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FORWARD
Report to Shareholders 2019
74 GOVERNANCE
Corporate Governance
Risk Management
Regulatory Compliance
113 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
211 OTHER INFORMATION
Interested Person Transactions
Key Executives
Major Properties
Group Five-Year Performance
Group Value-Added Statements
Share Performance
Shareholding Statistics
Corporate Information
Financial Calendar
74
106
110
114
119
129
130
131
132
135
138
201
211
212
217
222
226
227
228
229
230
VISION
A trusted global company building
a sustainable future.
MISSION
We deliver solutions for sustainable
urbanisation safely, responsibly
and profitably.
06 GROUP OVERVIEW
Key Figures
Group Financial Highlights
Global Presence
Chairman’s Statement
Interview with the CEO
Building a Sustainable Future
Eco-system for Value Creation
Sustainability Framework
Board of Directors
Keppel Group Boards of Directors
Keppel Technology Advisory Panel
Senior Management
Investor Relations
Significant Milestones
44 PERFORMANCE REVIEW
Operating & Financial Review
Offshore & Marine
Property
Infrastructure
Investments
Management Discussion & Analysis
Financial Review & Outlook
Group Structure
6
7
8
10
16
22
24
26
30
34
36
38
40
42
44
48
52
57
62
64
73
WE ARE BUILDING
A SUSTAINABLE
FUTURE FOR ALL
OUR STAKEHOLDERS.
Forward together as OneKeppel – we are creating a better tomorrow
by channelling our capabilities and collaborating across the Group
to provide solutions for sustainable urbanisation.
TOGETHER, WE
ARE SEIZING NEW
OPPORTUNITIES
THROUGH OUR
BUSINESS MODEL.
The Keppel difference lies in our ability to harness the Group’s diverse
capabilities to create value for stakeholders at different stages of the
value chain. Collaborating with one another, Keppel’s business units
open up opportunities that each may not have been able to capture alone.
Keppel DC Singapore 4, which was jointly developed by Alpha Data Centre
Fund and Keppel Data Centres and later injected into Keppel DC REIT, is a
prime example of how we create enduring value by developing, owning,
operating, and then monetising and managing real assets when they mature.
We are replicating this business model in our property, data centres, and
more recently, energy and sustainable infrastructure businesses, having
launched the Keppel Asia Infrastructure Fund (KAIF) in January 2020.
$515m
In total earnings generated by
our data centre business from 2014
to 2019, through the collaboration of
Keppel Data Centres and Keppel Capital.
US$360m
Worth of initial capital commitments
received from investors of the KAIF,
which has a target size of US$1 billion.
Keppel plans to inject its interest in
the Gimi Floating Liquefied Natural Gas
facility, which is being converted by
Keppel Offshore & Marine, as a seed
asset for the Fund.
For more information on our eco-system for value creation, please refer to page 24.
2
Report to Shareholders 2019
Keppel Corporation Limited
Keppel Corporation Limited
Report to Shareholders 2019
3
TOGETHER, WE
ARE BUILDING
A SUSTAINABLE
FUTURE FOR ALL.
We are making sustainability our business, through creating diverse
solutions which are good for the planet, for people and for Keppel.
Committed to doing our part to combat climate change, we have
defined the businesses we will avoid, maintain or focus on, based
on their environmental impact, and will apply an internal carbon price
in the evaluation of all major investments.
We have set targets to reduce our carbon emissions, waste generation
and water consumption, and also established Keppel Renewable Energy
in 2019 to explore opportunities in renewable energy infrastructure.
Anchored by strong corporate stewardship, we create a positive impact
wherever we operate.
AAA Rating
1st
On 1 January 2020, Keppel Bay Tower,
where Keppel is headquartered, became
Singapore’s first commercial development
to be fully powered by renewable energy.
Keppel Corporation was upgraded to
the highest rank in the Morgan Stanley
Capital International (MSCI) environmental,
social and governance (ESG) ratings.
The Company ranks among the top 11%
of industrial conglomerates in the MSCI All
Country World Index, based on ESG criteria,
and is an ESG leader in the areas of
corporate governance, labour management
and opportunities in clean technology.
For more information on our sustainability framework, please refer to page 26.
4
Report to Shareholders 2019
Keppel Corporation Limited
Keppel Corporation Limited
Report to Shareholders 2019
5
GROUP OVERVIEW
KEY FIGURES
Revenue
$7.6b
Net Profit
$707m
Increased 27% from FY 2018’s $6.0 billion.
Offshore & Marine, Infrastructure and Investments divisions
registered higher revenues during FY 2019.
Decreased 25% from FY 2018’s $948 million#.
The decrease was mainly due to lower gains from en-bloc
sales and divestments. All divisions were profitable in FY 2019.
Return on Equity
6.3%
Earnings Per Share
$0.39
Decreased by 2.1 percentage points from FY 2018’s 8.4%#.
Return on Equity decreased mainly due to lower net profit.
Decreased 26% from FY 2018’s $0.52 per share#.
This was mainly due to decrease in the net profit.
Cash Dividend Per Share
20.0cts
Decreased 33% from FY 2018’s cash dividend of 30.0 cents
per share.
Total distribution for FY 2019 comprises a proposed final
cash dividend of 12.0 cents per share and an interim cash
dividend of 8.0 cents per share. FY 2018’s distribution included a
special dividend of 5.0 cents per share for Keppel's 50th anniversary.
Net Asset Value Per Share
$6.17
Decreased 1% from FY 2018’s $6.22 per share.
Net Gearing Ratio
0.85x
Free Cash Outflow^
$653m
Increased from FY 2018’s net gearing of 0.48x.
