Transforming
to Deliver
Report to Shareholders 2018
K
e
p
p
e
l
C
o
r
p
o
r
a
t
i
o
n
L
i
m
i
t
e
d
T
r
a
n
s
f
o
r
m
i
n
g
t
o
D
e
l
i
v
e
r
R
e
p
o
r
t
t
o
S
h
a
r
e
h
o
l
d
e
r
s
2
0
1
8
Vision
Mission
Operating Principles
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.
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
the best risk-adjusted returns.
6 Clarity of focus and operating within
our core competence.
7 Being prepared for the future.
Contents
Group Overview
Key Figures
Group Financial Highlights
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
Sustainability Framework
Eco-system for Value Creation
Performance Review
Operating & Financial Review
Offshore & Marine
Property
Infrastructure
Investments
Management Discussion & Analysis
Financial Review & Outlook
Group Structure
8
9
10
16
22
26
28
30
32
34
36
40
42
47
50
55
60
62
70
Other Information
Interested Person Transactions
Key Executives
Major Properties
71
104
107
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
205
206
210
215
219
220
221
222
227
228
229
Governance
Corporate Governance
Risk Management
Regulatory Compliance
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
110
116
123
124
125
126
129
132
193
Transforming
to Deliver
The building blocks of our transformation
as a provider of solutions for sustainable
urbanisation are in place. We will focus on
executing and delivering on our growth initiatives
to create value for all our stakeholders.
Strengthening
Key Verticals
We have undertaken strategic initiatives to stay relevant,
unlock new opportunities and drive growth in a fast-changing
landscape. Our Offshore & Marine Division, for instance,
has been re-positioned as an offshore energy and infrastructure
solutions provider, expanding its markets beyond the oil drilling
sector. In 2018, we secured LNG and scrubber projects worth
$600 million. With the successful deployment of the world’s
first converted Floating LNG (FLNG) vessel, Hilli Episeyo,
we have demonstrated that converted FLNG solutions
can be a quick and cost-efficient way of monetising
stranded gas reserves.
$2.4b
Worth of gas-related orders
secured since 2015.
Seizing New
Opportunities
Urbanisation trends present many exciting and interconnected
opportunities for Keppel, whether it is providing energy,
property, environmental solutions or connectivity. With a view
to developing future growth engines, we are actively exploring
and investing in new businesses such as senior living and
renewable energy infrastructure. We are also expanding our
presence in consumer businesses including electricity retail,
urban logistics and telecommunications. In Singapore,
Keppel Electric became the largest electricity retailer
in the commercial and industrial sector, as well as a
leader in initial phases of the Open Electricity Market.
Over 50,000
Household customers
secured in the initial phases
of the Open Electricity Market,
expanding Keppel’s presence in
consumer businesses.
Unleashing
Synergies
Our businesses are collaborating with one another to seize
opportunities with the common purpose of providing solutions
for sustainable urbanisation. Keppel Urban Solutions (KUS)
brings together the Group’s capabilities and track record
in energy, property, infrastructure and connectivity
to create smart, sustainable urban townships. KUS is
working with Keppel Land to develop the 64-hectare Saigon
Sports City in Ho Chi Minh City, Vietnam. By working together
as a group, we can enhance the value of our landbank and
real estate, as well as enjoy multiple income streams from
developing and managing properties and infrastructure,
and providing a host of high-quality urban services.
About
800,000 sm
Of residential and mixed-use
gross floor area to be developed
in Saigon Sports City.
Group Overview
Key Figures
Revenue
$6.0b
Comparable with that of FY 2017.
Higher revenues from the Offshore &
Marine and Infrastructure divisions were
partially offset by lower revenues from
the Property and Investments divisions.
Net Profit
$944m
Increased 382% from FY 2017’s
$196 million#.
Excluding the one-off financial penalty
and related costs of $619 million^
from FY 2017’s results, FY 2018 net
profit would have increased 16% from
FY 2017’s $815 million#.
Employee Engagement
87%
Percentage of employees
who indicated that they would
“go beyond the norm” to contribute
to Keppel’s success.
Return On Equity
8.3%
Earnings Per Share
52.0cts
Increased by 6.6 percentage points
from FY 2017’s 1.7%#.
Excluding the effects of the one-off financial
penalty and related costs of $619 million^
from FY 2017’s results, Return on Equity
of 8.3% would have been 1.4 percentage
points higher than FY 2017’s 6.9%#.
Increased 381% from FY 2017’s
$0.11 per share#.
Excluding the effects of the one-off financial
penalty and related costs of $619 million^
from FY 2017’s results, Earnings Per
Share of $0.52 would have increased
16% from FY 2017’s $0.45 per share#.
Workplace Safety And Health Awards
28 Awards
The highest number of awards won
by a single organisation in 2018.
Net Gearing Ratio
0.48x
Increased slightly from FY 2017’s
net gearing of 0.46x.
This was largely driven by a decrease
in total equity as a result of lower
non-controlling interests.
Free Cash Inflow*
$515m
Decreased from FY 2017’s
$1,802 million.
This was mainly due to working
capital requirements.
Beneficiaries
>2,600
Beneficiaries whose lives have been
touched by Keppel Volunteers in 2018.
Cash Dividend Per Share
30.0cts
Increased 36% from FY 2017’s cash
dividend of 22.0 cents per share.
Total distribution for FY 2018 comprised a
proposed final cash dividend of 15.0 cents
per share, an interim cash dividend of
10.0 cents per share and a special cash
dividend of 5.0 cents per share.
Net Asset Value Per Share
$6.22
Decreased 1% from FY 2017’s
$6.29 per share.
Social Investments
$8.9m
Invested in social causes in 2018.
# 2017 financial figures have been adjusted following the adoption of Singapore Financial Reporting Standards (International).
^ One-off financial penalty and related costs of $619 million in FY 2017 arose from Keppel Offshore & Marine’s global resolution with criminal authorities in the United States,
Brazil and Singapore, and related legal, accounting & forensics costs.
* Free cash flow excludes expansionary acquisitions and capital expenditure, and major divestments.
8
Group Financial Highlights
Group Quarterly Results ($m)
Revenue
EBITDA
Operating profit
Profit/(Loss) before tax
Attributable profit/(loss)
Earnings per share (cents)
1Q
2Q
2018
3Q
4Q
Total
1Q
2Q
2017#
3Q
4Q
1,470
1,523
1,295
1,677
532
486
448
337
18.6
314
270
294
246
13.6
325
282
334
226
12.4
55
5
164
135
7.4
5,965
1,226
1,043
1,240
944
52.0
1,248
1,554
1,617
1,545
243
187
292
252
13.9
210
153
219
171
9.4
364
314
348
265
14.6
197
147
(417)^
(492)^
(27.1)^
Total
5,964
1,014
801
442^
196^
10.8^
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 ($m)
Shareholders’ funds
Non-controlling interests
Total equity
Net debt
Net gearing ratio (times)
Return on shareholders’ funds (%)
Profit before tax
Net profit
Shareholders’ value
Distribution (cents per share)
Interim dividend
Special dividend
Final dividend
Total distribution
Share price ($)
Total shareholder return (%)
2018
2017#
% Change
5,965
1,226
1,043
1,240
944
125
515
252
0.52
6.22
6.15
11,278
309
11,587
5,567
0.48
11.6
8.3
10.0
5.0
15.0
30.0
5.91
(16.4)
5,964
<0.1%
1,014
801
442^
196^
1,203
1,802
(839)^
0.11^
6.29
6.22
11,443
530
11,973
5,519
0.46
3.6^
1.7^
8.0
–
14.0
22.0
7.35
30.9
21%
30%
181%
382%
-90%
-71%
n.m.
381%
-1%
-1%
-1%
-42%
-3%
1%
4%
222%
388%
25%
n.m.
7%
36%
-20%
n.m.
n.m. = not meaningful
# 2017 financial figures have been adjusted following the adoption of Singapore Financial Reporting Standards (International).
^
* Free cash flow excludes expansionary acquisitions and capital expenditure, and major divestments.
Includes the one-off financial penalty and related costs of $619 million.
Keppel Corporation Limited Report to Shareholders 2018
9
Group Overview
Chairman’s Statement
2018 was a transformational
year for Keppel, during
which we focused not only
on executing our existing
businesses well, but also
on investing in and building
new growth engines.
10
Dear Shareholders,
2018 was an eventful year, marked by
volatility in the international economy,
with concerns over trade tensions between
the United States (US) and China, slowing
global growth, fluctuating oil prices and
uncertainty over how BREXIT will unfold.
At the same time, urbanisation trends and
a growing middle class, especially in Asia,
continue to drive demand and provide
opportunities for companies able to
supply solutions to meet their needs.
Robotics, artificial intelligence and
digitalisation are also empowering
companies with new ways of working,
and actionable insights which allow the
provision of better and more efficient
solutions for customers.
For Keppel, 2018 was a transformational
year, during which we focused not only
on executing our existing businesses well,
but also on investing in and building new
growth engines.
We began the year by refreshing the Group’s
mission and uniting our different businesses
behind the common goal of providing
solutions for sustainable urbanisation. Today,
Keppel is not a diverse group of companies
that share a common name, or a company
focused mainly on the offshore and marine
(O&M) or property businesses, but an
eco-system of companies working closely
together, and harnessing the synergies of
the multi-business group, as we provide much
needed urbanisation solutions, from energy,
to urban spaces and clean environments,
to physical and digital connectivity.
Last September, together with Singapore
Press Holdings (SPH), we launched an offer to
take majority control of M1. M1 complements
Keppel’s mission to be a solutions provider
for sustainable urbanisation. We believe
there are synergies which can be harnessed
by collaboration between M1 and other
parts of the Keppel Group. This will require
a major transformation of M1 which will take
some years to achieve. The Offeror achieved
majority control of M1 and the shareholding
threshold required to de-list M1 in February,
and on 6 March 2019, it announced that it
would exercise its rights to compulsorily
acquire all the remaining shares. Keppel
and SPH will work with M1’s board and
management to develop and implement
the transformation strategy and pursue
growth initiatives.
We also announced a scheme of arrangement
to privatise Keppel Telecommunications
& Transportation (Keppel T&T), to further
simplify our corporate structure and better
integrate Keppel T&T’s interests with the
rest of the Group.
Strong Performance
The Group performed well in 2018, achieving
a net profit of $944 million, up 382% from
$196 million in 2017, or up 16% from
$815 million, if we exclude the one-off
financial penalty for Keppel Offshore &
Marine’s (Keppel O&M) global resolution
with criminal authorities in the US, Brazil
and Singapore and other related costs
amounting to $619 million.
The growth in earnings was driven by
improved performance across our O&M,
Property and Infrastructure divisions, with
Property making the biggest contribution
to the Group. Significantly, our O&M Division
made a profit at both the operating and net
levels for the full year, excluding revaluations,
major impairments and divestments (RIDs),
underpinned by its extensive rightsizing
efforts and new contract wins. However,
the Division registered a loss of $109 million,
after provisions, including an additional
provision of $167 million for expected losses
on the rig contracts with Sete Brasil, partially
offset by write-back of provisions for claims.
The Group’s Return on Equity (ROE) was
8.3%, while our Economic Value Added was
$252 million in 2018.
The Board of Directors has proposed a final
cash dividend of 15.0 cents per share for
FY 2018. Together with the interim cash
dividend of 10.0 cents per share and special
cash dividend of 5.0 cents per share
distributed last August to commemorate
Keppel’s golden jubilee, we will be paying out
a total cash dividend of 30.0 cents per share
to shareholders for the whole of 2018.
Property
Keppel Land is continuing its transformation
to be a multi-dimensional real estate company,
with one of the highest rates of return in Asia.
Over two decades, the Group has expanded
regionally and invested in several key Asian
cities, where we enjoy a first mover advantage
and have built up a sizeable landbank.
China and Vietnam are two key markets
for Keppel Land, where rapid urbanisation
and rising affluence continue to drive
demand for quality housing and commercial
developments. In China, we are focusing on
the Jing-Jin-Ji region, Yangtze River Delta,
Greater Bay Area and the Chengdu metropolis,
where we see strong growth potential,
while in Vietnam, we are focused mainly on
Ho Chi Minh City (HCMC), where Keppel Land
has been operating for over 20 years.
In 2018, Keppel Land actively executed
its capital recycling strategy, completing
acquisitions totalling about $0.8 billion,
as well as divestments and en-bloc sales
totalling about $1.7 billion.
Lee Boon Yang
Chairman
We sold about 4,440 homes in 2018,
of which around 2,200 were in China,
achieving a total estimated sales value
of about $1.8 billion. Over and above these
home sales, we also sold five projects,
which are equivalent to approximately
11,500 units sold en-bloc.
Over the course of 2018, we replenished
our landbank with the addition of about
3,600 units in China and 500 units in
Indonesia, bringing our total landbank
to close to 50,000 homes as at end-2018.
In its commercial portfolio, Keppel Land
has about 1.5 million square metres of
gross floor area, of which about 60% is
under development. As the commercial
projects are progressively completed,
they will contribute steady recurring
income to the Group.
Offshore & Marine
Keppel O&M secured new contracts
totalling $1.7 billion in 2018, a significant
improvement over the $1.2 billion of new
orders won in the whole of 2017.
With the gradually declining rig supply
overhang, as well as increased tendering
activity, we are seeing growing optimism
in the O&M business, although we believe
it will take some time before we see
sustained recovery across the board.
The contract for a mid-water semisubmersible
rig for harsh environment use from Awilco,
our first newbuild drilling rig order since the
start of the downturn in 2014, was a significant
milestone. It demonstrated that despite the
continuing challenges in the O&M sector,
there continues to be strong preference in the
industry for high-specification rigs, built by
a reliable partner.
Keppel O&M won four production projects
during the year and is also seizing opportunities
arising from the growing adoption of liquefied
natural gas (LNG). With our ability to design,
develop and integrate solutions across the
gas value chain, Keppel is well positioned to
be the gas industry’s preferred partner.
Hilli Episeyo, the world’s first converted
floating LNG (FLNG) vessel which we delivered
in late-2017, has provided a successful
proof of concept of a faster-to-market
and cost-efficient solution for monetising
stranded gas reserves, thus opening up new
opportunities for Keppel in the liquefaction
vessel space. It has maintained 100% uptime
since commencing commercial operations
and despatched 13 LNG cargoes as at the end
of 2018. Keppel O&M has received a limited
notice to proceed from Golar LNG to commence
early conversion works on another FLNG
vessel, Gimi. Keppel Shipyard will commence
full construction activities when it receives
the final notice to proceed.
Keppel Corporation Limited Report to Shareholders 2018
11
Group Overview
Chairman’s Statement
1
12
We also see increasing demand for
scrubber retrofits as the International
Maritime Organization’s 2020 deadline
for the implementation of the 0.5% sulphur
cap on marine fuels approaches. In 2018,
Keppel O&M secured 65 contracts from
a variety of customers for such projects.
Beyond delivering our projects well,
Keppel O&M is continuing to build new
capabilities and capture new markets.
It has also streamlined and reorganised
its operations into a New Builds division,
covering Offshore as well as Gas &
Specialised Vessels, and a Conversions &
Repairs division. With its business divisions
working as an integrated body, Keppel O&M
is able to achieve greater efficiency and
provide customers with more competitive
and reliable end-to-end solutions.
At the same time, Keppel O&M is
innovating to develop rigs of the
future through increasing digitisation,
capturing and analysing data, and
offering enhanced solutions. Keppel O&M
has also launched its proprietary RigCare
Solution, which encompasses a suite of
digital services to support a rig’s lifecycle
needs, significantly increasing uptime and
reducing maintenance costs. The jackup rig,
Cantarell IV, that Keppel O&M delivered to
Grupo R in February 2019, is the first rig
equipped with our RigCare Solution, which
will significantly transform the efficiency,
safety and operability of the rig.
Keppel O&M is also enhancing the
productivity and efficiency of its operations
through developing yards of the future by
leveraging more advanced engineering
and production methods including the
use of robotics and smart sensors.
Infrastructure
We are growing our Infrastructure
Division as a stable pillar of earnings.
Keppel Infrastructure continues to seek
value-enhancing projects, leveraging its
project development, engineering, as well
as operations and maintenance expertise.
In 2018, Keppel Infrastructure secured
some $120 million worth of contracts for
energy and environmental infrastructure
across Singapore, Australia and Europe.
This includes a contract to supply
technology solutions to Australia’s first
waste-to-energy plant, located in Kwinana,
reflecting our efforts to expand into
new markets.
The construction of the Keppel Marina
East Desalination Plant has achieved 65%
completion, while the Hong Kong Integrated
Waste Management Facility is now at the
design and engineering phase and is expected
to contribute to our bottomline from 2019.
While pursuing new markets and opportunities,
we are growing our stable and recurring income
from the quality operations and maintenance
services provided by Infrastructure Services.
for long-term growth, including expanding
into new markets and asset classes,
focusing on areas which harness the
capabilities of the Keppel Group.
With a view to tapping opportunities in
the fast-growing senior living market,
Keppel Capital entered into a conditional
equity purchase agreement to acquire a
50% stake in leading US senior living operator,
Watermark Retirement Communities. It has
also signed Memoranda of Understanding
(MOUs) to establish new private funds to
invest in education real estate, and retail
properties in Australia.
Our listed REITs and Trust have also
been expanding their portfolios. In Australia,
Keppel DC REIT is enlarging its data centre
footprint with a new shell and core data
centre, to be built in the Macquarie Business
Park precinct in Sydney. In the US, Keppel-
KBS US REIT continued to capture strong
leasing demand from the technology and
professional services sectors in Seattle.
Keppel Infrastructure Trust has completed
its acquisition of a 100% interest in Ixom,
which is among the leading industrial
infrastructure businesses in Australia and
New Zealand, supplying and distributing
water treatment chemicals, as well as
industrial and specialty chemicals.
2018 also marked the 10th anniversary
of the Sino-Singapore Tianjin Eco-City,
a flagship government-to-government
project between China and Singapore.
With the Eco-City’s growing maturity,
we are seeing increasing demand for
homes and land in the city. Our joint venture,
the Sino-Singapore Tianjin Eco-City
Investment and Development Co., Ltd.,
sold three residential land plots for
RMB 3.4 billion in 2018, one of which
was acquired by Keppel Land to tap the
healthy demand for its green homes in
the Eco-City.
Leveraging the Group’s strong track record
in master development, Keppel Urban
Solutions (KUS) continues to make good
progress in its pilot project, the 64-hectare
Saigon Sports City in HCMC, which is
being developed in collaboration with
Keppel Electric has been the largest electricity
retailer in Singapore in terms of market share in
the commercial and industrial sector. Following
the launch of the Open Electricity Market (OEM)
in Singapore, Keppel Electric is also making
headway into the housing electricity market.
Starting from 1 November 2018, the OEM is
being progressively extended to all consumers
across Singapore by zones. The response to
Keppel Electric’s retail offerings for households
has been encouraging, with preliminary
results showing that it is among the retailers
with the largest market shares in the OEM.
Keppel T&T is scaling up its logistics and
data centre solutions to tap opportunities
created by the fast-growing digital economy.
With the burgeoning growth of cloud service
providers as well as increasing storage
and processing requirements, our data
centre business is well positioned to tap
growth opportunities.
In 2018, we added four new data centre projects
across Asia and Europe to our portfolio. This
expands our portfolio to 22 data centres with
a total value of about $2.7 billion. To further
grow its capabilities, Keppel T&T is also
exploring innovative solutions such as high-rise
green data centres and floating water-cooled
data centre parks, which tap Keppel O&M’s
expertise in floating infrastructure.
Expanding into new markets, we have,
through the Alpha Data Centre Fund
(Alpha DC Fund) and Keppel Data Centres
Holding (KDCH), signed conditional agreements
with the Salim Group to jointly develop and
operate a high-availability data centre in Bogor,
about 35 kilometres from Jakarta. Alpha DC
Fund and KDCH have also inked agreements
with a leading technology company to develop
and operate their first greenfield data centre in
Johor, Malaysia. Meanwhile, Keppel Logistics
focused on streamlining processes and
resources for better cost management while
seeking new opportunities in urban logistics.
We continued to drive the growth of UrbanFox,
our omnichannel logistics and channel
management solutions brand. UrbanFox’s
customer base has grown significantly, with
deliveries doubling over the course of 2018.
UrbanFox also plans to launch its integrated
channel management in other countries in
Southeast Asia, leveraging Keppel’s presence
in those markets.
Investments
2018 was an active year for our
Investments Division.
Keppel Capital announced acquisitions worth
over $2 billion and explored new platforms
2
1
Keppel Land expanded
its presence in China
in 2018 entering a new
market with a residential
land plot in Nanjing.
2
Keppel O&M’s proprietary
RigCare Solution,
implemented for the
first time on Cantarell IV,
will enhance the efficiency,
safety and operability of
the jackup rig.
Keppel Corporation Limited Report to Shareholders 2018
13
Group Overview
Chairman’s Statement
Keppel is committed to
sustainability, both as a
responsible corporate citizen,
and as a provider of solutions,
that can contribute to a better,
more sustainable world.
14
1
Keppel Land. KUS is also expanding its
presence into new geographies, with the
signing of an MOU with Envision Group and
the Wuxi government to collaborate in the
development of a new Smart IoT City in
Wuxi, China.
Sharpening Our Focus on Sustainability
Keppel is committed to sustainability, both
as a responsible corporate citizen, and as
a provider of solutions, that can contribute
to a better, more sustainable world.
We have identified the key material
environmental, social and governance
factors for the Company, and take them into
consideration in the determination of the
Company’s strategic direction and policies.
Compliance remains a key focus for
the Group. During the year, Keppel O&M
carried out a risk review and audit of
anti-corruption compliance. In November,
Keppel O&M’s entities in Singapore
achieved certification for the ISO 37001
Anti-Bribery Management System.
The Group is committed to putting in
place effective and robust compliance
and governance regimes and honouring
the undertakings given as part of the 2017
global resolution involving Keppel O&M.
Keppel Corporation has also engaged
KPMG to provide an independent platform
for employees and external parties such
as customers, suppliers and contractors
to raise concerns about any perceived
irregularity or misconduct. We have also
enhanced reporting channels and increased
the geographical coverage for whistle-blower
hotlines to include 10 countries, including
Brazil, China, Vietnam and the US.
We will continue to strengthen our policies
and procedures and ensure that we win
business legally and ethically, based on
the strengths of the Group and quality of
our solutions.
Reflecting our strong focus on safety,
Keppel won 28 awards at the Singapore
Workplace Safety and Health (WSH) Awards
2018, emerging again, as the organisation
which won the highest number of WSH
awards in the year. Sadly, despite our best
efforts, we lost a colleague during the year.
We have thoroughly investigated the incident
and will continue to strengthen efforts in our
safety journey to ensure Keppelites are able
to go home safe every day.
Keppelites are our most important resource
as we seek to grow the Company into the
future. We have continued to invest in
training and people development, including
providing opportunities for staff to expand
their horizons in different countries and
business units. As the Group expands into
new businesses, we have also bolstered
our bench strength with external hires,
to bring onboard external perspectives
and new skillsets. We will continue
to place emphasis on nurturing and
developing our global talent pool, as we
build a better and stronger Keppel that
is able to effectively navigate today’s
fast-changing business environment.
Further demonstrating our commitment
to sustainability, Keppel Corporation became
a signatory of the UN Global Compact in
May 2018. We have also made a public
pledge with the Singapore Ministry of
Environment and Water Resources,
articulating our commitment to address
climate change, including through having
more eco-friendly features in our products,
investing in green technology and increasing
the usage of renewable energy.
We are encouraged that Keppel’s sustainability
efforts continue to be recognised internationally,
with the Company’s inclusion in the Euronext
Vigeo Eiris Index – World 120 and MSCI
World ESG Leaders Index, amongst others.
Keppel was also Winner of the UN SDG
Category at the Sustainable Business
Awards 2018 in Singapore.
Keppel believes in doing good as we do well.
We strive to make a difference wherever
we operate, be it with the underprivileged,
through promoting education or caring
for the environment. We commemorated
our 50th anniversary by giving back to the
community, including through making
a $10 million donation to Singapore’s
Institute of Technical Education to support
education for students from financially
disadvantaged backgrounds.
Keppelites clocked more than 14,000 volunteer
hours in 2018, touching lives in Singapore,
China, Vietnam, Indonesia and Brazil, among
other countries. Recognising our social
impact in the community, Keppel was listed
as Champion of Good 2018 by the National
Volunteer and Philanthropy Centre.
strong background in the areas of leadership,
corporate governance and the development
of high-performance organisations will be
extremely valuable to the Board as we steer
the Group’s operations across multiple
businesses and jurisdictions in a
dynamic environment.
I would also like to thank my fellow
directors for their commitment, guidance
and generous sharing of their experience
during this transformative time for Keppel.
I am also grateful to our many partners
and stakeholders for their unwavering
support and confidence in Keppel.
My deep appreciation also goes to the
thousands of Keppelites around the world,
whose tenacity, hard work and dedication
continue to drive Keppel’s transformation
and growth.
We have a clear path forward, as OneKeppel,
advancing our mission of being a solutions
provider for sustainable urbanisation, and
committed to creating a sustainable future.
Yours sincerely,
Acknowledgements
We are pleased to welcome Professor
Jean-François Manzoni as an Independent
Director on the Board. Professor Manzoni’s
Lee Boon Yang
Chairman
8 March 2019
2
1
Keppel T&T, together
with Alpha DC Fund,
expanded the Group’s
data centre presence
to Bogor, Indonesia.
2
Singapore’s President
Halimah Yacob (seated,
centre), Dr Lee Boon Yang
(standing, rightmost),
Chairman of Keppel
Corporation and Mr Loh
Chin Hua (third from left),
CEO of Keppel Corporation,
joined Keppel’s beneficiaries
from Montfort Care and
Care Corner in a moss
art activity.
Keppel Corporation Limited Report to Shareholders 2018
15
Group Overview
Interview with the CEO
Loh Chin Hua
Chief Executive Officer
16
Q
Keppel’s businesses have evolved
significantly under your leadership.
How would you characterise the progress
of transformation? What can investors
expect in the next three to five years?
A
Keppel has gone through significant business
transformation in the past five years. During
this period, we rightsized and integrated
Keppel Offshore & Marine’s (Keppel O&M)
operating units, re-positioning the Division
amidst the offshore sector downturn. We
evolved Keppel Land into a multi-faceted
property company focused on seeking higher
returns. We also strengthened our data centres
and logistics businesses, including establishing
UrbanFox to extend our capabilities into the
business-to-consumer (B2C) market.
These are just some of the many strategic
initiatives we have undertaken to stay
relevant, unlock new opportunities and
drive growth in a fast-changing landscape.
We have worked hard in the last few years
to rally our different businesses around the
common purpose of providing solutions for
sustainable urbanisation, and encouraging
them to hunt as a pack for opportunities.
We have achieved significant traction on
this front, with inter-company collaboration
becoming an important part of our corporate
culture and language.
Across the Group today, we not only share
the same mission but also services for
critical functions such as finance, IT and
human resources. Supported by shared
services, our operating units can focus on
managing and growing their businesses,
as well as harnessing the synergies of our
multi-business group to offer compelling
solutions and services to customers.
Keppel Telecommunications & Transportation
(Keppel T&T) for instance, is working with
Keppel O&M on a concept for floating data
centre parks that utilise water for cooling,
as well as exploring opportunities with
Keppel Electric to offer bundled power
solutions to our data centre customers
in Singapore. We are seeing more of such
examples come into play as our business
verticals reach beyond their immediate
playing fields for common opportunities as
OneKeppel. In addition, business “horizontals”
such as Keppel Capital provide funding
platforms with co-investors, allowing us
to seize growth opportunities across our
chosen sectors, while generating recurring
fee income for the Group.
As our growth story unfolds, our stakeholders
and the market increasingly understand
that Keppel is more than just an offshore
and marine business, or property business,
but an eco-system of companies, working
together to provide solutions for sustainable
urbanisation. With the privatisation of
Keppel Land, the restructuring of our asset
management businesses under Keppel
Capital, and now the proposed scheme
to privatise Keppel T&T, we are further
simplifying our corporate structure.
This gives us better control of the Group’s
key business verticals, and the flexibility
to allocate capital more efficiently
towards investments with the best
risk-adjusted returns.
With a view to developing future growth
engines, we are actively exploring and
investing in new businesses such as senior
living and renewable energy infrastructure.
We are also expanding our presence in
B2C businesses including electricity retail
and urban logistics.
While some of the industries that we operate
in are cyclical, sustainable urbanisation,
and the solutions that we provide, will
enjoy many decades of secular growth.
As we grow our businesses, we aim to
improve both the magnitude and quality
of earnings. Our long-term goal is to
have each key division contribute no
more than 40% of the Group’s annual
net profit, thus moderating our exposure
to business-cycle risks.
The key pieces of our transformation have
been put in place. We are now focused
on executing and delivering on the growth
initiatives, the results of which will come
through in the next few years.
Q
Keppel is expanding into different areas
such as senior living, education real
estate and renewables. How do these
businesses fit in with the Group?
A
Keppel is a multi-business company.
At various points in our history, we have
expanded into and exited from different
industries, taking into account the emerging
trends and opportunities, to create value for
our stakeholders. While we actively explore
and invest in new businesses, we will stay
disciplined, focusing on businesses that
fall within our mission of providing solutions
for sustainable urbanisation, and which
harness the capabilities and synergies of
the Keppel Group.
The key pieces of Keppel’s transformation have been put in place.
We are now focused on executing and delivering on the growth
initiatives, the results of which will come through in the next few years.
Population ageing, especially in urban
societies, will be one of the most significant
social transformations of the twenty-first
century, with wide-ranging implications
on many sectors, including labour and
financial markets, as well as the demand
for goods and services. Our acquisition
of a stake in a leading US senior living
operator is a strategic move for Keppel
to enter this new growth sector and also
bring customised solutions to Singapore
and other markets in Asia.
Renewable energy is not a new business
for Keppel. We have been involved in
renewables in different ways, including
developing offshore wind turbine installation
vessels, and designing and fabricating wind
tower structures. As the world focuses
increasingly on climate change and
cleaner forms of energy, we see potential
for Keppel to be more actively involved
in renewable energy infrastructure.
Q
Which other growth areas are you
exploring beyond Keppel’s current
markets and sectors?
A
The megatrend of urbanisation presents
many exciting and interconnected
opportunities. We are looking to capture
growth from the digitalisation wave,
studying how technology and connectivity
can be more fully deployed in our solutions
for sustainable urbanisation.
Artificial intelligence (AI), the Internet
of Things (IoT) and 5G connectivity are
driving a surge in data production, as well
as powering new technologies from smart
manufacturing to autonomous vehicles
and intelligent retail. These developments
will have an impact on the demand for
data centres and network infrastructure,
and at a more fundamental level,
change the way people live, work, play
and interact with their environments
and one another.
test-bedding of some of the latest urban
solutions, which KUS is partnering leading
technology providers such as Envision,
Microsoft and ST Engineering to deliver.
Q
The O&M Division’s performance has
improved year on year, lowering its net
loss to $109 million for FY 2018. What is
the outlook for this business?
A
Our O&M Division performed commendably,
reducing its net loss by almost half to
$109 million from $207 million a year ago,
if we exclude the one-off global resolution
and related costs in 2017. Notably, the Division
made a net profit of $6 million for FY 2018,
before the $167 million provision for
projects with Sete Brasil and other
provisions and asset impairments of
$44 million, partially offset by a write-back
of provisions for claims.
Decisive rightsizing efforts over the
past four years have helped to cut the
Division’s overheads, and shape a leaner,
fitter and more agile Keppel O&M that
is more competitive and ready to seize
opportunities, even against the backdrop
of lower oil prices. Our efforts in positioning
Keppel O&M to capture new opportunities
in the gas, production and non-drilling
sectors have also paid off. In 2018,
Keppel O&M secured $1.7 billion worth
of new orders, up from $1.2 billion secured
in 2017. Significantly, liquefied natural gas
(LNG) and scrubber projects contributed
over $600 million to new orders won
in 2018.
Today, there are some early signs of
improvement in the offshore rig sector,
although we do not envisage a V-shaped
recovery. More projects are being
sanctioned at Brent oil prices of between
US$55 and US$65 a barrel, the rig supply
overhang is gradually reducing, and
tendering activity is improving. In the
production space, we see opportunities
in Floating Production Storage and
Offloading (FPSO) units, especially
conversions, with several projects reaching
their Final Investment Decisions (FID) in
2019 and 2020. The global demand for gas,
led by Asia, continues to grow, with a few
floating regasification projects expected to
be sanctioned later this year. With reduced
overheads, more of the revenues earned
will flow down to our bottomline as we
secure new orders.
Keppel Corporation Limited Report to Shareholders 2018
17
The consumer business is becoming
more interesting with, among others,
the advent of the sharing economy and
the “uberisation” of assets, supported by
a burgeoning middle class, who seek
higher standards of living. We see attractive
opportunities to cater to urban consumers
at different life stages, as reflected in our
efforts to enter the senior living and education
real estate sectors.
Keppel Urban Solutions (KUS) seeks
to harness the capabilities and track
record of the Group to develop vibrant
and digitally-connected smart cities,
which tap sensing technology and IoT.
Saigon Sports City in Ho Chi Minh City,
Vietnam, which KUS is developing in
collaboration with Keppel Land, and the
proposed Smart IoT City at Taihu New City
in Wuxi, China, are prime candidates for the
Group Overview
Interview with the CEO
1
In the production space,
Keppel O&M sees
opportunities in FPSOs,
especially conversions,
with several projects
reaching FID in 2019
and 2020. (In picture:
FPSO La Noumbi)
2
Keppel Land is well
positioned to tap the
demand for quality housing
in promising markets such
as China and Vietnam.
(In picture: Riviera Point,
Ho Chi Minh City, Vietnam)
1
Notwithstanding continuing challenges
in the O&M sector, we remain cautiously
optimistic about the business. Keppel O&M
will aim to become profitable in 2019 by
executing our projects well and growing
the Division’s topline. As the market is very
competitive, we will remain disciplined in
bidding for new contracts, seeking only
quality customers and projects with
attractive risk-adjusted rewards.
Q
What are you doing to prepare the
O&M Division to seize opportunities
when the market recovers?
A
Our goal is to build a more competitive
and sustainable O&M business. As part
of the rightsizing programme, we have
also more closely integrated the different
business units under two divisions, namely
the New Builds division, which covers
Offshore as well as Gas & Specialised
Vessels, and the Conversions & Repairs
division. Keppel FELS, Keppel Shipyard
and Keppel Singmarine are now working
more closely together as OneKOM,
and unleashing synergies through the
sharing of resources and construction
methodologies as the Division moves
towards Industry 4.0.
Even though the market is improving,
we do not expect the offshore business
to return to the heydays any time soon.
Offshore drillers are now more cautious,
having suffered significantly in the
past few years. As an industry leader,
Keppel O&M is responding to customers’
18
drive to improve operational efficiency
and lower costs across their project life
cycles through designing smarter and
more efficient rigs of the future, powered
by AI and sensing technology.
We are also looking beyond our present
playing fields for growth. Developing
economies, which are experiencing the
fastest urbanisation rates, are expected
to drive up global energy demand by
about 30% from 2019 to 2040. Demand
for renewable energy is expected to grow
rapidly, while natural gas is projected
to overtake coal as the second largest
source of energy.
In response to these emerging trends,
we have worked hard to re-position
Keppel O&M as an offshore energy and
infrastructure solutions provider over the
past few years, expanding its markets
beyond the oil drilling sector. Since 2015,
Keppel O&M has won $2.4 billion worth
of orders for gas-related solutions,
comprising 45% of all our new orders
over this period.
Our converted Floating LNG (FLNG)
vessels are also gaining increasing
traction, following the delivery
of Hilli Episeyo, the world’s first
converted FLNG vessel. Hilli Episeyo
has demonstrated that converted
FLNG solutions can be a quick and
cost-efficient way for monetising
stranded gas reserves.
to create innovative floating infrastructure
assets, including floating desalination plants
and data centres that harness the diverse
capabilities of the Group.
Q
What is the rationale behind the active
asset divestments in the Property
Division? Will you be re-investing
to grow the Property business?
A
We had about 50,000 homes in our
landbank at the end of 2018 of which
4,100 units were added through new
investments made during the year.
While this is lower compared to the
63,000 units at the end of 2017, it still
represents over half of our Property
book value. Turning assets efficiently is,
therefore, a key part of our strategy to
achieve our goal of transforming Keppel
Land into a multi-dimensional real estate
company with one of the highest returns
on equity (ROE) in Asia.
In 2018, we sold about 4,400 homes, and
five projects equivalent to an additional
11,500 units transacted en-bloc. That’s a
run rate of about 16,000 homes in a year.
The results of our efforts are evident,
with Keppel Land making a net profit
of $940 million for FY 2018, 41% higher
year-on-year. Keppel Land’s ROE also grew
to 11.4% from 7.8% in 2017, while gearing
remained low at 0.19x as at end-2018,
compared to 0.25x a year ago.
Looking ahead, Keppel O&M is also
collaborating with other business units
We believe that our through-cycle ROE
target of 12% for Keppel Land is reasonable,
considering that the company had achieved
an average ROE of 14.7% annually over
the last decade. To stay on track, we will
continue balancing the sale of individual
homes and projects en-bloc with the
selective acquisition of land where pricing
and market conditions are attractive.
Q
Property cooling measures in Singapore
and China show little signs of letting up,
how will you navigate the challenges in
your key markets?
A
Keppel Land’s established presence and
sizeable landbank across different Asian
cities give us optionality. We are not in
a hurry to acquire land in any particular
market, and will only invest selectively
if the projects are able to yield attractive
risk-adjusted returns.
Keppel Land maintains a quality portfolio in
Singapore, including The Garden Residences
in Serangoon North and two more residential
plots in the Keppel Bay precinct. We are
also looking to redevelop Keppel Towers
and Nassim Woods when the conditions
are right, and these can potentially add
over 400 homes in prime locations to our
Singapore portfolio. We will therefore remain
disciplined when bidding for new sites.
While cooling measures in China have
dampened short-term housing demand,
fundamentals in the medium to long term
are still encouraging on the back of
urbanisation trends and rising income
levels. We are positioning ourselves to
capture more opportunities by selectively
expanding and deepening our presence in
high-growth regions and cities where there
continue to be good demand for quality
housing and commercial developments.
We will focus in particular on the Jing-Jin-Ji
region, Yangtze River Delta, Greater Bay Area
and the Chengdu metropolis, where we see
considerable growth potential. The cities
which we have recently invested in, such as
Chengdu, Nanjing and the Sino-Singapore
Tianjin Eco-City, have healthy supply-demand
dynamics, and a home supply absorption
rate of 5.3 months on average over the
past five years.
Apart from Singapore and China, Vietnam
is another promising market that is driven
by urbanisation trends. As a pioneer foreign
developer with an established presence
and prime landbank in Ho Chi Minh City,
Keppel Land is well positioned to tap the
growth of this vibrant property market,
where the cost of land is still relatively
low in proportion to the total cost
of development.
Q
Keppel Infrastructure has been
contributing steadily to the Group.
What are some of the key highlights
and opportunities for this business?
A
2018 was an active year for our energy and
environmental infrastructure businesses
under Keppel Infrastructure. We secured
some $180 million worth of contracts for
energy and environmental infrastructure
across Singapore, Australia, China and
2
Europe. In Singapore, Keppel Electric
became the largest electricity retailer
in the commercial and industrial sector,
as well as a leader in the initial phases
of the Open Electricity Market, securing
over 50,000 household customers.
We are also making good progress with our
ongoing projects. The Keppel Marina East
Desalination Plant was about 65% completed
as at end-2018, and the Hong Kong Integrated
Waste Management Facility is well on track
with its design and engineering phase.
Looking ahead, we will continue to seek
new opportunities in the infrastructure
space. Infrastructure is both a complex
and interesting asset class for investors.
With the ability to create quality infrastructure
assets and also manage them, we are well
placed to partner institutional investors who
want to get closer to the coal face but may
not have the required expertise.
This opens up more growth opportunities
for Keppel, as we can bring in co-investors
through the funds we manage. As and when
the projects are completed and de-risked,
we can also consider injecting them into
one of our listed trusts.
Q
What are your plans for the data centre
and logistics businesses, especially if
Keppel T&T is privatised?
A
Keppel T&T is more than just our data centres
and logistics businesses – it is a provider
of connectivity solutions for people
and businesses in the digital economy.
The Scheme of Arrangement to privatise
Keppel T&T is intended to better align it
with the Group’s objectives, and enable
it to scale up more quickly through closer
collaboration with our other business units.
Connectivity is a critical growth pillar
and enabler in our suite of solutions for
sustainable urbanisation, be it smart cities,
data centres or rigs of the future. All these,
and more, are dependent on advanced
connectivity infrastructure and solutions.
We are positioning Keppel T&T to ride
this digitalisation wave and meet the
fast-changing needs of our enterprise
customers and consumers.
Keppel T&T will continue to sharpen its
edge in data centre design and technology
solutions. Our data centre business
generated a net profit of $76 million for
FY 2018, higher than the $15 million
for FY 2017, after including gains from
changes in our stake in Keppel DC REIT.
As we move further to the right of the
value chain, there will be more opportunities
for Keppel T&T to leverage its partnerships
Keppel Corporation Limited Report to Shareholders 2018
19
Group Overview
Interview with the CEO
Even as we grow recurring
income to improve the
overall quality of earnings,
we want to ensure that we
continue to turn our assets
efficiently to realise value
and achieve our desired
mid-teen ROE target for
the Group in the long run.
20
1
with the Alpha Data Centre Fund,
Keppel DC REIT, and our other businesses
to expand into new geographical markets
and create compelling solutions.
To harness the “uberisation” of logistics and
the growing e-commerce market, we will
continue to drive the growth of UrbanFox,
Keppel T&T’s omnichannel logistics and channel
management solutions brand. UrbanFox’s
customer base has grown significantly, with
deliveries doubling over the course of 2018.
As a case in point, UrbanFox made 16,000
deliveries in Singapore on 11.11 Singles’ Day
alone last year. We have plans to bring
UrbanFox’s solutions to other countries in
Southeast Asia, and also explore innovative
concepts such as online-to-offline retail that
will bridge the gap between internet users
and physical malls.
Q
Now that Keppel and SPH have gained
control of M1, which will be de-listed,
what are your plans for the telco?
A
Our investment in M1 has generated
good returns for the Group. We have
received $737 million in distributions
and capital gains over the years, on an
investment of $170 million. We believe
that there is continuing value that can be
derived from M1 but this would require
significant efforts to realise, amidst the
fast-changing landscape and an increasingly
competitive telecommunications sector.
Following the privatisation of M1, we will work
with Singapore Press Holdings (SPH) and M1’s
board and management to drive the needed
business changes that will enable M1 to
compete more effectively. These long-term
changes would include digital transformation,
cost management initiatives in both front
and back-end operations, growth initiatives
into new market segments and optimisation
of the balance sheet to unlock value.
M1’s connectivity solutions will be an
important tool to power some of our
other businesses, such as data centres,
urban solutions and even our shipyards.
M1 also complements our growing B2C
business, giving Keppel access to a wider
consumer market, and allowing us to offer
services through a common digital platform.
Already, Keppel Electric and M1 have been
working together to bundle their power and
mobile services for consumers.
With increasing demand for integrated
data centre solutions supported by subsea
cables and 5G connectivity, the growth
of smart cities and the proliferation of mobile
usage, there will be many meaningful touch
points with M1 across Keppel’s businesses
where synergies can be harnessed.
Q
How is Keppel Capital progressing
on its journey towards the $50 billion
AUM target by 2022? Where do you
see growth coming from?
A
2018 was an active year for our asset
management business as it continued on
its expansion drive, seeking out new markets
and asset classes for long-term growth.
Notwithstanding a few divestments by
Alpha Investment Partners (Alpha) during
the year, Keppel Capital’s total assets under
management (AUM) remained stable at
about $29 billion as at end-2018.
Paving the way for growth, Keppel Capital
announced acquisitions worth over
$2 billion, and seized organic and inorganic
opportunities to grow our asset portfolio.
The new initiatives include the acquisition
of industrial infrastructure company Ixom,
the proposed purchase of a 50% stake in
leading US senior living operator Watermark
Retirement Communities, as well as the
setting up of new funds for education-related
real estate and Australian retail properties.
In January 2019, Alpha also closed the
US$1.1 billion Alpha Asia Macro Trends
Fund III, 10% above its initial target.
We are excited by the many growth opportunities
as Keppel Capital progresses towards its AUM
target of $50 billion, leveraging the Group’s
core competencies to create innovative
investment solutions and connect investors
with high-quality real assets in fast-growing
sectors fuelled by urbanisation trends.
Q
How do you balance the focus on
growing recurring income with driving
higher returns through asset turns?
A
Both recurring income and gains from
revaluations, major impairments and
divestments (RID) are important sources of
earnings for a multi-business group such as
Keppel, which runs a combination of asset
light and asset heavy businesses, and owns
investment properties.
assets. For example, we recognised
$401 million in revaluation gains from
Phase 1 of Marina Bay Financial Centre,
Singapore, over a period of two years
from 2009. When we divested the office
development to Keppel REIT for about
$1.4 billion in 2010, we realised a significant
part of the revaluation gains after adjusting
for Keppel Land’s stake in Keppel REIT.
Like recurring income, gains from RIDs are
a consistent feature of the Group’s earnings
and are included in our dividend distributions.
For FY 2018, we would be paying out 48%
of our total net profit, excluding the special
cash dividend of 5.0 cents per share
distributed to commemorate Keppel’s
golden jubilee.
Therefore, even as we grow recurring income
to improve the overall quality of earnings,
we want to ensure that we continue to turn
our assets efficiently to realise value and
achieve our desired mid-teen ROE target
for the Group in the long run.
Q
In an environment of uncertainty and
disruptions, what is Keppel doing to
stay on track of its growth trajectory?
The nature of Keppel’s business is such that
we would regularly recognise gains from RIDs,
even though they are inherently lumpy. On
average, RIDs contributed some $260 million
annually to our net profit over the last five years.
Unrealised profit, in the form of revaluation
gains on our investment properties, is an
important aspect of our RIDs. These revaluation
gains are realised only when we divest the
A
To thrive in this fast-paced environment,
we need to be entrepreneurial and innovative,
quick to seize opportunities while staying
disciplined with risk taking. As we keep a
watchful eye on new developments and
potential disruptions to our businesses,
we are also building resilience through
our self-sustaining business model and
strengthened governance processes.
We see sustainability as essential to
Keppel’s long-term success. Our goal is
to run a profitable, safe and responsible
business providing the best value proposition
to customers, while being guided by our
core values and operating principles.
To ensure we have the license to operate as
a global company, we need also to carefully
consider the environmental, social and
governance issues when determining our
strategies and policies. In May 2018, Keppel
Corporation became a signatory of the
United Nations Global Compact. We are
committed to upkeeping the Compact’s 10
universal principles on human rights, labour,
environment and anti-corruption, all of which
resonate strongly with our own core values.
We will continue to strengthen our
compliance policies and procedures to
ensure that we win business legally and
ethically. Notably in 2018, Keppel O&M’s
entities in Singapore achieved certification
for the ISO 37001 Anti-Bribery Management
System. We will be rolling out the ISO
certification programme to Keppel O&M’s
overseas entities, and are also looking to
extend it to other business units in the Group.
As we foster a dynamic environment for
collaboration, innovation and the creation
of synergies and economic benefits for all
our stakeholders, we are also grooming
a new generation of Keppelites who are
committed to our values and mission.
We will create a conducive workplace
where Keppelites, regardless of gender,
ethnicity or age can explore, develop and
fulfil their professional aspirations as we
take the Group into the future.
2
1
M1’s capabilities and
consumer base will
augment Keppel’s
solutions for connectivity
and complement our
growing B2C businesses.
2
Keppel Capital continues
to seek out new markets
and asset classes,
such as senior living,
which are fuelled by
urbanisation trends.
Keppel Corporation Limited Report to Shareholders 2018
21
Group Overview
Board of Directors
Board Committees
N
A
R
Nominating Committee
Audit Committee
Remuneration Committee
BR
Board Risk Committee
BS
Board Safety Committee
22
Lee Boon Yang, age 71
Chairman
Non-Executive and Independent Director
Loh Chin Hua, age 57
Executive Director and
Chief Executive Officer
R N BS
BS
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:
20 April 2018
Date of last re-election as a director:
19 April 2016
Length of service as a director
(as at 31 December 2018):
9 years 8 months
Length of service as a director
(as at 31 December 2018):
5 years
Board Committee(s) served on:
Remuneration Committee (Member);
Nominating 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 2019):
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 2014 to
31 December 2018):
Nil
Others:
Former Minister for Information,
Communications and the Arts (May 2003 to
March 2009); Former Member of Parliament
(December 1984 to April 2011)
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 2019):
Listed companies
Keppel Telecommunications & Transportation Ltd
(Chairman)
Other principal directorships
Keppel Offshore & Marine Ltd (Chairman);
Keppel Land Limited (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 2014 to
31 December 2018):
KrisEnergy Ltd; Keppel REIT Management
Limited (Manager of Keppel REIT); Various
fund companies under management of
Alpha Investment Partners Limited
Others:
Nil
Tow Heng Tan, age 63
Non-Executive and
Non-Independent Director
Alvin Yeo Khirn Hai, age 57
Non-Executive and
Independent Director
Tan Ek Kia, age 70
Non-Executive and
Independent Director
RN
BR
A N
BS BR
A
Date of first appointment as a director:
15 September 2004
Date of first appointment as a director:
1 June 2009
Date of first appointment as a director:
1 October 2010
Date of last re-election as a director:
21 April 2017
Date of last re-election as a director:
19 April 2016
Date of last re-election as a director:
19 April 2016
Length of service as a director
(as at 31 December 2018):
14 years 4 months
Length of service as a director
(as at 31 December 2018):
9 years 7 months
Length of service as a director
(as at 31 December 2018):
8 years 3 months
Board Committee(s) served on:
Nominating Committee (Member);
Remuneration Committee (Member);
Board Risk Committee (Member)
Board Committee(s) served on:
Audit Committee (Member);
Nominating Committee (Member)
Board Committee(s) served on:
Board Safety Committee (Chairman);
Board Risk 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 Accountant
Present Directorships (as at 1 January 2019):
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 Holdings Pte. Ltd. (CEO);
Pavilion Capital International Pte. Ltd. (CEO);
Temasek Trust Investment Advisory Committee
(Member)
Past Directorships held over the preceding
5 years (from 1 January 2014 to
31 December 2018):
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 2019):
Listed companies
United Industrial Corporation Limited;
United Overseas Bank Limited
Other principal directorships
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 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 2014 to
31 December 2018):
Singapore Land Limited; Tuas Power Ltd;
Thomson Medical Pte. Ltd.
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)
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 2019):
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;
Singapore LNG Corporation Pte Ltd
Major Appointments (other than directorships):
Nil
Past Directorships held over the preceding
5 years (from 1 January 2014 to
31 December 2018):
CitySpring Infrastructure Management Pte Ltd
(as Trustee-Manager of CitySpring
Infrastructure Trust); City Gas Pte Ltd
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
Keppel Corporation Limited Report to Shareholders 2018
23
Group Overview
Board of Directors
24
Danny Teoh, age 63
Non-Executive and
Independent Director
Tan Puay Chiang, age 71
Non-Executive and
Independent Director
A
R
BR
N BS
Date of first appointment as a director:
1 October 2010
Date of first appointment as a director:
20 June 2012
Date of last re-election as a director:
21 April 2017
Date of last re-election as a director:
20 April 2018
Length of service as a director
(as at 31 December 2018):
8 years 3 months
Length of service as a director
(as at 31 December 2018):
6 years 7 months
Board Committee(s) served on:
Audit Committee (Chairman);
Remuneration Committee (Member);
Board Risk Committee (Member)
Board Committee(s) served on:
Nominating Committee (Chairman);
Board Safety Committee (Member)
Academic & Professional Qualification(s):
Associate member of the Institute of Chartered
Accountants in England & Wales
Academic & Professional Qualification(s):
MBA (Distinction), New York University;
Bachelor of Science (First Class Honours),
University of Singapore
Present Directorships (as at 1 January 2019):
Listed companies
DBS Group Holdings Ltd; M1 Limited (Chairman)
Present Directorships (as at 1 January 2019):
Listed companies
Nil
Other principal directorships
Changi Airport Group (Singapore) Pte Ltd;
DBS Bank Ltd; DBS Bank (China) Limited;
DBS Bank (Taiwan) Ltd; DBS Foundation Ltd;
Ascendas-Singbridge Pte. Ltd.
Major Appointments (other than directorships):
Nil
Past Directorships held over the preceding
5 years (from 1 January 2014 to
31 December 2018):
Singapore Olympic Foundation; CapitaLand Mall
Trust Management Limited (Manager of
CapitaLand Mall Trust); JTC Corporation
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 2014 to
31 December 2018):
Neptune Orient Lines Limited
Others:
Former Chairman, ExxonMobil (China)
Investment Co. (2001 to 2007)
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
Till Vestring, age 55
Non-Executive and
Independent Director
Veronica Eng, age 65
Non-Executive and
Independent Director
Jean-François Manzoni, age 57
Non-Executive and
Independent Director
R
N
BR
A
BR
Date of first appointment as a director:
16 February 2015
Date of first appointment as a director:
1 July 2015
Date of first appointment as a director:
1 October 2018
Date of last re-election as a director:
21 April 2017
Date of last re-election as a director:
20 April 2018
Date of last re-election as a director:
N.A.
Length of service as a director
(as at 31 December 2018):
3 years 11 months
Length of service as a director
(as at 31 December 2018):
3 years 6 months
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
Present Directorships (as at 1 January 2019):
Listed companies
Inchcape plc
Academic & Professional Qualification(s):
Bachelor of Business Administration
(First Class Honours), University of Singapore
Present Directorships (as at 1 January 2019):
Listed companies
Nil
Other principal directorships
Leap Philanthrophy Ltd;
Banteasy Srey Development Limited
Major Appointments (other than directorships):
Advisory Partner, Bain & Company Southeast Asia
Past Directorships held over the preceding
5 years (from 1 January 2014 to
31 December 2018):
Singapore Chinese Orchestra Company Limited
Others:
Nil
Other principal directorships
Keppel Capital Holdings Pte. Ltd.
Major Appointments (other than directorships):
Professor (Practice), NUS Business School
Past Directorships held over the preceding
5 years (from 1 January 2014 to
31 December 2018):
Permira Holdings Limited
Others:
Founding Partner of Permira (1985 to 2015);
Former Member of the Board and Executive
Committee of Permira
Length of service as a director
(as at 31 December 2018):
3 months
Board Committee(s) served on:
Board Risk Committee (Member)
Academic & Professional Qualification(s):
DBA, Harvard Business School, Boston;
MBA, McGill University, Montreal; Bachelor,
Business Administration, l’Ecole des Hautes
Etudes Commerciales de Montréal; Fellow of
the Singapore Institute of Directors
Present Directorships (as at 1 January 2019):
Listed companies
Nil
Other principal directorships
IMD Foundation Board; Association to
Advance Collegiate Schools of Business
(AACSB) International
Major Appointments (other than directorships):
President and Nestlé Professor, International
Institute for Management Development (IMD),
Switzerland; Member of International Advisory
panels of Singapore Public Service Division;
Digital Switzerland; Russian Presidential
Academy of National Economy and Public
Administration
Past Directorships held over the preceding
5 years (from 1 January 2014 to
31 December 2018):
Singapore Civil Service College
Others:
Nil
Keppel Corporation Limited Report to Shareholders 2018
25
Group Overview
Keppel Group Boards of Directors
Keppel Offshore & Marine
Keppel Land
Keppel Infrastructure
Loh Chin Hua
Chairman
Chief Executive Officer,
Keppel Corporation
Chris Ong Leng Yeow
Chief Executive Officer
Loh Chin Hua
Chairman
Chief Executive Officer,
Keppel Corporation
Tan Swee Yiow
Chief Executive Officer
Stephen Pan Yue Kuo
Chairman,
World-Wide Shipping Agency Limited
Tan Yam Pin
Former Managing Director,
Fraser and Neave Group
Po’ad Bin Shaik Abu Bakar Mattar
Independent Director,
Hong Leong Finance Limited
Koh-Lim Wen Gin
Former URA Chief Planner and
Deputy Chief Executive Officer
Tan Ek Kia
Chairman,
Star Energy Group Holdings Pte Ltd
Yap Chee Meng
Former Senior Partner, KPMG and
COO of KPMG International for Asia Pacific
Lim Chin Leong
Former Chairman of Asia,
Schlumberger
Willy Shee Ping Yah
Senior Advisor and Former Asia Chairman,
CBRE
Robert D. Somerville
Chairman,
Maine Maritime Academy Board of Trustee
Chan Hon Chew
Chief Financial Officer,
Keppel Corporation
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
Chan Hon Chew
Chief Financial Officer,
Keppel Corporation
Kevin Kwok Khien
Independent Director,
Singapore Exchange Ltd
(appointment till 31 Mar 2019)
26
Keppel Telecommunications
& Transportation
Keppel REIT Management
(Manager of Keppel REIT)
Keppel Infrastructure Fund
Management (Trustee-manager
of Keppel Infrastructure Trust)
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 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
Mrs Lee Ai Ming
Senior Consultant,
Dentons Rodyk & Davidson LLP
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
Mrs Penny Goh
Chairman
Co-Chairman and Senior Partner,
Allen & Gledhill LLP
Lee Chiang Huat
Independent Director
Lor Bak Liang
Independent Director
Christina Tan Hua Mui
Chief Executive Officer,
Keppel Capital
Tan Swee Yiow
Chief Executive Officer,
Keppel Land
Alan Rupert Nisbet
Independent Director
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
Lim Joo Ling Cindy
Director (Group Corporate Development),
Keppel Corporation
Managing Director,
Keppel Urban Solutions
(effective 18 Jul 2018)
Keppel DC REIT Management
(Manager of Keppel DC REIT)
Keppel-KBS US REIT Management
(Manager of Keppel-KBS US REIT)
Christina Tan Hua Mui
Chairman
Chief Executive Officer,
Keppel Capital
Lee Chiang Huat
Independent Director
Leong Weng Chee
Independent Director
Dileep Nair
Independent Director
Peter McMillan III
Chairman
Co-founder and Managing Director,
Willowbrook Capital Group, LLC
Soong Hee Sang
Independent Director
John J. Ahn
President,
Great American Capital Partners
Kenneth Tan Jhu Hwa
Co-Managing Partner and Managing Director,
Southern Capital Group Private Limited
Paul Tham
Chief Executive Officer,
Keppel REIT Management
(Manager of Keppel REIT)
Keppel Corporation Limited Report to Shareholders 2018
27
Thomas Pang Thieng Hwi
Chief Executive Officer,
Keppel Telecommunications & Transportation
Tow Heng Tan
Chief Executive Officer,
Pavilion Capital International Pte. Ltd.
Dr Tan Tin Wee
Chief Executive,
National Supercomputing Centre, Singapore
Thomas Pang Thieng Hwi
Chief Executive Officer,
Keppel Telecommunications & Transportation
Veronica Eng
Independent Director,
Keppel Corporation
Low Huan Ping
Independent Director
(effective 28 Feb 2019)
Kenny Kwan
Principal,
Baker & McKenzie
(effective 28 Feb 2019)
Group Overview
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.
KTAP members provide technology
foresight for Keppel, advise on strategic
projects, and provide contacts to broaden
Keppel’s networks. Collectively, members’
expertise cover a range of topics under
sustainable urbanisation, such as floating
platforms, urban design and liveability,
alternative energy and efficiency, as
well as communications networks and
digitalisation. This has helped Keppel
to enhance business value and harness
synergies across the Group.
KTAP convenes once a year with key
members of Keppel Corporation’s board
and senior management, and provides
support on projects when required.
Professor Ng Wun Jern
Chairman
BSc (Civil Engineering) QMC London University,
MSc (Water Resources) and PhD University of
Birmingham, PE(S),CEng(S), FIES, FAES.
Professor Ng founded the Nanyang
Environment & Water Research Institute
and led it for 10 years. He is Professor of
Environmental Engineering in the School
of Civil & Environmental Engineering at
Nanyang Technological University where
he leads the Environmental Bio-innovations
Group (EBiG). He has some 600 publications
on water and wastewater management,
and soil remediation; has founded spin-off
companies based on his IPs, and serves as
technical advisor to government agencies
and various companies across ASEAN,
China and India. Professor Ng’s own
spin-off companies also operate in these
geographies. He is active in the venture
capital and accelerator funding space.
Professor Ng’s contributions to education,
research and the industry have been
recognised with numerous awards.
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 several
universities and institutions.
Seated, from left: Loh Chin Hua (CEO of Keppel Corporation) and Dr Lee Boon Yang (Chairman of Keppel Corporation).
Standing, from left: Professor Jim Swithenbank, Professor Stefan Thomke, Professor Ng Wun Jern, Peter Noble, Chua Kee Lock and Dr Liu Thai-Ker.
