agreements that are in progress at the reporting date whose revenue are
recognised on a percentage of completion basis:
Aggregate amount of costs incurred and recognised profit
(less recognised losses) to date
Less: Progress billings
At 31 December
Group
2017
$’000
2016
$’000
1,426,286
(362,922)
1,414,377
(189,417)
1,063,364
1,224,960
Interest capitalised during the financial year amounted to $44,187,000 (2016: $54,982,000) at rates ranging from 1.60% to 3.36%
(2016: 0.93% to 3.91%) per annum for Singapore properties and 0.05% to 15.00% (2016: 0.05% to 15.00%) per annum for overseas
properties.
Certain properties held for sale with carrying amount of $1,186,296,000 (2016: $2,019,439,000) are mortgaged to banks for loan
facilities (Note 20).
147
Keppel Corporation Limited | Report to Shareholders 2017
Notes to the Financial Statements
14. Amounts due from/to
Subsidiaries
Amounts due from
- trade
- advances
Provision for doubtful debts
Amounts due to
- trade
- advances
Company
2017
$’000
2016
$’000
97,984
3,407,536
3,505,520
(6,600)
86,001
3,902,961
3,988,962
(6,600)
3,498,920
3,982,362
4,726
231,677
900,632
162,090
236,403
1,062,722
Movements in the provision for doubtful debts are as follows:
At 1 January/31 December
6,600
6,600
Advances to and from subsidiaries are unsecured and are repayable on demand. Interest is charged at rates up to 4.00% (2016: up to
4.00%) per annum on interest-bearing advances.
Associated Companies
Amounts due from
- trade
- advances
Provision for doubtful debts
Amounts due to
- trade
- advances
Movements in the provision for doubtful debts are as follows:
At 1 January
Charge to profit and loss account
At 31 December
Group
2017
$’000
2016
$’000
Company
2017
$’000
66,482
291,735
358,217
(15,257)
61,117
373,394
434,511
(1,131)
342,960
433,380
34,110
219,221
16,094
95,449
253,331
111,543
1,131
14,126
15,257
46
1,085
1,131
733
-
733
-
733
-
-
-
-
-
-
2016
$’000
688
-
688
-
688
-
-
-
-
-
-
Advances to and from associated companies are unsecured and are repayable on demand. Interest is charged at rates ranging from
0.25% to 8.00% (2016: 0.13% to 8.90%) per annum on interest-bearing advances.
148
Financial Report
Group
Company
15. Debtors
Trade debtors
Provision for doubtful debts
Long term receivables due within one year (Note 11)
Sundry debtors
Prepaid project cost & prepayments
Tax recoverable
Goods & Services Tax receivable
Interest receivable
Deposits paid
Land tender deposits
Recoverable accounts
Accrued receivables
Purchase consideration receivable from disposal of
subsidiaries/associated companies
Advances to subcontractors
Advances to non-controlling shareholders of subsidiaries
Provision for doubtful debts
2017
$’000
2,214,444
(41,027)
2,173,417
42,194
155,568
118,565
15,171
59,040
19,410
25,235
103,346
125,740
169,873
61,228
73,455
41,081
1,009,906
(13,906)
996,000
2016
$’000
2,569,022
(15,723)
2,553,299
2,399
182,536
88,321
22,693
52,648
12,314
25,104
-
150,507
141,926
-
86,132
69,789
834,369
(13,827)
820,542
Total
3,169,417
3,373,841
Movements in the provision for doubtful debts are as follows:
At 1 January
Charge to profit and loss account
Amount written off
Subsidiary disposed
Exchange differences
29,550
34,780
(7,361)
(1,926)
(110)
41,447
11,435
(23,504)
-
172
At 31 December
54,933
29,550
16. Short term investments
Available-for-sale investments:
Quoted equity shares
Unquoted equity funds
Total available-for-sale investments
Investments held for trading:
Quoted equity shares
Unquoted equity shares
Total investments held for trading
Total short term investments
2017
$’000
7
-
7
141
3,902
112
-
-
20
408
-
-
-
-
-
-
4,583
-
4,583
4,590
-
-
-
-
-
-
2016
$’000
-
-
-
146
2,173
168
-
-
32
446
-
-
-
-
-
-
2,965
-
2,965
2,965
-
-
-
-
-
-
Group
2017
$’000
55,048
-
2016
$’000
77,264
49,610
55,048
126,874
147,654
74
147,728
147,054
-
147,054
202,776
273,928
149
Keppel Corporation Limited | Report to Shareholders 2017
Notes to the Financial Statements
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
Amounts held under project accounts,
withdrawals from which are restricted to
payments for expenditures incurred on projects
Group
Company
2017
$’000
590,248
1,515,887
2016
$’000
437,654
1,436,485
32,340
68,306
135,313
144,633
2017
$’000
2,213
-
-
-
2016
$’000
542
-
-
-
2,273,788
2,087,078
2,213
542
Fixed deposits with banks of the Group mature on varying periods, substantially between 1 day to 12 months (2016: 1 day to 3 months).
This comprises Singapore dollar fixed deposits of $121,525,000 (2016: $10,051,000) at interest rates ranging from 0.35% to 1.24% (2016:
0.15% to 0.85%) per annum, and foreign currency fixed deposits of $1,394,362,000 (2016: $1,426,434,000) at interest rates ranging from
0.01% to 13.15% (2016: 0.03% to 14.21%) per annum.
18. Creditors
Trade creditors
Customers’ advances and deposits
Proceeds received from sale of properties
Sundry creditors
Accrued expenses
Advances from non-controlling shareholders
Retention monies
Interest payables
Other non-current liabilities:
Accrued expenses
Derivative liabilities
Group
Company
2017
$’000
579,371
89,656
677,997
1,227,417
2,401,071
177,151
176,850
42,105
2016
$’000
589,834
64,788
424,376
1,277,276
1,955,100
209,726
194,673
37,719
2017
$’000
161
-
-
4,070
39,074
-
-
25,280
2016
$’000
-
-
-
3,591
86,458
-
-
22,422
5,371,618
4,753,492
68,585
112,471
204,121
82,494
112,885
68,214
49,275
60,521
54,409
66,632
286,615
181,099
109,796
121,041
The carrying amount of the non-current liabilities approximates their fair value.
Advances from non-controlling shareholders of certain subsidiaries are unsecured and are repayable on demand. Interest is charged at
rates ranging from 2.00% to 4.35% (2016: 2.03% to 4.31%) per annum on interest-bearing advances.
During the financial year, a wholly-owned subsidiary, Keppel Land China Limited (“KLCL”), entered into a Sale & Purchase Agreement to
divest its interest in a wholly-owned subsidiary, Keppel China Marina Holdings Pte Ltd (“KCMH”), which indirectly owns a 80% interest in
Sunsea Yacht Club (Zhongshan) Company Limited (“SYCZS”) (“Divestment”). KLCL has received an advanced payment of $174,538,000
and the amount was included in sundry creditors as at 31 December 2017. Both KLCL and KCMH had, on 20 November 2017, been served
as co-defendants a writ of summons filed by Sunsea Yacht Club (Hong Kong) Company Limited (“SYCHK”), which indirectly owns the
remaining 20% interest in SYCZS, in the High Court of Singapore (“the Suit”). The reliefs claimed by SYCHK in the Suit are essentially to,
amongst others, restrain both KLCL and KCMH from completing the Divestment. The Interim Injunction application was dismissed by
the High Court on 15 December 2017. However, when SYCHK informed the High Court of its intention to apply to the Court of Appeal
for permission to appeal the Dismissal of Application (“Application to CA”), the High Court on 22 December 2017 imposed an order
restraining KLCL from completing the Divestment until the Application to CA is disposed of by the Court of Appeal.
In December 2017, a wholly-owned subsidiary, Keppel Offshore & Marine Limited (“KOM”), reached a global resolution with the criminal
authorities in the United States, Brazil and Singapore in relation to corrupt payments made by KOM’s former agent in Brazil, which
were made with knowledge or approval of former KOM executives. As part of the global resolution, KOM will pay fines in an aggregate
amount of US$422,216,980, or equivalent to approximately S$570 million, to be allocated between the three jurisdictions. The amount
was included in accrued expenses as at 31 December 2017.
150
Financial Report
As part of the global resolution, KOM has accepted a Conditional Warning from the Corrupt Practices Investigation Bureau (“CPIB”) in
Singapore, and entered into a Deferred Prosecution Agreement (“DPA”) with the U.S. Department of Justice (“DOJ”), while Keppel FELS
Brasil S.A., a wholly-owned subsidiary of KOM, has entered into a Leniency Agreement with the Public Prosecutor’s Office in Brazil, the
Ministério Público Federal (“MPF”). The Leniency Agreement would become effective following the approval of the Fifth Chamber for
Coordination and Review of the MPF. In addition, Keppel Offshore & Marine USA, Inc. (“KOM USA”), also a wholly-owned subsidiary
of KOM, has pleaded guilty to one count of conspiracy to violate the U.S. Foreign Corrupt Practices Act and has entered into a Plea
Agreement with the DOJ. KOM USA will pay a penalty, which will be subtracted from the amount owed by KOM to the United States
government under the DPA.
Pursuant to the DPA, KOM has paid a monetary penalty of US$105,554,245, of which US$4,725,000 has been paid as a criminal fine
by KOM USA, to the United States Treasury within ten business days of 22 December 2017 (the date of entry of the judgment of KOM
USA’s sentence by the United States District Court for the Eastern District of New York). In addition, KOM will pay US$211,108,490 to the
MPF within 90 days of the payment instructions provided by the MPF and after the approval of the Fifth Chamber for Coordination
and Review of the MPF. Under the Conditional Warning issued by CPIB, KOM has committed to certain undertakings and will pay
US$52,777,122.50 to the Singapore authorities within 90 days from the date of the Conditional Warning dated 23 December 2017 (i.e.
being 23 March 2018) and a further US$52,777,122.50 within three years from the date of the Conditional Warning (less any penalties paid
by KOM to specified Brazilian authorities during this period).
Based on the information available as at the date of these financial statements, management is of the opinion that no material claim has
arisen that would result in additional provision in relation to these corrupt payments.
19. Provisions
Group
2017
At 1 January
Charge to profit and loss account
Amount utilised
Subsidiary disposed
Exchange differences
At 31 December
2016
At 1 January
Write-back to profit and loss account
Amount utilised
Exchange differences
At 31 December
20. Term loans
Group
Keppel Corporation Medium Term Notes
Keppel Land Medium Term Notes
Keppel Telecommunications & Transportation
Medium Term Notes
Keppel GMTN Floating Rate Notes
Bank and other loans
- secured
- unsecured
Company
Keppel Corporation Medium Term Notes
Unsecured bank loans
(a)
(b)
(c)
(d)
(e)
(f)
(a)
(f)
Warranties
$’000
81,679
39,280
(4,205)
(397)
(385)
115,972
90,216
(1,450)
(7,153)
66
81,679
Due after
one year
$’000
1,700,000
786,873
120,000
286,600
744,449
3,579,799
2017
2016
Due within
one year
$’000
Due after
one year
$’000
Due within
one year
$’000
-
-
-
-
150,591
1,563,493
1,700,000
916,027
100,000
269,800
580,825
2,512,267
-
99,964
-
-
391,046
1,344,311
1,714,084
6,078,919
1,835,321
7,217,721
-
551,530
1,700,000
1,239,800
-
692,311
1,700,000
1,625,600
551,530
2,939,800
692,311
3,325,600
151
Keppel Corporation Limited | Report to Shareholders 2017
Notes to the Financial Statements
20. Term loans (continued)
(a)
(b)
(c)
(d)
At the end of the financial year, notes issued under the US$3,000,000,000 Multi-Currency Medium Term Note Programme by the
Company amounted to $1,700,000,000 (2016: $1,700,000,000). The notes denominated in Singapore Dollars, are unsecured and
comprised fixed rate notes due from 2020 to 2042 (2016: from 2020 to 2042) with interest rates ranging from 3.10% to 4.00% (2016:
3.10% to 4.00%) per annum.
At the end of the financial year, notes issued under the US$3,000,000,000 Multi-Currency Medium Term Note Programme by
Keppel Land Limited and its wholly-owned subsidiary, Keppel Land Financial Services Pte. Ltd. amounted to $486,696,000 (2016:
$357,691,000), of which $149,818,000 (2016: $nil) are denominated in Singapore dollar and $336,878,000 (2016: $357,691,000) are
denominated in foreign currency. The fixed rate notes are unsecured and are due from 2019 to 2023 (2016: from 2020 to 2042),
with interest rates of 2.84% per annum for fixed rate notes denominated in Singapore dollar and 3.26% (2016: 3.26%) per annum
for fixed rate notes denominated in foreign currency.
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 amounted to $429,331,000 (2016: $529,146,000). The notes denominated in Singapore Dollars, are
unsecured and comprised fixed rate notes due from 2020 to 2024 (2016: 2017 to 2024) with interest rates ranging from 2.83% to
3.90% (2016: 2.83% to 3.90%) per annum.
At the end of the financial year, notes issued under the S$500,000,000 Multi-Currency Medium Term Note Programme by Keppel
Telecommunications & Transportation Ltd, amounted to $100,000,000 (2016: $120,000,000). The fixed rates notes, due in 2024,
are unsecured and carried an interest rate of 2.85% per annum from September 2017 to September 2022 and 3.85% per annum
from September 2022 to September 2024 (2016: 2.63% per annum from August 2012 to August 2017 and 3.83% per annum from
August 2017 to August 2019).
At the end of the financial year, US$200,000,000 notes issued under the US$2,000,000,000 Euro Medium Term Note Programme
by Keppel GMTN Pte Ltd amounted to $269,800,000 (2016: $286,600,000). The floating rate notes due in 2020 are unsecured
and bear interest rate payable quarterly at 3-month US Dollar London Interbank Offered Rate plus 0.89% per annum and ranging
from 1.75% to 2.24% (2016: 1.21% to 1.75%) per annum.
(e)
The secured bank loans consist of:
-
-
A term loan of $256,498,000 (2016: $351,557,000) drawn down by a subsidiary. The term loan is repayable in 2019 and is
secured on certain assets of the subsidiary. Interest is based on money market rates ranging from 1.35% to 1.94% (2016:
0.93% to 2.30%) per annum.
Other secured bank loans comprised $474,918,000 (2016: $504,943,000) of foreign currency loans. They are repayable
between one to sixteen (2016: one to seventeen) years and are secured on investment property and certain fixed and other
assets of the subsidiaries. Interest on foreign currency loans is based on money market rates ranging from 1.49% to 7.23%
(2016: 1.60% to 10.89%) per annum.
During the previous financial year,
-
-
-
A term loan of $175,874,000 was drawn down by a subsidiary. The term loan was repaid in 2017 and was previously secured
on certain assets of the subsidiary. Interest was based on money market rates ranging from 1.28% to 2.68% per annum.
A term loan of $53,121,000 was drawn down by a subsidiary. The term loan was repaid in 2017 and was previously secured
on certain assets of the subsidiary. Interest was based on money market rates ranging from 1.21% to 2.94% per annum.
A term loan of $50,000,000 was drawn down by a subsidiary. The term loan was repaid in 2017 and was previously secured
on certain assets of the subsidiary. Interest was fixed at 2.62% per annum.
(f)
The unsecured bank and other loans of the Group totalling $4,075,760,000 (2016: $4,924,110,000) comprised $2,823,820,000
(2016: $3,136,786,000) of loans denominated in Singapore dollar and $1,251,940,000 (2016: $1,787,324,000) of foreign currency
loans. They are repayable between one to fourteen (2016: one to fifteen) years. Interest on loans denominated in Singapore
dollar is based on money market rates ranging from 1.18% to 3.38% (2016: 0.84% to 3.38%) per annum. Interest on foreign currency
loans is based on money market rates ranging from 0.48% to 10.69% (2016: 0.25% to 13.76%) per annum.
The unsecured bank loans of the Company totalling $1,791,330,000 (2016: $2,317,911,000) comprise $1,550,000,000 (2016:
$1,707,350,000) of loans denominated in Singapore dollar and $241,330,000 (2016: $610,561,000) of foreign currency loans. They
are repayable within one to seven years (2016: one to seven years). Interest on loans denominated in Singapore dollar is based on
money market rates ranging from 1.46% to 3.38% (2016: 0.84% to 3.38%) per annum. Interest on foreign currency loans is based on
money market rates ranging from 0.50% to 2.10% (2016: 0.41% to 2.30%) per annum.
152
Financial Report
The Group has mortgaged certain properties and assets of up to an aggregate amount of $1,894,728,000 (2016: $2,810,528,000) to
banks for loan facilities.
The fair values of term loans for the Group and Company are $7,864,285,000 (2016: $9,055,975,000) and $3,556,370,000
(2016: $4,024,498,000) respectively. These fair values, under Level 2 of the fair value hierarchy, are computed on the discounted cash flow
method using a discount rate based upon the borrowing rate which the Group expect would be available as at the balance sheet date.
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. Deferred taxation
Deferred tax liabilities:
Accelerated tax depreciation
Investment properties valuation
Offshore income & others
Deferred tax assets:
Provisions
Unutilised tax benefits
Net deferred tax liabilities
Group
2017
$’000
2016
$’000
Company
2017
$’000
2016
$’000
1,403,471
3,174,902
1,500,546
1,839,458
3,027,749
2,350,514
-
1,900,000
1,039,800
400,000
1,000,000
1,925,600
6,078,919
7,217,721
2,939,800
3,325,600
Group
2017
$’000
108,936
184,429
90,502
383,867
(32,778)
(16,415)
(49,193)
2016
$’000
115,424
152,751
96,334
364,509
(29,711)
(3,623)
(33,334)
334,674
331,175
Net deferred tax liabilities are determined by offsetting deferred tax assets against deferred tax liabilities of the same entities. 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 unrecognised deferred tax liabilities of $96,255,000 (2016: $86,905,000) for taxes that would be payable on the
undistributed earnings of certain subsidiaries as these earnings would not be distributed in the foreseeable future and the Group is in a
position to control the timing of the reversal of the temporary differences.
The Group has unutilised tax losses and capital allowances of $886,858,000 (2016: $950,132,000) 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. Tax losses amounting to $227,747,000 (2016: $322,206,000) can be carried
forward for a period of one to five years subsequent to the year of the loss, while the remaining tax losses have no expiry date.
153
Keppel Corporation Limited | Report to Shareholders 2017
Notes to the Financial Statements
21. Deferred taxation (continued)
Movements in deferred tax liabilities and assets are as follows:
Charged/
(credited)
to other
Charged/ comprehen-
At
(credited) to
1 January profit or loss
$’000
$’000
sive Subsidiaries Subsidiaries
acquired
$’000
disposed
$’000
income
$’000
Reclassifi-
cation
$’000
Exchange
At
differences 31 December
$’000
$’000
Group
2017
Deferred Tax Liabilities
Accelerated tax depreciation
Investment properties valuation
Offshore income & others
Total
Deferred Tax Assets
Other provisions
Unutilised tax benefits
Total
115,424
152,751
96,334
364,509
(2,320)
32,196
(5,028)
24,848
(29,711)
(3,623)
(33,334)
(3,392)
(7,402)
(10,794)
-
-
898
898
229
-
229
(2,753)
-
(1,441)
(4,194)
(53)
(6,052)
(6,105)
Net Deferred Tax Liabilities
331,175
14,054
1,127
(10,299)
-
-
-
-
-
-
-
-
(1,195)
-
-
(1,195)
(49)
(131)
(180)
(220)
(518)
(261)
(999)
108,936
184,429
90,502
383,867
198
793
991
(32,778)
(16,415)
(49,193)
(1,375)
(8)
334,674
2016
Deferred Tax Liabilities
Accelerated tax depreciation
Investment properties valuation
Offshore income & others
Total
Deferred Tax Assets
Other provisions
Unutilised tax benefits
Total
123,573
148,684
137,972
410,229
(9,212)
9,662
(39,261)
(38,811)
(26,981)
(10,075)
(37,056)
(2,650)
6,292
3,642
-
-
(14)
(14)
-
-
-
-
(4,380)
(853)
(5,233)
(50)
-
(50)
1,208
-
-
1,208
-
-
-
Net Deferred Tax Liabilities
373,173
(35,169)
(14)
(5,283)
1,208
22. Revenue
Revenue from construction contracts
Sale of property
- Recognised on completion of construction method
- Recognised on percentage of completion method
Sale of goods
Rental income from investment properties
Revenue from services rendered
Sale of investments
Dividend income from quoted shares
Others
23. Staff costs
Wages and salaries
Employer’s contribution to Central Provident Fund
Share options and share plans granted to Directors and employees
Other staff benefits
154
-
-
-
-
(55)
-
(55)
(55)
(145)
(1,215)
(1,510)
(2,870)
115,424
152,751
96,334
364,509
25
160
185
(29,711)
(3,623)
(33,334)
(2,685)
331,175
Group
2017
$’000
2016
$’000
1,771,007
2,705,985
885,022
748,037
49,835
54,592
2,417,293
34,953
2,760
274
1,064,540
797,071
118,808
59,718
2,017,761
-
3,163
218
5,963,773
6,767,264
Group
2017
$’000
821,201
75,609
32,583
97,626
2016
$’000
909,671
80,687
39,969
125,055
1,027,019
1,155,382
Financial Report
24. Operating profit
Operating profit is arrived at after charging/(crediting) the following:
Included in direct costs:
Fair value (gain)/loss on
- investments
- forward foreign exchange contracts
Cost of stocks & properties held for sale recognised as expense
Direct operating expenses
- investment properties that generated rental income
Included in staff costs:
Key management’s emoluments
(including executive directors’ remuneration)
- short-term employee benefits
- post-employment benefits
- share options and share plans granted
Included in other operating expense/(income):
Rental expense
- operating leases
Impairment/write-off of fixed assets
(Write-back of impairment)/impairment of investments and associated companies
Provision for stocks and work-in-progress
Provision for doubtful debts
Fair value gain on investment properties (Note 7)
Fair value (gain)/loss on
- investments
- forward foreign exchange contracts
Gain on differences in foreign exchange
Profit on sale of fixed assets
(Profit)/loss on sale of investments
Gain on disposal of subsidiaries
Gain on disposal of associated companies
Adjustment to gain on disposal of data centres
Fees and other remuneration to Directors of the Company
Contracts for services rendered by Directors or with a company
in which a Director has a substantial financial interest
Auditors’ remuneration
- auditors of the Company
- other auditors of subsidiaries
Non-audit fees paid to
- auditors of the Company
- other auditors of subsidiaries
25.