Net gearing increased mainly due to borrowings drawn
down for the acquisition of M1 and the privatisation of
Keppel Telecommunications & Transportation, recognition of
lease liabilities and higher working capital requirements.
Compared to FY 2018’s inflow of $515 million.
This was mainly due to higher working capital requirements
and lower proceeds from en-bloc sales.
Employee Engagement
86%
Workplace Safety and Health Awards
18 Awards
An increase from the 82% achieved in 2017.
The highest number of awards won by a single organisation
in 2019.
Social Investments
$9.6m
Invested in social causes in 2019.
Beneficiaries
>3,500
Beneficiaries whose lives have been touched by
Keppel Volunteers in 2019.
# The 2018’s financial figures have been restated due to an IFRIC agenda decision on SFRS(I) 1-23 Borrowing costs eligible for capitalisation.
^
Free cash flow excludes expansionary acquisitions and capital expenditure, and major divestments.
6
Report to Shareholders 2019
Keppel Corporation Limited
GROUP OVERVIEW
GROUP FINANCIAL HIGHLIGHTS
GROUP QUARTERLY RESULTS ($ million)
1Q
2Q
2019
3Q
4Q
Total
1Q
2Q
2018#
3Q
4Q
Total
Revenue
EBITDA
Operating profit
Profit before tax
Attributable profit
Earnings per share (cents)
1,531
1,784
2,067
2,198
389
322
283
203
11.2
262
160
206
153
8.4
289
183
227
159
8.8
312
212
238
192
10.5
7,580
1,252
877
954
707
38.9
1,470
1,523
1,295
1,677
532
486
448
337
18.6
324
280
298
249
13.7
326
283
334
227
12.5
55
6
165
135
7.5
5,965
1,237
1,055
1,245
948
52.3
For the year ($ million)
Revenue
Profit
EBITDA
Operating
Before tax
Net profit
Operating cash (outflow)/inflow
Free cash (outflow)/inflow^
Economic value added
Per share
Earnings ($)
Net assets ($)
Net tangible assets ($)
At year-end ($ million)
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 (%)
2019
2018#
% Change
7,580
1,252
877
954
707
(825)
(653)
188
0.39
6.17
5.25
11,211
435
11,646
9,874
0.85
7.9
6.3
8.0
0.0
12.0
20.0
6.77
18.5
5,965
1,237
1,055
1,245
948
125
515
263
0.52
6.22
6.15
11,268
309
11,577
5,567
0.48
10.8
8.4
10.0
5.0
15.0
30.0
5.91
(16.4)
27
1
-17
-23
-25
n.m.
n.m.
-29
-26
-1
-15
-1
41
1
77
77
-27
-25
-20
n.m.
-20
-33
15
n.m.
# The 2018’s financial figures have been restated due to an IFRIC agenda decision on SFRS(I) 1-23 Borrowing costs eligible for capitalisation.
^ Free cash flow excludes expansionary acquisitions and capital expenditure, and major divestments.
n.m. = Not meaningful
Keppel Corporation Limited
Report to Shareholders 2019
7
GROUP OVERVIEW
GLOBAL PRESENCE
5
3
Total FY 2019 Revenue
$7.6b
Markets outside of Singapore
contributed about 42% of the
Group’s revenue for FY 2019.
1
ASIA
•
•
•
•
China
India
Indonesia
Japan
• Malaysia
• Myanmar
•
•
•
•
Philippines
Singapore
South Korea
Vietnam
2
4
$5,825m
AUSTRALIA &
NEW ZEALAND $196m
3
MIDDLE EAST
$134m
• Qatar
•
United Arab Emirates
EUROPE
$456m
5
•
•
Belgium
Bulgaria
• Germany
•
•
Italy
Ireland
NORTH AMERICA $815m
•
United States
6
SOUTH AMERICA $154m
• Netherlands
•
United Kingdom
•
Brazil
6
4
1
2
8
Report to Shareholders 2019
Keppel Corporation Limited
Keppel Corporation Limited
Report to Shareholders 2019
9
GROUP OVERVIEW
CHAIRMAN’S STATEMENT
WE ARE LEVERAGING THE
GROUP’S CAPABILITIES TO
PROVIDE SOLUTIONS FOR
SUSTAINABLE URBANISATION.
DEAR SHAREHOLDERS,
2019 was a volatile year, marked by slowing
global growth, trade tensions among the
world’s largest economies and heightened
geopolitical risks. Since January 2020,
the international community has also
been seized with the Coronavirus Disease
2019 (COVID-19) outbreak, which the
World Health Organisation has declared
as a public health emergency of
international concern.
2019 was also a year of escalating focus
on climate change, and consensus about
the urgent need for action.
Sustainability is core to Keppel’s strategy.
It is reflected not just in the way we manage
environmental, social and governance (ESG)
issues, but also how we leverage the
Group’s capabilities and resources to
provide practical solutions for sustainable
development, whether in terms of meeting
energy needs, or providing various urban,
environmental or connectivity solutions.
The last few years have been transformative
for Keppel as the board and management
worked hard to build a more resilient and
sustainable company, committed to
delivering value and growth into the future.
The Group’s corporate structure has been
simplified with the privatisation of our
operating entities, starting with Keppel Land,
followed by Keppel Telecommunications &
Transportation (Keppel T&T) and M1, thus
allowing more efficient capital allocation.