Not in picture: Professor Foong Sew Bun.
28
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,
Professor Thomke was with McKinsey &
Company in Germany.
Chua Kee Lock
BSc. (Mechanical Engineering), University of
Wisconsin at Madison; M.Eng, Stanford University.
Mr Chua is the 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.
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 Chairman of Morrow
Architects & Planners Pte Ltd. He is the
Founding Chairman of Centre of Liveable
Cities, and has been Chairman of the Advisory
Board 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, as well as 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. 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, waste
and hydrogen.
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 has been
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.
Keppel Corporation Limited Report to Shareholders 2018
29
Property
Tan Swee Yiow
Chief Executive Officer
Keppel Land
(effective 1 Jan 2019)
Lim Kei Hin
Chief Financial Officer
Keppel Land
(appointment till 14 Aug 2018)
Tan Boon Ping
Chief Financial Officer
Keppel Land
(effective 15 Aug 2018)
Louis Lim Lu-yi
Chief Operating Officer
Keppel Land
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
Group Overview
Senior Management
Keppel Corporation
Loh Chin Hua
Chief Executive Officer
Chan Hon Chew
Chief Financial Officer
Corporate Services
Cindy Lim
Director
Group Corporate Development
Managing Director
Keppel Urban Solutions
Sebastien Lamy
Director
Group Strategy & Development
Managing Director
Keppel Technology & Innovation
(effective 1 Jan 2019)
Yeo Meng Hin
Director
Group Human Resources
Ho Tong Yen
Director
Group Corporate Communications
Lynn Koh
General Manager
Group Treasury
Caroline Chang
General Manager
Group Legal
Tok Soo Hwa
General Manager
Group Control & Accounts
Sepalika Kulasekera
General Manager
Group Internal Audit
Kevin Chng
General Manager
Group Risk & Compliance
30
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
Ho Kiam Kheong
India Representative
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
Managing Director (Offshore)
Keppel Offshore & Marine
Paul Tan Poh Lee
Chief Financial Officer
Keppel Offshore & Marine
Chor How Jat
Managing Director
(Conversions & Repairs)
Keppel Offshore & Marine
Abu Bakar Bin Mohd Nor
Managing Director
(Gas & Specialised Vessels)
Keppel Offshore & Marine
Tan Leong Peng
Executive Director (Offshore)
Keppel Offshore & Marine
Simon Lee Kim Foong
President
Keppel Offshore & Marine, USA
Marlin Khiew Huey Kang
President
Keppel FELS Brasil
Leong Kok Weng
President
Keppel Philippines Marine
Edmund Lek Hwee Chong
President
Keppel Nantong Shipyard
Keppel Nantong Heavy Industries
Infrastructure
Investments
Unions
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
Christina Tan Hua Mui
Chief Executive Officer
Keppel Capital
Ang Sock Cheng
Chief Financial Officer
Keppel Capital
(effective 1 Jan 2019)
Tan Swee Yiow
Chief Executive Officer
Keppel REIT Management
(appointment till 31 Dec 2018)
Paul Tham
Chief Executive Officer
Keppel REIT Management
(effective 1 Jan 2019)
Matthew Pollard
Chief Executive Officer
Keppel Infrastructure Fund Management
Thomas Pang Thieng Hwi
Chief Executive Officer
Keppel Telecommunications & Transportation
Chua Hsien Yang
Chief Executive Officer
Keppel DC REIT Management
Tan Eng Hwa
Chief Financial Officer
Keppel Telecommunications & Transportation
David Snyder
Chief Executive Officer
Keppel-KBS US REIT Management
Wong Wai Meng
Chief Executive Officer
Keppel Data Centres
Desmond Gay Kah Meng
Chief Executive Officer
Keppel Logistics
Alvin Mah
Chief Executive Officer
Alpha Investment Partners
Bridget Lee
Chief Executive Officer
Keppel Capital Alternative Asset
(effective 1 Jan 2019)
Keppel FELS Employees’ Union
Mahmood Bin Ali
President
Atyyah Binte Hassan
General Secretary
Keppel Employees’ Union
Razali Bin Maulod
President
Atan Enjah
General Secretary
Shipbuilding & Marine
Engineering Employees’ Union
Eileen Yeo Chor Gek
General Secretary
NTUC Central Committee Member
Singapore Industrial &
Services Employees’ Union
Sazali Bin Zainal
President
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
Keppel Corporation Limited Report to Shareholders 2018
31
Group Overview
Investor Relations
We are committed
to clear, timely
and consistent
communication
with the investment
community.
Shareholding by Investors (%)
Keppel Corporation’s vision is to be a
global company at the forefront of its
chosen industries, shaping the future for
the benefit of all stakeholders. As the
Group continues 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 2018, we focused on deepening the
investment community’s understanding
of our multi-business strategy, solutions
for sustainable urbanisation provided
through the Group’s business verticals,
collaboration across the Group, as well as
new growth initiatives.
Investor and Analyst Engagement
During the year, we held 216 meetings
and conference calls with institutional
investors, including non-deal roadshows
and conferences reaching out to investors
in Hong Kong, Japan, the United Kingdom
and the United States. We also hosted
tours of our residential and commercial
properties in China and Vietnam.
Institutions
Retail
Total
53.0
47.0
100.0
We continued to improve on disclosures
as we engaged analysts and investors,
including providing more information on
the Property and Investments divisions.
Shareholding by Geography (%)
Singapore
Asia (ex Singapore)
North America
Europe
Others*
Total
34.8
4.0
9.7
8.6
42.9
100.0
Presently, 18 sell-side research houses,
with analysts based in Singapore and
Malaysia, provide coverage on Keppel
Corporation. We continue to actively
engage and maintain close interactions
with these research analysts, who contribute
to achieving balanced and fair valuations
of the Company.
In 2018, apart from regular results briefings,
top management held a briefing for analysts
on the Pre-conditional Voluntary General
Offer for M1 by Keppel Corporation and
Singapore Press Holdings (SPH), and the
Scheme of Arrangement to privatise Keppel
Telecommunications & Transportation
(Keppel T&T). We have also actively
engaged the investment community
to help them understand the rationale
for the transaction, as well as long-term
plans to drive business transformation
at M1.
* Others comprise the rest of the world, as well as
unidentified holdings and holdings below the
analysis threshold as at 8 February 2019.
As part of our ongoing efforts to engage retail
shareholders, we partnered the Securities
Investors Association (Singapore) (SIAS),
to organise a briefing for retail shareholders,
where the Chief Executive Officer and
Chief Financial Officer (CFO) of Keppel
Corporation updated and engaged about
120 investors on the Group’s strategic
developments and performance. 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, enjoy access to a wide
range of seminars, workshops and other
support services during the year.
We will continue enhancing our best
practices and disclosures to enable the
investment community to better appreciate
Keppel’s strategic directions and how the
Group creates value by providing solutions
for sustainable urbanisation.
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 quarterly
results briefings, which facilitate real-time
interaction with senior management.
An archive of the quarterly webcast,
together with the presentation materials
and management speeches, are made
available on our website on the same
day the results are released on the SGX.
A transcript of the questions and answers
session from each webcast is also posted
online the following day.
Shareholder Information
As at 8 February 2019, institutions
formed 53.0% of our shareholder base,
while retail investors accounted for
the remaining 47.0%. Shareholders in
Singapore held approximately 34.8% of
our issued capital, while those in the rest
of Asia held 4.0%, North America 9.7%
and Europe 8.6%.
32
1
Senior management
of Keppel Corporation
addressed questions
from media and analysts
at the Company’s 2Q &
1H 2018 results briefing.
2
Dr Lee Boon Yang,
Chairman of Keppel
Corporation, engaged
retail shareholders at
the Company’s AGM.
3
Mr Chan Hon Chew,
CFO of Keppel Corporation,
presented business
updates at the Company’s
Briefing for Retail
Shareholders hosted
by SIAS.
1
2
3
Investor Relations Calendar
The following key events were held in 2018 to engage our investors and analysts:
Q1
4Q & FY 2017 results conference
and live webcast.
Non-deal roadshow to Hong
Kong hosted by UBS.
Q2
1Q 2018 live results webcast.
Non-deal roadshows to New York,
and to London and Edinburgh,
hosted by CGS-CIMB and Credit
Suisse respectively.
50th Annual General Meeting
(AGM).
Group visits to Keppel Land
Vietnam for clients of Citigroup
and Deutsche Bank.
Investor visit to Sino-Singapore
Tianjin Eco-City.
Q3
2Q & 1H 2018 results
conference and live webcast.
Q4
3Q & 9M 2018 live
results webcast.
Non-deal roadshow to Tokyo
hosted by Daiwa.
Investor visit to Keppel Land
Vietnam.
Keppel Corporation’s Briefing
for Retail Shareholders, hosted
by SIAS.
Analyst briefing on Pre-conditional
Voluntary General Offer for M1
by Keppel Corporation and SPH,
and Scheme of Arrangement
to privatise Keppel T&T.
CLSA Investors’ Forum 2018
in Hong Kong.
Keppel Corporation Limited Report to Shareholders 2018
33
Group Overview
Significant Milestones
Q1
Offshore & Marine
Q2
Offshore & Marine
Property
Q3
Corporate
Keppel O&M delivered two
projects, namely a jackup rig
to Borr Drilling, as well as
SEA’s first dual-fuel Liquefied
Natural Gas (LNG) tug to
Keppel Smit Towage.
Keppel O&M secured three
newbuild contracts namely,
Singapore’s first dual-fuel
bunker tanker from Mitsui,
SEA’s first LNG bunkering
vessel from FueLNG, and
two high-specification Trailing
Suction Hopper Dredgers
from Van Oord.
Keppel O&M sold five existing
jackup rigs to Borr Drilling for
approximately US$745 million.
Keppel O&M signed a cooperation
agreement with KrisEnergy,
where Keppel, as the preferred
contractor, will offer KrisEnergy
a comprehensive suite of
offshore oil and gas solutions.
Keppel O&M signed an MOU
with the Maritime Port Authority
of Singapore and Technology
Centre for Offshore and Marine,
Singapore to jointly develop
autonomous vessels for a
variety of applications including
undertaking harbour operations.
In China, Keppel Land announced
the divestment of its stakes in
two residential projects en-bloc
in Shenyang, and a commercial
project in Beijing.
Keppel Corporation announced,
in collaboration with Singapore
Press Holdings, a strategic
initiative to gain majority
control of M1.
Infrastructure
Keppel Data Centres partnered
DE-CIX to enhance cloud
connectivity at Keppel DC
Frankfurt 1.
Investments
Keppel DC REIT acquired
Keppel DC Singapore 5.
KUS signed MOUs with
Filinvest Development
Corporation (Filinvest) and
ST Engineering to develop
solutions for sustainable
developments in the Philippines,
Vietnam and other markets.
KUS signed an agreement with Filinvest
to develop and enhance urban solutions
for Filinvest’s development portfolio in
the Philippines.
Keppel Corporation and
Keppel Telecommunications
& Transportation (Keppel T&T)
jointly proposed a Scheme
of Arrangement to privatise
Keppel T&T.
Keppel Corporation was named
Winner of the UN SDG Category
at the Sustainable Business
Awards 2018.
Keppel Group clinched 28 awards
at the Workplace Safety and
Health Awards 2018.
Offshore & Marine
Keppel O&M secured two
contracts with a combined
value of about $70 million, to
undertake the topside module
fabrication and integration of
a Floating Production Storage
and Offloading (FPSO) vessel
for MODEC, as well as to convert
an LNG carrier into a Floating
Storage and Re-gasification
Unit (FSRU).
Keppel O&M delivered its
second dual-fuel tug capable
of running on LNG, Maju Loyalty,
to Maju Maritime and Keppel
Smit Towage.
Keppel O&M signed a
Technical Assistance and
License Agreement with
Gastransport & Technigaz to
jointly offer LNG systems in
the design, construction and
maintenance of LNG vessels.
Keppel Offshore & Marine
(Keppel O&M) delivered the
jackup rig SAGA to Borr Drilling.
Keppel O&M secured a contract
to build a mid-water harsh
environment semisubmersible
worth US$425 million for Awilco.
Property
Keppel Land consolidated its
ownerships of Keppel Land
Retail Management, as well
as Saigon Sports City in
Ho Chi Minh City, Vietnam.
Infrastructure
Keppel Infrastructure secured
two performance bonuses and
signed a five-year Technical
Support Agreement for the
Runcorn Energy-from-Waste
Facility in the United Kingdom.
UrbanFox partnered SmartOSC,
a leading e-commerce agency, to
jointly promote their end-to-end
e-commerce services to retailers
across Southeast Asia (SEA).
Investments
Keppel DC REIT entered
into a contract to acquire
a long leasehold interest in
Keppel DC Dublin 1.
Keppel Urban Solutions (KUS)
signed a Memorandum of
Understanding (MOU) with
Envision to leverage each
other’s resources to advance
their solutions for new and
clean energy, and smart cities.
In 2018, Keppel O&M secured its first
drilling rig order since 2014, to build
a mid-water harsh environment
semisubmersible for Awilco.
34
Property
Investments
In China, Keppel Land
announced the acquisition
of stakes in two residential
projects in Chengdu and Nanjing.
Keppel Land and its joint
venture partner Banco de Oro
Unibank topped off The Podium
West Tower, Phase 2 of the
SM-KL Project, in Manila,
the Philippines.
Keppel Land entered into an
agreement to divest 51% of
its convertible bonds issued
by Nam Long Investment
Corporation (NLG) and to
convert the remaining 49%
of the Bonds into shares.
Keppel Capital signed MOUs
with MindChamps and Vicinity
to establish an education
real estate fund and a
wholesale Australian property
fund respectively.
Keppel Capital entered into a
conditional agreement to acquire
a 50% stake in Watermark
Retirement Communities,
a leading senior living operator
in the United States (US).
Keppel DC REIT entered into
an agreement with Macquarie
Telecom to develop Intellicentre
3 East Data Centre in Sydney,
Australia.
Keppel Land entered into a
conditional agreement to divest
a 70% interest in Dong Nai
Waterfront City in Vietnam to NLG.
Keppel-KBS US REIT (KORE)
announced its maiden
acquisition of the Westpark
portfolio in Seattle, the US.
Intellicentre 3 East Data Centre is
Keppel DC REIT’s fourth data centre
in Australia.
Infrastructure
Keppel Infrastructure was
awarded a contract for the
initial phase of a tender by
JTC Corporation to design a
new district cooling system
plant in the upcoming Jurong
Innovation District in Singapore.
Keppel Data Centres, Alpha Data
Centre Fund (Alpha DC Fund)
and Salim Group signed
conditional agreements to
jointly develop and operate a
data centre in Bogor, Indonesia.
Keppel Data Centres entered
into an agreement with
technology companies in
China to develop, operate and
maintain more efficient and
robust data centres in China
and around the world.
Q4
Offshore & Marine
Keppel O&M delivered the FPSO
vessel La Noumbi to Perenco.
Keppel O&M secured contracts
worth over $400 million for a
newbuild ice-class LNG bunker
vessel from Shturman Koshelev,
65 scrubber retrofit projects,
a production barge upgrade from
KrisEnergy, refurbishment of an
FPSO and two small-scale LNG
carriers from Stolt-Nielsen Gas.
Keppel O&M received Limited
Notice to Proceed from Golar LNG
to commence early conversion
works for Gimi FLNG.
Property
In China, Keppel Land acquired
two residential land plots,
namely in Tianjin Eco-City and
Chengdu, and announced the
acquisition of a completed
commercial property in Beijing.
Keppel Land signed a General
Collaboration Agreement with
PT Metropolitan Land (Metland)
to cooperate on residential
projects owned and occupied
by Metland in Greater Jakarta,
Indonesia. Following this,
Keppel Land and Metland
entered into an agreement to
jointly develop a residential site
in Metland Menteng township
in East Jakarta, Indonesia.
Keppel Land, together with its
joint venture partner Puravankara,
entered into an agreement to
acquire a 3.09-hectare (ha) site
in Bengaluru, India, to develop
a Grade A office tower and
retail-cum-office facility.
Keppel Land consolidated its
ownership in I12 Katong mall
in Singapore.
Infrastructure
Keppel Infrastructure secured
a contract to supply waste-to-
energy (WTE) technology and
services for Australia’s first
WTE plant in Kwinana.
Keppel Data Centres and Alpha
DC Fund signed an agreement
to develop and operate the
Group’s first greenfield data
centre in Johor, Malaysia.
Keppel Electric became one
of the retailers with the highest
market shares in Singapore’s
Open Electricity Market.
Investments
Keppel REIT divested a
20% minority stake in Ocean
Financial Centre in Singapore
to Allianz Real Estate.
Keppel Infrastructure Trust
announced the proposed
acquisition of Ixom, one of
the leading industrial and
infrastructure businesses in
Australia and New Zealand.
KORE announced the acquisition
of Maitland Promenade I in
Florida, the US.
KUS signed an MOU with Envision
and the Wuxi government to
develop a Smart Internet of
Things City in Xuelang Town,
Taihu New City in Wuxi, China.
Australia’s first WTE plant in Kwinana will
use Keppel Seghers’ proprietary technology
and processes.
Keppel Land expanded its footprint in
China with the acquisition of a 10.97-ha
residential site in Tianjin Eco-City.
Keppel Corporation Limited Report to Shareholders 2018
35
Group Overview
Sustainability Framework
Keppel provides robust solutions for sustainable
urbanisation to meet the world’s needs for energy,
infrastructure, clean environments, high quality
homes and offices, and connectivity.
MATERIALITY APPROACH
HOW WE CREATE VALUE
Material issues affect our ability to
create value in the long term, and
influence the decisions of
our stakeholders.
Process
A robust process was undertaken to
identify and prioritise Keppel Corporation’s
material environmental, social and
governance (ESG) issues. 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 material
ESG issues for Keppel Corporation
were reviewed in 2018 and deemed
to remain relevant.
Keppel Corporation
Material Issues
Tier 1: Issues of Critical Importance
• Corporate governance
• Economic sustainability
• Safety and health
• Product excellence
• Environmental performance
Tier 2: Issues of High Importance
• Labour practices and human rights
• Community development
• Supply chain and
responsible procurement
Our Business Engines
Keppel provides solutions for sustainable urbanisation, with key businesses in Offshore
& Marine, Property, Infrastructure and Investments.
For more information on how we create value through our business model, please refer to pages 40 and 41.
Our Strategy
Our approach to sustainability starts with our goal to run a profitable, safe and responsible
business providing the best value proposition to customers, while guided by our core
values and operating principles.
The company’s sustainability strategy is guided by the three thrusts of Sustaining Growth,
Empowering Lives and Nurturing Communities.
Sustaining Growth
We integrate sustainability principles in our business strategies
and operations, and regard sustainable development both as a
corporate responsibility and a source of business opportunities.
We are focused on strong corporate governance, prudent risk
management and resource efficiency.
Empowering Lives
People are the cornerstone of our businesses.
We are committed to grow and nurture our talent pool through
training and development to help our people reach their full potential.
With safety as one of our core values, we are committed to
providing a safe and healthy workplace for all our stakeholders.
Nurturing Communities
As a global citizen, Keppel believes that as communities thrive,
we thrive.
We engage and nurture communities wherever we operate,
with the goal of shaping a sustainable future together.
For more information, view our Sustainability Report on our website at www.kepcorp.com
We are committed to sustainability,
and consider environmental, social and
governance issues in the determination
of our strategy and policies. Our approach
to sustainability starts with our goal to run
a profitable, safe and responsible business
providing the best value proposition to
customers, making a difference to the
wider community, and contributing to a
sustainable future.
Keppel Corporation is a signatory of
the United Nations (UN) Global Compact,
and we are committed to the Compact’s
10 universal principles. We are also
committed to working towards
the achievement of the Sustainable
Development Goals, and have
incorporated 10 of the goals as a
supporting framework to guide our
sustainability strategy.
OUR STAKEHOLDERS
GOVERNANCE
MEASURING PERFORMANCE
Employees
We are committed to investing in the
development of our people. We adopt
merit-based recruitment practices and
emphasise diversity and inclusiveness.
In our recent employee engagement survey,
87% of our employees indicated that they
would “go beyond the norm” to contribute
to Keppel’s success.
Customers
Customer satisfaction is crucial to the
success of our businesses. We are committed
to continually improve our range of products
to better meet customers’ needs, and we
harness insights from our engagements
with customers.
Governments
Governments shape the business environments
in which we operate. Political factors, policies
and regulation can affect how businesses are
run and create new opportunities for companies.
We track topics of concern to governments
and regulatory bodies wherever we operate.
Shareholders & Investors
Shareholders play an important role in the
financing and governance aspects of our
business. Our Investor Relations Policy sets
out the principles that the Company abides
by to help shareholders and prospective
investors make well-informed decisions
and ensure a level playing field.
Suppliers
Strong, effective relationships with our
suppliers give our businesses strategic
advantages, including better value. By effecting
stringent procurement processes and a
Supplier Code of Conduct, we aim to encourage
our suppliers to adopt sustainable practices.
Local Communities
As active members of our communities, we
aim to contribute towards their continued
well-being. We engage community leaders
to develop impactful programmes that drive
community development.
Strong Governance Framework
Keppel is focused on upholding
high standards of corporate
governance. We have a
strong and independent board,
and are committed to good
business ethics. We maintain
clear, consistent and
regular communication
with shareholders.
Keppel’s System of
Management Controls
Framework
The Framework outlines 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.
Core Values and
Operating Principles
Keppel’s core values of
integrity, accountability,
people-centredness, safety,
among others, along with
our operating principles, guide
management and staff in the
conduct of our businesses.
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 that enables us to
continue to respond effectively
to the dynamic business
environment, shifting business
demands and to seize new
value-added opportunities for
our stakeholders.
For more information,
please refer to page 71.
Balanced Scorecard
The Company’s balanced
scorecard aligns compensation
with corporate and individual
performance, both in terms of
financial and non-financial
performance.
There are four scorecard areas
that the Company has identified
as key to measuring the
performance of the Group:
1. Financial and Business Drivers;
2. Process;
3. Stakeholders; and
4. 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, sustainability
efforts, employee engagement,
talent development and
succession planning.
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.
36
Keppel Corporation Limited Report to Shareholders 2018
37
Group Overview
Sustainability Framework
Board Statement
The key material environmental, social and
governance factors for Keppel Corporation
have been identified and are regularly
reviewed by Keppel Corporation’s Board
of Directors and management. The Board
oversees the management and monitoring
of these factors and takes them into
consideration in the determination of the
Company’s strategic direction and policies.
by the Singapore Exchange. We also
participate in the CDP (formerly Carbon
Disclosure Project).
Keppel Corporation won the UN SDG
Category at the Sustainable Business
Awards 2018. The Awards, organised
by Global Initiatives in partnership with
PwC Singapore, recognise businesses
with sustainable business practices.
Management Structure
The Group Sustainability Steering
Committee, chaired by Keppel Corporation’s
Chief Executive Officer Loh Chin Hua and
comprising senior management from
across the Group, provides guidance on
the Group’s sustainability strategy while
the Group Sustainability Working Committee,
comprising discipline-specific working
groups, executes, monitors and reports
on the Group’s efforts.
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.
United Nations Global Compact
Keppel became a signatory of the United
Nations (UN) Global Compact, the world’s
largest corporate sustainability initiative, in
2018. We are committed to upholding the
Compact’s 10 principles on human rights,
labour, environment and anti-corruption,
which resonate strongly with our own
core values.
Sustainable Development Goals
Keppel believes that businesses can
play an important role in contributing
to the achievement of the Sustainable
Development Goals (SDGs) of the 2030
Agenda for Sustainable Development.
We firmly believe that a company that
is aligned with the global sustainable
development agenda can not only
enhance its social licence to operate,
but also improve the sustainability,
efficiency and competitiveness of its
business. Having reviewed how our
different businesses can contribute to
each of the SDGs, we have incorporated
the goals where appropriate, as a supporting
framework to shape and guide our strategy.
In our reports, we describe how Keppel is
contributing to ten of the SDGs.
Best Practices
Keppel Corporation is listed on various
sustainability indices and rankings,
including the MSCI World ESG Leaders Index,
Euronext Vigeo Eiris Index – World 120,
as well as the iEdge SG ESG Leaders Index
and iEdge SG ESG Transparency Index
38
The Company was also conferred Champion
of Good 2018 by National Volunteer and
Philanthropy Centre. This national
recognition framework acknowledges
companies that have been exemplary
in their corporate giving efforts.
Community Impact
Keppel gives back to the community
through financial contributions as well
as volunteerism efforts. In 2018, Keppel
invested $8.9 million in social causes, while
Keppel Volunteers achieved over 14,000
hours of community work, touching the lives
of over 2,600 beneficiaries. Keppel Care
Foundation, the Group’s philanthropic arm,
has disbursed $36 million to worthy causes
since its launch in 2012.
Reporting
We publish sustainability reports annually,
and the next report will be published in
May 2019. Our sustainability reports draw
on internationally-recognised standards
of reporting, including the Global Reporting
Initiative Standards, and are externally
assured in adherence to the AccountAbility
AA1000 Assurance Standard. The report is
also aligned with sustainability reporting
requirements by the Singapore Exchange.
Social Investment Spending
by Project Type in 2018 (%)
Education*
Industry Advancement
Arts/Sports/Community
Development Projects
Care for the Underprivileged/
Healthcare
Environment
Total
$8.9 million
70.1
9.6
3.9
14.9
1.5
100.0
*
Includes a $5 million donation (first payment
tranche) to the ITE Education Fund. Keppel had
committed a $10 million donation to the Fund to
promote education for financially-disadvantaged
students from ITE on the occasion of Keppel
Corporation’s 50th anniversary in 2018.
Supporting the SDGs
Keppel’s
Sustainability
Thrusts
Sustaining
Growth
Related
Material
Issues
Environmental
performance
Related
SDGs
Approach
Our advanced technology solutions address a wide spectrum of environmental
issues in solid waste and wastewater management, as well as seawater and
freshwater treatment to bolster water supply resilience.
Product excellence
We enhance access to energy with our diverse portfolio of solutions.
Our delivery of the world’s first Floating Liquefied Natural Gas vessel
conversion puts us ahead of the curve as a leading provider of
floating liquefaction solutions.
Economic
sustainability/
Product excellence
Our businesses help promote sustainable urbanisation. We offer solutions
for property, infrastructure, technology and services that optimise urban
systems and contribute towards resilient, green and liveable cities.
Environmental
performance/
Supply chain
and responsible
procurement
Environmental
performance
Corporate governance
Empowering
Lives
Safety and health
Labour practices and
human rights
Economic
sustainability/
Community
development
We are focused on achieving sustainable management and efficient use of
natural resources. We aim to reduce waste generation through resource
efficiency, recycling, and reuse of natural resources.
We are committed to minimising our environmental impact. To support the
climate change agenda, we have set a target of achieving a 28.8% reduction
in carbon emissions intensity by 2030 from 2010 levels, in addition to the
target of achieving a 16% improvement in carbon emissions from 2020
business-as-usual levels.
We will conduct ourselves according to the highest ethical standards
and comply with all applicable laws and regulations wherever we operate.
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.
Providing a safe and healthy working environment for all stakeholders is
fundamental to our commitment to conduct business responsibly. We are
strong advocates for safety and health in the broader community, and
champion national and industry initiatives to raise standards and drive
innovation in these aspects.
The Keppel Group won 28 awards at the Workplace Safety and Health Awards in
2018, the highest number of awards won by a single organisation in the year.
Our businesses spark economic growth, productivity and jobs. Our hiring
policies ensure equal employment opportunities for all, and we are
committed to invest in nurturing our human capital.
We are committed to operating sustainably, and apply our knowledge,
skills and technology to drive innovation and support economic development
and the well being of our communities.
Nurturing
Communities
Community
development
Through collaboration with our stakeholders, we mobilise and share
knowledge, expertise and technology, as well as financial and human
resources to support the achievement of the SDGs.
Keppel Corporation Limited Report to Shareholders 2018
39
Group Overview
Eco-system for Value Creation
Keppel is a multi-business company providing robust solutions
for sustainable urbanisation. We harness the collective strengths
of the Group’s key business verticals – Offshore & Marine, Property,
Infrastructure and Investments – to meet the world’s growing
needs for energy, clean environments, high-quality homes and
offices, and connectivity.
Our business model, underpinned by strong collaboration across
verticals, provides a robust eco-system that allows us to create
and capture value from all parts of the Group. From the time an asset
is created till its injection into a Keppel-managed trust or fund, our
business model produces multiple income streams and enables us
to create and capture value across our businesses.
To fuel Keppel’s growth, we are also expanding the Group’s capital
base, bringing on board like-minded co-investors through our private
funds to seize opportunities and accelerate asset creation without
putting a strain on our balance sheet.
We can also turn our assets efficiently through our business model,
unlocking value and recycling capital to achieve the best risk-adjusted
returns for our stakeholders.
OUR BUSINESS ENGINES
OUR BUSINESS MODEL
OUR STAKEHOLDERS
Offshore & Marine
Design and Build
a. Own and Operate
Stabilise and Monetise
REITs and Trust
We are a global leader in the design, construction,
conversion and repair of rigs and vessels, and are
extending our capabilities to create floating
infrastructure solutions.
For more information, please refer to page 42.
Property
We are a multi-faceted property company and a
choice developer in Asia with a sterling portfolio
of award-winning residential developments,
integrated townships and investment-grade
commercial properties.
For more information, please refer to page 47.
Infrastructure
We develop, own and operate competitive
energy and environmental infrastructure solutions
and provide related services, as well as offer
connectivity solutions for businesses and
consumers in the areas of data centres,
urban logistics and telecommunications.
For more information, please refer to page 50.
Investments
We manage private funds, and listed real estate
and infrastructure trusts, as well as incubate
the Group’s future growth engines, including
businesses in smart city development and more.
For more information, please refer to page 55.
40
The Group has a strong
track record for designing
and developing high-quality
real assets including rigs
and ships, residential and
commercial properties,
data centres, power plants
and more.
Private Funds
Through the creation of
private funds, Keppel can
also bring on board
investors, such as pension
and sovereign wealth funds,
to co-invest in the
development of assets
across its business
verticals. This expands
Keppel’s capital base to
seize opportunities while it
earns recurring fees from
managing the private funds.
Keppel owns and operates
many of the assets it
creates which are retained
as investments for
long-term, steady cash
flows and recurring income.
Business units can earn
fees from leasing out and
operating such assets.
They can also earn fees
from rendering project
and asset management
services to the private
funds created by Keppel.
b. Turnkey
The Group also sells
products and provides
turnkey solutions to its
customers. Some of the
assets created, such as rigs
and homes, will be handed
over to customers when
they are completed. In this
phase of asset creation,
business units can earn
development margins from
the sale of their solutions.
Our businesses collaborate to offer a spectrum of innovative and
sustainable solutions for urbanisation.
The heavy assets held
as investments by Keppel
and its private funds are
revalued annually, and
contribute revaluation
gains to the Group each
year. As these assets
mature and are de-risked
and stabilised, the Group
can monetise them through
divestments to its REITs
and Trust as well as third
parties. This robust process
for turning assets enables
the Group to achieve the
best risk-adjusted returns
from its investments by
unlocking value and
recycling capital to seize
new growth opportunities.
The Group sponsors and
manages real estate and
infrastructure trusts across
its business lines, which
it leverages as platforms
to recycle capital from
assets. Matured assets
are well suited to the
REITs and Trust, whose
investors seek stable,
recurring income.
The injection of assets to
the REITs and Trust helps
to grow the total portfolio
of assets managed by
the Group.
Employees
Customers
Governments
Shareholders
& Investors
Income Stream
Project-based income
Recurring income
Revaluation & divestment gains
Suppliers
Energy
Urban Living
Clean Environments
Connectivity
Asset Management
We support the safe and efficient
harvesting of energy sources to
power the world’s needs.
We shape skylines and
lives through vibrant urban
developments and smart cities.
We green cities with solutions
for waste, water and urban
climate control.
We connect people and
businesses with information,
goods and services in an
increasingly digital economy.
We create enduring value with
quality investment products
and platforms.
Local
Communities
Keppel Corporation Limited Report to Shareholders 2018
41
Performance Review
Operating & Financial Review
Offshore & Marine
We aim to be the preferred
solutions partner in the
global offshore and
marine industry.
The O&M Division continued
to secure new orders,
expand capabilities and
enhance efficiencies of
its operations in 2018.
Earnings Highlights ($m)
Revenue
EBITDA
Operating (Loss)/Profit
(Loss)/Profit before Tax
Net (Loss)/Profit
Average Headcount (Number)
Manpower Cost
2018
1,875
26
(73)
(113)
(109)
11,875
485
2017*
1,802
(37)
(167)
(862)^
(826)^
15,571
623
2016*
2,854
300
135
76
29
22,191
821
* 2017 financial figures have been adjusted following the adoption of Singapore Financial Reporting Standards
(International). 2016 financial figures were prepared in accordance with Singapore Financial Reporting Standards
and certain amounts have been reclassified for comparability purposes.
Includes the one-off financial penalty and related costs of $619 million.
^
Major Developments in 2018
Focus for 2019/2020
Secured about $1.7 billion worth of
new contracts.
Capture opportunities in new and
existing markets.
Sold five existing drilling rigs to Borr Drilling.
Delivered eight major projects safely,
on time and on budget.
Signed Technical Assistance and License
Agreement with Gaztransport & Technigaz
to jointly market LNG solutions.
Signed a Memorandum of Understanding
(MOU) with the Maritime Port Authority of
Singapore and the Technology Centre for
Offshore and Marine, Singapore to jointly
develop autonomous vessels.
Singapore entities achieved certification
for the ISO 37001 Anti-Bribery
Management System.
Continue to focus on execution excellence,
corporate governance and risk management.
Invest in R&D to strengthen existing
capabilities and build new muscles for
long-term growth.
Leverage synergies across Keppel O&M
and the wider Group to build up new strengths
and expand solution offerings.
Continue to explore re-purposing offshore
technology for other applications.
42
Earnings Review
Notwithstanding the volatility in oil prices,
there is growing optimism in the Offshore
& Marine (O&M) sector, with more projects
being sanctioned at oil prices of between
US$55 and US$65 per barrel. During the year,
Keppel O&M secured about $1.7 billion
of new orders, compared to $1.2 billion
secured in 2017. As at end-2018, Keppel
O&M’s net orderbook had grown to
$4.3 billion from $3.9 billion the year before,
with non-drilling solutions making up over
70% of the orderbook.
Revenue for the O&M Division was $1.9 billion,
$73 million or 4% higher than that of FY 2017,
mainly due to revenue recognition from the
jackup rigs sold to Borr Drilling and higher
revenue recognition from ongoing projects.
sulphur cap approaches, Keppel O&M is
seeing more demand for scrubber retrofits.
The company secured 65 contracts for
such projects in 2018 from a variety of
customers. Additionally, Keppel O&M has
seen continued demand for liquefied
natural gas (LNG) related solutions such
as LNG carriers and dual-fuel tugs. In 2018,
Keppel O&M secured over $600 million
worth of LNG and scrubber projects.
The rightsizing efforts that Keppel O&M
had undergone to streamline operations
and reduce overheads bore fruit in 2018,
when the Division turned a profit excluding
RIDs. During the year, Keppel O&M’s
direct global headcount was reduced by
17% from 2017, while its subcontract
headcount in Singapore fell by 5% in the
same period.
As part of ongoing efforts to strengthen its
compliance controls, Keppel O&M executed
a review and audit of its anti-corruption
compliance. In November 2018, the
Division’s entities in Singapore achieved
certification for the ISO 37001 Anti-Bribery
Management System. Keppel is committed
to putting in place effective and robust
compliance and governance regimes and
discharging the undertakings given as part
of the 2017 global resolution.
New Builds
In 2018, contracts for five jackup rigs
being constructed by Keppel FELS were
successfully novated to Borr Drilling
for a total value of approximately
US$745 million. The deal included
an upfront payment of US$288 million
from Borr Drilling, and the rigs are
Keppel O&M delivered
its first two of ten jackup
rigs, SKALD (in picture) and
SAGA, to Borr Drilling.
In 2018, the O&M Division registered a
lower net loss of $109 million, compared
to FY 2017’s net loss of $207 million,
excluding the one-off financial penalty and
related costs. The improved performance
was mainly due to higher operating results
arising from higher revenue, a write-back
of provisions for claims and lower net
interest expense, partly offset by higher
impairment provisions. Excluding
revaluations, major impairments and
divestments (RIDs), the Division turned
in a net profit of $6 million for FY 2018,
underpinned by its extensive rightsizing
efforts and new contract wins.
In 2018, the Division made an additional
provision of $167 million for expected
losses on the semisubmersibles being
built for Sete Brasil, and other provisions
and asset impairments of $44 million.
Meanwhile, the Division wrote back
$96 million of provisions for claims.
Operating Review
The O&M Division continued to secure
new orders, expand capabilities and
enhance efficiencies of its operations
in 2018.
Despite continued headwinds in the
offshore rig sector, there are signs of
improvements including a gradually
declining rig supply overhang and
increased tendering activity. One of
the key contracts secured during the
year is for a newbuild mid-water harsh
environment semisubmersible for Awilco,
marking Keppel O&M’s first drilling rig
order since the start of the downturn
in 2014. The order win demonstrates
that despite the ongoing challenges in
the O&M sector, there continues to be
strong demand for Keppel’s quality
high-specification rigs.
As the 2020 deadline for the International
Maritime Organization’s (IMO) 0.5% global
Keppel Corporation Limited Report to Shareholders 2018
43
Performance Review
Operating & Financial Review
Offshore & Marine
1
Senior management from
Keppel O&M and Perenco
Group, together with
government officials from
Republic of the Congo,
celebrated the naming
of FPSO La Noumbi,
Keppel’s sixth project for
Perenco and the fifth for
the Republic of the Congo.
2
Keppel O&M is building
Southeast Asia’s first
LNG bunkering vessel
which will provide
LNG to other vessels
passing through the
Port of Singapore.
1
expected to be delivered progressively
from 2019 to 2020. Meanwhile, Keppel FELS
delivered to Borr Drilling the first two of five
jackup rigs, whose contracts were novated
from Transocean in 2017.
Keppel FELS reached a significant milestone in
2018, securing a contract worth US$425 million
from Awilco to construct a mid-water
semisubmersible drilling rig for harsh
environment use. It was the first newbuild
drilling rig to be awarded in the offshore rig
market in three years.
Keppel FELS will continue to seek opportunities
in niche segments such as harsh environment
semisubmersibles, as well as the Middle East
and Mexican jackup markets. Building on its
engineering expertise in offshore platforms,
Keppel FELS will also actively explore
opportunities in the renewables and production
sectors, as well as opportunities to collaborate
with other Keppel business units on floating
infrastructure projects.
In the specialised shipbuilding space,
Keppel Singmarine clinched contracts from
new customer Van Oord to build two Trailing
Suction Hopper Dredgers, and delivered two
dual-fuel tugs to Keppel Smit Towage and
Maju Maritime in 2018.
Furthering its position as a preferred partner
for the gas industry, Keppel Singmarine
was entrusted to build a bunkering tanker
by Mitsui & Co (Asia Pacific), a bunkering
vessel by FueLNG and an ice-class LNG
bunker vessel by Shturman Koshelev.
In China, Keppel Nantong is on track
to deliver three dredgers to Jan De Nul
in 2019. Keppel Nantong has also
commenced works on the dual-fuel LNG
bunker vessel for FueLNG and a dual-fuel
bunker tanker for Mitsui. The yard continues
to play a vital role in supporting Keppel
O&M’s newbuild business in Asia.
of Coral Sul FLNG for SOFEC. In 2018,
Keppel Shipyard also received a Limited
Notice to Proceed (LNTP) to commence
early conversion works for the Gimi FLNG
over a period of up to four months, worth up
to $50 million. Full construction works will
commence when Keppel Shipyard receives
the final notice to proceed.
In the Americas, Keppel AmFELS is undertaking
two dual-fuel containerships for Pasha Hawaii,
built to Keppel’s proprietary design, which
includes energy saving features such as a
state-of-the-art engine, an optimised hull
form, and an underwater propulsion system
with a high-efficiency rudder and propeller.
Scheduled to be delivered in 2020, the
Jones Act vessels will run on LNG from
day one in service. Keppel AmFELS will
continue to build on its track record for the
construction of Jones Act vessels in the US,
newbuild offshore rigs and platforms, as well
as aftermarket services including repairs,
upgrades and modifications of rigs for
customers in the Gulf of Mexico.
Conversions & Repairs
During the year, Keppel Shipyard completed
two Floating Production Storage & Offloading
(FPSO) conversion projects, namely FPSO La
Noumbi for Dixstone, an affiliate of the Perenco
Group, and FPSO BW Adolo for BW Offshore.
As at end-2018, there were three FPSO
conversion and modification projects ongoing,
namely FPSO Liza Destiny for SBM Offshore,
Ngujima-Yin for Woodside and Ingenium II
for KrisEnergy. Keppel Shipyard is also
executing fabrication of the internal turret
In 2018, Keppel Shipyard repaired 328 vessels,
compared to 383 vessels the year before,
and completed a scrubber retrofit project on
a very large crude carrier. Notably, repair jobs
for LNG carriers grew to 30 in 2018 compared
23 in the preceding year. It also secured a
total of 65 scrubber retrofit projects and
completed nine Ballast Water Treatment
System (BWTS) installations during the year.
In the Philippines, Keppel Batangas repaired
76 vessels in 2018, 66 of which were for
domestic customers. Keppel Subic repaired
57 vessels, 33 of which were for foreign
customers from across Europe, Asia
and Central America. Keppel Subic also
established its first track record in the
ballast water management system market
with the installation of a BWTS on NORD
Savannah, a Panamanian bulk carrier owned
by Nissen Kaiun. Keppel Subic will capitalise
its track record to secure more similar
projects before the full implementation
of the Ballast Water Management
Convention’s requirements by 2024.
In Brazil, the FPSO P-69 was successfully
completed by BrasFELS and achieved
its first oil milestone in October 2018.
44
We remain confident of the
long-term potential of the
O&M industry as the demand
for energy remains strong,
fuelled by urbanisation
and global economic growth.
The vessel is currently undergoing further
offshore commissioning. In 2018, BrasFELS
completed repair jobs on six vessels from
both new and repeat customers including
MODEC, Helix, McDermott and QGOG.
BrasFELS also signed an MOU with Ocyan
and Magma Global to provide the latter’s
composite multi-bore riser solutions, which
will bolster BrasFELS’s position as a
one-stop solutions provider for deepwater
production platforms.
Market Review & Outlook
Notwithstanding the oil price volatility,
there is returning confidence in the
O&M sector although we do not foresee
a V-shaped recovery.
In 2018, utilisation rates continued to
improve as more rigs were put to work,
underpinned by national oil companies’
decisions to ramp-up activity in regions
such as China, India, Mexico, Middle East
and West Africa. In Brazil, the international oil
companies have secured significant acreages,
and there is growing optimism that potential
foreign investments will flow into the Brazilian
oil & gas industry. According to Brazil’s Agency
of Petroleum, Natural Gas and Biofuels (ANP),
improvements to the Local Content (2018)
rules will unlock investments in 36 FPSOs
up to 2027.
It is expected that drilling activity will
continue to pick up in 2019, driven mainly
by increased drilling activity in the North Sea
and West Africa regions. There are also
more opportunities in FPSOs and Floating
Storage Re-gasification Units (FSRU),
especially conversions, with several
projects approaching Final Investment
Decision (FID) in 2019 and 2020. As the
2020 deadline for the International Maritime
Organization’s implementation of the 0.5%
sulphur cap on marine fuels approaches,
demand for greener solutions such as
LNG vessels remains robust. Meanwhile,
continued rig attrition and secondary rig
transactions will help to rebalance the
demand and supply of the jackup rig market.
The cut in exploration & production (E&P)
expenditures by oil companies and fleet
operators has driven the industry towards
greater efficiency and productivity. 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 re-positioned
itself and improved on existing core products
and services. At the same time, leveraging
technology, the Division is developing
innovative solutions to stay ahead of the curve.
Enhancing operational productivity and
efficiency, Keppel O&M is also developing
yards of the future. The use of emerging
technologies including robotics, enhanced
IoT solutions, smart sensors, predictive
analytics, and artificial intelligence are
being evaluated and incorporated into
the manufacturing process.
Today, Keppel O&M is leaner, fitter and
more agile, and ready to seize opportunities.
We remain confident of the long-term
potential of the O&M industry as the
demand for energy remains strong, fuelled
by urbanisation and global economic growth.
Offshore Rigs
According to information provider IHS Markit,
the average global demand for mobile
drilling offshore units (MODU) is expected
2
Keppel Corporation Limited Report to Shareholders 2018
45
extensive range of non-oil related solutions
and is also capturing opportunities in the
Jones Act market through Keppel AmFELS
in Brownsville, Texas.
Keppel O&M’s capabilities in non-drilling
and gas solutions will provide the
company with new growth areas and
revenue streams, despite continuing
challenges in the offshore drilling sector.
Shiprepair
With the enforcement of IMO’s 0.5%
global sulphur cap, ship owners are actively
pursuing alternative solutions, such as the
installation of scrubbers, to reduce sulphur
emissions. In 2018, Keppel O&M secured
a total of 65 scrubber retrofit projects and
anticipates more awards in the run-up to
the IMO 2020 deadline.
As global demand for LNG continues
to increase, charterers are likely to seek
more spot vessels, resulting in ship owners
reactivating idle vessels. This would
generate more shiprepair work for yards.
Over the longer term, the shipping industry
will also continue its drive towards
greater efficiency by reducing costs,
improving utilisation and deploying
new technologies, while meeting
environmental standards.
Against this backdrop, Keppel O&M
is well placed to provide retrofitting
solutions to meet the changing needs
of the shiprepair industry.
Market research also estimates that
the number of LNG-fuelled vessels will
more than double to 200 by 2020 from
77 vessels in 2016, driven partly by the
IMO 2020 regulations. Wood Mackenzie
also reports that 2019 is expected to be
a record year for LNG project sanctions,
with the capacity of projects likely to
reach FID tripling to over 60 million metric
tonnes per annum (mmtpa) in 2019 from
21 mmtpa sanctioned in 2018.
With the successfully converted Hilli
Episeyo operating offshore Cameroon,
floating LNG solutions are gaining traction
globally, especially in Africa. Riding on
Hilli Episeyo’s success, Keppel Shipyard
received a LNTP for Gimi FLNG in 2018.
The Greater Tortue Ahmeyim development
offshore Mauritania and Senegal, for
which Gimi FLNG is slated to operate,
achieved FID at end-2018 while project
execution activities for the field are
expected to commence in 2019.
With its 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 amongst others.
Leveraging its technology and construction
expertise, Keppel O&M is able to provide an
Keppel O&M’s capabilities
in non-drilling and gas
solutions will provide
new growth areas and
revenue streams.
Performance Review
Operating & Financial Review
Offshore & Marine
to increase by 13% between to 2018
to 2020, with niche markets such as the
Norwegian North Sea and Gulf of Mexico
experiencing higher demand. While the
global demand for shallow-water jackup
rigs will improve through to 2020,
IHS Markit expects the increase in MODU
demand to be driven by semisubmersibles
and drillships as operators ramp-up activity
in deepwater areas.
Keppel O&M is exploring how technology
can define the future of jackup rigs by
introducing new systems and expanding
rig capabilities. These rigs of tomorrow will
transform the current rigs, making them
more efficient, ergonomic and versatile
without compromising on safety.
In collaboration with the Group,
Keppel O&M is also exploring opportunities
to re-purpose its offshore technology for
other applications such as floating data
centre parks.
With an extensive suite of proprietary
solutions for the offshore drilling market
and network of yards around the world,
Keppel O&M is well positioned to ride the
upturn when it returns.
Floating Production Systems
The number of operating vessels in the
FPSO market grew to 183 at end-2018
from 178 at end-2017. According to
Rystad Energy, more than 30 FPSO
projects could be sanctioned between
2019 and 2021, while the Energy Maritime
Associates forecasts between 83 and 173
orders for floating production systems
over the next five years.
With a complete suite of O&M solutions,
Keppel O&M will remain focused on
pursuing opportunities for a variety of
production solutions including FPSO
conversions, mobile offshore production
units, production semisubmersibles
and tension leg platforms. We aim to
leverage synergies across the Group
to provide value-added solutions for
our customers.
Gas Solutions
Global demand for gas continues to be
led by Asia, which accounts for 50% of the
expected growth in demand for natural gas
from 2017 to 2022. Westwood estimates
global capex on floating liquefaction and
import vessels to reach US$37.6 billion
over the 2018 to 2023 period, representing
a 66% increase compared to the total
capex of US$22.6 billion over the 2012
to 2017 period. Of these, Africa and
North America are expected to account
for the largest proportion of floating
liquefaction capex.
46
Property
We are committed to
providing quality and
innovative real estate
solutions in Asia.
To generate the best
risk-adjusted returns,
Keppel Land will continue
to explore opportunities to
unlock capital, and reinvest
in new residential sites and
commercial projects.
Earnings Highlights ($m)
Revenue
EBITDA
Operating Profit
Profit before Tax
Net Profit
Average Headcount (Number)
Manpower Cost
2018
1,340
1,065
1,032
1,188
938
3,059
204
2017*
1,782
705
668
844
650
3,257
194
2016*
2,035
639
611
833
620
3,733
199
* 2017 financial figures have been adjusted following the adoption of Singapore Financial Reporting Standards
(International). 2016 financial figures were prepared in accordance with Singapore Financial Reporting Standards
and certain amounts have been reclassified for comparability purposes.
Major Developments in 2018
Focus for 2019/2020
Sold about 4,440 homes in Asia,
mainly in China, Vietnam and India.
Completed divestments and sale of
residential projects en-bloc worth $1.7 billion
across Singapore, China, Vietnam
and Thailand.
Invest strategically in Asia with Singapore,
China and Vietnam as its key markets, while
continuing to scale up in other markets such
as Indonesia and India.
Actively scale up commercial presence to
provide steady stream of recurring income.
Completed about $0.8 billion worth
of acquisitions in Singapore, China,
Vietnam and Indonesia.
Replenished residential landbank with the
addition of about 3,600 units in China and
500 units in Indonesia.
Recycle capital strategically, reinvesting
for growth and higher returns.
Strengthen collaboration with strategic
partners to capture growth opportunities
in the region.
Invest in and develop property technology
and new solution offerings.
Keppel Corporation Limited Report to Shareholders 2018
47
Performance Review
Operating & Financial Review
Property
Total Asset Distribution by Country (%)
as at 31 December 2018
Singapore
China
Vietnam
Indonesia
Others
Total
40.3
40.0
9.1
5.9
4.7
100.0
Total Asset Distribution by Segment (%)
as at 31 December 2018
Property Trading
Property Investments
Hotels & Resorts
Others
Total
53.6
39.0
2.3
5.1
100.0
48
Earnings Review
The Property Division generated a revenue
of $1.3 billion for FY 2018, down $442 million
or 25% from FY 2017, mainly due to lower
revenue from a few trading projects in
Singapore and China, as a result of cooling
measures implemented.
The Division’s FY 2018 net profit was
$938 million, an increase of $288 million
or 44% from FY 2017, mainly due to higher
sale of residential projects en-bloc and
gain from divestment of the stake in Aether.
This was partly offset by lower fair value
gains on investment properties, lower
contribution from Singapore and China
property trading, and lower share of
profits from associated companies
and joint ventures (JV).
In FY 2018, the Property Division contributed
99% of the Group’s net profit.
Operating Review
Singapore
Keppel Land sold about 160 residential units
in Singapore, lower than the sales achieved
in 2017, following the cooling measures
implemented by the Singapore government
in July 2018. About 80% of the units sold
in 2018 came from Highline Residences,
which was fully sold in March 2018, and
The Garden Residences, which was launched
in June 2018. As at end-2018, the take-up
rate of The Garden Residences was about
48% of the 156 launched units. 32 units
at Reflections at Keppel Bay and Corals
at Keppel Bay were also sold in 2018.
The two projects were 89% and 77% sold
as at end-2018.
Keppel Land announced plans to redevelop
Nassim Woods into a luxurious condominium
of about 100 homes and will continue to
monitor the market for an appropriate time
to launch the project.
Keppel Land is also reviewing the plans for
Keppel Bay – plots 4 and 6, Keppel Towers
and I12 Katong.
China
In 2018, Keppel Land sold about 2,240 units
in China, lower than the 3,725 units sold
in 2017, mainly due to the government’s
property cooling measures. Sales were
mainly from Seasons Gardens, Seasons
Residences and Seasons Heights in Tianjin
Eco-City, V City in Chengdu, as well as Park
Avenue Heights and Waterfront Residences
in Wuxi, supported by healthy supply-demand
balance in these geographies.
During the year, Keppel Land continued to
expand its presence in China, focusing on
the Jing-Jin-Ji region, Yangtze River Delta,
Greater Bay Area and the Chengdu metropolis.
It made its maiden entry into Nanjing’s
residential market in 2018 through a 40%
stake in a JV with Gemdale, and added to its
landbanks in Tianjin Eco-City and Chengdu.
These are markets where the supply of
homes with pre-sale permits is expected
to be absorbed in less than six months.
During the year, Keppel Land also announced
the acquisition of a completed commercial
property in Haidian District, Beijing. The
acquisition is in line with Keppel Land’s
strategy to grow its commercial portfolio
in China, with a focus on Tier 1 cities,
and will provide a steady stream of cash
flow for the Group.
Vietnam
In Vietnam, Keppel Land sold about 910 units
in 2018, lower than the 1,110 units sold in
2017, due to fewer sales launches. The
Infiniti sold 78% of the 442 units launched,
Palm Garden sold 80% of the 420 units
launched, while Cove Residences also
registered a strong take-up rate of 95%.
In December 2018, the entire Phase 2 of
Estella Heights in District 2, Ho Chi Minh City
(HCMC) was completed and handed over.
Its retail mall, Estella Place, also commenced
operations in December 2018 with a
committed occupancy of over 90%.
In 2018, Keppel Land acquired the remaining
10% stake in Saigon Sports City to gain
full ownership of the modern township
development which will house some 4,300
smart homes. Keppel Land is collaborating
with Keppel Urban Solutions to develop
Saigon Sports City into a vibrant destination
of choice.
During the year, Keppel Land converted its
stake of the bonds issued by Nam Long
Group (NLG), bringing its stake in NLG to
about 10% from about 5%. This makes
Keppel Land the second largest shareholder
of the affordable housing developer.
Others
In Indonesia, Keppel Land sold about
350 homes, about 32% higher than the sales
achieved in 2017. Following the successful
launch of Phase 1 of The Riviera at Puri at
end-2017, Phases 2 and 3 launched in 2018
were also well-received. As at end-2018,
The Riviera project was close to 90% sold.
Capitalising on the demand for landed
homes in Indonesia, Keppel Land formed a
strategic alliance with PT Metropolitan Land
Tbk (Metland), its partner for The Riviera
at Puri, to cooperate on residential projects
owned and occupied by Metland in Greater
Jakarta, with an investment value of up to
Rp. 5 trillion (about $470 million). Following
the launch of this alliance, Keppel Land
and Metland entered into an agreement to
develop a 12-hectare residential site in the
established Metland Menteng township in
East Jakarta.
In India, Keppel Land launched the 2,082-unit
Provident Park Square in Bengaluru, through
a JV with Indian developer Puravankara.
The project was well-received with 70% of
the 1,102 launched units sold. Keppel Land
also partnered Puravankara to acquire a
prime site in Bengaluru, to develop its first
commercial development in India with a gross
floor area (GFA) of 95,000 square metres (sm).
The project is expected to be completed
in 2023.
In the Philippines, The Podium West Tower,
a landmark Grade A office tower in Manila,
was topped off in September 2018. The
office tower is expected to be completed in
2Q 2019 and has been conferred the LEED
Gold (Core & Shell) Pre-certification by the
United States (US) Green Building Council.
Capital Recycling for the
Best Risk-adjusted Returns
Keppel Land continues to review its
portfolio to unlock capital and generate
the best risk-adjusted returns.
During the year, Keppel Land completed
five divestments and the sale of five
residential projects en-bloc totalling about
$1.7 billion. These included the sale of its
stakes in residential projects in Zhongshan
and Shenyang in China, HCMC, Vietnam
and Bangkok, Thailand; a commercial
development in Beijing, China, and some
of its units in Keppel DC REIT.
in 2018, 17% lower than 2017. Prices rose
7.9% for 2018 compared to a 1.1% increase
in 2017, and home prices as at end-2018
were 3.2% below the last peak in 3Q 2013.
and cities. Keppel Land will focus on the
Jing-Jin-Ji region, Yangtze River Delta,
Greater Bay Area and the Chengdu metropolis,
where it sees considerable growth potential.
In the commercial sector, CBRE reported that
Grade A core Central Business District (CBD)
office rent rose 14.9% in 2018, reflecting
a 20.7% growth from the last trough in
2Q 2017, on the back of robust demand
and decreasing supply of prime space.
Keppel Land continues to be on the
lookout for good business opportunities
in Singapore.
Overseas
Rapid urbanisation and a fast-growing
middle class will continue to drive demand
for high-quality homes in Asia. Riding on
these trends, Keppel Land will continue to
tap demand with over 18,000 overseas
launch-ready homes from 2019 to 2021.
China’s Gross Domestic Product (GDP) growth
slowed in 2018 to 6.6% and is expected to
slow further in 2019, given lagged effects
of credit tightening, and from the global
slowdown and headwinds from US-China
trade tensions.
While property cooling measures have had
an impact on the Chinese market, urbanisation
trends and growing income levels continue
to drive demand for quality housing and
commercial developments in key regions
In Vietnam, GDP growth was 7.1% in 2018,
faster than 6.8% in 2017. The property
market in HCMC remains promising.
According to CBRE, about 31,100 new
homes were sold compared with 30,800
units launched in HCMC in 2018, while
average selling prices increased by about
10% in 2018. With a sizeable landbank
of about 17,000 units, Keppel Land is
poised to meet the robust demand
for homes in Vietnam. Grade A office
supply remains limited, driving rents up
by 15.8%, and the retail market also
saw healthy demand and tight supply
in HCMC’s CBD.
In Indonesia, the economy is expected to
grow at above 5% per annum from now
through to 2020 supported by domestic
spending. While the supply of condominiums
remains high, the landed residential market
in Jakarta and Greater Jakarta is expected
to remain resilient, backed by fundamental
housing demand.
With a pipeline of close to 50,000 residential
units and a total commercial footprint of
1.5 million sm of GFA in key Asian cities,
Keppel Land is well positioned to capitalise
on the demand for homes, office and retail
spaces in its target markets.
Keppel Land also deepened its presence
in key markets. During the year, seven
acquisitions totalling about $0.8 billion were
completed. These included residential sites
in China and Indonesia; as well as increased
stakes in a residential project in HCMC,
Vietnam, and a retail mall in Singapore.
With a commercial
footprint of 1.5 million sm
of GFA, Keppel Land is
well positioned to capitalise
on the demand for
office and retail spaces
in its target markets.
(In picture: Estella Place
in HCMC, Vietnam)
To generate the best risk-adjusted returns,
Keppel Land will continue to explore
opportunities to unlock capital, and reinvest in
new residential sites and commercial projects.
Market Review & Outlook
Singapore
Singapore’s economy grew by 3.2% in 2018,
which continued to support demand in
the residential and commercial markets.
In July 2018, the Singapore government
imposed cooling measures, which included
increasing the Additional Buyer’s Stamp
Duty and lowering loan-to-value limits, and
subsequently tightened the guidelines on
maximum allowable dwelling units in
October 2018.
Residential en-bloc sales have slowed
significantly since the measures. The number
of new private home sales was 8,795 units
Keppel Corporation Limited Report to Shareholders 2018
49
Performance Review
Operating & Financial Review
Infrastructure
We will focus on growing
the Infrastructure Division’s
contributions to the Group.
We are a developer, owner
and operator of quality
infrastructure assets
with a focus on growing
stable income from the
management, operations
and maintenance of our
projects and the provision
of connectivity solutions.
50
Earnings Highlights ($m)
Revenue
EBITDA
Operating Profit
Profit before Tax
Net Profit
Average Headcount (Number)
Manpower Cost
2018
2,629
150
105
184
169
2,698
183
2017*
2,207
169
125
170
134
2,618
180
2016*
1,744
136
94
123
99
2,669
173
* 2017 financial figures have been adjusted following the adoption of Singapore Financial Reporting Standards
(International). 2016 financial figures were prepared in accordance with Singapore Financial Reporting Standards
and certain amounts have been reclassified for comparability purposes.
Major Developments in 2018
Focus for 2019/2020
Secured $180 million worth of contracts in
energy and environmental infrastructure
across Singapore, Australia, China and Europe.
Signed two agreements to develop and
operate data centres in Jakarta, Indonesia
and Johor, Malaysia.
Signed partnership agreements to explore
data centre opportunities in China.