Investment income, interest income and interest expenses
Investment income from:
Shares - quoted outside Singapore
Shares - unquoted
Interest income from:
Bonds, debentures and deposits
Associated companies
Interest expenses on notes, loans and overdrafts
Fair value (loss)/gain on interest rate caps and swaps
Group
2017
$’000
2016
$’000
(9,094)
3,305
1,165,049
(4,236)
(23,366)
1,376,888
27,528
20,975
10,783
124
7,740
13,618
102
6,956
94,090
15,530
(24,862)
84,377
34,780
(177,939)
(406)
35,181
(5,389)
(20,142)
(341)
(165,293)
(61,848)
-
2,341
3,926
2,770
2,218
135
129
Group
2017
$’000
129
19,742
19,871
85,306
52,622
105,618
121,934
119,971
74,532
11,435
(63,745)
15,914
(43,236)
(26,150)
(6,170)
4,123
(11,853)
-
(26,963)
2,139
2,973
2,357
2,463
54
245
2016
$’000
103
15,076
15,179
74,546
49,547
137,928
124,093
(189,223)
(4)
(225,760)
1,211
(189,227)
(224,549)
155
Keppel Corporation Limited | Report to Shareholders 2017
Notes to the Financial Statements
26. Taxation
(a)
Income tax expense
Tax expense comprised:
Current tax
Adjustment for prior year’s tax
Share of taxation of associated companies (Note 9)
Others
Deferred tax movement:
Movements in temporary differences (Note 21)
Group
2017
$’000
184,624
(6,365)
95,990
10,085
2016
$’000
243,458
(39,419)
72,361
(8,084)
14,054
(35,169)
298,388
233,147
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 due to the following:
Profit before tax
Tax calculated at tax rate of 17% (2016: 17%)
Income not subject to tax
Expenses not deductible for tax purposes
Utilisation of previously unrecognised tax benefits
Effect of different tax rates in other countries
Adjustment for prior year’s tax
(b) Movement in current income tax liabilities
At 1 January
Exchange differences
Tax expense
Adjustment for prior year’s tax
Net income taxes (paid)/received
Subsidiaries disposed
Reclassification
- tax recoverable and others
Group
2017
$’000
2016
$’000
515,567
1,054,922
87,646
(125,393)
319,770
(12,637)
35,367
(6,365)
179,337
(108,737)
199,795
(10,860)
13,031
(39,419)
298,388
233,147
Group
Company
2017
$’000
339,108
(4,939)
184,624
(6,365)
(321,729)
(2,981)
2016
$’000
352,595
(2,044)
243,458
(39,419)
(223,020)
(97)
2017
$’000
17,263
-
12,400
4,400
(108)
-
2016
$’000
15,867
-
7,700
(6,931)
627
-
6,581
7,635
-
-
At 31 December
194,299
339,108
33,955
17,263
156
Financial Report
27. Earnings per ordinary share
Net profit attributable to shareholders
Adjustment for dilutive potential ordinary shares
of subsidiaries and associated companies
Group
2017
$’000
2016
$’000
Basic
216,668
Diluted
216,668
Basic
783,928
Diluted
783,928
-
-
-
(443)
Adjusted net profit
216,668
216,668
783,928
783,485
Weighted average number of ordinary shares
(excluding treasury shares)
Adjustment for dilutive potential ordinary shares
Weighted average number of ordinary shares used
to compute earnings per share
(excluding treasury shares)
Number of Shares
’000
Number of Shares
’000
1,816,965
-
1,816,965
12,737
1,814,792
-
1,814,792
11,566
1,816,965
1,829,702
1,814,792
1,826,358
Earnings per ordinary share
11.9 cts
11.8 cts
43.2 cts
42.9 cts
28. Dividends
A final cash dividend of 14.0 cents per share tax exempt one-tier (2016: final cash dividend of 12.0 cents per share tax exempt one-tier)
in respect of the financial year ended 31 December 2017 has been proposed for approval by shareholders at the next Annual General
Meeting to be convened.
Together with the interim dividend comprising a cash dividend of 8.0 cents per share tax exempt one-tier (2016: cash dividend of 8.0
cents per share tax exempt one-tier), total distributions paid and proposed in respect of the financial year ended 31 December 2017 will
be 22.0 cents per share (2016: 20.0 cents per share).
During the financial year, the following distributions were made:
A final cash dividend of 12.0 cents per share tax exempt one-tier on the issued
and fully paid ordinary shares in respect of the previous financial year
An interim cash dividend of 8.0 cents per share tax exempt one-tier on the issued
and fully paid ordinary shares in respect of the current financial year
$’000
218,117
145,414
363,531
157
Keppel Corporation Limited | Report to Shareholders 2017
Notes to the Financial Statements
29. Commitments
(a)
Capital commitments
Capital expenditure/commitments not provided for in the financial statements:
In respect of contracts placed:
- for purchase and construction of investment properties
- for purchase of other fixed assets
- for purchase/subscription of shares mainly in property development companies
- for commitments to private funds
- for construction of desalination plant
Amounts approved by Directors in addition to contracts placed:
- for purchase and construction of investment properties
- for purchase of other fixed assets
- for purchase/subscription of shares mainly in property development companies
Less: Non-controlling shareholders’ shares
Group
2017
$’000
2016
$’000
175,759
17,341
174,311
450,247
165,814
105,115
224,903
36,509
1,349,999
(69,698)
261,950
46,730
376,308
169,953
-
108,422
313,196
-
1,276,559
(34,584)
1,280,301
1,241,975
There was no significant future capital expenditure/commitment for 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 is as follows:
Years after year-end:
Within one year
From two to five years
After five years
Group
2017
$’000
89,315
300,506
684,204
2016
$’000
94,214
326,154
806,359
1,074,025
1,226,727
Company
2017
$’000
40
-
-
40
2016
$’000
121
40
-
161
(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 is as follows:
Years after year-end:
Within one year
From two to five years
After five years
Group
2017
$’000
88,087
166,553
61,638
2016
$’000
104,100
212,861
81,721
316,278
398,682
Company
2017
$’000
2016
$’000
-
-
-
-
-
-
-
-
Some of the operating leases are subject to revision of lease rentals at periodic intervals. For the purposes of the above, the
prevailing lease rentals are used.
158
Financial Report
30. Contingent liabilities and guarantees (unsecured)
Guarantees in respect of banks and other loans
granted to subsidiaries and associated companies
Bank guarantees
Others
Group
2017
$’000
585,207
1,677
-
2016
$’000
469,263
5,328
327
Company
2017
$’000
1,574,853
-
-
2016
$’000
1,715,102
-
-
586,884
474,918
1,574,853
1,715,102
The financial effects of 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.
31. Significant related party transactions
In addition to the related party information disclosed elsewhere in the financial statements, the Group has significant related party
transactions as follows:
Sales of goods and/or services to
- associated companies
- other related parties
Purchase of goods and/or services from
- associated companies
- other related parties
Treasury transactions with
- associated companies
32. Financial risk management
Group
2017
$’000
168,705
82,884
2016
$’000
205,489
103,749
251,589
309,238
83,761
28,842
79,384
48,057
112,603
127,441
9,093
10,546
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 Chief Financial
Officer of the Company and includes Chief Financial Officers of the Group’s key operating companies and Head Office specialists.
Market Risk
(i)
Currency risk
The Group has receivables and payables denominated in foreign currencies viz US dollars, Renminbi and other currencies. The
Group’s foreign currency exposures arise mainly from the exchange rate movement of these foreign currencies against the
functional currencies of the respective Group entities. To hedge against the volatility of future cash flows 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 cash flow 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
$6,344,009,000 (2016: $7,865,165,000). The net positive fair value of forward foreign exchange contracts is $58,266,000
(2016: net negative fair value of $270,025,000) comprising assets of $105,511,000 (2016: $138,169,000) and liabilities of $47,245,000
(2016: $408,194,000). These amounts are recognised as derivative assets and derivative liabilities.
As at the end of the financial year, the Company has outstanding forward foreign exchange contracts with notional amounts
totalling $6,269,592,000 (2016: $7,716,396,000). The net positive fair value of forward foreign exchange contracts is $56,859,000
(2016: net negative fair value of $265,342,000) comprising assets of $104,045,000 (2016: $137,860,000) and liabilities of
$47,186,000 (2016: $403,202,000). These amounts are recognised as derivative assets and derivative liabilities.
159
Keppel Corporation Limited | Report to Shareholders 2017
Notes to the Financial Statements
32. Financial risk management (continued)
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:
Group
Financial Assets
Debtors
Investments
Bank balances, deposits & cash
Financial Liabilities
Creditors
Term loans
Company
Financial Assets
Debtors
Bank balances, deposits & cash
USD
$’000
2017
RMB
$’000
Others
$’000
USD
$’000
187,377
278,092
140,111
68,066
55,896
1,001
-
245,835
90,994
98,973
14,323
214
-
52,988
241,330
157,984
248,108
324,295
67,650
504,611
2016
RMB
$’000
1,376
-
94,344
Others
$’000
85,427
56,334
24,578
148
-
24,045
210,281
-
1
52
330
-
13
40
97
65
527
2
11
Sensitivity analysis for currency risk
If the relevant foreign currency change against SGD by 5% (2016: 5%) with all other variables held constant, the effects will be as
follows:
Group
USD against SGD
- Strengthened
- Weakened
RMB against SGD
- Strengthened
- Weakened
Company
USD against SGD
- Strengthened
- Weakened
RMB against SGD
- Strengthened
- Weakened
Profit before tax
2017
$’000
2016
$’000
Equity
2017
$’000
2016
$’000
10,109
(10,109)
12,331
(12,331)
-
-
19
(19)
(4,524)
4,524
4,778
(4,778)
7
(7)
28
(28)
13,812
(13,812)
12,466
(12,466)
-
-
-
-
-
-
-
-
-
-
-
-
(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 enters into interest rate swap agreements to hedge the interest rate risk exposure arising from its SGD, USD and
Renminbi 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 $1,778,962,000 (2016: $1,678,235,000) whereby it receives variable rates equal to SIBOR and LIBOR
(2016: SIBOR, LIBOR and SHIBOR) and pays fixed rates of between 1.27% and 3.62% (2016: 1.27% and 4.90%) on the notional
amount.
The net negative fair value of interest rate swaps for the Group is $58,025,000 (2016: net negative fair value of $10,605,000)
comprising assets of $4,339,000 (2016: $2,703,000) and liabilities of $62,364,000 (2016: $13,308,000). These amounts are
recognised as derivative assets and derivative liabilities.
Sensitivity analysis for interest rate risk
If interest rates increase/decrease by 0.5% (2016: 0.5%) with all other variables held constant, the Group’s profit before tax would
have been lower/higher by $13,649,000 (2016: $19,060,000) as a result of higher/lower interest expense on floating rate loans.
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Financial Report
(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 benchmark fuel price indices, High Sulphur
Fuel Oil (HSFO) 180-CST and Dated Brent. As at the end of the financial year, the Group has outstanding HSFO forward contracts
with notional amounts totalling $542,679,000 (2016: $579,270,000). The net positive fair value of HSFO forward contracts for
the Group is $89,599,000 (2016: net positive fair value of $57,122,000) comprising assets of $97,957,000 (2016: $83,215,000) and
liabilities of $8,358,000 (2016: $26,093,000). These amounts are recognised as derivative assets and derivative liabilities. The
Group has no outstanding Dated Brent forward contracts as at 31 December 2016 and 2017.
The Group hedges against fluctuations in electricity prices via its daily sales of electricity. Exposure to price fluctuations is
managed via electricity futures contracts. As at the end of the financial year, the Group has outstanding electricity futures
contracts with notional amounts totalling $47,042,000 (2016: $6,964,000). The net negative fair values of electricity futures
contracts is $2,297,000 (2016: net negative fair value of $124,000) comprising assets of $199,000 (2016: $405,000) and liabilities of
$2,496,000 (2016: $529,000). These amount are recognised as derivative assets and derivative liabilities.
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% (2016: 5%) with all other variables held constant, the Group’s hedging reserve in equity
would have been higher/lower by $30,635,000 (2016: $31,820,000) as a result of fair value changes on cash flow hedges.
If prices for electricity futures contracts increase/decrease by 5% (2016: 5%) with all other variables held constant, the Group’s
hedging reserve in equity would have been lower/higher by $2,467,000 (2016: $15,000) as a result of fair value changes on cash
flow hedges.
If prices for quoted investments increase/decrease by 5% (2016: 5%) with all other variables held constant, the Group’s profit before
tax would have been higher/lower by $8,965,000 (2016: $7,353,000) as a result of higher/lower fair value gains on investments
held for trading, and the Group’s fair value reserve in other comprehensive income would have been higher/lower by $3,195,000
(2016: $4,507,000) as a result of higher/lower fair value gains on available-for-sale investments.
The various sensitivity rates used in the sensitivity analysis for currency, interest rate and price risks represent rates generally used
internally by management when assessing the various risks.
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. 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 debtors, amounts due from associated
companies and bank balances, deposits and cash.
(i)
Financial assets that are neither past due nor impaired
Debtors and amounts due from associated companies 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.
(ii)
Financial assets that are past due but not impaired/partially impaired
The age analysis of trade debtors past due but not impaired/partially impaired is as follows:
Past due zero to three months but not impaired
Past due three to six months but not impaired
Past due over six months and partially impaired
Group
2017
$’000
88,280
74,420
1,180,123
2016
$’000
120,531
74,905
1,262,615
1,342,823
1,458,051
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.
161
Keppel Corporation Limited | Report to Shareholders 2017
Notes to the Financial Statements
32. Financial risk management (continued)
Liquidity Risk
Prudent liquidity risk management requires the Group to maintain sufficient cash and marketable securities, internally generated cash
flows, and the availability of funding resources through an adequate amount of committed credit facilities. Group Treasury Department
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.
The following table details the liquidity analysis for derivative financial instruments and borrowings of the Group and the Company
based on contractual undiscounted cash inflows/(outflows).
Group
2017
Gross-settled forward foreign exchange contracts
- Receipts
- Payments
Net-settled HSFO forward contracts
- Receipts
- Payments
Net-settled electricity futures contracts
- Receipts
- Payments
Borrowings
2016
Gross-settled forward foreign exchange contracts
- Receipts
- Payments
Net-settled HSFO forward contracts
- Receipts
- Payments
Net-settled electricity futures contracts
- Receipts
- Payments
Borrowings
Company
2017
Gross-settled forward foreign exchange contracts
- Receipts
- Payments
Borrowings
2016
Gross-settled forward foreign exchange contracts
- Receipts
- Payments
Borrowings
Within
one year
$’000
Within
one to
two years
$’000
Within
two to
five years
$’000
After
five years
$’000
5,367,540
(5,310,740)
989,250
(989,397)
85,426
(4,564)
12,150
(1,841)
48,742
(50,423)
381
(1,953)
-
-
-
-
52
(2,390)
(1,903,567)
147
(106)
(1,567,496)
-
-
(3,457,684)
-
-
(1,884,254)
5,417,222
(5,688,831)
1,419,776
(1,402,107)
681,250
(663,117)
55,851
(17,390)
25,690
(7,354)
1,673
(1,349)
-
-
-
-
513
(495)
(1,542,315)
-
(142)
(2,011,240)
-
-
(3,415,261)
-
-
(2,794,455)
5,306,832
(5,251,003)
(644,666)
973,865
(974,631)
(85,514)
48,742
(50,423)
(2,096,221)
-
-
(1,333,585)
5,286,287
(5,559,747)
(312,060)
1,405,221
(1,387,357)
(486,119)
675,651
(657,486)
(1,230,036)
-
-
(2,262,454)
In addition to the above, creditors (Note 18) of the Group and the Company have a maturity profile of within one year from the balance
sheet date.
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. The Group’s current strategy remains unchanged from the previous financial year. The Group and the Company
are in compliance with externally imposed capital undertakings for the financial year ended 31 December 2017. Externally imposed
capital undertakings are mainly debt covenants included in certain loans of the Group and the Company requiring the Group or certain
subsidiaries of the Company to maintain net gearing to total equity not exceeding ratios ranging from 2.00 to 3.00 times.
162
Financial Report
Management monitors capital based on the Group net gearing. The Group net gearing is calculated as net borrowings divided by total
equity. Net borrowings are calculated as bank balances, deposits & cash (Note 17) less total term loans (Note 20).
Net debt
Total equity
Net gearing ratio
Group
2017
$’000
5,519,215
11,960,434
0.46x
2016
$’000
6,965,964
12,333,640
0.56x
Fair Value of Financial Instruments and Investment Properties
The Group classifies fair value measurement using a fair value hierarchy that reflects the significance of the inputs used in making the
measurement. The fair value hierarchy has the following levels:
•
•
•
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices)
Level 3 - Inputs for the asset or liability that are not based on observable market data (unobservable inputs). Fair value is
determined by reference to the net tangible assets of the investments.
The following table presents the assets and liabilities measured at fair value.
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total
$’000
Group
2017
Financial assets
Derivative financial instruments
Call option
Investments
- Available-for-sale investments
- Investments at fair value through profit or loss
Short term investments
- Available-for-sale investments
- Investments held for trading
Financial liabilities
Derivative financial instruments
Non-financial assets
Investment Properties
- Commercial and residential, completed
- Commercial, under construction
Group
2016
Financial assets
Derivative financial instruments
Call option
Investments
- Available-for-sale investments
- Investments at fair value through profit or loss
Short term investments
- Available-for-sale investments
- Investments held for trading
Financial liabilities
Derivative financial instruments
Non-financial assets
Investment Properties
- Commercial and residential, completed
- Commercial, under construction
-
-
8,854
31,647
55,048
147,654
208,006
-
-
43,250
-
-
-
137,200
238,606
30,813
-
74
243,203
251,256
406,693
208,006
137,200
247,460
105,710
55,048
147,728
901,152
-
-
-
-
-
-
12,878
-
77,264
147,054
237,196
-
-
-
-
120,463
-
120,463
-
-
-
1,404,294
2,056,314
1,404,294
2,056,314
3,460,608
3,460,608
224,492
-
11,788
-
49,610
-
-
120,600
221,890
8,973
-
-
285,890
351,463
224,492
120,600
246,556
8,973
126,874
147,054
874,549
448,124
-
448,124
-
-
-
1,639,368
1,910,922
1,639,368
1,910,922
3,550,290
3,550,290
163
Keppel Corporation Limited | Report to Shareholders 2017
Notes to the Financial Statements
32. Financial risk management (continued)
Company
2017
Financial assets
Derivative financial instruments
Investments
- Available-for-sale investments
Financial liabilities
Derivative financial instruments
2016
Financial assets
Derivative financial instruments
Investments
- Available-for-sale investments
Financial liabilities
Derivative financial instruments
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total
$’000
-
-
-
-
-
-
-
-
107,631
-
107,631
-
15,012
15,012
107,631
15,012
122,643
90,049
140,122
-
-
90,049
140,122
-
14,340
14,340
140,122
14,340
154,462
411,945
-
411,945
There have been no transfers between Level 1, Level 2 and Level 3 for the Group and Company in 2017 and 2016.
The following table presents the reconciliation of financial instruments measured at fair value based on significant unobservable inputs
(Level 3).
At 1 January
Purchases
Sales
Impairment loss
Fair value gain recognised in other comprehensive income
Fair value gain recognised in profit or loss
Exchange differences
Group
Company
2017
$’000
351,463
22,522
(8,265)
-
17,062
24,199
(288)
2016
$’000
311,988
56,200
(53,629)
(183)
30,955
5,962
170
2017
$’000
14,340
-
-
-
672
-
-
At 31 December
406,693
351,463
15,012
2016
$’000
-
-
-
-
14,340
-
-
14,340
The following table presents the reconciliation of investment properties measured at fair value based on significant unobservable inputs
(Level 3).
At 1 January
Development expenditure
Fair value gain
Subsidiary disposed
Reclassification
- Stocks and work-in-progress
- Fixed assets
Exchange differences
At 31 December
Group
2017
$’000
3,550,290
181,522
182,753
(405,604)
-
1,376
(49,729)
2016
$’000
3,272,112
257,865
70,418
(74,062)
89,131
50,040
(115,214)
3,460,608
3,550,290
The fair value of financial instruments categorised under Level 1 of the fair value hierarchy is based on published market bid prices at the
balance sheet date.