Backed by strong demand for high-quality
homes, Keppel Land sold 950 homes in
Ho Chi Minh City in 2019. (In picture:
Artist’s impression of Empire City)
10 Report to Shareholders 2019
Keppel Corporation Limited
We have also consolidated our asset
management businesses under
Keppel Capital, which serves both as a
platform for capital recycling and tapping
third-party funds for growth. We have been
deepening our presence in rapidly urbanising
markets such as China and Vietnam, and
expanding our products and offerings, with
smart, urban projects, renewables, gas
solutions, asset management and digital
connectivity among our new growth engines.
We have also been actively promoting
collaboration among our business
units to harness synergies and seize
opportunities that each unit might not
be able to tap on its own. Our long-term
goal is for Keppel to be one integrated
business, pursuing our common
mission of providing solutions for
sustainable urbanisation.
RESILIENT PERFORMANCE
AMID UNCERTAINTY
Against a challenging operating environment,
Keppel has performed creditably.
For FY 2019, Keppel Corporation made
a net profit of $707 million, with improved
performance from Keppel Offshore & Marine
(Keppel O&M), Keppel Infrastructure and
Keppel Capital. Our net profit was lower
year-on-year, as Keppel Land had benefitted
from a few lumpy divestments and en-bloc
sales in 2018. The Group’s Return on Equity
was 6.3%.
The Board of Directors has proposed a final
cash dividend of 12.0 cents per share for
FY 2019. Together with the interim cash
dividend of 8.0 cents per share, we will be
paying out a total cash dividend of 20.0
cents per share to shareholders for the
whole of 2019. This is a payout ratio of
51% of our net profit.
PROPERTY
Urbanisation trends in Asia continue to drive
demand for the quality urban living solutions
that we provide.
In 2019, Keppel Land sold about
5,150 homes, an increase of 16%
compared to the 4,440 homes sold
in 2018, with a total sales value of about
$3.2 billion. Despite concerns about slowing
economic growth in China, we continued
to see healthy demand for homes in the
cities where we operate. Our total home
sales in both China and Singapore grew
by more than 50% year-on-year, while
contributions from our property business
in Vietnam have been growing steadily.
With a view to growing our property
business in key growth markets,
LEE BOON YANG
Chairman
we completed nine acquisitions totalling
about $0.5 billion across China, Vietnam
and India in 2019. We have also broken
ground for the 64-hectare Saigon Sports
City in the prime District 2 of Ho Chi Minh
City, which Keppel Land and Keppel Urban
Solutions are collaborating to develop into
a smart, integrated township.
Our residential landbank stood at about
45,000 homes as at end-2019, with more
than 17,000 homes in key Asian cities
which will be launch-ready from 2020
to 2022. In our commercial portfolio,
Keppel Land has about 1.6 million square
metres of gross floor area, of which about
half is under development.
OFFSHORE & MARINE
The offshore and marine (O&M) business
remains challenging. While there are signs
of recovery, with improving utilisation and
dayrates, it would take time for this to
translate into new orders, especially for
jackup rigs, which continue to be over supplied.
Despite the challenging operating
environment, Keppel O&M secured more
than $2 billion in new orders in 2019,
an increase of 18% year-on-year. Our
diversification strategy has borne fruit, with
gas and offshore renewables making up
over 60% of new orders. Significantly,
Keppel O&M secured new contracts worth
about $720 million for offshore wind
projects in the German sector of the
North Sea and Taiwan.
Keppel Corporation Limited
Report to Shareholders 2019
11
GROUP OVERVIEW
CHAIRMAN’S STATEMENT
Keppel O&M has expanded its capabilities
in the offshore wind sector, securing
new contracts worth about $720 million
for related projects in the German sector
of the North Sea and Taiwan.
We also secured over 100 scrubber and
ballast water treatment system retrofit
projects, as shipowners sought to meet the
IMO 2020 requirements on the sulphur
content of marine fuel, as well as the
standards set out by the Ballast Water
Management Convention. Keppel O&M’s
orderbook stood at $4.4 billion as at
end-2019.
in the oil and gas production market.
Keppel O&M is also developing rigs of the
future, leveraging digitalisation and analytics
to enhance the efficiency and versatility
of our rigs, as well as yards of the future
by incorporating robotics and artificial
intelligence into our manufacturing process
to ensure that we remain at the forefront
of the industry.
In 2019, Keppel O&M continued to focus
on execution, delivering 13 newbuild and
conversion projects. Keppel O&M also
reached a Settlement Agreement with
Sete Brasil (Sete) in Brazil, bringing closure
to the outstanding contracts for the six
Sete rigs. The agreement will become
effective upon the fulfilment of certain
conditions precedent.
On the back of our improved topline,
robust cost management efforts and
lower impairment provisions, Keppel O&M
made a profit of $10 million in 2019,
reversing the loss of $109 million in 2018.
This is the first time that our O&M Division
has returned to profitability since 2016.
Looking ahead, we will continue to seek
opportunities in renewables, as well as
INFRASTRUCTURE
The Infrastructure business continues
to contribute steadily to the Group’s
earnings with its project development,
engineering, as well as operations and
maintenance expertise.
The Keppel Marina East Desalination Plant
in Singapore is scheduled to commence
operations in 1H 2020, while the Hong Kong
Integrated Waste Management Facility is
progressing well and has been contributing
to the Group’s bottomline.
Keppel Infrastructure also expanded into
new markets and invested in new technology,
including taking stakes in the MET Group,
an integrated European energy company,
and Zerowaste Asia, which provides
environmental solutions in industrial waste
12 Report to Shareholders 2019
Keppel Corporation Limited
and wastewater treatment. Zerowaste
Asia’s proprietary technology will enhance
our position as a leading provider of
environmental solutions, allowing us to
contribute further to a circular economy
through the treatment and recycling of
residual waste.