Raised stake in UrbanFox to 85% to
pursue growth in e-commerce channel
management and last-mile fulfilment.
Continue to seek out value-enhancing
projects locally and overseas, 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.
Continue to build up a portfolio of quality
data centre assets and provide higher value
services to customers.
Extend and develop new business-to-consumer
retail and marketing capabilities in power,
e-commerce and urban logistics, adding
value to product offerings and improving
customer experience.
Earnings Review
We are a developer, owner and operator of
quality infrastructure assets with a focus on
growing stable income from the management,
operations 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 for
FY 2018 was $2.6 billion or 19% higher
than FY 2017, mainly due to strong
performance from Energy Infrastructure.
The Division’s FY 2018 net profit of
$169 million was $35 million or 26%
higher than FY 2017, due to higher
profit from Environmental Infrastructure,
Infrastructure Services and Data Centres.
During the year, Infrastructure Services
continued to contribute steadily to the
Group’s recurring income base.
In FY 2018, the Infrastructure Division
contributed 18% of the Group’s net profit.
Energy Infrastructure
Operating Review
Despite the challenging market conditions,
Keppel’s Energy Infrastructure business
continued to perform well in 2018.
Since the launch of the Open Electricity
Market (OEM) in Singapore in 2018,
competition in the electricity market has
intensified. Alongside marketing activities,
Keppel Electric partnered other companies
including M1, CityGas, and the nation’s
local banks to expand its customer reach.
Preliminary results have shown that
Keppel Electric is among the retailers
with the largest market shares in the OEM.
Keppel Electric has also grown its commercial
and industrial customer base and advanced
its position to become Singapore’s largest
private electricity retailer with a market share
of 14.5% in December 2018, compared to
14% in December 2017.
Keppel Gas continued to ramp up its gas
supply to serve an expanding customer
base. Under long-term contracts, the
revenue growth from an increased offtake
of gas by its customers will contribute
to the Group’s recurring income stream.
In 2018, Keppel Infrastructure’s
wholly-owned subsidiary, Pipenet, was
awarded a contract by JTC Corporation
(JTC) to design, build and operate pipe
racks in Jurong Island, Singapore, worth
about $40 million. The racks, slated for
completion by 2020, will add to the Group’s
recurring income base upon commencement
of the 15-year operations and maintenance
phase of the contract. JTC has the option to
extend the operations and maintenance
contract for another 15 years.
During the year, Keppel DHCS clinched
a contract for the initial design phase of a
new district cooling services (DCS) plant in
the upcoming Jurong Innovation District
in Singapore. Contingent upon approval
by JTC, there may be a subsequent phase
of the contract to build, own and operate a
DCS plant, with a capacity of up to 14,000
refrigeration tonnes (RT), on a 30-year
contract term. With the aggregate installed
capacity across major business and
industrial parks projected to increase
to 74,000 RT, Keppel DHCS remains the
largest DCS provider in Singapore.
Under a research grant awarded by the
Energy Market Authority in Singapore,
Keppel DHCS and the National University
of Singapore are jointly developing
novel heat transfer materials for DCS.
If successful, the new technology would
not only improve energy efficiency by as
much as five times but could also result
in space savings of the same magnitude.
The project is expected to be completed
by 2021.
Market Review & Outlook
Singapore’s average electricity demand
remained subdued in 2018, increasing 1%
from 2017. Meanwhile, the electricity retail
market experienced significant expansion with
the nationwide launch of the OEM, to be
progressively rolled out, from 1 November 2018.
Since then, an estimated 450,000 households
have been given contestable status as at
end-2018, and about one-third of contestable
consumers have switched to their retailer
of choice. With 13 electricity retailers
participating in the OEM, the market
remains highly competitive.
It is estimated that as at end-2018, about
1.3 million households had yet to switch to a
private electricity retailer. Keppel Electric will
increase its efforts to target this untapped
market and expand its market leadership
in the electricity retail market as the OEM
is progressively rolled out in 1H 2019.
Since 2015, natural gas has consistently
accounted for 95% of the fuel mix used
in power generation in Singapore. The
ongoing efforts by the government to
develop Singapore as a gas trading hub are
expected to yield additional supplies of gas.
Keppel Gas is exploring new opportunities to
deliver competitive, value-added solutions to
existing and potential customers.
Meanwhile, Singapore’s DCS sector continues
to experience a steady increase in demand,
with a compounded annual growth rate
(CAGR) of 7% since 2010. This is driven by
the Singapore government’s intensification
of land use and promotion of sustainable
cooling. Further afield, Keppel DHCS is
actively looking for growth opportunities
in Asia to expand its geographical reach.
Environmental Infrastructure
Operating Review
In 2018, Keppel Seghers secured two
performance bonuses and signed a five-year
Technical Support Agreement with Viridor
EfW (Runcorn) in the United Kingdom. The
bonuses, which totalled about $7 million,
were awarded in recognition of the plant’s
higher electrical efficiency and lower
chemical consumption since commencing
operations in 2015.
During the year, Keppel Seghers expanded
its track record as a choice provider of
waste-to-energy (WTE) technology and
services, and its geographical reach.
Upon completion in 2020,
the Keppel Marina East
Desalination Plant will
contribute to the Group’s
recurring income stream.
Keppel Corporation Limited Report to Shareholders 2018
51
Performance Review
Operating & Financial Review
Infrastructure
1
Keppel Infrastructure
Services will operate and
maintain the Hong Kong
IWMF when it is completed
in 2024.
2
Senior management
from Keppel T&T and the
Salim Group marked the
groundbreaking of IKDC 1
on 17 January 2019.
1
In China, Keppel Seghers secured a contract
to provide WTE technology and services for
a project in Xian, Shaanxi Province. With this,
Keppel is currently executing nine technology
package projects with a total incineration
capacity of over 15,000 tonnes per day in
China. Meanwhile, the Sino-Singapore Tianjin
Eco-City Water Reclamation Centre
commenced commercial operations in
January 2018.
In October 2018, Keppel Seghers secured a
contract to supply technology and services
worth over €70 million for Australia’s first
WTE plant in Kwinana. When completed
in 2021, the facility, which utilises Keppel
Seghers’ proprietary technology, can reduce
the volume of waste for landfills by over
90% and export about 36 megawatts of
green electricity to the grid.
In Singapore, the Keppel Marina East
Desalination Plant (KMEDP) is on track
for completion in 2020. Meanwhile,
engineering design work is progressing
well for Phase 1 of the Hong Kong Integrated
Waste Management Facility (IWMF), with
key procurement and prefabrication works
expected to commence in 2019 alongside
ground preparation for reclamation works.
Market Review & Outlook
In 2018, the world generated over two billion
tonnes of municipal solid waste (MSW)
and the annual waste generated is
expected to increase by 70% to about
3.4 billion tonnes by 2050. With continued
population growth and rapid urbanisation,
the sustainable collection and treatment
of MSW have become key focus areas for
governments globally.
52
In China, the government continues to
limit the addition of landfills, and maintains
its push towards the target of treating
one-third of China’s solid waste using
proven incineration technologies by 2030.
As a result, the demand for incineration
projects in China is likely to increase over
the next few years.
In India, favourable feed-in tariffs for green
power generated from solid waste continue
to fuel strong interest in WTE projects. With
MSW constituting about 75% of India’s waste
and continuing pressure for more efficient
treatment processes, opportunities for
waste management solutions in India’s more
developed regions are expected to increase.
Countries within Southeast Asia (SEA) present
good market potential, given the increasing
level of environmental awareness, less
developed waste management structures, as
well as rapid urbanisation in several countries.
Moreover, landfills in major cities are no
longer viable as land has become scarce and
expensive. Locally, Singapore’s declaration
of 2019 as the Year Towards Zero Waste will
provide new opportunities for the development
of waste management solutions.
In Europe, the focus has turned to improving
and upgrading waste management facilities
to fulfil the European Union’s waste legislation
on landfill diversion. This has created pockets
of opportunities across member countries.
With a global track record in waste and
water projects, Keppel Seghers is well
positioned to support municipalities and
industries with its proven solutions and
strong operational competencies.
Infrastructure Services
Operating Review
Keppel Infrastructure Services (KIS) continues
to maintain high operating standards by
maximising availability, reliability, and
efficiency for its portfolio of assets spanning
the power, WTE, water and district cooling
sectors. With its track record of executional
excellence, KIS sets the benchmark in the
industry for operations and maintenance.
KIS is also focused on improving the operational
efficiency of its plants. Amongst improvement
projects in 2018 was the modification of
the flue gas treatment system at the Keppel
Seghers Tuas WTE plant, which enhanced
the plant’s chemical scrubbing operations.
Harnessing synergies, KIS has synchronised
its procurement activities with other units
within the Group. This has allowed KIS to
boost data control and audit compliance,
demonstrating its commitment towards
good corporate governance.
Market Review & Outlook
New regulatory regimes and urbanisation
blueprints are increasingly fuelled by
burgeoning concerns around climate
change. While these trends provide exciting
opportunities, KIS must continue to evolve
and adapt for more resource-efficient and
environmentally-friendly operations and
maintenance solutions.
Supporting the Group’s vision of shaping
a sustainable future, KIS will continue
to actively seek new projects spanning
DCS, water, WTE and power to deliver
high-quality value-added operations and
maintenance services.
Keppel T&T is pursuing
innovative new solutions
in collaboration with other
business units in the Group.
These include floating data
centre parks and high-rise
green data centres.
Data Centres
Operating Review
Keppel Data Centres Holding (KDCH) continued
to pursue expansion opportunities in target
markets, while enhancing its capabilities
and service offerings to meet the growing
demand for big data and connectivity. Today,
the Group has a portfolio of 22 data centres
across 14 cities in Asia Pacific and Europe.
KDCH along with Alpha Data Centre Fund
(Alpha DC Fund) has entered into several
strategic partnerships to develop and
operate data centres in the Asia Pacific.
In a joint venture with the Salim Group, KDCH
and Alpha DC Fund will develop and operate
a data centre in Bogor, about 35 kilometres
from Jakarta, Indonesia. The IndoKeppel
Data Centre 1 (IKDC 1), with a 3-hectare
land plot, will be the first phase of a larger
data centre campus development that will
cater to a growing demand for quality data
centre space in Indonesia. IKDC 1 will be
a Tier 3 data centre with a gross floor area
(GFA) of approximately 105,300 square feet (sf).
The construction of the data centre’s core and
shell, as well as first phase fit-out, is expected
to be completed by 1H 2020.
KDCH and Alpha DC Fund also entered into an
agreement with a leading technology company
(the customer) to develop and operate a
greenfield data centre in an industrial park
in Johor, Malaysia, earmarked to be a data
and research hub for the state. The data
centre will feature minimum Tier 3 equivalent
specifications for concurrent maintainability,
spread over 100,495 sf of GFA. Upon expected
completion in 2020, the data centre will be
fully committed by the customer.
To further expand its footprint, KDCH is
fostering partnerships with technology
companies in China, to develop, operate
and maintain more efficient and robust
data centres in China and around the world.
In Singapore, Keppel DC Singapore 4
has secured close to 60% committed
occupancy upon the completion of its
phase 2 fit-out in 2018. Upon Keppel DC
REIT’s acquisition of Keppel DC Singapore 5
(formerly known as Kingsland Data Centre),
KDCH was appointed as the master
lessee and facility manager for the asset.
To meet the changing demands and
requirements of clients for greater
connectivity, KDCH partnered DE-CIX,
one of the world’s leading Internet
Exchange providers in Frankfurt,
Germany, to offer premium interconnection
services at Keppel DC Frankfurt 1.
Keppel T&T is pursuing innovative
new solutions in collaboration with
other business units in the Group.
These include floating data centre
parks and high-rise green data centres,
which may also incorporate cold energy
harvesting facilities.
In recognition of its commitment to
operational excellence and track record,
KDCH was named the Singapore Wholesale
Colocation Service Provider of the Year
by Frost and Sullivan in November 2018.
Market Review & Outlook
The proliferation of Internet of Things,
big data, Artificial Intelligence, and
cloud-based services continues to drive
demand for data centre space.
According to the Cisco Global Cloud Index,
Asia Pacific has been identified as the hot spot
of investments for cloud giants, with cloud
workloads estimated to grow at a CAGR of
27% from 2016 to 2021. While Tier 1 cities
like Singapore remain the preferred location
as a cloud region, emerging markets such as
Indonesia and Vietnam are gaining traction
as focus hubs for data centre investments
by cloud giants.
2
Keppel Corporation Limited Report to Shareholders 2018
53
Performance Review
Operating & Financial Review
Infrastructure
Data centre colocation remains a viable
solution for enterprises and cloud services
providers, with its flexibility, lower upfront
cost and localisation advantages. According
to Technavio’s latest research, the global
data centre colocation market is forecasted
to grow at a CAGR of 9% from 2018 to 2022.
Structure Research, a research and consultancy
firm focused on internet infrastructure,
estimates that the Singapore colocation
market is expected to register a healthy
CAGR of 12%, reaching $2 billion by 2021.
The rising demand and opportunities
have also resulted in steeper competition
from global incumbents and new players.
Additionally, data centre providers also
face the challenge of land scarcity.
KDCH will continue to work closely with
Alpha DC Fund and Keppel DC REIT to
proactively seek new development and
acquisition opportunities in Asia Pacific
and Europe. It will also sharpen its value
proposition, especially in the areas of
enhancing connectivity, as well as explore
innovative and sustainable data centre
designs and technologies.
five as at end-2017, and more than doubled
the number of last-mile business-to-consumer
(B2C) deliveries. The company also launched
new solution offerings during the year and
expanded its UrbanFox Marketplace to
include the business-to-business (B2B)
segment. As at end-2018, more than 300
brands have been made available on the
UrbanFox Marketplace.
In line with its commitment to provide agile
and innovative solutions for customers,
UrbanFox invested in technology and
process optimisation initiatives to strengthen
its services. Growing beyond Singapore,
it is gearing up to seize opportunities
offered by e-commerce in SEA.
In 2018, Keppel Logistics retrofitted its
Tampines Logistics Hub in Singapore
and increased its warehouse footprint in
Malaysia and Vietnam. In Indonesia, Keppel
Logistics expanded its transportation fleet
and commenced domestic sea freight and
air freight delivery services. Meanwhile,
the warehouse occupancy and transport
volumes in Australia grew during the year
with new customer wins.
Logistics
Operating Review
In 2018, Keppel Logistics focused its efforts
on building new capabilities and expanding
its omnichannel solution offerings to
customers in SEA.
To augment its urban logistics business,
Keppel Logistics increased its stake in
UrbanFox to 85% from 59.6%. In 2018,
UrbanFox expanded its customer base to over
200 channel management customers from
Keppel Logistics’ river ports in Foshan,
Guangzhou experienced a drop in throughput,
against the backdrop of changing regulatory
requirements as well as concerns over
trade tensions between the US and China.
Construction of the Keppel Wanjiang
International Coldchain Logistics Park in
Anhui province was completed, and operations
are expected to commence in 1H 2019.
Keppel Telecommunications & Transportation
is undertaking a strategic review of its China
logistics business, as it seeks to optimise
and focus resources to become a leading
urban logistics solutions provider.
Market Review & Outlook
According to the OECD’s latest report,
Emerging Asia’s Gross Domestic Product
is forecasted to grow at an annual average
of 6.1% from 2019 to 2023. This is expected
to support the growth of urban logistics in
SEA through increased domestic consumption
and investment.
The e-commerce market in SEA remains
promising. A joint study by Google and
Temasek published in 2018 reported that
SEA’s internet economy had hit an inflection
point in 2018, when its internet economy’s
year-on-year growth of 37% exceeded the
32% CAGR recorded between 2015 and
2018. According to the report, SEA’s
internet economy will continue growing
at unprecedented pace, reaching a gross
market value of US$240 billion by 2025 from
US$32 billion in 2015. Growth of the internet
economy is expected to be driven mainly by
the e-commerce sector, which is projected
to register a CAGR of 34% from 2015 to
2025 to reach a gross market value of
US$102 billion by 2025. Within SEA, the
highest e-commerce growth is expected to
be from Indonesia, Thailand and Vietnam.
Leveraging the Group’s global presence and
its integrated end-to-end logistics services,
Keppel Logistics is well positioned to tap the
growing demand for e-commerce in the region.
Keppel Logistics will continue to transform
its business and build new capabilities to
provide omnichannel solutions for the
fast-growing e-commerce market in Asia.
54
During the year,
Keppel Logistics fully
integrated its B2B and
B2C operations at
Tampines Logistics
Hub in Singapore, and
expanded its omnichannel
solution offerings to
customers in SEA.
Investments
We create value
for shareholders
by investing strategically
and developing new
growth engines.
Photo credit: ST Press
Leveraging the Group’s
core competencies,
Keppel Capital will
continue to create
innovative investment
solutions and connect
investors with high-quality
real assets in fast-growing
sectors fuelled by
urbanisation trends.
Earnings Highlights ($m)
Revenue
EBITDA
Operating (Loss)/Profit
(Loss)/Profit before Tax
Net (Loss)/Profit
Average Headcount (Number)
Manpower Cost
2018
2017*
121
(15)
(21)
(19)
(54)
554
146
173
177
175
290
238
416
110
2016*
134
63
61
56
36
286
89
* 2017 financial figures have been adjusted following the adoption of Singapore Financial Reporting Standards
(International). 2016 financial figures were prepared in accordance with Singapore Financial Reporting Standards
and certain amounts have been reclassified for comparability purposes.
Major Developments in 2018
Focus for 2019/2020
Keppel Capital announced expansion into
new asset classes such as senior living.
Keppel REIT divested a 20% stake in
Ocean Financial Centre in Singapore.
KIT announced the acquisition of Ixom.
Keppel DC REIT and KORE expanded their
portfolios with acquisitions worth over
$700 million.
AAMTF III closed at US$1.1 billion.
KUS signed MOUs with Envision and
ST Engineering for smart city solutions.
KUS signed MOUs for development
opportunities in the Philippines and China.
Keppel & SPH launched an offer to take
majority control of M1.
Keppel Capital will continue to
pursue organic and inorganic growth
opportunities to grow the Group’s asset
management platform.
M1 will continue to build up its capabilities
to capitalise on new opportunities. Keppel
and SPH will work with M1’s board and
management to drive its business
transformation plans.
Continue development of the Sino-Singapore
Tianjin Eco-City to realise its vision of
being a model for sustainable urbanisation
in China.
Keppel Corporation Limited Report to Shareholders 2018
55
lease to expiry (WALE) of 5.9 years that
will underpin KREIT’s long-term stable
recurring income.
Meanwhile, Keppel-KBS US REIT Management
delivered on its investment and growth
strategy to augment Keppel-KBS US REIT’s
(KORE) portfolio by acquiring quality
income-producing properties in first
choice submarkets in the United States (US)
with positive macroeconomic and office
fundamentals. During the year, KORE
deepened its presence in key growth cities
with acquisitions in Seattle and Orlando.
As at end-2018, KORE’s portfolio occupancy
and WALE by net lettable area remained
healthy at 91.6% and 3.9 years respectively,
providing stable income streams
to unitholders.
The private funds managed by Alpha also
registered strong fundraising efforts. The
Alpha Asia Macro Trends Fund (AAMTF) III
closed in December 2018 at approximately
US$1.1 billion, including co-investments,
exceeding its initial target of US$1 billion.
During the year, Alpha divested over
US$1.9 billion in assets across the various
funds under management, and committed
to acquisitions in Singapore, Brisbane,
Shanghai and Tokyo with a gross asset
value of over US$1.1 billion.
Data Centres
Keppel DC REIT Management maintained
its focused investment strategy of seeking
quality income-producing acquisitions in
key data centre hubs across Asia Pacific
and Europe.
In 2018, the REIT added Keppel DC Singapore
5 and maincubes Data Centre to its stable
of quality data centres, and announced the
addition of Intellicentre 3 East Data Centre
(IC3 East DC) which will be built on
the vacant land within its Intellicentre 2
Data Centre’s site. IC3 East DC is expected
to be completed in 2020. This has brought
the REIT’s total AUM to $2 billion across
15 data centres, excluding IC3 East DC.
The Manager also acquired the remaining
999-year leasehold interest at Keppel DC
Dublin 1, with completion expected in 1H 2020.
As at end-2018, the REIT’s portfolio occupancy
remained healthy at 93.1%, while the WALE
was at 8.3 years by leased area, providing
good visibility to its income stream.
Alpha Data Centre Fund (Alpha DC Fund)
continued to expand its portfolio of assets
in new markets. Working with Keppel Data
Centres, Alpha DC Fund marked its foray
into Indonesia through a partnership for a
data centre project in Bogor, near Jakarta.
Alpha DC Fund also successfully secured a
built-to-suit project with a leading technology
company for its first greenfield data centre
asset in Johor, Malaysia. This is the Fund’s
first large-scale project for the customer,
with Alpha DC Fund’s innovative deal structuring
setting a repeatable and scalable operating
model for the Fund’s future expansion
plans in Asia.
Infrastructure
Keppel Infrastructure Fund Management
announced the strategic addition of Ixom
to Keppel Infrastructure Trust (KIT). Ixom is
one of the leading industrial and infrastructure
businesses in Australia and New Zealand.
Following the completion of the transaction
in February 2019, the addition of Ixom
will provide KIT with long-term and stable
cash flows, underpinned by multiple core
assets and a well-positioned network of
infrastructure, as well as extend the cash
flow life of the Trust’s portfolio. KIT will
continue to deliver steady income from
its three core sectors of Energy, Distribution
& Network, and Waste & Water sectors.
Performance Review
Operating & Financial Review
Investments
Earnings Review
The Investments Division comprises mainly
Keppel Capital and Keppel Urban Solutions
(KUS), as well as the Group’s investments
in M1, KrisEnergy and the Sino-Singapore
Tianjin Eco-City (Eco-City).
The Investments Division generated revenue
of $121 million for FY 2018, down $52 million
or 30% from the previous year, due mainly
to the absence of sale of investments and
lower revenue from the asset management
business. The Division reported a pre-tax
loss of $19 million for FY 2018, compared to
a pre-tax profit of $290 million for FY 2017.
This was due mainly to lower profit from
land sales in the Eco-City, lower contribution
from the asset management business and
provision for impairment of an associated
company, partly offset by lower share
of loss from KrisEnergy. In 2017, the
Investments Division also benefitted from
the share of profits from k1 Ventures and
write-back of provision for impairment of
an associated company.
Accordingly, the Division reported a net loss
of $54 million for FY 2018, compared to a
net profit of $238 million for FY 2017.
Keppel Capital
Operating Review
2018 was an active year for Keppel Capital
as it continued to expand into new markets
and asset classes. Keppel Capital’s total
assets under management (AUM) remained
stable at about $29 billion as at end-2018 on
a fully leveraged and invested basis, despite
a few divestments by Alpha Investment
Partners (Alpha) during the year.
In 2018, Keppel Capital made headway in the
investments into alternative asset classes,
including senior living and education real
estate sectors, as well as announced plans
to establish its first retail-focused fund with
an initial focus on Australia. At the same
time, a Renminbi fund management entity
was also established in the Sino-Singapore
Tianjin Eco-City.
Real Estate
In 2018, Keppel REIT Management strategically
divested a 20% minority stake in Ocean
Financial Centre to Allianz Real Estate for
$537.3 million. This allowed Keppel REIT
(KREIT) to recognise some capital gains while
maintaining its exposure to the strengthening
Singapore office market through its 79.9%
controlling stake. In Australia, development
of the Grade A office tower at 311 Spencer
Street in Melbourne is slated for completion
in 1H 2020.
The Manager’s proactive leasing efforts
kept KREIT’s portfolio well occupied in 2018,
with committed occupancy at 98.4% as at
end-2018, and a long weighted average
1
56
1
Keppel DC REIT acquired
Keppel DC Singapore 5,
a purpose-built, carrier-
neutral colocation data
centre, in 2018.
2
Mr Lawrence Wong (left),
Singapore’s Minister for
National Development
and Second Minister for
Finance, and Mr Zhang
Yuzhuo (right), Tianjin
Binhai New Area Party
Secretary, officiated at the
launch of the Eco-City’s
city centre.
2
Business Outlook
As an integrated asset manager,
Keppel Capital continues to play a
key role in collaborating with other
business units to create real assets
from the spectrum of solutions offered
by the Group. Keppel Capital 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. Leveraging the Group’s core
competencies, Keppel Capital will continue
to create innovative investment solutions
and connect investors with high-quality real
assets in fast-growing sectors fuelled by
urbanisation trends.
Sino-Singapore Tianjin Eco-City
In 2018, the Eco-City celebrated its
10th anniversary. The former saline
wasteland has been transformed into a
thriving green city, and the Eco-City is on
track to realising its vision of becoming a
model for sustainable urbanisation in China.
Keppel leads the Singapore consortium, which
works with its Chinese partner to guide the
50-50 joint venture (JV) – Sino-Singapore
Tianjin Eco-City Investment and Development
Co., Ltd. (SSTEC) – in its role as master
developer of the Eco-City.
Today, more than 100,000 people1 live
and work in the Eco-City, which is a bustling
community with three neighbourhood
centres, five libraries, three health services
centres, a hospital and 17 schools with
about 10,000 students. The Eco-City’s
business parks also continued to attract
new investments and tenants. To date, the
Eco-City has over 7,700 registered companies1.
The Tianjin government’s property cooling
measures have continued to dampen market
demand for homes in the Eco-City. In 2018,
a total of 2,700 homes were sold by various
developers in the Eco-City, down 30% from
the homes sold in 2017. Despite the lower
sales volume, the Eco-City remains a highly
sought-after residential precinct within the
Tianjin Binhai New Area for homebuyers and
developers alike. In 2018, SSTEC sold three
residential land plots to developers keen
to participate in the Eco-City’s continued
development. One plot was acquired by
Keppel Land China to expand its presence
in the Eco-City.
With the successful completion of the
Start-Up Area (SUA), SSTEC will focus on
developing the Eco-City’s Central District,
where the future city centre will be located.
Land parcels will be developed or sold in
tandem with the market’s needs, to drive
the city centre’s growth.
Reflecting the good progress of the
Eco-City, at a meeting in September 2018,
the Eco-City’s Joint Steering Council,
co-chaired by Singapore’s Deputy Prime
Minister Teo Chee Hean and Chinese
Vice Premier Han Zheng, supported the
replication of the Eco-City’s experience in
other Chinese cities as well as along the
Belt and Road regions. A joint cooperation
framework was signed between the two
governments to promote the replication
of the Eco-City’s development experience.
In 2018, Keppel Land China sold about
630 homes in the Eco-City. As at end-2018,
Keppel Land China had launched about
4,500 homes in the Eco-City, of which about
98% had been sold. Riding on its strong track
record in the Eco-City, Keppel Land China also
successfully secured a 10.97-hectare residential
site in the Eco-City’s SUA, which will be
developed into an eco-community comprising
terrace houses and low-rise apartments.
Different business units in the Keppel Group are
contributing to the Eco-City’s development. The
occupancy of Keppel Telecommunications &
Transportation’s logistics distribution centre
in the Eco-City improved to about 80% by
end-2018, compared to 65% in 2017. In the
meantime, the Sino-Singapore Tianjin Eco-City
Water Reclamation Centre, a JV between
Keppel Infrastructure and Tianjin Eco-City
Investment and Development Co., Ltd,
commenced commercial operations in
January 2018. 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. Keppel
Capital China also established a fund
management entity in the Eco-City in 2018.
Keppel Urban Solutions
KUS is an end-to-end master developer of
smart, sustainable urban townships, leveraging
the Group’s experience and strong track
record 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,
smart and sustainable communities.
With more than half of the population in Asia
moving to and living in cities and urban centres
by 2040, KUS is focused on capturing the
growing demand for smart, sustainable
townships and precincts in the region. KUS’
points of differentiation are premised on its
1 These figures include the Tourism District and Central Fishing Port.
Keppel Corporation Limited Report to Shareholders 2018
57
Performance Review
Operating & Financial Review
Investments
1
KUS is an end-to-end
master developer of smart,
sustainable urban townships,
leveraging the Group’s
experience and strong track
record in the planning
and development of
large-scale projects in
the Asia Pacific.
58
end-to-end offerings from planning to
precinct operations, leveraging the Keppel
Group’s solutions. These include horizontal
and vertical infrastructure, connectivity,
urban logistics and place management.
KUS’ capabilities will first be applied in
Saigon Sports City (SSC), a 64-hectare
township development in Ho Chi Minh City,
Vietnam. The development of SSC will be
driven by enablers for essential services
such as smart security management, smart
mobility and environmental infrastructure
solutions. Through active programming and
place-making initiatives, SSC aims to be an
inclusive and vibrant destination of choice.
In 2018, KUS established a partnership with
ST Engineering to leverage each company’s
expertise and resources in the design and
implementation of smart city masterplans
and solutions within Keppel’s developments.
The companies can also collaborate on
third-party projects in Asia Pacific.
Over in China, KUS signed an agreement
with Envision and the Wuxi government
for the development of a Smart Internet of
Things (IoT) City which includes a smart
IoT-industry park in Xuelang Town of Taihu
New City in Wuxi. Through a city-industry
integration, the parties intend to create a
work-live-play model that is replicable and
scalable in China and overseas.
KrisEnergy
In 2018, exploration & production (E&P) operator
KrisEnergy continued to face strong headwinds.
Brent crude oil averaged US$72 per barrel (bbl)
during the year, an increase from 2017’s
average of US$55/bbl. In 4Q 2018, a series of
geo-political developments coupled with surging
oil production in the US resulted in oil prices
swinging from a high of US$86/bbl in October
2018 to a low of US$50/bbl in December 2018.
Notwithstanding this, KrisEnergy recorded
a 40% increase in the average realised oil
price to US$69/bbl. Average gas sales price
in Thailand increased 15% year-on-year
to US$4.58 per thousand cubic feet (mcf)
in 2018, while the gas price achieved from
the onshore Bangora field in Bangladesh
was unchanged at US$2.32/mcf.
In 2018, KrisEnergy reported revenues of
US$145 million and net cash flow from
operations of US$37 million, up from
US$141 million and US$23 million for
FY 2017 respectively. Earnings before
interest, taxation, depreciation, amortisation,
geological expenses and exploration
expenses amounted to US$58 million,
up from US$27 million for FY 2017,
marking KrisEnergy’s highest performance
since 2011. Despite these improvements,
the company reported net loss after tax of
US$160 million for FY 2018, due to non-cash
impairment expenses and write-offs for
non-core assets, depreciation, depletion
and amortisation costs, and finance charges.
Total capital expenditure (capex) for
2018 was US$56 million versus a revised
forecast of US$97 million at mid-2018,
due to a change in timeline for certain
projects. KrisEnergy’s balance sheet
remains under pressure. As at end-2018,
gearing rose to 99.9% from 73.5% as at
end-2017. KrisEnergy intends to execute
the appropriate strategies to de-leverage its
balance sheet while maintaining its investment
in core assets to maximise future cash flow.
In 2018, KrisEnergy remained focused on
its core development assets in the Gulf
of Thailand (GOT), namely the Apsara oil
development offshore Cambodia and the
Rossukon oil development in the G6/48 licence.
KrisEnergy’s working interest production
averaged 10,691 barrels of oil equivalent per day
(boepd) in 2018, down 16% from 2017. The
KrisEnergy-operated Wassana field, in the
G10/48 licence in the GOT, produced an
average of 4,455 barrels of oil per day (bopd) in
2018, up from 4,377 bopd in 2017. Meanwhile,
the Bangora gas field onshore Bangladesh
produced an average of 14,798 boepd.
In the non-operated B8/32 in the GOT, infill
drilling commenced in 2H 2018 and gross
production averaged 32,724 boepd in 2018.
As at end-2018, KrisEnergy’s working interest
proved plus probable (2P) reserves were
estimated by Netherland, Sewell & Associates,
Inc. (NSAI) at 63.5 million barrels of oil
equivalent (mmboe) compared to 83.5 mmboe
as at end-2017. This was largely due to the
company ceasing participation in the Block A
Aceh production sharing contract in Indonesia
and the G11/48 licence. Reserves assigned
to the G10/48 licence in the GOT decreased
53% due to 2018 production and lower
well recovery. Assessments for 2P reserves
also decreased for B8/32 and Block 9 due
to 2018 production and, in the case of B8/32,
assumptions of reduced future infill drilling.
NSAI recognised best estimate contingent
(2C) resources of 64.1 mmboe as at
end-2018, a 27% drop from 2017 due to
the removal of contribution from G11/48
and Block A Aceh. Gains in 2C resources of
6.6 mmboe were recorded for G10/48 and
G6/48, which contains the Rossukon oil
development project in the GOT.
Health, safety and the environment remained
a priority. In 2018, KrisEnergy recorded about
1.6 million man-hours on its operated assets
with one lost-time injury in March.
In 2018, KrisEnergy appointed Keppel Offshore
& Marine (Keppel O&M) as the preferred
contractor under a cooperation agreement.
With this, Keppel O&M can offer KrisEnergy a
comprehensive suite of offshore oil and gas
solutions as KrisEnergy enhances its assets in
Asia. Subsequent to the agreement, Keppel O&M
secured a production barge upgrade contract
from KrisEnergy in November 2018. Works
commenced on the barge at the end of 2018.
M1
In 2018, M1 continued to expand its customer
base. The company added 22,000 postpaid
customers in 2018, bringing the total base
to 1.4 million as at end-2018, while its fibre
customer base grew 11% from 2017 to
209,000 in 2018. As at end-2018, M1’s total
customer base stood at 2.2 million.
Amidst intensifying market competition, M1
seeks to strengthen its position by enhancing
customer experiences, introducing value-added
services and seeking new growth verticals.
M1 is committed to delivering the best mobile
experience to its customers. Recognising
the need for faster network speeds and
high-bandwidth mobile applications, M1
continued to invest in expanding capacity
and delivering superior network performance.
In 2018, M1 collaborated with multiple vendors
to embark on Singapore’s first end-to-end 5G
live trial, and announced plans to conduct
a 5G small cell trial to develop the next
generation of 5G small cells architecture.
M1 became the first operator in Singapore
to launch the digital eSIM on the new
generation of iPhones, allowing users to activate
an additional cellular plan. M1 also launched a
new cloud-based subscription video surveillance
service to help businesses and small and
medium sized enterprises with the adoption of
digital technologies. As part of plans to expand
its corporate segment and digital solutions
in Smart Nation, Fintech and Cybersecurity,
M1 signed an MOU with Jurong Port to provide
a terminal-wide wireless private network.
Privatisation of M1
In September 2018, a Pre-conditional Voluntary
General Offer was made by Konnectivity,
a joint venture between Keppel Corporation
and Singapore Press Holdings (SPH) for
the remaining shares in M1, for a cash offer
of $2.06 per share.
By end-February 2019, Konnectivity and its
concert parties had obtained majority control
of M1. Strong support for the Offer by M1’s
shareholders has resulted in M1 ceasing
to have at least 10% of the total number of
shares held by the public. Konnectivity will
be de-listing M1 from the Main Board of the
SGX-ST after the close of the Offer, and will
be exercising its right to compulsorily acquire
all the shares of M1 from shareholders who
had not accepted the Offer.
Together with SPH, Keppel seeks to drive
business changes that will enable M1 to compete
more effectively in the telecommunications
industry. With the privatisation of M1, Keppel
and SPH will be better able to drive changes
and create greater value, together with M1’s
board and management.
M1 also complements Keppel’s mission as a
solutions provider for sustainable urbanisation,
which includes connectivity. M1 can serve as
a digital platform and connectivity partner to
complement and augment Keppel’s current
suite of solutions, and at the same time,
benefit from harnessing the synergies of
the Keppel Group.
2
1
Saigon Sports City is
envisaged to be a bustling
hub, combining high-quality
urban living with modern
healthy lifestyle concepts.
2
M1 can serve as a digital
platform and connectivity
partner to complement and
augment Keppel’s current
suite of solutions for
sustainable urbanisation.
Keppel Corporation Limited Report to Shareholders 2018
59
Performance Review
Operating & Financial Review
Management Discussion
& Analysis
We are configured for
growth, building on
an institutional quality
balance sheet.
Free Cash Inflow
$515m
As compared to $1,802m for FY 2017.
Earnings Per Share
52.0cts
An increase from 10.8cts^ for FY 2017.
^
Includes the one-off financial penalty and related
costs of $619 million.
60
Group Overview
Group net profit was $944 million, an
increase of 382% from $196 million for 2017.
Net profit for 2017 included $619 million for
the one-off financial penalty arising from
Keppel Offshore & Marine’s (Keppel O&M)
global resolution with criminal authorities in
the United States (US), Brazil and Singapore,
and related legal, accounting and forensics
costs. Excluding the one-off financial penalty
and related costs from 2017, net profit for
2018 of $944 million was 16% above the
net profit of $815 million for 2017 due
largely to earnings growth registered by
the Property and Infrastructure divisions as
well as lower loss at the Offshore & Marine
(O&M) Division, partly offset by loss from
the Investments Division.
Earnings Per Share (EPS) was 52.0 cents,
an increase of 381% from 10.8 cents for 2017.
Return On Equity (ROE) was 8.3%, compared
to 1.7% for 2017. Economic Value Added
was positive $252 million for 2018, compared
to negative $839 million for 2017.
Free cash inflow was $515 million, compared
to $1,802 million for 2017, mainly due to
working capital requirements. Meanwhile,
net gearing for 2018 was 0.48 times,
compared to 0.46 times for 2017.
Total cash dividend for 2018 will be
30.0 cents per share. This comprises a
proposed final cash dividend of 15.0 cents
per share, as well as an interim cash dividend
of 10.0 cents per share and a special cash
dividend of 5.0 cents per share paid in the
third quarter of 2018 to commemorate
Keppel’s golden jubilee.
Segment Operations
Group revenue of $5,965 million for 2018
was at almost the same level as in 2017.
Revenue from the O&M Division improved
by $73 million or 4% to $1,875 million due
to revenue recognition in relation to the
jackup rigs sold to Borr Drilling and higher
revenue recognition from ongoing projects.
Major jobs completed and delivered in
2018 included two jackup rigs, a gas carrier
refurbishment, two Floating Production
Storage and Offloading conversions, a
Roll-on/Roll-off conversion and two dual-fuel
liquefied natural gas tugs. Revenue from the
Property Division decreased by $442 million
to $1,340 million due mainly to lower revenue
from Singapore, China and Vietnam property
trading. Revenue from the Infrastructure
Division grew by $422 million to $2,629 million
as a result of increased sales in the power
and gas businesses, partly offset by lower
progressive revenue recognition from
the Keppel Marina East Desalination Plant
project. Meanwhile, revenue from the
Investments Division decreased by
$52 million to $121 million due mainly
to the absence of sale of investments
and lower revenue from the asset
management business.
Group net profit of $944 million for 2018
was $748 million or 382% higher than the
previous year. Net profit for 2017 included
$619 million for the one-off financial penalty
and related costs. Excluding the one-off
Key Performance Indicators
Revenue
Net profit
Earnings Per Share
Return On Equity
Economic Value Added
Operating cash flow
Free cash flow*
Total cash dividend per share
2018
$ million
5,965
944
52.0 cts
8.3%
252
125
515
30.0 cts@
18 vs 17
% +/(-)
2017#
$ million
17 vs 16
% +/(-)
<0.1
382
381
388
n.m.
(90)
(71)
36
5,964
196^
10.8 cts^
1.7%^
(839)^
1,203
1,802
22.0 cts
(12)
(75)
(75)
(75)
499
309
234
10
2016
$ million
6,767
784
43.2 cts
6.9%
(140)
294
540
20.0 cts
# 2017 financial figures have been adjusted following the adoption of Singapore Financial Reporting Standards
(International).
Includes the one-off financial penalty and related costs of $619 million.
^
* Free cash flow excludes expansionary acquisitions and capital expenditure, and major divestments.
@ Comprises a proposed final cash dividend of 15.0 cents per share, an interim cash dividend of 10.0 cents
per share and a special cash dividend of 5.0 cents per share.
Offshore & Marine
Property
Infrastructure
Investments
2,854
1,802
1,875
2,035
1,782
1,340
1,744
2,207
2,629
134
173
121
Total
6,767
5,964
5,965
Revenue ($m)
3,500
3,000
2,500
2,000
1,500
1,000
500
0
2016
2017
2018
Net Profit ($m)
1,000
800
600
400
200
0
-200
-400
-600
-800
-1,000
2016
2017*
2018
Offshore & Marine
Property
Infrastructure
Investments
29
(826)^
(109)
620
650
938
99
134
169
36
238
(54)
Total
784
196
944
* Net profit for FY 2017 has been adjusted following the adoption of Singapore Financial Reporting Standards
(International).
Includes the one-off financial penalty and related costs of $619 million.
^
financial penalty and related costs from
2017, 2018 net profit of $944 million was
$129 million or 16% above the net profit of
$815 million for 2017.
In 2018, the O&M Division’s loss narrowed
to $109 million as compared to the net loss
of $207 million in 2017, which excluded the
one-off financial penalty and related costs.
This was mainly due to higher operating
results arising from higher revenue, write-back
of provisions for claims and lower net
interest expense, partly offset by higher
impairment provisions and absence of gain
from divestment of Keppel Verolme in 2017.
Profit from the Property Division increased
by $288 million to $938 million due mainly
to sale of development projects en-bloc
and gain from divestment of the stake
in Aether. The positive variance was
partly offset by lower fair value gains on
investment properties, lower contribution
from Singapore and China property
trading, and lower share of associated
companies’ profits.
Profit from the Infrastructure Division
was $169 million, $35 million above that
in 2017. This was mainly due to dilution
gain following Keppel DC REIT’s private
placement, the gain arising from the sale
of stake in Keppel DC REIT, as well as
higher contribution from Environmental
Infrastructure and Infrastructure Services,
partly offset by lower contribution from
Energy Infrastructure, lower share of
profits from Keppel Infrastructure Trust,
and absence of gain from the divestment
of GE Keppel Energy Services.
Loss from the Investments Division was
$54 million for 2018, compared to a profit
of $238 million for 2017. This was mainly
due to lower land sales in the Sino-Singapore
Tianjin Eco-City, lower contribution from the
asset management business and provision
for impairment of an associated company,
partly offset by lower share of loss from
KrisEnergy. In 2017, the Investments
Division also benefitted from the share
of profit from k1 Ventures, write-back of
provision for impairment of an associated
company, and profit from sale of investments.
In 2018, the Property Division was the
largest contributor to the Group’s net
profit with a 99% share, followed by the
Infrastructure Division’s 18%, while the
O&M and Investments divisions contributed
negative 11% and negative 6% to the
Group’s net profit respectively.
Keppel Corporation Limited Report to Shareholders 2018
61
Performance Review
Operating & Financial Review
Financial Review & Outlook
We will sustain value
creation through execution
excellence, technology
innovation and
financial discipline.
Total Assets
$26.6b
Down 7% as compared to $28.7b in
FY 2017, mainly due to a decrease
in current assets.
Total Cash Dividend Per Share
30.0cts
This represents 58% of Group net profit.
Excluding the special dividend, the
proposed final cash dividend together
with the interim cash dividend
represents 48% of Group net profit.
62
Prospects
The Offshore & Marine (O&M) Division’s net
orderbook, excluding the semisubmersibles
for Sete Brasil (Sete), stood at $4.3 billion as at
end-2018. The Division will continue to focus
on delivering its projects well, exploring new
markets and opportunities, investing in R&D
and building new capabilities. The Division
is also actively capturing opportunities in
production assets, specialised vessels, gas
solutions, floating infrastructure and offshore
renewables, as well as exploring ways to
re-purpose its technology in the offshore
industry for other uses.
The Property Division sold about 4,440 homes
in 2018, comprising about 160 in Singapore,
2,240 in China, 910 in Vietnam, 350 in Indonesia
and 780 in India. Keppel REIT’s office buildings
in Singapore and Australia maintained a high
portfolio committed occupancy rate of 98% as
at 31 December 2018. The Division will remain
focused on strengthening its presence in its
key markets such as Singapore, China and
Vietnam and scaling up in other markets
such as Indonesia and India, while seeking
opportunities to unlock value and recycle capital.
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 to pursue
promising growth opportunities.
Meanwhile, 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.
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, Vietnam,
Keppel Urban Solutions will also explore
opportunities in other cities across Asia.
The Sino-Singapore Tianjin Eco-City Investment
and Development Company Co., Ltd. will
continue the development of the Eco-City,
including selling further land parcels in 2019.
The Group had launched a strategic initiative
to gain majority control of M1, in collaboration
with Singapore Press Holdings, via a
Pre-conditional Voluntary General Offer
(the Offer) to drive business changes in
M1 that will enable M1 to compete more
effectively in the telecommunications industry.
The initiative complements the Group’s
mission as a solutions provider for sustainable
urbanisation, which includes connectivity. M1
can serve as a digital platform and connectivity
partner to complement and augment the
Group’s current suite of solutions, and at
the same time benefit from harnessing the
synergies of the Group. By end-February 2019,
Konnectivity and its concert parties had
obtained majority control of M1. Strong support
for the Offer by M1’s shareholders has resulted
in M1 ceasing to have at least 10% of the
total number of shares held by the public.
Konnectivity will be de-listing M1 from the
Main Board of the SGX-ST after the close of
the Offer, and will be exercising its right to
compulsorily acquire all the shares of M1 from
shareholders who had not accepted the Offer.
In addition, Keppel Corporation and
Keppel T&T are jointly proposing a Scheme
of Arrangement to privatise Keppel T&T and
provide Keppel T&T’s minority shareholders
with a cash exit at a compelling premium.
The proposed Scheme is consistent with
the Group’s strategy to simplify its corporate
structure, with a view to improving capital
allocation and better aligning Keppel T&T’s
interests with the rest of the Group’s.
The Group will continue to execute its
multi-business strategy, capturing value
by harnessing its core strengths and
growing collaboration across its divisions
to unleash potential synergies, while being
agile and investing in the future.
Shareholders Returns
Return On Equity (ROE) increased to 8.3%
in 2018 from 1.7% in the previous year,
largely due to higher profits as net profit
for 2017 included $619 million for the
ROE & Dividend
%
25
20
15
10
5
0
cents
50
40
30
20
10
0
ROE
Full-Year Dividend
Interim Dividend
2014
18.8
48.0
12.0
2015
14.2
34.0
12.0
2016
6.9
20.0
8.0
2017
1.7^
22.0
8.0
2018
8.3
30.0
15.0@
^ ROE for 2017 included the one-off financial penalty from the global resolution and related costs of $619 million
and was adjusted following the adoption of the Singapore Financial Reporting Standards (International)
(“SFRS(I)s”).
@ Comprises an interim cash dividend of 10.0 cents per share and a special cash dividend of 5.0 cents per share.
one-off financial penalty from the global
resolution and related costs. Excluding the
one-off financial penalty and related costs of
$619 million from 2017, ROE was 6.9% in 2017.
The Company will be distributing a total
cash dividend of 30.0 cents per share for
2018, comprising a proposed final cash
dividend of 15.0 cents per share, as well
as the interim cash dividend of 10.0 cents
per share and the special cash dividend of
5.0 cents per share distributed in the third
quarter of 2018 to commemorate Keppel’s
golden jubilee. Total cash dividend for 2018
represents 58% of Group net profit. Excluding
the special dividend, the proposed final cash
dividend together with the interim cash
dividend represents 48% of Group net profit.
On a per share basis, it translates into a gross
yield of 5.1% on the Company’s last transacted
share price of $5.91 as at 31 December 2018.
Economic Value Added
In 2018, Economic Value Added (EVA)
was positive $252 million as compared to
negative $839 million in the previous year.
EVA
Profit/(loss) 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)
Average EVA Capital Employed (Note 3)
Weighted Average Cost of Capital (Note 4)
Capital Charge
2018
$ million
892
198
20
(38)
76
1,148
16,539
5.42%
(896)
18 vs 17
+/(-)
2017^
$ million
17 vs 16
+/(-)
2016
$ million
909
9
(6)
–
–
912
(17)
189
26
(38)
76
236
(783)
(36)
(3)
6
79
(737)
766
225
29
(44)
(3)
973
(2,152)
(0.33%)
179
18,691
5.75%
(1,075)
(428)
(0.07%)
38
19,119
5.82%
(1,113)
Economic Value Added
252
1,091
(839)
(699)
(140)
Notes:
1. Profit/(loss) 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% (2017: 5.0%);
(b) Risk-free rate of 2.06% (2017: 2.41%) based on yield-to-maturity of Singapore Government 10-year Bonds;
(c) Unlevered beta at 0.75 (2017: 0.75); and
(d) Pre-tax Cost of Debt at 1.85% (2017: 2.30%) using 5-year Singapore Dollar Swap Offer Rate plus 60 basis points (2017: 60 basis points).
^ EVA for 2017 included the one-off financial penalty from the global resolution and related costs of $619 million and was adjusted following the adoption of SFRS(I)s.
Keppel Corporation Limited Report to Shareholders 2018
63
Performance Review
Operating & Financial Review
Financial Review & Outlook
This was attributable to a net operating
profit after tax in 2018 as compared to
net operating loss after tax in 2017, as
well as lower capital charge. Excluding
the one-off financial penalty from Keppel
Offshore & Marine’s (Keppel O&M) global
resolution and related costs of $619 million
from 2017, EVA was negative $220 million
in 2017.
Capital charge decreased by $179 million
as a result of lower Average EVA Capital
Employed and lower Weighted Average Cost
of Capital (WACC). WACC decreased from
5.75% to 5.42% due mainly to a lower
cost of debt, partially offset by increase
in equity value as a result of higher market
capitalisation. Average EVA Capital
Employed decreased by $2,152 million
from $18.69 billion to $16.54 billion
mainly due to lower borrowings.
Financial Position
Group shareholders’ funds of $11.28 billion
as at 31 December 2018 were $0.2 billion
or 1% lower than the previous year end.
The decrease was mainly attributable
to purchase of treasury shares in 2018,
EVA ($m)
2,000
1,500
1,000
500
0
-500
-1,000
2013
1,142
2014
1,778
2015
648
2016
(140)
2017
(839)^
2018
252
^ EVA for 2017 included the one-off financial penalty from the global resolution and related costs of
$619 million and was adjusted following the adoption of SFRS(I)s.
Total Shareholder Return (%)
decrease in fair value on cash flow hedges,
foreign exchange translation losses,
decrease in revenue reserves arising
from the adoption of SFRS(I) 9 Financial
Instruments, payment of final dividend of
14.0 cents per share in respect of FY 2017
and payment of interim and special dividends
of 15.0 cents per share for 1H 2018, partly
offset by retained profits for the year.
Group total assets of $26.61 billion as
at 31 December 2018 were $2.1 billion
or 7% lower than the previous year end.
The decrease in current assets was
mainly due to the lower stocks, contract
assets, debtors and bank balances,
deposits & cash. The decrease in
non-current assets was due mainly
to a decrease in investment properties
following the divestment of Aether and
decrease in long term assets arising from
the adoption of SFRS(I) 9, partly offset
by acquisition and further investment in
associated companies.
Group total liabilities of $15.02 billion as
at 31 December 2018 were $1.7 billion
or 10% lower than the previous year-end.
Total liabilities decreased mainly due to the
reduction in creditors and net repayment
of term loans.
120
100
80
60
40
20
0
(20)
(40)
(20)
(80)
10-year annualised TSR as at 2018
9.3%
Keppel
9.2%
STI
Keppel
STI
2009
100.8
70.8
2010
47.0
13.4
2011
(6.4)
(14.0)
2012
22.9
23.3
2013
9.0
3.2
2014
(17.8)
9.5
2015
(22.3)
(11.4)
2016
(6.3)
3.8
2017
30.9
22.0
2018
(16.4)
(6.5)
Source: Total Return Analysis for KCL & STI from Bloomberg.
64
Group net debt of $5.57 billion was slightly
higher than that as at 31 December 2017.
This was mainly due to dividend payments
by the Company and its listed subsidiaries,
working capital requirements, acquisition
and further investment in associated
companies, as well as other capital
expenditure cash requirements. These
were offset by proceeds from the disposal
of subsidiaries and associated companies
in the Property Division, as well as
dividends received from investments
and associated companies.
As at 31 December 2018, Group net gearing
ratio was 48% as compared to 46% as at
31 December 2017. This was largely driven
by a decrease in total equity arising from
lower non-controlling interests following
the divestment of Aether.
Total Shareholder Return
We are 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 2018 Total Shareholder Return (TSR)
of negative 16.4% was 9.9 percentage points
below the benchmark Straits Times Index’s
(STI) TSR of negative 6.5%. Our 10-year
annualised TSR growth rate of 9.3% was
slightly higher than STI’s 9.2%.
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
$125 million for 2018 as compared to
$1,203 million for 2017. This was due
mainly to cash outflow arising from working
capital requirements as compared to inflow
in the prior year.
After excluding expansionary acquisitions,
capital expenditure and major divestments,
net cash from investment activities was
$390 million. The Group spent $450 million on
investments and operational capital expenditure.
Total Assets Owned ($m)
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
Fixed assets
Properties
Investments
Stocks
Contract assets
Debtors & others
Bank balances, deposits & cash
Total
2016*
2017*
2,645
3,550
6,076
6,568
4,157
4,861
2,087
2,433
3,461
6,575
5,780
3,643
4,520
2,274
2018
2,373
2,851
6,826
5,514
3,213
3,848
1,981
29,944
28,686
26,606
* 2017 financial figures have been adjusted following the adoption of SFRS(I)s. 2016 financial figures
were prepared in accordance with Singapore Financial Reporting Standards (“FRS”) and certain
amounts have been reclassified for comparability purposes.
Total Liabilities 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
Contract liabilities
Term loans & bank overdrafts
Other liabilities
Total
2016*
2017*
2018
11,668
11,443
11,278
677
6,602
1,613
9,053
331
530
6,635
1,950
7,793
335
309
5,355
1,918
7,549
197
29,944
28,686
26,606
* 2017 financial figures have been adjusted following the adoption of SFRS(I)s. 2016 financial
figures were prepared in accordance with FRS and certain amounts have been reclassified for
comparability purposes.
Keppel Corporation Limited Report to Shareholders 2018
65
Performance Review
Operating & Financial Review
Financial Review & Outlook
After taking into account the proceeds
from divestments and dividend income
of $1,057 million, as well as advances to
associated companies of $217 million,
free cash inflow was $515 million.
Total distribution to shareholders of the
Company and non-controlling shareholders
of subsidiaries for the year amounted to
$546 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 into account changes in
the operating environment. This committee
is chaired by the Chief Financial Officer (CFO)
of the Company and includes CFOs 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 exposures arising from
United States (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.
were $7.5 billion (2017: $7.8 billion and
2016: $9.1 billion). At the end of 2018,
20% (2017: 22% and 2016: 20%) of
Group borrowings were repayable
within one year, with the balance
largely repayable more than three
years later.
– 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, swaptions
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 end-2018
Unsecured borrowings constituted 92%
(2017: 91% and 2016: 87%) 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 $1.07 billion
(2017: $1.89 billion and 2016: $2.81 billion).
Fixed rate borrowings constituted
67% (2017: 65% and 2016: 58%) of
total borrowings with the balance at
floating rates. The Group has cross
currency swap and interest rate swap
agreements with notional amount
totalling $1,667 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 1.33%
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
75% (2017: 73% and 2016: 69%) of
total borrowings. The balance was
mainly in US dollars. Foreign currency
borrowings were drawn to hedge against
the Group’s overseas investments and
receivables that were denominated in
foreign currencies.
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 operating activities
Investments & capital expenditure
Divestments & dividend income
Advances to associated companies
Net cash from investing activities
Free Cash Flow*
2018
$ million
1,043
(495)
548
(183)
(240)
125
(450)
1,057
(217)
390
515
18 vs 17
+/(-)
2017^
$ million
17 vs 16
+/(-)
2016
$ million
242
(213)
29
(1,284)
177
(1,078)
(263)
228
(174)
(209)
801
(282)
519
1,101
(417)
1,203
(187)
829
(43)
599
(100)
(689)
(789)
1,687
11
909
(31)
369
15
353
(1,287)
1,802
1,262
901
407
1,308
(586)
(428)
294
(156)
460
(58)
246
540
Dividend paid to shareholders of the Company & subsidiaries
(546)
(156)
(390)
232
(622)
* Free cash flow excludes expansionary acquisitions and capital expenditure, and major divestments.
^ 2017 financial figures have been adjusted following the adoption of SFRS(I)s.
66
The weighted average tenor of the Group’s
debt was about four years at the beginning
of 2018 and about four years at the end
of 2018 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 end-2018 was $11.59 billion
as compared to $11.97 billion as at end-2017
and $12.34 billion as at end-2016. The Group
was in a net debt position of $5,567 million
as at end-2018, which was slightly above the
$5,519 million as at end-2017 but below the
$6,966 million as at end-2016. The Group’s
net gearing ratio was 0.48 times as at
end-2018, compared to 0.46 times as at
end-2017.
Interest coverage decreased from
4.46 times in 2016 to 2.61 times in 2017
before increasing to 6.12 times in 2018.
Interest coverage in 2018 was higher due
to higher Earnings before Interest expense
and Tax (EBIT).
Cash flow coverage increased from
2.00 times in 2016 to 5.98 times in 2017
before decreasing to 1.53 times in 2018.
This was mainly due to lower operational
cash inflow in 2018.
At the Annual General Meeting in 2018,
shareholders gave their approval for the
mandate to buy back shares. During the year,
11,300,000 shares were bought back and
held as treasury shares. The Company also
transferred 5,374,744 treasury shares to
employees upon vesting of shares released
under the KCL Share Plans and Share Option
Scheme. As at end-2018, the Company had
5,936,044 treasury shares. Except for this
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
as well as sufficient undrawn banking
facilities and capital market programmes.
Funding of working capital requirements,
capital expenditure and investment needs
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)
2016
2017
2018
(6,966)
(5,519)
(5,567)
12,345*
11,973*
11,587
(0.56)
(0.46)
(0.48)
* 2017 financial figures have been adjusted following the adoption of SFRS(I)s. 2016 financial figures were
prepared in accordance with FRS and certain amounts have been reclassified for comparability purposes.
Interest Coverage
Interest Coverage = EBIT
Interest Cost
$m
1,500
1,000
500
0
Note: EBIT = Profit before tax + Interest expense
No. of times
9.0
6.0
3.0
0
EBIT
Total Interest Cost
Interest Cover
2016
1,313*
294
4.46*
2017
631*
241
2.61*
2018
1,438
235
6.12
* 2017 financial figures have been adjusted following the adoption of SFRS(I)s and EBIT for 2017 included
the one-off financial penalty and related costs of $619 million. 2016 financial figures were prepared in
accordance with FRS and certain amounts have been reclassified for comparability purposes.
Cash Flow Coverage
Cash Flow Coverage = Operating Cash Flow + Interest Cost
Interest Cost
$m
1,800
1,500
1,200
900
600
300
0
No. of times
9.0
7.5
6.0
4.5
3.0
1.5
0
Total Interest Expense + Interest Capitalised
Operating Cash Flow + Interest
Cash Flow Coverage
2016
294
589
2.00
2017
241
1,445
5.98
2018
235
360
1.53
Keppel Corporation Limited Report to Shareholders 2018
67
Performance Review
Operating & Financial Review
Financial Review & Outlook
Keppel is committed to
delivering value to shareholders,
relying on our multi-business
strategy and core strengths
to deliver earnings growth.
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-2018, total available credit
facilities, including cash at Corporate
Treasury, amounted to $9.37 billion
(2017: $11.51 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
judgement in the process of applying
the accounting policies. It also requires
the use of accounting estimates and
assumptions which affect the reported
amounts of assets, liabilities, income and
expenses. Critical accounting estimates
and judgement are described below.
Expected Credit Loss on Financial Assets
Measured at Amortised Cost and Fair Value
Through Other Comprehensive Income
The Group assesses, on a forward looking
basis, the expected credit losses (ECLs)
associated with its financial assets measured
at amortised cost and fair value through
other comprehensive income (FVOCI). The
impairment methodology applied depends
on whether there has been a significant
increase in credit risk.
ECLs are probability-weighted estimates of
credit losses. Credit losses are measured
at the present value of all cash shortfalls
(i.e. the difference between the cash flows
due to the entity in accordance with the
contract and the cash flows that the Group
expects to receive). ECLs are discounted
at the effective interest rate of the financial
asset. At each balance sheet date, the
Group assesses whether financial assets
carried at amortised cost and at FVOCI
are credit-impaired. A financial asset is
‘credit-impaired’ when one or more events
that have a detrimental impact on the
estimated future cash flows of the financial
asset have occurred. These events include
probability of insolvency, significant financial
difficulties of the debtor and default or
significant delay in payments.
When determining whether the credit risk of
a financial asset has increased significantly
since initial recognition and when estimating
ECLs, the Group considers reasonable and
supportable information that is relevant
and available without undue cost or
effort. This includes both quantitative and
qualitative information and analysis, based
on the Group’s historical experience and
informed credit assessment and includes
forward-looking information.