164
Financial Report
The fair value of financial instruments categorised under Level 2 of the fair value hierarchy are fair valued under valuation techniques
with market observable inputs. These include forward pricing and swap models utilising present value calculations using inputs such as
observable foreign exchange rates (forward and spot rates), interest rate curves and forward rate curves and discount rates that reflects
the credit risks of various counterparties. The fair value of investment at fair value through profit or loss categorised under Level 2 of the
fair value hierarchy is based on the consideration specified in a sales and purchase agreement.
The following table presents the valuation techniques and key inputs that were used to determine the fair value of financial instruments
and investment properties categorised under Level 3 of the fair value hierarchy.
Description
Investments
Call option
Fair value
as at
31 December
2017
$’000
269,493
Valuation
Techniques
Net asset value and/or
discounted cash flow
137,200
Direct comparison method and
investment method
Investment Properties
- Commercial and residential,
completed
1,404,294
Direct comparison method,
investment method, cost
replacement method and/or
discounted cash flow method
- Commercial, under construction
2,056,314
Direct comparison method, and/or
residual method
Description
Investments
Call option
Fair value
as at
31 December
2016
$’000
230,863
Valuation
Techniques
Net asset value and/or
discounted cash flow
120,600
Direct comparison method and
investment method
Investment Properties
- Commercial and residential,
completed
1,639,368
Direct comparison method,
investment method, income
capitalisation method,
cost replacement method
and/or discounted cash flow
method
- Commercial, under construction
1,910,922
Direct comparison method,
and/or residual method
Unobservable
Inputs
Net asset value*
Discount rate
Transacted price of
comparable properties
(psf)
Capitalisation rate
Discount rate
Terminal yield
Capitalisation rate
Price of comparable
land plots (psm)
Transacted price of
comparable properties
(psf)
Price of comparable
land plots (psm)
Gross development
value ($’million)
Unobservable
Inputs
Net asset value*
Discount rate
Transacted price of
comparable
properties (psf)
Capitalisation rate
Discount rate
Occupancy rate
Terminal yield
Capitalisation rate
Price of comparable
land plots (psm)
Transacted price of
comparable properties
(psf)
Price of comparable
land plots (psm)
Gross development
value ($’million)
Range of
Unobservable
Inputs
Not applicable
11%
$2,600 to $3,200
3.5% to 3.75%
11.50% to 13.00%
7.00%
2.80% to 12.50%
$7,627 to $12,463
$1,321 to $2,500
$7,627 to $12,463
$588 to $1,866
Range of
Unobservable
Inputs
Not applicable
11%
$3,000 to $3,400
3.5% to 3.75%
7.50% to 13.70%
95%
7.25% to 7.70%
2.80% to 12.50%
$9,513 to $13,213
$1,296 to $2,100
$9,513 to $13,213
$629 to $1,699
*
Fair value of unquoted equity instruments is determined by reference to the underlying assets value of the investee companies, which comprise mainly
investment properties stated at fair value.
165
Keppel Corporation Limited | Report to Shareholders 2017
Notes to the Financial Statements
32. Financial risk management (continued)
The financial instruments and investment properties categorised under Level 3 of the fair value hierarchy are generally sensitive to the
various unobservable inputs tabled above. A significant movement of each input would result in significant change to the fair value of
the respective asset/liability.
The Group’s finance team assessed the fair value of available-for-sale investments on a quarterly basis.
Valuation process of investment properties is described in Note 7.
33. Segment analysis
The Group is organised into business units based on their products and services, and has four reportable operating segments as follows:
(i) Offshore & Marine
Principal activities include offshore rig design, construction, repair and upgrading, ship conversions and repair, and specialised
shipbuilding. The Division has operations in Brazil, China, Singapore, United States and other countries.
(ii) Property
Principal activities include property development and investment, and property fund management. The Division has operations in
Australia, China, India, Indonesia, Singapore, Vietnam and other countries.
(iii)
(iv)
Infrastructure
Principal activities include environmental engineering, power generation, logistics and data centres. The Division has operations in
China, Qatar, Singapore, United Kingdom and other countries.
Investments
The Investments Division consists mainly of the Group’s investments in fund management, KrisEnergy Limited, M1 Limited,
k1 Ventures Ltd, Sino-Singapore Tianjin Eco-City Investment and Development Co., Limited and equities.
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Financial Report
Management monitors the results of each of the above operating segments for the purpose of making decisions about resource
allocation and performance assessment. Segment performance is evaluated based on net profit or loss. Information regarding the
Group’s reportable segments is presented in the following table:
2017
Revenue
External sales
Inter-segment sales
Total
Segment Results
Operating (loss)/profit
One-off financial penalty &
related costs
Investment income
Interest income
Interest expenses
Share of results of associated
companies
(Loss)/Profit before tax
Taxation
(Loss)/Profit for the year
Attributable to:
Shareholders of Company
Non-controlling interests
Other information
Segment assets
Segment liabilities
Net assets
Investment in associated companies
Additions to non-current assets
Depreciation and amortisation
Impairment loss/(write-back of
impairment loss)
Geographical information
Offshore
& Marine
$’000
Property
$’000
Infrastructure
$’000
Investments
$’000
Elimination
$’000
Total
$’000
1,801,347
584
1,801,931
1,782,343
6,217
1,788,560
2,207,162
20,031
2,227,193
172,921
62,795
235,716
-
(89,627)
(89,627)
5,963,773
-
5,963,773
(176,407)
656,200
122,309
173,477
99
775,678
(618,722)
2,112
50,897
(127,080)
6,692
(862,508)
4,838
(857,670)
-
12,377
40,413
(67,053)
225,562
867,499
(187,180)
680,319
-
-
47,801
(16,009)
12,590
166,691
(27,800)
138,891
-
5,382
263,754
(243,923)
145,195
343,885
(88,246)
255,639
-
-
(264,937)
264,838
-
-
-
-
(618,722)
19,871
137,928
(189,227)
390,039
515,567
(298,388)
217,179
(835,433)
(22,237)
(857,670)
684,858
(4,539)
680,319
131,730
7,161
138,891
235,513
20,126
255,639
-
-
-
216,668
511
217,179
9,542,565
8,353,177
1,189,388
14,949,530
6,892,999
8,056,531
690,086
183,879
129,527
2,918,425
342,337
36,869
3,417,867
1,867,633
1,550,234
1,032,008
224,996
43,953
11,096,071
9,931,790
1,164,281
1,260,733
173,216
2,031
109,800
8,499
2,554
(45,808)
(10,893,244)
(10,893,244)
-
-
-
-
-
28,112,789
16,152,355
11,960,434
5,901,252
924,428
212,380
75,045
External sales
Non-current assets
Singapore
$’000
3,969,057
5,925,269
China
$’000
807,780
3,367,171
Other Far East
& ASEAN
countries
$’000
436,187
1,473,070
Brazil
$’000
456,727
267,965
Other
countries
$’000
294,022
893,942
Elimination
$’000
Total
$’000
-
-
5,963,773
11,927,417
Other than Singapore and China, no single country accounted for 10% or more of the Group’s revenue for the financial year ended
31 December 2017.
Information about a major customer
No single external customer accounted for 10% or more of the Group’s revenue for the financial year ended 31 December 2017.
Note: Pricing of inter-segment goods and services is at fair market value.
167
Keppel Corporation Limited | Report to Shareholders 2017
Notes to the Financial Statements
33. Segment analysis (continued)
2016
Revenue
External sales
Inter-segment sales
Total
Segment Results
Operating profit
Investment income
Interest income
Interest expenses
Share of results of associated
companies
Profit before tax
Taxation
Profit for the year
Attributable to:
Shareholders of Company
Non-controlling interests
Other information
Segment assets
Segment liabilities
Net assets
Investment in associated companies
Additions to non-current assets
Depreciation and amortisation
Impairment loss/(write-back of
impairment loss)
Geographical information
Offshore
& Marine
$’000
Property
$’000
Infrastructure
$’000
Investments
$’000
Elimination
$’000
Total
$’000
2,853,509
405
2,853,914
2,035,435
6,445
2,041,880
1,744,075
24,537
1,768,612
134,245
67,188
201,433
-
(98,575)
(98,575)
6,767,264
-
6,767,264
134,972
940
58,180
(151,718)
47,384
89,758
(40,911)
48,847
504,744
12,031
26,845
(62,036)
277,277
758,861
(132,631)
626,230
93,766
(6)
45,729
(18,347)
1,900
123,042
(23,005)
100,037
48,429
2,214
251,312
(237,119)
18,425
83,261
(36,600)
46,661
28,491
20,356
48,847
620,281
5,949
626,230
98,856
1,181
100,037
36,300
10,361
46,661
13,302
-
(257,973)
244,671
-
-
-
-
-
-
-
795,213
15,179
124,093
(224,549)
344,986
1,054,922
(233,147)
821,775
783,928
37,847
821,775
10,321,883
8,418,854
1,903,029
16,043,419
6,901,118
9,142,301
3,338,699
1,833,488
1,505,211
6,873,596
7,090,497
(216,901)
(7,343,443)
(7,343,443)
-
29,234,154
16,900,514
12,333,640
587,366
93,434
164,775
2,806,570
412,073
27,888
993,847
311,650
42,076
1,024,798
1,283
1,736
278,643
(50,398)
34,548
46,000
-
-
-
-
5,412,581
818,440
236,475
308,793
External sales
Non-current assets
Singapore
$’000
4,405,789
6,089,036
China
$’000
1,101,948
3,076,821
Other Far East
& ASEAN
countries
$’000
478,099
1,501,665
Brazil
$’000
390,663
316,728
Other
countries
$’000
390,765
764,746
Elimination
$’000
Total
$’000
-
-
6,767,264
11,748,996
Other than Singapore and China, no single country accounted for 10% or more of the Group’s revenue for the financial year ended
31 December 2016.
Information about a major customer
No single external customer accounted for 10% or more of the Group’s revenue for the financial year ended 31 December 2016.
Note: Pricing of inter-segment goods and services is at fair market value.
168
Financial Report
34. New accounting standards and interpretations
Full convergence with International Financial Reporting Standards (IFRS) and adoption of new standards
Singapore-incorporated companies listed on the Singapore Exchange are required to apply a new financial reporting framework
identical to the IFRS, Singapore Financial Reporting Standards (International) (SFRS(I)s), for annual periods beginning on or after 1 January
2018.
The Group has adopted SFRS(I)s on 1 January 2018 and as a result, the Group’s financial statements for the financial year ending
31 December 2018 will be prepared in accordance with SFRS(I)s.
In adopting SFRS(I)s, the Group is required to apply all of the specific transition requirements in SFRS(I) 1 First-time Adoption of Singapore
Financial Reporting Standards (International). The Group expects that the adoption of SFRS(I)s will have no material impact on the financial
statements in the year of initial application, other than the election of optional exemption to reset its cumulative translation differences
for all foreign operations to nil at the date of transition at 1 January 2017. As a result, the Group expects to reclassify cumulative translation
losses of $280,787,000 from foreign exchange translation account to revenue reserves as at 1 January 2017. After the date of transition,
any gain or loss on disposal of any foreign operations will exclude translation differences that arose before the date of transition.
In addition to the adoption of SFRS(I)s, the following SFRS(I)s, and amendments and interpretations of SFRS(I)s that are relevant to the
Group and the Company are effective on or after the same date.
•
•
•
•
•
•
•
SFRS(I) 15 Revenue from Contracts with Customers
SFRS(I) 9 Financial Instruments
SFRS(I) 16 Leases
Amendments to SFRS(I) 9 Prepayment Features with Negative Compensation
Amendments to SFRS(I) 1-28 Long-term Interests in Associates and Joint Ventures
SFRS(I) INT 22 Foreign Currency Transactions and Advance Consideration
SFRS(I) INT 23 Uncertainty over Income Tax Treatments
The management anticipates that the adoption of the above standards and interpretations in future periods will not have a material
impact on the financial statements of the Group and of the Company in the period of their initial adoption except for the following:
SFRS(I) 15 Revenue from Contracts with Customers
SFRS(I) 15 establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers.
The core principle of SFRS(I) 15 is that an entity should recognise revenue to depict the transfer of promised goods or services to
customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or
services. Specifically, the standard introduces a 5-step approach to revenue recognition:
•
•
•
•
•
Step 1: Identify the contract(s) with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation
Under SFRS(I) 15, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e. when ‘control’ of the goods or
services underlying the particular performance obligation is transferred to the customer. Far more prescriptive guidance has been added
in SFRS(I) 15 to deal with specific scenarios. Furthermore, extensive disclosures are required by SFRS(I) 15.
SFRS(I) 15 will take effect from financial years beginning on or after 1 January 2018. In accordance with the requirements of SFRS(I) 1, the
Group will adopt SFRS(I) 15 retrospectively. The Group is currently finalising the transition adjustments.
SFRS(I) 9 Financial Instruments
SFRS(I) 9 introduces new requirements for classification and measurement of financial instruments, impairment of financial assets, and
hedge accounting. SFRS(I) 9 also introduces expanded disclosure requirements and changes in presentation. The adoption of SFRS(I)
9 will have an effect on the classification and measurement of the Group’s financial assets, but no impact on the classification and
measurement of the Group’s financial liabilities.
SFRS(I) 9 will take effect from financial years beginning on or after 1 January 2018. The Group plans to elect to apply the short-term
exemption under SFRS(I) 1, which exempt the Group from applying SFRS(I) 9 to comparative information. The Group is currently finalising
the transition adjustments.
169
Keppel Corporation Limited | Report to Shareholders 2017
Notes to the Financial Statements
34. New accounting standards and interpretations (continued)
SFRS(I) 16 Leases
SFRS(I) 16 will result in almost all leases being recognised on the balance sheet, as the distinction between operating and finance leases
is removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals are recognised. The
only exceptions are short-term and low-value leases. The accounting for lessors will not change significantly.
Some of the commitments may be covered by the exception for short-term and low-value leases and some commitments may relate to
arrangements that will not qualify as leases under SFRS(I) 16.
The standard also introduces expanded disclosure requirements and changes in presentation.
SFRS(I) 16 will take effect from financial years beginning on or after 1 January 2019.
The standard will affect primarily the accounting for the Group’s operating leases. The future minimum rental expense payable under
significant non-cancellable leases is disclosed in Note 29. The Group has yet to determine to what extent these commitments will result
in the recognition of an asset and a liability for future payments and how this will affect the Group’s profit and classification of cash flows.
35. Subsquent event
Civil action by EIG funds
In February 2018, the Company’s subsidiary, Keppel Offshore & Marine Limited (“KOM”) was served a summons by eight investment
funds (“plaintiffs”) managed by EIG Management Company, LLC (“EIG”) where a civil action was commenced by the plaintiffs pursuant
to the Racketeer Influenced and Corrupt Organizations Act (“RICO”) in the United States District Court, Southern District of New York. The
plaintiffs seek damages for its loss of investment of US$221 million in Sete Brasil, trebled under RICO to US$663 million, plus interest,
costs and mandatory attorneys’ fees under RICO.
This new lawsuit came after an earlier civil action commenced by eight of EIG’s managed funds in the United States District Court, District
of Columbia against, among others, the Company and KOM. The case was dismissed by the Court on 30 March 2017.
Management is of the view that the reported cause of action by the plaintiffs is without merit and KOM will vigorously defend itself.
As at the date of these financial statements, it is premature to predict or determine the eventual outcome of the action and hence, the
potential amount of any loss cannot currently be assessed. KOM anticipates filing a motion to dismiss EIG’s complaint.
36. 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.