Keppel Electric is also one of the largest
Open Electricity Market retailers, with
26% market share of residential consumers
as of December 2019.
The data centre business is an important
growth engine for Keppel. During the year,
we increased the Group’s portfolio to
25 data centres, including four which are
under development. The Alpha Data Centre
Fund and Keppel Data Centres also divested
Keppel DC Singapore 4 to Keppel DC REIT.
Beyond revaluation and divestment gains,
we will continue to earn recurring income
from the operation and maintenance of the
data centre, as well as asset management
fees. This is a good illustration of how the
Keppel Group creates value and earns
different income streams through the
life cycles of the assets that we build,
operate, maintain and manage.
Tapping rapid urbanisation in Asia
and the growing e-commerce trends,
we continue to grow our urban
logistics business, including providing
comprehensive omnichannel logistics
and e-commerce solutions. To streamline
its operations and better allocate resources,
Keppel T&T has divested its stakes in
logistics facilities and operations in
Foshan and Hong Kong.
INVESTMENTS
2019 was an active year for Keppel Capital,
with its assets under management growing
by 14% from $29 billion to $33 billion as
at end-2019.
Further expanding its asset classes,
Keppel Capital established a joint debt
mezzanine platform together with
Pierfront Capital. Keppel Capital
also became a strategic investor in
Prime US REIT, which was successfully
listed in July 2019. Earlier this year,
Keppel Capital also launched the
Keppel Asia Infrastructure Fund, a new
closed-end infrastructure private equity
fund, to seize opportunities in the
fast-growing energy and sustainable
infrastructure sectors. Investors are
attracted not just by the asset management
capabilities of Keppel Capital, but also
the Keppel Group’s business model and
ability to develop, operate and maintain
specialised assets.
In October 2019, we were honoured to
welcome Singapore’s Deputy Prime Minister
Heng Swee Keat to the Sino-Singapore
Tianjin Eco-City (Eco-City), which is growing
steadily as a model for sustainable
development, with over 100,000 residents
and 8,800 registered companies.
Our joint venture master developer,
the Sino-Singapore Tianjin Eco-City
Investment and Development Co., Ltd.
(SSTEC), continues to actively drive the
growth of the Eco-City, including through
the development of certain land plots
by SSTEC, and the sale of others to
third-party developers.
Investors are attracted not just by the asset
management capabilities of Keppel Capital,
but also the Keppel Group’s business model
and ability to develop, operate and maintain
specialised assets.
Following the successful privatisation
of M1 in 2019, Keppel, together with
Singapore Press Holdings, has been
working with M1’s board and management
to transform and grow the company.
We have begun to see the results of our
efforts, with M1 growing its postpaid
customer base by about 11% as at
end-2019, despite a challenging
operating environment.
M1 has also been making significant
headways in 5G developments, including
embarking on 5G research and trials with
universities in Singapore, and working
with Singapore government agencies and
other partners to co-develop use cases to
deliver the full potential of 5G technology.
More recently, M1 and StarHub have
submitted a joint bid for a 5G licence.
We see M1 as a key pillar of Keppel’s
connectivity business. It is an enabler
which links and enhances our various
other businesses such as our smart
districts and buildings, data centres,
yards and vessels. We have already
seen many examples of collaboration
between M1 and Keppel’s other
businesses. For example, Keppel O&M
and M1 are working with the
Maritime and Port Authority of Singapore
to testbed Maritime Autonomous
Surface Ships, while Keppel Data Centres
is collaborating with M1 to widen
its data centre capabilities and
offerings. We will continue to
deepen the collaboration between
M1 and the rest of the Group
to further enhance our solutions for
sustainable urbanisation.
Keppel Corporation Limited
Report to Shareholders 2019
13
GROUP OVERVIEW
CHAIRMAN’S STATEMENT
FORWARD TOGETHER
In the first half of 2019, we commenced
an exercise to develop the Company’s
Vision 2030. We brought together a group
of younger Keppel business leaders to
tap their insights and also create more
opportunities for them to network and
collaborate to take the company forward.
The recommendations that arose from this
process will be taken on board as we chart
the Company’s Vision 2030, including interim
targets for 2025. We will share more on our
Vision 2030 when it is finalised later this year.
We will do our part to combat climate
change, including introducing an
internal carbon price in the evaluation
of major investment decisions.
As we prepare ourselves for a more
volatile future characterised by accelerating
change, we are also deepening our focus
on innovation. To this end, we have been
strengthening the Group’s digital capabilities
and tapping the start-up eco-system to gain
access to emerging trends and creative
new solutions.
SUSTAINABILITY MATTERS
During the year, the Board reviewed the
Company’s material ESG issues and
strengthened our focus on cyber security
and data protection, as well as climate
action. Environmental sustainability has
been woven into the performance appraisal
of senior management across the Group.
We have defined the businesses that we will
not pursue, such as coal-fired plants, those
that we will maintain, and those we will
grow, taking into account their respective
environmental impacts. We have also set
targets to reduce carbon emissions, waste
generation and water consumption, and
invest in renewable energy generation.
We will do our part to combat climate
change, including introducing an internal
carbon price in the evaluation of major
investment decisions. At the same time,
we have established a new business unit,
Keppel Renewable Energy, to pursue
opportunities for Keppel as a developer,
owner and operator of renewable
energy infrastructure.
Accountability is one of our core values and
we are committed to upholding the highest
standards of corporate governance and
regulatory compliance. In 2019, Keppel O&M
became one of the first companies in
Singapore to achieve global ISO 37001
anti-bribery certification. We will work
progressively towards ISO 37001 certification
for all other Keppel business units.