The Group uses a provision matrix to
measure the ECLs. In measuring the ECLs,
assets are grouped based on shared
credit risk characteristics and days past
due. In calculating the expected credit loss
rates, the Group considers historical loss
rates for each category of customers and
adjusts to reflect current and forward-looking
macroeconomic factors affecting the ability
of the customers to settle the receivables.
Debt Maturity ($m)
< 1 year
1 - 2 years
2 - 3 years
3 - 4 years
4 - 5 years
> 5 years
1,481 (20%)
1,154 (15%)
903 (12%)
1,618 (22%)
1,165 (15%)
1,228 (16%)
Financial Capacity
Cash at Corporate Treasury
Available credit facilities to the Group
$ million
Remarks
406
20% of total cash of $1.98 billion
8,966 Credit facilities of $11.06 billion,
of which $2.09 billion was utilised
Total
9,372
68
Claims, Litigations & Reviews
The Group enters 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 judgement
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.
Civil Action by EIG Funds
In February 2018, the Company’s subsidiary,
Keppel O&M was served a summons
by eight investment funds (“plaintiffs”)
managed by EIG Management Company
(EIG) where a civil action was commenced
by the plaintiffs pursuant to the Racketeer
Influenced and Corrupt Organizations Act
(RICO) in the US District Court, Southern
District of New York. The plaintiffs seek
damages for its loss of investment of
US$221 million in Sete, 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 US District Court,
District of Columbia against, among
others, the Company and Keppel O&M.
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 Keppel O&M 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.
Keppel O&M has filed a motion to dismiss
EIG’s complaint.
The carrying amounts of trade, intercompany
and other receivables, and financial assets at
FVOCI 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 (CGUs).
This requires the Group to estimate the
future cash flows expected from the
CGUs and an appropriate discount rate
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.
Revenue Recognition and Contract Cost
The Group recognises contract revenue and
contract cost over time by reference to the
Group’s progress towards completing the
construction of the contract work. The stage
of completion is measured in accordance
with the accounting policy stated in Note
2.20. 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 23.
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 Contract Asset and
Receivable Balances in Relation to
O&M Construction Contracts
Contracts with 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 FY 2018,
an expected credit loss on trade receivables
of $102,000,000 (2017: $81,000,000) was
recognised and a provision for contract
related costs of $65,000,000 was made.
Taking into consideration cost of completion,
cost of discontinuance, salvage cost and
unpaid progress billings with regards to
these rigs, the total cumulative loss recognised
in relation to these rig contracts amounted
to $476,000,000.
Other Contracts
As at 31 December 2018, the Group
had several rigs that were under
construction for customers where
customers had requested for deferral
of delivery dates of the rigs in prior years.
See Note 14 on contract assets balances.
Management has assessed each
deferred construction project individually
to make a judgement 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 performed an
assessment of the expected credit loss
on contract assets and trade receivables
of deferred projects to determine if a
provision for expected loss is necessary.
In the event that the customers are unable
to fulfil their contractual obligations, the
Group can exercise their right to retain
payments received to date and the legal
possession of the rigs under construction.
Management has further assessed if
the values of the rigs would exceed the
carrying values of contract assets and trade
receivables. Management has estimated,
with the assistance of an independent
professional firm, the values of the rigs
using Discounted Cash Flow (DCF)
calculations that cover each class of rig
under construction. The most significant
inputs to the DCF calculations include
day rates and discount rates.
During FY 2018, an expected credit loss
on contract assets of $21,000,000
was recognised.
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.
Keppel Corporation Limited Report to Shareholders 2018
69
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
• Logistics and data centres
•
Investments
• Asset management
• Master development
•
Investments
KEPPEL OFFSHORE &
MARINE LTD
KEPPEL LAND LIMITED
KEPPEL INFRASTRUCTURE
HOLDINGS PTE LTD
KEPPEL CAPITAL HOLDINGS
PTE LTD
100%
Keppel Land
International Limited
Southeast Asia and India
Keppel Land China
China
Keppel Bay Pte Ltd
Keppel REIT3 & 4
100%
ENERGY INFRASTRUCTURE
Keppel Gas Pte Ltd
Keppel Electric Pte Ltd
Keppel DHCS Pte Ltd
Keppel Merlimau Cogen
Pte Ltd5
100%
100%
47%
Keppel FELS Limited
Keppel Shipyard Limited
Keppel Singmarine Pte Ltd
Keppel LeTourneau
Keppel Nantong Shipyard
Company Limited
China
Offshore Technology
Development Pte Ltd
Keppel Marine &
Deepwater Technology Pte Ltd
Keppel AmFELS LLC
United States
Keppel FELS Brasil SA
Brasil
Keppel Philippines Marine Inc
The Philippines
Keppel Subic Shipyard Inc
The Philippines
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
98%
86%
Dyna-Mac Holdings Limited4
24%
Keppel REIT Management
Limited
100%
100%
Alpha Investment Partners Ltd
100%
Keppel Infrastructure Fund
Management Pte Ltd
100%
100%
100%
100%
100%
49%
Keppel DC REIT
Management Pte Ltd6
Keppel-KBS US REIT
Management Pte Ltd
Keppel-KBS US REIT4
ENVIRONMENTAL INFRASTRUCTURE
Keppel Seghers Pte Ltd
100%
INFRASTRUCTURE SERVICES
Keppel Infrastructure
Services Pte Ltd
INVESTMENTS
100%
KEPPEL URBAN SOLUTIONS
PTE LTD
KRISENERGY LTD4
Cayman Islands
M1 LIMITED2, 4 & 7
Keppel Infrastructure Trust4
18%
KEPPEL TELECOMMUNICATIONS &
TRANSPORTATION LTD
79%
LOGISTICS & DATA CENTRES
Keppel Logistics Pte Ltd
Keppel Data Centres Holding
Pte Ltd
UrbanFox Pte Ltd
Keppel DC REIT4
100%
100%
85%
25%
50%
50%
7%
100%
40%
93%
50%
SINO-SINGAPORE TIANJIN ECO-CITY INVESTMENT AND DEVELOPMENT CO., LTD1
China
GROUP CORPORATE SERVICES
Control & Accounts
Human Resources
Corporate Communications
Legal
Tax
Treasury
Strategy & Development
Risk & Compliance
Information Systems
Corporate Development
Audit
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 (19%), a 79%-owned subsidiary of Keppel Corporation and Konnectivity (74%), a joint venture between
Keppel Corporation and Singapore Press Holdings.
3 Owned by Keppel Land Limited (43%) and Keppel Capital Holdings Pte Ltd (4%).
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 Konnectivity will be exercising its right to compulsorily acquire all the shares of M1 from shareholders who had not accepted the Offer.
Updated as at 8 March 2019. The complete list of subsidiaries and significant associated companies is available at www.kepcorp.com.
70
Governance
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 2012
(the “2012 CG Code”). In describing corporate
governance practices, the Company also
took guidance from the Code of Corporate
Governance 2018 (the “2018 CG Code”)1
and accompanying Practice Guidance.
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:
Governance Framework 2018
Board Risk
Committee
Board Safety
Committee
CHAIRMAN
BOARD
CHIEF EXECUTIVE
OFFICER
Corporate
Functions
IMPAC
Group Regulatory
Compliance
Management
Committee
Group Regulatory
Compliance
Working Team
Dr Lee Boon Yang is the non-executive and
independent Chairman of the Company.
Mr Loh Chin Hua is the Chief Executive
Officer (CEO) of the Company.
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.
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 board
meetings, the Chairman encourages a full
and frank exchange of views, drawing out
contributions from all directors so that the
debate benefits from the full diversity
of views, in a robust yet collegiate setting.
At annual general meetings and other
shareholders’ meetings, the Chairman
ensures constructive dialogue between
shareholders, the Board and management.
The Chairman sets the right ethical and
behavioural tone and takes a leading role in
Audit
Committee
Nominating
Committee
Remuneration
Committee
Management
Committees
Internal
Audit
Central Finance
Committee
IT Steering
Committee
Management
Development
Committee
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,
which were revised in January 2019 for
alignment with the 2018 CG Code
(see Appendix 1 for details).
The CEO, assisted by the management team,
makes strategic proposals to the Board
and after robust and constructive board
discussion, 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 its 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;
Group
Sustainability
Steering Committee
1 The 2018 CG Code was issued on 6 August 2018
by the Monetary Authority of Singapore to replace
the 2012 CG Code and will apply to annual reports
covering financial years commencing from
1 January 2019 onwards.
Keppel Corporation Limited Report to Shareholders 2018
71
Governance
Corporate Governance
(3) Central Finance Committee, which
reviews, guides and monitors financial
policies and activities of
Group companies;
(4) 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
an guidelines, and facilitates the
implementation and sharing of policies
and procedures across the Group;
(5) 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 reviews training
and communication programmes2;
(6) Keppel IT Steering Committee, which
provides strategic information
technology (IT) leadership and ensures
IT strategy alignment in achieving
business strategies; and
(7) Group Sustainability Steering Committee,
which sets sustainability strategy and
leads performance in key focus areas.
Board Matters
Role: The principal functions of the Board
are to:
•
•
•
provide entrepreneurial leadership and
decide on matters in relation to the
Group 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
(including appropriate focus on value
creation, innovation and sustainability),
monitor the performance of management
and ensure that the Company has
necessary resources to meet its
strategic objectives;
set the Company’s values, standards
(including ethical standards), appropriate
tone-from-the-top and desired
organisational culture, and put in place
policies, structures and mechanism to
ensure such values, standards and
culture are complied with;
hold management accountable for
performance and ensure proper
accountability within the Group;
oversee processes for evaluating
the adequacy and effectiveness of
internal controls, risk management,
financial reporting and compliance,
and satisfy itself as to the adequacy
and effectiveness of such processes;
be responsible for the governance of risk
and ensure that management maintains
a sound system of risk management
and internal controls, to safeguard
the interests of the Company and its
stakeholders; and
assume responsibility for corporate
governance and ensure transparency
and accountability to key
stakeholder groups.
•
•
•
•
Board Strategic Review: The Board
periodically reviews and approves the
Group’s strategic plans. In FY 2014, the
Board approved the Group’s Vision 20202
which sets out the vision, operating principles
and values of the Group, and the roadmap3
to take the Group’s businesses into 2020
and beyond 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
provide the Board an opportunity to perform
an in-depth review into each of the Group’s
core businesses.
Independent Judgement: All directors are
expected to exercise independent judgement
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 2018, all directors
have discharged this duty consistently well.
Conflicts of Interest: Every director is required
to promptly disclose any conflict of interest,
whether direct or indirect, in relation to 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. Directors facing
conflicts of interest recuse themselves when
the conflict-related matter is discussed,
unless the Board is of the opinion that his/
her presence and participation is necessary
to enhance the efficacy of such discussion,
and abstain from voting in relation to
conflict-related matters. In January 2019,
the Board had, on the recommendation of
the Nominating Committee (“NC”), approved
and adopted the “Keppel Group – Directors’
Conflict of Interest Policy” to help inform
Keppel directors about the general principles
relating to conflicts of interest, as well as to
guide directors in identifying, disclosing and
managing conflict situations. The policy
further serves to emphasise the Keppel
Group’s commitment to ethics and compliance
with the law, for the protection of the
Company’s interest and the promotion of
transparency for the benefit of shareholders.
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 from time to
time and on a need basis, and any relevant
feedback would be shared and discussed
with the executive director. The number of
board and board committee meetings held
2 With effect from FY 2014, and following a review and update in 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 solutions for sustainable urbanisation profitably, safely and responsibly.
3 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.
72
in FY 2018, as well as the attendance of
each Board member at these meetings,
are disclosed in the table below.
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, all transactions exceeding
$150 million by any Group company (not
separately listed) require the approval of the
Board. For transactions between $30 million
and $150 million, IMPAC will determine if
Board approval is required, depending on
the individual considerations for each case.
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 roles, duties,
obligations and responsibilities 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 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 2018, some KCL directors attended
talks on topics relating to corporate
governance and ethics (including case
studies), cybersecurity governance, health
safety and environment (HSE) performance,
and macroeconomic trends. Sites 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. Please refer to
page 75 of this report for details on the process.
Board Independence: The NC determines
on an annual basis whether or not a director
is independent. In January 2019, the NC
carried out the review on the independence
of each non-executive director based on
the respective directors’ self-declaration in
the Directors’ Independence Checklist and
their actual performance on the Board and
board committees, taking into account
the recent amendments to listing rules
on the circumstances in which a director
will not be deemed independent and
guidance in the 2018 CG Code as to the
circumstances in which a director should
not be deemed independent.
In this connection, the NC (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 NC that
although he is a partner with a 5% or more
stake in WongPartnership LLP, he did not
involve himself in the selection and
appointment of legal advisers for the Group,
and that he supported the selection of legal
advisers based on assessment of quality,
and for their remuneration to be based on
market rate. In addition, the NC noted that
Keppel Infrastructure (KI) management had,
of their own accord, appointed Mr Yeo as
lead counsel to represent KI in its arbitration
proceedings with the State of Qatar in relation
to the Doha South Waste Management
Centre project, based on merit and taking
Board and Committee Meetings and Attendance
Board Meetings
Audit
Nomination
Remuneration
Safety
Risk
Board Committee Meetings
Lee Boon Yang
Loh Chin Hua
Tow Heng Tan
Alvin Yeo Khirn Hai
Tan Ek Kia
Danny Teoh
Tan Puay Chiang1
Till Vestring
Veronica Eng
11
11
8
9
9
10
10
11
11
Jean-François Manzoni2
No. of Meetings Held
3 out of 3
11
–
–
–
5
5
5
–
–
5
–
5
3
–
3
1
–
–
3
3
–
–
3
4
–
2
–
–
4
–
4
–
–
4
4
4
–
–
4
–
4
–
–
–
4
–
–
4
–
4
4
4
–
4
–
4
Notes:
1 Mr Tan Puay Chiang ceased to be a member of the Board Risk Committee with effect from 2 January 2019.
2 Prof Jean-François Manzoni was appointed to the Board as a non-executive and independent director with effect from 1 October 2018, and was appointed as a member of the
Board Risk Committee on 2 January 2019.
Keppel Corporation Limited Report to Shareholders 2018
73
Governance
Corporate Governance
into consideration the complexity of the
matter. Taking these factors into consideration
together with Mr Yeo’s comments, along
with his active participation and actual
performance on the Board and board
committees in the discharge of his duties,
his valuable contributions to the Board
and board committees, and the outcome
of the recent self and peer Individual
Director Performance assessment, the NC
unanimously agreed that Mr Yeo has at
all times exercised independent judgement
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 NC 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, and he is also the independent
non-executive chairman of KrisEnergy Ltd
which has an interest person transaction
(“IPT”) framework agreement with the
Company and its subsidiaries. Mr Tan had
declared to the NC that (i) he was not involved
in the negotiation of contracts or business
dealings between TransOcean with the
Keppel Offshore & Marine Group, and (ii) the
IPT framework agreement with KrisEnergy is
renewed annually by a vote of the independent
shareholders of KrisEnergy and he abstains
from making any recommendations to the
board and shareholders of KrisEnergy and
from voting in respect of such agreement.
The NC also took into account Mr Tan’s
active participation and actual performance
on the Board and board committees, his
valuable contributions to the Board and
board committees and the outcome of the
recent self and peer Individual Director
Performance assessment, and unanimously
agreed that Mr Tan has at all times exercised
independent judgement 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 5% shareholder is deemed as non
independent under the 2018 CG Code.
Mr Tow Heng Tan is the CEO of Pavilion
Capital International Pte Ltd, a wholly-owned
subsidiary of Temasek Holdings (Private)
Limited (“Temasek”). As Mr Tow is currently
employed by a wholly-owned subsidiary
of Temasek, the NC (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 NC further noted that Dr Lee Boon Yang
and Mr Alvin Yeo have both served beyond
nine years since their respective first
appointments. The 2012 CG Code states
that the independence of any director who
has served on the Board beyond nine years
from the date of his/her first appointment
should be subject to particularly rigorous review.
In relation to Dr Lee, taking into consideration,
among other things, his active participation
and actual performance on the Board and
board committees in the discharge of his
duties, his valuable contributions to the
board and board committees and leadership
as Chairman, and the outcome of the recent
self and peer Individual Director Performance
assessment, the NC agreed unanimously that
Dr Lee has at all times exercised independent
judgement 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. In relation
to Mr Alvin Yeo, please see above the NC’s
reasons for considering him independent.
Following the review, the NC 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, Ms Veronica Eng
and Prof Jean-François Manzoni should be
deemed independent. The Board has reviewed
the basis of the NC’s recommendations, and
concurred with the assessment of independence
in respect of the above-mentioned directors.
In view of the above, the Board currently
comprises majority independent directors,
with a total of 10 directors of whom eight
are independent.
Lead Independent Director: The NC has
deliberated and decided that it was not
necessary to appoint a Lead Independent
Director given the majority independence
of the Board and that the Chairman was
independent. Further, matters affecting
the Chairman such as succession and
remuneration were deliberated by the
board committees where the majority of
the members (including the Chairman)
were independent directors, and where the
Chairman was conflicted, he would recuse
himself and abstain from voting.
Board Size: The Board, in concurrence
with the NC, 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.
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 90 herein.
Board Diversity: The NC is satisfied that
the Board and the board committees
comprise directors who, as a group, provide
an appropriate balance and mix of skills,
knowledge, experience, and other aspects
of diversity such as gender and age. The NC
is also satisfied that the directors, as a group,
possess core competencies including
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. In this respect, the NC 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, while due consideration would
be given to the benefits of diversity, new
directors will continue to be selected on merits
based on objective criteria set as part of the
“Process for appointment of new directors
and Board succession planning” (detailed on
the next page). In FY 2018, there was one
female director out of a total of 10 directors.
Taking into account the independence and
diversity of the Board, the NC is of the view
that the Board has an appropriate level of
independence and diversity of thought and
background in its composition to enable it
to make decisions in the best interests of
the Company.
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.
74
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. The Board
also reviews the budget on an annual basis,
and any material variance between the
projections and actual results would be
disclosed and explained. 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. Directors
are also entitled to request from management,
and would be provided with, such additional
information as may be needed from time to
time in order to make informed decisions.
Non-executive Directors’ Meetings:
The non-executive directors meet on a
need-be basis at the end of each scheduled
quarterly meeting 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.
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 the 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 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 89 and 90 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
mix of skills, knowledge, experience, and
other aspects of diversity such as gender
and age, and the size of the Board which
would facilitate decision-making. In this
review, the NC will also take into account
the needs of the Group, the collective
skills and competencies of the Board
and service tenure spread of the directors.
In the year under review (FY 2018), for
purposes of Board succession planning,
the NC also took into consideration the
2018 CG Code and the amendments to the
SGX Listing Rules relating to the continued
appointment as “independent directors” of
a director who has served for an aggregate
period of more than nine years, bearing
in mind that these rules would come into
effect from 1 January 2022.
(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, Singapore
Institute of Directors and search
consultants) 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:
(1) Integrity
(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
Pursuant to the above appointment
process and criteria, the Board will be
recommending at the upcoming annual
general meeting the re-election of a new
director, Prof Jean-François Manzoni, who
was appointed as an independent director
on 1 October 2018.
Prof Manzoni is currently the President
(Dean) and Nestlé Professor at the
International Institute for Management
Development (IMD) in Switzerland,
where he is based. Prior to re-joining
IMD in 2016, he had served at INSEAD’s
Singapore campus where he co-directed
the International Directors Program.
He was also on the faculty of INSEAD
(Fontainebleau), where he founded and
directed the PwC Research Initiative
on High Performance Organisations.
Prof Manzoni is the recipient of several
awards for excellence in research and
teaching, and has been involved in
consulting, top management team
support and leadership development
with several international organisations,
spanning more than 30 countries over
the years. Prof Manzoni is a member
of the International Advisory Panels
of Digital Switzerland, Singapore’s
Public Service Division and the Russian
Keppel Corporation Limited Report to Shareholders 2018
75
Governance
Corporate Governance
Presidential Academy of National Economy
and Public Singapore Institute of Directors,
and served on the Board of Singapore’s
Civil Service College from 2015 to 2017.
Prof Manzoni also sits on the board of AACSB
International, the world’s largest business
education alliance. Please refer to Appendix 2
on pages 93 and 94 herein for further details.
conduct and participation on the Board and
board committees, including availability and
attendance at regular scheduled meetings
and ad-hoc meetings. The NC is of the view
that such an assessment is sufficiently
robust to detect and address, on a timely
basis, any time commitment issues that may
hinder the effectiveness of the directors.
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. Please refer to Appendix 2 on
pages 93 and 94 herein for further details.
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.
Annual Review of Directors’ Independence
The NC is also charged with determining
the “independence” status of the directors
annually. Please refer to pages 73 and 74
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 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 duties as a
director of the Company. Instead of fixing
a maximum number of listed company
board representation and/or other principal
commitments 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 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 director’s actual
In respect of FY 2018, 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 2018,
all the directors performed well. The NC was
therefore satisfied that in FY 2018, 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 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 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.
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 22 to 25: 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 111 and 112: 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. Mr Michael Lim, former Chairman,
PricewaterhouseCoopers and Land Transport
Authority, and currently Chairman of Nomura
Singapore Limited, was appointed for this
role. Mr Michael Lim does not have business
relationships or any other connections with
the Company or its directors which may
affect his independent judgement.
Formal Process and Performance Criteria:
The evaluation processes and performance
criteria are disclosed in the Appendix 1 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.
76
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, share-based incentives and
awards, benefits in kind and termination
payments) 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 2018, 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.
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 facilitate
their access to and review of board
materials. 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
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
Keppel Corporation Limited Report to Shareholders 2018
77
Governance
Corporate Governance
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 directors’ fee structure, which remained
unchanged from FY 2017, is set out in the
table below.
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.
(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 RC is of the view that the remuneration
of non-executive directors is appropriate
to their level of contribution, taking into
account factors such as effort, time spent
and responsibilities.
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.
The total remuneration structure reflects
the following four key objectives:
The 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 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.
(a) Shareholder Alignment: To incorporate
performance measures that are
aligned to shareholders’ interests
The RC exercises broad discretion
and independent judgement in ensuring
that the amount and mix of remuneration
Directors’ Fee Structure
Board Chairman
Board Member
Audit Committee
Board Risk Committee
Remuneration Committee
Board Safety Committee
Nominating Committee
78
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
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 Remuneration Committee
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:
(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;
(d) potential forfeiture of variable incentives
in any year due to misconduct; and
(e) requiring the executive director and
key management personnel to hold a
minimum number of shares under the
share ownership guideline.
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 2018.
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.
Keppel Corporation Limited Report to Shareholders 2018
79
Governance
Corporate Governance
Long-term Incentive Plans
KCL Share Plans
The KCL Share Plans are put in place 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 in
pages 113 to 115 and 149 to 151.
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 2018
The level and mix of each of the directors’
remuneration are set out below.
Remuneration of employees who are
immediate family members of a Director
or the CEO
No employee of the Company and its
subsidiaries was an immediate family
member of a director or the CEO and whose
remuneration exceeded $50,000 during the
financial year ended 31 December 2018.
“Immediate family member” means the
spouse, child, adopted child, step-child,
brother, sister and parent.
Base/Fixed
Salary
($)
Performance-Related
Cash Bonuses Earned1
($)
1,229,360
1,855,450
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Directors’ Total Fees2
($)
Cash
component4
Shares
component4
–
525,000
139,300
117,600
158,900
169,400
150,500
125,300
147,700
19,055
–
225,000
59,700
50,400
68,100
72,600
64,500
53,700
63,300
8,167
Benefits-
in-Kind
($)
Contingent
awards of shares3
($)
Total
Remuneration
($)
PSP
RSP
2,108,800
1,532,434
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
n.m.5
–
–
–
–
–
–
–
–
–
6,726,0446
750,000
199,000
168,000
227,000
242,000
215,000
179,000
211,000
27,222
Remuneration &
Name of Director
Loh Chin Hua
Lee Boon Yang
Tow Heng Tan
Alvin Yeo Khirn Hai
Tan Ek Kia
Danny Teoh
Tan Puay Chiang
Till Vestring
Veronica Eng
Jean-François Manzoni
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 2018 were met.
2 Based on the non-executive directors’ fee structure set out in Table 2, the total fees amount to $2,218,222. 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 30 April 2018, being the grant date for the
contingent awards under the KCL PSP, the estimated value of each share was $6.59. As at 15 February 2019, being the grant date for the contingent deferred shares award
under the KCL RSP, the estimated value of each share was $5.84. For the KCL PSP, the figures are based on the value of the PSP shares at 100% of the award and the figures
may not be indicative of the actual value at vesting which can range from 0% to 150% of the award.
4 The amounts stated may be adjusted as indicated on pages 78 and 79 of this report.
5 n.m. – not material
6 Total remuneration shown above for Mr Loh Chin Hua does not include vested share of carried interests for funds created during the time he was Managing Director at
Alpha Investment Partners. These carried interests are only earned at the end of the fund life and depends entirely on the actual performance of the funds after they have
been liquidated.
80
PSP and RSP Shares granted and vested for the Executive Director are shown below:
PSP
Awards
Vesting
Date
Contingent
Awards
of PSP
Shares
Number of
PSP Shares
Vested
Value of
PSP Shares
Vested
($)7
RSP
Awards
Vesting
Date
Contingent
Awards
of RSP
Shares
Number of
RSP Shares
Vested
Value of
RSP Shares
Vested
($)7
Name of
Executive Director
Loh Chin Hua
2015
Awards
28 Feb
2018
0 to 330,000
2016
Awards
28 Feb
2019
0 to 450,0008
28 Feb
2022
28 Feb
2020
0 to 1,125,0009
0 to 495,000
2017
Awards
2018
Awards
26 Feb
2021
0 to 480,000
0
–
–
–
–
0
–
–
–
–
2015
Awards
2016
Awards
26 Feb 2016
9 Mar 2017
28 Feb 2018
9 Mar 2017
28 Feb 2018
28 Feb 2019
2018
Awards
2019
Awards
28 Feb 2018
28 Feb 2019
28 Feb 2020
28 Feb 2019
28 Feb 2020
26 Feb 2021
150,000
180,000
272,352
262,403
50,000
50,000
50,000
60,000
60,000
–
265,500
337,500
393,500
405,000
472,200
–
90,784
–
–
714,470
–
–
–
–
–
–
–
–
Notes:
7 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 2018 were met.
8 Refers to contingent shares awarded under the KCL PSP.
9 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 2018 was $12,137,512. 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
Cash Bonuses Earned10
Benefits-
in-Kind
Contingent awards of shares
PSP
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, Christina11
Above $1,750,000 to $2,000,000
Ong Leng Yeow, Chris
Above $1,250,000 to $1,500,000
Pang Thieng Hwi, Thomas12
22%
19%
24%
26%
29%
27%
29%
24%
20%
31%
n.m.
n.m.
n.m.
n.m.
n.m.
29%
29%
32%
38%
9%
22%
23%
20%
16%
31%
Notes:
10 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
which their KPIs for FY 2018 were met.
11 Total remuneration shown above for Ms Tan Hua Mui, Christina does not include vested share of carried interests for funds created during the time she was 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.
12 On Keppel Telecommunications & Transportation Ltd (“KTT”) share based remuneration scheme for the PSP award. As at 30 April 2018, being the grant date, the estimated
value of each share granted in respect of the contingent awards under the KTT PSP was $1.15. Mr Thomas Pang is an eligible participant of the KTT share based remuneration
plan and the KCL RSP. Due to the on-going scheme of arrangement in respect of KTT, the decision on the grant of contingent share awards under any of such plans to
Mr Pang has been deferred until the conclusion of the scheme.
Keppel Corporation Limited Report to Shareholders 2018
81
Governance
Corporate Governance
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 113 to 115 and 149 to 151 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/annualreport2018/.
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 Audit Committee (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 the Board Risk Committee (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 two
years 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 pages 88 and 89 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 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 83 and 84
of this Annual Report.
KCL’s Group Internal Audit also conducts regular
reviews of the adequacy and effectiveness of
the Group’s material internal 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.
The AC met with the external auditors five
times, and with the internal auditors five
times during the year, and, in each case, 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 financial, operational, compliance
and IT risks of the Company. All significant audit
findings and recommendations put up by the
internal and the external auditors were reported
to the AC, and discussed at AC meetings.
The AC reviewed and approved the Group
external auditor’s audit plan for the year and
assessed the quality of the work carried out
by the external auditors in accordance with
the Audit Quality Indicators Disclosure
Framework published by the Accounting
and Corporate Regulatory Authority (ACRA),
and is satisfied with the performance.
Taking into account the requirements
under the Accountants Act (Chapter 2) of
Singapore, the AC 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 25 of the Notes
to the Financial Statements on page 174.
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 and
effectiveness of the internal audit function and
is satisfied that the team is independent and
adequately resourced, staffed with persons with
the relevant qualifications and experience, 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.
82
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
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 92 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 judgement 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 2018, the AC
reviewed the key areas of management’s
estimates and judgement applied for key
financial issues, including valuation and
assessment of impairment of assets,
recoverability of contract assets and stocks,
financial exposure in relation to contracts with
Sete Brasil, 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 2018.
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 contract assets and stocks,
as well as financial exposure in relation to
contracts with Sete Brasil, including expectation
of probable outcomes, assessment on whether
there was a potential for any additional provision
in relation to the corrupt payments or to the
matters described in sub-paragraph (2) on
page 86 of this Annual Report, as well as
estimates of the total costs and physical
proportion of work completed in determining
the stage 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.
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 Ek Kia
Independent Member
• Prof Jean-François Manzoni
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
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 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 fifth member is Prof Jean-François
Manzoni, who is currently the President (Dean)
and Nestlé Professor at the International
Institute for Management Development (IMD)
in Switzerland, where he is based. Prior to
re-joining IMD in 2016, he had served at
INSEAD’s Singapore campus where he
co-directed the International Directors
Program. He was also on the faculty of
INSEAD (Fontainebleau), where he founded
and directed the PwC Research Initiative on
High Performance Organisations.
The BRC considers the nature and extent
of the significant risks which the Company
may take in achieving its strategic objectives
and value creation; and 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 89 herein.
The Group’s approach to risk management
is set out in the “Risk Management” section
on pages 104 to 106 of this Annual Report.
The Group is guided by a set of Risk Tolerance
Guiding Principles, as disclosed on page 104.
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.
Keppel Corporation Limited Report to Shareholders 2018
83
Governance
Corporate Governance
KCL’s Group Internal Audit also conducts regular
reviews of the adequacy and effectiveness
of the Group’s material internal 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.
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 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 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, IT 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 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 FY 2018
At Keppel, integrity is a core value. As our
Code of Conduct states, “we care how results
are achieved, not just that they are attained”.
Implementing that core value through
enhancing our regulatory compliance process
and by reminding every Keppelite of that value
is a focus of attention for us, our boards, and
officers and line managers across the globe.
This section provides an overview of the
improvements and enhancements that have
been made to strengthen Keppel’s compliance
programme over the past year. Further details
of our compliance initiatives are set out on
pages 107 and 108 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 over
the past year to further enhance its internal
controls, policies and procedures:
(i) retained an independent consultant
and successfully attained ISO 37001
certification in November 2018 for the
Singapore operations of our wholly-
owned subsidiary, Keppel Offshore &
Marine Limited (“Keppel O&M”). Both the
independent consultant and certifying
authority have conducted additional
compliance and risk assessments and
recommended further enhancements of
Keppel O&M’s compliance programme;
Keppel’s System of Management Controls (KSMC)
Policies
4
Board Oversight
Board of Directors
3
Assurance
Business Unit
Representation
Internal
Audit
External
Audit
Management &
Assurance Frameworks
Self Assessment
Process
Enterprise Risk
Management
Regulatory
Compliance
IT Governance
Framework
P
r
o
c
e
s
s
e
s
Business Governance/
Rules of Governance
Core Values, Corporate & Employee Conduct
Policy
Management
Compliance
Governance
Operational
Governance
Financial
Governance
People
2
1
s
m
e
t
s
y
S
84
(ii) continuing to hire and integrate
professional and experienced compliance
officers in each business unit and to
increase the Group’s internal audit
headcount; and hired a Senior Legal &
Ethics counsel at the KCL level;
(iii) continued training in each business unit,
including focused ‘gate-keeper’ training
for finance personnel, compliance
training by external trainers for personnel
who are involved in compliance,
specialised compliance workshops on
doing business in specific jurisdictions
as well as continued training of senior
management within the Group;
(iv) rolled out and implemented a new
Solicitations and Extortions Policy to
provide guidance to employees on how to
avoid and resist such types of improper
payments, and enhanced the Group’s
Gifts and Hospitality Policy to address
among others the area of customer travel;
(v) simplified and consolidated various
policies into user-friendly documents, such
as with the introduction of the Group’s
Global Anti-Bribery Policy as a single plain
language reference guide for all Keppel
employees, and a stand-alone document
specifying the Group’s due diligence
procedures with respect to intermediaries;
(vi) regular messaging by the Group’s and
each business unit’s senior management
stressing the importance of compliance;
(vii) regular discussions of compliance
issues and matters at meetings of senior
management, core functions, and board
(or board committee) levels;
(viii) enhancements to the Group’s due
diligence procedures with respect to
intermediaries including, at Keppel O&M,
having its board of directors, in addition
to Keppel O&M board’s audit and risk
committee, review the due diligence
procedures relating to Keppel O&M’s
commercial agents (i.e., third parties
retained to assist Keppel O&M in
obtaining business);
(ix) conducted special compliance audits
by Group Internal Audit on Keppel O&M’s
Singapore operations, as well as its
Brazilian and U.S. operations; and
additional reporting channels has been
outsourced to a third party (KPMG). Further
details of our Whistle-Blower Policy are
set out on page 92 of this Annual Report.
The Group’s Enhanced
Compliance Programme
The Group’s enhanced compliance
programme also includes the following:
(i) a compliance governance structure that
is overseen by 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;
(ii) 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;
(iii) the 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
Chief Financial Officer (CFO) of the
Company; and
(iv) an enhanced Whistle-Blower Policy with
centralised procedures and established
local toll-free whistle-blower hotlines for
Singapore, Brazil, China, USA, Vietnam,
Indonesia, Philippines, Australia, UK and
Germany respectively.
The Group’s compliance programme is and
will be subjected to a periodic review to ensure
it meets the following standards, i.e. that:
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.
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;
(f) facilitation payments; and
(g) solicitation and extortion.
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.
ii.
transactions are performed in
accordance with the Group’s
general guidelines or
specific authorisation;
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 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.
(x) enhancements to our Whistle-Blower
2. Policies and Procedures
Policy with centralised procedures and
established additional whistle-blower
reporting channels, including an email
hotline, local toll-free whistle-blower
hotlines for Singapore, Brazil, China, U.S.,
Vietnam, Indonesia, Philippines, Australia,
UK and Germany respectively, and an online
reporting portal. The manning of these
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
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
Keppel Corporation Limited Report to Shareholders 2018
85
Governance
Corporate Governance
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 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 annual e-training for directors,
officers and employees; and
(b) corresponding certifications by
such senior management members
(including directors), employees, agents
and business partners, acknowledging
their understanding of policies and
conformity with training requirements.
5. Internal Reporting, Communication
and Investigation
The Group maintains a 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 whistle-blower
and investigation subjects.
The Group maintains a 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.
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
86
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 CFO, Mr Chan Hon
Chew, that except for the matters described
in sub-paragraph (2) below, 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 2018, except for the
matters described in sub-paragraph (2)
below, 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 2018, except
for the matters described in sub-paragraph
(2) below, 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.
(1) As part of the global resolution with the
authorities, the Group has committed
to strengthening the compliance and
governance regime in Keppel O&M.
Amongst others, it included a commitment
to secure certification of ISO 37001
Anti-Bribery Management System and
testing of the effectiveness of the policies
and procedures put in place. In November
2018, Keppel O&M’s entities in Singapore
achieved certification for the ISO 37001
Anti-Bribery Management System.
(2) Anti-bribery and corruption compliance
audits were also performed during the
year on entities within the Keppel O&M
Group. These audits revealed that the
enhanced policies and procedures put in
place to-date were, in general, functioning
as intended in the current year. The audits
did, however, identify certain matters
relating to contracts entered into several
years ago which require follow-up actions
and further review. Notwithstanding,
based on currently available information,
management is of the opinion that no
additional provisions would be required
in relation to these matters.
(3) With the Group’s enhanced compliance
programme in place as part of the global
resolution, there is reasonable assurance
that the current internal controls are
adequate and effective.
(4) The Group reiterates its zero tolerance for
bribery and corruption and its commitment
to continue to review its compliance
measures and put in place effective
and robust compliance and governance
regimes to ensure that the Group
secures business legally and ethically.
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 judgement
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 International Professional Practices
Framework 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 for the Professional
Practice of Internal Auditing. Group Internal
Audit staff performs 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.
The purpose, authority, and responsibility of
Group Internal Audit is formally defined in an
internal audit charter, which is approved by
the AC. The internal audit charter establishes
Group Internal Audit’s position within the
organisation, including the nature of its
functional reporting relationship with the AC;
authorises access to records, personnel, and
physical properties relevant to the performance
of engagements; and defines the scope of
internal audit activities. The Charter mandates
Group Internal Audit to maintain a quality
assurance and improvement programme
that covers all aspects of the internal audit
activity, including the evaluation of its
conformance with the Standards, and an
evaluation of whether internal auditors
apply the IIA’s Code of Ethics.
During the year, Group Internal Audit adopted
a risk-based auditing approach that focuses
on key risks, including financial, operational,
compliance and IT 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 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 Control & Accounts 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
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,
and sets out the mechanism through which
shareholders may contact the Company with
questions and through which the Company
may respond to such questions.
The Company’s mobile-friendly website is
regularly updated with the latest information.
These include latest updates on business
and operations, quarterly financial statements
and dividend information, 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.
The Company employs various platforms
to effectively engage 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, email
communications, publications and content
on the Company’s corporate website, as well
as through facility visits, where shareholders
may raise any queries or concerns that they
may have. In addition, senior management
meets investors, analysts and the media, as
well as travels on roadshows, and participates
in selected conferences organised by major
brokerage firms to solicit and understand
the views of the investment community.
In FY 2018, the Company hosted about
216 meetings and conference calls with
institutional investors, including several
facility visits to its residential and commercial
properties in China and Vietnam. Management
also traveled on non-deal roadshows to meet
overseas investors in the United States, the
United Kingdom, Japan and Hong Kong.
Keppel Corporation Limited Report to Shareholders 2018
87
Governance
Corporate Governance
The Company engages retail shareholders at
the general meeting. In addition, the Company
has, since 2017, been collaborating with the
Securities Investors Association (Singapore)
(SIAS) to hold briefings for retail shareholders.
In 2018, senior management briefed about
120 retail shareholders on the Company’s
strategy and performance.
All materials presented on these occasions
are also made available on the SGXNET and
the Company’s website in a timely manner,
to ensure fair disclosure of information for
the benefit of all shareholders.
The Company’s general meetings are
held in central locations which are easily
accessible by public transportation,
ensuring that shareholders have the
opportunity to participate effectively and
vote at shareholders’ meetings. Shareholders
are informed of the 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/she is allowed to appoint up to two
proxies to vote on his/her 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 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.
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. However, where the issues
88
are interdependent and linked so as to
form one significant proposal, the Company
may propose “bundled resolutions” and
will set out the reasons and material
implication 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 shareholders’ meetings. External auditors
are also present at such meetings to assist
the directors to address shareholders’
queries, if necessary.
The constitution of the Company allows
for absentia voting at general meetings.
However, the Company is not implementing
absentia voting methods such as voting
via mail, email 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.
The Company is committed to rewarding
shareholders fairly and sustainably, while
balancing the payment of dividends with
its capital requirements to ensure that the
best interests of the Company are served.
While it does not have a formal dividend
policy, the Company has a consistent track
record of distributing about 40 to 50% of its
annual net profit as dividends. 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. For FY 2018, the Company will be
paying out a total cash dividend of 30.0 cents
per share to shareholders. Excluding the
special cash dividend of 5.0 cents per share
distributed in August 2018 to celebrate
the Company’s 50th anniversary, the total
dividend for FY 2018 represented a payout
ratio of 48%.
The Company has identified and prioritised
its material environmental, social and
governance issues. An overview of the
Company’s approach to sustainability
management can be found on pages 36 to
39 of this Annual Report. More details on
Keppel Corporation’s sustainability
management and materiality approach
will be made available through a separate
Sustainability Report published by the
Company annually in May.
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 1
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 judgements contained in them, for
better assurance of the integrity of
such statements and announcements.
1.2 Review and report to the Board at
least annually the adequacy and
effectiveness of the Group’s internal
controls, including financial, operational,
compliance and IT 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 taken by management on the
recommendations and observations.
1.4 Review the scope and results of the
external audit and independence and
objectivity of the external auditors.
1.5 Review the nature and extent of
non-audit services performed by the
external auditors, to ensure their
independence and objectivity.
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
removal of the external auditors, and
approve the remuneration and terms
of engagement of the external auditors.
1.8 Review the adequacy and effectiveness
of the internal audit function, at
least annually.
1.9 Ensure that the internal audit function
is adequately resourced and has
appropriate standing within the
Company, at least annually.
1.17 Ensure that the internal auditors and
external auditors have direct and
unrestricted access to the Chairman
of the Committee.
1.18 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 Risk Committee
B.
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.
1.10 Approve the hiring, removal evaluation
and compensation of the head of
internal audit, or the accounting/
auditing firm or corporation to which
the internal audit function is outsourced.
1.3 Receive and review quarterly reports
from Management on major risk
exposures and the steps taken to
monitor, control and mitigate
such risks.
1.11 Review the Company’s procedures
1.4 Review the Group’s capability to
for detecting fraud, its whistle-blower
policy, the 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
to ensure they are on normal
commercial terms and are not
prejudicial to the interests of the
Company or its minority shareholders.
1.13 Investigate any matters within the
Committee’s purview, whenever it
deems necessary.
identify and manage new risk types.
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.
1.14 Report to the Board on material
1.8 Review and monitor Management’s
1.10 Review the Committee’s terms of
reference annually and recommend
any proposed changes to the Board.
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.
1.12 Perform such other functions as the
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
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.
1.4 Decide, where a director has other
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.
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.
matters, findings and recommendations.
1.15 Review the Committee’s terms of
reference annually and recommend
any proposed changes to the Board
for approval.
1.16 Perform such other functions as the
Board may determine.
responsiveness to the risks and matters
identified and recommendations of
the Group Risk and Compliance
department.
1.6 Annual assessment of the
effectiveness of the Board as a
whole and individual directors.
1.9 Provide timely input to the Board
1.7 Review the succession plans for the
on critical risk and compliance
issues, material matters, findings
and recommendations.
Board (in particular, the Chairman)
and senior management (in particular,
the CEO).
Keppel Corporation Limited Report to Shareholders 2018
89
Governance
Corporate Governance
1.8 Review talent development plans.
1.9 Review the training and professional
development programmes for
Board members.
1.10 Review and, if deemed fit, approve
recommendations for nomination 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;
(ii) managers or trustee-managers of
any collective investment schemes,
business trusts, or any other trusts
which are listed on the Singapore
Exchange or any other stock
exchange; and
(iii) parent companies of the Company’s
core businesses which are unlisted.
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.
1.5 Report to the Board on material
matters and recommendations.
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 Ensure a process is in place to have
fatalities and other major incidents
investigated by an independent and
competent team.
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 Review the Committee’s terms
1.6 Ensure that each Group company
1.11 Report to the Board on material
matters and recommendations.
of reference annually and recommend
any proposed changes to the Board.
1.7 Perform such other functions as the
1.12 Review the Committee’s terms of
Board may determine.
reference annually and recommend
any proposed changes to the Board.
1.13 Perform such other functions as the
Board may determine.
1.14 Sub-delegate any of its powers within
its terms of reference as listed above,
from time to time as this Committee
may deem fit.
Remuneration Committee
D.
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
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.
Board Safety Committee
E.
1.1 Ensure there is a set of Group 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
complies with HSE legislation in the
country in which it operates as a
minimum and review any emerging or
new legislations that may potentially
impact the Group company.
1.7 Keep abreast of developments in the
HSE world, discuss such developments
and best practices and consider the
desirability of implementation in
the Group.
1.8
Introduce actions to enhance safety
awareness and culture within the Group.
1.9 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.
1.10 Review the major changes to HSE risk
profile of each Group company that has
changed or will change as a result of
new business, new market, new product,
etc. and the steps taken to monitor,
control and mitigate such risks.
Nature of Current Directors’ Appointments and Membership on Board Committees
Committee Membership
Director
Board Membership
Audit
Nominating
Remuneration
Risk
Safety
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
Jean-François Manzoni
Chairman
Chief Executive Officer
Non-Independent & Non-Executive
Independent
Independent
Independent
Independent
Independent
Independent
Independent
–
–
–
Member
Member
Chairman
–
–
Member
–
Member
–
Member
Member
–
–
Chairman
Member
–
–
Member
–
Member
–
–
Member
–
Chairman
–
–
–
–
Member
–
Member
Member
–
–
Chairman
Member
Member
Member
–
–
Chairman
–
Member
–
–
–
90
Keppel’s Board Safety
Committee regularly
conducts site visits to the
Group’s operations such
as the Keppel Marina
East Desalination Plant
in Singapore.
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 directly 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 IC 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 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
judgement, 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 email,
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
Keppel Corporation Limited Report to Shareholders 2018
91
Governance
Corporate Governance
proper procedures to ensure the effective
functioning of the Board, whether he
ensured that the time devoted to board
meetings were appropriate (in terms of
number of meetings held a year and
duration of each board meeting) for
effective discussion and decision making
by the Board, whether he ensured that
information provided to the Board was
adequate (in terms of adequacy and
timeliness) for the Board to make informed
and considered decisions, whether he
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.
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
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
92
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.
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 directly
to the Receiving Officer or the AC Chairman,
or via the whistle-blower reporting channels
that the Group has established. There is an
email hotline (kpmgethicsline@kpmg.com)
and local toll-free numbers in Singapore,
Brazil, China, USA, Vietnam, Indonesia,
Philippines, Australia, UK and Germany.
Manning of the whistle-blower hotline has
been outsourced to a third party (KPMG)
and provides for reporting in the languages
listed above. KPMG also maintains the
aforementioned email hotline and an
on line portal, the link to which is available
on the “Contact Us” section of the
Company’s website at www.kepcorp.com.
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.
Investigation
Every Protected Report (referring to a report
made in good faith that discloses suspected
Reportable Conduct) received will be
assessed by the Receiving Officer, who will
review the information disclosed, interview
the Whistle-Blower(s) when required and if
contactable and, either exercising her own
discretion or in consultation with the
Investigation Advisory Committee, make
recommendations to the AC Chairman as
to whether the circumstances warrant an
investigation. If the AC Chairman or the AC
(if the AC Chairman consults the other AC
members), determines that an investigation
should be carried out, the AC Chairman or
the AC (as the case may be) shall determine
the appropriate investigative process to be
employed and the corrective or remedial
actions (if any) to be taken. The AC Chairman
and the Investigation Advisory Committee
(if consulted) will use their respective best
endeavours to ensure that there is no
conflict of interests on the part of any
person involved in the investigations.
The Investigation Advisory Committee
(comprising of representatives from each
of the Group HR, Group Legal and Group Risk
& Compliance departments), or such other
representatives as the AC mat determine)
assists the AC Chairman with overseeing
the investigation process and any matters
arising therefrom.
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-Blowers, 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 or she has
cooperated as a Whistle-Blower or a witness
in determining the suitable disciplinary
measure to be taken against him/her.
Appendix 2
Rule 720(6) of the Listing Manual of the SGX-ST
The information required under Rule 720(6) read with Appendix 7.4.1 of the Listing Manual in respect of Directors whom the Company is
seeking re-election by shareholders at the annual general meeting to be held in 2019 is set out below.
Name of Director
Date of Appointment
Alvin Yeo
1 June 2009
Tan Ek Kia
Loh Chin Hua
Jean-François Manzoni
1 October 2010
1 January 2014
1 October 2018
Date of last re-appointment (if applicable)
19 April 2016
19 April 2016
19 April 2016
Age
57
70
57
N.A.
57
Country of principal residence
Singapore
Singapore
Singapore
Switzerland
The process for succession planning for the Board, appointment of directors, and the re-nomination
and re-election of Directors to the Board, is set out in pages 73 to 76 of this Annual Report.
Non-executive
Non-executive
Executive
Non-executive
The Board’s comments on this appointment
(including rationale, selection criteria, and the
search and nomination process)
Whether the appointment is executive, and if so,
the area of responsibility
Job Title (e.g. Lead ID, AC Chairman,
AC Member etc.)
Professional qualifications
Non-executive and
Independent Director;
Audit Committee
(Member); Nominating
Committee (Member)
LLB Honours, King’s
College London;
University of London
Gray’s Inn (Barrister-
at-Law);
Senior Counsel,
Singapore
Working experience and occupation(s) during
the past 10 years
2007 to Present
Chairman &
Senior Partner,
WongPartnership LLP
Non-executive and
Independent Director;
Board Safety
Committee (Chairman);
Board Risk Committee
(Member); Audit
Committee (Member)
BSc Mech Eng
(First Class Hons),
Nottingham University,
UK; Management
Development
Programme,
International Institute
for Management
Development Lausanne,
Switzerland; Fellow of
the Institute of
Engineers, Malaysia
Chartered Engineer of
Engineering Council, UK;
Member of Institute of
Mechanical Engineer, UK
Non-executive
directorship role in
various companies and
full time executive as
interim CEO of SMRT
Corporation Ltd in
year 2012.
Executive Director
and Chief Executive
Officer; Board Safety
Committee (Member)
Non-executive and
Independent Director;
Board Risk Committee
(Member)
Bachelor in Property
Administration,
Auckland University;
Presidential Key
Executive MBA,
Pepperdine University;
CFA® charterholder
DBA, Harvard Business
School, Boston;
MBA, McGill University,
Montreal ; Bachelor,
Business Administration;
l’Ecole des Hautes
Etudes Commerciales
de Montréal; Fellow of
the Singapore Institute
of Directors
1 Jan 2014 to Present:
Chief Executive Officer,
Keppel Corporation
2016 to Present:
IMD (the International
Institute for Management
Development) Switzerland
1 Jan 2012 to 31 Dec
2013: Chief Financial
Officer, Keppel
Corporation
19 Sep 2011 to Present:
Chairman, Alpha
Investment Partners
Limited
2011 to 2016:
INSEAD Singapore
Shell Chair in Human
Resources and
Organisational
Development and
Professor of
Management Practice
1 May 2003 to 31 Dec
2011: Managing
Director, Alpha
Investment Partners
Limited
2004 to 2010:
IMD Singapore,
Professor of Leadership
and Organisational
Development
Shareholding interest in the listed issuer and
its subsidiaries
44,225 (direct interests)
and 42,000 (deemed
interests)
42,825 (direct interests) 1,310,592 (direct
Nil
interest) and 38,500
(deemed interest)
Any relationship (including immediate family
relationships) with any existing director, existing
executive officer, the issuer and/or substantial
shareholder of the listed issuer or of any of its
principal subsidiaries
Conflict of interest (including any
competing business)
Undertaking (in the format set out in Appendix 7.7)
under Rule 720(1) has been submitted to the
listed issuer
No
No
Yes
No
No
Yes
No
No
Yes
No
No
Yes
Keppel Corporation Limited Report to Shareholders 2018
93
Governance
Corporate Governance
Appendix 2
Rule 720(6) of the Listing Manual of the SGX-ST
Name of Director
Alvin Yeo
Tan Ek Kia
Loh Chin Hua
Jean-François Manzoni
Other Principal Commitments including
Directorships
– Past (for the last 5 years)
Singapore Land
Limited; Tuas Power
Ltd; Thomson Medical
Pte. Ltd.
CitySpring
Infrastructure
Management Pte Ltd
(as Trustee-Manager of
CitySpring Infrastructure
Trust); City Gas Pte Ltd
Singapore Civil
Service College
KrisEnergy Ltd;
Keppel REIT
Management Limited
(Manager of Keppel
REIT); Various fund
companies under
management of
Alpha Investment
Partners Limited
IMD Foundation Board;
Association to Advance
Collegiate Schools of
Business (AACSB)
International
KrisEnergy Ltd (Chairman);
PT Chandra Asri
Petrochemical Tbk;
Transocean Ltd; SMRT
Corporation Ltd;
Keppel Offshore &
Marine Ltd; Star Energy
Group Holdings Pte Ltd
(Chairman); Dialog
Systems (Asia) Pte Ltd;
Singapore LNG
Corporation Pte Ltd
Keppel
Telecommunication &
Transportation Ltd
(Chairman); Keppel
Offshore & Marine Ltd
(Chairman); Keppel
Land Limited (Chairman);
Keppel Infrastructure
Holdings Pte. Ltd.
(Chairman); Keppel
Capital Holdings Pte.
Ltd. (Chairman); Keppel
Care Foundation Limited
No
No
No
Other Principal Commitments including Directorships
– Present
United Industrial
Corporation Limited;
United Overseas Bank
Limited; Valencia C.F
(k) Whether he has been the subject of any
current or past investigation or disciplinary
proceedings, or has been reprimanded or
issued any warning, by the Monetary Authority
of Singapore or any other regulatory authority,
exchange, professional body or government
agency, whether in Singapore or elsewhere?
Yes
Mr Yeo is the subject
of an investigation
by the Law Society/
disciplinary tribunal
in relation to
WongPartnership’s
representation of an
elderly individual, in
Court proceedings
brought by family
members to appoint
Deputies to take
charge of her assets,
which were ultimately
granted by the Court.
The investigation
is ongoing.
Any prior experience as a director of an issuer
listed on the Exchange?
Yes
Yes
Yes
No
Please see above
in relation to Other
Principal Commitments
including Directorships
(both Past and Present)
Please see above in
relation to Other
Principal Commitments
including Directorships
(both Past and Present)
Please see above in
relation to Other
Principal Commitments
including Directorships
(both Past and Present)
Please see above in
relation to Other
Principal Commitments
including Directorships
(both Past and Present)
N.A.
N.A.
N.A.
N.A.
If yes, please provide details of prior experience.
If no, please state if the director has attended
or will be attending training on the roles and
responsibilities of a director of a listed issuer
as prescribed by the Exchange.
Please provide details of relevant experience
and the nominating committee’s reasons for
not requiring the director to undergo training
as prescribed by the Exchange (if applicable).
94
Code of Corporate Governance 2012
Guidelines for Disclosure
Guideline
General
Questions
How has the Company complied?
(a) Has the Company complied with all the
Yes.
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
N.A.
corporate governance practices achieve
the objectives of the principles and
conform to the guidelines in the Code?
Board Responsibility
Guideline 1.5
What are the types of material transactions
which require approval from the Board?
Members of the Board
Guideline 2.6
(a) What is the Board’s policy with
regards 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.
(c) What steps has the Board taken to achieve
the balance and diversity necessary to
maximise its effectiveness?
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.
All transactions exceeding $150 million by any Group company (not separately
listed) require the approval of the Board. For transactions between $30 million
and $150 million, IMPAC will determine if Board approval is required,
depending on the individual considerations for each case.
The Nominating Committee (NC) reviews annually the balance and mix
of skills, knowledge, experience, and other aspects of diversity such as
gender and age, 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 mix of skills,
knowledge, experience, and other aspects of diversity such as gender and
age. The NC is also satisfied that the directors, as a group, possess core
competencies including 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.
There is a process of refreshing the Board progressively.
See Guideline 4.6 below on process for nomination of new directors and
Board succession planning.
For new directors
(a) The NC reviewed the balance and mix of skills, knowledge, experience,
and other aspects of diversity such as gender and age, and the size of
the Board which would facilitate decision-making. In this review, the NC
also took into account the needs of the Group, the collective skills and
competencies of the Board and service tenure spread of the directors.
In the year under review (FY 2018), for purposes of Board succession
planning, the NC also took into consideration the 2018 CG Code and the
amendments to the SGX Listing Rules relating to the continued
appointment as “independent directors” of a director who has served for
an aggregate period of more than nine years, bearing in mind that these
rules would come into effect from 1 January 2022.
(b) In the light of such review and in consultation with management, the NC
assessed 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 met 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.
(d) NC made recommendations to the Board for approval.
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 him/herself for re-election at the annual general
meeting immediately following his/her 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.
Keppel Corporation Limited Report to Shareholders 2018
95
Governance
Corporate Governance
Code of Corporate Governance 2012
Guidelines for Disclosure
Guideline
Questions
How has the Company complied?
Guideline 1.6
(a) Are new directors given formal training?
Yes, all new directors undergo a comprehensive orientation programme.
If not, please explain why.
(b) What are the types of information and
training provided to (i) new directors and
(ii) existing directors to keep them
up-to-date?
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.
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?
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.
Sites 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 and/or other principal commitments 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 director’s 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 91 of the Corporate Governance Report.
(b) Has the Board met its performance
Yes.
objectives?
96
Code of Corporate Governance 2012
Guidelines for Disclosure
Guideline
Questions
How has the Company complied?
Independence
of Directors
Guideline 2.1
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.
Yes.
Guideline 2.3
(a) Is there any director who is deemed to be
Yes.
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.
Guideline 2.4
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.
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, and he is also the independent non-executive chairman of
KrisEnergy Ltd which has an IPT framework agreement with the Company
and its subsidiaries.
Mr Alvin Yeo had declared to the NC that although he is a partner with a
5% or more stake in WongPartnership LLP, he did not involve himself in the
selection and appointment of legal advisers for the Group, and that he
supported the selection of legal advisers based on assessment of quality,
and for their remuneration to be based on market rate. In addition, the NC
noted that Keppel Infrastructure (KI) management had, of their own accord,
appointed Mr Yeo as lead counsel to represent KI in its arbitration proceedings
with the State of Qatar in relation to the Doha South Waste Management
Centre project, based on merit and taking into consideration the complexity
of the matter. Taking these factors into consideration together with Mr Yeo’s
comments, along with his active participation and actual performance on
the Board and board committees in the discharge of his duties, his valuable
contributions to the Board and board committees, and the outcome of the
recent self and peer Individual Director Performance assessment, the NC
unanimously agreed that Mr Yeo has at all times exercised independent
judgement 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 (i) he was not involved in the
negotiation of contracts or business dealings between TransOcean with the
Keppel Offshore & Marine Group, and (ii) the IPT framework agreement with
KrisEnergy is renewed annually by a vote of the independent shareholders
of KrisEnergy and he abstains from making any recommendations to the
board and shareholders of KrisEnergy and from voting in respect of such
agreement. The NC also took into account Mr Tan’s active participation
and actual performance on the Board and board committees, his valuable
contributions to the Board and board committees and the outcome of the
recent self and peer Individual Director Performance assessment, and
unanimously agreed that Mr Tan has at all times exercised independent
judgement 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.
Yes. Dr Lee Boon Yang and Mr Alvin Yeo have both served beyond nine years
since their respective first appointments.
In relation to Dr Lee, taking into consideration, among other things, his active
participation and actual performance on the Board and board committees in
the discharge of his duties, his valuable contributions to the board and board
committees and leadership as Chairman, and the outcome of the recent
self and peer Individual Director Performance assessment, the NC agreed
unanimously that Dr Lee has at all times exercised independent judgement
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.
In relation to Mr Alvin Yeo, please see above the NC’s reasons for
considering him independent.
Keppel Corporation Limited Report to Shareholders 2018
97
Governance
Corporate Governance
Code of Corporate Governance 2012
Guidelines for Disclosure
Guideline
Questions
How has the Company complied?
Disclosure on
Remuneration
Guideline 9.2
Yes.
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?
Guideline 9.3
(a) Has the Company disclosed each key
Yes.
management personnel’s remuneration, in
bands of $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).
Aggregate remuneration paid to top five key management personnel:
$12,137,512
Guideline 9.4
Guideline 9.6
Is there any employee who is an immediate
family member of a director or the CEO,
and whose remuneration exceeds $50,000
during the year? If so, please identify the
employee and specify the relationship with
the relevant director or the CEO.
(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?
No.
The total remuneration mix comprises three 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 RC is satisfied that the quantum of performance-related bonuses
and the value of shares vested under the KCL PSP and RSP to the senior
executive directors, executive director and key management personnel was
fair and appropriate taking into account the extent to which their KPIs and
performance conditions for FY 2018 were met.
Please refer to pages 78 to 81 of the Corporate Governance Report for
more details.
98
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. The Board also reviews the budget on an annual basis,
and any material variance between the projections and actual results would
be disclosed and explained.
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. Directors are also entitled to request from
management, and would be provided with, such additional information
as may be needed from time to time in order to make informed decisions.
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
Guideline 11.3
Does the Company have an internal audit
function? If not, please explain why.
Yes.
(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 and
Board Risk Committee.
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 Board Risk Committee has concurred with this view.
Keppel Corporation Limited Report to Shareholders 2018
99
Governance
Corporate Governance
Code of Corporate Governance 2012
Guidelines for Disclosure
Guideline
Questions
Guideline 11.3
(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?
How has the Company complied?