170
Financial Report
Significant Subsidiaries and Associated Companies
Gross
Interest
Effective Equity
Interest
Cost of Investment
2017
%
2017
%
2016
%
2017
$’000
2016
$’000
Country of
Incorporation
/Operation
Principal Activities
OFFSHORE & MARINE
Offshore
Subsidiaries
Keppel Offshore & Marine Ltd
Keppel FELS Ltd
100
100
100
100
100
100
Angra Propriedades &
Administracao Ltd (1a)
Deepwater Technology Group
Pte Ltd
100
100
100
100
100
100
Estaleiro BrasFELS Ltda (1a)
100
100
100
FELS Offshore Pte Ltd
Fernvale Pte Ltd
100
100
100
100
100
100
FSTP Brasil Ltda (1a)
75
75
75
FSTP Pte Ltd
75
75
75
Greenwood Pte Ltd
Guanabara Navegacao Ltda (1a)
Keppel AmFELS, LLC
100
100
100
100
100
100
100
100
100
Keppel FELS Baltech Ltd (1a)
100
100
100
Keppel FELS Brasil SA (1a)
100
100
100
Keppel Letourneau USA, Inc
100
100
100
Keppel Offshore & Marine
Engineering Services Mumbai
Pte Ltd (1a)
Keppel Offshore & Marine
Technology Centre Pte Ltd
100
100
100
100
100
100
Keppel Offshore & Marine USA Inc
Keppel Sea Scan Pte Ltd
100
100
100
100
100
100
Keppel Verolme BV (3)
KV Enterprises BV (3)
KVE Adminstradora de Bens
Imoveis Ltda (1a)
-
100
100
-
100
100
100
100
100
Lindel Pte Ltd
100
100
100
Offshore Technology
Development Pte Ltd
100
100
100
801,720
801,720
Singapore
Investment holding
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
Singapore
#
#
Brazil
Singapore
#
Brazil
Construction, fabrication and repair of
offshore production facilities and
drilling rigs, power barges, specialised
vessels and other offshore production
facilities
Holding of long-term investments and
property management
Research and experimental
development on deepwater
engineering
Engineering, construction and
fabrication of platforms for the oil and
gas sector, shipyard works and other
general business activities
#
#
Singapore
Holding of long-term investments
Singapore
Construction, fabrication and repair of
drilling rigs and offshore production
facilities
#
Brazil
Procurement of equipment and
materials for the construction of
offshore production facilities
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
Singapore
Project management, engineering and
procurement
Singapore
Holding of long-term investments
Brazil
USA
Bulgaria
Brazil
USA
India
Ship owning
Construction and repair of offshore
drilling rigs and offshore production
facilities
Marine and offshore engineering
services
Engineering, construction and
fabrication of platforms for the oil and
gas industry
Design and license of various offshore
rigs and platforms
Marine and offshore engineering
services
Singapore
Research & development on marine
and offshore engineering
USA
Offshore and marine-related services
Singapore
Trading and installation of hardware,
industrial, marine and building related
products, leasing and provision of
services
Netherlands
Disposed
Netherlands
Holding of long-term investments
Brazil
Holding of long-term investments and
property management
Singapore
Project management, engineering and
procurement
Singapore
Production of jacking systems
171
Keppel Corporation Limited | Report to Shareholders 2017
Significant Subsidiaries and Associated Companies
Gross
Interest
Effective Equity
Interest
Cost of Investment
2017
%
2017
%
2016
%
2017
$’000
2016
$’000
Country of
Incorporation
/Operation
Principal Activities
Regency Steel Japan Ltd (1a)
51
51
51
Willalpha Limited (3)
100
100
100
Associated Companies
Asian Lift Pte Ltd
50
50
50
Atwin Offshore & Marine Pte Ltd (2)
FloaTEC Singapore Pte Ltd (2)
Floatel International Ltd (1a)
30
50
50
30
50
50
30
50
50
Marine Housing Services Pte Ltd
50
50
50
Seafox 5 Ltd (2)
49
49
49
Marine
Subsidiaries
Keppel Shipyard Ltd
100
100
100
Keppel Philippines Marine Inc (1a)
98
98
98
Alpine Engineering Services
Pte Ltd
100
100
100
Blastech Abrasives Pte Ltd
100
100
100
Keppel Nantong Heavy Industry
Co Ltd (1a)
Keppel Nantong Shipyard
Company Ltd (1a)
100
100
100
100
100
100
Keppel Singmarine Pte Ltd
100
100
100
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
Japan
Sourcing, fabricating and supply of
specialised steel components
BVI
Holding of long-term investments
Singapore
Provision of heavy-lift equipment and
related services
Singapore
Investment holding company
Singapore
Manufacturing and repair of oil rigs
Bermuda
Singapore
Isle of Man
Operating accommodation and
construction support vessels (floatels)
for the offshore oil and gas industry
Provision of housing services for marine
workers
Owning and leasing of multi-purpose
self-elevating platforms
Singapore
Ship repairing, shipbuilding and
conversions
Philippines
Shipbuilding and repairing
Singapore
Marine contracting
Singapore
Painting, blasting, shot blasting, process
and sale of slag
China
China
Engineering and construction of
specialised vessels
Engineering and construction of
specialised vessels
Singapore
Shipbuilding and repairing
Keppel Subic Shipyard Inc (1a)
87 +
86 +
86 +
3,020
3,020
Philippines
Shipbuilding and repairing
KS Investments Pte Ltd
KSI Production Pte Ltd (3)
Marine Technology Development
Pte Ltd
100
100
100
100
100
100
100
100
100
Associated Companies
Arab Heavy Industries PJSC (2)
Dyna-Mac Holdings Ltd
Keppel Smit Towage Pte Ltd (r)
Maju Maritime Pte Ltd (r)
Nakilat - Keppel Offshore &
Marine Ltd (2)
33
24
51
51
20
33
24
51
51
20
33
24
51
51
20
PV Keez Pte Ltd (2)
20
20
20
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
Singapore
Holding of long-term investments
BVI
Holding of long-term investments
Singapore
Provision of technical consultancy for
ship design and engineering works
UAE
Shipbuilding and repairing
Singapore
Investment holding
Singapore
Provision of towage services
Singapore
Provision of towage services
Qatar
Ship repairing
Singapore
Chartering of ships, barges and boats
with crew
PROPERTY
Subsidiaries
Keppel Land Ltd
100
100
100
4,793,367
4,716,367
Singapore
Holding, management and investment
company
Keppel Land China Ltd
Keppel Bay Pte Ltd
100
100
100
100
100
100
#
#
#
#
Singapore
Investment holding
Singapore
Property development
Keppel Philippines Properties Inc (1a)
87 +
87 +
80 +
493
493
Philippines
Investment holding
172
Financial Report
Gross
Interest
Effective Equity
Interest
Cost of Investment
2017
%
2017
%
2016
%
2017
$’000
2016
$’000
Aether Ltd (2)
Agathese Pte Ltd
Aintree Assets Ltd (3)
Bayfront Development Pte Ltd
Beijing Aether Property
Development Ltd (2)
Beijing Kingsley Property
Development Co Ltd (1a)
Broad Elite Investments Ltd (3)
Changzhou Fushi Housing
Development Pte Ltd (1a)
Chengdu Hillstreet Development
Co Ltd (1a)
Chengdu Hilltop Development
Co Ltd (1a)
Chengdu Shengshi Jingwei
Real Estate Co Ltd (1a)
Corredance Pte Ltd
Dattson Pte Ltd
DC REIT Holdings Pte Ltd
Double Peak Holdings Ltd (3)
Estella JV Co Ltd (1a)
Evergro Properties Ltd
First King Properties Ltd (3)
Floraville Estate Pte Ltd
Greenfield Development Pte Ltd
Harbourfront One Pte Ltd
Harvestland Development Pte Ltd
Hillsvale Resort Pte Ltd
Hillwest Pte Ltd
Jencity Ltd (3)
Jiangyin Evergro Properties
Co Ltd (1a)
KeplandeHub Ltd
Keppel Bay Property Development
(Shenyang) Co Ltd (1a)
Keppel China Marina Holdings
Pte Ltd
Keppel China Township
Development Pte Ltd
51
100
100
100
100
51
100
100
100
51
51
100
100
100
51
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
98
100
100
100
100
100
100
100
100
90
100
100
100
100
100
100
100
98
100
100
100
100
100
100
100
100
90
99
100
100
100
100
100
100
98
100
100
100
100
100
100
100
100
90
99
100
100
100
100
100
100
100
100
Keppel Digihub Holdings Ltd
100
100
100
Keppel Heights (Wuxi) Property
Development Co Ltd (1a)
Keppel Hong Da (Tianjin Eco-City)
Property Development Co Ltd (1a)
Keppel Hong Yuan
(Tianjin Eco-City) Property
Development Co Ltd (1a)
100
100
100
100
100
100 +
100
100
100 +
Keppel Lakefront (Nantong)
Property Development Co Ltd (3)
-
-
100
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
Country of
Incorporation
/Operation
Principal Activities
HK
Investment holding
Singapore
Investment holding
BVI
Investment holding
Singapore
Investment holding
China
Property investment
China
Property development
BVI
China
Investment holding
Property development
China
Property development
China
Property development
China
Property development
Singapore
Investment holding
Singapore
Investment holding
Singapore
Investment holding
BVI
Investment holding
Vietnam
Property development
Singapore
Investment holding
Jersey
Investment holding
Singapore
Investment holding
Singapore
Investment holding
Singapore
Property investment
Singapore
Property development
Singapore
Investment holding
Singapore
Investment holding
BVI
China
Investment holding
Property development
Singapore
Investment holding
China
Property development
Singapore
Investment holding
Singapore
Investment holding
Singapore
Investment, management and holding
company
China
Property development
China
Property development
China
Property development
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
China
Disposed
173
Keppel Corporation Limited | Report to Shareholders 2017
Significant Subsidiaries and Associated Companies
Gross
Interest
Effective Equity
Interest
Cost of Investment
2017
%
2017
%
2016
%
2017
$’000
2016
$’000
Country of
Incorporation
/Operation
Principal Activities
China
Property development
Singapore
Property development
HK
Investment holding
Singapore
Investment holding
Singapore
Financial services
Singapore
Property services
Singapore
Property development
Vietnam
Vietnam
Property development
Property development
Singapore
Investment holding
Singapore
Property management services,
consultancy services and investment
holding
#
#
#
#
#
#
#
#
#
#
#
#
Singapore
Investment holding
126,137
Singapore
Investment holding
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
China
Property development
Singapore
Investment holding
Singapore
Investment holding
Singapore
Investment holding
Singapore
Investment holding
HK
Investment holding
Singapore
Property development
Singapore
Investment holding
Singapore
Investment holding
Singapore
Investment holding
Singapore
Investment holding
Singapore
Investment holding
Singapore
Property investment
Singapore
Investment holding
BVI
Investment holding
Singapore
Investment holding
Indonesia
Property development
Indonesia
Property investment and development
Indonesia
Property development
Indonesia
Golf course ownership and operation
Indonesia
Disposed
Indonesia
Hotel ownership and operations
Indonesia
Property development
Vietnam
Vietnam
BVI
Property development
Property development
Investment holding
Keppel Lakefront (Wuxi) Property
Development Co Ltd (1a)
Keppel Land (Mayfair) Pte Ltd
Keppel Land (Saigon Centre) Ltd (1a)
Keppel Land (Singapore) Pte Ltd
(fka Keppel Land Properties
Pte Ltd)
Keppel Land Financial Services
Pte Ltd
Keppel Land International Ltd
Keppel Land Realty Pte Ltd
Keppel Land Watco IV Co Ltd (1a)
Keppel Land Watco V Co Ltd (1a)
Keppel REIT Investment Pte Ltd
Keppel REIT Property
Management Pte Ltd
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
84
84
100
100
100
100
84
84
100
100
100
100
68
68
100
100
Keppel Tianjin Eco-City Holdings
Pte Ltd
100
100
100 +
Keppel Tianjin Eco-City
Investments Pte Ltd
100
100
100 +
Keppel Township Development
100
100
100
(Shenyang) Co Ltd (1a)
Kingsdale Development Pte Ltd
Kingsley Investment Pte Ltd
Krystal Investments Pte Ltd
Joysville Investment Pte Ltd
Main Full Ltd (1a)
Mansfield Developments Pte Ltd
Meadowsville Investment Pte Ltd
Merryfield Investment Pte Ltd
Ocean & Capital Properties Pte Ltd
Oceansky Pte Ltd
OIL (Asia) Pte Ltd
Parksville Development Pte Ltd
Pasir Panjang Realty Pte Ltd
Pembury Properties Ltd (3)
Portsville Pte Ltd
PT Harapan Global Niaga (1a)
PT Kepland Investama (1a)
PT Puri Land Development (1a)
PT Ria Bintan (1a)
PT Sentral Tanjungan Perkasa (1a)
PT Straits-CM Village (1a)
PT Sukses Manis Tangguh (n)(1a)
Riviera Cove LLC (1a)
Riviera Point LLC (1a)
86
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
100
100
100
75
86
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
46
-
39
100
100
75
86
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
46
80
39
-
100
75
Saigon Centre Investment Ltd (3)
100
100
100
174
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
Financial Report
Gross
Interest
Effective Equity
Interest
Cost of Investment
2017
%
2017
%
2016
%
2017
$’000
2016
$’000
Saigon Sports City Ltd (1a)
Shanghai Floraville Land Co Ltd (1a)
Shanghai Hongda Property
Development Co Ltd (1a)
Shanghai Ji Lu Land Co Ltd (1a)
Shanghai Ji Xiang Land Co Ltd (1a)
Shanghai Jinju Real Estate
Development Co Ltd (1a)
Shanghai Maowei Investment
Consulting Co Ltd (1a)
Shanghai Merryfield Land Co Ltd (1a)
Shanghai Pasir Panjang Land
Co Ltd (1a)
Sherwood Development Pte Ltd
Spring City Golf & Lake Resort
Co Ltd (1a)
Spring City Resort Pte Ltd
Straits Greenfield Ltd (2)
Straits Properties Ltd
Straits Property Investments
Pte Ltd
Sunsea Yacht Club (Zhongshan)
Co Ltd (1a)
Sunseacan Investment (HK)
Co Ltd (1a)
Third Dragon Development Pte Ltd
Tianjin Fulong Property
Development Co Ltd (1a)
Tianjin Fushi Property
Development Co Ltd (1a)
Tianjin Keppel Hong Hui
Procurement Headquarter
Co Ltd (1a)
Triumph Jubilee Ltd (3)
West Gem Properties Ltd (3)
Wiseland Investment (Myanmar)
Ltd (3)
Atlantic Marina Services
(Asia-Pacific) Pte Ltd
100
99
100
100
100
100
90
99
99
90
99
99
99
99
100
100
99
99
100
99
99
99
99
70
80
100
100
100
100
99
99
70
69
100
100
100
100
99
99
70
69
100
100
100
100
100
80
80
80
80
80
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
100
100
-
100
100
100
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
Country of
Incorporation
/Operation
Principal Activities
Vietnam
Property development
China
China
China
China
China
Property development
Property development
Property development
Property development
Property development
China
Investment holding
China
China
Property development
Property development
Singapore
Property development
China
Golf club operations and development
and property development
Singapore
Investment holding
#
#
#
#
#
#
#
#
#
#
#
#
# Myanmar
Hotel ownership and operations
#
#
#
#
#
#
#
#
#
#
Singapore
Property development
Singapore
Investment holding
China
Development of marina lifestyle cum
residential properties
HK
Investment holding
Singapore
Investment holding
China
Property development
China
Property development
China
Trading of construction materials
BVI
Jersey
Investment holding
Investment holding
# Myanmar
Disposed
100 +
100 +
100 +
1,460
1,460
Singapore
Investment holding
FELS Property Holdings Pte Ltd
100
100
100
29,814
78,214
Singapore
Investment holding
FELS SES International Pte Ltd
98 +
98 +
98 +
Keppel Houston Group LLC (3)
100 +
100 +
100 +
Keppel Kunming Resort Ltd (1a)
100 +
98 +
98 +
48
#
4
48
Singapore
Investment holding
#
4
USA
HK
Property investment
Property investment
Keppel Point Pte Ltd
Petro Tower Ltd (1a)
Associated Companies
Bellenden Investments Ltd (3)
Chengdu Taixin Real Estate
Development Co Ltd (2)
CityOne Development (Wuxi)
Co Ltd (3)
100 +
100 +
100 +
122,785
122,785
Singapore
Property development and investment
76
74
74
67
35
67
35
67
35
-
-
50
#
#
#
#
#
Vietnam
Property investment
#
#
#
BVI
China
Investment holding
Property investment
China
Disposed
175
Keppel Corporation Limited | Report to Shareholders 2017
Significant Subsidiaries and Associated Companies
CityOne Township Development
Pte Ltd (2)
City Square Office Co Ltd (2)
Davinelle Ltd (3)
Dong Nai Waterfront City LLC (1a)
Empire City Limited LLC (2)
EM Services Pte Ltd
Equity Rainbow II Pte Ltd (2)
Garden Development Pte Ltd (n)
Keppel Land Watco I Co Ltd (1a)
Keppel Land Watco II Co Ltd (1a)
Keppel Land Watco III Co Ltd (1a)
Keppel REIT
Marina Bay Suites Pte Ltd (3)
Nam Long Investment
Corporation (2)
PT Pulomas Gemala Misori (2)
PT Purimas Straits Resorts (3)
Raffles Quay Asset Management
Pte Ltd (2)
Renown Property Holdings (M)
Sdn Bhd (1a)
Quoc Loc Phat Joint Stock
Company (2)
South Rach Chiec LLC (1a)
Suzhou Property Development
Pte Ltd (2)
Vietcombank Tower 198 Ltd (2)
Vision (III) Pte Ltd (n)(2)
INFRASTRUCTURE
Subsidiaries
Keppel Infrastructure Holdings
Pte Ltd
Energy Infrastructure
Subsidiaries
Keppel Energy Pte Ltd
Keppel Electric Pte Ltd
Keppel Gas Pte Ltd
Keppel DHCS Pte Ltd
Associated Companies
Gross
Interest
Effective Equity
Interest
Cost of Investment
2017
%
2017
%
2016
%
2017
$’000
2016
$’000
Country of
Incorporation
/Operation
Principal Activities
50
50
50
40
67
50
40
25
43
60
61
61
61
46
33
5
25
-
33
40
67
50
40
25
43
60
61
61
61
46
33
5
25
-
33
40
67
50
40
25
43
-
45
45
45
46
33
5
25
25
33
40
40
40
45
45
45
42
25
30
30
42
25
30
30
42
25
30
-
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
Singapore
Investment holding
# Myanmar
Property development
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
BVI
Vietnam
Vietnam
Investment holding
Property development
Property development
Singapore
Property management
Singapore
Property investment
Singapore
Property development
Vietnam
Vietnam
Vietnam
Property investment and development
Property investment and development
Property investment and development
Singapore
Real estate investment trust
Singapore
In the process of liquidation
Vietnam
Trading of development properties
Indonesia
Property development
Indonesia
Disposed
Singapore
Property management
# Malaysia
Property investment
#
#
#
#
#
Vietnam
Property development
Vietnam
Property development
Singapore
Property development
Vietnam
Property investment
Singapore
Investment holding
100
100
100
445,892
445,892
Singapore
Investment holding
100
100
100
100
100
100
100
100
100
100
100
100
#
#
#
#
#
#
#
#
#
Singapore
Investment holding
Singapore
Electricity, energy and power supply
and general wholesale trade
Singapore
Purchase and sale of gaseous fuels
Singapore
Development of district heating and
cooling system for the purpose of air
cooling and other utility services
#
Singapore
Commercial power generation
Keppel Merlimau Cogen Pte Ltd (2)
49
49
49
176
Financial Report
Gross
Interest
Effective Equity
Interest
Cost of Investment
2017
%
2017
%
2016
%
2017
$’000
2016
$’000
Country of
Incorporation
/Operation
Principal Activities
Environmental Infrastructure
Subsidiaries
Keppel Seghers Pte Ltd
100
100
100
Keppel Seghers Holdings BV (1a)
Keppel Seghers Belgium NV (1a)
100
100
100
100
100
100
Marina East Water Pte Ltd (n)
100
100
-
Associated Companies
Tianjin Eco-City Energy Investment
& Construction Co Ltd (2)
20
20
20
Tianjin Eco-City Environmental
Protection Co Ltd (2)
20
20
20
Infrastructure Services
Subsidiaries
Keppel Infrastructure Services
Pte Ltd
100
100
100
KMC O&M Pte Ltd
100
100
100
Keppel Seghers Engineering
Singapore Pte Ltd
100
100
100
Investments
Subsidiaries
Keppel Integrated Engineering Ltd
Keppel Prince Engineering Pty
Ltd (1a)
100
100
100
100
100
100
Keppel XTE Investments Pte Ltd
100
100
100
18
-
18
-
18
50
Associated Companies
Keppel Infrastructure Trust (2)
GE Keppel Energy Services Pte
Ltd (3)
Logistics & Data Centres
Subsidiaries
Keppel Telecommunications &
Transportation Ltd
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
Singapore
Provision of environmental,
technologies, engineering works &
construction activities
#
#
Netherlands
Investment holding
Belgium
Provider of services and solutions to the
environmental industry related to solid
waste treatment
#
Singapore
Design and construction of desalination
plant
#
China
#
China
Investment and implementation of
energy and utilities related
infrastructure
Investment, construction and operation
of infrastructure for environmental
protection
#
Singapore
#
Singapore
#
Singapore
Provision of technical support including
engineering, construction, operations
and maintenance of plants and facilities
Engineering works, construction and
operations and maintenance of plants
and facilities
Engineering works, construction and
operations and maintenance of plants
and facilities
#
#
#
#
#
Singapore
Investment holding
Australia
Metal fabrication
Singapore
Investment holding
Singapore
Infrastructure business trust
Singapore
Disposed
79
79
80
397,647
397,647
Singapore
Investment, management and holding
company
Keppel Logistics Pte Ltd
100
79
80
Keppel Logistics (Foshan) Ltd (2)
70
55
56
Keppel Logistics (Foshan Sanshui
Port) Co Ltd (2)
Jilin Sino-Singapore Food Zone
International Logistics Co Ltd (2)
60
33
33
70
55
56
#
#
#
#
#
#
#
#
Singapore
Integrated logistics services and supply
chain solutions
China
China
China
Integrated logistics port operations,
warehousing and distribution
Integrated logistics port operations and
warehousing
Integrated logistics services,
warehousing and distribution
177
Keppel Corporation Limited | Report to Shareholders 2017
Significant Subsidiaries and Associated Companies
Gross
Interest
Effective Equity
Interest
Cost of Investment
2017
%
2017
%
2016
%
2017
$’000
2016
$’000
Country of
Incorporation
/Operation
Principal Activities
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
China
Integrated logistics services, food
trading hub, warehousing and
distribution
#
#
#
#
#
#
#
Singapore
Warehousing and distribution
Singapore
Investment holding
Singapore
Investment holding and management
services
Singapore
Data centre facilities management
Singapore
Data centre facilities management
Singapore
Investment holding
Singapore
Trading and provision of
communications systems and
accessories
#
Singapore
Investment holding
#
#
#
#
#
#
#
HK
USA
Operation of an air cargo handling
terminal
IT consulting and outsourcing provider
Singapore
Data centre real estate investment trust
USA
Singapore
Thailand
China
Data centre leasing, co-location and
inter-connection services
Distribution and maintenance of
communications equipment and
systems
Distribution of IT products and
telecommunications services
Integrated logistics services and port
operations
783,000
783,000
Singapore
Investment holding
#
#
#
#
#
-
#
#
#
#
#
#
-
#
Singapore
Investment holding
Singapore
Fund management
Singapore
Real estate investment trust
management and investment holding
Singapore
Trust management
Singapore
Investment advisory and property fund
management
Philippines
Investment holding
Singapore
Investment holding
90,000
90,000
Singapore
Investment holding
18,425
18,425
Singapore
Investment holding
#
#
HK
Investment company
Keppel Wanjiang International
Coldchain Logistics Park (Anhui)
Co Ltd (2)
Courex Pte Ltd (2)
Keppel Data Centres Pte Ltd
Keppel Data Centres Holding
Pte Ltd
Keppel DC Singapore 1 Ltd
Keppel DC Singapore 2 Pte Ltd
Keppel DC Investment Holdings
Pte Ltd
60
47
48
60
100
47
79
48
80
100 +
86 +
86 +
100 +
100 +
86 +
86 +
86 +
86 +
100
79
80
Keppel Communications Pte Ltd
100
79
80
Keppel Telecoms Pte Ltd
100
79
80
Associated Companies
Asia Airfreight Terminal Company
Ltd (2)
Computer Generated Solutions
Inc (2)
10
21
8
17
8
17
Keppel DC REIT (2)
35 +
29 +
29 +
Nautilus Data Technologies,
21
17
-
Inc. (n)(2)
Radiance Communications Pte Ltd
50
40
40
SVOA Public Company Ltd (2)
32
25
25
Wuhu Sanshan Port Co Ltd (2)
50
40
40
INVESTMENTS
Subsidiaries
Keppel Capital Holdings Pte Ltd
Keppel Capital Investment
Holdings Pte Ltd
100
100
100
100
100
100
Alpha Investment Partners Ltd
100
100
100
Keppel DC REIT Management
Pte Ltd
Keppel Infrastructure Fund
Management Pte Ltd
100 +
90 +
90 +
100
100
100
Keppel REIT Management Ltd
100
100
100
Keppel Philippines Holdings Inc (1a)
82 +
81 +
64 +
99
100
100
100
99
100
100
100
99
100
100
100
Alpha Real Estate Securities Fund
Kephinance Investment Pte Ltd
Kepinvest Singapore Pte Ltd
Kepital Management Ltd (1a)
Keppel Group Eco-City
Investments Pte Ltd
Keppel Funds Investment Pte Ltd
Keppel GMTN Pte Ltd
Keppel Investment Ltd
178
100 +
100 +
100 +
126,744
126,744
Singapore
Investment holding
100
100
100
100
100
100
100
100
100
#
10
#
#
10
#
Singapore
Investment company
Singapore
Investment holding
Singapore
Investment company
Financial Report
Gross
Interest
Effective Equity
Interest
2017
%
2017
%
2016
%
100
100
100
100
100
100
100
100
100
100
100
100
90 +
90 +
90 +
Keppel Oil & Gas Pte Ltd
Kepventure Pte Ltd
KI Investments (HK) Ltd (3)
Primero Investments Pte Ltd
Singapore Tianjin Eco-City
Investment Holdings Pte Ltd
Substantial Enterprises Ltd (3)
100 +
100 +
100 +
Cost of Investment
Country of
Incorporation
/Operation
Principal Activities
2017
$’000
#
2016
$’000
#
Singapore
Investment holding
594,922
594,922
Singapore
Investment holding
#
#
#
#
#
#
#
#
HK
In the process of liquidation
Singapore
Investment company
Singapore
Investment holding
BVI
Investment holding
Travelmore Pte Ltd
100
100
100
265
265
Singapore
Travel agency
Associated Companies
k1 Ventures Ltd (2)
Keppel-KBS US REIT (n)(2)
KrisEnergy Ltd (2)
M1 Ltd (2)
Sino-Singapore Tianjin Eco-City
Investment and Development
Co., Ltd (2)
Total
Subsidiaries
36
7
40
19
50
36
7
40
15
45
36
-
40
15
45
#
#
#
#
#
#
#
#
#
#
Singapore
Investment holding
Singapore
Real estate investment trust
Cayman
Islands
Exploration for, and the development
and production of oil and gas
Singapore
Telecommunications services
China
Property development
8,209,616
8,307,153
Notes:
(i) All the companies are audited by PricewaterhouseCoopers LLP, Singapore except for the following:
(1a) Audited by overseas practice of PricewaterhouseCoopers LLP;
(2) Audited by other firms of auditors; and
(3) 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.