We are committed to safety in our global
operations. In 2019, the Keppel Group
clinched 18 awards at the Workplace
Safety and Health Awards in Singapore –
the highest number of awards won by a
single organisation in the year. We also
achieved our goal of zero fatalities across
the Group, the first time in over 25 years.
We will continue to do our best to ensure
that at all our work places, everyone goes
home safe, every day.
Keppel seeks to make a positive impact on
the community, wherever we operate,
whether it is through caring for the
underprivileged, protecting the environment
or supporting education and the arts.
Keppelites contributed a total of over
18,000 volunteer hours during the year,
surpassing the target of 10,000 hours. We
also contributed $9.6 million to social causes.
We are glad to see Keppel’s commitment
to sustainability gain recognition with
Morgan Stanley Capital International (MSCI)
upgrading Keppel Corporation to their
highest triple-A ESG rating in February
this year.
In October 2019, Temasek announced
a voluntary pre-conditional partial offer to
acquire an additional 30.55% of shares
in Keppel Corporation. If the partial offer
is successful, it will result in Temasek
and the offeror owning an aggregate 51%
of Keppel. While we are not able to
comment on the pre-conditional partial
offer, we believe that there is long-term
value in Keppel’s businesses, a view which
Temasek shares.
14 Report to Shareholders 2019
Keppel Corporation Limited
Madam Halimah Yacob, President of
the Republic of Singapore (seated, centre),
witnessed the launch of Keppel’s
partnership with SPD to support its
sheltered workshop programme for
persons with disabilities. She was
accompanied by Keppel Corporation’s
Chairman Dr Lee Boon Yang (standing,
leftmost) and CEO, Mr Loh Chin Hua
(standing, third from left), and senior
management from the Keppel Group.
Volunteer hours
>18,000 hrs
Contributed by Keppelites in
2019, surpassing the target of
10,000 hours.
ACKNOWLEDGEMENTS
We are pleased to welcome
Mr Teo Siong Seng, Mr Tham Sai Choy
and Mrs Penny Goh as independent
directors, further bolstering the
diverse capabilities and strengths
of the Board.
Mr Teo’s extensive business experience
and network will help Keppel to better
navigate and seize opportunities amidst
a challenging global environment, while
the Group will benefit from Mr Tham’s
extensive experience in developing global
strategies on cyber security and data
analytics, as well as corporate governance.
We also welcome Mrs Goh’s depth of
experience in providing strategic legal
counsel to corporates and her guidance
on best practices.
We would like to thank non-executive and
non-independent director, Mr Tow Heng Tan,
and non-executive independent director,
Mr Tan Puay Chiang, who stepped down
from the Board with effect from
1 November 2019. We are grateful
to Mr Tow for his over 15 years of
distinguished service and wise guidance,
and also to Mr Tan, whose
extensive experience and in-depth
understanding of the energy
business helped to chart Keppel’s
growth over the years.
My appreciation also goes to my fellow
directors for their commitment and
insightful counsel. I am also grateful
to our many partners and stakeholders
for their continued confidence in Keppel.
Last but not least, I commend Keppelites
in all our operations globally for their
unwavering commitment and passion
to propel Keppel forward together on
our growth trajectory.
Yours sincerely,
LEE BOON YANG
Chairman
27 February 2020
Keppel Corporation Limited
Report to Shareholders 2019
15
GROUP OVERVIEW
INTERVIEW WITH THE CEO
WE ARE COLLABORATING AND
HARNESSING SYNERGIES AS
ONEKEPPEL TO CREATE GREATER
VALUE FOR OUR STAKEHOLDERS.
Q How is Keppel’s progress towards
its Vision 2020, which was adopted
six years ago?
A We have made good progress
towards Vision 2020, which includes
comprehensive targets related to
financial performance, people,
processes and stakeholders.
The past few years have been an
exciting journey of transformation
and growth, as we steered the Group
through a difficult macro environment,
especially following the sharp downturn
in the oil and gas sector. The world
today is characterised by slowing
global growth, trade tensions and
growing geopolitical risks. Since the
start of the year, many countries
have also been affected by the
COVID-19 outbreak, whose full impact
is still unfolding.
Against a challenging backdrop, the
Group has remained resilient, united
behind our common mission to provide
solutions for sustainable urbanisation.
In FY 2019, earnings contributions
across Keppel Offshore & Marine
(Keppel O&M), Keppel Infrastructure
and Keppel Capital grew, even though
net profit of $707 million at Group-level
was lower year-on-year, mainly because
our property business had benefitted
from a few lumpy divestments and
en-bloc sales in 2018. Excluding such
gains from both years, Keppel Land too,
fared slightly better in 2019 than it did
in 2018.
We have strengthened processes
within the Group. Compliance,
controls and risk management are
now well entrenched in our corporate
culture. In 2019, Keppel O&M became
one of the first companies in
Singapore to achieve global ISO 37001
anti-bribery certification. We will work
progressively towards ISO 37001
certification for all other Keppel
business units.
We have developed a common digital
spine running through the organisation
that will enable us to further enhance
process automation and continuous
monitoring across IT, finance and
human resources.
We have also made good progress
in safety – one of Keppel’s core values.
For the first time in over 25 years,
we achieved zero fatalities across
our global operations in 2019. This is
not only a significant milestone, but also
an impetus for us to work even harder
to maintain this record and ensure that
everyone who comes to work goes
home safe.
In 2019, Keppel was named one of
the world’s best regarded companies
and best employers by Forbes’ Global
2000 rankings. I am encouraged that
our employee engagement score
has risen steadily from 80% in 2015
to 86% in 2019, 10 percentage
points higher than the average
score among Singapore companies.