Yes. The Board has received assurance from the CEO and the CFO on points
(i) and (ii), except for the matters described in sub-paragraph (2) below. The
Board received assurance from the external auditor on the adequacy and
effectiveness of the Company’s internal control systems.
(1) As part of the global resolution with the authorities, the Group has
committed to strengthening the compliance and governance regime in
Keppel O&M. Amongst others, it included a commitment to secure
certification of ISO 37001 Anti-Bribery Management System and
testing of the effectiveness of the policies and procedures put in place.
In November 2018, Keppel O&M’s entities in Singapore achieved
certification for the ISO 37001 Anti-Bribery Management System.
(2) Anti-bribery and corruption compliance audits were also performed
during the year on entities within the Keppel O&M Group. These audits
revealed that the enhanced policies and procedures put in place
to-date were, in general, functioning as intended in the current year.
The audits did, however, identify certain matters relating to contracts
entered into several years ago which require follow-up actions and
further review. Notwithstanding, based on currently available
information, management is of the opinion that no additional
provisions would be required in relation to these matters.
(3) With the Group’s enhanced compliance programme in place as part of
the global resolution, there is reasonable assurance that the current
internal controls are adequate and effective.
(4) The Group reiterates its zero tolerance for bribery and corruption and
its commitment to continue to review its compliance measures and
put in place effective and robust compliance and governance regimes
to ensure that the Group secures business legally and ethically.
Guideline 12.6
(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.
The Group’s estimated audit fees payable to the external auditors of the
Company and other auditors of subsidiaries for FY 2018 is $5,122,000.
The Group’s non-audit services fees paid to external auditors of the
Company and other auditors of subsidiaries amounted to $640,000.
(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.
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.
100
Code of Corporate Governance 2012
Guidelines for Disclosure
Guideline
Questions
Communication
with Shareholders
How has the Company complied?
Guideline 15.4
(a) Does the Company regularly communicate
Yes.
with shareholders and attend to their
questions? How often does the Company
meet with institutional and retail investors?
In FY 2018, the Company hosted about 216 meetings and conference calls
with institutional investors, including several facility visits to its residential
and commercial properties in China and Vietnam. Management also
traveled on non-deal roadshows to meet overseas investors in the
United States, the United Kingdom, Japan and Hong Kong. Such meetings
provide useful platforms for management to engage with investors and
analysts. In addition, the Company engaged retail shareholders through a
Briefing to Retail Shareholders, organised with SIAS, during which senior
management briefed about 120 retail shareholders on the Company’s
strategy and performance.
(b) Is this done by a dedicated investor
relations team (or equivalent)? If not,
who performs this role?
This role is performed by Group Communications Department
(with assistance from the Group Control & Accounts and Group Legal
departments, where required).
(c) How does the Company keep shareholders
informed of corporate developments, apart
from SGXNET announcements and the
annual report?
The Company employs various platforms to effectively engage
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,
email communications, publications and content on the Company’s
corporate website, as well as through facility visits, where shareholders
may raise any queries or concerns that they may have. The Company
also attends selected conferences and overseas non-deal roadshows to
engage institutional investors and shareholders. The Company engages
retail shareholders at the general meeting. In addition, the Company has,
since 2017, been collaborating with SIAS to hold briefings for retail
shareholders. All materials presented on these occasions are also made
available on the SGXNET and the Company’s website in a timely manner,
to ensure fair disclosure of information for the benefit of all shareholders.
In addition to shareholder meetings, senior management meets investors,
analysts and the media, as well as travels on roadshows, and participates
in selected conferences organised by major brokerage firms 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.
Keppel Corporation Limited Report to Shareholders 2018
101
Governance
Corporate Governance
Code of Corporate Governance 2012
Specific Principles and Guidelines for Disclosure
Relevant Guideline or Principle
Guideline 1.3
Delegation of authority, by the Board to any board committee, to make decisions on certain board matters
Guideline 1.4
The number of 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 directors
Page Reference in this Report
Page 71
Page 73
Page 73
Page 73
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
Pages 73 and 74
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.
Pages 73 and 74
Guideline 3.1
Relationship between the Chairman and the CEO where they are immediate family members
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
Guideline 4.4
The maximum number of listed company board representations which directors may hold should be disclosed
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
N.A.
Pages 75, 89 and 90
Page 96
Pages 75 and 76
Pages 22 to 25
Pages 91 and 92
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 77 and 90
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
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)
Page 77
Pages 77 to 81
Pages 77 to 81
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
Page 80
102
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 $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 81
Guideline 9.4
Details of the remuneration of employees who are immediate family members of a director or the CEO, and whose
remuneration exceeds $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 $50,000
Page 80
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 113 to 115 and
149 to 151
Pages 78 to 81
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 83 to 87
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
Pages 82, 88 and 89
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
Pages 82 and 100
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
Page 92
Pages 82 and 83
Page 82
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
Pages 87 and 88
Guideline 15.5
Where dividends are not paid, companies should disclose their reasons.
N.A.
Keppel Corporation Limited Report to Shareholders 2018
103
Ownership &
Accountability
Leadership
& Governance
Transparency
& Competency
Risk-Centric
Culture
Framework
& Values
Training &
Communications
Process &
Methods
Governance
Risk Management
We maintain a balanced
approach to risk management,
undertaking only appropriate
and well-considered risks
to optimise returns for
our shareholders.
As an enterprise that seeks to deliver
solutions for sustainable urbanisation,
Keppel adopts a balanced approach to risk
management, undertaking only appropriate
and well-considered risks to optimise returns
for our shareholders. Keppel’s risk management
approach stems 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. It is consistent with our
operating principles and belief that a holistic
approach of balancing risks and rewards
is key to delivering long-term value and
growth for our shareholders.
In 2018, we continued a disciplined pursuit
of new opportunities, innovation and
revenue streams to safeguard shareholders’
interests 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 and shifting business demands
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
3. Process & Methods
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 Group’s framework and process, the
appropriate tools, techniques and risk
management methodologies are applied,
along with the requisite domain knowledge
capabilities, in making decisions.
4. Training & Communications
Training and communications are
conducted regularly to enhance risk
management 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.
Through the Board Risk Committee (BRC),
the Board provides valuable advice to
management in formulating and implementing
the risk management framework, policies
and guidelines. Keppel’s management
surfaces significant risk issues for discussion
with the BRC and the Board to keep them
apprised of key issues in a timely manner.
The terms of reference for the BRC are
disclosed on page 89 of this report. The Board
has defined three risk tolerance guiding
principles for the Group, which serves to
determine the nature and extent of the
significant risks which the 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.
Our management is fully committed to
fostering a strong risk-centric culture and
consistently demonstrate 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.
5. Transparency & Competency
We promote transparency in information
sharing and escalation of risk-related
matters. Risk identification and assessment
are embedded in key control processes.
A Group-wide survey is conducted
periodically to assess risk awareness
amongst employees.
2. Framework & Values
When considering risks in daily
activities, the Group’s management
and staff are guided by our Enterprise
Risk Management (ERM) framework;
our core values of integrity, accountability,
people centredness and safety, as well
as our mission and vision to responsibly
deliver sustainable urbanisation solutions
in our chosen markets.
6. Ownership & Accountability
To maintain our standards in risk
management, we advocate ownership and
accountability through the employee
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.
Keppel’s risk governance framework, set out
on pages 83 to 87 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
104
the Group operates and constantly enhance the
framework and systems where necessary, to
ensure strong risk governance across the Group.
Keppel’s ERM framework, a component of
Keppel’s System of Management Controls,
provides the Group with a systematic approach
to risk management. It outlines the reporting
structure, monitoring mechanisms, processes
and tools, as well as policies and limits,
applied in addressing the Group’s key risks.
Our ERM framework is constantly refined to
ensure it remains relevant in our operating
environment and where required, is tailored
to the requirements of each business unit
(BU) depending on specific industry practices
and objectives. The framework takes reference
from the Singapore Code of Corporate
Governance, ISO 31000, ISO 22313 and the
Guidebook for Board Risk Committees.
Our Risk and Compliance Committee, comprising
relevant subject matter risk champions across
the BUs, drives and coordinates Group-wide
risk management activities and initiatives.
The Committee’s activities are facilitated by
regular bilateral and BU-level meetings to
ensure that pertinent 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.
Keppel adopts a balanced approach to risk
management. Whilst our financial performance
and operating environment are influenced by a
vast range of risk factors, we recognise that 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 include
market driven forces, evolving competitive
landscapes, changing customer demands
and disruptive innovation. The Group remains
vulnerable to several external factors
including uncertainties in the global economy,
implications of recent and impending
geo-political developments, intense competition
in our core markets and threats of disruptive
technology. These risks receive constant
high-level attention throughout the year.
Strategy meetings are held across the Group 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 principles. These
policies and principles are subject to periodic
reviews to ensure that they continue to
support business objectives and are aligned
to our risk tolerance levels. Taking into
consideration the prevailing business climate
and the Group’s risk tolerance, the policies
aim to address market and competition
risks effectively and proactively.
Strategic Ventures, Investments & Divestments
We have an established process for evaluating
investment and divestment decisions including
strategic ventures. Investments, divestments
and strategic ventures are monitored to ensure
that they are on track to meet the Group’s
strategic intent, investment objectives and
returns, and where required, the need for timely
recalibration of strategies in response to
the changing business environment. 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 in taking considered risks
in a controlled manner, exercising the spirit
of enterprise and prudence to earn the best
risk-adjusted returns on invested capital
across our businesses.
Investment risk assessment involves
rigorous due diligence, feasibility studies
and sensitivity analyses of key assumptions
and variables. Some of the critical factors
considered include alignment with 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
all employees. The Group is focused on
strengthening succession planning and bench
strength, as well as building new organisational
capabilities to drive business growth whilst
maintaining our status as an employer of choice.
In talent development programmes, we
emphasise the importance of having a
risk-centric mindset and endeavour to
inculcate the ability to identify and assess
risks, develop and implement mitigation
actions, as well as monitor risks. Keppel
Leadership Institute, established as a
global centre to groom leaders and equip
employees 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 project 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 in projects. Particular
attention is given to technically challenging
and high-value projects, including greenfield
developments and deployment of new
technology and/or operations in new
geographies. Projects are managed in
accordance with the respective country’s
environmental laws and labour practices.
At the project execution stage, we execute
project reviews and quality assurance
programmes to address issues involving
cost, schedule and quality. Project Key Risk
Indicators are used as early warning signals
to determine if remedial actions are required.
In addition, we conduct knowledge-sharing
workshops to share best practices and
lessons learnt across the Group. These
processes help to ensure that projects are
completed on time and within budget,
without compromising 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 risk indicators/matrices to monitor
HSE performance in each BU.
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
28 awards at the Workplace Safety and
Health (WSH) Awards for exemplary safety
performances, implementation of strong
WSH management systems, as well as
efforts to create solutions that improve
workplace safety.
Business & Operational Processes
We continue to streamline our business
processes. We have established common
shared services platforms which enable us
to better manage costs while enhancing
efficiency, productivity, compliance
and controls.
Keppel Corporation Limited Report to Shareholders 2018
105
Governance
Risk Management
Recognising the need to keep at the
forefront of technology, we have embarked
on digitalisation initiatives and continue to
take measured steps, applying a risk-based
approach, to embrace the appropriate
technologies in optimising our processes.
We have adopted ISO standards and
certifications to achieve standardisation
of some of our processes and kept up
with best practices. In addition, procedures
relating to defect management, operations,
project control and supply chain management
continue to be refined 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 with 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 risk of
natural disasters, terrorism and cyber threats,
and we seek to maintain operational resilience
through regular review and testing of our
BCM plans under different threat scenarios.
The BCM Steering Committee provides
direction and guidance to ensure BCM plans
across the Group are effectively managed.
With the increasing risk of cyber threats and
attacks, we have increased our efforts and
focus on ensuring adequacy of our defense
against the risk and our response plans in
the event of an incident. The Group maintains
a close watch and keeps abreast of evolving
techniques and threats in order to develop
the appropriate mitigation measures. We
constantly evaluate our ongoing state of
readiness against business disruptions
to ensure that plans remain current
and relevant.
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, and to expedite recovery. We are
focused on building capabilities to respond
to crises effectively while safeguarding
our people and assets, and the interests
of our stakeholders.
Information Technology
Information Technology risks are an integral
aspect of our processes. The Group has
in place an Information Technology (IT)
governance structure and IT security
framework to address both general IT and
data security controls, as well as evolving
IT risks including cybersecurity, theft or
loss of confidential data and data integrity.
106
Our IT security, governance and controls
continue to be strengthened through the
refinement and alignment of our IT policies,
processes and systems, and the consolidation
of servers and storages. We have also
appointed IT security officers and instituted
policies on end-user computing and
safeguarding information, as well as IT
self-assessments to identify security gaps.
Our pool of dedicated IT experts enables us
to keep abreast of the latest developments,
innovation and threats in the IT domain.
They are assisted by Keppel Technology and
Innovation to assess risks at various levels,
and to further the adoption of technology
and innovation within Keppel. Extensive
training and assessment exercises have
been conducted on user security education
to heighten overall awareness of IT threats.
Measures and considerations have also been
taken to safeguard corporate data assets
against loss of information, data security and
service disruption of critical IT systems.
Compliance Risks
Laws, Regulations & Compliance
Given the geographical diversity of our
businesses, we closely monitor developments
in 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 updated on changes
to laws and regulations, ensuring that we can
assess our exposures and risks effectively.
We recognise that non-compliance with laws
and regulations not only have significant
financial impact but have potentially detrimental
reputational impact on Keppel. While we have
significantly strengthened our regulatory
compliance framework, we remain fully
committed to enhancing our regulatory
compliance policies and processes, ensuring
that the Group maintains a high level of
compliance and ethical standards in the
way in which we conduct our business. Our
emphasis is clear and consistently reiterated.
We have zero tolerance for fraud, bribery,
corruption and violation of laws and regulations.
In 2018, we made significant progress in 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 to operationalise
our regulatory compliance framework are
set out on pages 107 and 108 of this report.
Financial Risks
Fraud, Misstatement of Financial
Statements & Disclosures
We maintain a strong emphasis on ensuring
that financial statements are accurate and
presented fairly in accordance with applicable
financial reporting standards and frameworks.
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 conduct regular training and education
programmes to enhance competency of the
Group’s finance managers. Keppel’s System
of Management Controls framework outlines
our internal control and risk management
processes and procedures. For more details
on the framework, please refer to pages 83
and 84 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.
We are focused on financial discipline
and seek to deploy our capital to earn the
best risk-adjusted returns for shareholders,
while maintaining a strong balance sheet
to seize new opportunities.
Our procedures include the evaluation of
counterparties and other related risks against
pre-established internal guidelines. We conduct
impact assessments and stress tests to gauge
the Group’s exposure to changing market
situations, to enable informed decision making
and implementation of prompt mitigating
actions. We also regularly monitor our asset
concentration exposure in countries where we
have a presence to ensure that our portfolio
of assets, investments and businesses are
well diversified and adequately safeguarded
against the systemic risks of operating in a
specific geography. For more details, please
refer to page 66 of this report.
Proactive Risk Management
Effective risk management requires
a dynamic approach and we recognise
the need to continually evolve our
framework and processes to ensure
our risk identification and mitigation
remains effective. We remain vigilant
against emerging threats that may affect
our different businesses. We have a
dedicated focus group across BUs to identify,
discuss and analyse emerging risks which
may have an impact on the Group’s activities.
Where applicable, these are escalated for
discussion and consideration at various
governance committees.
Through close collaboration with stakeholders
and constant vigilance, we will continue to
proactively assess our risks and review our
risk management system to ensure that our
ability to manage and respond to threats
remains adequate and effective.
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.
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 for regulatory compliance is clear
and consistently reiterated from the top and
throughout all levels of the Group. 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,
we remain focused on ensuring consistency
in application and operational effectiveness
of the compliance programme across the
Group. We are developing a compliance
framework that commensurate with the
size, role and activity of our businesses,
including appropriate compliance control
systems, to be able to effectively detect
and remedy gaps. Most importantly, we
remain focused on rebuilding our credibility
and reputation with our stakeholders,
and building a sustainable compliance
framework that supports 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
implementation of 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 and its members includes
all business unit (BU) 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.
The Group RCMC is supported by the Group
Regulatory Compliance Working Team
Compliance
Resources
Culture
Compliance,
Risk Assessment,
Review & Monitoring
Regulatory
Compliance
Framework
Policies &
Procedures
Key Compliance
Processes
Training &
Communications
(Group RCWT), which is chaired by the Head
of Group Risk & Compliance. The Group
RCWT oversees the development and review
of pertinent regulatory compliance matters,
over-arching compliance policies and
guidelines for the Group, as well as reviewing
training and communication programmes.
Each BU 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 BU. This includes
providing support to BU management with
subject matter expertise, process excellence
and regular reporting to ensure that compliance
risks are effectively managed and mitigated.
Across the Group, continued recruitment
efforts are in progress to strengthen the
Compliance team with additional professional
and experienced compliance officers.
Under the direction of the Group RCMC and
Group RCWT, BUs 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 that
control measures are adequate and effective,
to mitigate the identified risks which the
BUs may face.
Regulatory Compliance Framework
As part of ongoing efforts to strengthen
our regulatory compliance framework,
we have 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.
A key aspect of the framework is the
structure of the compliance organisation.
Our reporting structure of the compliance
organisation reinforces independence of the
function. The Head of Group Risk & Compliance
reports directly to the Chairman of the BRC.
Similarly, the Compliance Leads of the
BUs have established direct reporting
lines to the respective Audit or Board Risk
Committees. Furthermore, BU 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.
Culture
Culture and mindset are critical in ensuring the
effectiveness of our compliance programme.
Management has a key role in setting the
right tone and walking the talk. The tone for
Keppel Corporation Limited Report to Shareholders 2018
107
Governance
Regulatory Compliance
full regulatory compliance must cascade
down the organisation. We have posters
on anti-bribery, anti-corruption and reporting
mechanisms that are exhibited in our
offices globally to reinforce the message.
Individual performance measures to
influence personal behaviour, and periodic
compliance-focused messages are also
delivered by BU heads to employees.
Policies & Procedures
Employee Code of Conduct
We have a strict Code of Conduct (the Code)
that applies to all employees, and who are
required to acknowledge and comply with
the Code. The Code 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.
We continually review and enhance our
Code to ensure that it stays updated and
properly instructive.
Appropriate disciplinary action, including
suspension or termination of employment,
will be taken if an employee is found to
have violated the rules set out in the Code.
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. We ensure
that disciplinary actions are carried out
consistently and fairly across all levels
of employees.
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 include 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.
provider to cater to language and time zone
requirements across the different countries
in which the Group operates.
Compliance Policies
We maintain a comprehensive list of policies
covering compliance-related matters including
anti-bribery, gifts & hospitality, agent fees,
donations & sponsorships, solicitation &
extortion, conflict of interest, 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 BUs and unless the
jurisdictional regulatory requirements are
more stringent, these policies represent
the minimum standard for the Group.
Compliance remains a key focus for the
Group. Our written policy on commitment
to compliance with anti-corruption laws
was strengthened in 2018 with the issuance
of the Global Anti-Bribery Policy, consolidating
the multiple relevant policies which form
part of our compliance programme. The
procedures and rules defined in the Policy
encapsulates key points of the Group’s
zero-tolerance approach towards bribery. In
November 2018, Keppel Offshore & Marine’s
Singapore entities achieved the ISO 37001
certification on Anti-Bribery Management
System. We continue to work towards
certification for the other entities within
Keppel Offshore & Marine and the Group.
Training & Communication
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
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. Toolbox
training on anti-bribery are also carried out
for industrial/general workers.
We continue to focus on refining our
compliance training programmes and
curriculum for new and existing employees.
We are also focused on developing and
tailoring training content depending on
the target audience.
The process is reviewed regularly. In 2018,
the whistle-blower hotline was outsourced
to an external and independent service
In addition to policy-related training
programmes, we conduct trainings focused
on the line manager’s responsibilities in
108
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 that potential
gaps are identified and mitigated in a
timely manner.
Training focused on building risk and
compliance competencies are also organised
to ensure that we are apprised on changes
in approaches, best practices and tools.
Group Risk & Compliance conducts
periodic site visits, particularly to locations
susceptible to higher corruption risks,
to raise awareness of compliance risks.
We also leverage opportunities at various
management conferences and employee
meetings to stress the importance
of compliance.
Key Processes
Due Diligence
We continue to improve 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.
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.
Directors’ Statement & Financial Statements
Contents
Financial Report
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
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
110
116
123
124
125
126
129
132
193
205
206
210
215
219
220
221
222
227
228
229
Keppel Corporation Limited Report to Shareholders 2018
109
Directors’ Statement
For the financial year ended 31 December 2018
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 2018.
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 123 to 204, 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 2018, 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
Jean-François Manzoni (appointed on 1 October 2018)
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;
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.
110
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 2015)
Loh Chin Hua
(Unvested restricted shares to be delivered after 2016)
Loh Chin Hua
(Unvested restricted shares to be delivered after 2017)
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
(Contingent award of performance shares issued in 2018 to be
delivered after 2020) ¹
Loh Chin Hua
Holdings At
1.1.2018
31.12.2018
21.1.2019
264,000
694,557
290,000
895,341
290,000
895,341
38,500
48,888
28,789
38,225
42,000
34,825
65,825
50,600
7,103
68,000
12,000
38,500
55,888
28,789
44,225
42,000
42,825
73,825
57,600
7,103
74,000
19,000
38,500
55,888
28,789
44,225
42,000
42,825
73,825
57,600
7,103
74,000
19,000
50,000
-
-
120,000
60,000
60,000
-
181,568
181,568
220,000
-
-
300,000
300,000
300,000
330,000
330,000
330,000
-
320,000
320,000
(Contingent award of performance shares – Transformation Incentive Plan
issued in 2016 to be delivered after 2021) ¹
Loh Chin Hua
750,000
750,000
750,000
(3.145% Fixed Rate Notes due 2022)
Tan Puay Chiang
Subsidiary
- Keppel Land Limited
(3.90% Fixed Rate Notes due 2024)
Tan Puay Chiang
$250,000
$250,000
$250,000
$250,000
$250,000
$250,000
Keppel Corporation Limited Report to Shareholders 2018
111
Directors’ Statement
4.
Directors’ interests in shares and debentures (continued)
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
1.1.2018
31.12.2018
21.1.2019
16,989
7,000
556,160
5,568
8,070
4,303
17,385
7,000
556,160
5,568
8,070
4,303
17,385
7,000
556,160
5,568
8,070
4,303
210,663
210,663
210,663
1,939
8,911
12,000
6,000
1,939
8,911
12,000
6,000
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 791,500 Shares issued by virtue of
exercise of options and options to take up 3,407,100 Shares were cancelled during the financial year. At the end of the financial year, there
were 1,890,185 Shares under option as follows:
Date of grant
14.02.08
14.08.08
05.02.09
06.08.09
09.02.10
Balance at
1.1.2018
1,444,800
2,077,000
88,400
1,036,785
1,441,800
6,088,785
Number of Share Options
Exercised
(136,800)
(73,700)
(15,400)
(307,600)
(258,000)
(791,500)
Cancelled
(1,308,000)
(2,003,300)
(4,400)
(40,800)
(50,600)
(3,407,100)
Balance at
31.12.2018
Exercise
price
-
-
68,600
688,385
1,133,200
1,890,185
$8.46
$8.73
$3.07
$6.86
$6.89
Date of
expiry
13.02.18
13.08.18
04.02.19
05.08.19
08.02.20
There are no options granted to any of the Company’s controlling shareholders or their associates under the Scheme.
112
Financial Report
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.
Details of share plans awarded under the KCL PSP, KCL PSP-Transformation Incentive Plan (“KCL PSP-TIP”), KCL RSP and KCL RSP-
Deferred Shares are disclosed in Note 3 to the financial statements and as follows:
Contingent awards:
Date of Grant
KCL PSP
31.3.2015
30.7.2015
29.4.2016
28.4.2017
30.4.2018
KCL PSP-TIP
29.4.2016
28.4.2017
Awards:
Date of Grant
KCL RSP-
Deferred shares
23.2.2018
Awards released but not vested:
Date of Grant
KCL RSP
31.3.2014
31.3.2015
30.7.2015
29.4.2016
KCL RSP-
Deferred shares
23.2.2018
Number of Shares
Released
Cancelled
Balance at
1.1.2018
405,000
170,000
830,000
1,120,000
-
2,525,000
4,707,491
2,040,000
6,747,491
Contingent
awards
granted
Adjustments
upon
release
-
-
-
-
1,180,000
1,180,000
(405,000)
(170,000)
-
-
-
(575,000)
-
-
-
-
-
-
Balance at
31.12.2018
-
-
645,000
1,070,000
1,180,000
2,895,000
-
-
(185,000)
(50,000)
-
(235,000)
(771,524)
(10,000)
(781,524)
3,935,967
2,030,000
5,965,967
-
-
-
-
-
-
-
-
-
Balance at
1.1.2018
Awards
granted
Adjustments
upon
release
Released
Cancelled
Balance at
31.12.2018
Number of Shares
-
-
4,099,369
4,099,369
-
-
(4,097,507)
(4,097,507)
(1,862)
(1,862)
-
-
Balance at
1.1.2018
5,400
1,359,391
224,325
3,513,249
5,102,365
Number of Shares
Released
Vested
Cancelled
Other
adjustments
Balance at
31.12.2018
-
-
-
-
-
-
(1,312,918)
(223,925)
(1,741,200)
(3,278,043)
(1,200)
(35,473)
(400)
(141,531)
(178,604)
-
-
-
4,200
11,000
-
(15,600)
(15,600)
1,614,918
1,630,118
-
-
4,097,507
4,097,507
(1,365,201)
(1,365,201)
(111,969)
(111,969)
(34,100)
(34,100)
2,586,237
2,586,237
Keppel Corporation Limited Report to Shareholders 2018
113
Directors’ Statement
6.
Share plans of the Company (continued)
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:
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)
-
320,000
1,520,814
(501,014)
(69,800)
950,000
-
750,000
-
-
750,000
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
Awards granted
during the
financial year
272,352
272,352
-
(272,352)
-
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
(584,757)
60,000
272,352
(90,784)
181,568
69,800
(69,800)
-
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
Awards:
Name of Director
KCL RSP-Deferred shares
Director of the Company
Loh Chin Hua
Awards released but not vested:
Name of Director
KCL RSP
Director of the Company
Loh Chin Hua
KCL RSP-Deferred shares
Director of the Company
Loh Chin Hua
KCL PSP
Director of the Company
Loh Chin Hua
114
Financial Report
No Director or employee received more than 5% 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
financial year (%)
Aggregate
contingent
shares granted
to date (%)
11.2%
6.0%
There are no contingent award of Shares granted to any of the Company’s controlling shareholders or their associates under the KCL
RSP, KCL RSP-Deferred shares, 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 no unissued shares of Keppel Telecommunications & Transportation Ltd under option relating
to Keppel T&T Share Option Scheme. In addition, there were 1,225,485 unvested shares under Keppel T&T Restricted Share Plan and
830,000 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, 25 February 2019
LOH CHIN HUA
Chief Executive Officer
Keppel Corporation Limited Report to Shareholders 2018
115
Independent Auditor’s Report
to the Shareholders of Keppel Corporation Limited
For the financial year ended 31 December 2018
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”), Singapore Financial Reporting Standards (International) (“SFRS(I)s”) and International Financial
Reporting Standards (“IFRSs”) 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 2018, 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 balance sheets of the Group and of the Company as at 31 December 2018;
the consolidated profit and loss account of the Group for the financial year then ended;
the consolidated statement of comprehensive income of the Group for the financial year then ended;
the statements of changes in equity of the Group and of the Company for the financial year then ended;
the consolidated statement of cash flows of the Group for the financial 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 judgements; 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 2018. 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 contract assets and stocks (work-in-
progress) in relation to Offshore and Marine (“O&M”)
business unit
(Refer to Notes 2.27(ii), 13 and 14 to the financial statements)
As at 31 December 2018, the Group has:
(i) Stocks (work-in-progress) (“WIP”) amounting to $594 million
(after a provision of $52 million made in prior year); and
(ii) contract assets relating to certain rig building contracts where
the scheduled delivery dates of the rigs had been deferred and
have higher counterparty risks, amounting to $1,383 million
(after a provision for expected credit loss of $21 million in 2018).
We focused on this area because significant judgement and
assumptions are required in:
(i) estimating the net realisable values (“NRV”) of the WIP
balance; and
(ii) estimating the expected credit loss of the contract asset
balance.
116
We reviewed management’s assessment of the NRV of the WIP
and the recovery of the contract assets balance.
We reviewed the most significant inputs to the DCF calculations
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 judgement
around the NRV of the WIP and the recovery of contract assets to
be appropriate.
Financial Report
Key Audit Matter
How our audit addressed the Key Audit Matter
In determining whether the NRV of the WIP exceeds its carrying
amount, management has considered arrangements to market
the WIP and estimated its NRV based on Discounted Cash Flow
(“DCF”) model. NRV of the WIP was estimated to be above the
carrying value at the balance sheet date.
For contract assets relating to certain rig building contracts where
the scheduled delivery dates of the rigs had been deferred and
have higher counterparty risks, in the event that the customers
are unable to fulfil their contractual obligations, the Group can
exercise their right to retain payments received to date and take
legal possession of the rigs under construction. Management
has assessed if the values of the rigs would exceed the carrying
values of the contract assets. Management has estimated, with
the assistance of an independent professional firm, the values of
the rigs using DCF calculations that cover each class of rig under
construction. The most significant inputs to the DCF calculations
include day rates and discount rates.
Arising from management’s assessment, an expected credit loss
provision of $21 million was made against contract assets in 2018.
2. 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”), an associated 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.
At 31 December 2018, the carrying value of the Group’s equity
interest in KrisEnergy was significantly higher than the fair value of
the investment (based on KrisEnergy’s quoted market 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 Value-
In-Use (“VIU”) basis using a DCF model with the assistance of an
independent professional firm.
Based on the result of the assessment, an impairment loss of
$53 million was recognised in 2018 to write down the carrying
amount of the investment to its estimated recoverable amount.
We focused on this area as the assessment of the recoverable
amount required management to make projections of cash
flows arising from oil reserves in which several estimates and
assumptions were applied.
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 judgement and sources of estimation
uncertainty to be adequate.
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.
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$67 to
US$73 per barrel for 2019 to 2037, 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 also considered the adequacy of the disclosures in the
financial statements in respect of this matter.
Based on our procedures, we found the significant estimates and
key assumptions within the discounted cash flow model to be
reasonable. In respect of the independent professional firm, we
found that it possessed the requisite competency and experience
to assist management in the assessment of the recoverable
amount of KrisEnergy.
We also found the disclosures in the financial statements in
respect of the impairment to be adequate.
Keppel Corporation Limited Report to Shareholders 2018
117
Independent Auditor’s Report
Key Audit Matter
How our audit addressed the Key Audit Matter
3. Financial exposure in relation to contracts with Sete Brasil
(Refer to Note 2.27(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.
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.
Based on the latest information available at 31 December
2018, taking into consideration cost of completion, cost of
discontinuance, salvage cost and unpaid progress billings with
regards to these rigs, an expected credit loss of $102 million and a
provision of $65 million for contract related costs were recognised
in the current year. The total cumulative expected losses
recognised on these contracts amounted to $476 million.
We focused on this area because of the significant judgement
required in assessing if the expected credit loss and contract
related costs recognised by the Group as at 31 December 2018
was adequate.
4. Global resolution with criminal authorities in relation to
corrupt payments
(Refer to Note 19 to the financial statements)
In December 2017, a wholly-owned subsidiary, Keppel Offshore
and 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 its subsidiary has paid
US$106 million and US$211 million to the United States Treasury
and MPF respectively. In addition, under the Conditional Warning
issued by CPIB, KOM has committed to certain undertakings, has
paid US$52 million to CPIB and recorded a further US$52 million
payable.
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 provisions
recognised during the year and corroborated the inputs against
supporting documents and externally available information.
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
in respect of the expected credit loss and contract related costs
recognised in 2018 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 obtained understanding of management’s compliance and
governance regime, including the progress of its implementation,
through enquiries of appropriate personnel within the Group and
attendance at the board of directors meetings.
We read the reporting by KOM to DOJ and CPIB and sighted the
ISO 37001 certificate.
We discussed with management to understand the scope,
approach and findings of the anti-bribery and corruption
compliance audits performed during the year.
We also considered the adequacy of the disclosures in the
financial statements in respect of this matter. We found that the
disclosures in the financial statements to be adequate.
118
Financial Report
Key Audit Matter
How our audit addressed the Key Audit Matter
As part of the global resolution with the authorities, the Group
has committed to strengthening the compliance and governance
regime in KOM. Amongst others, it included a commitment to
secure certification of ISO 37001 Anti-Bribery Management System
and testing of the effectiveness of the policies and procedures put
in place. In November 2018, Keppel O&M’s entities in Singapore
achieved certification for the ISO 37001 Anti-Bribery Management
System.
Anti-bribery and corruption compliance audits were also performed
during the year on entities within the KOM Group. These audits
revealed that the enhanced policies and procedures put in place
to-date were, in general, functioning as intended in the current
year. The audits did, however, identify certain matters relating
to contracts entered into several years ago which require
follow-up actions and further review. Notwithstanding, based on
information currently available, management is of the opinion that
no additional provisions would be required in relation to these
matters.
We focused on this area because of the management judgement
required in determining if additional provision is required.
5. Revenue recognition - measurement of progress towards
performance obligation
(Refer to Notes 2.20 and 23 to the financial statements)
During the year, the Group recognised $1,876 million of revenue
relating to its rigbuilding, shipbuilding and repairs, and long-term
engineering contracts (“construction contracts”). The Group
recognises revenue over time by reference to the Group’s progress
towards completing the construction of the contract work.
The stage of completion was measured by reference to either
the percentage of the physical proportion of the contract work
completed or the proportion of contract costs incurred to date to
the estimated total contract costs.
We focused on this area because of the significant management
judgement 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.
Based on our procedures and representations obtained from
management, we found management’s assessment of the matter
described to be appropriate.
In respect of construction contracts where progress was
measured based on the percentage of the physical proportion
of the contract work completed, 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.
In respective of construction contracts where progress was
measured based on the proportion of contract costs incurred
to date to the estimated total contract costs, 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 recognised for the current
financial year based on the respective percentage of completion
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 measurement of the progress of construction contracts to
be reasonable. We also found the disclosures in the financial
statements to be adequate.
Keppel Corporation Limited Report to Shareholders 2018
119
Independent Auditor’s Report
Key Audit Matter
How our audit addressed the Key Audit Matter
6. Valuation of properties held for sale
(Refer to Note 13 to the financial statements)
At 31 December 2018, the Group has residential properties held for
sale of $4,653 million mainly in China, Singapore, Indonesia and
Vietnam.
Properties held for sale are stated at the lower of cost and net
realisable values. 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 its estimates of future selling prices, the
Group took into account macroeconomic and real estate price
trend information. Management 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.
For certain development projects, fair values based on
independent valuation reports are used to determine the net
realisable value of these properties.
We focused on this area as significant judgment is required in
making estimates of future selling prices and the estimated
cost to complete the development project. In instances where
independent valuation reports are used, the valuation process
involves significant judgement 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 discount rate and price of
comparable plots and properties.
Continued unfavourable market conditions in certain of the
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 these financial
statements exceed future selling prices, resulting in 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 cost to complete
and corroborated the underlying assumptions made with our
understanding of past completed projects.
For projects where management has used independent valuation
reports as a basis to determine the net realisable value, we
evaluated the qualifications and competence of the external
valuer and considered the valuation methodologies used against
those applied by other valuers for similar property type. We tested
the reliability of inputs used in the valuation and corroborated
key inputs such as the discount rate and price of comparable
plots and properties used in the valuation 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 effect of additional factors and, when necessary,
held further discussions with the valuers.
We focused our work on development projects with slower-than-
expected sales or with low or negative margins. For projects which
are expected to sell below cost, we checked the computation of
the provision for properties held for sale.
We also considered the adequacy of the disclosures in the
financial statements, in describing the provision for properties held
for sale.
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.
120
Financial Report
Key Audit Matter
How our audit addressed the Key Audit Matter
7. Valuation of investment properties
(Refer to Note 7 and Note 33 to the financial statements)
At 31 December 2018, the Group owns a portfolio of investment
properties of $2,851 million comprising office buildings, hotel, retail
mall 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.
Investment properties are stated at their fair values based on
independent external valuations.
We focused on this area as the valuation process involves
significant judgement 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 such as the capitalisation rate, discount
rate, net initial yield, terminal yield and price of comparable plots
and properties.
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, net initial yield, terminal yield, discount rate 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.
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.
Other information
Management is responsible for the other information. The other information comprises the “Directors’ Statement” (but does not include the
financial statements and our auditor’s report thereon) which we obtained prior to the date of this auditor’s report and other sections of the
Keppel Corporation Limited Report to Shareholders 2018 (“Other Sections of the Annual Report”) which 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, SFRS(I)s and IFRSs, 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.
Keppel Corporation Limited Report to Shareholders 2018
121
Independent Auditor’s Report
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.
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 Yeoh Oon Jin.
PricewaterhouseCoopers LLP
Public Accountants and Chartered Accountants
Singapore, 25 February 2019
122
Financial Report
Balance Sheets
As at 31 December 2018
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
Contract assets
Amounts due from:
- subsidiaries
- associated companies
Debtors
Derivative assets
Short term investments
Bank balances, deposits & cash
Current liabilities
Creditors
Derivative liabilities
Contract liabilities
Provisions for warranties
Amounts due to:
- subsidiaries
- associated companies
Term loans
Taxation
Net current assets
Non-current liabilities
Term loans
Deferred taxation
Other non-current liabilities
Group
Company
Note
31 December
1 January
31 December
1 January
2018
$’000
2017
$’000
2017
$’000
2018
$’000
2017
$’000
2017
$’000
3
3
4
5
6
7
8
9
10
11
12
13
14
15
15
16
17
18
1,291,722
1,291,310
1,288,394
1,291,722
1,291,310
1,288,394
(45,073)
(74)
(15,523)
(45,073)
(74)
(15,523)
10,031,561
10,151,498
10,395,101
11,278,210
11,442,734
11,667,972
308,930
530,225
676,918
6,396,589
7,643,238
-
6,341,656
7,632,892
-
5,346,838
6,619,709
-
11,587,140
11,972,959
12,344,890
7,643,238
7,632,892
6,619,709
2,372,560
2,851,380
-
2,432,963
3,460,608
-
2,645,456
3,550,290
6,676
-
296
-
852
-
-
7,867,959
7,972,849
8,154,201
6,239,685
5,913,777
5,423,831
449,515
679,464
129,007
458,638
774,316
132,594
377,704
814,438
140,669
-
16,957
8,801
-
-
15,012
14,346
-
-
14,340
97,557
-
12,721,611
13,172,896
12,952,388
7,900,393
8,002,503
8,266,950
5,514,006
3,212,712
5,780,042
3,643,495
6,567,740
4,157,146
-
-
-
-
-
-
-
-
-
4,043,121
3,498,920
3,982,362
291,729
342,960
433,380
2,702,300
3,088,417
3,373,841
45,976
136,587
181,226
202,776
98,984
273,928
1,981,406
2,273,788
2,087,078
548
6,229
23,217
27,400
370
733
4,590
93,530
-
2,213
688
2,965
42,923
-
542
13,884,716
15,512,704
16,992,097
4,100,885
3,599,986
4,029,480
19
4,391,023
5,720,165
5,483,318
119,405
37,969
379,910
1,918,547
1,950,151
1,612,984
69,614
115,972
81,679
76,172
27,796
-
-
68,585
29,528
-
-
112,471
345,313
-
-
-
-
-
162,611
236,403
1,062,722
115,824
253,331
111,543
1,480,757
1,714,084
1,835,321
297,922
220,761
364,845
8,393,092
10,012,433
9,869,600
-
460,657
43,519
770,755
-
551,530
33,955
920,001
-
692,311
17,263
2,230,080
5,491,624
5,500,271
7,122,497
3,330,130
2,679,985
1,799,400
6,067,752
6,078,919
7,217,721
3,495,610
2,939,800
3,325,600
196,626
361,717
334,674
286,615
331,175
181,099
-
-
-
91,675
109,796
121,041
6,626,095
6,700,208
7,729,995
3,587,285
3,049,596
3,446,641
14
20
15
15
21
27
21
22
19
Net assets
11,587,140
11,972,959
12,344,890
7,643,238
7,632,892
6,619,709
The accompanying notes form an integral part of these financial statements.
Keppel Corporation Limited Report to Shareholders 2018
123
Consolidated Profit and Loss Account
For the financial year ended 31 December 2018
Revenue
Materials and subcontract costs
Staff costs
Depreciation and amortisation
Impairment loss on financial assets
Other operating income - net
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
2018
$’000
2017
$’000
23
5,964,781
5,963,773
(4,187,631)
(3,957,402)
24
(987,830)
(1,027,019)
(182,386)
(95,457)
531,089
25
1,042,566
(212,380)
(130,110)
164,184
801,046
26
26
26
9
27
5
28
-
(618,722)
9,991
164,260
19,871
137,928
(198,443)
(189,227)
221,518
1,239,892
290,533
441,429
(283,747)
(244,049)
956,145
197,380
943,829
12,316
956,145
196,025
1,355
197,380
52.0 cts
51.7 cts
10.8 cts
10.7 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.
124
Financial Report
Consolidated Statement of Comprehensive Income
For the financial year ended 31 December 2018
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, net of tax
- 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
Items that will not be reclassified subsequently to profit and loss account:
Financial assets, at FVOCI
- Fair value changes arising during the year
Foreign exchange translation
- Exchange difference arising during the year
Share of other comprehensive income of associated companies
- Financial assets, at FVOCI
Other comprehensive expense for the year, net of tax
Total comprehensive income for the year
Attributable to:
Shareholders of the Company
Non-controlling interests
2018
$’000
2017
$’000
956,145
197,380
-
-
1,619
(28,815)
(238,794)
132,017
357,211
(49,852)
(132,866)
(220,787)
5,574
(9,537)
-
20,031
(42,821)
(256,859)
719
(8,384)
(93,232)
(51,058)
(31,566)
-
(3,545)
(17,311)
581
-
(34,530)
(17,311)
(291,389)
(68,369)
664,756
129,011
656,303
8,453
664,756
144,491
(15,480)
129,011
The accompanying notes form an integral part of these financial statements.
Keppel Corporation Limited Report to Shareholders 2018
125
Statements of Changes in Equity
For the financial year ended 31 December 2018
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
1,291,310
(74)
281,407 10,486,054
(626,009) 11,432,688
527,746 11,960,434
-
-
-
-
-
-
(302,453)
302,453
-
-
-
10,046
-
10,046
2,479
12,525
Group
2018
As at 31 December 2017
As previously reported
Adoption of SFRS(I) 1
Adoption of SFRS(I) 15
As adjusted at 31 December 2017
1,291,310
(74)
281,407 10,193,647
(323,556) 11,442,734
530,225 11,972,959
Adoption of SFRS(I) 9
-
-
1,058
(236,296)
-
(235,238)
(255)
(235,493)
As reported at 1 January 2018
1,291,310
(74)
282,465
9,957,351
(323,556) 11,207,496
529,970 11,737,466
-
943,829
-
943,829
12,316
956,145
(117,413)
-
(170,113)
(287,526)
(3,863)
(291,389)
(117,413)
943,829
(170,113)
656,303
8,453
664,756
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 29)
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 from
revenue reserves
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
-
-
-
-
-
-
412
-
-
-
-
-
-
-
-
-
-
-
-
(90,758)
-
(526,152)
33,073
-
-
-
-
-
-
-
-
45,759
(40,435)
-
-
-
44,771
(44,771)
814
-
-
30
412
(44,999)
38,223
(570,893)
-
-
-
-
-
-
-
-
(8,332)
-
-
(8,332)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(526,152)
33,073
-
412
(90,758)
5,324
-
814
30
-
(526,152)
481
33,554
(20,321)
(20,321)
-
-
-
-
-
4,442
412
(90,758)
5,324
-
814
4,472
(577,257)
(15,398)
(592,655)
(8,332)
(1,426)
(9,758)
-
-
(210,166)
(210,166)
(2,503)
(2,503)
(8,332)
(214,095)
(222,427)
(585,589)
(229,493)
(815,082)
Total transactions with owners
412
(44,999)
29,891
(570,893)
As at 31 December 2018
1,291,722
(45,073)
194,943 10,330,287
(493,669) 11,278,210
308,930 11,587,140
*
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.
126
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
-
-
-
-
-
-
(280,787)
280,787
9,023
-
9,023
-
-
2,227
11,250
11,667,972
676,918
12,344,890
-
-
As adjusted at 1 January 2017
1,288,394
(15,523)
11,486 10,383,615
-
196,025
-
196,025
1,355
197,380
272,022
-
(323,556)
(51,534)
(16,835)
(68,369)
272,022
196,025
(323,556)
144,491
(15,480)
129,011
-
-
-
-
-
-
2,916
-
-
-
-
-
-
-
-
-
-
-
-
-
(19,428)
-
(363,531)
31,124
-
-
-
-
-
-
-
-
34,877
(33,503)
-
-
-
-
22,462
(22,462)
-
707
-
-
-
-
2,916
15,449
20,790
(385,993)
-
-
-
-
-
-
-
-
(22,891)
-
-
(22,891)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(363,531)
31,124
-
(363,531)
470
31,594
-
(26,574)
(26,574)
2,916
(19,428)
1,374
-
-
707
-
-
-
-
-
77
152
3,368
2,916
(19,428)
1,374
-
77
859
3,368
(346,838)
(22,507)
(369,345)
(22,891)
-
-
(43,489)
(69,451)
4,234
(66,380)
(69,451)
4,234
(22,891)
(108,706)
(131,597)
(369,729)
(131,213)
(500,942)
Group
2017
As at 1 January 2017
As previously reported
Adoption of SFRS(I) 1
Adoption of SFRS(I) 15
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
Shares issued
Purchase of treasury shares
Treasury shares reissued
pursuant to share plans
and share option scheme
Transfer of statutory, capital
and other reserves from
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
2,916
15,449
(2,101)
(385,993)
As at 31 December 2017
1,291,310
(74)
281,407
10,193,647
(323,556) 11,442,734
530,225
11,972,959
*
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.
Keppel Corporation Limited Report to Shareholders 2018
127
Statements of Changes in Equity
Company
2018
As at 1 January 2018
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
Other adjustments
Total transactions with owners
Share
Capital
$’000
Treasury
Shares
$’000
Capital
Reserves
$’000
Revenue
Reserves
$’000
Total
$’000
1,291,310
(74)
209,506
6,132,150
7,632,892
-
-
-
-
-
412
-
-
-
-
-
-
-
-
-
(90,758)
-
588,420
1,945
1,945
-
588,420
588,420
1,945
590,365
-
(526,152)
(526,152)
31,125
-
-
-
-
-
-
31,125
412
(90,758)
5,324
30
45,759
(40,435)
-
-
30
412
(44,999)
(9,310)
(526,122)
(580,019)
As at 31 December 2018
1,291,722
(45,073)
202,141
6,194,448
7,643,238
Company
2017
As at 1 January 2017
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
1,288,394
(15,523)
213,116
5,133,722
6,619,709
-
-
-
-
-
2,916
-
-
2,916
-
-
-
-
-
-
(19,428)
34,877
15,449
-
672
672
1,361,959
1,361,959
-
672
1,361,959
1,362,631
-
(363,531)
(363,531)
29,221
-
-
(33,503)
(4,282)
-
-
-
-
29,221
2,916
(19,428)
1,374
(363,531)
(349,448)
As at 31 December 2017
1,291,310
(74)
209,506
6,132,150
7,632,892
The accompanying notes form an integral part of these financial statements.
128
Financial Report
Consolidated Statement of Cash Flows
For the financial year ended 31 December 2018
Operating activities
Operating profit
Adjustments:
Depreciation and amortisation
Share-based payment expenses
Profit on sale of fixed assets and an investment property
Gain on disposal of subsidiaries
Gain on disposal of associated companies
Impairment/write-off of fixed assets
Impairment/(write-back of impairment) of associated companies
Impairment of investments
Fair value gain on investment properties
Profit on sale of investments
(Gain)/loss from change in interest in associated companies
Unrealised foreign exchange differences
Operational cash flow before changes in working capital
Working capital changes:
Stocks
Contract assets
Debtors
Creditors
Contract liabilities
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
Advances to/from associated companies
Dividends received from investments and associated companies
Net cash from 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 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 financing activities
Net (decrease)/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
The accompanying notes form an integral part of these financial statements.
Note
2018
$’000
2017
$’000
1,042,566
801,046
182,386
34,885
(2,795)
(604,638)
(48,783)
6,911
60,782
-
(84,886)
(2,232)
(63,622)
27,622
548,196
(394,258)
357,046
543,245
(696,015)
12,430
(5,448)
(561)
177
364,812
154,482
(198,637)
(195,904)
124,753
(38,052)
(365,818)
(254,511)
1,085,671
179,342
5,524
(216,636)
281,375
676,895
212,380
32,583
(20,142)
(146,542)
(62,673)
15,530
(39,192)
14,330
(177,939)
(35,294)
13,075
(87,745)
519,417
438,670
478,634
122,556
(217,728)
357,652
(17,549)
(731)
(60,578)
1,620,343
130,832
(184,841)
(363,377)
1,202,957
-
(291,356)
(392,991)
878,873
96,954
37,385
(42,555)
270,199
556,509
A
B
(3,337)
412
(66,380)
2,916
5,324
-
1,549,445
(1,939,475)
(90,758)
(526,152)
(20,321)
(1,024,862)
1,374
77
1,700,023
(2,707,102)
(19,428)
(363,531)
(26,574)
(1,478,625)
(223,214)
280,841
2,241,448
2,018,772
(46,390)
(58,165)
C
1,971,844
2,241,448
Keppel Corporation Limited Report to Shareholders 2018
129
Consolidated Statement of Cash Flows
Reconciliation of liabilities arising from financing activities
2018
1 January 2018
$’000
Principal and
interest payments
(net of proceeds)
$’000
Non-cash changes
Acquisition of
subsidiaries
$’000
Disposal of
subsidiaries
$’000
Interest expense
(Note 26)
$’000
Foreign exchange
movement
$’000
31 December 2018
$’000
Term loans
7,793,003
(588,667)
297,923
(171,380)
199,464
18,166
7,548,509
2017
1 January 2017
$’000
Principal and interest
payments (net of
proceeds)
$’000
Term loans
9,053,042
(1,191,920)
Disposal of
subsidiaries
$’000
(138,288)
Non-cash changes
Interest expense
(Note 26)
$’000
Foreign exchange
movement
$’000
31 December 2017
$’000
189,223
(119,054)
7,793,003
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
Investment Properties
Debtors and other assets
Bank balances and cash
Creditors
Borrowings
Current and deferred taxation
Total identifiable net assets at fair value
Amount previously accounted for as associated companies
Loss on remeasurement of previously held equity interest
at fair value at acquisition date
Net assets acquired
Total purchase consideration
Less: Bank balances and cash acquired
Cash outflow on acquisition
2018
$’000
47
360,000
530
18,521
(6,778)
(297,923)
(3,827)
70,570
(32,484)
18,487
56,573
56,573
(18,521)
38,052
2017
$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Acquisition of subsidiaries during the year relates mainly to the acquisition of 77.6% interest in PRE 1 Investments Pte Ltd on
20 December 2018.
The accompanying notes form an integral part of these financial statements.
130
Financial Report
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
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
Sale proceeds
Add: Payments received in advance
Less: Advance payments received in prior year
Less: Bank balances and cash disposed
Less: Deferred proceeds
Cash inflow on disposal
2018
$’000
(4,272)
(948,613)
-
(692,651)
(7,939)
(39,194)
446,973
171,380
139,863
210,166
2017
$’000
(129,536)
(405,604)
(2,102)
(282,344)
(159,030)
(36,374)
77,431
138,288
13,280
69,451
(724,287)
(716,540)
-
(724,287)
(604,638)
(7,575)
(1,336,500)
-
174,538
39,194
37,097
73,593
(642,947)
(146,542)
9,698
(779,791)
(174,538)
-
36,374
39,082
(1,085,671)
(878,873)
Significant disposal of subsidiaries during the year relates to the sale of Keppel China Marina Holdings Pte Ltd, Keppel Township
Development (Shenyang) Co. Ltd, Keppel Bay Property Development (Shenyang) Co. Ltd and Aether Limited.
Significant disposal in the prior year relates to the sale of Keppel Lakefront (Nantong) Property Development Co Ltd, Wiseland Investment
(Myanmar) Limited, 80% interest in PT Sentral Tunjungan Perkasa, Keppel DC Singapore 4, 90% interest in Keppel DC Singapore 3, Keppel
Verolme and Kepwealth Property Phils., Inc. In addition, the Group lost control of some entities in the prior year but continued to retain
significant influence. These entities were deconsolidated from the Group’s financial statements for the financial year ended 31 December
2017 and were accounted for as associated companies using the equity method from their respective dates of ceasing control.
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
2018
$’000
2017
$’000
1,981,406
2,273,788
(9,562)
(32,340)
1,971,844
2,241,448
The accompanying notes form an integral part of these financial statements.
Keppel Corporation Limited Report to Shareholders 2018
131
Notes to the Financial Statements
For the financial year ended 31 December 2018
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 2018 and the balance sheet and statement of changes in
equity of the Company at 31 December 2018 were authorised for issue in accordance with a resolution of the Board of Directors on
25 February 2019.
2.
Significant accounting policies
2.1 Basis of Preparation
The financial statements have been prepared in accordance with the provisions of the Singapore Companies Act and Singapore Financial
Reporting Standards (International) (“SFRS(I)s”) and International Financial Reporting Standards (“IFRSs”). The financial statements have
been prepared under the historical cost convention, except as disclosed in the accounting policies below.
2.2 Adoption of SFRS(I)s and IFRSs
The Group has adopted a new financial reporting framework, SFRS(I)s, on 1 January 2018. SFRS(I)s comprise standards and
interpretations that are equivalent to International Financial Reporting Standards (IFRSs) as issued by the International Accounting
Standards Board. An entity that complies with SFRS(I)s can also elect to simultaneously include an explicit and unreserved statement of
compliance with IFRS. The Group has elected to assert dual compliance with both SFRS(I)s and IFRSs with effect from annual periods
beginning on or after 1 January 2018. All references to SFRS(I)s and IFRSs are referred to collectively as SFRS(I)s in these financial
statements, unless specified otherwise. The financial statements for the year ended 31 December 2018 are the first set of annual
financial statements the Group prepared in accordance with SFRS(I)s. The Group’s previously issued financial statements for periods up
to and including the financial year ended 31 December 2017 were prepared in accordance with Singapore Financial Reporting Standards
(“FRS”).
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). Under SFRS(I) 1, these financial statements are required to be prepared using accounting
policies that comply with SFRS(I) effective as at 31 December 2018. The same accounting policies are applied throughout all periods
presented in these financial statements, subject to the mandatory exceptions and optional exemptions under SFRS(I) 1.
The Group’s opening balance sheet under SFRS(I)s has been prepared as at 1 January 2017, which is the Group’s date of transition to
SFRS(I)s.
(a)
Application of SFRS(I) 1
The Group has elected for the optional exemption to reset its cumulative translation differences for all foreign operations to nil
at the date of transition 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. Consequently, the gains on disposal of subsidiaries and
associated companies during the financial year ended 31 December 2017 were adjusted.
The Group has presented (i) land appreciation tax under taxation instead of materials and subcontract costs, and (ii) share of
taxation of associated companies under share of results of associated companies instead of taxation.
The Group has elected to apply the short-term exemption to adopt SFRS(I) 9 Financial Instruments on 1 January 2018. Accordingly,
the requirements of FRS 39 Financial Instruments: Recognition and Measurement are applied to financial instruments up to the
financial year ended 31 December 2017. The Group is also exempted from complying with SFRS(I) 7 Financial Instruments:
Disclosure to the extent that the disclosures required by SFRS(I) 7 relate to the items within scope of SFRS(I) 9. As a result, the
requirements under FRS are applied in place of the requirements under SFRS(I) 7 and SFRS(I) 9 to comparative information about
items within scope of SFRS(I) 9.
132
Financial Report
The Group has elected to apply the optional exemption relating to SFRS(I) 3 Business Combinations. Accordingly, SFRS(I) 3 has
not been applied to business combinations that occurred before the date of transition on 1 January 2017. The carrying amounts
of assets and liabilities at the date of transition to SFRS(I) is the same as previously reported under FRS. The Group has not
applied SFRS(I) 1-21 The Effects of Changes in Foreign Exchange Rates retrospectively to fair value adjustments and goodwill from
business combinations that occurred before the date of transition to SFRS(I) on 1 January 2017. Such fair value adjustments and
goodwill continue to be accounted for using the same basis as under FRS 21.
(b)
Reconciliation of the Group’s balance sheets reported in accordance with FRS to SFRS(I)
Share capital
Treasury shares
Reserves
Share capital & reserves
Non-controlling interests
Total equity
Represented by:
Fixed assets
Investment properties
Associated companies
Investments
Long term assets
Intangibles
Current assets
Stocks & work-in-progress in excess of
related billings
Stocks
Contract assets
Amounts due from 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
Contract liabilities
Provisions for warranties
Amounts due to associated companies
Term loans
Taxation
Net current assets
Non-current liabilities
Term loans
Deferred taxation
Other non-current liabilities
Net assets
Explanatory
Note
A1, C
A1
A1
A2
A2
A2
A2, C
A2
A2
C
As at
1 Jan 2017
reported
under FRS
$’000
1,288,394
(15,523)
10,386,078
11,658,949
674,691
12,333,640
2,645,456
3,550,290
5,412,581
377,704
814,438
140,669
12,941,138
10,025,805
-
-
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
7,122,497
7,217,721
331,175
181,099
7,729,995
12,333,640
Effect of
applying
SFRS(I) 1
$’000
Effect of
applying
SFRS(I) 15
$’000
As at
1 Jan 2017
reported
under SFRS(I)
$’000
1,288,394
(15,523)
10,395,101
11,667,972
676,918
-
-
9,023
9,023
2,227
11,250
12,344,890
-
-
11,250
-
-
-
11,250
(10,025,805)
7,116,105
3,608,781
-
-
-
-
-
699,081
2,645,456
3,550,290
5,423,831
377,704
814,438
140,669
12,952,388
-
7,116,105
3,608,781
433,380
3,373,841
98,984
273,928
2,087,078
16,992,097
(25,737)
-
755,563
-
5,483,318
379,910
-
-
-
-
-
25,737
-
(1,669,466)
1,612,984
-
-
-
-
699,081
-
1,612,984
81,679
111,543
1,835,321
364,845
9,869,600
7,122,497
7,217,721
331,175
181,099
7,729,995
-
-
-
-
-
11,250
12,344,890
-
-
*
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
*
Effects of applying SFRS (I) 1 includes a reclassification of cumulative translation losses of $280,787,000 from foreign exchange translation account to
revenue reserves as at 1 January 2017. Both foreign exchange translation account and revenue reserves are recorded under Reserves on the balance
sheets.
Keppel Corporation Limited Report to Shareholders 2018
133
Notes to the Financial Statements
2.