(ii) + The shareholdings of these companies are held jointly with other subsidiaries.
(iii) # The shareholdings of these companies are held by subsidiaries of Keppel Corporation Limited.
(iv)
(v)
(vi) The subsidiaries’ place of business is the same as its country of incorporation, unless otherwise specified.
(vii) Abbreviations:
(n) These companies were incorporated/acquired during the financial year.
(r) These companies were accounted as associated companies in 2017 following the loss of control by the Group.
British Virgin Islands (BVI)
Hong Kong (HK)
United Arab Emirates (UAE)
United States of America (USA)
(viii) The Company has 253 significant subsidiaries and associated companies as at 31 December 2017. Subsidiaries and associated companies are considered as significant
(a) in accordance to Rule 718 of The Singapore Exchange Securities Trading Limited – Listing Rules, or (b) by reference to the significance of their economic activities.
179
Keppel Corporation Limited | Report to Shareholders 2017
Interested Person Transactions
The Group has obtained a general mandate from shareholders of the Company for interested person transactions in the Annual General
Meeting held on 21 April 2017. During the financial year, the following interested person transactions were entered into by the Group:
Name of Interested Person
Transaction for the Sale of Goods and Services
CapitaLand Group
Neptune Orient Lines Group
PSA International Group
SATS Group
SembCorp Marine Group
Singapore Power Group
Singapore Technologies Engineering Group
Temasek Holdings Group
Transaction for the Purchase of Goods and Services
CapitaMalls Asia Group
Certis CISCO Security Group
Mapletree Investments Group
Pavilion Gas Pte Ltd
PSA International Group
SembCorp Marine Group
Singapore Power Group
Singapore Technologies Engineering Group
Singapore Telecommunications Group
Temasek Holdings Group
Total Interested Person Transactions
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)
2017
$’000
2016
$’000
2017
$’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
280
–
–
–
–
–
–
–
–
–
–
–
174,000
–
8,077
24,400
1,783
2,657
189
338
254
718
1,020
51,000
305
–
353
3,289
441
546
280
269,370
2016
$’000
–
389
1,482
–
4,635
1,567
899
16,938
–
474
–
50,000
208
55
526
5,437
1,160
1,810
85,580
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.
180
Other Information
Key Executives
Chan Hon Chew, 52
Bachelor of Accountancy (Honours), National University of Singapore; CFA® charterholder; Member of the Institute of Chartered Accountants
Australia and Fellow Member of the Institute of the Singapore Chartered Accountants.
Mr Chan is the Chief Financial Officer of Keppel Corporation Limited, appointed with effect from 1 February 2014.
Prior to joining Keppel Corporation, Mr Chan was with Singapore Airlines Limited (SIA) and served as Senior Vice President (SVP) of Finance
since June 2006. As SVP Finance, Mr Chan was responsible for a diverse range of functions including investor relations, corporate accounting
and reporting, treasury, risk management and insurance. He was also involved in SIA’s strategic planning process and had represented SIA as
Director on the Boards of various companies including Tiger Airways and Virgin Atlantic Airways Limited.
Prior to SIA, Mr Chan was Assistant General Manager for Finance and Corporate Services at Wing Tai Holdings Limited, where he oversaw all
financial matters as well as tax, legal and corporate secretarial functions from 1998 to 2003.
Mr Chan was appointed by Singapore’s Ministry of Finance to the Board of the Accounting Standard Council in November 2015. He also serves
on the management board of the Institute of System Science, National University of Singapore since 15th April 2015.
Mr Chan’s principal directorships include Keppel Offshore & Marine Ltd, Keppel Land Limited, Keppel Infrastructure Holdings Pte Ltd, Keppel
Telecommunications & Transportation Ltd, KrisEnergy Ltd and Keppel Capital Holdings Pte Ltd. He is also the Chairman of Keppel DC REIT
Management Pte Ltd (Manager of Keppel DC REIT).
Past principal directorships in the last five years
Tiger Airways Holdings Limited, Singapore Aviation & General Insurance Company (Pte) Ltd and RCMS Properties Private Limited.
Ang Wee Gee, 56
Bachelor of Science summa cum laude, University of Denver, USA; Master of Business Administration, Imperial College, University of London, UK.
Mr Ang joined The Keppel Land Group in 1991 and was the Chief Executive Officer of Keppel Land Limited from 1 January 2013 to 31 December
2017.
Prior to his appointment as Chief Executive Officer of Keppel Land Limited, Mr Ang held senior management positions in the Group. He was
Executive Vice Chairman of Keppel Land China Limited, a wholly-owned subsidiary of Keppel Land Limited which was formed in 2010 to own
and operate Keppel Land Limited’s businesses in China. Prior to that, he was Executive Director and Chief Executive Officer, International of
Keppel Land International Limited, responsible for the Group’s overseas businesses. He was also Chairman of Keppel Philippines Properties Inc
which is listed on the Philippine Stock Exchange and Chairman of Keppel Thai Properties Public Company Limited which was listed on The Stock
Exchange of Thailand. Mr Ang was also the Group’s Country Head for Vietnam as well as Head of Keppel Land Hospitality Management Pte
Ltd. He previously held various positions in business and project development for Singapore and overseas markets, and corporate planning in
the Group’s hospitality management arm.
Prior to joining Keppel Land Group, Mr Ang acquired diverse experience in the hotel, real estate and management consulting industries in the
USA, Hong Kong and Singapore.
Mr Ang was a member of the Board of the Building and Construction Authority of Singapore.
Past principal directorships in the last five years
Various subsidiaries and associated companies of Keppel Land Limited.
Ong Tiong Guan, 59
Bachelor of Engineering (First Class Honours), Monash University; Doctor of Philosophy (Ph.D.) under Monash Graduate Scholarship, Monash
University.
Dr Ong was appointed Keppel Energy Pte Ltd’s Executive Director in November 1999. He became Managing Director of Keppel Energy Pte Ltd
with effect from 1 May 2003 and was appointed Deputy Chairman of Keppel Integrated Engineering Ltd on April 2013.
Upon reorganisation of Keppel Energy Pte Ltd and Keppel Integrated Engineering Ltd under Keppel Infrastructure Holdings Pte Ltd in May
2013, Dr Ong was appointed Chief Executive Officer of Keppel Infrastructure Holdings Pte Ltd, responsible for the Keppel Group’s energy
infrastructure business.
Dr Ong’s career spans across the energy industry from engineering and contracting to investment and ownership of energy assets.
His principal directorships include Keppel Infrastructure Holdings Pte Ltd, Keppel Energy Pte Ltd, Keppel Electric Pte Ltd, Keppel Gas Pte Ltd,
Keppel DHCS Pte Ltd, Keppel Infrastructure Services Pte Ltd, Keppel Seghers Pte Ltd, Keppel Capital Holdings Pte Ltd and Energy Studies
Institute.
Past principal directorships in the last five years
Keppel Merlimau Cogen Pte Ltd, GE Keppel Energy Services Pte Ltd and Keppel Infrastructure Fund Management Pte Ltd (Trustee-Manager of
Keppel Infrastructure Trust).
181
Keppel Corporation Limited | Report to Shareholders 2017 Key Executives
Chris Ong Leng Yeow, 43
Bachelor and Master Degree in Electrical and Electronics Engineering, National University of Singapore.
Mr Chris Ong is the Chief Executive Officer of Keppel Offshore & Marine since 1 July 2017. Prior to this, he was Acting Chief Executive Officer of
Keppel Offshore & Marine. Mr Ong started his career at Keppel FELS in 1999 as a Commissioning Superintendent (E&I) and has accumulated
extensive experience through subsequent appointments as a Project Engineer, Section Manager, General Manager (Engineering), Acting
Executive Director (Operations), Executive Director (Commercial) and Managing Director.
In addition to his current appointment, he is also a board member of The Institute of Technical Education Board of Governors (BOG), a member
of the Workplace Safety & Health (WSH) Council Marine Industries Committee, a member of the U EnTech Steering Committee, a member of the
Keppel Chair Professor Management/Selection Committee and a member of the Governance Board of Keppel-NUS Corporate Laboratory. He
was appointed a Board Member of the Maritime and Port Authority of Singapore on 2 Feb 2018.
Mr Ong is a Chartered Engineer, a Fellow of the Institute of Marine Engineering, Science and Technology and is a member of the American
Bureau of Shipping and the DNV GL South East Asia and Pacific Committee.
Mr Ong is the Chairman of Bennett Offshore LLC, Keppel LeTourneau USA Inc, Bintan Offshore Fabricators Pte Ltd and Keppel SLP LLC and a
director of various subsidiaries or associated companies of Keppel Offshore & Marine Ltd. He was also appointed a director of Kris Energy Ltd
and Keppel Technology and Innovation Pte. Ltd.
Past principal directorships in the last five years
Mod Prefab Private Limited, Bintan Offshore Fabricators Pte Ltd, Keppel FEL Engineering Shenzhen Co Ltd, Keppel Offshore and Marine
Engineering Services Mumbai Pvt Ltd, PT Bintan Offshore, Keppel FELS Baltech OOD and Keppel FELS Engineering Wu Han Co. Ltd.
Christina Tan Hua Mui, 52
Bachelor of Accountancy (Honours), National University of Singapore; CFA® charterholder.
Ms Tan is the CEO of Keppel Capital Holdings Pte Ltd (Keppel Capital).
Keppel Capital is the Keppel Group’s asset management arm, which includes the asset managers Keppel REIT Management, Keppel
Infrastructure Fund Management, Keppel DC REIT Management, Keppel-KBS REIT Management and Alpha Investment Partners Limited
(“Alpha”). Ms Tan is a founding member of Alpha. She sits on the Investment Committee for all Alpha-managed funds and is instrumental in
developing as well as implementing the portfolio strategy for all the funds.
Ms Tan has over 20 years of expertise and experience in investing and fund management across the US, Europe and Asia. She previously served
as the Chief Financial Officer of GRA (Singapore) Private Limited, the Asian real estate fund management arm of the Prudential Insurance
Company of America. Prior to that, she was the Treasury Manager with Chartered Industries of Singapore, managing the group’s cash positions
and investments. Ms Tan started her career with Ernst & Young before joining the Government of Singapore Investment Corporation (GIC).
Ms Tan’s principal directorships include Keppel Capital, Keppel REIT Management Limited (the manager of Keppel REIT), Keppel DC REIT
Management Pte Ltd (the manager of Keppel DC REIT), Keppel Infrastructure Fund Management Pte Ltd (the trustee-manager of Keppel
Infrastructure Trust) and Alpha.
Past principal directorships in the last five years
Nil.
Thomas Pang Thieng Hwi, 53
Bachelor of Arts (Engineering) and Master of Arts (Honorary Award), University of Cambridge (UK).
Mr Pang is currently Executive Director and Chief Executive Officer of Keppel Telecommunications & Transportation Ltd, a position he held since
July 2014. From June 2010 to June 2014, he was Chief Executive Officer of Keppel Infrastructure Fund Management Pte Ltd, the Trustee-Manager
of Keppel Infrastructure Trust (KIT).
Mr Pang joined Keppel Offshore & Marine Ltd in 2002 as a Senior Manager (Merger Integration Office) to assist in the merger integration of
Keppel FELS Limited and Keppel Shipyard Limited. He was promoted to General Manager (Corporate Development) in 2007 and oversaw the
investment, mergers and acquisitions, and strategic planning of Keppel Offshore & Marine Ltd. Prior to that, he was an investment manager
with Vertex Management (United Kingdom) from 1998 to 2001. Mr Pang was also the Vice President (Central USA) of the Singapore Tourism
Board from 1995 to 1998, as well as the Assistant Head (Services Group, Enterprise Development Division) at the Economic Development Board
of Singapore from 1988 to 1995.
Mr Pang currently holds directorships in several Keppel Telecommunications & Transportation subsidiaries, associates and joint venture
companies. He is also directors on ADCF C Private Limited, Keppel Capital Holdings Pte Ltd, Keppel DC REIT Management Pte Ltd (manager of
Keppel DC REIT) and Keppel Technology and Innovation Pte Ltd.
Past principal directorships in the last five years
Various subsidiaries and associated companies of Keppel Telecommunications & Transportation Ltd, Keppel DC REIT and Keppel Infrastructure
Trust.
182
Other Information Tan Swee Yiow, 57
Bachelor of Science (First Class Honours) in Estate Management, National University of Singapore; Master of Business Administration in
Accountancy, Nanyang Technological University.
Mr Tan was appointed Chief Executive Officer and Executive Director of Keppel REIT Management Limited with effect from 20 March 2017.
Mr Tan has been with the Keppel Land Group since 1990. Prior to his current appointment, Mr Tan was President, Singapore, in Keppel Land
and concurrently Head, Keppel Land Hospitality Management.
Mr Tan is the President of Singapore Green Building Council and a Member of World Green Building Council’s Corporate Advisory Board. He also
serves as Honorary Treasurer on the Management Council of Real Estate Developers’ Association of Singapore and sits on the Workplace Safety
and Health Council (Construction and Landscape Committee).
Past principal directorships in the last five years
Keppel Thai Properties Public Company Ltd and other subsidiaries and associated companies of Keppel Land Limited.
Khor Un-Hun, 48
Bachelor of Accountancy (First Class Honours), Nanyang Technological University.
Mr Khor has been the Chief Executive Officer of Keppel Infrastructure Fund Management Pte Ltd, the Trustee-Manager of Keppel Infrastructure
Trust (KIT), since May 2014. As the Chief Executive Officer, he is responsible for working with the Board to determine the strategy for KIT.
He works with other members of the Trustee-Manager’s management team to execute the stated strategy of the Trustee-Manager. He is
concurrently the Director (Group Mergers & Acquisitions) of Keppel Corporation Limited.
Mr Khor joined Keppel Infrastructure Holdings Pte Ltd (KI) as Development Director in April 2014, where he worked on KI’s various business
development initiatives.
Prior to joining KI, Mr Khor spent most of his career in the banking industry, during which he was involved in a wide range of mergers and
acquisitions, financial advisory, capital markets and debt transactions across different sectors throughout Asia.
He held various positions in the corporate finance teams of Deutsche Bank and ING Bank in Singapore and Hong Kong before becoming
Managing Director and Head of Corporate Finance, Asia at ING Bank. He was also a member of ING Bank’s Regional Management Committee.
Past principal directorships in the last five years
Nil.
Chua Hsien Yang, 40
Bachelor of Engineering (Civil), University of Canterbury; Master of Business Administration, University of Western Australia.
Mr Chua is the Chief Executive Officer of Keppel DC REIT Management Pte Ltd (Manager of Keppel DC REIT). Mr Chua has more than 16 years of
experience in mergers and acquisitions, real estate investments, fund management, business development and asset management in the real
estate sector within the Asia Pacific region.
Prior to joining Keppel DC REIT Management Pte Ltd, Mr Chua headed the investment team of Keppel REIT Management Limited for six years.
He was previously with Ascott Residence Trust Management Limited as Director of Business Development and Asset Management, and with
Hotel Plaza Limited (now known as Pan Pacific Hotels Group Limited) as Assistant Vice President of Asset Management.
Past principal directorships in the last five years
Mirvac 8 Chifley Pty Limited and Mirvac (Old Treasury) Pty Limited.
183
Keppel Corporation Limited | Report to Shareholders 2017 Key Executives
David Eric Snyder, 47
Bachelor of Science in Business Administration, Biola University.
Mr Snyder is the Chief Executive Officer/Chief Investment Officer of Keppel-KBS US REIT Management Pte Ltd, the manager of Keppel-KBS US
REIT.
Prior to this, Mr Snyder was a consultant to KBS where he oversaw the overall management of the AFRT portfolio and assisted in formulating
the operational strategy and tactics for the portfolio. From 2008 to 2015, Mr Snyder was the Chief Financial Officer at KBS where he managed
and advised five non-traded REITs. In addition, he oversaw, directed and participated in all aspects of investor relations, finance, financial
reporting, accounting and financial planning including the negotiation and management of a portfolio transfer of over 800 properties with a
value of over US$1 billion.
Mr Snyder started out as a Senior Accountant with Arthur Andersen LLP in 1993 where he was responsible for the design, testing and
supervision of the financial statements of various public and private enterprises. From 1996 to 1997, Mr Snyder joined Regency Health Services
as its Director of Financial Reporting. Subsequently, from 1998 to 2008, Mr Snyder was with Nationwide Health Properties, starting out
as a Financial Controller before rising to become Vice President & Financial Controller in 2005. He was one of four members on the senior
management team which determined the corporate strategy and financial decisions of the firm.
Past principal directorships in the last five years
Nil.