We have also deepened our bench
strength and enhanced succession
planning with an average of two
successors for each key position
in the Group.
We will continue to make Keppel
a great place to work, offering
Keppelites purposeful and varied
careers, and developing them to
their full potential. I am confident
that the spirit and tenacity of
our people will stand us in good
stead to achieve the Group’s targets
and ambitions.
16 Report to Shareholders 2019
Keppel Corporation Limited
Q How successful have you been
at getting the business units to
collaborate with one another?
A We have worked hard in the last few
years to get our businesses to hunt as
a pack, with collaboration increasingly
becoming a part of our DNA.
A case in point is Keppel DC Singapore 4,
which was jointly developed by
Alpha Data Centre Fund and Keppel
Data Centres to meet the growing
demand for quality data centres in Asia.
When the asset was stabilised in 2019,
a 99% interest in the data centre was
injected into Keppel DC REIT. The Group
continues to earn recurring fees from
rendering asset management, operation
and maintenance services for the asset,
even after its injection.
More recently, Keppel Capital launched
the US$1 billion Keppel Asia Infrastructure
Fund (KAIF) in January 2020 to seize
opportunities in the fast-growing energy
and sustainable infrastructure sectors.
We plan to seed our interest in the
Gimi Floating Liquefaction Vessel
(FLNG) facility, which is being converted
by Keppel O&M, into the Fund. Keppel
O&M’s involvement in the Gimi project
was very helpful to Keppel Capital’s
fundraising efforts, which drew initial
capital commitments of US$360 million
from investors, including a sovereign
wealth fund and an endowment fund.
Another notable example is the
partnership between Keppel Land
and Keppel Urban Solutions (KUS)
to develop Saigon Sports City. In
November 2019, we broke ground
for the project, which will be developed
into a smart, integrated township in
the prime District 2 of Ho Chi Minh City
(HCMC). Saigon Sports City provides
an interesting platform where we can
involve other businesses in and beyond
the Group to co-create and test bed
innovative solutions and services.
These are just some examples where
different units are coming together
to create and capture value. Keppel is
more than just a property developer,
an offshore & marine (O&M) company,
or a provider of infrastructure solutions.
What differentiates Keppel is our ability
to integrate our diverse capabilities
to create value for stakeholders at
different stages of the value chain,
LOH CHIN HUA
Chief Executive Officer
and in the process, open up new
opportunities that each business unit
might not have been able to capture
on its own. We will continue to drive
such OneKeppel projects that involve
two or more business units. I am
confident that over time, our synergistic
efforts will show that OneKeppel is
much more than the sum of its parts.
Along the way, we will also increase the
magnitude and quality of our earnings,
with more recurring income.
Q What will it take for Keppel to
achieve its mid to long term Return
on Equity (ROE) target of 15%?
A To achieve Keppel’s full potential,
all our engines must be firing. We will
focus on improving the profits of our
various businesses, as well as turning
our assets and divesting non-core
businesses more quickly.
more than 45,000 homes, and we will
proactively explore opportunities to
unlock value.
We are also looking at how we can
better tap Keppel Land’s established
capabilities and regional presence to
earn fees and carried interest that can
generate higher returns in the property
business. For example, Keppel Land
and Keppel Capital are exploring how
they can work with investors, who are
seeking trusted partners, to explore
opportunities in Vietnam.
We achieved a significant milestone
in FY 2019 with Keppel O&M returning
to profitability for the first time
since FY 2016, on the back of its
diversification and cost management
strategy. Keppel O&M was also able to
find solutions for some of the stranded
rigs that it was saddled with over the
last few years.
Keppel Land and Keppel O&M presently
make up the largest part of our balance
sheet. For an asset-heavy business
such as Keppel Land’s, I believe that
12% is a realistic long-term ROE target,
considering that it had achieved an
average ROE of 14.3% over the last
decade. There is inherent potential in
Keppel Land’s sizeable landbank of
Meanwhile, businesses such as
Keppel Capital, Keppel Infrastructure,
Keppel Data Centres and M1 are already
achieving ROEs above 15% and with
relatively low gearing levels. M1 is being
transformed into a digital platform for
connectivity solutions, while Keppel
Capital’s and Keppel Infrastructure’s
contributions to the Group have been
growing steadily. Keppel Data Centres
Keppel Corporation Limited
Report to Shareholders 2019
17
GROUP OVERVIEW
INTERVIEW WITH THE CEO
Keppel O&M has commenced conversion
works on the Gimi, its second
FLNG project. During the year, Keppel
O&M also clinched 104 scrubber and
ballast water treatment systems retrofit
orders worth some $160 million on the
back of the IMO 2020 and Ballast Water
Management Convention requirements.
Looking ahead, we will focus on
capturing opportunities in oil production,
gas and renewables where we have
received active enquiries. We are
hopeful about winning a fair share of
projects in these sectors as we continue
to execute and deliver on our strategy.
Q The Singapore, China and
Vietnam markets have contributed
comparably to property earnings
in 2019. What are your plans for
these markets in the year ahead?
A The Singapore, China and Vietnam
markets have done well for us, collectively
underpinning a 16% increase in home
sales to 5,150 homes in 2019.
The Singapore market has been resilient
despite the property cooling measures.
At Keppel Bay, we have seen an increase
in units sold following the Government’s
announcements on the exciting
developments along the Greater
Southern Waterfront. Looking ahead,
we plan to launch 19 Nassim later in
2020, and will also consider launching
Plot 4 at Keppel Bay depending on
market conditions.
Despite the slowdown in the Chinese
economy, we continued to see healthy
demand in the cities where we operate.