Significant accounting policies (continued)
Explanatory
Note
A1, B1, B2, C
As at
31 Dec 2017
reported
under FRS
$’000
1,291,310
(74)
10,141,452
11,432,688
A1, B1, B2
527,746
Share capital
Treasury shares
Reserves
Share capital &
reserves
Non-controlling
interests
Total equity
11,960,434
Represented by:
Fixed assets
Investment properties
Associated companies
Investments
Long term assets
Intangibles
Current assets
Stocks & work-in-
progress in excess
of related billings
Stocks
Contract assets
Amounts due from
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
Contract liabilities
Provisions for warranties
Amounts due to
associated companies
Term loans
Taxation
Net current assets
Non-current liabilities
Term loans
Deferred taxation
Other non-current
liabilities
Net assets
A1
B1
B1
2,432,963
3,460,608
5,901,252
458,638
774,316
132,594
13,160,371
A2
A2
A2
8,782,251
-
-
A2, B2
342,960
3,169,417
181,226
202,776
2,273,788
14,952,418
A2
A2
C
1,764,874
-
115,972
253,331
1,714,084
194,299
9,452,147
5,500,271
6,078,919
334,674
286,615
6,700,208
11,960,434
Effect of
applying
SFRS(I) 1
$’000
-
-
*
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Effect of
applying
SFRS(I) 15
$’000
-
-
10,046
As at
31 Dec 2017
reported
under SFRS(I)
$’000
1,291,310
(74)
10,151,498
Effect of
applying
SFRS(I) 9
$’000
-
-
(235,238)
As at
1 Jan 2018
reported
under SFRS(I)
$’000
1,291,310
(74)
9,916,260
10,046
11,442,734
(235,238)
11,207,496
2,479
530,225
(255)
529,970
12,525
11,972,959
(235,493)
11,737,466
-
-
12,525
-
-
-
12,525
2,432,963
3,460,608
5,913,777
458,638
774,316
132,594
13,172,896
-
-
1,611
(40,846)
(170,524)
-
(209,759)
2,432,963
3,460,608
5,915,388
417,792
603,792
132,594
12,963,137
(8,782,251)
5,981,322
3,442,215
-
5,981,322
3,442,215
-
-
-
-
5,981,322
3,442,215
-
(81,000)
-
-
342,960
3,088,417
181,226
202,776
-
(25,734)
-
-
342,960
3,062,683
181,226
202,776
-
560,286
2,273,788
15,512,704
-
(25,734)
2,273,788
15,486,970
-
-
-
(1,764,874)
1,950,151
-
-
1,950,151
115,972
-
-
26,462
-
-
-
-
560,286
253,331
1,714,084
220,761
10,012,433
-
-
-
-
-
-
-
-
-
5,720,165
37,969
-
1,950,151
115,972
253,331
1,714,084
220,761
10,012,433
-
-
-
-
-
-
-
-
-
-
-
5,500,271
(25,734)
5,474,537
6,078,919
334,674
286,615
6,700,208
-
-
-
-
6,078,919
334,674
286,615
6,700,208
12,525
11,972,959
(235,493)
11,737,466
A2, C
5,371,618
37,969
(26,462)
-
375,009
-
5,720,165
37,969
*
Effects of applying SFRS (I) 1 relate to a reclassification of cumulative translation losses of $302,453,000 from foreign exchange translation account to
revenue reserves as at 31 December 2017. Both foreign exchange translation account and revenue reserves are recorded under Reserves on the balance
sheets.
134
Financial Report
(c)
Reconciliation of the Group’s total comprehensive income reported in accordance with FRS to SFRS(I)
For the financial year ended
31 December 2017
Revenue
Explanatory
Note
Reported
under FRS
$’000
5,963,773
Effect of
applying
SFRS(I) 1
$’000
-
Materials and subcontract costs
C
(3,999,053)
41,651
Staff costs
Depreciation and amortisation
Impairment loss on financial assets
Other operating income/(expenses) - net
C
Operating profit
One-off financial penalty & related costs
Investment income
Interest income
Interest expenses
Share of results of associated companies
A1, C
(1,027,019)
(212,380)
(130,110)
180,467
775,678
(618,722)
19,871
137,928
(189,227)
390,039
515,567
C
(298,388)
-
-
-
(16,283)
25,368
-
-
-
-
(100,781)
(75,413)
54,339
Effect of
applying
SFRS(I) 15
$’000
-
-
-
-
-
-
-
-
-
-
-
1,275
1,275
Reported
under SFRS(I)
$’000
5,963,773
(3,957,402)
(1,027,019)
(212,380)
(130,110)
164,184
801,046
(618,722)
19,871
137,928
(189,227)
290,533
441,429
-
(244,049)
Profit before tax
Taxation
Profit for the year
Other comprehensive income
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
Items that will not be reclassified subsequently
to profit and loss account:
Foreign exchange translation
- Exchange difference arising during the year
217,179
(21,074)
1,275
197,380
1,619
(28,815)
357,211
(49,852)
-
-
-
-
(237,715)
16,928
(30,994)
21,457
719
(8,384)
(93,232)
-
-
-
-
(89,443)
(17,311)
21,074
-
-
-
-
-
-
-
-
-
-
-
1,619
(28,815)
357,211
(49,852)
(220,787)
(9,537)
719
(8,384)
(93,232)
(17,311)
(68,369)
Total comprehensive income for the year
127,736
-
1,275
129,011
(d)
There were no material adjustments to the Group’s statement of cash flows arising from the transition from FRS to SFRS(I).
(e)
The adoption of SFRS(I)s has no impact on the financial statements of the Company for the financial year ended 31 December
2017.
Keppel Corporation Limited Report to Shareholders 2018
135
Notes to the Financial Statements
2.
Significant accounting policies (continued)
Explanatory notes to reconciliations:
The effects of transition to SFRS(I) mainly arises from the adoption of SFRS(I) 15 Revenue from Contracts with Customers and
SFRS(I) 9 as well as the application of SFRS (I) 1.
A.
Adoption of SFRS (I) 15
SFRS (I) 15 establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts
with customers. 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.
In accordance with the requirements of SFRS(I) 1, the Group has adopted the SFRS(I) 15 retrospectively. The adoption of the
SFRS(I) 15 resulted in adjustments to the previously issued FRS financial statements as explained below:
A1. The Group has equity accounted for an associated company’s impact arising from the application of SFRS (I) 15.
A2. Presentation of contract assets and contract liabilities
The Group has also changed the presentation of balances relating to construction contracts with customers in the balance
sheets. Balances which were previously presented under work-in-progress in excess of related billings and billings on work-
in-progress in excess of related costs were reclassified to contract assets, debtors, contract liabilities and creditors.
B.
Adoption of SFRS(I) 9
As disclosed in Note 2.2(a), the Group has elected to apply the short-term exemption to adopt SFRS(I) 9 on 1 January
2018. Accordingly, the requirements of FRS 39 Financial Instruments: Recognition and Measurement are applied to financial
instruments up to the financial year ended 31 December 2017. The Group is also exempted from complying with SFRS(I) 7
Financial Instruments: Disclosure to the extent that the disclosures required by SFRS(I) 7 relate to the items within scope of
SFRS(I) 9. As a result, the requirements under FRS are applied in place of the requirements under SFRS(I) 7 and SFRS(I) 9 to
comparative information about items within scope of SFRS(I) 9.
B1. Classification and measurement of financial assets
For financial assets held by the Group on 1 January 2018, management has assessed the business models that are
applicable on that date to these assets so as to classify them into the appropriate categories under the SFRS(I) 9. Material
reclassifications resulting from management’s assessment are disclosed below.
Investments
at fair value
through
profit & loss
(FVPL)
$’000
Note
Available-
for-sale
investments
(AFS)
$’000
Long term
assets
and
debtors
$’000
Associated
companies
$’000
Investments
at fair value
through
other
compre-
hensive
income
(FVOCI)
$’000
Fair value
reserve
$’000
Revenue
reserves
$’000
Non-
controlling
interests
$’000
253,438
407,976 3,862,733 5,913,777
-
99,169 10,193,647
530,225
(i)
(i)
-
-
(270,904)
(55,048)
(ii)
22,256
(22,256)
(ii)
17,870
(42,989)
-
-
-
-
(iii)
-
(iv)
(4,123)
-
-
(185,692)
-
-
-
-
-
-
-
(v)
B2
-
-
(16,779)
15,168
1,611
-
(25,734)
-
271,956
1,058
55,048
-
-
-
4,123
-
-
-
-
-
-
-
-
-
-
-
-
(25,119)
(185,692)
-
-
(6)
-
-
-
-
-
-
(25,485)
(249)
289,441
- 3,666,475 5,915,388
331,127
100,227 9,957,351
529,970
Balance as at 31 December 2017
- before adoption of SFRS(I) 9
Reclassify unlisted equities from AFS
to FVOCI
Reclassify listed equities from AFS to
FVOCI
Reclassify unlisted debt securities
from AFS to FVPL
Reclassify unquoted preference
shares from AFS to FVPL
Reclassify loan to associate from
amortised cost to FVPL
Reclassify listed equity from FVPL to
FVOCI
Reclassify unquoted shares from
AFS to associated company and
long term assets
Provision for expected credit losses
- Trade debtors
Balance as at 1 January 2018
- after adoption of SFRS(I) 9
136
Financial Report
(i)
Equity investments reclassified from AFS to FVOCI
The Group has elected to recognise changes in the fair value of all its equity investments not held for trading and
previously classified as available-for-sale, in other comprehensive income.
As a result, unlisted equities with fair value of $271,956,000 were reclassified from AFS to FVOCI on 1 January 2018,
with related fair value gain of $1,058,000 recognised in fair value reserve. Listed equities with fair value of $55,048,000
were also reclassified from AFS to FVOCI on 1 January 2018.
(ii)
(iii)
Reclassification of unlisted debt securities and unquoted preference shares from AFS to FVPL
Investments in unlisted debt securities and unquoted preference shares was reclassified from AFS to FVPL. They are
non-equity instruments that do not meet the criteria to be classified as amortised cost in accordance with SFRS(I)
9, because their cash flows do not represent solely payments of principal and interest. Related fair value loss of
$25,119,000 was recognised in revenue reserves on 1 January 2018.
Reclassification of loan to associate from amortised cost to FVPL
Loan to an associated company where the cash flows do not represent solely payments of principal and interest
was reclassified from amortised cost to FVPL at its fair value of $93,312,000 at 1 January 2018. Related fair value
loss of $185,692,000 was recognised in revenue reserves on 1 January 2018. The loan to an associated company is
presented as part of “long term assets” in the balance sheet.
(iv) Reclassify listed equity from FVPL to FVOCI
The Group has elected to recognise changes in the fair value of an equity investment in other comprehensive income
from 1 January 2018.
(v)
Reclassify unquoted shares from AFS to associated companies and long term assets
Long term investment amounting to $1,611,000 and $15,168,000 have been reclassified from AFS to investment in
associated company and long term assets following reassessment of the investments.
B2.
C.
Impairment of financial assets
SFRS(I) 9 replaces the ‘incurred loss model’ in FRS 39 with an ‘expected credit loss’ model. The new impairment model
applies to financial assets measured at amortised cost and FVOCI, and contract assets. The application of SFRS(I) 9
impairment requirements at 1 January 2018 results in additional allowances for impairment of $25,734,000.
Application of SFRS(I) 1
As disclosed in Note 2.2(a), the Group has elected for the 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, cumulative translation losses of
$280,787,000 was reclassified 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. Consequently, the gains on disposal of subsidiaries and associated companies in 2017
were adjusted, resulting in a reduction of $21,074,000 to the profit for the year ended 31 December 2017 or a reduction of
$21,666,000 to the net profit attributable to shareholders of the Company for the year ended 31 December 2017.
The Group has presented (i) the land appreciation tax expenses of $41,651,000 for the year ended 31 December 2017 under
taxation instead of materials and subcontract costs and the corresponding land appreciation tax balances of $26,462,000
as at 31 December 2017 and $25,737,000 as at 1 January 2017 under taxation instead of creditors, and (ii) the share of
taxation of associated companies of $95,990,000 for the year ended 31 December 2017 under share of results of associated
companies instead of taxation.
2.3 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.
Keppel Corporation Limited Report to Shareholders 2018
137
Notes to the Financial Statements
2.
Significant accounting policies (continued)
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.
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.
2.4 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.
2.5
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.
138
Financial Report
2.6 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.
2.7 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.
2.8
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.
Keppel Corporation Limited Report to Shareholders 2018
139
Notes to the Financial Statements
2.
Significant accounting policies (continued)
2.9 Service Concession Arrangement
The Group entered into a service concession arrangement with a governing agency (the grantor) to design, build, own and operate a
desalination plant in Singapore. Under the service concession arrangement, the Group will operate the plant for 25 years. At the end of the
concession period, the grantor may require the plant to be handed over in a specified condition or to be demolished at reasonable costs
borne by the grantor. Such service concession arrangement falls within the scope of SFRS(I) INT 12 Service Concession Arrangements.
The Group constructs the plant (construction services) used to provide public services and operates and maintains the plant (operation
services) for the concession period as specified in the contract. The Group recognises and measures revenue in accordance with
SFRS(I) 15 for the services it performs.
The Group recognises a financial asset arising from the provision of the construction services when it has a contractual right to receive
fixed and determinable amounts of payments irrespective of the output produced. The consideration receivable is measured initially at
fair value and subsequently measured at amortised amount using the effective interest method.
2.10 Investments
(i)
Before 1 January 2018
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.
(ii)
From 1 January 2018
Investments are classified as fair value through other comprehensive income or fair value through profit or loss.
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 at fair value through other comprehensive income are initially measured at fair value plus transaction costs that are
directly attributable to the acquisition of the investments. Investments at fair value through profit or loss are initially measured at
fair value with the related transaction costs recognised immediately as expenses in the profit and loss account.
Investments are subsequently carried at fair value. For investments at fair value through other comprehensive income, gains or
losses arising from changes in fair value are included in other comprehensive income until the investment is disposed of, at which
time the cumulative gain or loss previously recognised in other comprehensive income is reclassified to the revenue reserves. For
investments at fair value through profit or loss, gains or losses arising from changes in fair value are included in 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.
140
Financial Report
2.11 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.
For fair value hedges, changes in the fair value of the designated hedging instruments are recognised in the profit and loss account.
The hedged item is adjusted to reflect change in its fair value in respect of the risk hedged, with any gain or loss recognised in 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.
2.12 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.
2.13 Stocks
Stocks, consumable materials and supplies are stated at the lower of cost and net realisable value, cost being principally determined on
the weighted average method. 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.
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.
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.
2.14 Contract Assets and Contract Liabilities
For contract where the customer is invoiced on a milestone payment schedule, a contract asset is recognised if the value of the contract
work transferred by the Group exceed the receipts from the customer and a contract liability is recognised if the receipts from the
customer exceed the value of the contract work transferred by the Group.
Keppel Corporation Limited Report to Shareholders 2018
141
Notes to the Financial Statements
2.
Significant accounting policies (continued)
2.15 Impairment of Assets
Financial Assets
(i)
Before 1 January 2018
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.
(ii)
From 1 January 2018
The Group assesses on a forward looking basis the expected credit losses associated with its debt financial assets carried at
amortised cost and FVOCI. The impairment methodology applied depends on whether there has been a significant increase in
credit risk. Note 33 details how the Group determines whether there has been a significant increase in credit risk.
For trade receivables and contract assets, the Group applies the simplified approach permitted by the SFRS(I) 9, which requires
expected lifetime losses to be recognised from initial recognition of the receivables.
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.
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.
142
Financial Report
2.16 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.
2.17 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.
2.18 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.
2.19 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.
2.20 Revenue
Revenue consists of:
-
-
-
-
-
Revenue recognised on rigbuilding, shipbuilding and repairs, property construction and long term engineering contracts;
Sale of goods and services;
Rental income from investment properties;
Investment and fee income; and
Dividend income.
Revenue recognition
The Group enters into rigbuilding, shipbuilding and repairs, property construction and long term engineering contracts with customers.
These contracts are fixed in prices. Revenue is recognised when the control over the contract work is transferred to the customer.
At contract inception, the Group assesses whether the Group transfers control of the contract work over time or at a point in time by
determining if (a) its performance does not create an asset with an alternative use to the Group; and (b) the Group has an enforceable
right to payment for performance completed to date.
Keppel Corporation Limited Report to Shareholders 2018
143
Notes to the Financial Statements
2.
Significant accounting policies (continued)
The contract work, except for overseas property construction contracts, has no alternative use for the Group due to contractual
restriction, and the Group has enforceable rights to payment arising from the contractual terms. For these contracts, revenue is
recognised over time by reference to the Group’s progress towards completing the construction of the contract work. For overseas
property construction contracts, the Group does not have enforceable rights to payment arising from the contractual terms. Revenue
from overseas property construction contracts is recognised at a point in time when the rights to payment become enforceable.
The measure of progress for rigbuilding contracts, and shipbuilding and repair contracts, is determined by engineers’ estimates. The
measure of progress for property construction and long term engineering contracts is determined based on the proportion of contract
costs incurred to date to the estimated total contract costs. Costs incurred that are not related to the contract or that do not contribute
towards satisfying a performance obligation are excluded from the measure of progress.
An impairment loss is recognised in the profit or loss to the extent that the carrying amount of capitalised contract costs exceeds the
expected remaining consideration less any directly related costs not yet recognised as expenses.
Revenue from sale of goods is recognised when the Group satisfies a performance obligation by transferring control of a promised
good or service to the customer. The amount of revenue recognised is the amount of the transaction price allocated to the satisfied
performance obligation.
Revenue from the rendering of services including electricity supply, logistic services, and operations and maintenance under service
concession arrangement, 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.
2.21 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.
2.22 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 re-issued to the employee.
144
Financial Report
2.23 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.
2.24 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 disposal.
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.
Keppel Corporation Limited Report to Shareholders 2018
145
Notes to the Financial Statements
2.
Significant accounting policies (continued)
2.25 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.
2.26 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.
2.27 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 47% (2017: approximately 45%) gross ownership interest of units in Keppel REIT as at 31 December
2018. 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.
Control over KrisEnergy
The Group has approximately 40% (2017: approximately 40%) gross ownership interest of shares in KrisEnergy Limited
(“KrisEnergy”) as at 31 December 2018. 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 20% (2017: approximately 26%) interest held by another two shareholders (2017: 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:
Expected credit loss on financial assets measured at amortised cost and fair value through other comprehensive income
The Group assesses on a forward looking basis the expected credit losses (“ECLs”) associated with its financial assets measured
at amortised cost and fair value through other comprehensive income (“FVOCI”). The impairment methodology applied depends
on whether there has been a significant increase in credit risk. Note 33 details how the Group determines whether there has been a
significant increase in credit risk.
ECLs are probability-weighted estimates of credit losses. Credit losses are measured at the present value of all cash shortfalls (i.e.
the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects
to receive). ECLs are discounted at the effective interest rate of the financial asset. At each balance sheet date, the Group assesses
whether financial assets carried at amortised cost and at FVOCI are credit-impaired. A financial asset is ‘credit-impaired’ when
one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. These
events include probability of insolvency, significant financial difficulties of the debtor and default or significant delay in payments.
When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when
estimating ECLs, the Group considers reasonable and supportable information that is relevant and available without undue cost
or effort. This includes both quantitative and qualitative information and analysis, based on the Group’s historical experience and
informed credit assessment and includes forward-looking information.
The Group uses a provision matrix to measure the ECLs. In measuring the ECLs, assets are grouped based on shared credit risk
characteristics and days past due. In calculating the expected credit loss rates, the Group considers historical loss rates for each
category of customers and adjusts to reflect current and forward-looking macroeconomic factors affecting the ability of the
customers to settle the receivables.
The carrying amounts of trade, intercompany and other receivables, and financial assets at FVOCI are disclosed in the balance sheet.
146
Financial Report
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, 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 2018. Refer to Notes 6, 8, 9 and 12 for
more details.
Revenue recognition and contract cost
The Group recognises contract revenue and contract cost over time by reference to the Group’s progress towards completing the
construction of the contract work. The stage of completion is measured in accordance with the accounting policy stated in Note
2.20. 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 23.
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 contract asset and receivable balances in relation to Offshore & Marine construction contracts
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 2018, an expected credit loss on trade receivables of
$102,000,000 (2017: $81,000,000) was recognised and a provision for contract related costs of $65,000,000 was made. Taking into
consideration cost of completion, cost of discontinuance, salvage cost and unpaid progress billings with regards to these rigs, the
total cumulative loss recognised in relation to these rig contracts amounted to $476,000,000.
Other contracts
As at 31 December 2018, the Group had several rigs that were under construction for customers where customers had requested
for deferral of delivery dates of the rigs in prior years. See Note 14 on contract assets balances.
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 performed an assessment of the expected credit loss on contract assets and trade receivables of deferred
projects to determine if a provision for expected loss is necessary.
In the event that the customers are unable to fulfill their contractual obligations, the Group can exercise their right to retain
payments received to date and the legal possession of the rigs under construction. Management has further assessed if the
values of the rigs would exceed the carrying values of contract assets and trade receivables. Management has estimated, with the
assistance of an independent professional firm, the values of the rigs using Discounted Cash Flow (“DCF”) calculations that cover
each class of rig under construction. The most significant inputs to the DCF calculations include day rates and discount rates.
During the financial year ended 31 December 2018, an expected credit loss on contract assets of $21,000,000 was recognised.
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.
Keppel Corporation Limited Report to Shareholders 2018
147
Notes to the Financial Statements
2.
Significant accounting policies (continued)
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$663 million, plus interest, costs and mandatory attorneys’ fees under RICO.
This new lawsuit came after an earlier civil action commenced by eight of EIG’s managed funds in the United States District Court,
District of Columbia against, among others, the Company and KOM. The case was dismissed by the Court on 30 March 2017.
Management is of the view that the reported cause of action by the plaintiffs is without merit and KOM will vigorously defend itself.
As at the date of these financial statements, it is premature to predict or determine the eventual outcome of the action and hence,
the potential amount of any loss cannot currently be assessed. KOM has filed a motion to dismiss EIG’s complaint.
3.
Share capital
Group and Company
Number of Ordinary Shares (“Shares”)
Issued Share Capital
Treasury Shares
2018
2017
2018
2017
Balance at 1 January
1,818,334,180
1,817,910,180
(10,788)
(2,232,510)
Issue of shares under the share option scheme
60,000
424,000
-
-
Treasury shares transferred pursuant to
share option scheme
Treasury shares transferred pursuant to KCL RSP
Treasury shares purchased
Balance at 31 December
-
-
-
-
-
-
731,500
4,643,244
208,900
4,862,822
(11,300,000)
(2,850,000)
1,818,394,180
1,818,334,180
(5,936,044)
(10,788)
Balance at 1 January
Issue of shares under the share option scheme
Treasury shares transferred pursuant to
share option scheme
Treasury shares transferred pursuant to KCL RSP
Treasury shares purchased
Balance at 31 December
Issued Share Capital
Treasury Shares
Amount ($’000)
2018
2017
1,291,310
1,288,394
412
2,916
-
-
-
-
-
-
1,291,722
1,291,310
2018
(74)
-
6,253
39,506
(90,758)
(45,073)
2017
(15,523)
-
1,437
33,440
(19,428)
(74)
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 60,000 (2017: 424,000) Shares at an average weighted price of $6.86 (2017: $6.88)
per Share for cash upon exercise of options under the KCL Share Option Scheme.
During the financial year, 4,643,244 (2017: 4,862,822) Shares under the KCL Restricted Share Plan (“KCL RSP”) were vested.
During the financial year, the Company transferred 5,374,744 (2017: 5,071,722) treasury shares to employees under vesting of shares
released under the KCL Share Option Scheme and KCL Share Plans. The Company also purchased 11,300,000 (2017: 2,850,000) treasury
shares in the Company in the open market during the financial year. The total amount paid was $90,758,000 (2017: $19,428,000). Except
for the transfer, there was no other sale, disposal, cancellation and/or use of treasury shares during the financial year.
148
Financial Report
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 closing 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
2018
2017
Number of
options
6,088,785
(791,500)
(3,407,100)
1,890,185
Weighted
average
exercise
price
$7.83
$7.25
$8.57
$6.74
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
Exercisable at 31 December
1,890,185
$6.74
6,088,785
$7.83
The weighted average share price at the date of exercise for options exercised during the financial year was $8.15 (2017: $7.58).
The options outstanding at the end of the financial year had a weighted average exercise price of $6.74 (2017: $7.83) and a weighted
average remaining contractual life of 0.9 year (2017: 1.0 year).
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.
Keppel Corporation Limited Report to Shareholders 2018
149
Notes to the Financial Statements
3.
Share capital (continued)
Details of the KCL RSP, the KCL RSP-Deferred Shares, the KCL PSP and the KCL PSP-Transformation Incentive Plan (“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
(2016 award)
-
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
(c) Individual Performance
Achievement
(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 and 2018 awards)
Final Award
Vesting
Condition
and Schedule
0% to 100% of the
contingent award granted,
depending on achievement
of pre-determined targets
If pre-determined targets
are achieved, awards will
vest equally over three
years subject to fulfilment
of service requirements
100% of the awards granted
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 RSP-Deferred Shares, the KCL PSP and the KCL PSP-TIP are as follows:
2018
2017
KCL RSP-
Deferred
Shares
KCL PSP
KCL PSP-TIP
KCL RSP
KCL PSP
KCL PSP-TIP
-
4,099,369
-
(4,097,507)
(1,862)
-
2,525,000
1,180,000
(575,000)
-
(235,000)
2,895,000
6,747,491
-
-
-
(781,524)
5,965,967
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
2018
2017
KCL RSP
5,102,365
-
(3,278,043)
(178,604)
(15,600)
1,630,118
KCL RSP-
Deferred
Shares
-
4,097,507
(1,365,201)
(111,969)
(34,100)
2,586,237
KCL PSP
4,854,898
5,676,157
(4,862,822)
(539,868)
(26,000)
5,102,365
Contingent awards/Awards
(KCL RSP-Deferred Shares)
Balance at 1 January
Granted
Adjustments upon released
Released
Cancelled
Balance at 31 December
Awards released but not vested:
Balance at 1 January
Released
Vested
Cancelled
Other adjustments
Balance at 31 December
150
Financial Report
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.
As at 31 December 2018, there were 1,630,118 (2017: 5,102,365) shares under the KCL RSP and 2,586,237 (2017: nil) shares under the
KCL RSP-Deferred Shares that were released but not vested. At the end of the financial year, the number of contingent Shares granted
but not released was 2,895,000 (2017: 2,525,000) under the KCL PSP and 5,965,967 (2017: 6,747,491) 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 4,342,500 under the KCL PSP and zero to a maximum of 8,948,951 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 23 February 2018, the Company granted awards of 4,099,369 Shares under the KCL RSP-Deferred Shares and the estimated fair value
of the shares granted was $7.76. On 30 April 2018 (2017: 28 April 2017), the Company granted contingent awards of 1,180,000 (2017:
1,120,000) Shares under the KCL PSP and the estimated fair value of the shares granted was $6.59 (2017: $5.22). In the prior year, the
Company granted contingent awards of 2,040,000 Shares under the KCL PSP-TIP on 28 April 2017 and the estimated fair value of the
shares granted was $1.74.
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 of the Company
Expected term
Risk free rate
Expected dividend yield
2018
KCL RSP-
Deferred Shares
KCL PSP
23.02.2018
30.04.2018
$7.96
26.88%
$8.19
27.00%
0.00 - 2.00 years
2.83 years
1.52% - 1.70%
*
2017
2.05%
*
KCL PSP
KCL PSP-TIP
28.04.2017
28.04.2017
$6.51
23.47%
$6.51
23.47%
2.83 years
4.83 years
1.35%
*
1.64%
*
*
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 audited financial statements.
Keppel Corporation Limited Report to Shareholders 2018
151
Notes to the Financial Statements
4.
Reserves
Group
Company
31 December
1 January
31 December
Capital Reserves
Share option and share plan reserve
Fair value reserve
Hedging reserve
Bonus issue by subsidiaries
Others
Revenue Reserves
Foreign Exchange
Translation Account
2018
$’000
203,926
69,700
2017
$’000
202,048
99,169
2017
$’000
2018
$’000
207,139
126,014
177,529
16,957
(198,816)
(111,930)
(410,797)
40,000
80,133
194,943
40,000
52,120
281,407
40,000
49,130
11,486
2017
$’000
177,599
15,012
-
-
-
-
1 January
2017
$’000
184,593
14,340
-
-
7,655
202,141
16,895
209,506
14,183
213,116
10,330,287
10,193,647
10,383,615
6,194,448
6,132,150
5,133,722
(493,669)
(323,556)
-
-
-
-
10,031,561
10,151,498
10,395,101
6,396,589
6,341,656
5,346,838
Movements in the Group’s and the Company’s reserves are set out in the Statements of Changes in Equity. Movements in hedging
reserve by risk categories are as follows:
Group
2018
As at 1 January
Fair value changes arising during the year, net of tax
Realised and transferred to profit and loss account
- Revenue
- Materials and subcontract costs
- Other operating income – net
-
Interest expenses
Share of associated companies’ fair value gains
Less: Non-controlling interests
As at 31 December
Foreign
exchange risk
$’000
Interest
rate risk
$’000
Price risk
$’000
Total
$’000
(174,557)
(53,261)
(30,052)
(23,137)
92,679
(162,396)
(111,930)
(238,794)
94,440
18,903
86,400
-
717
(140)
-
-
-
15,247
19,314
-
-
(82,973)
-
-
-
-
94,440
(64,070)
86,400
15,247
20,031
(140)
(27,498)
(18,628)
(152,690)
(198,816)
The changes in fair value of the hedging instruments approximate the changes in fair value of the hedged items, which resulted in
minimal hedge ineffectiveness recognise in profit or loss. Fair value loss arising from hedge ineffectiveness for cash flow hedges of
$16,513,000 was recognised in profit or loss during the year.
5.
Non-controlling interests
The Group’s subsidiaries that have material non-controlling interests (“NCI”) are as follows:
NCI percentage of
ownership interest and
voting interest
Carrying amount of NCI
Profit after tax
allocated to NCI
31 December
1 January
31 December
1 January
31 December
2018
$’000
-
21%
2017
$’000
49%
21%
2017
$’000
49%
2018
$’000
2017
$’000
2017
$’000
2018
$’000
2017
$’000
-
199,716
202,855
(277)
2,150
20%
184,067
174,784
165,461
12,728
11,317
124,863
155,725
308,602
(135)
(12,112)
Beijing Aether Property
Development Limited
Keppel Telecommunications &
Transportation Ltd
Other subsidiaries with
immaterial NCI
Total
308,930
530,225
676,918
12,316
1,355
152
Financial Report
Summarised financial information before inter-group elimination
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Net assets
Less: NCI
Revenue
(Loss)/profit for the year
Total comprehensive income/(loss)
Beijing Aether Property
Development Limited
Keppel Telecommunications &
Transportation Ltd
31 December
31 December
2018
$’000
-
-
-
-
-
-
-
-
(294)
2,322
2017
$’000
934,671
2,001
139,547
389,542
407,583
-
407,583
-
4,387
(36,347)
2018
$’000
1,360,166
326,630
490,930
194,919
1,000,947
(115,160)
885,787
183,223
69,236
61,326
2017
$’000
1,276,908
272,816
366,009
222,985
960,730
(113,499)
847,231
176,988
60,184
65,478
Net cash flow (used in)/from operations
(4,829)
(8,909)
4,123
9,736
Total comprehensive income allocated to NCI
1,282
(17,810)
11,387
12,499
Dividends paid to NCI
-
-
6,804
6,495
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/payable on changes in ownership interest in subsidiaries
Non-controlling interest acquired
Total amount recognised in equity reserves
6.
Fixed assets
2018
$’000
(9,758)
1,426
2017
$’000
(66,380)
43,489
(8,332)
(22,891)
Group
2018
Cost
At 1 January
Additions
Disposals
Write-off
Subsidiaries acquired
Subsidiaries disposed
Reclassification
- Stocks
- 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
Total
$’000
115,711
202
(18)
-
-
-
2,068,595
1,269
(7,946)
-
-
-
-
812
(2,406)
-
14,076
(21,042)
292,682
174
(8,248)
-
-
(4,191)
-
71,135
3,607
2,015,487
54,633
(32,845)
(6,184)
47
(1,601)
368,501
104,134
-
(4,388)
-
(557)
4,860,976
160,412
(49,057)
(10,572)
47
(6,349)
(319)
30,693
(22,342)
-
(116,716)
(3,356)
(319)
-
(45,539)
At 31 December
114,301
2,054,952
355,159
2,037,569
347,618
4,909,599
Accumulated Depreciation
At 1 January
Depreciation charge
Disposals
Write-off
Subsidiaries disposed
Reclassification
- Other fixed assets categories
Exchange differences
At 31 December
Net Book Value
60,077
3,597
(18)
-
-
(170)
(559)
865,244
54,324
(7,474)
-
-
139,400
9,667
(8,234)
-
(979)
1,303,505
110,111
(30,262)
(3,661)
(1,098)
59,787
-
-
-
-
2,428,013
177,699
(45,988)
(3,661)
(2,077)
10
(5,915)
12,410
(1,109)
160
(8,806)
(12,410)
(558)
-
(16,947)
62,927
906,189
151,155
1,369,949
46,819
2,537,039
51,374
1,148,763
204,004
667,620
300,799
2,372,560
Keppel Corporation Limited Report to Shareholders 2018
153
Notes to the Financial Statements
6.
Fixed assets (continued)
Included in freehold land & buildings are freehold land amounting to $7,812,000 (31 December 2017: $8,726,000, 1 January 2017:
$8,758,000).
Certain fixed assets with carrying amount of $159,996,000 (31 December 2017: $155,748,000, 1 January 2017: $273,363,000) are
mortgaged to banks for loan facilities (Note 21).
Interest capitalised during the financial year amounted to $2,009,000 (2017: $1,460,000).
The Group has $1,545,641,000 of fixed assets as at 31 December 2018 where management performed an impairment review.
Each rigbuilding, shipbuilding and repair facilities in the Offshore & Marine Division 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 11% (31 December 2017: 6% to 13%, 1 January 2017: 6% to 14%) per annum, depending on the location of the facilities. In the prior
year, the Group recognised impairment losses amounting to $3,102,000 relating to the Offshore & Marine Division’s assets.
In relation to the Infrastructure Division’s assets in China, the Group has 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 8.2% (31 December 2017: 9.0%, 1 January 2017:
9.3%). In the prior year, the Group recognised impairment losses amounting to $3,700,000 relating to the Infrastructure Division’s assets
in China.
In the prior year, the Group also recognised an impairment loss of $8,501,000 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.
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
2,150,487
516,442
2,075,836
173
(606)
-
9,775
(22,319)
-
1,334
(45,837)
-
(4)
(49,646)
(172,064)
51,108
(57,415)
(12,305)
(55,406)
311,979
149,079
-
(10)
(16,320)
-
-
1,356
(6,848)
(775)
-
7,636
(26,563)
(46)
-
2,211
(9,358)
82
(1,370)
(1,376)
60,273
(45,310)
-
(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)
1,304,783
60,429
2,530,928
850,850
56,206
(16,752)
9,242
26
255,130
20,318
(40,756)
10
-
(24,745)
(91,352)
127,073
(47,304)
6,002
(12,114)
(47,803)
-
-
49
-
-
-
-
207,373
(105,338)
15,303
(12,088)
(163,904)
(1,943)
-
(1,791)
(690)
(7,102)
-
(4)
(152)
4
(3,946)
(26,984)
(691)
(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
(1) Others comprise furniture, fittings and office equipment, cranes and small equipment and tools.
154
Financial Report
Company
2018
Cost
At 1 January
Additions
Disposals
At 31 December
Accumulated Depreciation
At 1 January
Depreciation charge
Disposals
At 31 December
Net Book Value
2017
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.
Freehold
Land &
Buildings
$’000
Plant,
Machinery,
Equipment
& Others (2)
$’000
Capital Work-
in-Progress
$’000
1,233
-
-
8,693
550
(452)
-
6,139
-
Total
$’000
9,926
6,689
(452)
1,233
8,791
6,139
16,163
1,231
2
-
8,399
307
(452)
1,233
8,254
-
-
-
-
-
537
6,139
1,233
-
-
8,570
177
(54)
1,233
8,693
1,220
11
-
1,231
2
7,731
722
(54)
8,399
294
-
-
-
-
-
-
-
-
-
9,630
309
(452)
9,487
6,676
9,803
177
(54)
9,926
8,951
733
(54)
9,630
296
Keppel Corporation Limited Report to Shareholders 2018
155
Notes to the Financial Statements
7.
Investment properties
At 1 January
Development expenditure
Fair value gain
- Attributable to the Group (Note 25)
- Attributable to third parties under a contractual agreement
Disposal
Subsidiary acquired
Subsidiary disposed
Reclassification
- Stocks (Note 13)
- Fixed assets (Note 6)
Exchange differences
At 31 December
Group
31 December
2018
$’000
2017
$’000
3,460,608
3,550,290
94,099
181,522
84,886
-
(2,870)
360,000
177,939
4,814
-
-
(948,613)
(405,604)
(158,300)
-
(38,430)
-
1,376
(49,729)
2,851,380
3,460,608
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 2018:
-
-
-
-
-
-
Savills Valuation and Professional Services (S) Pte Ltd and Knight Frank Pte Ltd for properties in Singapore;
Colliers International (Hong Kong) Limited for properties in China;
Savills Vietnam Co. Ltd for properties in Vietnam;
CBRE Limited for a property in the Netherlands;
Knight Frank LLP for a property in 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 $3,408,000 (2017: $6,777,000).
The Group has mortgaged certain investment properties of up to an aggregate amount of $905,656,000 (31 December 2017:
$552,684,000, 1 January 2017: $517,726,000) to banks for loan facilities (Note 21).
During the year, the Group reclassified $158,300,000 from investment properties to properties held for sale upon change of use of the
asset from holding for capital gain and/or rental yield to property trading.
In 2017, the Group reclassified $1,376,000 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.
156
Financial Report
8.
Subsidiaries
Quoted shares, at cost
Market value: $829,294,000 (2017: $701,714,000)
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
31 December
2018
$’000
2017
$’000
1 January
2017
$’000
398,140
7,821,604
8,219,744
398,140
7,821,594
8,219,734
398,140
7,919,131
8,317,271
(351,785)
(246,885)
(163,070)
7,867,959
7,972,849
8,154,201
Company
31 December
2018
$’000
246,885
104,900
2017
$’000
163,070
83,815
1 January
2017
$’000
31,070
132,000
351,785
246,885
163,070
Impairment of $104,900,000 (2017: $83,815,000) 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 11.7% (2017: 10.0%) per annum.
Cash and cash equivalents of $684,375,000 (31 December 2017: $857,168,000, 1 January 2017: $946,797,000) held in the People’s
Republic of China are subject to local exchange control regulations. These regulations place restriction on the amount of currency being
exported other than through dividends and capital repatriation upon liquidations.
Information relating to significant subsidiaries consolidated in the financial statements is given in Note 37.
9.
Associated companies
Quoted shares, at cost
Market value: $3,149,785,000
(31 Dec 2017: $3,484,189,000;
1 Jan 2017: $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
31 December
2018
$’000
2017
$’000
1 January
2017
$’000
3,149,917
2,096,656
5,246,573
3,105,919
1,784,809
4,890,728
3,080,800
1,640,502
4,721,302
(161,367)
(100,297)
(150,845)
5,085,206
4,790,431
4,570,457
534,106
526,582
510,871
5,619,312
5,317,013
5,081,328
315,787
304,586
310,242
286,522
245,000
97,503
6,239,685
5,913,777
5,423,831
Notes issued by an associated company of $245,000,000 are unsecured and will mature in 2040. The remaining Notes are denominated
in USD, secured and will mature in 2024. Interest is charged at rates ranging from 0% to 17.5% (31 December 2017: 0% to 17.5%,
1 January 2017: 17.5%) per annum.
Advances to associated companies are unsecured and are not repayable within the next 12 months. Interest is charged at rates ranging
from 3.0% to 7.0% (31 December 2017: 3.0% to 7.0%, 1 January 2017: 6.0%) per annum on interest-bearing advances.
Keppel Corporation Limited Report to Shareholders 2018
157
Notes to the Financial Statements
9.
Associated companies (continued)
Movements in the provision for impairment of associated companies are as follows:
At 1 January
Impairment loss/(write-back of impairment loss)
Disposal
Exchange differences
At 31 December
Group
2018
$’000
100,297
60,782
-
288
2017
$’000
150,845
(39,192)
(9,873)
(1,483)
161,367
100,297
Impairment loss made during the year mainly relates to the shortfall between the carrying amount of the costs of investment and the
recoverable amount of certain associated companies.
Write-back of impairment losses in the prior 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.
The Group’s share of net profit of associated companies is as follows:
Share of profit before tax
Share of taxation
Share of net profit
Group
2018
$’000
2017
$’000
317,699
(96,181)
386,773
(96,240)
221,518
290,533
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
Sino-Singapore Tianjin Eco-City Investment and Development Co., Limited
Floatel International Limited
Other associated companies
31 December
2018
$’000
2017
$’000
1 January
2017
$’000
1,972,303
1,850,409
1,844,738
254,035
196,311
377,616
560,818
362,760
267,169
321,562
396,152
541,837
342,694
284,320
347,397
392,834
416,262
334,697
2,515,842
6,239,685
2,193,954
5,913,777
1,803,583
5,423,831
158
Financial Report
The summarised financial information of the material associated companies, not adjusted for the Group’s proportionate share, based on
its SFRS(I) 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 income/(loss)
Total comprehensive income
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 income
Fair value of ownership interest (if listed) **
Dividends received
**
#
Based on the quoted market price at 31 December (Level 1 in the fair value hierarchy).
Information for 1 January 2017 is not available.
Keppel REIT
31 December
2018
$’000
274,529
7,509,922
7,784,451
134,156
2,314,699
2,448,855
5,335,596
2017
$’000
208,307
7,395,981
7,604,288
492,865
2,196,165
2,689,030
4,915,258
1 January
2017
$’000
290,193
7,245,132
7,535,325
59,869
2,576,898
2,636,767
4,898,558
(578,311)
(151,834)
(151,841)
4,757,285
4,763,424
4,746,717
47%
45%
45%
2,255,429
2,146,723
2,128,798
(283,126)
(296,314)
(284,060)
1,972,303
1,850,409
1,844,738
165,858
154,588
3,028
157,616
164,516
180,154
(49,789)
130,365
#
#
#
#
1,834,206
1,914,043
1,505,741
87,247
80,011
#
Keppel Infrastructure Trust
31 December
2018
$’000
521,616
3,283,391
3,805,007
1,233,598
1,393,153
2,626,751
1,178,256
2017
$’000
488,154
3,468,262
3,956,416
919,010
1,725,512
2,644,522
1,311,894
1 January
2017
$’000
516,723
3,601,919
4,118,642
937,324
1,727,348
2,664,672
1,453,970
(125,780)
(158,959)
(198,580)
1,052,476
1,152,935
1,255,390
18%
191,761
62,274
254,035
637,387
(2,358)
13,876
11,518
341,023
26,134
18%
209,949
57,220
267,169
632,476
13,776
(10,051)
3,725
403,858
26,126
18%
228,607
55,713
284,320
#
#
#
#
333,622
#
Keppel Corporation Limited Report to Shareholders 2018
159
Notes to the Financial Statements
9.
Associated companies (continued)
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
Notes issued by associated company
Revenue
Loss after tax
Other comprehensive (loss)/income
Total comprehensive 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
Profit after tax
Other comprehensive (loss)/income
Total comprehensive income
Fair value of ownership interest (if listed) **
Dividends received
KrisEnergy Limited *
31 December
2018
$’000
147,702
761,267
908,969
103,342
671,960
775,302
133,667
-
2017
$’000
191,987
869,374
1,061,361
74,604
653,172
727,776
333,585
-
1 January
2017
$’000
183,440
1,236,024
1,419,464
273,951
546,346
820,297
599,167
-
133,667
333,585
599,167
40%
53,213
72,311
125,524
70,787
196,311
40%
133,067
123,253
256,320
65,242
321,562
216,454
(201,924)
(132)
196,612
(293,277)
32
(202,056)
(293,245)
40%
239,607
107,790
347,397
-
347,397
#
#
#
#
43,673
60,425
110,679
-
-
#
Keppel DC REIT
31 December
2018
$’000
220,244
2,032,687
2,252,931
186,779
590,158
776,937
2017
$’000
178,078
1,585,204
1,763,282
53,224
593,556
646,780
1 January
2017
$’000
338,312
1,244,687
1,582,999
35,144
473,987
509,131
1,475,994
1,116,502
1,073,868
(31,155)
(26,786)
(343)
1,444,839
1,089,716
1,073,525
25%
364,244
13,372
377,616
175,535
146,009
(4,628)
141,381
459,925
27,876
35%
380,617
15,535
396,152
139,050
70,274
21,044
91,318
562,990
20,958
35%
375,841
16,993
392,834
#
#
#
#
466,534
#
*
**
#
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.
Based on the quoted market price at 31 December (Level 1 in the fair value hierarchy).
Information for 1 January 2017 is not available.
160
Financial Report
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 income
Total comprehensive income
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
Profit after tax
Other comprehensive income
Total comprehensive income
Dividends received
#
Information for 1 January 2017 is not available.
Sino-Singapore Tianjin Eco-City Investment and
Development Co., Limited
31 December
2018
$’000
889,954
438,662
2017
$’000
816,431
458,652
1 January
2017
$’000
1,004,529
508,672
1,328,616
1,275,083
1,513,201
190,317
16,668
206,985
165,498
25,912
191,410
1,121,631
1,083,673
-
-
608,565
72,116
680,681
832,520
-
1,121,631
1,083,673
832,520
50%
560,815
3
50%
541,836
1
50%
416,260
2
560,818
541,837
416,262
492,503
111,222
-
111,222
22,493
1,247,882
267,163
-
267,163
-
Floatel International Limited
31 December
2018
$’000
186,613
1,771,181
1,957,794
104,714
1,141,620
1,246,334
711,460
-
2017
$’000
334,668
1,818,093
2,152,761
48,606
1,432,657
1,481,263
671,498
-
#
#
#
#
#
1 January
2017
$’000
263,092
2,038,004
2,301,096
62,292
1,584,259
1,646,551
654,545
-
711,460
671,498
654,545
50%
355,161
7,599
362,760
50%
335,212
7,482
342,694
393,535
443,442
22,225
6,796
29,021
-
48,829
7,728
56,557
-
50%
326,749
7,948
334,697
#
#
#
#
#
Keppel Corporation Limited Report to Shareholders 2018
161
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 2019 to 2037 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$67 to US$73 per barrel for 2019 to 2037 (31 December 2017: US$52 to US$70 per barrel for 2018 to 2036, 1 January 2017: 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
11.7% (31 December 2017 and 1 January 2017: 10%). The Group has recognised an impairment charge of $53,000,000 (2017: write-back
of impairment charge of $46,000,000) during the financial year. 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% (2017: 10%) lower than
management’s estimates, the Group would have recognised a further impairment charge of $55,000,000 (2017: reduction in write-back of
impairment charge by $24,000,000).
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 1.2% (31 December 2017: 2.2%, 1 January 2017: 2.0%) and a discount rate ranging from
9.3% to 11.2% (31 December 2017: 7.9%, 1 January 2017: 7.6%) per annum on the cash flows. An impairment charge of $6,000,000
(2017: $8,000,000) was recognised in the profit and loss account within other operating expense as a result of the above review.
An independent professional firm was engaged to assist in the impairment assessment for the financial year ended 31 December 2018.
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
2018
$’000
172,557
(56,897)
(26,215)
89,445
2017
$’000
168,364
(26,698)
(41,061)
100,605
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 37.
10.
Investments
Group
Company
31 December
1 January
31 December
2018
$’000
2017
$’000
2017
$’000
2018
$’000
2017
$’000
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 other
comprehensive income (“OCI”):
- Quoted equity shares
- Unquoted equity shares
- Unquoted property funds
Total investments at fair value through OCI
Investments at fair value through profit or loss:
- Quoted warrants
- Unquoted equity shares
- Unquoted - others
-
-
-
-
-
-
-
-
-
6,527
96,903
104,927
208,357
29,332
189,559
22,267
8,854
53,419
185,187
-
247,460
83,212
22,256
105,468
352,928
-
-
-
-
31,647
74,063
-
Total investments at fair value through
profit or loss
241,158
105,710
12,878
47,736
174,154
11,788
246,556
98,481
23,694
122,175
368,731
-
-
-
-
-
8,973
-
8,973
-
-
-
-
-
-
-
-
-
-
16,957
-
16,957
-
-
-
-
1 January
2017
$’000
-
14,340
-
-
14,340
-
-
-
-
15,012
-
-
15,012
-
-
-
15,012
14,340
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total investments
449,515
458,638
377,704
16,957
15,012
14,340
162
Financial Report
The breakdown of the investments at fair value through other comprehensive income is as follows:
Unquoted property funds managed by
a related company
Unquoted equity shares in real estate
industry
Quoted and unquoted equity shares in
oil and gas industry
Others
Group
Company
31 December
1 January
31 December
2018
$’000
2017
$’000
2017
$’000
104,927
48,115
34,235
21,080
208,357
-
-
-
-
-
-
-
-
-
-
2018
$’000
-
16,957
-
-
16,957
2017
$’000
1 January
2017
$’000
-
-
-
-
-
-
-
-
-
-
Quoted warrants are issued by an associated company, KrisEnergy.
Unquoted investments included a bond amounting to $39,868,000 (31 December 2017: $39,256,000, 1 January 2017: $41,700,000)
bearing interest at 4% (31 December 2017 and 1 January 2017: 4%) per annum which is maturing in 2027.
During the prior year, the Group recognised an impairment loss of $14,330,000 for certain unquoted equity securities in which the Group
does not expect to recover its cost of investment.
11. Long term assets
Staff loans
Derivative assets
Call option
Service concession receivable
Long term receivables and others
Less: Amounts due within one year and
included in debtors (Note 16)
Group
Company
31 December
1 January
31 December
1 January
2018
$’000
633
22,002
150,500
235,959
313,350
722,444
2017
$’000
933
26,780
137,200
115,835
535,762
816,510
2017
$’000
1,395
125,508
120,600
-
569,334
816,837
2018
$’000
105
8,751
-
-
-
8,856
2017
$’000
386
14,101
-
-
-
14,487
2017
$’000
504
97,199
-
-
-
97,703
(42,980)
(42,194)
(2,399)
(55)
(141)
(146)
679,464
774,316
814,438
8,801
14,346
97,557
Included in staff loans are interest-free advances to directors of related corporations amounting to $47,000 (31 December 2017:
$179,000, 1 January 2017: $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. Limited to
Keppel REIT in 2011. The Group has an option to acquire the same shares exercisable at the price of $1 upon the expiry of 99 years
from 14 December 2011 under the share purchase agreement. The call option may be exercised earlier upon the occurrence of certain
specified events as stipulated in the call option deed. As at 31 December 2018, 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
843-year leasehold and 92-year leasehold (31 December 2017: based on the remaining 844-year leasehold and 93-year leasehold,
1 January 2017: 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 33.
The service concession receivable relates to a service concession arrangement with a governing agency of the Government of Singapore
(the grantor) to design, build, own and operate a desalination plant in Singapore, which has a capacity to produce 137,000 cubic metres
of fresh drinking water per day. The plant is expected to be operational in 2020. The Group has a contractual right under the concession
arrangement to receive fixed and determinable amounts of payment during the concession period of 25 years irrespective of the output
produced. At the end of the concession period, the grantor may require the plant to be handed over in a specified condition or to be
demolished at reasonable costs borne by the grantor. In arriving at the carrying value of the service concession arrangements as at
the end of the reporting year, effective interest rates of 4.30% (31 December 2017: 4.33%) per annum were used to discount the future
expected cash flows.
Long term receivables are unsecured, largely repayable after five years (31 December 2017 and 1 January 2017: five years) and bears
effective interest ranging from 2.00% to 9.00% (31 December 2017: 2.00% to 6.00%, 1 January 2017: 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 unsecured, interest-bearing USD loan amounting to $139,799,000 (31 December 2017:
secured, interest-bearing US$ loan amounting to $279,004,000, 1 January 2017: secured, interest-bearing US$ loan amounting to
$285,167,000) which is repayable on 2025 by an associated company.
Keppel Corporation Limited Report to Shareholders 2018
163
Notes to the Financial Statements
12.
Intangibles
Group
2018
At 1 January
Additions
Amortisation
Exchange differences
Goodwill
$’000
Development
Expenditure
$’000
Management
Rights
$’000
Customer
Contracts
$’000
Customer
Relationships
$’000
Total
$’000
59,270
-
-
-
19,073
561
(1,760)
143
16,757
13,227
24,267
132,594
-
-
-
-
(1,464)
-
-
(1,463)
396
561
(4,687)
539
At 31 December
59,270
18,017
16,757
11,763
23,200
129,007
Cost
Accumulated amortisation
59,270
-
38,808
(20,791)
16,757
-
24,963
(13,200)
28,342
(5,142)
168,140
(39,133)
59,270
18,017
16,757
11,763
23,200
129,007
2017
At 1 January
Additions
Amortisation
Reversal
Exchange differences
59,270
-
-
-
-
20,779
731
(1,646)
-
(791)
16,757
14,694
29,169
140,669
-
-
-
-
-
(1,467)
-
-
-
(1,894)
(1,195)
(1,813)
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
For the purpose of impairment testing, goodwill is allocated to cash-generating units.
Out of the total goodwill of $59,270,000, goodwill allocated to a cash-generating unit in the Infrastructure Division amounted to
$57,178,000 (31 December 2017 and 1 January 2017: $57,178,000). The recoverable amount of the cash-generating unit at the balance
sheet date is based on current bid prices of the quoted shares of the cash-generating unit.
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% (31 December 2017: 5.0%, 1 January 2017: 6.5%) per annum. 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
Consumable materials and supplies
Finished products for sale
Work-in-progress (net of provision)
Properties held for sale
31 December
2018
$’000
162,445
103,995
594,312
Group
2017
$’000
110,434
96,978
763,255
1 January
2017
$’000
150,096
85,889
724,890
(a)
4,653,254
4,809,375
5,606,865
5,514,006
5,780,042
6,567,740
For work-in-progress balances, the Group determines the estimated net realisable value based on arrangements to market the work-
in-progress and discounted cash flow models. The provision for work-in-progress at the end of the financial year was $53,697,000
(31 December 2017: $52,483,000, 1 January 2017: $55,055,000).
164
Financial Report
(a)
Properties held for sale
Properties under development
Land cost
Development cost incurred to date
Related overhead expenditure
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
31 December
2018
$’000
2017
$’000
1 January
2017
$’000
2,587,958
2,380,942
2,738,209
544,505
244,828
3,377,291
1,304,119
4,681,410
866,949
314,834
3,562,725
1,284,426
4,847,151
784,947
288,238
3,811,394
1,867,887
5,679,281
(28,156)
(37,776)
(72,416)
4,653,254
4,809,375
5,606,865
37,776
72,416
799
(33)
(10,386)
-
-
(383)
(28,866)
(5,391)
83,959
19,008
(400)
(15,155)
(14,996)
28,156
37,776
72,416
The provision for properties held for sale is arrived at after 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.
Interest capitalised during the financial year amounted to $31,288,000 (2017: $44,187,000) at rate of 3.30% (2017: 1.60% to 3.36%)
per annum for Singapore properties and 4.75% to 15.00% (2017: 0.05% to 15.00%) per annum for overseas properties.
In 2017, certain properties held for sale with carrying amount of $1,186,296,000 are mortgaged to banks for loan facilities
(Note 21).
14. Contract assets/liabilities
Contract assets
Contract liabilities
Group
31 December
2018
$’000
2017
$’000
1 January
2017
$’000
3,212,712
3,643,495
4,157,146
1,918,547
1,950,151
1,612,984
Contract assets relating to certain rig building contracts where the scheduled dates of the rigs have been deferred and have higher
counter-party risks amounted to $1,383,286,000 (2017: $1,127,566,000, 1 January 2017: $868,535,000).
Contract liabilities included proceeds received from sale of properties of $890,139,000 (31 December 2017: $677,997,000, 1 January
2017: $424,376,000).
Revenue recognised during the financial year ended 31 December 2018 in relation to contract liability balance at 1 January 2018 was
$544,361,000 (2017: $409,175,000).
The aggregate amount of the transaction price allocated to the remaining performance obligation is $4,553,150,000 and the Group
expects to recognise this revenue over the next 1 to 6 years.
As permitted under the transitional provisions in the SFRS(I) 15, the transaction price allocated to partially or fully unsatisfied
performance obligations as of 31 December 2017 and 1 January 2017 is not disclosed.
Keppel Corporation Limited Report to Shareholders 2018
165
Notes to the Financial Statements
14. Contract assets/liabilities (continued)
Movements in the provision for contract assets are as follows:
At 1 January
Charge to profit and loss account
At 31 December
15. Amounts due from/to
Subsidiaries
Amounts due from
- trade
- advances
Provision for doubtful debts
Amounts due to
- trade
- advances
Group
31 December
2018
$’000
-
21,000
21,000
2017
$’000
-
-
-
1 January
2017
$’000
-
-
-
Company
31 December
2018
$’000
2017
$’000
1 January
2017
$’000
163,800
3,885,921
4,049,721
(6,600)
97,984
3,407,536
3,505,520
(6,600)
86,001
3,902,961
3,988,962
(6,600)
4,043,121
3,498,920
3,982,362
8,130
154,481
4,726
231,677
900,632
162,090
162,611
236,403
1,062,722
Movements in the provision for doubtful debts are as follows:
At 1 January/31 December
6,600
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% (2017: 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
Company
31 December
1 January
31 December
2018
$’000
2017
$’000
2017
$’000
2018
$’000
2017
$’000
1 January
2017
$’000
84,201
223,526
307,727
(15,998)
66,482
291,735
358,217
(15,257)
61,117
373,394
434,511
(1,131)
291,729
342,960
433,380
51,979
63,845
34,110
219,221
16,094
95,449
115,824
253,331
111,543
15,257
741
1,131
14,126
15,998
15,257
46
1,085
1,131
548
-
548
-
548
-
-
-
-
-
-
733
-
733
-
733
-
-
-
-
-
-
688
-
688
-
688
-
-
-
-
-
-
Advances to and from associated companies are unsecured and are repayable on demand. Interest is charged at rates ranging from
0.45% to 11.50% (31 December 2017: 0.25% to 8.00%, 1 January 2017: 0.13% to 8.90%) per annum on interest-bearing advances.
166
Financial Report
16. Debtors
Group
Company
31 December
1 January
31 December
Trade debtors
1,831,028
2,214,444
2,569,022
Provision for doubtful debts
(246,879)
(122,027)
(15,723)
1,584,149
2,092,417
2,553,299
2018
$’000
2017
$’000
2017
$’000
Long term receivables due within
one year (Note 11)
Sundry debtors
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
42,980
203,069
137,518
7,109
90,057
15,830
28,971
145,411
155,747
197,059
42,194
155,568
118,565
15,171
59,040
19,410
25,235
103,346
125,740
169,873
37,097
47,736
61,228
73,455
26,705
41,081
1,135,289
1,009,906
(17,138)
1,118,151
(13,906)
996,000
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
2,702,300
3,088,417
3,373,841
Movements in the provision for doubtful
debts are as follows:
At 1 January
Adoption of SFRS(I) 9
Charge to profit and loss account
Amount written off
Subsidiary disposed
Exchange differences
Reclassification
135,933
29,550
41,447
25,734
95,457
(5,959)
-
8
12,844
-
115,780
(7,361)
(1,926)
(110)
-
-
11,435
(23,504)
-
172
-
Total
264,017
135,933
29,550
2018
$’000
2
-
2
55
478
104
-
83
21
279
-
5,207
-
-
-
-
6,227
-
6,227
6,229
-
-
-
-
-
-
-
-
2017
$’000
7
-
7
141
3,902
112
-
-
20
408
-
-
-
-
-
-
4,583
-
4,583
4,590
-
-
-
-
-
-
-
-
1 January
2017
$’000
-
-
-
146
2,173
168
-
-
32
446
-
-
-
-
-
-
2,965
-
2,965
2,965
-
-
-
-
-
-
-
-
During the financial year ended 31 December 2018, a provision of $102,000,000 (2017: $81,000,000) was recognised for the rig contracts
with Sete Brasil.
Keppel Corporation Limited Report to Shareholders 2018
167
Notes to the Financial Statements
17. Short term investments
Group
Company
31 December
1 January
31 December
2018
$’000
2017
$’000
Available-for-sale investments:
Quoted equity shares
Unquoted equity funds
Total available-for-sale investments
Total investments at fair value through
other comprehensive income:
2018
$’000
-
-
-
2017
$’000
55,048
-
2017
$’000
77,264
49,610
55,048
126,874
Quoted equity shares
34,428
-
-
Investments at fair value through
profit or loss:
Quoted equity shares
Unquoted equity shares
Total investments at fair value through
profit or loss
Total investments at amortised cost:
74,759
147,654
147,054
-
74
-
74,759
147,728
147,054
-
-
-
-
-
-
-
Unquoted - others
27,400
-
-
27,400
Total short term investments
136,587
202,776
273,928
27,400
Investments at fair value through other comprehensive income are in the oil and gas industry.
1 January
2017
$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The unquoted investment at amortised cost is repayable upon the repayment of a short term borrowing of an associated company.
18. 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
31 December
1 January
31 December
1 January
2018
$’000
2017
$’000
2017
$’000
779,003
590,248
437,654
1,042,052
1,515,887
1,436,485
9,562
32,340
68,306
150,789
135,313
144,633
2018
$’000
370
2017
$’000
2,213
-
-
-
-
-
-
2017
$’000
542
-
-
-
1,981,406
2,273,788
2,087,078
370
2,213
542
Fixed deposits with banks of the Group mature on varying periods, substantially between 1 day to 6 months (31 December 2017:
1 day to 12 months, 1 January 2017: 1 day to 3 months). This comprises Singapore dollar fixed deposits of $34,824,000 (31 December
2017: $121,525,000, 1 January 2017: $10,051,000) at interest rates ranging from 0.60% to 1.59% (31 December 2017: 0.35% to 1.24%,
1 January 2017: 0.15% to 0.85%) per annum, and foreign currency fixed deposits of $1,007,228,000 (31 December 2017: $1,394,362,000,
1 January 2017: $1,426,434,000) at interest rates ranging from 0.02% to 7.55% (31 December 2017: 0.01% to 13.15%, 1 January 2017:
0.03% to 14.21%) per annum.