184
Other Information Major Properties
Held By
Completed properties
Effective
Group
Interest
Location
Description and
Approximate
Land Area
Tenure
Usage
Keppel REIT
45%
Keppel DC REIT
29%
Bugis Junction
Towers
Victoria Street,
Singapore
Ocean Financial
Centre
Collyer Quay,
Singapore
One Raffles Quay
Singapore
Marina Bay
Financial Centre
(Phase 1)
Marina Boulevard,
Singapore
Marina Bay
Financial Centre
(Phase 2)
Marina Boulevard,
Singapore
275 George Street
Brisbane,
Australia
15-storey office tower
99 years leasehold
Commercial office building with
rentable area of 22,722 sqm
Land area: 6,109 sqm
43-storey office tower
999 years leasehold
Commercial office building with
rentable area of 81,892 sqm
Land area: 15,497 sqm
Two office towers of
50-storey and 29-storey
Land area: 32,978 sqm
Two office towers of
33-storey and 50-storey
with ancillary retail space
Land area: 9,710 sqm
46-storey office tower
with retail podium
99 years leasehold
Commercial office building with
rentable area of 123,413 sqm
99 years leasehold
Commercial office building with
rentable area of 161,459 sqm
99 years leasehold
Commercial office building with
rentable area of 124,503 sqm
Land area: 3,655 sqm
31-storey office tower
Freehold
Commercial office building with
rentable area of 41,749 sqm
8 Exhibition Street
Melbourne,
Australia
Land area: 4,329 sqm
35-storey office tower
with ancillary retail space
Freehold
Commercial office building with
rentable area of 45,283 sqm
8 Chifley Square
Sydney,
Australia
David Malcolm
Justice Centre
Perth,
Australia
Keppel DC
Singapore 1
Serangoon,
Singapore
Keppel DC
Singapore 2
Tampines,
Singapore
Keppel DC
Singapore 3
Tampines,
Singapore
Gore Hill Data
Centre
Sydney,
Australia
Almere Data
Centre
Amsterdam,
Netherlands
Keppel DC
Dublin 1
Dublin,
Ireland
Keppel DC
Dublin 2
Dublin,
Ireland
Land area: 1,581 sqm
30-storey office tower
99 years leasehold
Commercial office building with
rentable area of 19,349 sqm
Land area: 2,947 sqm
33-storey office tower
99 years leasehold
Commercial office building with
rentable area of 31,175 sqm
Land area: 7,333 sqm
6-storey data centre
Land area: 5,000 sqm
5-storey data centre
Land area: 5,000 sqm
5-storey data centre
30 years lease with
option for another
30 years
30 years lease with
option for another
30 years
30 years lease with
option for another
30 years
Data centre with rentable area
of 10,193 sqm
Data centre with rentable area
of 3,447 sqm
Data centre with rentable area
of 5,103 sqm
Land area: 6,692 sqm
4-storey data centre
Freehold
Data centre with rentable area
of 8,450 sqm
Land area: 7,930 sqm
3-storey data centre
Freehold
Data centre with rentable area
of 11,000 sqm
Land area: 20,275 sqm
2-storey data centre
40 years leasehold
Data centre with rentable area
of 6,328 sqm
Land area: 13,900 sqm
Single-storey data centre
999 years leasehold
Data centre with rentable area
of 2,341 sqm
185
Keppel Corporation Limited | Report to Shareholders 2017
Major Properties
Held By
Effective
Group
Interest
Thorium DC Pte Ltd
65%
Calcium DC Pte Ltd
68%
Description and
Approximate
Land Area
Land area: 6,805 sqm
Tenure
Usage
30 years lease with
option for another
30 years
Data centre with gross floor area
of 16,917 sqm
Land area: 38,445 sqm
Freehold
Data centre with gross floor area
of 20,000 sqm
Location
Keppel DC
Singapore 4
Tampines,
Singapore
Graphite DC
Heinrich-Lanz-Allee
47 Kalbach,
Frankfurt,
Germany
Keppel-KBS US REIT
7%
The Plaza Buildings
8th Street, Bellevue,
Washington,
USA
Land area: 16,295 sqm
16 and 10 storey
multi-tenanted
office buildings
Land area: 188,570 sqm
Office campus featuring
9 multi-tenanted office
buildings
Bellevue
Technology
Center
24th Street,
Bellevue,
Washington,
USA
Freehold
Freehold
Commercial office building with
rentable area of 45,615 sqm
Commercial office buildings with
rentable area of 30,705 sqm
Westmoor Center
Westmoor Drive,
Colorado,
USA
Land area: 176,953 sqm
Office campus featuring
6 multi-tenanted office
buildings
Freehold
Commercial office building with
rentable area of 56,462 sqm
1800 West Loop
South
Houston,
USA
Keppel Towers and
Keppel Towers 2
Hoe Chiang Rd,
Singapore
Reflections
at Keppel Bay
Singapore
Corals at
Keppel Bay
Singapore
Keppel Bay Tower
HarbourFront
Avenue,
Singapore
Nassim Woods
Nassim Road,
Singapore
I12 Katong
East Coast Road
and Joo Chiat Road,
Singapore
Spring City Golf
& Lake Resort
Kunming,
China
Park Avenue
Heights
Chengdu,
China
V-City (Phase 2)
Chengdu,
China
Serenity Villa
Tianjin,
China
Land area: 7,627 sqm
A 21-storey high rise office
multi-tenanted property
Freehold
Commercial office building with
rentable area of 37,021 sqm
Land area: 9,127 sqm
27-storey and 13-storey
office towers
Freehold
Commercial office building with
rentable area of 39,958 sqm
Land area: 83,538 sqm
99 years leasehold
Land area: 38,830 sqm
99 years leasehold
A 1,129-unit waterfront
condominium development
A 366-unit waterfront
condominium development
Land area: 17,267 sqm
18-storey office tower
99 years leasehold
Commercial office building with
rentable area of 36,015 sqm
Land area: 5,785 sqm
99 years leasehold
A 35-unit condominium
development
Land area: 7,261 sqm
99 years leasehold
A 6-storey shopping mall
Land area: 2,578,705 sqm
Two 18-hole golf courses,
a club house
Land area: 50,782 sqm
Land area: 167,000 sqm
70 years lease
(residential)
50 years lease
(golf course)
70 years lease
(residential)
40 years lease
(commercial)
70 years lease
(residential)
40 years lease
(commercial)
Integrated resort comprising
golf courses, resort homes
and resort facilities
A 1,535-unit residential
development with commercial
facilities in Jinjiang District
A 5,399-unit residential
development with retail facilities
Land area: 128,685 sqm
70 years leasehold
A 340-unit residential
development in Tianjin Eco-City
Mansfield Development
Pte Ltd
100%
Keppel Bay Pte Ltd
100%
100%
HarbourFront One Pte Ltd
100%
Parksville Development
Pte Ltd
100%
DC REIT Holdings Pte Ltd
22%
Spring City Golf &
Lake Resort Co
(owned by Kingsdale
Development Pte Ltd)
Chengdu Hillstreet
Development Co Ltd
Chengdu Taixin Real
Estate Development Co
Ltd
69%
100%
35%
Tianjin Fushi Property
Development Co Ltd
100%
186
Other Information
Held By
Tianjin Fulong Property
Development Co Ltd
Effective
Group
Interest
100%
Location
Waterfront
Residence
Tianjin,
China
Description and
Approximate
Land Area
Tenure
Usage
Land area: 103,683 sqm
70 years leasehold
A 341-unit landed development
in Tianjin Eco-City
Shanghai Pasir Panjang
Land Co Ltd
99%
Shanghai Ji Xiang Land
Co Ltd
Shanghai Xusheng
Property Investment
Co Ltd
100%
30%
PT Straits-CM Village
39%
PT Kepland Investama
100%
100%
Eight Park Avenue
Shanghai,
China
Seasons Residence
Shanghai,
China
Trinity Tower
Shanghai,
China
Land area: 33,432 sqm
70 years leasehold
A 918-unit residential
development
Land area: 71,621 sqm
70 years leasehold
Land area: 16,427 sqm
50 years lease
(office)
40 years lease
(retail)
A 1,102-unit residential
development in Nanxiang,
Jiading District
A mixed-use development in
Hong Kou District
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
International
Financial Centre
(Tower 1)
Jakarta,
Indonesia
International
Financial Centre
(Tower 2)
Jakarta,
Indonesia
Land area: 10,428 sqm
20 years lease with
option for another
20 years
A prime office development with
rentable area of 27,933 sqm
Land area: 10,428 sqm
20 years lease with
option for another
20 years
A prime office development with
rentable area of 50,200 sqm
Keppel Land Watco I Co Ltd 61%
Saigon Centre
(Phase 1)
Ho Chi Minh City,
Vietnam
Land area: 2,730 sqm
25-storey office, retail
cum serviced apartments
development
50 years leasehold
South Rach Chiec LLC
42%
City Square Office Co Ltd
40%
Straits Greenfield Ltd
100%
First King Properties Ltd
100%
Properties under development
Keppel REIT
45%
Keppel Bay Pte Ltd
100%
Keppel DC REIT
29%
Palm City
(South Rach Chiec)
(Phase 1)
Ho Chi Minh City,
Vietnam
Junction City Tower
(Phase 1)
Yangon,
Myanmar
Sedona Hotel
Yangon
Yangon,
Myanmar
Land area: 289,365 sqm
50 years leasehold
Land area: 26,406 sqm
Land area: 40,516 sqm
50 years BOT with
option for another
two 10-years
50 years BOT with
option for another
two 10-years
Commercial office building with
rentable area of 10,626 sqm office
and 89 units of serviced
apartments
A 3,670-unit residential township
and commercial space
A mix-used development in CBD
A 5-star hotel in Yangon with
797 rooms
Office Development Land area: 1,947 sqm
9-storey office tower
75 King William
Street
London,
United Kingdom
Freehold
Commercial office building with
rentable area of 11,731 sqm
311 Spencer Street
Melbourne,
Australia
Keppel Bay Plot 6
Singapore
maincubes Data
Centre Main,
Germany
Land area: 5,136 sqm
Freehold
Land area: 43,701 sqm
99 years leasehold
An office development located in
CBD
*(2019)
A proposed 86-unit waterfront
condominium development
Land area: 5,596 sqm
Freehold
Data centre
*(2018)
Harvestland Development
Pte Ltd
100%
Highline Residences Land area: 10,991 sqm
Tiong Bahru,
Singapore
99 years leasehold
Beijing Aether Property
Development Ltd
51%
Commercial
Development
Beijing,
China
Land area: 26,081 sqm
40/50 years
leasehold
A 500-unit condominium
development
*(2018)
An office and retail development
in Chaoyang District
*(2020)
187
Keppel Corporation Limited | Report to Shareholders 2017
Major Properties
Held By
Shanghai Floraville Land
Co Ltd
Effective
Group
Interest
99%
Location
Description and
Approximate
Land Area
Park Avenue Central Land area: 28,488 sqm
Shanghai,
China
Tenure
Usage
70 years leasehold
An office and retail development
*(2022)
A 217-unit landed development
in Sheshan
*(2018 Phase 1)
A 5,399-unit residential
development with retail facilities
*(2018 Phase 3)
Integrated resort comprising
golf courses, resort homes and
resort facilities
(Hill Crest Residence Phase 2B)
*(2020)
A 1,292-unit residential
development with commercial
facilities in Liangxi District
*(2018 Phase 2)
A 1,481-unit residential
development with commercial
and SOHO facilities in Binhu
District
*(2018 Phase 2)
A 2,794-unit residential township
with integrated facilities in
Shenbei New District
A 4,297-unit residential
development with office and
retail space
*(2019 Seasons Garden Plot 9)
A 274-unit landed development
in Xinjin County
*(2020 Phase 2)
A 573-unit landed development
in Xinjin County
*(2020 Phase 2)
A residential development with a
mix of villas and apartments, and
integrated marina lifestyle
facilities
*(2018 Phase 2)
A 1,470-unit residential
development with commercial
and SOHO facilities
*(2021 Phase 3D)
A residential-cum-retail
development at Upper East Side
in Manhattan
*(2018)
Shanghai Jinju Real Estate
Development Co Ltd
99%
Chengdu Taixin Real Estate
Development Co Ltd
35%
Spring City Golf &
Lake Resort
69%
Sheshan Riviera
Shanghai,
China
V-City
Chengdu,
China
Spring City Golf
& Lake Resort
Kunming,
China
Keppel Heights (Wuxi)
Property Development
Pte Ltd
Keppel Lakefront (Wuxi)
Property Development
Co Ltd
100%
100%
Park Avenue
Heights
Wuxi,
China
Waterfront
Residence
Wuxi,
China
Land area: 175,191 sqm
70 years leasehold
Land area: 167,000 sqm
70 years lease
(residential)
40 years lease
(commercial)
Land area: 2,419,701 sqm
70 years leasehold
Land area: 66,010 sqm
Land area: 215,230 sqm
Keppel Township
Development (Shenyang)
Co Ltd
100%
The Seasons
Shenyang,
China
Land area: 348,312 sqm
Land area: 353,716 sqm
70 years lease
(residential)
40 years lease
(commercial)
70 years lease
(residential)
40 years lease
(commercial)
50 years lease
(residential)
40 years lease
(commercial)
70 years lease
(residential)
40 years lease
(commercial)
Keppel Hong Da
(Tianjin Eco-City) Property
Development Co Ltd
100%
Chengdu Hilltop
Development Co Ltd
100%
Chengdu Shengshi Jingwei
Real Estate Co Ltd
100%
Sunsea Yacht Club
(Zhongshan) Co Ltd
80%
Jiangyin Evergro Properties 99%
Co Ltd
MIP 59th and Third
Development LLC
83%
PT Harapan Global Niaga
100%
Development in
Sino-Singapore
Tianjin Eco-City
Tianjin,
China
Hill Crest Villa
Chengdu,
China
Serenity Villa
Chengdu,
China
Keppel Cove
Zhongshan,
China
Stamford City
Jiangyin,
China
The Residences
at 200 East 59
New York,
United States
West Vista
Jakarta,
Indonesia
City Square Tower Co Ltd
40%
Keppel Land Watco II & III
Co Ltd
61%
Junction City Tower
(Phase 2)
Yangon,
Myanmar
Saigon Centre
(Phase 2 & 3)
Ho Chi Minh City,
Vietnam
188
Land area: 249,330 sqm
70 years leasehold
Land area: 286,667 sqm
70 years leasehold
Land area: 891,752 sqm
Land area: 82,987 sqm
70 years lease
(residential)
40 years lease
(commercial)
70 years lease
(residential)
40 years lease
(commercial)
Land area: 636 sqm
Freehold
Land area: 28,851 sqm
Land area: 26,406 sqm
30 years lease with
option for another
20 years
A 2,855-unit residential
development with ancillary shop
houses
*(2018 Phase 1)
50 years BOT with
option for another
two 10-years
A mix-used development in CBD
*(2021)
Land area: 8,355 sqm
50 years leasehold
Commercial building with
rentable area of 37,600 sqm retail,
34,000 sqm office and 195 units
of serviced apartments
*(2018)
Other Information
Held By
Effective
Group
Interest
Location
Description and
Approximate
Land Area
Tenure
Usage
Saigon Sports City Ltd
90%
South Rach Chiec LLC
42%
Estella JV Co Ltd
98%
Empire City LLC
40%
Saigon Sports City
Ho Chi Minh City,
Vietnam
Palm City
(South Rach Chiec)
Ho Chi Minh City,
Vietnam
Estella Heights
Ho Chi Minh City,
Vietnam
Empire City
Ho Chi Minh City,
Vietnam
Dong Nai Waterfront City
LLC
(owned by Portsville
Pte Ltd)
50%
Dong Nai
Waterfront City
Dong Nai Province,
Vietnam
Land area: 640,477 sqm
50 years leasehold
Land area: 289,365 sqm
50 years leasehold
Land area: 25,393 sqm
50 years leasehold
Land area: 146,000 sqm
50 years leasehold
Land area: 3,667,127 sqm
50 years leasehold
A 4,300-unit residential township,
commercial complexes and public
sports facilities
*(2021 Phase 1)
A 3,670-unit residential township
and commercial space
*(2019 Phase 2)
A 872-unit residential
development with commercial
space in An Phu Ward, District 2
*(2018 Phase 2)
A residential development with
commercial space in Thu Thiem
New Urban Area, District 2
*(2020 Phase 1 & 2)
A 7,850-unit residential township
with commercial space in
Long Thanh District
*(2023 Phase 1)
INDUSTRIAL PROPERTIES
Keppel FELS Limited
100%
Estaleiro BrasFELS Ltda
100%
Keppel Shipyard Limited
100%
*
Expected year of completion
Pioneer and
Crescent Yard,
Singapore
Angra dos Reis,
Rio de Janeiro,
Brazil
Benoi and
Pioneer Yard,
Singapore
Land area: 522,097 sqm
buildings, workshops,
building berths, drydocks
and wharves
Land area: 409,020 sqm
buildings, workshops,
drydock, berths and wharf
Land area: 799,111 sqm
buildings, workshops,
drydocks and wharves
16 - 30 years
leasehold
Offshore oil rig construction and
repair
30 years leasehold
Offshore oil rig construction and
repair
30 years leasehold
Shiprepairing, shipbuilding and
marine construction
189
Keppel Corporation Limited | Report to Shareholders 2017
Group Five-Year Performance
Selected Profit & Loss Account Data
($ million)
Revenue
Operating profit
Profit before tax
Net profit attributable to shareholders
of the Company
Selected Balance Sheet Data
($ million)
Fixed assets & properties
Investments
Stocks, debtors, cash & long term assets
Intangibles
Assets classified as held for sale
Total assets
Less:
Creditors
Borrowings
Other liabilities
Liabilities directly associated with assets
classified as held for sale
Net assets
Share capital & reserves
Non-controlling interests
Total Equity
Per Share
Earnings (cents) (Note 1):
Before tax
After tax
Total distribution (cents)
Net assets ($)
Net tangible assets ($)
Financial Ratios
Return on shareholders’ funds (%) (Note 2):
Profit before tax
Net profit
Dividend cover (times)
Net cash/(gearing) (times)
Employees
Average headcount (number)
Wages & salaries ($ million)
2013
2014
2015
2016
2017
12,380
2,134
2,794
1,846
5,986
6,192
17,792
86
-
30,056
8,700
7,100
567
-
13,689
9,701
3,988
13,689
120.5
102.3
49.5
5.37
5.32
23.0
19.5
2.1
(0.11)
13,283
2,373
2,889
1,885
4,661
5,718
19,851
102
1,259
31,591
8,579
7,383
451
450
14,728
10,381
4,347
14,728
123.9
103.8
48.0
5.73
5.67
22.4
18.8
2.2
(0.11)
10,296
1,514
1,997
1,525
6,118
6,030
16,672
100
-
28,920
7,925
8,259
810
-
11,926
11,096
830
11,926
104.6
84.0
34.0
6.13
6.07
17.7
14.2
2.5
(0.53)
6,767
795
1,055
784
6,195
6,065
16,833
141
-
29,234
7,335
9,053
512
-
12,334
11,659
675
12,334
55.2
43.2
20.0
6.42
6.34
8.8
6.9
2.2
(0.56)
5,964
776
516 ^
217 ^
5,894
6,563
15,523
133
-
28,113
7,738
7,793
622
-
11,960
11,433
527
11,960
27.4 ^
11.9 ^
22.0
6.29
6.21
4.3 ^
1.9 ^
0.5
(0.46)
38,878
1,748
39,049
1,859
36,153
1,662
28,879
1,282
21,862
1,107
^
Includes the one-off financial penalty from the global resolution and related costs of $619 million
Notes:
1.
2.
Earnings per share are calculated based on the Group profit by reference to the weighted average number of shares in issue during the year.
In calculating return on shareholders’ funds, average shareholders’ funds has been used.
190
Other Information
2017
Group revenue of $5,964 million for 2017 was $803 million or 12% below that of 2016. Revenue from the Offshore & Marine Division declined
by $1,052 million to $1,802 million due to lower volume of work and deferment of some projects. Major jobs completed and delivered in
2017 include a semi, a subsea construction vessel, a Floating Production Storage & Offloading (FPSO) vessel conversion, an FPSO topsides
installation/integration, a module fabrication & integration, a floating liquefaction vessel conversion and an ice-class multi-purpose vessel
project. Revenue from the Property Division decreased by $253 million to $1,782 million due mainly to lower revenue from China and Singapore,
partly offset by higher revenue from Vietnam. Revenue from the Infrastructure Division grew by $463 million to $2,207 million as a result of
increased sales in the power and gas businesses and progressive revenue recognition from the Keppel Marina East Desalination Plant project.
Group pre-tax profit for the current year was $516 million, $539 million or 51% below the previous year. Excluding the one-off financial penalty from
the global resolution and related costs, the Group registered a pre-tax profit of $1,135 million which is 8% higher than that of the preceding year.
The Offshore & Marine Division’s pre-tax loss in 2017 was $862 million. Excluding the one-off financial penalty from the global resolution and
related costs, the Division’s pre-tax loss was $243 million as compared to pre-tax profit of $90 million in 2016. This was mainly due to lower
operating results arising from lower revenue and lower share of associated companies’ profits, partly offset by lower impairment provisions
and lower net interest expense. Provisions mainly for impairment of fixed assets, stocks & work-in-progress, investments and an associated
company, and restructuring costs, of $140 million in 2017 was lower than the $277 million impairment provisions recorded in 2016. Pre-tax
profit from the Property Division of $868 million was $109 million or 14% higher than that in 2016. This was due mainly to higher fair value
gains on investment properties and higher contribution from Singapore and Vietnam property trading, and en-bloc sales of development
projects, partly offset by lower share of associated companies’ profits, mainly resulting from the absence of the gains from divestment of
the stakes in Life Hub @ Jinqiao and 77 King Street last year, and the absence of reversal of impairment for hospitality assets. Pre-tax profit of
the Infrastructure Division increased by $44 million to $167 million due mainly to higher contribution from Energy Infrastructure, the gain on
divestment of its interest in GE Keppel Energy Services Pte Ltd, as well as the recognition of fair value gain on investment. These were partly
offset by lower contribution from the data centre business, due mainly to the absence of contribution from Keppel DC Singapore 3, which was
injected into Keppel DC REIT in January 2017. Pre-tax profit of the Investments Division increased by $260 million to $343 million due mainly to
higher share of profit from Sino-Singapore Tianjin Eco-City and k1 Ventures, higher contribution from asset management business, write-back
of provision for impairment of investments and profit on sale of investments. These were partly offset by the share of loss in KrisEnergy and
recognition of fair value loss on KrisEnergy warrants.
Taking into account income tax expenses and non-controlling interests, and excluding the one-off financial penalty from the global resolution
and related costs of $619 million, net profit attributable to shareholders was $836 million, an increase of $52 million from last year. The Property
Division was the largest contributor to the Group’s net profit with an 82% share, followed by the Investments Division’s 28% and Infrastructure
Division’s 16% while the Offshore & Marine Division contributed negative 26% to the Group’s net profit.
2016
Group revenue of $6,767 million for 2016 was $3,529 million or 34% lower than that for the full year of 2015. Offshore & Marine Division’s
revenue of $2,854 million was 54% below the $6,241 million for 2015 because of lower volume of work, deferment of some projects and the
suspension of the Sete Brasil contracts. Major jobs completed in 2016 include four jackup rigs, a land rig, a derrick lay vessel, an accommodation
semisubmersible and two FPSO conversions. The Property Division saw its revenue increase by 12% to $2,035 million due mainly to higher
revenue from Singapore and China. Revenue from the Infrastructure Division contracted by $293 million to $1,744 million as a result of a drop in
revenue recorded by the power and gas business from lower prices and volume.
The Group’s pre-tax profit for the current year was $1,055 million, $942 million or 47% below the previous year. The Offshore & Marine Division
reported a $609 million drop in pre-tax profit to $90 million due mainly to lower operating results arising from lower revenue, lower share of
associated companies’ profits and impairment of assets. Impairment of assets in the year amounted to $277 million and comprises impairment
of fixed assets, stocks & work-in-progress and investments. The negative variance was partially offset by the absence of provision for losses
for the Sete Brasil rig building contracts of about $230 million in 2015. The Property Division’s profit of $759 million for 2016 was $89 million or
11% lower than 2015 due mainly to lower fair value gains on investment properties, lower contribution from Singapore property trading, lower
share of associated companies’ profits and the absence of cost write-back upon finalisation of project cost for Reflections at Keppel Bay in 4Q
2015, partially offset by reversal of impairment of hospitality assets. The lower share of associated companies’ profits was due mainly to lower
share of fair value gains on investment properties, partly offset by share of profits arising from divestment of the stake in Life Hub @ Jinqiao
and 77 King Street. Profit from the Infrastructure Division decreased by $120 million to $123 million due mainly to lower fair value gains on data
centres and the absence of gains recognised in 2015. In 2015, there were gains from disposal of the 51% interest in Keppel Merlimau Cogen Pte
Revenue ($ billion)
Pre-Tax Profit ($ million)
Net Profit ($ million)
15
12
9
6
3
0
3,000
2,400
1,800
1,200
600
0
2,000
1,600
1,200
800
400
0
2013
12.4
2014
13.3
2015
10.3
2016
2017
6.8
6.0
2013
2014
2015
2016
2,794
2,889
1,997
1,055
2017
516
2013
2014
2015
1,846
1,885
1,525
2016
784
2017
217
191
Keppel Corporation Limited | Report to Shareholders 2017 Group Five-Year Performance
Ltd and dilution re-measurement gain from the combination of Crystal Trust and CitySpring Infrastructure Trust to form the enlarged Keppel
Infrastructure Trust, which were partially offset by the losses following finalisation of the cost to complete the Doha North Sewage Treatment
Plant. Pre-tax profit of the Investments Division decreased by $124 million to $83 million due mainly to share of losses and impairment losses
of an associated company, and the absence of gain from sale of investments last year, partially offset by share of profits from Sino-Singapore
Tianjin Eco-City.