Our home sales in China grew by more
than 50% year-on-year to 3,400 units
in 2019. During the year, Keppel Land
also deepened its commercial presence
in first-tier cities through acquisitions
across Beijing, Shanghai and Guangzhou.
In 2020, we will continue to watch
the Chinese market closely, especially
following the COVID-19 outbreak,
and time the release of our
2,600 launch-ready homes across
China accordingly.
Vietnam, where Keppel Land has been
present for about 30 years, is a bright
spot for us. Contributions from Vietnam
have grown steadily from just $10 million
in 2015 to $165 million or about 31% of
Keppel Land’s net profit in FY 2019.
We continue to see strong demand for
quality homes and commercial projects
in HCMC, underpinned by growing
affluence and urbanisation trends.
1
has also become more asset-light
through opportune and strategic
recycling of its assets and working with
Keppel Capital to attract co-investors.
Q Looking ahead, where do you see
most of the demand in the O&M
industry coming from?
When all our engines are firing, I am
confident that the Group would be able
to reach our target ROE of 15%.
Q Now that the Offshore & Marine
business has become profitable
again, how confident is Keppel
of improving on its performance
in 2020?
A Today, Keppel O&M is a more
resilient and agile company with the
competencies to serve a wider spectrum
of the offshore market, be it in gas,
renewables or floating infrastructure.
In 2019, Keppel O&M secured new orders
worth over $2 billion, far surpassing the
trough of about $440 million in 2016.
Notably, non-drilling solutions
made up over 70% of the new orders
won over this period, bolstered by
substantive contracts for gas and
offshore wind projects.
Keppel O&M’s underlying performance
for the period was positive. Excluding
revaluations, major impairments and
divestments (RID), its operating profit
for FY 2019 was $76 million,
representing an operating margin of
3.4%, compared to about 2% a year ago.
The toll on the Division’s performance
should ease in the coming years once
the issues with the remaining stranded
rigs and associates have been resolved.
As we continue to win more contracts
and execute our projects efficiently,
this will contribute positively to the
Division’s performance.
A We see gradual signs of recovery in
the O&M industry. Utilisation and
dayrates have been on the mend,
though capital spending on newbuild
rigs is likely to remain subdued.
Consistent with industry reports of
a pickup in the contract deployment of
existing fleets, Keppel O&M has received
more enquiries year-on-year for the
reactivation and repair of jackup rigs.
This is an encouraging development,
which should help to improve the jackup
oversupply situation progressively.
Meanwhile, activity levels, and
consequently demand for floating
production solutions, are expected
to increase in the next couple of
years as more projects reach their
Final Investment Decisions.
As the global energy mix evolves,
renewables are expected to be the
fastest growing source of energy from
now till 2040, while gas is set to outplace
coal as the second-largest fuel source.
In diversifying with the evolving energy
mix, we have prepared Keppel O&M
to compete effectively in the liquefied
natural gas (LNG) and offshore wind
sectors, which are drawing interest and
investments from a deepening global
focus on environmental sustainability.
In 2019, we made significant strides
into the renewable energy sector,
securing about $720 million worth of
offshore wind projects for Germany
and Taiwan. Since receiving the green
light from Golar LNG in April 2019,
18 Report to Shareholders 2019
Keppel Corporation Limited
funds of about $365 million. This does
not include the approximately $335 million
premium over the carrying value of
Keppel’s stake in Keppel DC REIT as at
end-2019.
Q The asset management business
has been active over the past
year. What is the outlook for
this business?
We are seizing inorganic opportunities
to grow our market share and technology
expertise for energy and environmental
solutions. Keppel Infrastructure invested
about $85 million in 2019 to acquire
stakes in integrated European energy
company, MET Group, and industrial
waste and wastewater treatment
solutions provider, Zerowaste Asia.
Data centres are critical for smart,
connected cities, and demand for them
is growing. But they also have a large
carbon footprint. As a leading provider
of data centre solutions, Keppel Data
Centres will continue to develop and
launch more energy-efficient and
greener concepts including floating
and high-rise data centres.
New opportunities for energy
infrastructure, environmental
infrastructure and data centres abound,
fuelled by rising urbanisation trends.
We will continue to seize opportunities
in these sectors in partnership with
co-investors, and without relying just
on our own balance sheet.
A Our asset management business had
a good run in 2019, with creditable
improvements in profit contributions
to the Group as well as assets under
management (AUM), which grew by
14% to $33 billion. During the year,
Keppel Capital completed about
$8.4 billion in acquisitions and
divestments and raised equity
and debt amounting to $9.5 billion.
It also expanded into a new asset
class through a joint debt mezzanine
platform with Pierfront Capital and
took a strategic stake in Prime US REIT,
which was listed on the Singapore
Exchange in July 2019.
Keppel Capital will continue to seek
growth opportunities, both organically
as well as externally. In January 2020,
we formed an equal joint venture with
Australian Unity Limited to create funds
focused on the Australian metropolitan
office sector. The joint venture has
also acquired the REIT manager of
Australian Unity Office Fund, which
has an AUM of about A$668 million.
1
Following the success of Hilli
Episeyo, Keppel O&M received
final notice to proceed on
the conversion of Gimi FLNG,
which will be deployed in BP’s
Greater Tortue Ahmeyim project.
2
When operational in 1H 2020,
Keppel Marina East Desalination
Plant will add to the Group’s
recurring income stream.
We are also deepening our presence in
India, which has good long-term potential.