The bank balances at 31 December 2018 include an amount of $99,450,000 (31 December 2017: $102,000,000, 1 January 2017: $nil)
pledged to a bank in relation to certain banking arrangement.
168
Financial Report
19. Creditors
Group
Company
31 December
1 January
31 December
Trade creditors
Customers’ advances and deposits
Sundry creditors
Accrued expenses
Advances from non-controlling
shareholders
Retention monies
Interest payables
Other non-current liabilities:
Accrued expenses
Derivative liabilities
2018
$’000
486,278
87,102
896,743
2,584,096
145,998
148,895
41,911
2017
$’000
579,371
89,656
1,380,955
3,274,077
177,151
176,850
42,105
2017
$’000
589,834
64,788
1,431,539
2,955,039
209,726
194,673
37,719
2018
$’000
3,139
-
3,007
47,020
-
-
2017
$’000
161
-
4,070
39,074
-
-
1 January
2017
$’000
-
-
3,591
86,458
-
-
23,006
25,280
22,422
4,391,023
5,720,165
5,483,318
76,172
68,585
112,471
191,990
169,727
204,121
82,494
112,885
68,214
48,372
43,303
49,275
60,521
54,409
66,632
361,717
286,615
181,099
91,675
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 4.75% (31 December 2017: 2.00% to 4.35%, 1 January 2017: 2.03% to 4.31%) per annum on interest-bearing
advances.
During the financial year ended 31 December 2018, there was a write-back of provision for claims of $96,380,000. This was in relation
to customer potential claims arising from a rig contract in the Offshore & Marine Division. In view of commercial sensitivity, the Group
is unable to disclose the name of the customer or the amount of the potential claims. The original contract value was adjusted for cost
escalations. The validity of the contract value adjustments was subsequently challenged. Due to prolonged uncertainty, provisions were
made by the Group for the potential claims in the past, the first such provision being made more than ten years ago. For the current
financial year, the Group has assessed, including seeking legal opinion, its position in respect of these potential claims and concluded that
there are reasonable grounds for the write-back.
During the financial year ended 31 December 2018, a provision for related contract costs of $65,000,000 was recognised for the rig
contracts with Sete Brasil, bringing the total provision to $245,000,000 as at 31 December 2018. These were included in sundry creditors
as at 31 December 2018, 31 December 2017 and 1 January 2017.
In the prior 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 advance 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. The Court of Appeal
dismissed the Application to CA on 26 February 2018 and the divestment was subsequently completed during the year.
In the prior year, 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. Fines in an aggregated amount of US$422,216,980, or equivalent to
approximately S$570 million, paid/payable are allocated between the three jurisdictions.
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 has 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.
Keppel Corporation Limited Report to Shareholders 2018
169
Notes to the Financial Statements
19. Creditors (continued)
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. In addition, KOM has paid US$211,108,490 to the MPF. Under the Conditional Warning issued by
CPIB, KOM has committed to certain undertakings and has paid US$52,777,122.50 and a further US$52,777,122.50 will be payable within
three years from the date of the Conditional Warning (less any penalties paid by KOM to specified Brazilian authorities during this period).
The amount payable was included in accrued expenses as at 31 December 2018 and 31 December 2017.
As part of the global resolution with the authorities, the Group has committed to strengthening the compliance and governance regime in
KOM. Amongst others, it included a commitment to secure certification of ISO 37001 Anti-Bribery Management System and testing of the
effectiveness of the policies and procedures put in place. In November 2018, Keppel O&M’s entities in Singapore achieved certification for
the ISO 37001 Anti-Bribery Management System.
Anti-bribery and corruption compliance audits were also performed during the year on entities within the KOM Group. These audits
revealed that the enhanced policies and procedures put in place to-date were, in general, functioning as intended in the current year.
The audits did, however, identify certain matters relating to contracts entered into several years ago which require follow-up actions and
further review. Notwithstanding, based on currently available information, management is of the opinion that no additional provisions
would be required in relation to these matters.
20. Provisions for warranties
Group
2018
At 1 January
Write-back to profit and loss account
Amount utilised
Exchange differences
At 31 December
2017
At 1 January
Charge to profit and loss account
Amount utilised
Subsidiary disposed
Exchange differences
At 31 December
21. Term loans
$’000
115,972
(1,550)
(43,640)
(1,168)
69,614
81,679
39,280
(4,205)
(397)
(385)
115,972
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
(a)
(b)
(c)
(d)
(e)
(f)
31 December
2018
2017
1 January
2017
Due within
one year
$’000
Due after
one year
$’000
Due within
one year
$’000
Due after
one year
$’000
Due within
one year
$’000
Due after
one year
$’000
-
1,700,000
342,316
729,196
-
-
100,000
274,000
-
-
-
-
1,700,000
916,027
-
1,700,000
99,964
786,873
100,000
269,800
-
-
120,000
286,600
412,412
726,029
185,874
150,591
580,825
391,046
744,449
3,078,682
1,563,493
2,512,267
1,344,311
3,579,799
1,480,757
6,067,752
1,714,084
6,078,919
1,835,321
7,217,721
Company
Keppel Corporation Medium
Term Notes
Unsecured bank loans
170
(a)
(f)
-
460,657
1,700,000
1,795,610
-
551,530
1,700,000
1,239,800
-
692,311
1,700,000
1,625,600
460,657
3,495,610
551,530
2,939,800
692,311
3,325,600
Financial Report
(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 (31 December 2017 and 1 January 2017: $1,700,000,000). The notes denominated in
Singapore Dollars, are unsecured and comprised fixed rate notes due from 2020 to 2042 (31 December 2017 and 1 January 2017:
from 2020 to 2042) with interest rates ranging from 3.10% to 4.00% (31 December 2017 and 1 January 2017: 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 $642,060,000
(31 December 2017: $486,696,000, 1 January 2017: $357,691,000), of which $299,744,000 (31 December 2017: $149,818,000,
1 January 2017: $nil) are denominated in Singapore dollar and $342,316,000 (31 December 2017: $336,878,000, 1 January
2017: $357,691,000) are denominated in foreign currency. The fixed rate notes are unsecured and are due from 2019 to 2023
(31 December 2017: 2019 to 2023, 1 January 2017: 2020 to 2042), with interest rates ranging from 2.68% to 2.84% (31 December
2017: 2.84%) per annum for fixed rate notes denominated in Singapore dollar and with interest rates of 3.26% (31 December 2017
and 1 January 2017: 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 $429,452,000 (31 December 2017: $429,331,000, 1 January 2017: $529,146,000). The notes
denominated in Singapore Dollars, are unsecured and comprised fixed rate notes due from 2020 to 2024 (31 December 2017: 2020
to 2024, 1 January 2017: 2017 to 2024) with interest rates ranging from 2.83% to 3.90% (31 December 2017 and 1 January 2017:
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 (31 December 2017: $100,000,000, 1 January 2017:
$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 (31 December 2017: 2.85% per annum
from September 2017 to September 2022 and 3.85% per annum from September 2022 to September 2024, 1 January 2017: 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 $274,000,000 (31 December 2017: $269,800,000, 1 January 2017: $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 2.24% to 3.30% (31 December 2017: 1.75% to 2.24%, 1 January 2017: 1.21% to 1.75%) per
annum.
(e)
The secured bank loans consist of:
-
-
-
A term loan of $297,923,000 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 of 2.89% per annum.
A term loan of $3,000,000 drawn down by a subsidiary. The term loan is repayable in 2023 and is secured on certain assets
of the subsidiary. Interest is based on money market rates of 2.74% per annum.
Other secured bank loans comprised $297,363,000 (31 December 2017: $474,918,000, 1 January 2017: $504,943,000)
of foreign currency loans. They are repayable between one to fifteen (31 December 2017: one to sixteen, 1 January 2017:
one to seventeen) years and are secured on investment properties and certain fixed and other assets of the subsidiaries.
Interest on foreign currency loans is based on money market rates ranging from 1.59% to 9.59% (31 December 2017: 1.49%
to 7.23%, 1 January 2017: 1.60% to 10.89%) per annum.
The secured bank loans as of 31 December 2017 consist of a term loan of $256,498,000 (1 January 2017: $351,557,000) which
was drawn down by a subsidiary. The term loan was repaid in 2018 and was previously secured on certain assets of the subsidiary.
Interest was based on money market rates ranging from 1.35% to 1.94% (1 January 2017: 0.93% to 2.30%) per annum.
The secured bank loans as of 1 January 2017 also include:
-
-
-
A term loan of $175,874,000 which 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 which 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 which 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.
Keppel Corporation Limited Report to Shareholders 2018
171
Notes to the Financial Statements
21. Term loans (continued)
(f)
The unsecured bank and other loans of the Group totalling $3,804,711,000 (31 December 2017: $4,075,760,000, 1 January 2017:
$4,924,110,000) comprised $2,604,736,000 (31 December 2017: $2,823,820,000, 1 January 2017: $3,136,786,000) of loans
denominated in Singapore dollar and $1,199,975,000 (31 December 2017: $1,251,940,000, 1 January 2017: $1,787,324,000) of
foreign currency loans. They are repayable between one to thirteen (31 December 2017: one to fourteen, 1 January 2017: one to
fifteen) years. Interest on loans denominated in Singapore dollar is based on money market rates ranging from 2.13% to 3.08%
(31 December 2017: 1.18% to 3.38%, 1 January 2017: 0.84% to 3.38%) per annum. Interest on foreign currency loans is based
on money market rates ranging from 0.50% to 9.30% (31 December 2017: 0.48% to 10.69%, 1 January 2017: 0.25% to 13.76%)
per annum.
The unsecured bank loans of the Company totalling $2,256,267,000 (31 December 2017: $1,791,330,000, 1 January 2017:
$2,317,911,000) comprise $1,707,050,000 (31 December 2017: $1,550,000,000, 1 January 2017: $1,707,350,000) of loans
denominated in Singapore dollar and $549,217,000 (31 December 2017: $241,330,000, 1 January 2017: $610,561,000) of foreign
currency loans. They are repayable within one to six years (31 December 2017 and 1 January 2017: one to seven years). Interest on
loans denominated in Singapore dollar is based on money market rates ranging from 2.13% to 3.08% (31 December 2017: 1.46%
to 3.38%, 1 January 2017: 0.84% to 3.38%) per annum. Interest on foreign currency loans is based on money market rates ranging
from 0.50% to 3.96% (31 December 2017: 0.50% to 2.10%, 1 January 2017: 0.41% to 2.30%) per annum.
The Group has mortgaged certain properties and assets of up to an aggregate amount of $1,065,652,000 (31 December 2017:
$1,894,728,000, 1 January 2017: $2,810,528,000) to banks for loan facilities.
The fair values of term loans for the Group and Company are $7,672,894,000 (31 December 2017: $7,864,285,000, 1 January 2017:
$9,055,975,000) and $3,935,905,000 (31 December 2017: $3,556,370,000, 1 January 2017: $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
22. Deferred taxation
Deferred tax liabilities:
Accelerated tax depreciation
Investment properties valuation
Offshore income & others
Deferred tax assets:
Other provisions
Unutilised tax benefits
Net deferred tax liabilities
Group
Company
31 December
1 January
31 December
2018
$’000
2017
$’000
2017
$’000
2018
$’000
2017
$’000
1 January
2017
$’000
1,153,733
3,686,101
1,227,918
1,403,471
3,174,902
1,500,546
1,839,458
3,027,749
2,350,514
705,500
2,069,580
720,530
-
1,900,000
1,039,800
400,000
1,000,000
1,925,600
6,067,752
6,078,919
7,217,721
3,495,610
2,939,800
3,325,600
31 December
2018
$’000
116,707
49,843
80,163
246,713
Group
2017
$’000
108,936
184,429
90,502
383,867
1 January
2017
$’000
115,424
152,751
96,334
364,509
(34,740)
(15,347)
(50,087)
(32,778)
(16,415)
(49,193)
(29,711)
(3,623)
(33,334)
196,626
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 $84,027,000 (31 December 2017: $105,725,000, 1 January 2017: $86,905,000) for
taxes that would be payable on the undistributed earnings of certain subsidiaries and associated companies 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.
172
Financial Report
The Group has unutilised tax losses and capital allowances of $682,317,000 (31 December 2017: $886,858,000, 1 January 2017:
$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 $145,177,000
(31 December 2017: $227,747,000, 1 Jan 2017: $322,206,000) can be carried forward for a period of one to eight years subsequent to the
year of the loss, while the remaining tax losses have no expiry date.
Movements in deferred tax liabilities and assets are as follows:
At
Charged/
(credited) to
1 January profit or loss
$’000
$’000
Charged/
(credited)
to other
comprehen-
sive Subsidiaries Subsidiaries
acquired
$’000
disposed
$’000
income
$’000
Reclassifi-
cation
$’000
Exchange
At
differences 31 December
$’000
$’000
Group
2018
Deferred Tax Liabilities
Accelerated tax depreciation
Investment properties valuation
Offshore income & others
Total
Deferred Tax Assets
Other provisions
Unutilised tax benefits
Total
108,936
184,429
90,502
383,867
4,262
6,263
(9,437)
1,088
-
-
(243)
(243)
-
(139,774)
-
(139,774)
(32,778)
(16,415)
(49,193)
(3,045)
1,245
(1,800)
1,046
-
1,046
-
-
-
3,670
-
-
3,670
-
-
-
Net Deferred Tax Liabilities
334,674
(712)
803
(139,774)
3,670
-
-
-
-
-
-
-
-
(161)
(1,075)
(659)
(1,895)
116,707
49,843
80,163
246,713
37
(177)
(140)
(34,740)
(15,347)
(50,087)
(2,035)
196,626
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
23. Revenue
Revenue from contracts with customers
Revenue from construction contracts
Sale of property
Sale of goods
Sale of electricity, utilities and gases
Revenue from other services rendered
Other sources of revenue
Rental income from investment properties
Gain on sale of investments
Dividend income from quoted shares
Others
Group
2018
$’000
1,875,857
1,215,915
44,297
2,090,651
683,843
5,910,563
49,176
2,232
2,703
107
2017
$’000
1,771,007
1,633,059
49,835
1,662,772
754,521
5,871,194
54,592
34,953
2,760
274
5,964,781
5,963,773
Sales are made with credit terms that are consistent with market practice. During the financial year, there was a sale of five rigs to a
customer where amounts are paid in instalments within five years from the respective delivery dates of each individual rig.
Keppel Corporation Limited Report to Shareholders 2018
173
Notes to the Financial Statements
24. Staff costs
Wages and salaries
Employer’s contribution to Central Provident Fund
Share options and share plans granted to Director and employees
Other staff benefits
25. Operating profit
Operating profit is arrived at after charging/(crediting) the following:
Included in materials and subcontract costs:
Fair value loss/(gain) on
investments
-
- forward foreign exchange contracts
Cost of stocks & contract assets 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 impairment loss on financial assets:
Provision for doubtful debts (Note 16)
Impairment of investments (Note 10)
Included in other operating income - net:
Rental expense
- operating leases
Impairment/write-off of fixed assets
Impairment/(write-back of impairment) of associated companies (Note 9)
Provision for stocks
Provision for related contract costs (Note 19)
Provision for contract assets (Note 14)
Write-back of provision for claims (Note 19)
Fair value gain on investment properties (Note 7)
Fair value (gain)/loss on
investments
-
- forward foreign exchange contracts
Loss/(gain) on differences in foreign exchange
Profit on sale of fixed assets and an investment property
Profit on sale of investments
Gain on disposal of subsidiaries
Gain on disposal of associated companies
(Gain)/loss from change in interest in associated companies
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
174
Group
2018
$’000
780,104
68,357
34,885
104,484
2017
$’000
821,201
75,609
32,583
97,626
987,830
1,027,019
Group
2018
$’000
2017
$’000
942
18,095
771,465
(9,094)
3,305
1,165,049
24,951
27,528
9,015
95
7,771
10,783
124
7,740
95,457
-
115,780
14,330
84,854
6,911
60,782
6,271
65,000
21,000
(96,380)
(84,886)
(13,823)
(6,966)
42,070
(2,795)
-
(604,638)
(48,783)
(63,622)
2,373
3,510
3,121
2,001
486
154
94,090
15,530
(39,192)
3,377
-
-
-
(177,939)
(18,861)
35,181
(5,389)
(20,142)
(341)
(146,542)
(62,673)
13,075
2,341
3,926
2,770
2,218
135
129
Financial Report
26.
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
Service concession arrangement
Interest expenses on notes, loans and overdrafts
Fair value gain/(loss) on interest rate caps and swaps
27. Taxation
(a)
Income tax expense
Tax expense comprised:
Current tax
Adjustment for prior year’s tax
Others
Deferred tax movement:
Group
2018
$’000
34
9,957
9,991
100,376
56,760
7,124
2017
$’000
129
19,742
19,871
84,051
52,622
1,255
164,260
137,928
(199,464)
(189,223)
1,021
(4)
(198,443)
(189,227)
Group
2018
$’000
245,091
(32,200)
10,958
2017
$’000
184,624
(6,365)
10,085
Movements in temporary differences (Note 22)
(712)
14,054
Land appreciation tax:
Current year
60,610
41,651
283,747
244,049
The income tax expense on the results of the Group differ from the amount of income tax expense determined by applying the
Singapore standard rate of income tax to profit before tax due to the following:
Profit before tax
Share of profit of associated companies, net of tax
Profit before tax and share of profit of associated companies
Tax calculated at tax rate of 17% (2017: 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
Effects of changes in tax rates
Land appreciation tax
Effect of tax reduction on land appreciation tax
Group
2018
$’000
1,239,892
(221,518)
1,018,374
173,124
(170,942)
232,299
(17,314)
39,861
(32,200)
13,461
60,610
(15,152)
2017
$’000
441,429
(290,533)
150,896
25,652
(151,650)
313,952
(12,637)
43,859
(6,365)
-
41,651
(10,413)
283,747
244,049
Keppel Corporation Limited Report to Shareholders 2018
175
Notes to the Financial Statements
27. Taxation (continued)
(b) Movement in current income tax liabilities
At 1 January
Exchange differences
Tax expense
Adjustment for prior year’s tax
Land appreciation tax
Net income taxes paid
Subsidiaries acquired
Subsidiaries disposed
Reclassification
Group
2018
$’000
220,761
(4,291)
245,091
(32,200)
60,610
2017
$’000
364,845
(4,217)
184,624
(6,365)
41,651
(195,904)
(363,377)
157
(89)
-
(2,981)
- tax recoverable and others
3,787
6,581
Company
2018
$’000
2017
$’000
33,955
17,263
-
10,200
(636)
-
-
-
-
-
-
12,400
4,400
-
(108)
-
-
-
At 31 December
297,922
220,761
43,519
33,955
28. Earnings per ordinary share
Group
2018
$’000
2017
$’000
Basic
Diluted
Basic
Diluted
Net profit attributable to shareholders
943,829
943,829
196,025
196,025
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
1,814,159
1,814,159
1,816,965
1,816,965
-
10,728
-
12,737
1,814,159
1,824,887
1,816,965
1,829,702
Earnings per ordinary share
52.0 cts
51.7 cts
10.8 cts
10.7 cts
29. Dividends
A final cash dividend of 15.0 cents per share tax exempt one-tier (2017: final cash dividend of 14.0 cents per share tax exempt one-tier)
in respect of the financial year ended 31 December 2018 has been proposed for approval by shareholders at the next Annual General
Meeting to be convened.
Together with the interim cash dividend of 10.0 cents per share tax exempt one-tier and the special cash dividend of 5.0 cents per share
tax exempt one-tier (2017: interim 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 2018 will be 30.0 cents per share (2017: 22.0 cents per share).
During the financial year, the following distributions were made:
A final cash dividend of 14.0 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 10.0 cents per share tax exempt one-tier on the issued
and fully paid ordinary shares in respect of the current financial year
A special cash dividend of 5.0 cents per share tax exempt one-tier on the issued
and fully paid ordinary shares in respect of the current financial year
In the prior year, total distributions of $363,531,000 were made.
176
$’000
254,290
181,241
90,621
526,152
Financial Report
30. 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
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
31 December
2018
$’000
2017
$’000
1 January
2017
$’000
372,292
13,034
406,662
388,093
175,759
17,341
174,311
450,247
261,950
46,730
376,308
169,953
19,665
158,677
105,115
224,903
108,422
313,196
77,260
36,509
-
1,435,683
1,184,185
1,276,559
(65,018)
(69,698)
(34,584)
1,370,665
1,114,487
1,241,975
In addition to the above, the Group made a voluntary conditional general offer (“Offer”) for all the issued and paid up ordinary shares
in the capital of M1 Limited and proposed to acquire all the issued ordinary shares in the capital of Keppel T&T by way of a scheme
of arrangement (“Scheme”) in 2018. The assumed maximum consideration for the Offer and the Scheme was $1,506,865,000.
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
Company
31 December
1 January
31 December
2018
$’000
2017
$’000
2017
$’000
81,555
255,324
572,156
89,315
300,506
684,204
94,214
326,154
806,359
909,035
1,074,025
1,226,727
2018
$’000
199
179
-
378
2017
$’000
40
-
-
40
1 January
2017
$’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
Company
31 December
1 January
31 December
2018
$’000
2017
$’000
2017
$’000
2018
$’000
2017
$’000
1 January
2017
$’000
98,856
159,497
60,457
88,087
166,553
61,638
104,100
212,861
81,721
318,810
316,278
398,682
-
-
-
-
-
-
-
-
-
-
-
-
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.
Keppel Corporation Limited Report to Shareholders 2018
177
Notes to the Financial Statements
31. Contingent liabilities and guarantees (unsecured)
Guarantees in respect of banks and other loans
granted to subsidiaries and associated companies
Bank guarantees
Group
2018
$’000
2017
$’000
Company
2018
$’000
2017
$’000
676,470
23,996
585,207
1,677
1,376,427
-
1,574,853
-
700,466
586,884
1,376,427
1,574,853
See Note 2.27 for further disclosures relating to the Group’s claims and litigations.
The financial effects of SFRS(I) 9 relating to financial guarantee contracts issued by the Company are not material to the financial
statements of the Company and therefore are not recognised.
32. 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
33. Financial risk management
Group
2018
$’000
2017
$’000
183,486
63,544
168,705
82,884
247,030
251,589
105,056
61,321
83,761
28,842
166,377
112,603
21,412
9,093
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 via 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
$5,284,557,000 (31 December 2017: $6,344,009,000, 1 January 2017: $7,865,165,000). The net negative fair value of forward
foreign exchange contracts is $4,778,000 (31 December 2017: net positive fair value of $58,266,000, 1 January 2017: net negative
fair value of $270,025,000) comprising assets of $28,143,000 (31 December 2017: $105,511,000, 1 January 2017: $138,169,000)
and liabilities of $32,921,000 (31 December 2017: $47,245,000, 1 January 2017: $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 $5,203,754,000 (31 December 2017: $6,269,592,000, 1 January 2017: $7,716,396,000). The net negative fair value of
forward foreign exchange contracts is $4,972,000 (31 December 2017: net positive fair value of $56,859,000, 1 January 2017:
net negative fair value of $265,342,000) comprising assets of $27,731,000 (31 December 2017: $104,045,000, 1 January 2017:
$137,860,000) and liabilities of $32,703,000 (31 December 2017: $47,186,000, 1 January 2017: $403,202,000). These amounts are
recognised as derivative assets and derivative liabilities.
178
Financial Report
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
Investments
Bank balances, deposits & cash
Financial Liabilities
Creditors
Term loans
USD
$’000
22,038
197,976
134,222
88,895
611,546
776
27,400
78
3,757
294,550
2018
RMB
$’000
19,388
-
186,215
7,878
-
83
-
236
246
-
Others
$’000
USD
$’000
374,124
92,244
27,109
25,874
131,718
-
-
-
69
13,607
187,377
278,092
140,111
68,066
55,896
-
-
1
-
-
2017
RMB
$’000
1,001
-
245,835
Others
$’000
90,994
98,973
14,323
214
-
52,988
241,330
52
-
330
-
-
-
-
13
-
-
Sensitivity analysis for currency risk
If the relevant foreign currency change against SGD by 5% (2017: 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
2018
$’000
2017
$’000
Equity
2018
$’000
2017
$’000
(25,195)
25,195
9,886
(9,886)
(13,602)
13,602
3
(3)
10,109
(10,109)
12,331
(12,331)
-
-
19
(19)
7,759
(7,759)
13,812
(13,812)
-
-
-
-
-
-
-
-
-
-
-
-
(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 21). As at the end of the financial year, the Group has interest rate swap agreements
with notional amount totalling $1,667,483,000 (31 December 2017: $1,778,962,000, 1 January 2017: $1,678,235,000) whereby
it receives variable rates equal to SIBOR and LIBOR (31 December 2017: SIBOR and LIBOR, 1 January 2017: SIBOR, LIBOR and
SHIBOR) and pays fixed rates of between 1.33% and 3.62% (31 December 2017: 1.27% and 3.62%, 1 January 2017: 1.27% and
4.90%) on the notional amount.
The net negative fair value of interest rate swaps for the Group is $62,841,000 (31 December 2017: net negative fair value of
$58,025,000, 1 January 2017: net negative fair value of $10,605,000) comprising assets of $4,677,000 (31 December 2017:
$4,339,000, 1 January 2017: $2,703,000) and liabilities of $67,518,000 (31 December 2017: $62,364,000, 1 January 2017:
$13,308,000). These amounts are recognised as derivative assets and derivative liabilities.
Keppel Corporation Limited Report to Shareholders 2018
179
Notes to the Financial Statements
33. Financial risk management (continued)
Sensitivity analysis for interest rate risk
If interest rates increase/decrease by 0.5% (2017: 0.5%) with all other variables held constant, the Group’s profit before tax would
have been lower/higher by $10,827,000 (2017: $13,649,000) as a result of higher/lower interest expense on floating rate loans.
(iii) Price risk
The Group hedges against fluctuations arising on the purchase of natural gas that affect cost. Exposure to price fluctuations is
managed via fuel oil forward contracts, whereby the price of natural gas is indexed to 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 and Dated Brent
forward contracts with notional amounts totalling $938,774,000 (31 December 2017: $542,679,000, 1 January 2017: $579,270,000)
and $10,001,000 (31 December 2017 and 1 January 2017: $Nil) respectively. The net negative fair value of HSFO forward contracts
for the Group is $147,250,000 (31 December 2017: net positive fair value of $89,599,000, 1 January 2017: net positive fair value of
$57,122,000) comprising assets of $25,568,000 (31 December 2017: $97,957,000, 1 January 2017: $83,215,000) and liabilities of
$172,818,000 (31 December 2017: $8,358,000, 1 January 2017: $26,093,000). These amounts are recognised as derivative assets
and derivative liabilities. The net negative fair value of Dated Brent forward contracts for the Group of $14,138,000 (31 December
2017 and 1 January 2017: $Nil) is recognised as derivative liabilities.
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 $80,055,000 (31 December 2017: $47,042,000, 1 January 2017: $6,964,000). The net positive fair
values of electricity futures contracts is $7,857,000 (31 December 2017: net negative fair value of $2,297,000, 1 January 2017: net
negative fair value of $124,000) comprising assets of $9,002,000 (31 December 2017: $199,000, 1 January 2017: $405,000) and
liabilities of $1,145,000 (31 December 2017: $2,496,000, 1 January: $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 at fair value
through profit or loss and investments at fair value through other comprehensive income, in the case of 2017, 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 and Dated Brent increase/decrease by 5% (31 December 2017 and 1 January 2017: 5%) with all other
variables held constant, the Group’s hedging reserve in equity would have been higher/lower by $39,366,000 (31 December 2017:
$30,635,000, 1 January 2017: $31,820,000) and $252,000 (31 December 2017 and 1 January 2017: $Nil) respectively as a result of
fair value changes on cash flow hedges.
If prices for electricity futures contracts increase/decrease by 5% (31 December 2017 and 1 January 2017: 5%) with all other
variables held constant, the Group’s hedging reserve in equity would have been lower/higher by $2,849,000 (31 December 2017:
$2,467,000, 1 January 2017: $15,000) as a result of fair value changes on cash flow hedges.
If prices for quoted investments increase/decrease by 5% (2017: 5%) with all other variables held constant, the Group’s profit
before tax would have been higher/lower by $5,205,000 (2017: $8,965,000) as a result of higher/lower fair value gains on
investments at fair value through profit or loss, and the Group’s fair value reserve in other comprehensive income would have been
higher/lower by $2,047,000 (2017: $3,195,000) as a result of higher/lower fair value gains on investments at fair value through
other comprehensive income, in the case of 2017, 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 Group assesses on a forward looking basis the expected credit losses (“ECLs”) associated with its financial assets which are mainly
debtors, amounts due from associated companies and bank balances, deposits and cash.
ECLs are probability-weighted estimates of credit losses. Credit losses are measured at the present value of all cash shortfalls (i.e.
the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to
receive). ECLs are discounted at the effective interest rate of the financial asset. At each balance sheet date, the Group assesses whether
financial assets carried at amortised cost and at FVOCI are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events
that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. These events include probability
of insolvency, significant financial difficulties of the debtor and default or significant delay in payments.
180
Financial Report
When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating
ECLs, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This
includes both quantitative and qualitative information and analysis, based on the Group’s historical experience and informed credit
assessment and includes forward-looking information.
The Group uses a provision matrix to measure the ECLs. In measuring the ECLs, assets are grouped based on shared credit risk
characteristics and days past due. In calculating the expected credit loss rates, the Group considers historical loss rates for each
category of customers and adjusts to reflect current and forward-looking macroeconomic factors affecting the ability of the customers to
settle the receivables.
Trade receivables and contract assets are written off when there is no reasonable expectation of recovery, such as a debtor failing to
engage in a repayment plan with the Group.
The Group’s credit risk exposure in relation to debtors under SFRS(I) 9 as at 31 December 2018 are set out in the provision matrix as
follows:
Offshore & Marine
Expected loss rate
Trade receivables
Loss allowance
Infrastructure
Expected loss rate
Trade receivables
Loss allowance
Current
$’000
1 to 3 months
$’000
3 to 6 months
$’000
> 6 months
$’000
Total
$’000
0.02%
164,367
28
0.1%
134,201
128
0.4%
27,776
107
0.7%
33,701
244
0.5%
11,511
21.6%
1,128,408
1,332,062
52
243,665
243,852
5.0%
4,378
219
51.7%
3,928
2,032
176,208
2,623
For the remaining subsidiaries which transact with low volume of customers and customers are monitored individually for credit
loss assessment, the receivables (including concession service receivable and contract assets) are assessed individually for lifetime
expected credit losses at each reporting date. In calculating the expected credit loss, the Group uses a probability-weighted amount that
is determined by evaluating a range of possible outcomes. The possible outcomes include an unbiased estimate of the possibility that a
credit loss occurs and the possibility that no credit loss occurs even if the most likely outcome is no credit loss.
Individual customer will be evaluated periodically for its credit risk and the credit risk assessment is based on historical, current and
forward-looking information such as:
-
-
-
-
Historical financial and default rate of the customer
Any publicly available information on the customer
Any macro-economic or geopolitical information relevant to the customer
Any other objectively supportable information on the quality and abilities of the customer’s management relevant for its
performance
Property
For investment properties, the Group manages credit risks arising from tenants defaulting on their rental by requiring the tenants to
furnish cash deposits, and/or banker’s guarantees. The Group also has a policy of regular review of debt collection and rental contracts
are entered into with customers with an appropriate credit history.
In measuring the expected credit losses, trade debtors and contract assets are grouped based on shared credit risk characteristics and
days past due. The Group has therefore concluded that the expected loss rates for trade debtors are a reasonable approximation of the
loss rates for the contract assets.
In calculating the expected credit loss rates, the Group considers historical loss rates for each category of customers and adjusts to
reflect current and forward-looking macroeconomic factors affecting the ability of the customers to settle the receivables.
Trade receivables are subject to immaterial credit loss under the property segment.
Investments
Trade receivables are subject to immaterial credit loss under the investments segment.
Balances due from associated companies are subject to immaterial credit loss.
The Company has assessed that its subsidiaries have strong financial capacity to meet the contractual cash flow obligations and hence
does not expect significant credit losses.
Keppel Corporation Limited Report to Shareholders 2018
181
Notes to the Financial Statements
33. Financial risk management (continued)
Previous accounting policy for impairment of debtors
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.
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.
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
31 December
2017
$’000
88,280
74,420
1 January
2017
$’000
120,531
74,905
1,180,123
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.
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 21.
182
Financial Report
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
31 December 2018
Gross-settled forward foreign exchange contracts
- Receipts
- Payments
Net-settled HSFO forward contracts
- Receipts
- Payments
Net-settled Dated Brent forward contracts
- Receipts
- Payments
Net-settled electricity futures contracts
- Receipts
- Payments
Borrowings
31 December 2017
Gross-settled forward foreign exchange contracts
- Receipts
- Payments
Net-settled HSFO forward contracts
- Receipts
- Payments
Net-settled electricity futures contracts
- Receipts
- Payments
Borrowings
1 January 2017
Gross-settled forward foreign exchange contracts
- Receipts
- Payments
Net-settled HSFO forward contracts
- Receipts
- Payments
Net-settled electricity futures contracts
- Receipts
- Payments
Borrowings
Company
31 December 2018
Gross-settled forward foreign exchange contracts
- Receipts
- Payments
Borrowings
31 December 2017
Gross-settled forward foreign exchange contracts
- Receipts
- Payments
Borrowings
1 January 2017
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
4,371,906
(4,376,578)
595,863
(590,895)
291,056
(293,122)
18,276
(78,658)
588
(11,333)
5,291
(89,608)
-
(2,377)
2,001
(4,551)
-
(1,019)
-
-
-
-
-
-
3,042
(986)
(1,880,464)
5,960
(159)
(1,107,664)
-
-
(3,958,879)
-
-
(1,565,429)
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)
4,295,278
(4,300,024)
(767,884)
591,445
(586,549)
(592,033)
291,056
(293,122)
(2,224,328)
-
-
(982,992)
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 19) of the Group and the Company have a maturity profile of within one year from the balance
sheet date.
Keppel Corporation Limited Report to Shareholders 2018
183
Notes to the Financial Statements
33. Financial risk management (continued)
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 2018. 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.
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 18) less total term loans (Note 21).
Net debt
Total equity
Net gearing ratio
Group
31 December
2018
$’000
2017
$’000
1 January
2017
$’000
5,567,103
5,519,215
6,965,964
11,587,140
11,972,959
12,344,890
0.48x
0.46x
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.
Group
31 December 2018
Financial assets
Derivative financial instruments
Call option
Investments
-
-
Investments at fair value through other comprehensive income
Investments at fair value through profit or loss
Short term investments
-
-
Investments at fair value through other comprehensive income
Investments at fair value through profit or loss
Financial liabilities
Derivative financial instruments
Non-financial assets
Investment Properties
- Commercial and residential, completed
- Commercial, under construction
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total
$’000
-
-
6,527
29,332
34,428
74,759
67,978
-
-
43,800
-
-
-
150,500
201,830
168,026
-
-
67,978
150,500
208,357
241,158
34,428
74,759
145,046
111,778
520,356
777,180
-
-
-
-
289,132
-
289,132
-
-
-
1,716,314
1,135,066
1,716,314
1,135,066
2,851,380
2,851,380
184
Financial Report
Group
31 December 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 at fair value through profit or loss
Financial liabilities
Derivative financial instruments
Non-financial assets
Investment Properties
- Commercial and residential, completed
- Commercial, under construction
Group
1 January 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 at fair value through profit or loss
Financial liabilities
Derivative financial instruments
Non-financial assets
Investment Properties
- Commercial and residential, completed
- Commercial, under construction
-
-
-
-
-
-
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total
$’000
-
-
8,854
31,647
55,048
147,654
208,006
-
-
43,250
-
-
-
137,200
238,606
30,813
-
74
208,006
137,200
247,460
105,710
55,048
147,728
243,203
251,256
406,693
901,152
120,463
-
120,463
-
-
-
1,404,294
2,056,314
1,404,294
2,056,314
3,460,608
3,460,608
224,492
-
-
120,600
12,878
11,788
-
-
221,890
8,973
77,264
147,054
49,610
-
-
-
224,492
120,600
246,556
8,973
126,874
147,054
237,196
285,890
351,463
874,549
-
-
-
-
448,124
-
448,124
-
-
-
1,639,368
1,910,922
1,639,368
1,910,922
3,550,290
3,550,290
Keppel Corporation Limited Report to Shareholders 2018
185
Notes to the Financial Statements
33. Financial risk management (continued)
Company
31 December 2018
Financial assets
Derivative financial instruments
Investments
Investments at fair value through other
-
comprehensive income
Financial liabilities
Derivative financial instruments
31 December 2017
Financial assets
Derivative financial instruments
Investments
- Available-for-sale investments
Financial liabilities
Derivative financial instruments
1 January 2017
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
-
-
-
-
-
-
-
-
-
-
-
-
31,968
-
31,968
-
16,957
16,957
31,968
16,957
48,925
71,099
107,631
-
-
71,099
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 2018 and 2017.
The following table presents the reconciliation of financial instruments measured at fair value based on significant unobservable inputs
(Level 3).
At 1 January
Adoption of SFRS(I) 9
- Reclassification of investments previously held at cost
- Fair value loss
Purchases
Sales
Fair value (loss)/gain recognised in other comprehensive income
Fair value gain recognised in profit or loss
Reclassification
Exchange differences
At 31 December
Group
2018
$’000
2017
$’000
Company
2018
$’000
2017
$’000
406,693
351,463
15,012
14,340
90,408
(25,119)
105,664
(122,034)
(1,124)
47,785
16,877
1,206
-
-
22,522
(8,265)
17,062
24,199
-
(288)
-
-
-
-
-
-
-
-
1,945
672
-
-
-
-
-
-
520,356
406,693
16,957
15,012
186
Financial Report
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
Disposal
Subsidiary acquired
Subsidiary disposed
Reclassification
- Stocks
- Fixed assets
Exchange differences
At 31 December
Group
2018
$’000
2017
$’000
3,460,608
3,550,290
94,099
84,886
(2,870)
360,000
181,522
182,753
-
-
(948,613)
(405,604)
(158,300)
-
(38,430)
-
1,376
(49,729)
2,851,380
3,460,608
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.
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
2018
$’000
369,856
Valuation
Techniques
Unobservable
Inputs
Range of
Unobservable
Inputs
Net asset value and/or discounted
cash flow
Net asset value *
Not applicable
Discount rate
11%
150,500
Direct comparison method and
investment method
Transacted price of
comparable properties
(psf)
$2,500 to $3,200
Capitalisation rate
3.5% to 3.65%
*
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.
Keppel Corporation Limited Report to Shareholders 2018
187
33. Financial risk management (continued)
Description
Investment Properties
- Commercial and residential,
completed
Fair value
as at
31 December
2018
$’000
1,716,314
Valuation
Techniques
Unobservable
Inputs
Range of
Unobservable
Inputs
Direct comparison method,
investment method, cost
replacement method and/or
discounted cash flow method
Discount rate
10.25% to 12.45%
Terminal yield
7.00%
Capitalisation rate
4.25% to 12.00%
Net initial yield
3.7%
Price of comparable
land plots (psm)
$4,700 to $5,707
Transacted price of
comparable properties
(psf)
$1,727 to $3,294
- Commercial, under construction
1,135,066
Direct comparison method, and/or
residual method
Price of comparable
land plots (psm)
$6,737 to $11,990
Gross development
value ($’million)
$636 to $1,898
Fair value
as at
31 December
2017
$’000
269,493
Valuation
Techniques
Unobservable
Inputs
Range of
Unobservable
Inputs
Net asset value and/or discounted
cash flow
Net asset value *
Not applicable
Discount rate
11%
137,200
Direct comparison method and
investment method
Description
Investments
Call option
Investment Properties
- Commercial and residential,
completed
1,404,294
Direct comparison method,
investment method, cost
replacement method and/or
discounted cash flow method
Transacted price of
comparable properties
(psf)
$2,600 to $3,200
Capitalisation rate
3.5% to 3.75%
Discount rate
11.50% to 13.00%
Terminal yield
7.00%
Capitalisation rate
2.80% to 12.50%
Net initial yield
3.8%
Price of comparable
land plots (psm)
Transacted price of
comparable properties
(psf)
$7,627 to $12,463
$1,321 to $2,500
- Commercial, under construction
2,056,314
Direct comparison method, and/or
residual method
Price of comparable
land plots (psm)
$7,627 to $12,463
*
Fair value of unquoted equity instruments is determined by reference to the underlying assets value of the investee companies, which comprise mainly investment
properties stated at fair value.
Gross development
value ($’million)
$588 to $1,866
188
Financial Report
Description
Investments
Call option
Fair value
as at
1 January
2017
$’000
230,863
Valuation
Techniques
Unobservable
Inputs
Range of
Unobservable
Inputs
Net asset value and/or discounted
cash flow
Net asset value *
Not applicable
Discount rate
11%
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
Transacted price of
comparable properties
(psf)
$3,000 to $3,400
Capitalisation rate
3.5% to 3.75%
Discount rate
7.50% to 13.70%
Occupancy rate
95%
Terminal yield
7.25% to 7.70%
Capitalisation rate
2.80% to 12.50%
Net initial yield
5.3%
Price of comparable
land plots (psm)
Transacted price of
comparable properties
(psf)
$9,513 to $13,213
$1,296 to $2,100
- Commercial, under construction
1,910,922
Direct comparison method, and/or
residual method
Price of comparable
land plots (psm)
$9,513 to $13,213
Gross development
value ($’million)
$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.
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 investments at fair value through other comprehensive income on a quarterly basis.
Valuation process of investment properties is described in Note 7.
34. 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.
Keppel Corporation Limited Report to Shareholders 2018
189
34. Segment analysis (continued)
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:
Offshore
& Marine
$’000
Property
$’000
Infrastructure
$’000
Investments
$’000
Elimination
$’000
Total
$’000
1,874,571
-
1,874,571
1,340,235
6,139
1,346,374
2,628,571
22,729
2,651,300
121,404
60,872
182,276
-
(89,740)
(89,740)
5,964,781
-
5,964,781
2018
Revenue
External sales
Inter-segment sales
Total
Segment Results
Operating (loss)/profit
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
External revenue from contracts
with customers
- At a point in time
- Over time
(73,433)
1,199
53,675
(102,630)
8,001
(113,188)
2,523
(110,665)
1,031,852
3,976
57,268
(70,869)
165,311
1,187,538
(253,963)
933,575
105,332
2,230
57,265
(16,969)
36,499
184,357
(7,837)
176,520
(23,019)
2,586
295,233
(305,322)
11,707
(18,815)
(24,470)
(43,285)
(109,250)
(1,415)
(110,665)
937,896
(4,321)
933,575
169,584
6,936
176,520
(54,401)
11,116
(43,285)
1,834
-
(299,181)
297,347
-
-
-
-
-
-
-
-
-
-
-
-
1,042,566
9,991
164,260
(198,443)
221,518
1,239,892
(283,747)
956,145
943,829
12,316
956,145
962,426
4,948,137
5,910,563
54,218
5,964,781
Other sources of revenue
Total
-
1,874,571
45,398
1,340,235
3,536
2,628,571
97,835
1,776,736
1,874,571
825,480
469,357
1,294,837
28,642
2,596,393
2,625,035
10,469
105,651
116,120
5,284
121,404
Other information
Segment assets
Segment liabilities
Net assets
Investment in associated companies
Additions to non-current assets
Depreciation and amortisation
Impairment loss
Geographical information
8,461,013
5,556,134
2,904,879
13,850,067
5,692,596
8,157,471
706,189
87,478
99,091
32,503
3,206,987
461,857
32,762
796
3,649,336
2,248,589
1,400,747
1,066,849
61,394
44,930
1,754
7,596,099
8,472,056
(875,957)
(6,950,188)
(6,950,188)
-
26,606,327
15,019,187
11,587,140
1,259,660
28,225
5,603
53,000
- 6,239,685
- 638,954
- 182,386
88,053
-
External sales
Non-current assets
Singapore
$’000
4,370,849
6,119,704
China
$’000
741,759
2,747,668
Brazil
$’000
224,573
229,917
Other Far East
& ASEAN
countries
$’000
374,430
1,648,108
Other
countries
$’000
253,170
847,235
Elimination
$’000
Total
$’000
-
-
5,964,781
11,592,632
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 2018.
Information about a major customer
Revenue of $730,615,000 is derived from a single external customer and is attributable to the Infrastructure Division for the year ended
31 December 2018.
Note: Pricing of inter-segment goods and services is at fair market value.
190
Financial Report
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
Offshore
& Marine
$’000
Property
$’000
Infrastructure
$’000
Investments
$’000
Elimination
$’000
Total
$’000
1,801,347
1,782,343
2,207,162
584
6,217
20,031
1,801,931
1,788,560
2,227,193
172,921
62,795
235,716
-
5,963,773
(89,627)
(89,627)
-
5,963,773
(166,747)
667,610
124,984
175,100
99
801,046
(618,722)
-
2,112
50,897
12,377
40,413
-
-
47,801
-
5,382
263,754
(127,080)
(67,053)
(16,009)
(243,923)
-
(618,722)
-
(264,937)
264,838
19,871
137,928
(189,227)
(2,650)
190,492
(862,190)
843,839
12,587
169,363
90,104
-
290,417
-
290,533
441,429
14,180
(198,552)
(27,797)
(31,880)
-
(244,049)
(Loss)/Profit for the year
(848,010)
645,287
141,566
258,537
-
197,380
-
-
-
-
-
-
196,025
1,355
197,380
1,169,871
4,701,323
5,871,194
-
92,579
-
5,963,773
Attributable to:
Shareholders of Company
Non-controlling interests
External revenue from contracts
with customers
- At a point in time
- Over time
(825,773)
649,826
(22,237)
(4,539)
(848,010)
645,287
133,813
7,753
141,566
238,159
20,378
258,537
Other sources of revenue
Total
-
51,069
3,407
1,801,347
1,782,343
2,207,162
230,402
1,570,945
1,801,347
899,744
831,530
1,731,274
27,365
2,176,390
2,203,755
12,360
122,458
134,818
38,103
172,921
Other information
Segment assets
Segment liabilities
Net assets
10,102,851
14,949,530
8,913,463
1,189,388
6,892,999
8,056,531
3,417,867
1,867,633
1,550,234
7,791,404
(7,576,052)
28,685,600
6,614,598
(7,576,052)
16,712,641
1,176,806
-
11,972,959
Investment in associated companies
690,086
2,918,425
1,032,008
1,273,258
-
5,913,777
Additions to non-current assets
183,879 342,337 224,996 173,216
-
129,527
36,869
43,953
2,031
-
924,428
212,380
28,800
8,499
2,554
(45,808)
-
(5,955)
Depreciation and amortisation
Impairment loss/(write-back of
impairment loss)
Geographical information
External sales
Non-current assets
Singapore
$’000
3,969,057
5,937,794
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
11,939,942
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.
Keppel Corporation Limited Report to Shareholders 2018
191
Notes to the Financial Statements
35. New accounting standards and interpretations
At the date of authorisation of these financial statements, the following new/revised SFRS(I)s, SFRS(I) Interpretations and amendments
to SFRS(I)s that are relevant to the Group and the Company were issued but not effective:
•
•
•
•
•
•
•
SFRS(I) 16 Leases
SFRS(I) INT 23 Uncertainty Over Income Tax Treatments
Amendments to SFRS(I) 9 Prepayment Features with Negative Compensation
Amendments to SFRS(I) 1-28 Long-term Interests in Associates and Joint Ventures
Amendments to SFRS(I) 3 and 11 Previously held interest in a joint operation
Amendments to SFRS(I) 1-12 Income tax consequences of payments on financial instruments classified as equity
Amendments to SFRS(I) 1-23 Borrowing costs eligible for capitalization
The management anticipates that the adoption of the above SFRS(I)s, SFRS(I) Interpretations and amendments to SFRS(I)s 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) 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 leases and leases of low value assets. The accounting for lessors will not change significantly.
SFRS(I) 16 will take effect from financial years beginning on or after 1 January 2019. The Group intends to apply the simplified transition
approach and will not restate comparative amounts for the year prior to first adoption.
The standard will affect primarily the accounting for the Group’s operating leases. As at 31 December 2018, the Group has non-cancellable
operating lease commitment of $909,035,000 (Note 30) that may result in the recognition of an asset and a liability for future payments.
The Group is currently finalising the transition adjustments.
36. Subsequent event
(a)
On 28 January 2019, the Group announced that its 50% owned associate, Dong Nai Waterfront City LLC (“DNWC”) is undergoing a
demerger and upon issuance of the Investment Registration Certificate by the relevant Vietnamese authorities, DNWC will become
a wholly owned subsidiary of the Group.
The Group will then divest its 70% interest (the “Sale Stake”) in DNWC to the Group’s associate, Nam Long Investment Corporation
at a consideration of VND 2,313 billion (approximately S$136 million). The consideration was arrived on a willing-buyer and willing-
seller basis. The unaudited net asset value attributable to the Sale Stake was approximately S$57 million as at 31 December 2018.
(b)
On 27 September 2018, a subsidiary of the Company, Konnectivity Pte Ltd, announced its intention to make a voluntary conditional
general offer (“Offer”) for all the issued and paid up ordinary shares in the capital of M1 Limited. The Offer is subject to satisfaction
of certain conditions. On 15 February 2019, the Offer turned unconditional and M1 Limited will become a subsidiary of the Group.
The closing date of the Offer has been extended to 4 March 2019. The disclosure of the effect of the business combination on
the financial statements could not be made as the purchase price allocation has not commenced at the date of this financial
statements.
37. 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.