Taking into account income tax expenses and non-controlling interests, net profit attributable to shareholders was $784 million, $741 million or
49% lower than last year. The Property Division was the largest contributor to Group net profit at 79%, followed by the Infrastructure Division’s
13%, the Investments Division’s and the Offshore & Marine Division’s at 4% each.
2015
Group revenue of $10,296 million for 2015 was $2,987 million or 22% lower than that for the full year of 2014. Offshore & Marine Division’s revenue
of $6,241 million was 27% below the $8,556 million for 2014 due to lower volume of work, deferment of some projects and the suspension of the
Sete Brasil contracts. Major jobs completed in 2015 include seven jackup rigs, an accommodation semisubmersible, one FPSO conversion, one
depletion compression platform, one floating crane and an FPSO integration. The Property Division saw its revenue increase by 12% to
$1,823 million due mainly to higher revenue from China partly offset by lower revenue from Singapore and the absence of the sale of a residential
development in Jeddah, Saudi Arabia which was sold in 2014. Revenue from the Infrastructure Division contracted by $877 million to
$2,037 million as a result of a drop in revenue recorded by the power and gas business due to lower prices and volume, lower revenue from
engineering, procurement and construction (EPC) projects, lower contribution from the data centre business, as well as absence of revenue from
Keppel FMO Pte Ltd which was disposed in December 2014.
The Group’s pre-tax profit for the current year was $1,997 million, $892 million or 31% below the previous year. The Offshore & Marine Division
reported a $666 million drop in pre-tax profit to $699 million. Lower operating results arising from lower revenue, provision for losses for Sete
Brasil rig building contracts of about $230 million and lower net interest income were partially offset by an increase in share of associated
companies’ profits. The Property Division’s profit of $848 million for 2015 was $122 million or 13% below that of 2014. This was due mainly to
lower operating results, reduction in share of associated companies’ profits, higher net interest expense and absence of gains from the disposal
of investment properties (Equity Plaza, Prudential Tower and Marina Bay Financial Centre Tower 3 were disposed in 2014), partly offset by higher
fair value gains on investment properties and cost write-back upon finalisation of project cost for the Reflections at Keppel Bay. Profit from the
Infrastructure Division decreased by $192 million to $243 million. The gain from disposal of 51% interest in Keppel Merlimau Cogen Pte Ltd and
dilution re-measurement gain from the combination of Crystal Trust and CitySpring Infrastructure Trust to form the enlarged Keppel Infrastructure
Trust were partially offset by the losses following finalisation of the cost to complete the Doha North Sewage Treatment Works and the reduced
contribution from the power and gas business. There were also gains from divestment of data centre assets and Keppel FMO in 2014.
Taking into account income tax expenses and non-controlling interests, net profit attributable to shareholders was $1,525 million, $360 million
or 19% lower than last year. The Property Division was the largest contributor to Group net profit at 43%, followed by the Offshore & Marine
Division’s 32%, the Infrastructure Division’s 13% and the Investments Division’s at 12%.
2014
Group revenue of $13,283 million for 2014 was $903 million or 7% higher than that for the full year of 2013. Offshore & Marine Division’s revenue
of $8,556 million was 20% above the S$7,126 million for 2013, driven mainly by progress from on-going jobs. Major jobs completed in 2014
include 7 jackup rigs, 3 FPSO upgrades, 2 FPSO conversions, one FPSO integration and one semisubmersible upgrade. Revenue from the
Infrastructure Division decreased by $538 million to $2,914 million mainly due to lower revenue contributed by Keppel Infrastructure’s power
generation plant, partially offset by stronger contribution from Keppel Telecommunications & Transportation’s logistics and data centre
businesses. The Property Division saw its revenue weakened by 2% to $1,629 million mainly from weaker sales in Singapore. In addition,
Keppel REIT did not contribute any revenue in 2014 as it was deconsolidated from 31 August 2013. This was partly offset by sale of a residential
development in Jeddah, Saudi Arabia.
The Group’s pre-tax profit for the current year was $2,889 million, $95 million or 3% above the previous year. The Offshore & Marine Division
posted a higher pre-tax profit of $1,365 million mainly from better operating results and higher interest income partially offset by lower share of
associated companies’ profits. Profit from the Infrastructure Division increased by $365 million to $435 million due mainly to better operating
results from both Keppel Infrastructure and Keppel Telecommunications & Transportation as well as gains from divestments of data centre
assets and Keppel FMO. The Property Division’s profit of $970 million for 2014 was $407 million or 30% below that of 2013. Lower operating
results, lower fair value gains on investment properties and absence of gains from deconsolidation of Keppel REIT recognised in 2013 was
partially offset by gains from the disposals of Equity Plaza, Prudential Tower and Marina Bay Financial Centre Tower 3 in 2014.
Shareholders’ Fund ($ billion)
Total Equity ($ billion)
Market Capitalisation ($ billion)
15
12
9
6
3
0
25
20
15
10
5
0
2013
9.7
2014
10.4
2015
11.1
2016
11.7
2017
11.4
2013
13.7
2014
14.7
2015
11.9
2016
12.3
2017
12.0
2013
20.2
2014
16.0
2015
11.8
2016
10.5
2017
13.4
12.5
10
7.5
5.0
2.5
0
192
Other Information Taking into account income tax expenses and non-controlling interests, net profit attributable to shareholders was $1,885 million, $39 million
or 2% higher than last year. The Offshore & Marine Division was the largest contributor to Group net profit at 55%, followed by the Property
Division’s 25%, the Infrastructure Division’s 16% and the Investments Division’s at 4%.
2013
Group revenue was $12,380 million as compared to $13,965 million for 2012. Many jobs started during the year have not reached the stage
of revenue recognition resulting in the revenue of Offshore & Marine Division falling by 11% to $7,126 million. In 2013, 22 major newbuilds,
comprising 20 jack-ups, an accommodation semisubmersible and a semisubmersible, were completed. Other significant jobs completed
include a drillship upgrade, a semi upgrade, several FPSO projects and a diving support vessel. Revenue from Infrastructure Division increased
by $620 million to $3,452 million due to higher revenue contributed by the co-generation power plant in Singapore. Property Division saw its
revenue weakened by 43% to $1,711 million mainly from decline in sales recognition of Reflections at Keppel Bay units arising from the deliveries
of residential units sold under the deferred payment scheme in 2012 which was not repeated in 2013.
At the pre-tax level, Group profit went down by $462 million from $3,256 million in 2012 to $2,794 million for the current year. Offshore &
Marine Division posted a higher pre-tax profit of $1,202 million mainly from an increase in share of associated companies’ profits partly offset
by a decrease in operating results. Profit from Infrastructure Division picked up by 21% to $70 million due mainly to improved performance
by its power and gas business. There was also a reversal of provision following the finalisation of the sale of the power barge. This was partly
offset by losses arising from cost overruns pertaining to the EPC contracts. Property Division profit of $1,377 million was 22% lower than profit
of $1,757 million for 2012. Reflections at Keppel Bay recorded higher profits in the previous year as it benefited from revenue recognition from
the deliveries of residential units sold under the deferred payment scheme. There were also lower gains on investment properties in 2013.
This reduction was partially offset by higher contribution of profit from China, profit from the sale of Jakarta Garden City project and gain from
deconsolidation of Keppel REIT during the current year. Fewer disposals of equity investments in 2013 resulted in the decline of Investments
Division’s profit to $144 million.
Taking into account income tax expenses and non-controlling interests, net profit attributable to shareholders was $1,846 million, $391 million
or 17% lower than last year. The Offshore & Marine Division was the largest contributor to Group net profit at 51%, followed by the Property
Division’s 43%.
193
Keppel Corporation Limited | Report to Shareholders 2017 Group Value-Added Statements
2013
2014
2015
2016
2017
($ 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
Other operating income / (expenses)
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
One-off financial penalty & related costs
Total Distribution
Balance retained in the business:
Depreciation & amortisation
Non-controlling interests share of profits
in subsidiaries
Retained profit for the year
12,380
(8,696)
3,684
13,283
(9,474)
3,809
10,296
(7,365)
2,931
6,767
(4,393)
2,374
139
345
(187)
2,671
1,155
233
225
77
545
847
-
5,964
(4,141)
1,823
158
390
192
2,563
1,027
298
189
27
364
580
619
145
504
563
5,021
1,733
462
134
266
763
1,163
-
134
504
402
3,971
1,600
404
155
83
872
1,110
-
3,358
3,114
2,235
2,524
265
276
1,122
1,663
5,021
220
(15)
652
857
236
(39)
239
436
212
(26)
(147)
39
3,971
2,671
2,563
158
626
361
4,829
1,668
397
125
175
1,357
1,657
-
3,722
242
376
489
1,107
4,829
Number of employees
38,878
39,049
36,153
28,879
21,862
Productivity data:
Gross value added per employee ($’000)
Gross value added per dollar employment cost ($)
Gross value added per dollar sales ($)
95
2.21
0.30
98
2.20
0.29
81
1.83
0.28
4,829
5,021
($ million)
5,000
4,000
3,000
2,000
1,000
0
82
2.06
0.35
3,971
83
1.78
0.31
2,671
2,563
2013
2014
2015
One-off financial penalty and related costs
One-off financial penalty and related cost
-
0
-
0
-
0
Depreciation & Retained Profit
Depreciation & Retained Profit
1,107
1,107
1,663
1,663
857
857
Interest Expenses & Dividends
Interest Expenses & Dividends
1,657
1,657
1,163
1,163
1,110
1,110
Taxation
Taxation
397
397
462
462
404
404
2016
-
0
436
436
847
847
233
233
2017
619
619
39
39
580
580
298
298
Wages, Salaries & Benefits
Wages, Salaries & Benefits
1,668
1,668
1,733
1,733
1,600
1,600
1,155
1,155
1,027
1,027
194
Other Information
Share Performance
Turnover
(million)
Share Prices
($)
400
300
200
180
160
140
120
100
80
60
40
20
0
40
30
20
18
16
14
12
10
8
6
4
2
0
2013
2014
2015
2016
2017
Turnover
High and Low Prices
Share Price ($) *
Last transacted (Note 3)
High
Low
Volume weighted average (Note 2)
Per Share
Earnings (cents) (Note 1)
Total distribution (cents)
Distribution yield (%) (Note 2)
Net price earnings ratio (Note 2)
Net assets backing ($)
At Year End
Share price ($)
Distribution yield (%) (Note 3)
Net price earnings ratio (Note 3)
Net price to book ratio (Note 3)
2013
2014
2015
2016
11.19
11.93
10.01
10.87
102.3
49.5
4.6
10.6
5.32
11.19
4.4
10.9
2.1
8.85
11.24
7.91
10.01
103.8
48.0
4.8
9.6
5.70
8.85
5.4
8.5
1.6
6.51
9.54
6.20
7.92
84.0
34.0
4.3
9.4
6.07
6.51
5.2
7.8
1.1
5.79
6.56
4.64
5.46
43.2
20.0
3.7
12.6
6.34
5.79
3.5
13.4
0.9
Earnings per share are calculated based on the Group net profit by reference to the weighted average number of shares in issue during the year.
Notes:
1.
2. Volume weighted average share price is used in calculating distribution yield and net price earnings ratio.
3.
*
^
Last transacted share price is used in calculating distribution yield, net price earnings ratio and net price to book ratio.
Historical share prices are not adjusted for special dividends, capital distribution and dividend in specie.
Includes the one-off financial penalty from the global resolution and related costs of $619 million
.
2017
7.35
7.83
5.73
6.79
11.9^
22.00
3.2
57.0
6.21
7.35
3.0
61.7
1.2
195
Keppel Corporation Limited | Report to Shareholders 2017
Shareholding Statistics
As at 5 March 2018
Issued and Fully paid-up capital (including Treasury Shares) : $1,291,720,897.98
Issued and Fully paid-up capital (excluding Treasury Shares) : $1,271,805,975.81
Number of Issued shares (including Treasury Shares)
Number of Issued shares (excluding Treasury Shares)
Number/Percentage of Treasury Shares
Number/Percentage of Subsidiary Holdings 1
Class of Shares
Voting Rights (excluding Treasury Shares)
: 1,818,394,180
: 1,816,051,774
: 2,342,406 (0.13%)
: 0 (0%)
: Ordinary Shares
: One Vote Per Share. The Company cannot exercise any
voting rights in respect of treasury shares
Subject to the Companies Act, Chapter 50, subsidiaries cannot exercise any voting rights in respect of shares held by them as subsidiary
holdings.
Size of Shareholdings
1 - 99
100 - 1,000
1,001 - 10,000
10,001 - 1,000,000
1,000,001 & Above
Total
Twenty Largest Shareholders
Temasek Holdings (Private) Limited
Citibank Nominees Singapore Pte Ltd
DBS Nominees Pte Ltd
HSBC (Singapore) Nominees Pte Ltd
United Overseas Bank Nominees Pte Ltd
DBSN Services Pte Ltd
Raffles Nominees (Pte) Ltd
BPSS Nominees Singapore (Pte.) Ltd.
DB Nominees (S) Pte Ltd
OCBC Nominees Singapore Pte Ltd
OCBC Securities Private Ltd
Shanwood Development Pte Ltd
UOB Kay Hian Pte Ltd
Phillip Securities Pte Ltd
Chen Chun Nan
BNP Paribas Nominees Singapore Pte Ltd
DBS Vickers Securities (S) Pte Ltd
Maybank Kim Eng Securities Pte Ltd
Societe Generale S’pore Branch
Lim Chee Onn
Total
No. of
Shareholders
155
16,150
42,800
8,900
29
%
0.23
23.74
62.91
13.08
0.04
No. of
Shares
5,166
13,171,982
166,475,923
270,204,384
1,366,194,319
%
0.00
0.72
9.17
14.88
75.23
68,034
100.00
1,816,051,774
100.00
No. of
Shares
371,408,292
337,189,662
204,205,679
105,390,174
91,335,967
80,508,498
50,055,361
39,434,983
19,134,179
11,957,711
7,277,482
7,040,000
4,492,915
3,993,737
3,618,100
3,234,394
3,035,770
2,856,473
2,841,985
2,569,282
%
20.45
18.57
11.24
5.80
5.03
4.43
2.75
2.17
1.05
0.66
0.40
0.39
0.25
0.22
0.20
0.18
0.17
0.16
0.16
0.14
1,351,580,644
74.42
Substantial Shareholders (as shown in the Register of Substantial Shareholders)
Temasek Holdings (Private) Limited 2
BlackRock, Inc 3
The PNC Financial Services Group, Inc 4
371,408,292
20.45
655,258
96,191,360
96,202,088
0.03
5.29
5.29
372,063,550
96,191,360
96,202,088
Direct Interest
Deemed Interest
Total Interest
No. of Shares
%
No. of Shares
%
No. of Shares
%
20.48
5.29
5.29
Notes:
1
2
3
4
”Subsidiary holdings” is defined in the Listing Manual to mean shares referred to in Sections 21(4), 21(4B), 21(6A) and 21(6C) of the Companies Act, Chapter 50.
Temasek Holdings (Private) Limited is deemed interested in 655,258 shares in which its subsidiaries and associated companies have direct or deemed interests.
BlackRock, Inc is deemed to be interested in an aggregate of 96,191,360 shares held through its various subsidiaries.
The PNC Financial Services Group, Inc is deemed to be interested in the 96,191,360 shares held through BlackRock, Inc through its over 20% ownership of BlackRock, Inc.
as well as 10,728 shares represented by 5,364 American Depository Receipts through other entities.
Public Shareholders
Based on the information available to the Company as at 5 March 2018, approximately 79% of the issued shares of the Company is held by the
public and therefore, pursuant to Rules 723 and 1207 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.
196
Other Information
Notice of Annual General Meeting & Closure of Books
eppel
Corporation
Keppel Corporation Limited
Company Registration No. 196800351N
(Incorporated in the Republic of Singapore)
NOTICE IS HEREBY GIVEN that the 50th Annual General Meeting of the Company will be held at Level 3, Heliconia Main Ballroom, Sands Expo
and Convention Centre, 10 Bayfront Avenue, Singapore 018956 on Friday, 20 April 2018 at 3.00 p.m. to transact the following business:
Ordinary Business
1.
2.
3.
4.
5.
To receive and adopt the Directors’ Statement and Audited Financial Statements for the year ended 31 December 2017.
Resolution 1
To declare a final tax-exempt (one-tier) dividend of 14.0 cents per share for the year ended 31 December 2017
(2016: final tax-exempt (one-tier) dividend of 12.0 cents per share).
Resolution 2
To re-elect the following directors of the Company (“Directors”), each of whom will be retiring by rotation pursuant
to Regulation 83 of the Constitution of the Company (“Constitution”) and who, being eligible, offers himself for
re-election pursuant to Regulation 84 of the Constitution (see Note 3):
(i) Dr Lee Boon Yang
(ii) Mr Tan Puay Chiang
(iii) Ms Veronica Eng
To approve the sum of S$2,191,000 as Directors’ fees for the year ended 31 December 2017 (2016: S$2,020,948) (see
Note 4).
Resolution 3
Resolution 4
Resolution 5
Resolution 6
To re-appoint PricewaterhouseCoopers LLP as the auditors of the Company, and authorise the Directors to fix their
remuneration.
Resolution 7
Special Business
To consider and, if thought fit, approve with or without any modifications, the following ordinary resolutions:
6.
That pursuant to Section 161 of the Companies Act, Chapter 50 of Singapore (the “Companies Act”), authority be and
is hereby given to the Directors to:
Resolution 8
(1)
(a)
issue shares in the capital of the Company (“Shares”), whether by way of rights, bonus or otherwise, and
including any capitalisation 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
(b) 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
(2)
(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;
197
Keppel Corporation Limited | Report to Shareholders 2017
Notice of Annual General Meeting & Closure of Books
provided that:
(i)
(ii)
(iii)
(iv)
7.
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 to this Resolution and any adjustment effected under
any relevant Instrument) shall not exceed fifty (50) per cent. of the total number of issued Shares (excluding
treasury Shares and subsidiary holdings) (as calculated in accordance with sub-paragraph (ii) 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 adjustment effected under any relevant Instrument) shall not exceed five (5) per cent. of the total
number of issued Shares (excluding treasury Shares and subsidiary holdings) (as calculated in accordance with
sub-paragraph (ii) below);
(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 (i) above, the percentage of issued Shares shall be calculated based on the total number of
issued Shares (excluding treasury Shares and subsidiary holdings) at the time this Resolution is passed, after
adjusting for:
(a)
new Shares arising from the conversion or exercise of convertible securities or share options or vesting of
share awards which are outstanding or subsisting as at the time this Resolution is passed; and
(b)
any subsequent bonus issue, consolidation or sub-division of Shares,
and in sub-paragraph (i) above and this sub-paragraph (ii), “subsidiary holdings” has the meaning given to it in
the listing manual of the SGX-ST (“Listing Manual”);
in exercising the authority conferred by this Resolution, the Company shall comply with the provisions of
the Companies Act, the Listing Manual (unless such compliance has been waived by the SGX-ST) and the
Constitution for the time being in force; and
(unless revoked or varied by the Company in a 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 of the Company is required by law to be held, whichever is the earlier (see Note 5).
for the purposes of the Companies Act, the exercise by the Directors of all the powers of the Company to
purchase or otherwise acquire Shares not exceeding in aggregate the Maximum Limit (as hereafter defined), at
such price(s) as may be determined by the Directors from time to time up to the Maximum Price (as hereafter
defined), whether by way of:
(a) market purchase(s) (each a “Market Purchase”) on the SGX-ST; and/or
(b)
off-market purchase(s) (each an “Off-Market Purchase”) in accordance with any equal access scheme(s)
as may be determined or formulated by the Directors as they consider fit, which scheme(s) shall satisfy all
the conditions prescribed by the Companies Act;
and otherwise in accordance with all other laws and regulations, including but not limited to, the provisions of
the Companies Act and the Listing Manual as may for the time being be applicable, be and is hereby authorised
and approved generally and unconditionally (the “Share Purchase Mandate”);
Resolution 9
(2)
(unless varied or revoked by the members of the Company in a general meeting) the authority conferred on
the Directors pursuant to the Share Purchase Mandate may be exercised by the Directors at any time and from
time to time during the period commencing from the date of the passing of this Resolution and expiring on the
earliest of:
(a)
the date on which the next annual general meeting of the Company is held;
(b)
the date on which the next annual general meeting of the Company is required by law to be held; or
(c)
the date on which the purchases or acquisitions of Shares by the Company pursuant to the Share Purchase
Mandate are carried out to the full extent mandated;
198
Other Information
(3)
in this Resolution:
“Maximum Limit” means that number of issued Shares representing five (5) per cent. of the total number of
issued Shares as at the date of the passing of this Resolution, unless the Company has at any time during the
Relevant Period reduced its share capital by a special resolution under Section 78C of the Companies Act, or the
court has, at any time during the Relevant Period (as hereinafter defined), made an order under Section 78I of
the Companies Act confirming the reduction of share capital of the Company, in which event the total number
of issued Shares shall be taken to be the total number of issued Shares as altered by the special resolution of the
Company or the order of the court, as the case may be. Any Shares which are held as treasury shares and any
subsidiary holdings will be disregarded for purposes of computing the five (5) per cent. limit;
“Relevant Period” means the period commencing from the date of the passing of this Resolution and expiring
on the date the next annual general meeting is held or is required by law to be held, whichever is the earlier;
“subsidiary holdings” has the meaning given to it in the Listing Manual; and
“Maximum Price”, in relation to a Share to be purchased or acquired, means the purchase price (excluding
brokerage, stamp duties, commission, applicable goods and services tax and other related expenses) which is:
(a)
in the case of a Market Purchase, 105 per cent. of the Average Closing Price (as hereafter defined); and
(b)
in the case of an Off-Market Purchase pursuant to an equal access scheme, 120 per cent. of the Average
Closing Price,
where:
“Average Closing Price” means the average of the closing market prices of a Share over the last five (5) Market
Days (a “Market Day” being a day on which the SGX-ST is open for trading in securities), on which transactions in
the Shares were recorded, in the case of Market Purchases, before the day on which the purchase or acquisition
of Shares was made and deemed to be adjusted for any corporate action that occurs after the relevant five (5)
Market Days, or in the case of Off-Market Purchases, before the date on which the Company makes an offer for
the purchase or acquisition of Shares from holders of Shares, stating therein the purchase price of each Share
and the relevant terms of the equal access scheme for effecting the Off-Market Purchase; and
(4)
the Directors and/or any of them be and are hereby authorised to complete and do all such acts and
things (including without limitation, executing such documents as may be required) as they and/or he may
consider necessary, expedient, incidental or in the interests of the Company to give effect to the transactions
contemplated and/or authorised by this Resolution (see Note 6).
8.
That:
(1)
(2)
(3)
(4)
approval be and is hereby given, for the purposes of Chapter 9 of the Listing Manual, for the Company, its
subsidiaries and target associated companies (as defined in Appendix 2 to this Notice of Annual General
Meeting (“Appendix 2”)), or any of them, to enter into any of the transactions falling within the types of Interested
Person Transactions described in Appendix 2, with any person who falls within the classes of Interested Persons
described in Appendix 2, provided that such transactions are made on normal commercial terms and in
accordance with the review procedures for Interested Person Transactions as set out in Appendix 2 (the “IPT
Mandate”);
the IPT Mandate shall, unless revoked or varied by the Company in general meeting, continue in force until the
date that the next annual general meeting is held or is required by law to be held, whichever is the earlier;
the Audit Committee of the Company be and is hereby authorised to take such action as it deems proper in
respect of such procedures and/or to modify or implement such procedures as may be necessary to take into
consideration any amendment to Chapter 9 of the Listing Manual which may be prescribed by the SGX-ST from
time to time; and
the Directors and/or any of them be and are hereby authorised to complete and do all such acts and things
(including, without limitation, executing such documents as may be required) as they and/or he may consider
necessary, expedient, incidental or in the interests of the Company to give effect to the IPT Mandate and/or this
Resolution (see Note 7).
To transact such other business which can be transacted at the annual general meeting of the Company.
Resolution 10
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Keppel Corporation Limited | Report to Shareholders 2017
Notice of Annual General Meeting & Closure of Books
NOTICE IS ALSO HEREBY GIVEN THAT:
(a)
(b)
the Share Transfer Books and the Register of Members of the Company will be closed on 27 April 2018 at 5.00 p.m., for
the preparation of dividend warrants. Duly completed transfers of Shares received by the Company’s Share Registrar,
B.A.C.S. Private Limited, at 8 Robinson Road, #03-00 ASO Building, Singapore 048544 up to 5.00 p.m. on 27 April
2018 will be registered to determine shareholders’ entitlement to the proposed final dividend. Shareholders whose
securities accounts with The Central Depository (Pte) Limited are credited with Shares as at 5.00 p.m. on 27 April 2018
will be entitled to the proposed final dividend. The proposed final dividend if approved at this annual general meeting
will be paid on 10 May 2018; and
the electronic copy of the Company’s Annual Report 2017 will be published on the Company’s website on 29 March
2018. The Company’s website address is http://www.kepcorp.com, and the electronic copy of the Annual Report
2017 can be viewed or downloaded from the annual report microsite at www.kepcorp.com/annualreport2017/. To
download the electronic copy of the Annual Report 2017, click on the link at the top right hand corner of the microsite
webpage. You will need an internet browser and PDF reader to view the document.
BY ORDER OF THE BOARD
Caroline Chang/Leon Ng
Company Secretaries
Singapore, 29 March 2018
200
Other Information Notes:
1.
A member of the Company entitled to attend and vote at a meeting of the Company, and who is not a Relevant Intermediary is entitled to appoint one proxy or two proxies
to attend and vote in his place. A member of the Company who is a Relevant Intermediary is entitled to appoint more than two proxies to attend and vote in his place, but
each proxy must be appointed to exercise the rights attached to a different Share or Shares held by such member. A proxy need not be a member of the Company.
“Relevant Intermediary” has the meaning ascribed to it in Section 181 of the Companies Act.
2.
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 72 hours before the time appointed for holding the annual general meeting. In the case of members of the Company whose Shares are entered against their
names in the Depository Register, the Company may reject any instrument appointing a proxy or proxies lodged if such members are not shown to have Shares entered
against their names in the Depository Register as at 72 hours before the time appointed for holding the annual general meeting as certified by The Central Depository
(Pte) Limited to the Company.
3.
Detailed information on these directors can be found in the “Board of Directors” section of the Company’s Annual Report for the financial year ended 31 December 2017
(“Annual Report 2017”).
Dr Lee Boon Yang will, upon his re-election, continue to serve as the Chairman of the Board and as a member of the Nominating, Remuneration and Board Safety
Committees. Dr Lee was formerly Minister for Information, Communications and the Arts, and Member of Parliament. He stood as a candidate in the Singapore General
Elections in 1984 and won the Jalan Besar parliamentary seat, which he held for six consecutive terms till his retirement in 2011. He is currently also the Chairman of the
boards of Singapore Press Holdings Limited, Singapore Press Holdings Foundation Limited and Keppel Care Foundation Limited.
Mr Tan Puay Chiang will, upon his re-election, continue to serve as the Chairman of the Nominating Committee, and as a member of the Board Safety and Board
Risk Committees. Mr Tan was formerly Chairman, ExxonMobil (China) Investment Co. During his 37-year career with Mobil and later ExxonMobil, he held executive
management roles in Australia, Singapore and the United States. These included the executive positions of Vice-President, Mobil Research & Technology Corp, United
States; and Chairman of Mobil Oil Australia. He is a member of the board of Singapore Power Limited and is also the Chairman of the board of SP Services Limited.
Ms Veronica Eng will, upon her re-election, continue to serve as the Chairman of the Board Risk Committee and as a member of the Audit Committee. Ms Eng retired
as a Founding Partner of Permira in late 2015. Over her 30-year career with Permira, Ms Eng held a number of key positions in the firm and had extensive experience
in a wide range of roles in relation to its funds’ investments across sectors and geographies. She served on the board of Permira and its Executive Committee, chaired
the Investment Committee and was the Fund Minder to various Permira funds. In addition, she also had oversight of Permira’s firm-wide risk management as well as its
operations in Asia. Ms Eng sits on the Board of the Centre for Asset Management Research & Investments at National University of Singapore’s Business School, and is a
member of Singapore’s Diversity Action Committee. She is also a Professor (Practice) at the National University of Singapore’s Business School.
Dr Lee Boon Yang, Mr Tan Puay Chiang and Ms Veronica Eng are considered by the board of Directors to be independent Directors. Please see pages 20 and 23 of the
Annual Report 2017.
4.
Resolution 6 is to approve the payment of an aggregate sum of S$2,191,000 as Directors’ fees for the non-executive Directors of the Company for FY 2017. This is lower
than the total fees for the non-executive directors for FY 2016 (before the voluntary 10% reduction in their total fees for FY 2016).
If approved, each of the non-executive Directors (including the Chairman) will receive 70% of his/her total Directors’ fees in cash (“Cash Component”) and 30% in the form
of Shares (“Remuneration Shares”) (both amounts subject to adjustment as described below). The actual number of Remuneration Shares, to be purchased from the
market on the first trading day immediately after the date of the annual general meeting (“Trading Day”) for delivery to the respective non-executive Directors, will be
based on the market price of the Company’s shares on the SGX-ST on the Trading Day. The actual number of Remuneration Shares will be rounded down to the nearest
thousand and any residual balance will be paid in cash.
The Remuneration Shares will rank pari passu with the then existing issued Shares. Details of the Directors’ remuneration can be found on page 71 of the Annual Report
2017. The non-executive Directors will abstain from voting, and will procure that their respective associates abstain from voting, in respect of this Resolution.
Resolution 8 is to empower the Directors from the date of this annual general meeting until the date of the next annual general meeting to issue Shares and Instruments in
the Company, up to a number not exceeding 50 per cent. of the total number of Shares (excluding treasury shares and subsidiary holdings) (with a sub-limit of 5 per cent.
of the total number of Shares (excluding treasury shares and subsidiary holdings) in respect of Shares to be issued other than on a pro rata basis to shareholders). The 5 per
cent. sub-limit for non-pro rata issues is lower than the 20 per cent. sub-limit allowed under the Listing Manual. Of the 5 per cent. sub-limit, in relation to the Company’s
Restricted Share Plan and Performance Share Plan (collectively, the “Share Plans”), the Company shall not award Shares (“Awards”) under the Share Plans exceeding in
aggregate 2 per cent. of the total number of issued Shares (“Yearly Limit”). However, if the Yearly Limit is not fully utilised in any given year, the balance of the unutilised
Yearly Limit may be used by the Company to make grants of Awards in subsequent years. For the purpose of determining the total number of Shares (excluding treasury
shares and subsidiary holdings) that may be issued, the percentage of issued Shares shall be based on the total number of issued Shares (excluding treasury shares and
subsidiary holdings) at the time that this Resolution is passed, after adjusting for 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 8 is passed, and any subsequent bonus issue, consolidation or sub-
division of Shares.
Resolution 9 relates to the renewal of the Share Purchase Mandate which was originally approved by Shareholders on 18 February 2000 and was last renewed at the
annual general meeting of the Company on 21 April 2017. At this annual general meeting, the Company is seeking a lower “Maximum Limit” of 5 per cent. of the total
number of issued Shares, which is lower than the 10 per cent. limit allowed under the Listing Manual. Please refer to Appendix 1 to this Notice of Annual General Meeting
for details.
Resolution 10 relates to the renewal of a mandate given by Shareholders on 22 May 2003 allowing the Company, its subsidiaries and target associated companies to enter
into transactions with interested persons as defined in Chapter 9 of the Listing Manual. Please refer to Appendix 2 to this Notice of Annual General Meeting for details.
Personal Data Privacy:
By submitting an instrument appointing proxy or proxies, and/or representative(s) to attend, speak and vote at the annual general meeting and/or any adjournment
thereof, a member (i) consents to the collection, use and disclosure of the member’s personal data by the Company (or its agents or service providers) for the purpose of
the processing, administration and analysis by the Company (or its agents or service providers) of proxies and representatives appointed for the annual general meeting
(including any adjournment thereof), and in order for the Company (or its agents or service providers) to comply with any applicable laws, listing rules, regulations and/or
guidelines (collectively, the “Purposes”), and (ii) warrants that where the member discloses the personal data of the member’s proxy(ies) and/or representative(s) to the
Company (or its agents or service providers), the member has obtained the prior consent of such proxy(ies) and//or representative(s) for the collection, use and disclosure
of such individual’s personal data for the Purposes.
5.
6.
7.
8.
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Keppel Corporation Limited | Report to Shareholders 2017
Corporate Information
Board of Directors
Lee Boon Yang (Chairman)
Loh Chin Hua (Chief Executive Officer)
Tow Heng Tan
Alvin Yeo Khirn Hai
Tan Ek Kia
Danny Teoh
Tan Puay Chiang
Till Vestring
Veronica Eng
Audit Committee
Danny Teoh (Chairman)
Alvin Yeo Khirn Hai
Veronica Eng
Tan Ek Kia
Remuneration Committee
Till Vestring (Chairman)
Lee Boon Yang
Danny Teoh
Tow Heng Tan
Nominating Committee
Tan Puay Chiang (Chairman)
Lee Boon Yang
Tow Heng Tan
Alvin Yeo
Till Vestring
Board Risk Committee
Veronica Eng (Chairman)
Tow Heng Tan
Danny Teoh
Tan Puay Chiang
Tan Ek Kia
Board Safety Committee
Tan Ek Kia (Chairman)
Lee Boon Yang
Loh Chin Hua
Tan Puay Chiang
Company Secretaries
Caroline Chang
Leon Ng
Registered Office
1 HarbourFront Avenue
#18-01 Keppel Bay Tower
Singapore 098632
Telephone: (65) 6270 6666
Facsimile No.: (65) 6413 6391
Email: keppelgroup@kepcorp.com
Website: www.kepcorp.com
Share Registrar
B.A.C.S. Private Limited
8 Robinson Road
#03-00 ASO Building
Singapore 048544
Auditors
PricewaterhouseCoopers LLP
7 Straits View
Marina One East Tower
Level 12
Singapore 018936
Audit Partner: Sim Hwee Cher
Year appointed: 2016
202
Other Information Financial Calendar
FY 2017
Financial year-end
Announcement of 2017 1Q results
Announcement of 2017 2Q results
Announcement of 2017 3Q results
Announcement of 2017 full year results
Despatch of Annual Report to Shareholders
Annual General Meeting
2017 Proposed final dividend
Books closure date
Payment date
FY 2018
Financial year-end
Announcement of 2018 1Q results
Announcement of 2018 2Q results
Announcement of 2018 3Q results
Announcement of 2018 full year results
31 December 2017
20 April 2017
20 July 2017
19 October 2017
25 January 2018
29 March 2018
20 April 2018
5.00 p.m., 27 April 2018
10 May 2018
31 December 2018
April 2018
July 2018
October 2018
January 2019
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eppel
Corporation
Keppel Corporation Limited
Company Registration No. 196800351N
(Incorporated in the Republic of Singapore)
ANNUAL GENERAL MEETING
Proxy Form
IMPORTANT
1. Relevant Intermediaries (as defined in Section 181 of the Companies Act,
Chapter 50 of Singapore), may appoint more than two proxies to attend and
vote at the Annual General Meeting.
2. For CPF/SRS investors who have used their CPF/SRS monies to buy ordinary
shares in the capital of Keppel Corporation Limited (“Shares”), this report is
forwarded to them at the request of their Agent Banks/SRS Operators and is
sent solely FOR INFORMATION ONLY.
3. This Proxy Form is not valid for use by CPF/SRS investors and shall be
ineffective for all intents and purposes if used or purported to be used by
them.
4. A CPF/SRS investor who wishes to attend the Annual General Meeting as
proxy has to submit his request to his Agent Bank/SRS Operator so that his
Agent Bank/SRS Operator may appoint him as its proxy within the specified
timeframe. (Agent Banks/SRS Operators: Please refer to Notes 2(b) and 4 on
the reverse side of this form on the required details.)
Personal Data Privacy
By submitting an instrument appointing proxy or proxies and/or representative(s),
a member of the Company accepts and agrees to the personal data privacy terms
set out in the Notice of Annual General Meeting dated 29 March 2018.
I/We, (Name) (NRIC/Passport/UEN Number)
of (Address)
being a member or members of KEPPEL CORPORATION LIMITED (the “Company”) hereby appoint:
Name
Address
NRIC/
Passport Number
Proportion of Shareholdings
(Ordinary Shares)
No. of Shares
%
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and/or (delete as appropriate)
Name
Address
NRIC/
Passport Number
Proportion of Shareholdings
(Ordinary Shares)
No. of Shares
%
as my/our proxy/proxies to attend, speak and vote for me/us on my/our behalf at the Annual General Meeting of the Company
(“AGM”) to be held on Friday, 20 April 2018 at Level 3, Heliconia Main Ballroom, Sands Expo and Convention Centre, 10 Bayfront Avenue,
Singapore 018956 at 3.00 p.m. and at any adjournment thereof. I/We direct my/our proxy/proxies to vote for or against the resolutions
to be proposed at the meeting as indicated hereunder. If no specific direction as to voting is given, the proxy/proxies will vote or abstain
from voting at his/their discretion, as he/they will on any other matter arising at the meeting and at any adjournment thereof.
Resolutions
Number of Votes
For *
Number of Votes
Against *
o
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e
d
.
Ordinary Business
1. Adoption of Directors’ Statement and Audited Financial Statements
2. Declaration of Dividend
3. Re-election of Dr Lee Boon Yang as Director
4. Re-election of Mr Tan Puay Chiang as Director
5. Re-election of Ms Veronica Eng as Director
6. Approval of fees to non-executive Directors
7. Re-appointment of Auditors
Special Business
8. Authority to issue shares and convertible instruments
9. Renewal of Share Purchase Mandate
10. Renewal of Shareholders’ Mandate for Interested Person Transactions
*
If you wish to exercise all your votes “For” or “Against” the relevant Resolution, please tick (“4”) within the relevant box provided. Alternatively, if you wish to
exercise your votes for both “For” and “Against” the relevant Resolution, please indicate the number of Shares in the boxes provided.
Dated this day of 2018
Total Number of
Shares held
Signature(s) or Common Seal of Member(s)
IMPORTANT: Please read the notes overleaf before completing this Proxy Form.
Glue all sides firmly. Stapling and spot sealing are disallowed.
Notes:
1. Please insert the total number of Shares held by you. If you only have Shares entered against your name in the Depository Register (as defined in Part IIIAA of the
Securities and Futures Act, Chapter 289 of Singapore), you should insert that number of Shares. If you only have Shares registered in your name in the Register of
Members, you should insert that number of Shares. However, if you have Shares entered against your name in the Depository Register and Shares registered in your
name in the Register of Members, you should insert the aggregate number of Shares entered against your name in the Depository Register and registered in your
name in the Register of Members. If no number is inserted, the proxy form shall be deemed to relate to all the Shares held by you (in both the Register of Members
and the Depository Register).
2.
(a) A member of the Company entitled to attend and vote at a meeting of the Company, and who is not a Relevant Intermediary, is entitled to appoint one or
two proxies to attend and vote instead of him. A proxy need not be a member of the Company. Where a member of the Company appoints two proxies, the
proportion of the shareholding concerned to be represented by each proxy shall be specified in the proxy form. If no percentage is specified, the first named
proxy shall be deemed to represent 100 per cent of the shareholding and the second named proxy shall be deemed to be an alternate to the first named proxy.
(b) A member of the Company who is a Relevant Intermediary is entitled to appoint more than two proxies to attend and vote at a meeting of the Company, but
each proxy must be appointed to exercise the rights attached to a different Share or Shares held by such member. Where more than one proxy is appointed, the
number and class of shares in relation to which each proxy has been appointed shall be specified in the proxy form. In relation to a Relevant Intermediary who
wishes to appoint more than two proxies, it should annex to the proxy form the list of proxies, setting out, in respect of each proxy, the name, address, NRIC/
Passport Number and proportion of shareholding (number of shares, class of shares and percentage) in relation to which the proxy has been appointed. For the
avoidance of doubt, Agent Bank/SRS Operator who intends to appoint CPF/SRS investors as its proxies shall comply with this Note.
(c) “Relevant Intermediary” has the meaning ascribed to it in Section 181 of the Companies Act, Chapter 50 of Singapore (“Companies Act”).
Affix
Postage
Stamp
Fold along this line (1)
The Company Secretary
Keppel Corporation Limited
1 HarbourFront Avenue
#18-01 Keppel Bay Tower
Singapore 098632
Fold along this line (2)
-
3. Completion and return of the proxy form shall not preclude a member from attending and voting in person at the meeting. Any appointment of a proxy or proxies
will be revoked if a member attends the meeting in person, and in such event, the Company reserves the right to refuse to admit any person or persons appointed
under the proxy form, to the meeting.
4.
5.
The proxy form must be deposited at the registered office of the Company at 1 HarbourFront Avenue, #18-01 Keppel Bay Tower, Singapore 098632, not less than 72
hours before the time appointed for the Annual General Meeting.
The proxy form appointing a proxy or proxies must be under the hand of the appointor or of his attorney duly authorised in writing. Where the proxy form is executed
by a corporation, it must be executed either under its seal or under the hand of an officer or attorney duly authorised in writing. Where a proxy form is signed on
behalf of the appointor by an attorney, the power of attorney or other authority or a duly certified copy thereof must (failing previous registration with the Company)
be lodged with the proxy form, failing which the proxy form may be treated as invalid.
6. A corporation which is a member of the Company may authorise, by resolution of its directors or other governing body, such person as it thinks fit to act as its
representative at the Annual General Meeting, in accordance with Section 179 of the Companies Act.
7.
The Company shall be entitled to reject the proxy form appointing a proxy or proxies if it is incomplete, improperly completed or illegible or where the true intentions
of the appointor are not ascertainable from the instructions of the appointor specified in the proxy form (including any related attachment) appointing a proxy or
proxies. In addition, in the case of members of the Company whose Shares are entered against their names in the Depository Register, the Company shall be entitled
to reject any proxy form lodged if such members are not shown to have Shares entered against their names in the Depository Register as at 72 hours before the time
appointed for holding the Annual General Meeting as certified by The Central Depository (Pte) Limited to the Company.
Notes
Notes
Edited and Compiled by
Group Corporate Communications, Keppel Corporation
Designed by
Sedgwick Richardson
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
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