192
Financial Report
Significant Subsidiaries and Associated Companies
Gross
Interest
Effective Equity
Interest
Cost of Investment
2018
%
31 December
2018
%
2017
%
1 January
2017
%
31 December
2018
$’000
2017
$’000
1 January
2017
$’000
Country of
Incorporation
/Operation
Principal Activities
100
100
100
100
801,720
801,720
801,720 Singapore
Investment holding
OFFSHORE & MARINE
Offshore
Subsidiaries
Keppel Offshore and
Marine Ltd
Keppel FELS Ltd
100
100
100
100
#
#
# Singapore
Construction, fabrication and repair
of offshore production facilities and
drilling rigs, power barges,
specialised vessels and other
offshore production facilities
Angra Propriedades &
Administracao Ltd (1a)
Deepwater Technology
Group Pte Ltd
100
100
100
100
100
100
100
100
Estaleiro BrasFELS
Ltda (1a)
100
100
100
100
FELS Offshore Pte Ltd
Fernvale Pte Ltd
100
100
100
100
100
100
100
100
FSTP Brasil Ltda (1a)
75
75
75
75
FSTP Pte Ltd
75
75
75
75
Greenwood Pte Ltd
Guanabara Navegacao
Ltda (1a)
100
100
100
100
100
100
100
100
Keppel AmFELS, LLC
100
100
100
100
Keppel FELS Baltech
Ltd (1a)
Keppel FELS Brasil
SA (1a)
100
100
100
100
100
100
100
100
Keppel Floatec LLC
100
100
100
100
Keppel Letourneau
USA, Inc
Keppel Offshore &
Marine Engineering
Services Mumbai
Pte Ltd (1a)
Keppel Offshore &
Marine Technology
Centre Pte Ltd
Keppel Offshore &
Marine USA Inc
Keppel Sea Scan
Pte Ltd
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
KV Enterprises BV (3)
100
100
100
100
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
# Brazil
Holding of long-term investments
and property management
# Singapore
Research and experimental
development on deepwater
engineering
# Brazil
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
# Brazil
Construction, fabrication and repair
of drilling rigs and offshore
production facilities
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
Ship owning
# USA
# Bulgaria
# Brazil
# USA
# USA
#
India
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
Fabrication of offshore platforms
and structures
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 Holding of long-term investments
Keppel Corporation Limited Report to Shareholders 2018
193
Significant Subsidiaries and Associated Companies
Gross
Interest
Effective Equity
Interest
Cost of Investment
2018
%
31 December
2018
%
2017
%
1 January
2017
%
31 December
2018
$’000
2017
$’000
1 January
2017
$’000
Country of
Incorporation
/Operation
Principal Activities
KVE Adminstradora
de Bens Imoveis
Ltda (1a)
100
100
100
100
Lindel Pte Ltd
100
100
100
100
Offshore Partners
Pte Ltd
(fka Caspian
Rigbuilders Pte Ltd)
Offshore Technology
Development Pte Ltd
Regency Steel Japan
Ltd (1a)
100
100
100
100
100
100
100
100
51
51
51
51
Willalpha Limited (3)
100
100
100
100
Associated Companies
Asian Lift Pte Ltd
50
50
Atwin Offshore &
Marine Pte Ltd (2)
FloaTEC Singapore
Pte Ltd (2)
Floatel International
Ltd (1a)
30
30
50
50
50
50
Marine Housing
Services Pte Ltd
50
50
Seafox 5 Ltd (2)
49
49
50
30
50
50
50
49
50
30
50
50
50
49
Marine
Subsidiaries
Keppel Shipyard Ltd
100
100
100
100
Keppel Philippines
Marine Inc (1a)
Alpine Engineering
Services Pte Ltd
Blastech Abrasives
Pte Ltd
Keppel Nantong Heavy
Industry Co Ltd (1a)
Keppel Nantong
Shipyard Company
Ltd (1a)
Keppel Singmarine
Pte Ltd
98
98
98
98
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
# Brazil
Holding of long-term investments
and property management
# Singapore
Project management, engineering
and procurement
# Singapore
Building of ships, tankers and other
ocean-going vessels; environmental
engineering services
# Singapore
Production of jacking systems
# 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
Operating accommodation and
construction support vessels
(floatels) for the offshore oil and gas
industry
# Singapore
Provision of housing services for
marine workers
#
Isle of Man
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
87+
86+
86+
86+
3,020
3,020
3,020 Philippines
Shipbuilding and repairing
Inc (1a)
KS Investments Pte Ltd
KSI Production Pte
Ltd (3)
Marine Technology
Development Pte Ltd
194
100
100
100
100
100
100
100
100
100
100
100
100
#
#
#
#
#
#
# Singapore
Holding of long-term investments
# BVI
Holding of long-term investments
# Singapore
Provision of technical consultancy
for ship design and engineering
works
Financial Report
Gross
Interest
Effective Equity
Interest
Cost of Investment
2018
%
31 December
2018
%
2017
%
1 January
2017
%
31 December
2018
$’000
2017
$’000
1 January
2017
$’000
Country of
Incorporation
/Operation
Principal Activities
Associated Companies
Arab Heavy Industries
PJSC (2)
Dyna-Mac Holdings Ltd
Keppel Smit Towage
Pte Ltd
Maju Maritime Pte Ltd
Nakilat - Keppel
Offshore & Marine
Ltd (2)
33
33
24
51
51
20
24
51
51
20
33
24
51
51
20
33
24
51
51
20
PV Keez Pte Ltd (2)
20
20
20
20
PROPERTY
Subsidiaries
#
#
#
#
#
#
#
#
#
#
#
#
# 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
Keppel Land Ltd
100
100
100
100 4,793,367 4,793,367 4,716,367 Singapore
Holding, management and
investment company
Keppel Land China Ltd
Keppel Bay Pte Ltd
Keppel Philippines
Properties Inc (1a)
Aether Ltd (3)
Aether Pte Ltd
Agathese Pte Ltd
Aintree Assets Ltd (3)
Bayfront Development
Pte Ltd
Beijing Aether Property
Development Ltd (3)
Beijing Kingsley
Property
Development Co
Ltd (1a)
Broad Elite Investments
Ltd (3)
Cesario Pte Ltd
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
Corson Pte Ltd
Dattson Pte Ltd
DC REIT Holdings
Pte Ltd
100
100
100
100
100
100
100
100
#
#
#
#
# Singapore
Investment holding
# Singapore
Property development
87+
87+
87+
80+
493
493
493 Philippines
Investment holding
-
100
100
100
100
-
100
100
100
100
51
100
100
100
100
51
100
100
100
100
-
-
51
51
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
#
#
#
#
-
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
# HK
Disposed
# Singapore
Investment holding
# Singapore
Investment holding
# BVI
Investment holding
# Singapore
Investment holding
# China
Disposed
# China
Property development
# BVI
Investment holding
# Singapore
Investment holding
# China
Property development
# China
Property development
# China
Property development
# China
Property development
# Singapore
Investment holding
# Singapore
Investment holding
# Singapore
Investment holding
# Singapore
Investment holding
Keppel Corporation Limited Report to Shareholders 2018
195
Significant Subsidiaries and Associated Companies
Gross
Interest
Effective Equity
Interest
Cost of Investment
2018
%
31 December
2018
%
2017
%
1 January
2017
%
31 December
2018
$’000
2017
$’000
1 January
2017
$’000
Country of
Incorporation
/Operation
Principal Activities
Double Peak Holdings
Ltd (3)
100
100
100
100
Estella JV Co Ltd (1a)
98
98
98
98
100
100
-
-
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
-
100
100
100
99
100
100
-
-
100
100
90
99
-
100
100
100
100
90
99
-
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100+
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
-
-
#
#
#
#
#
#
-
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
# BVI
Investment holding
# Vietnam
Property development and
investment
- HK
Investment holding
# Singapore
Investment holding
# Jersey
Property investment
# Singapore
Investment holding
# Singapore
Investment holding
# Singapore
Investment holding
# Singapore
Property investment
# Singapore
Property development
# Singapore
Investment holding
# Singapore
Investment holding
# BVI
Investment holding
# China
Property development
# Singapore
Investment trust
# Singapore
Investment holding
# China
Disposed
# Singapore
Disposed
# Singapore
Property development
# Singapore
Investment, management and
holding company
# China
Property development
# China
Property development
100
100
100
100+
#
#
# China
Property development
100
100
100
100
100
100
100
100
100
100
100
100
#
#
#
#
#
#
# China
Property development
# Singapore
Property development
# HK
Investment holding
Eternal Commercial
Ltd (n)(1a)
Evergro Properties Ltd
First King Properties
Ltd (3)
Flemmington
Investment Pte Ltd
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)
Katong Retail Trust (n)
KeplandeHub Ltd
Keppel Bay Property
Development
(Shenyang) Co Ltd (3)
Keppel China Marina
Holdings Pte Ltd (3)
Keppel China Township
Development Pte Ltd
Keppel Digihub
Holdings Ltd
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)
Keppel Lakefront (Wuxi)
Property
Development Co
Ltd (1a)
Keppel Land (Mayfair)
Pte Ltd
Keppel Land (Saigon
Centre) Ltd (1a)
196
Financial Report
Gross
Interest
Effective Equity
Interest
Cost of Investment
2018
%
31 December
2018
%
2017
%
1 January
2017
%
31 December
2018
$’000
2017
$’000
1 January
2017
$’000
Country of
Incorporation
/Operation
Principal Activities
Keppel Land
(Singapore) Pte Ltd
Keppel Land Financial
Services Pte Ltd
Keppel Land
International Ltd
Keppel Land Realty
Pte Ltd
Keppel Land Retail
Management 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 (3)
Keppel Seasons
Residences Property
Development (Wuxi)
Co., Ltd (n)(1a)
Keppel Tianjin Eco-City
Holdings Pte Ltd
Keppel Tianjin Eco-City
Investments Pte Ltd
Keppel Township
Development
(Shenyang) Co Ltd (3)
Keppel Yongxiang
Corporate
Management
(Shanghai) Company
Ltd (n)(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 (3)
Merryfield Investment
Pte Ltd
Ocean & Capital
Properties Pte Ltd
Oceansky Pte Ltd
OIL (Asia) Pte Ltd
Parksville Development
Pte Ltd
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
84
84
84
84
84
84
68
68
100
100
100
100
-
-
100
100
100
100
-
-
100
100
100
100+
100
100
100
100+
-
-
100
100
100
100
-
-
86
86
86
86
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
-
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
#
#
#
#
#
#
#
#
-
#
#
#
-
#
#
#
#
#
#
#
-
#
#
#
#
#
#
#
#
#
#
#
#
#
#
-
#
# Singapore
Investment holding
# Singapore
Financial services
# Singapore
Property services
# Singapore
Property development
# Singapore
Investment holding
# Vietnam
Property development
# Vietnam
Property development
# Singapore
Investment holding
# Singapore
Disposed
- China
Property development
# Singapore
Investment holding
#
126,137 Singapore
Investment holding
#
-
#
#
#
#
#
#
#
#
#
#
#
#
# China
Disposed
- China
Property services
# Singapore
Investment holding
# Singapore
Investment holding
# Singapore
Investment holding
# Singapore
Investment holding
# HK
Investment holding
# Singapore
Property development
# Singapore
Dissolved
# Singapore
Investment holding
# Singapore
Investment holding
# Singapore
Investment holding
# Singapore
Investment holding
# Singapore
Property development
Keppel Corporation Limited Report to Shareholders 2018
197
Significant Subsidiaries and Associated Companies
Gross
Interest
Effective Equity
Interest
Cost of Investment
2018
%
31 December
2018
%
2017
%
1 January
2017
%
31 December
2018
$’000
2017
$’000
1 January
2017
$’000
Country of
Incorporation
/Operation
Principal Activities
Pasir Panjang Realty
Pte Ltd
Pembury Properties
Ltd (3)
Pisamir Pte Ltd
Portsville Pte Ltd
Pre-1 Investments Pte
Ltd (n)
PT Harapan Global
Niaga (1a)
PT Kepland
Investama (1a)
PT Puri Land
Development (1a)
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
-
100
-
100
100
100
100
100
100
100
100
100
100
100
100
PT Ria Bintan (1a)
100
46
46
46
PT Straits-CM Village (1a)
PT Sukses Manis
Indonesia (1a)
PT Sukses Manis
Tangguh (1a)
100
100
39
100
39
100
39
100
100
100
100
-
Riviera Cove LLC (1a)
100
100
Riviera Point LLC (1a)
75
75
100
75
100
90
99
99
100
75
100
90
99
99
100
100
100
100
99
99
100
99
100
99
99
99
100
100
100
100
100
99
99
99
100
99
99
99
99
99
99
99
70
70
80
69
99
99
70
69
99
99
70
69
100
100
100
100
Saigon Centre
Investment Ltd (3)
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
198
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
-
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
# Singapore
Investment holding
# BVI
Investment holding
- Singapore
Investment holding
# Singapore
Investment holding
- Singapore
Investment holding
#
Indonesia
Property development
#
Indonesia
Property investment
#
Indonesia
Property development
#
Indonesia
Golf course ownership and
operations
#
#
Indonesia
Hotel ownership and operations
Indonesia
Property development
-
Indonesia
Property development
# Vietnam
Property development
# Vietnam
Property development
# BVI
Investment holding
# Vietnam
Property development
# China
Property investment
# China
Property development
# China
Property development and
investment
# China
Property development
# China
Property development
# China
Investment holding
# China
Property development
# China
Property development
# Singapore
Property development
# China
Golf club operations and
development and property
development
# Singapore
Investment holding
Financial Report
Gross
Interest
Effective Equity
Interest
Cost of Investment
Country of
Incorporation
/Operation
Principal Activities
31 December
2018
%
2017
%
1 January
2017
%
31 December
2018
$’000
2017
$’000
1 January
2017
$’000
2018
%
100
100
100
-
-
100
100
100
-
-
100
100
100
100
100
100
80
80
80
80
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
#
#
#
-
-
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
# Myanmar
Hotel ownership and operations
# Singapore
Property development
# Singapore
Investment holding
# China
Disposed
# HK
Disposed
# Singapore
Investment holding
# China
Property development
# China
Property development
# China
Trading of construction materials
# BVI
Investment holding
# Jersey
Investment holding
100+
100+
100+
100+
1,460
1,460
1,460 Singapore
Investment holding
100
100
100
100
29,814
29,814
78,214 Singapore
Investment holding
98+
98+
98+
98+
48
48
48 Singapore
Investment holding
100+
100+
100+
100+
100+
98+
98+
98+
#
4
#
4
# USA
Property investment
4 HK
Property investment
Straits Greenfield Ltd (2)
Straits Properties Ltd
Straits Property
Investments Pte Ltd
Sunsea Yacht Club
(Zhongshan) Co
Ltd (3)
Sunseacan Investment
(HK) Co Ltd (3)
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)
Atlantic Marina
Services
(Asia-Pacific)
Pte Ltd
FELS Property Holdings
Pte Ltd
FELS SES International
Pte Ltd
Keppel Houston Group
LLC (3)
Keppel Kunming Resort
Ltd (1a)
Keppel Point Pte Ltd
100+
100+
100+
100+
122,785
122,785
122,785 Singapore
Property development and
investment
Petro Tower Ltd (1a)
76
74
74
74
Associated Companies
Bellenden Investments
Ltd (3)
Chengdu Taixin Real
Estate Development
Co Ltd (2)
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)
67
67
35
35
67
35
67
35
50
50
50
50
40
40
67
50
67
50
40
40
40
67
50
40
40
67
50
40
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
# Vietnam
Property investment
# BVI
Investment holding
# China
Property investment
# Singapore
Investment holding
# Myanmar
Property development
# BVI
Investment holding
# Vietnam
Property development
# Vietnam
Property development
Keppel Corporation Limited Report to Shareholders 2018
199
Significant Subsidiaries and Associated Companies
Gross
Interest
Effective Equity
Interest
Cost of Investment
Country of
Incorporation
/Operation
Principal Activities
31 December
2018
%
2017
%
1 January
2017
%
31 December
2018
$’000
2017
$’000
1 January
2017
$’000
EM Services Pte Ltd
Equity Rainbow II Pte
Ltd (2)
Garden Development
Pte Ltd
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)
Raffles Quay Asset
Management Pte
Ltd (2)
Renown Property
Holdings (M) Sdn
Bhd (1a)
Quoc Loc Phat Joint
Stock Company (3)
South Rach Chiec
LLC (1a)
Suzhou Property
Development Pte Ltd
Vietcombank
Tower 198 Ltd (2)
2018
%
25
43
25
43
60
60
61
61
61
61
61
61
47
-
47
-
10
10
25
25
33
33
-
-
42
42
25
25
30
30
Vision (III) Pte Ltd (2)
30
30
25
43
60
61
61
61
46
33
5
25
33
25
43
-
45
45
45
46
33
5
25
33
45
42
25
30
30
45
42
25
30
-
40
40
40
40
#
#
#
#
#
#
#
-
#
#
#
#
-
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
# 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
Liquidated
# Vietnam
Trading of development properties
#
Indonesia
Property development
# Singapore
Property management
# Malaysia
Property investment
# Vietnam
Disposed
# Vietnam
Property development
# Singapore
Property development
# Vietnam
Property investment
- Singapore
Investment holding
100
100
100
100
445,892
445,892
445,892 Singapore
Investment holding
100
100
100
100
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
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
200
Financial Report
Gross
Interest
Effective Equity
Interest
Cost of Investment
2018
%
31 December
2018
%
2017
%
1 January
2017
%
31 December
2018
$’000
2017
$’000
1 January
2017
$’000
Country of
Incorporation
/Operation
Principal Activities
Associated Companies
Keppel Merlimau
Cogen Pte Ltd (2)
Environmental Infrastructure
Subsidiaries
49
49
49
49
#
#
# Singapore
Commercial power generation
Keppel Seghers Pte Ltd
100
100
100
100
Keppel Seghers
Holdings BV (1a)
Keppel Seghers
Belgium NV (1a)
100
100
100
100
100
100
100
100
Marina East Water Pte Ltd
100
100
100
-
Associated Companies
Tianjin Eco-City Energy
20
20
20
20
Investment &
Construction Co
Ltd (2)
Tianjin Eco-City
Environmental
Protection Co Ltd (2)
Infrastructure Services
Subsidiaries
Keppel Infrastructure
Services Pte Ltd
20
20
20
20
100
100
100
100
KMC O&M Pte Ltd
100
100
100
100
Keppel Seghers
Engineering
Singapore Pte Ltd
Investments
Subsidiaries
Keppel Integrated
Engineering Ltd
Keppel Prince
Engineering Pty
Ltd (1a)
Keppel XTE
Investments Pte Ltd
Associated Companies
Keppel Infrastructure
Trust (2)
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
18
18
18
18
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
# 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
Provision of technical support
including engineering, construction,
operations and maintenance of
plants and facilities
# Singapore
Engineering works, construction and
O&M of plants and facilities
# Singapore
Engineering works, construction and
O&M of plants and facilities
# Singapore
Investment holding
# Australia
Metal fabrication
# Singapore
Investment holding
# Singapore
Public trust
Keppel Corporation Limited Report to Shareholders 2018
201
Significant Subsidiaries and Associated Companies
Gross
Interest
Effective Equity
Interest
Cost of Investment
2018
%
31 December
2018
%
2017
%
1 January
2017
%
31 December
2018
$’000
2017
$’000
1 January
2017
$’000
Country of
Incorporation
/Operation
Principal Activities
79
79
79
80
397,647
397,647
397,647 Singapore
Investment, management and
holding company
Logistics & Data Centres
Subsidiaries
Keppel
Telecommunications
& Transportation Ltd
Keppel Logistics Pte
Ltd
Keppel Logistics
(Foshan) Ltd (2)
Keppel Logistics
(Foshan Sanshui
Port) Co Ltd (2)
Jilin Sino-Singapore
Food Zone
International
Logistics Co Ltd (2)
Keppel Wanjiang
International
Coldchain Logistics
Park (Anhui) Co
Ltd (2)
UrbanFox Pte Ltd (2)
(fka Courex Pte Ltd)
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
100
79
70
55
60
33
79
55
33
80
56
33
70
55
55
56
60
47
47
48
85
67
100
79
47
79
48
80
100+
85+
85+
86+
100+
85+
85+
86+
100+
85+
85+
86+
100
79
79
79
80
80
Keppel Communications
Pte Ltd
100
79
Keppel Telecoms Pte
Ltd
Associated Companies
Asia Airfreight Terminal
Company Ltd (3)
Computer Generated
Solutions Inc (2)
100
79
79
80
-
-
8
8
21
17
17
17
Keppel DC REIT (2)
25+
20+
29+
29+
Nautilus Data
Technologies, Inc. (2)
Radiance
Communications
Pte Ltd
SVOA Public Company
Ltd (2)
Wuhu Sanshan Port Co
Ltd (2)
21
17
17
-
50
40
40
40
32
25
50
40
25
40
25
40
202
#
#
#
#
#
#
#
#
#
#
#
#
#
-
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
# Singapore
Integrated logistics services and
supply chain solutions
# China
# China
Integrated logistics port operations,
warehousing and distribution
Integrated logistics port operations
and warehousing
# China
Integrated logistics services,
warehousing and distribution
# China
Integrated logistics services, food
trading hub, warehousing and
distribution
# Singapore
Omnichannel logistics and channel
management solutions provider
# 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
Disposed
# USA
IT consulting and outsourcing
provider
# Singapore
Data centre facilities and colocation
services
- USA
# Singapore
Water-cooled data centre leasing,
colocation and interconnection
services
Distribution and maintenance of
communications equipment and
systems
# Thailand
Distribution of IT products and
telecommunications services
# China
Integrated logistics services and
port operations
Financial Report
INVESTMENTS
Subsidiaries
Keppel Capital Holdings
Pte Ltd
Keppel Capital
Investment Holdings
Pte Ltd
Alpha Investment
Partners Ltd
Keppel DC REIT
Management Pte Ltd
Keppel Infrastructure
Fund Management
Pte Ltd
Keppel REIT
Management Ltd
Keppel Philippines
Holdings Inc (1a)
Alpha Real Estate
Securities Fund
Kephinance Investment
Pte Ltd
Kepinvest Holdings
Pte Ltd (n)
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
Keppel Oil & Gas Pte
Ltd
KI Investments (HK)
Ltd (3)
Primero Investments
Pte Ltd (3)
Singapore Tianjin
Eco-City Investment
Holdings Pte Ltd
Substantial Enterprises
Ltd (3)
Gross
Interest
Effective Equity
Interest
Cost of Investment
2018
%
31 December
2018
%
2017
%
1 January
2017
%
31 December
2018
$’000
2017
$’000
1 January
2017
$’000
Country of
Incorporation
/Operation
Principal Activities
100
100
100
100
783,000
783,000
783,000 Singapore
Investment holding
100
100
100
100
100
100
100
100
100+
90+
90+
90+
100
100
100
100
100
100
100
100
82+
81+
81+
81+
99
99
99
99
#
#
#
#
#
#
#
#
#
#
#
#
#
#
# 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
100
100
100
100
90,000
90,000
90,000 Singapore
Investment holding
100
100
-
-
10
-
- Singapore
Investment holding
100
100
100
100
18,425
18,425
18,425 Singapore
Investment holding
100
100
100
100
#
#
# HK
Investment company
100+
100+
100+
100+
126,744
126,744
126,744 Singapore
Investment holding
Kepventure Pte Ltd
100
100
100
594,922
594,922
594,922 Singapore
Investment holding
100
100
100
100
100
100
100
100
100
100
-
-
-
-
100
100
100
100
100
100
100
100
100
100
100
90+
90+
90+
90+
100+
100+
100+
100+
#
10
#
#
#
10
#
#
# Singapore
Investment company
10 Singapore
Investment holding
# Singapore
Investment company
# Singapore
Investment holding
-
-
#
#
#
#
#
#
# HK
Liquidated
# Singapore
Liquidated
# Singapore
Investment holding
# BVI
Investment holding
Travelmore Pte Ltd
100
100
100
100
265
265
265 Singapore
Travel agency
Associated Companies
k1 Ventures Ltd (2)
36
36
36
36
Keppel-KBS US REIT (2)
8
7
7
-
#
#
#
#
# Singapore
Investment holding (under
liquidation)
- Singapore
Real estate investment trust
Keppel Corporation Limited Report to Shareholders 2018
203
M1 Ltd (2)
Sino-Singapore Tianjin
Eco-City Investment
and Development
Co., Ltd (2)
Total subsidiaries
Notes:
Significant Subsidiaries and Associated Companies
Gross
Interest
Effective Equity
Interest
Cost of Investment
2018
%
31 December
2018
%
2017
%
1 January
2017
%
31 December
2018
$’000
2017
$’000
1 January
2017
$’000
Country of
Incorporation
/Operation
Principal Activities
KrisEnergy Ltd (2)
40
40
40
40
19
50
15
45
15
45
15
45
#
#
#
#
#
#
# Cayman
Islands
Exploration for, and the
development and production of oil
and gas
# Singapore
Telecommunications services
# China
Property development
8,209,626 8,209,616 8,307,153
(i) All the companies are audited by PricewaterhouseCoopers LLP, Singapore except for the following:
(1a)
Audited by overseas practice of PricewaterhouseCoopers LLP;
(2)
(3)
Audited by other firms of auditors; and
Not required to be audited by law in the country of incorporation and companies disposed, liquidated and struck off.
In accordance to Rule 716 of The Singapore Exchange Securities Trading Limited – Listing Rules, the Audit Committee and Board of Directors of the Company confirmed
that they are satisfied that the appointment of different auditors for its subsidiaries and significant associated companies would not compromise the standard and
effectiveness of the audit of the Company.
(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) (n) These companies were incorporated/acquired during the financial year.
(v) The subsidiaries’ place of business is the same as its country of incorporation, unless otherwise specified.
(vii) Abbreviations:
British Virgin Islands (BVI)
United Arab Emirates (UAE)
Hong Kong (HK)
United States of America (USA)
(viii) The Company has 260 significant subsidiaries and associated companies as at 31 December 2018. 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.
204
Financial Report
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 20 April 2018. 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
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
Singapore Power Group
Singapore Technologies Engineering Group
Singapore Telecommunications Group
SMRT Corporation 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)
2018
$’000
2017
$’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
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)
2018
$’000
–
208
–
2,202
923
1,272
–
–
549
773
52,000
501
43
350
6,772
209
436
2017
$’000
174,000
8,077
24,400
1,783
2,657
189
338
254
718
1,020
51,000
305
353
3,289
441
–
546
66,238
269,370
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.
Keppel Corporation Limited Report to Shareholders 2018
205
Key Executives
Chan Hon Chew, 53
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 of 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 joining 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 15 April 2015.
Mr Chan’s principal directorships include Keppel Offshore & Marine Ltd, Keppel Land Limited, Keppel Infrastructure Holdings Pte Ltd, Keppel
Telecommunications & Transportation Ltd, and Keppel Capital Holdings Pte Ltd.
Past principal directorships in the last five years
KrisEnergy Ltd and Keppel DC REIT Management Pte Ltd (the Manager of Keppel DC REIT).
Ong Tiong Guan, 60
Bachelor of Engineering (First Class Honours), Monash University, Australia; Doctor of Philosophy (Ph.D.) under Monash Graduate Scholarship,
Monash University, Australia.
Dr Ong was appointed Executive Director of Keppel Energy Pte Ltd from 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 in 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 and
environmental infrastructure businesses.
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 and Keppel Capital Holdings Pte Ltd.
Past principal directorships in the last five years
Keppel Merlimau Cogen Pte Ltd, GE Keppel Energy Services Pte Ltd, Keppel Infrastructure Fund Management Pte Ltd (the Trustee-Manager of
Keppel Infrastructure Trust) and Energy Studies Institute.
Christina Tan Hua Mui, 53
Bachelor of Accountancy (Honours), National University of Singapore; CFA® charterholder.
Ms Tan is the Chief Executive Officer of Keppel Capital Holdings Pte Ltd (Keppel Capital), Chairman of Keppel DC REIT Management Pte Ltd (the
Manager of Keppel DC REIT) and Deputy Chairman of Alpha Investment Partners Limited (Alpha).
Ms Tan has more than 20 years of experience and expertise in investing and fund management across the United States, 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, managing more than US$1 billion in real estate funds. 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, as well as the listed REITs and Business Trust – Keppel REIT Management Limited,
Keppel DC REIT Management Pte Ltd and Keppel Infrastructure Fund Management Pte Ltd, and the private funds. She also sits on the
Investment Committee for the private funds, and is instrumental in developing and implementing the funds’ portfolio strategy.
Past principal directorships in the last five years
Nil.
206
Other Information
Chris Ong Leng Yeow, 44
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 Ltd (Keppel O&M) with effect from 1 July 2017. Prior to this
appointment, he was Acting Chief Executive Officer of Keppel O&M. Mr. Ong’s career began in Keppel FELS since 1999 as a Commissioning
Superintendent (E&I) and he has held appointments as Project Engineer, Section Manager, Deputy Engineering Manager, Assistant General
Manager (Engineering), General Manager (Engineering), Acting Executive Director (Operation), Executive Director (Commercial) and Managing
Director of Keppel FELS Limited.
In addition to his current appointment, Mr Ong is also a board member of the Maritime and Port Authority of Singapore and The Institute of
Technical Education Board of Governors (BOG), a member of the Workplace Safety & Health Council Marine Industries Committee, U EnTech
Steering Committee, Keppel Chair Professor Management/Selection Committee and the Governance Board of Keppel-NUS Corporate
Laboratory.
Mr. Ong is a Chartered Engineer, a Fellow of the Institute of Marine Engineering, Science and Technology and a member of the American Bureau
of Shipping, DNV GL South East Asia and Pacific Committee as well as Bureau Veritas Asia-Australia Committee.
Mr. Ong is the Chairman of Floatel International Ltd, Keppel Nantong Heavy Industry Co. Ltd, Keppel Nantong Shipyard Ltd and Keppel FELS
Brasil S.A. He is also director of various subsidiaries or associated companies of Keppel O&M.
Mr. Ong is also a non-executive director of KrisEnergy Ltd.
Past principal directorships in the last five years
Various subsidiaries and associated companies of Keppel O&M.
Tan Swee Yiow, 58
Bachelor of Science (First Class Honours) in Estate Management, National University of Singapore; Master of Business Administration in
Accountancy, Nanyang Technological University.
Mr Tan has been appointed the Chief Executive Officer and Executive Director of Keppel Land with effect from 1 January 2019.
Mr Tan joined the Keppel Group in 1990. Prior to his current appointment, Mr Tan was the Chief Executive Officer and Executive Director of
Keppel REIT Management Limited (the Manager of Keppel REIT). Before this, he was President, Singapore, at Keppel Land and concurrently
Head, Keppel Land Hospitality Management.
Mr Tan continues to serve on the Board of Keppel REIT Management Limited as a Non-Executive Director. He is also President of the Singapore
Green Building Council and a Director of the World Green Building Council. Mr Tan serves as Deputy Chairman of the Workplace Safety and
Health Council (Construction and Landscape Committee) and is second Vice-President on the Management Council of Real Estate Developers’
Association of Singapore.
Past principal directorships in the last five years
Nil.
Thomas Pang Thieng Hwi, 54
Bachelor of Arts (Engineering) and Master of Arts (Honorary Award), University of Cambridge.
Mr Pang is currently Executive Director and Chief Executive Officer of Keppel Telecommunications & Transportation Ltd (Keppel T&T), 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 (Keppel O&M) in 2002 as a Senior Manager (Merger Integration Office) to assist in the merger
and 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, as well as strategic planning of Keppel O&M. Prior to that, Mr Pang 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 of Keppel T&T’s subsidiaries, associates and joint venture companies. He is also a Director of
ADCF C Private Limited, Keppel Capital Holdings Pte Ltd, Keppel DC REIT Management Pte Ltd (the 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 T&T, KDC REIT and KIT.
Keppel Corporation Limited Report to Shareholders 2018
207
Key Executives
Paul Tham Wei Hsing, 37
Bachelor of Science in Civil & Environmental Engineering, Cornell University; Masters in Business Administration, Singapore Management
University.
Mr Tham was appointed the Chief Executive Officer of Keppel REIT Management Limited (the Manager of Keppel REIT) with effect from 1
January 2019, after having served as its Deputy Chief Executive Officer since 1 February 2018.
Before his current appointment, Mr Tham was the Chief Financial Officer of Keppel Capital Holdings Pte Ltd (Keppel Capital), the asset
management arm of Keppel Corporation Limited, overseeing the finance, compliance, legal and investor relations functions. Prior to that, Mr
Tham was part of Keppel Corporation’s Group Strategy & Development department, where he played a key role in the formation of Keppel
Capital.
Before Keppel, Mr Tham served as a management consultant for Bain & Company working with leading global companies in Asia Pacific across
a range of topics including financial performance management and growth strategy. Mr Tham started his career as a structural engineer in New
York and has experience with building developments and infrastructure.
Mr Tham is also a Director of Keppel-KBS US REIT Management Pte. Ltd. (the Manager of Keppel-KBS US REIT).
Past principal directorships in the last five years
Nil.
Matthew R. Pollard, 51
Bachelors of Arts Degree, Columbia University; Masters in Business Administration, University of Chicago.
Mr Pollard was appointed Chief Executive Officer (CEO) of Keppel Infrastructure Fund Management Pte Ltd, the Trustee-Manager of Keppel
Infrastructure Trust (KIT), with effect from 1 July 2018.
As CEO of the Trustee-Manager, Mr Pollard 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.
Mr Pollard joined Keppel Capital Holdings Pte Ltd (Keppel Capital) as Managing Director, Infrastructure, in November 2017.
Prior to joining Keppel Capital, Mr Pollard spent more than 28 years of his career in investment banking, direct investment and entrepreneurship,
of which 25 years have been in Asia. He has been involved in the energy, power, renewable and infrastructure sectors his entire career.
Mr Pollard was founder and managing director of Capital Partners Group, Singapore, from 2014 to 2017. He was Head of Infrastructure (Asia) at
Arcapita Group from 2008 to 2013. In addition, he was the Chairman of China-based Honiton Energy Group from 2009 to 2015. Prior to joining
Arcapita Bank, Mr Pollard held senior positions in the energy and utilities teams of Citigroup, Dresdner Kleinwort, Enron Corp, and Power Pacific
Co.
Past principal directorships in the last five years
Nil.
Chua Hsien Yang, 41
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 (the Manager of Keppel DC REIT). Mr Chua has extensive
experience in real estate funds management and the hospitality industries, with more than 17 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 the Manager of Keppel DC REIT, Mr Chua held the position of Senior Vice President of Keppel REIT Management Limited (the
Manager of Keppel REIT) since May 2008, where he headed the investment team.
From January 2006 to April 2008, Mr Chua was with Ascott Residence Trust Management Limited (the Manager of Ascott Residence Trust)
as Director of Business Development and Asset Management. From October 2001 to December 2005, Mr Chua was with Hotel Plaza Limited
(now known as Pan Pacific Hotels Group Limited) as Assistant Vice President of Asset Management. He was responsible for the business
development and asset management activities of the group-owned properties.
Past principal directorships in the last five years
Mirvac 8 Chifley Pty Limited and Mirvac (Old Treasury) Pty Limited.
208
Other Information
David Eric Snyder, 48
Bachelor of Science in Business Administration, Biola University, California.
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 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$1.7 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, he was with Nationwide Health Properties, starting out as a
Financial Controller before rising to become Vice President & Financial Controller in 2005. Mr Snyder 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.
Keppel Corporation Limited Report to Shareholders 2018
209
Major Properties
Held By
Completed properties
Effective
Group
Interest
Location
Description and
Approximate
Land Area
Tenure
Usage
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 23,119 sqm
Land area: 6,221 sqm
43-storey office tower
with ancillary retail space
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
999 years leasehold
Commercial office building with
rentable area of 81,509 sqm
99 years leasehold
Commercial office building with
rentable area of 123,349 sqm
99 years leasehold
Commercial office building with
rentable area of 161,348 sqm
99 years leasehold
Commercial office building with
rentable area of 124,472 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 45,227 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
Keppel DC
Singapore 5
Jurong,
Singapore
Gore Hill Data
Centre
Sydney,
Australia
Almere Data Centre
Amsterdam,
Netherlands
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 19,337 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: 7,742 sqm
5-storey data centre
23 years lease
Data centre with rentable area of
9,176 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: 13,900 sqm
Single-storey data centre
999 years leasehold
Data centre with rentable area of
2,334 sqm
Keppel REIT
47%
Keppel DC REIT
25%
210
Other Information
Held By
Effective
Group
Interest
Location
Description and
Approximate
Land Area
Tenure
Usage
Thorium DC Pte Ltd
65%
Calcium DC Pte Ltd
68%
Land area: 5,596 sqm
Freehold
Data centre with rentable area of
9,016 sqm
Land area: 6,805 sqm
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
maincubes Data
Centre
Offenbach am Main,
Germany
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
Bellevue Technology Land area: 188,570 sqm
Center
24th Street, Bellevue, multi-tenanted office
Washington,
USA
Office campus featuring 9
buildings
The Westpark
Portfolio
8200-8644 154th
Avenue NE
Redmond,
Washington,
USA
Westmoor Center
Westmoor Drive,
Colorado,
USA
1800 West Loop
South
Houston,
USA
Land area: 166,989 sqm
Business campus
comprising 19 office
buildings and 2 flex
buildings which are
multi-tenanted
Land area: 176,953 sqm
Office campus featuring 6
multi-tenanted office
buildings
Land area: 7,627 sqm
A 21-storey high rise office
multi-tenanted property
Mansfield Development
Pte Ltd
100%
Keppel Towers and
Keppel Towers 2
Hoe Chiang Rd,
Singapore
Land area: 9,127 sqm
27-storey and 13-storey
office towers
Freehold
Freehold
Freehold
Freehold
Freehold
Freehold
Commercial office building with
rentable area of 45,615 sqm
Commercial office buildings with
rentable area of 30,705 sqm
Commercial office and flex
buildings with rentable area of
72,667 sqm
Commercial office building with
rentable area of 56,939 sqm
Commercial office building with
rentable area of 37,171 sqm
Commercial office building with
rentable area of 45,355 sqm
A 1,129-unit waterfront
condominium development
A 366-unit waterfront
condominium development
Keppel Bay Pte Ltd
100%
100%
HarbourFront One Pte Ltd
100%
Katong Retail Trust
100%
Spring City Golf & Lake
Resort Co (owned by
Kingsdale Development
Pte Ltd)
69%
Vision (III) Pte Ltd
30%
Reflections at
Keppel Bay
Singapore
Corals at
Keppel Bay
Singapore
Keppel Bay Tower
HarbourFront
Avenue,
Singapore
I12 Katong
East Coast Road
and Joo Chiat Road,
Singapore
Spring City Golf
& Lake Resort
Kunming,
China
Trinity Tower
Shanghai,
China
Land area: 83,538 sqm
99 years leasehold
Land area: 38,830 sqm
99 years leasehold
Land area: 17,267 sqm
18-storey office tower
99 years leasehold
Commercial office building with
rentable area of 36,015 sqm
Land area: 7,261 sqm
99 years leasehold
A 6-storey shopping mall
Land area: 2,507,653 sqm
Two 18-hole golf courses,
a club house
70 years lease
(residential)
50 years lease
(golf course)
Integrated resort comprising
golf courses, resort homes
and resort facilities
Land area: 16,427 sqm
50 years lease (office) A mixed-use development in
40 years lease (retail) Hong Kou District
Keppel Corporation Limited Report to Shareholders 2018
211
Major Properties
Held By
Effective
Group
Interest
Location
Description and
Approximate
Land Area
PT Kepland Investama
100%
100%
Keppel Land Watco I Co Ltd 61%
Keppel Land Watco II & III
Co Ltd
61%
International
Financial Centre
(Tower 1)
Jakarta,
Indonesia
International
Financial Centre
(Tower 2)
Jakarta,
Indonesia
Saigon Centre
(Phase 1)
Ho Chi Minh City,
Vietnam
Saigon Centre
(Phase 2)
Ho Chi Minh City,
Vietnam
Land area: 10,428 sqm
Tenure
Usage
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
Land area: 2,730 sqm
25-storey office, retail cum
serviced apartments
development
50 years leasehold
Commercial building with rentable
area of 11,683 sqm office and 89
units of serviced apartments
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
A township comprising residential
units, commercial space and
recreational facilities in Skudai
A mix-used development in CBD
A 5-star hotel in Yangon with
797 rooms
Tanah Sutera Development 18%
Sdn Bhd
Land area: 2,018,390 sqm
Taman Sutera and
Taman Sutera Utama
Johor Bahru,
Malaysia
Freehold
City Square Office Co Ltd
40%
Junction City Tower Land area: 26,406 sqm
(Phase 1)
Yangon,
Myanmar
Land area: 32,000 sqm
50 years BOT with
option for another
two 10-years
50 years BOT with
option for another
two 10-years
Straits Greenfield Ltd
100%
First King Properties Ltd
100%
Properties under development
Keppel REIT
47%
Garden Development Pte Ltd 60%
Parksville Development
Pte Ltd
100%
Keppel Bay Pte Ltd
100%
Sedona Hotel
Yangon
Yangon,
Myanmar
75 King William
Street
London,
United Kingdom
311 Spencer Street
Melbourne,
Australia
The Garden
Residences
Serangoon,
Singapore
Nassim Woods
Nassim Road,
Singapore
Keppel Bay Plot 6
Singapore
Land area: 1,947 sqm
9-storey office tower
Freehold
Commercial office building with
rentable area of 11,731 sqm
Land area: 5,136 sqm
Freehold
Land area: 17,189 sqm
99 years leasehold
Land area: 5,785 sqm
99 years leasehold
Land area: 43,701 sqm
99 years leasehold
An office development located
in CBD
*(2020)
A 613-unit condominium
development
*(2020)
A 100-unit condominium
development
*(2022)
A proposed 86-unit waterfront
condominium development
Shanghai Floraville Land
Co Ltd
99%
Park Avenue Central Land area: 28,488 sqm
Shanghai,
China
Shanghai Jinju Real Estate
Development Co Ltd
99%
Sheshan Riviera
Shanghai,
China
Land area: 175,191 sqm
Chengdu Taixin Real Estate 35%
Development Co Ltd
Keppel Heights (Wuxi)
Property Development
Co Ltd
100%
V-City
Chengdu,
China
Park Avenue
Heights
Wuxi,
China
Land area: 167,357 sqm
Land area: 66,010 sqm
40 years lease (retail) An office and retail development
50 years lease (office) *(2023)
70 years lease
(residential)
40 years lease
(commercial)
70 years lease
(residential)
40 years lease
(commercial)
70 years lease
(residential)
40 years lease
(commercial)
A 217-unit landed development in
Sheshan
*(2021 Phase 2)
A 5,399-unit residential
development with retail facilities
*(2019 Phase 4)
A 1,285-unit residential
development with commercial
facilities in Liangxi District
*(2019 Phase 2)
212
Other Information
Held By
Effective
Group
Interest
Location
Description and
Approximate
Land Area
Tenure
Usage
Keppel Seasons Residences 100%
Property Development
(Wuxi) Co Ltd
Seasons Residences Land area: 180,258 sqm
Wuxi,
China
Keppel Lakefront (Wuxi)
Property Development
Co Ltd
100%
Waterfront
Residence
Wuxi,
China
Land area: 215,230 sqm
70 years lease
(residential)
40 years lease
(commercial)
70 years lease
(residential)
40 years lease
(commercial)
100%
Seasons City in
Sino-Singapore
Tianjin Eco-City
Tianjin,
China
Land area: 40,451 sqm
40 years leasehold
A 2,904-unit residential
development with integrated
facilities in Xinwu District
*(2020 Phases 1 & 2)
A 1,403-unit residential
development with commercial
and SOHO facilities in Binhu
District
*(2019 Phase 4)
A commercial sub-centre
comprising a retail complex and
three office towers
*(2020 Phase 1)
Keppel Hong Yuan (Tianjin
Eco-City) Property
Development Co Ltd/
Keppel Hong Tai (Tianjin
Eco-City) Property
Development Co Ltd/
Keppel Hong Teng (Tianjin
Eco-City) Property
Development Co Ltd
Keppel Hong Da (Tianjin
Eco-City) Property
Development Co Ltd
100%
Nanjing Jinsheng Real
Estate Development Co Ltd
40%
Chengdu Hilltop
Development Co Ltd
100%
Chengdu Shengshi Jingwei
Real Estate Co Ltd
100%
PT Harapan Global Niaga
100%
Tanah Sutera Development 18%
Sdn Bhd
Development in
Sino-Singapore
Tianjin Eco-City
Tianjin,
China
Nanjing Jinsheng
Nanjing,
China
Hill Crest Villa
Chengdu,
China
Serenity Villa
Chengdu,
China
West Vista at Puri
Jakarta,
Indonesia
Taman Sutera and
Taman Sutera
Utama
Johor Bahru,
Malaysia
Land area: 313,265 sqm
Land area: 87,790 sqm
70 years lease
(residential)
40 years lease
(commercial)
70 years lease
(residential)
40 years lease
(commercial)
Land area: 249,330 sqm
70 years leasehold
Land area: 286,667 sqm
70 years leasehold
Land area: 28,851 sqm
30 years lease with
option for another
20 years
Land area: 2,018,390 sqm
Freehold
A 4,297-unit residential
development with office and
retail space
*(2019 Seasons Garden Plot 9)
A 1,597-unit residential
development in the core of
Nanjing Jiangbei New Area
*(2021 Phase 1)
A 274-unit landed development in
Xinjin County
*(2020 Phase 1)
A 867-unit landed development in
Xinjin County
*(2020 Phase 2)
A 2,855-unit residential
development with ancillary shop
houses
*(2019 Phase 1)
A township comprising residential
units, commercial space and
recreational facilities in Skudai
City Square Tower Co Ltd
40%
Junction City Tower Land area: 26,406 sqm
(Phase 2)
Yangon,
Myanmar
50 years BOT with
option for another
two 10-years
A mix-used development in CBD
*(2022)
Saigon Sports City Ltd
100%
South Rach Chiec LLC
42%
Empire City LLC
40%
Riviera Point Ltd
75%
Dong Nai Waterfront City
LLC (owned by Portsville
Pte Ltd)
50%
Saigon Sports City
Ho Chi Minh City,
Vietnam
Palm City (South
Rach Chiec)
Ho Chi Minh City,
Vietnam
Empire City
Ho Chi Minh City,
Vietnam
Riviera Point
Ho Chi Minh City,
Vietnam
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: 146,000 sqm
50 years leasehold
Land area: 89,727 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
*(2022 Phase 1)
A 3,670-unit residential township
and commercial space
*(2019 Phase 1)
A residential development with
commercial space in Thu Thiem
New Urban Area, District 2
*(2020 Phases 1 & 2)
A 2,400-unit residential
development with commercial
space in District 7
*(2019 Phase B)
A 7,850-unit residential township
with commercial space in
Long Thanh District
*(2024 Phase 1)
Keppel Corporation Limited Report to Shareholders 2018
213
Major Properties
Held By
Industrial properties
Effective
Group
Interest
Location
Description and
Approximate
Land Area
Tenure
Usage
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
214
Other Information
Group Five-Year Performance
2014#
2015#
2016#
2017#
2018
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)
13,283
2,391
2,835
10,296
1,576
1,991
1,885
1,525
6,118
6,030
16,672
100
-
6,767
901
1,088
784
6,195
6,076
17,532
141
-
5,964
801
442^
196^
5,894
6,575
16,084
133
-
5,965
1,043
1,240
944
5,224
6,841
14,412
129
-
28,920
29,944
28,686
26,606
7,925
8,259
810
-
8,034
9,053
512
-
8,298
7,793
622
-
6,912
7,549
558
-
11,926
12,345
11,973
11,587
11,096
830
11,926
11,668
677
12,345
11,443
530
11,973
11,278
309
11,587
104.2
84.0
34.0
6.13
6.07
17.6
14.2
2.5
(0.53)
57.1
43.2
20.0
6.43
6.35
9.1
6.9
2.2
23.3^
10.8^
22.0
6.29
6.22
3.7
1.7
0.5
(0.56)
(0.46)
67.4
52.0
30.0*
6.22
6.15
10.8
8.3
1.7*
(0.48)
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
120.9
103.8
48.0
5.73
5.67
21.9
18.8
2.2
(0.11)
39,049
1,859
36,153
1,662
28,879
1,282
21,862
1,107
18,186
1,018
#
^
*
2017 financial figures have been adjusted following the adoption of Singapore Financial Reporting Standards (International) (“SFRS(I)s”). 2014 to 2016 financial figures were
prepared in accordance with Singapore Financial Reporting Standards (“FRS”) and certain amounts have been reclassified for comparability purpose.
Includes the one-off financial penalty from the global resolution and related costs of $619 million.
Includes the special dividend paid of 5.0 cents per share.
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.
Keppel Corporation Limited Report to Shareholders 2018
215
Group Five-Year Performance
2018
Group revenue of $5,965 million for 2018 was at almost the same level as in 2017. Revenue from the O&M Division improved by $73 million or
4% to $1,875 million due to revenue recognition in relation to the jackup rigs sold to Borr Drilling Limited and higher revenue recognition from
ongoing projects. Major jobs completed and delivered in 2018 included two jackup rigs, a gas carrier refurbishment, two Floating Production
Storage and Offloading (FPSO) conversions, a Roll-on/Roll-off (RORO) conversion and two dual-fuel Liquified Natural Gas (LNG) tugs. Revenue
from the Property Division decreased by $442 million to $1,340 million due mainly to lower revenue from Singapore, China and Vietnam property
trading. Revenue from the Infrastructure Division grew by $422 million to $2,629 million as a result of increased sales in the power and gas
businesses, partly offset by lower progressive revenue recognition from the Keppel Marina East Desalination Plant project. Revenue from the
Investments Division decreased by $52 million to $121 million due mainly to the absence of sale of investments and lower revenue from the
asset management business.
Group pre-tax profit for the current year was $1,240 million, $798 million or 181% above the previous year. Group pre-tax profit for 2017 included
$619 million for the one-off financial penalty and related costs. Excluding the one-off financial penalty and related costs from 2017, Group
pre-tax profit for 2018 of $1,240 million was $179 million or 17% above the pre-tax profit of $1,061 million for 2017.
The O&M Division’s pre-tax loss was $113 million as compared to pre-tax loss, excluding the one-off financial penalty and related costs, of
$243 million in 2017. This was mainly due to higher operating results arising from higher revenue, write-back of provisions for claims and lower
net interest expense, partly offset by higher impairment provisions and absence of gain from divestment of Keppel Verolme. Pre-tax profit from
the Property Division increased by $344 million to $1,188 million due mainly to en-bloc sales of development projects (Keppel China Marina
Holdings Pte Ltd, Keppel Bay Property Development (Shenyang) Co. Ltd., Keppel Township Development (Shenyang) Co. Ltd. and Quoc Loc Phat
Joint Stock Company) and gain from divestment of the stake in Aether Limited. The positive variance was partly offset by lower fair value gains
on investment properties, lower contribution from Singapore and China property trading, and lower share of associated companies’ profits.
Pre-tax profit of the Infrastructure Division was $184 million, $14 million above that in 2017. This was mainly due to dilution gain following
Keppel DC REIT’s private placement exercise, the gain arising from the sale of stake in Keppel DC REIT, as well as higher contribution from
Environmental Infrastructure and Infrastructure Services, partly offset by lower contribution from Energy Infrastructure, lower share of profits
from Keppel Infrastructure Trust, and absence of gain from divestment of GE Keppel Energy Services Pte Ltd compared against last year. Pre-
tax loss of the Investments Division was $19 million as compared to pre-tax profit of $290 million in 2017. This was mainly due to lower profit
from land sales in the Sino-Singapore Tianjin Eco-City, lower contribution from the asset management business and provision for impairment of
an associated company, partly offset by lower share of loss from KrisEnergy. In 2017, the Investments Division also benefitted from the share of
profit from k1 Ventures, write-back of provision for impairment of an associated company, and profit from sale of investments.
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 in 2017, net profit attributable to shareholders for 2018 was $944 million, an increase of $129 million from
$815 million in 2017. The Property Division was the largest contributor to the Group’s net profit with a 99% share, followed by the Infrastructure
Division’s 18% while the O&M Division and Investments Division contributed negative 11% and negative 6% to the Group’s net profit respectively.
2017
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 (semi), a subsea construction vessel, an FPSO conversion, an FPSO topsides installation/integration, a module
fabrication & integration, a floating LNG 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 $442 million, $646 million or 59% 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 $1,061 million which is $27 million lower than that of the
preceding year.
Revenue ($ 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
2014
13.3
2015
10.3
2016
2017
2018
6.8
6.0
6.0
2014
2015
2016
2017
2018
2,835*
1,991*
1,088*
442* ^
1,240
2014
2015
2016
1,885
1,525
784
2017
196* ^
2018
944
2017 financial figures have been adjusted following the adoption of SFRS(I)s. 2014 to 2016 financial figures were prepared in accordance with FRS and certain amounts
have been reclassified for comparability purpose.
Includes the one-off financial penalty and related costs of $619 million.
216
Other Information
The O&M 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 $76 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 & works-in-progress (WIP), 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 $844 million was $11 million or 1% 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 $47 million to $170 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 $234 million to $290 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 $815 million, an increase of $31 million from last year. The Property
Division was the largest contributor to the Group’s net profit with an 80% share, followed by the Investments Division’s 29% and Infrastructure
Division’s 16% while the O&M Division contributed negative 25% 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. O&M 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 contracts. Major jobs completed in 2016 include four jackup rigs, a land rig, a derrick lay vessel, an accommodation semi 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 $1,088 million, $903 million or 45% below the previous year. The O&M Division reported a
$614 million drop in pre-tax profit to $76 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 & WIP and investments. The negative variance was partially offset by the absence of provision for losses for the Sete rigbuilding
contracts of about $230 million in 2015. The Property Division’s profit of $833 million for 2016 was $31 million or 4% 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 $116 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 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 $142 million to $56 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, $741 million or
49% lower than last year. The Property Division was the largest contributor to Group net profit at 79%, followed by the Infrastructure Division’s
13%, the Investments Division’s and the O&M Division’s at 4% each.
Shareholders’ Fund ($ billion)
Total Equity ($ billion)
Market Capitalisation ($ billion)
12.5
10
7.5
5.0
2.5
0
15
12
9
6
3
0
25
20
15
10
5
0
2014
10.4
2015
11.1
2016
11.7
2017
11.4
2018
11.3
2014
14.7
2015
11.9
2016
12.3
2017
12.0
2018
11.6
2014
16.0
2015
11.8
2016
10.5
2017
13.4
2018
10.7
Keppel Corporation Limited Report to Shareholders 2018
217
Group Five-Year Performance
2015
Group revenue of $10,296 million for 2015 was $2,987 million or 22% lower than that for the full year of 2014. O&M 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 contracts. Major jobs completed in 2015 include seven jackup rigs, an accommodation semi, 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 $1,991 million, $844 million or 30% below the previous year. The O&M Division reported a
$667 million drop in pre-tax profit to $690 million. Lower operating results arising from lower revenue, provision for losses for Sete rigbuilding
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 $864 million for 2015 was $80 million or 8% 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 (MBFC T3) 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 $193 million to $239 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 O&M 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. O&M Division’s revenue of
$8,556 million was 20% above the $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 semi upgrade. 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. 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 (Keppel T&T) logistics and data
centre businesses.
The Group’s pre-tax profit for the current year was $2,835 million, $28 million or 1% above the previous year. The O&M Division posted a higher
pre-tax profit of $1,357 million mainly from better operating results and higher interest income partially offset by lower share of associated
companies’ profits. The Property Division’s profit of $944 million for 2014 was $476 million or 34% 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 MBFC T3 in 2014. Profit from the Infrastructure Division increased
by $366 million to $432 million due mainly to better operating results from both Keppel Infrastructure and Keppel T&T as well as gains from
divestments of data centre assets and Keppel FMO.
Taking into account income tax expenses and non-controlling interests, net profit attributable to shareholders was $1,885 million, $39 million or
2% higher than last year. The O&M Division was the largest contributor to Group net profit at 55%, followed by the Property Division’s 25%, the
Infrastructure Division’s 16% and the Investments Division’s at 4%.
218
Other Information
Group Value-Added Statements
2014*
2015*
2016*
2017*
2018
($ 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
Number of employees
Productivity data:
13,283
(9,456)
3,827
10,296
(7,303)
2,993
6,767
(4,287)
2,480
5,964
(4,119)
1,845
5,965
(3,939)
2,026
174
222
186
2,608
988
284
198
20
526
744
-
139
272
(187)
2,704
1,155
266
225
77
545
847
-
158
291
196
2,490
1,027
244
189
27
364
580
619
2,268
2,470
2,016
236
(39)
239
436
212
(25)
(167)
20
182
(8)
418
592
145
432
563
4,967
1,733
408
134
266
763
1,163
-
3,304
265
276
1,122
1,663
134
436
402
3,965
1,600
398
155
83
872
1,110
-
3,108
220
(15)
652
857
4,967
3,965
2,704
2,490
2,608
39,049
36,153
28,879
21,862
18,186
Gross value added per employee ($’000)
Gross value added per dollar employment cost ($)
Gross value added per dollar sales ($)
98
2.21
0.29
83
1.87
0.29
86
2.15
0.37
84
1.80
0.31
111
2.05
0.34
*
2017 financial figures have been adjusted following the adoption of Singapore Financial Reporting Standards (International). 2014 to 2016 financial figures were prepared in
accordance with Singapore Financial Reporting Standards and certain amounts have been reclassified for comparability purpose.
($ million)
5,000
4,000
3,000
2,000
1,000
0
4,967
3,965
2,704
2,490
2,608
One-off financial penalty and related cost
Depreciation & Retained Profit
Interest Expenses & Dividends
Taxation
2014
2015
-
1,663
1,163
408
-
857
1,110
398
2016
-
436
847
266
2017
619
20
580
244
Wages, Salaries & Benefits
1,733
1,600
1,155
1,027
2018
-
592
744
284
988
Keppel Corporation Limited Report to Shareholders 2018
219
Share Performance
Turnover
(million)
Share Prices
($)
400
300
200
180
160
140
120
100
80
60
40
20
0
40
30
20
18
16
14
12
10
8
6
4
2
0
2014
2015
2016
2017
2018
Turnover
High and Low Prices
Share Price ($) *
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)
2014
2015
2016
2017
2018
8.85
11.24
7.91
10.01
103.8
48.0
4.8
9.6
5.67
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
6.35 #
5.79
3.5
13.4
0.9
7.35
7.83
5.73
6.79
10.8 #^
22.0
3.2
62.9
6.22 #
7.35
3.0
68.1
1.2
5.91
8.92
5.67
7.35
52.0
30.0 @
4.1 @
14.1
6.15
5.91
5.1 @
11.4
1.0
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 financial figures have been adjusted following the adoption of Singapore Financial Reporting Standards (International). 2014 to 2016 financial figures were prepared in
accordance with Singapore Financial Reporting Standards and certain amounts have been reclassified for comparability purpose.
Includes the special dividend paid of 5.0 cents per share.
@
220
Other Information
Shareholding Statistics
As at 5 March 2019
Issued and Fully paid-up capital (including Treasury Shares) : $1,291,720,897.98
Issued and Fully paid-up capital (excluding Treasury Shares) : $1,281,221,788.97
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
: 1,817,009,407
: 1,384,773 (0.08%)
: 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
DBSN Services Pte Ltd
HSBC (Singapore) Nominees Pte Ltd
United Overseas Bank Nominees Pte Ltd
Raffles Nominees (Pte) Limited
BPSS Nominees Singapore (Pte.) Ltd.
OCBC Nominees Singapore Pte Ltd
OCBC Securities Private Ltd
Shanwood Development Pte Ltd
Phillip Securities Pte Ltd
UOB Kay Hian Pte Ltd
DB Nominees (Singapore) Pte Ltd
Maybank Kim Eng Securities Pte. Ltd.
BNP Paribas Nominees Singapore Pte Ltd
Chen Chun Nan
Societe Generale S’pore Branch
DBS Vickers Securities (S) Pte Ltd
CGS-CIMB Securities (Singapore) Pte Ltd
Total
No. of
Shareholders
173
16,580
45,252
9,838
29
%
0.24
23.07
62.96
13.69
0.04
No. of
Shares
5,924
13,500,831
178,205,142
298,075,370
1,327,222,140
%
0.00
0.74
9.81
16.41
73.04
71,872
100.00
1,817,009,407
100.00
No. of
Shares
371,408,292
314,398,607
226,126,815
113,271,708
88,578,995
51,958,823
49,073,283
30,281,441
13,493,272
9,085,641
7,040,000
6,126,521
5,886,625
5,248,353
3,774,906
3,625,575
3,618,100
3,427,365
3,285,400
3,151,583
%
20.44
17.30
12.45
6.23
4.87
2.86
2.70
1.67
0.74
0.50
0.39
0.34
0.32
0.29
0.21
0.20
0.20
0.19
0.18
0.17
1,312,861,305
72.25
Substantial Shareholders (as shown in the Register of Substantial Shareholders)
Temasek Holdings (Private) Limited 2
371,408,292
20.44
13,780,895
0.75
385,189,187
21.19
Direct Interest
Deemed Interest
Total Interest
No. of Shares
%
No. of Shares
%
No. of Shares
%
Notes:
1
2
”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 14,774,336 shares in which its subsidiaries and associated companies have direct or deemed interests.
Public Shareholders
Based on the information available to the Company as at 5 March 2019, approximately 78% 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.
Keppel Corporation Limited Report to Shareholders 2018
221
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 51st Annual General Meeting of the Company will be held at Suntec Singapore Convention and Exhibition
Centre, Nicoll 1-3, Level 3, 1 Raffles Boulevard Suntec City, Singapore 039593 on Tuesday, 23 April 2019 at 3.00 p.m. to transact the following
business:
Ordinary Business
1.
2.
3.
4.
5.
6.
To receive and adopt the Directors’ Statement and Audited Financial Statements for the year ended 31 December
2018.
Resolution 1
To declare a final tax-exempt (one-tier) dividend of 15.0 cents per share for the year ended 31 December 2018 (2017:
final tax-exempt (one-tier) dividend of 14.0 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) Mr Alvin Yeo
(ii) Mr Tan Ek Kia
(iii) Mr Loh Chin Hua
To re-elect Prof Jean-François Manzoni, whom being appointed by the board of Directors after the last annual general
meeting of the Company, will retire in accordance with Regulation 82(a) of the Constitution and who, being eligible,
offers himself for re-election (see Note 3).
Resolution 3
Resolution 4
Resolution 5
Resolution 6
To approve the sum of S$2,218,222 as Directors’ fees for the year ended 31 December 2018 (2017: S$2,191,000) (see
Note 4).
Resolution 7
To re-appoint PricewaterhouseCoopers LLP as the auditors of the Company, and authorise the Directors to fix their
remuneration.
Resolution 8
Special Business
To consider and, if thought fit, approve with or without any modifications, the following ordinary resolutions:
7.
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 9
(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;
222
Other Information
provided that:
(i)
(ii)
(iii)
(iv)
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 is required by law to be held, whichever is the earlier (see Note 5).
8.
That:
(1)
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”);
(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;
Resolution 10
Keppel Corporation Limited Report to Shareholders 2018
223
Notice of Annual General Meeting & Closure of Books
(3)
in this Resolution:
“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;
“Maximum Limit” means that number of issued Shares representing two (2) 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 two (2) per cent. limit;
“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
shall not exceed, whether pursuant to a Market Purchase or an Off-Market Purchase, 105 per cent. of the
Average Closing Price;
“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; and
“subsidiary holdings” has the meaning given to it in the Listing Manual; 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).
9.
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 11
224
Other Information
NOTICE IS ALSO HEREBY GIVEN THAT:
(a)
(b)
the Share Transfer Books and the Register of Members of the Company will be closed on 30 April 2019 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 30 April 2019
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 30 April 2019 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 2019; and
the electronic copy of the Company’s Annual Report 2018 will be published on the Company’s website on 1 April 2019.
The Company’s website address is http://www.kepcorp.com, and the electronic copy of the Annual Report 2018 can
be viewed or downloaded from the annual report microsite at www.kepcorp.com/annualreport2018/. To download the
electronic copy of the Annual Report 2018, 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, 1 April 2019
Keppel Corporation Limited Report to Shareholders 2018
225
Notice of Annual General Meeting & Closure of Books
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 on pages 22 to 25 and 93 to 94 of the Company’s Annual Report for the financial year ended 31 December 2018 (“Annual
Report 2018”).
Mr Alvin Yeo will, upon his re-election, continue to serve as a member of the Audit Committee and Nominating Committee. Mr Alvin Yeo is the Chairman and Senior Partner
of WongPartnership LLP, a member of the Monetary Authority of Singapore’s advisory panel to advise the Minister of Finance on appeals under various financial services
legislation, the Court of the Singapore International Arbitration Centre, the Singapore Medical Council’s Panel of Disciplinary Tribunal Chairmen, and the Panel of Disciplinary
Tribunal Chairmen of the Supreme Court of Singapore, as well as a Fellow of the Singapore Institute of Arbitrators. He is also a director and chairman of the remuneration
committee of United Industrial Corporation Limited and a director of United Overseas Bank Limited.
Mr Tan Ek Kia will, upon his re-election, continue to serve as the Chairman of the Board Safety Committee and member of the Board Risk Committee and Audit Committee.
Mr Tan is a seasoned executive in the oil and gas and petrochemicals business. Prior to his retirement as the Vice President (Ventures and Developments) of Shell Chemicals,
Asia Pacific and Middle East region (based in Singapore) in September 2006, Mr Tan held senior positions in Shell including Managing Director (Exploration and Production)
of Shell Malaysia, Chairman of Shell North East Asia and Managing Director of Shell Nanhai Ltd (both based in Beijing, China). His other directorships include Transocean Ltd,
KrisEnergy Ltd (Chairman), PT Chandra Asli Petrochemical Tbk, SMRT Corporation Ltd, Star Energy Group Holdings Pte Ltd (Chairman), Singapore LNG Corporation Pte Ltd
and Dialog Systems (Asia) Pte Ltd.
Mr Loh Chin Hua will, upon his re-election, continue to serve as a member of Board Safety Committee. Mr Loh is currently the Chief Executive Officer of the Company, after
having served as its Chief Financial Officer from 1 January 2012 to 1 January 2014, playing a pivotal role in all its major investment initiatives and financial decisions as well
as shaping the Group’s business strategy. Mr Loh has over 30 years of experience in real estate investing and fund management spanning the United States of America,
Europe and Asia. He joined the Keppel Group in 2002 as the Managing Director of Alpha Investment Partners Ltd. Prior to this, he was the Managing Director at Prudential
Investment Inc leading its Asian real estate fund management business and overseeing all investment and asset management for the real estate funds managed out of Asia.
Mr Loh began his career with the Government of Singapore Investment Corporation, where he held key appointments in its San Francisco and London office.
Prof Jean-François Manzoni will, upon his re-election, continue to serve as a member of the Board Risk Commitee. Prof Manzoni is currently the President (Dean) and Nestlé
Professor at the International Institute for Management Development (IMD) in Switzerland, where he is based. Prior to re-joining IMD in 2016, he had served at INSEAD’s
Singapore campus where he co-directed the International Directors Program. He was also on the faculty of INSEAD (Fontainebleau), where he founded and directed the
PwC Research Initiative on High Performance Organisations. Prof Manzoni is the recipient of several awards for excellence in research and teaching, and has been involved
in consulting, top management team support and leadership development with several international organisations, spanning more than 30 countries over the years. Prof
Manzoni is a member of the International Advisory Panels of Digital Switzerland, Singapore’s Public Service Division and the Russian Presidential Academy of National
Economy and Public Administration. He is a Fellow of the Singapore Institute of Directors, and served on the Board of Singapore’s Civil Service College from 2015 to 2017.
Prof Manzoni also sits on the board of AACSB International, the world’s largest business education alliance.
Mr Alvin Yeo, Mr Tan Ek Kia and Prof Jean-François Manzoni are considered by the board of Directors to be independent Directors. Please see pages 23 and 25 of the Annual
Report 2018.
4.
Resolution 7 is to approve the payment of an aggregate sum of S$2,218,222 as Directors’ fees for the non-executive Directors of the Company for FY2018. The fees include
pro-rated fees payable to Prof Jean-François Manzoni, who was appointed as a non-executive and independent Director of the Company on 1 October 2018.
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 80 of the Annual Report 2018.
The non-executive Directors will abstain from voting, and will procure that their respective associates abstain from voting, in respect of this Resolution.
Resolution 9 is to empower the Directors from the date of this annual general meeting until the date of the next annual general meeting to issue 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 9 is passed, and any subsequent bonus issue, consolidation or sub-division of Shares.
Resolution 10 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 20 April 2018. At this annual general meeting, the Company is seeking a lower “Maximum Limit” of 2 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 11 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 a proxy(ies), 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 the preparation and compilation of the attendance lists, minutes and other documents relating to 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 by the Company (or
its agents or service providers) of the personal data of such proxy(ies) and/or representative(s) for the Purposes.
5.
6.
7.
8.
226
Other Information
Corporate Information
Board of Directors
Lee Boon Yang (Chairman)
Loh Chin Hua (Chief Executive Officer)
Tow Heng Tan
Alvin Yeo
Tan Ek Kia
Danny Teoh
Tan Puay Chiang
Till Vestring
Veronica Eng
Jean-François Manzoni
Audit Committee
Danny Teoh (Chairman)
Alvin Yeo
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 Ek Kia
Jean-François Manzoni
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
Public Accountants and Chartered
Accountants
7 Straits View
Marina One East Tower
Level 12
Singapore 018936
Audit Partner: Yeoh Oon Jin
Year appointed: 2018
Keppel Corporation Limited Report to Shareholders 2018
227
31 December 2018
19 April 2018
19 July 2018
18 October 2018
24 January 2019
1 April 2019
23 April 2019
5.00 p.m., 30 April 2019
10 May 2019
31 December 2019
April 2019
July 2019
October 2019
January 2020
Financial Calendar
FY2018
Financial year-end
Announcement of 2018 1Q results
Announcement of 2018 2Q results
Announcement of 2018 3Q results
Announcement of 2018 full year results
Despatch of Annual Report to Shareholders
Annual General Meeting
2018 Proposed final dividend
Books closure date
Payment date
FY2019
Financial year-end
Announcement of 2019 1Q results
Announcement of 2019 2Q results
Announcement of 2019 3Q results
Announcement of 2019 full year results
228
Other Information
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 1 April 2019.
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
%
.
d
e
w
o
l
l
i
a
s
d
e
r
a
g
n
i
l
a
e
s
t
o
p
s
d
n
a
g
n
i
l
p
a
t
S
l
.
y
m
r
i
f
s
e
d
s
i
l
l
a
e
u
G
l
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 and vote for me/us on my/our behalf at the Annual General Meeting of the Company (“AGM”) to be
held on Tuesday, 23 April 2019 at Suntec Singapore Convention and Exhibition Centre, Nicoll 1-3, Level 3, 1 Raffles Boulevard Suntec
City, Singapore 039593 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 *
l
G
u
e
a
l
l
i
s
d
e
s
f
i
r
m
y
.
l
S
t
a
p
l
i
n
g
a
n
d
s
p
o
t
s
e
a
l
i
n
g
a
r
e
d
s
a
i
l
l
o
w
e
d
.
Ordinary Business
1. Adoption of Directors’ Statement and Audited Financial Statements
Re-election of Prof Jean-François Manzoni as Director
2. Declaration of Dividend
3. Re-election of Mr Alvin Yeo as Director
4. Re-election of Mr Tan Ek Kia as Director
5. Re-election of Mr Loh Chin Hua as Director
6
7. Approval of fees to non-executive Directors
8. Re-appointment of Auditors
Special Business
9. Authority to issue shares and convertible instruments
10. Renewal of Share Purchase Mandate
11. 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 2019
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. 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.
5. 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
Black Sun Pte Ltd
K
e
p
p
e
l
C
o
r
p
o
r
a
t
i
o
n
L
i
m
i
t
e
d
T
r
a
n
s
f
o
r
m
i
n
g
t
o
D
e
l
i
v
e
r
R
e
p
o
r
t
t
o
S
h
a
r
e
h
o
l
d
e
r
s
2
0
1
8
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