In December 2019, Keppel Land
announced a joint venture with the
Rustomjee Group, to develop about
7,400 homes and retail units as part
of the 51.4-hectare Urbania integrated
township in Mumbai, India. Expanding
its presence in the co-working space,
Keppel Land has also invested
US$25 million in Smartworks, a
leading pan-India flexible space
solutions provider.
Given our sizeable property portfolio,
we will continue to focus on unlocking
value through home and en-bloc sales,
as well as divestments. We will make
strategic acquisitions only where pricing
and market conditions are attractive.
Q Can you elaborate on Keppel’s
approach to en-bloc sales
and property divestments?
Will these be a regular feature
of Keppel’s earnings?
A The short answer to the question
is yes. We will push for en-bloc sales
and divestments more deliberately
as part of our strategy. Our team at
Keppel Land is working proactively
to seize the right opportunities to turn
our assets, or co-develop some of the
landbank with our partners, if there
are suitable opportunities.
Q The infrastructure businesses have
generated stable profits of about
$169 million annually in the past
two years. What are the growth
plans for these businesses?
A Our businesses under Keppel
Infrastructure and Keppel Data Centres,
although relatively young compared to
Keppel O&M and Keppel Land, have
strong track records in the development,
operation and maintenance of critical
infrastructure assets. They are not
only key to our solutions for sustainable
urbanisation but also important growth
engines for the Group.
Over the past six years from 2014 to 2019,
Keppel Infrastructure had contributed
total earnings of about $667 million to
the Group, on average shareholders’
funds of about $637 million. Across
the same period, our data centre
business, through the collaboration of
Keppel Data Centres and Keppel Capital,
generated total earnings of about
$515 million, on average shareholders’
2
Keppel Corporation Limited
Report to Shareholders 2019
19
GROUP OVERVIEW
INTERVIEW WITH THE CEO
Keppel Bay Tower, where Keppel is
headquartered, is the first commercial
building in Singapore to be fully powered
by renewable energy.
We are excited by the prospects as
Keppel Capital moves steadily towards
its AUM target, carving its niche as
a manager of multi-asset portfolios
across sectors fuelled by sustainable
urbanisation trends. Through ongoing
collaboration with Keppel Land,
Keppel Telecommunications &
Transportation, Keppel Infrastructure
and Keppel O&M, Keppel Capital has
also expanded its repertoire from real
estate to data centre and infrastructure
assets, of which the Group is an active
developer and operator.
Keppel Capital’s private funds, as in
the case of KAIF, enable us to grow
our infrastructure business by tapping
third-party funds, whilst reducing the
burden on our balance sheet. The
capabilities of the Group in creating
and operating such real assets are an
attractive proposition for the investors
of Keppel Capital’s funds. They see
Keppel Capital not just as a financial
investor, but more importantly, as part
of a larger Group that can create real
assets from green and brown fields and
who also has an eco-system of REITs
and a business trust that can help to
monetise the assets when they mature.
Keppel Capital is not just an asset
management business. Together
with units like KUS, it plays an important
horizontal role in bringing together our
different businesses to create unique
and value-enhancing propositions,
as OneKeppel. Keppel Capital and KUS
allow the Keppel Group to connect all
our different businesses into one
powerful end-to-end enterprise,
something that differentiates us from
our peers.
Q How would you describe
the progress of the business
transformation at M1 a year
following its privatisation?
A Acquiring M1 was an opportunity for
us to build on a business that Keppel
knows well and has long been invested
in. We are cognisant of the risks and
challenges, but with a clear plan laid out
and a capable management team in
place to drive the necessary changes,
we are confident of overcoming the
obstacles to create value.
from 2018, leveraging the launch of
its new made-to-measure One Plan.
We are also working to improve the
cross-selling of services among
the Group’s different consumer
businesses, where there is significant
scope to expand our share of wallets
by improving customer experience
and stickiness.
On the B2B front, M1 is actively
partnering other Keppel businesses
to create smarter, future-ready
offerings, be it smart rigs and yards
of the future, data centres or urban
solutions. In efforts to gain early
insights and knowledge on 5G,
M1 has embarked on multi-vendor
trials and is working closely with
Government agencies, enterprises
and institutes of higher learning to
co-develop use cases and launch
smart applications empowered by
5G technology.
The privatisation of M1 in 2019 contributed
a total of $153 million to the Group’s
earnings for the year. This included a
re-measurement gain from our previously
held interests in M1 and offsetting
charges related to the acquisition.
The M1 team, led by its CEO
Manjot Singh Mann, has made good
headway since launching into its
multi-year transformation plan. Despite
a challenging competitive landscape,
M1 grew its postpaid customer base
to about 1.5 million in 2019, up 11%
We firmly believe that M1’s potential
as a connectivity solutions provider
can be fully unleashed within the
Keppel eco-system, and will continue
to work with Singapore Press Holdings’
and M1’s management to drive the
necessary changes to enhance its
competitiveness. M1 and StarHub
have submitted a joint bid for a 5G
licence in Singapore, and if successful,
would avail even more exciting
opportunities to realise the potential
of Keppel’s solutions.
20 Report to Shareholders 2019
Keppel Corporation Limited
Q With sustainability becoming
a bigger focus for the Group,
how is that changing the way
you look at Keppel’s businesses?
A When we look at sustainability
and what it means for us, we see
an intrinsic link to Keppel’s vision,
mission, strategy and core capabilities.
In 2019, we conducted a comprehensive
review of our material environmental,
social and governance factors
and enhanced our sustainability
framework and environmental
sustainability strategy.
Moving forward, we will focus our
efforts on four key areas. Firstly,
we have set targets to reduce carbon
emissions, waste generation and water
consumption and will be enhancing
the Group’s emissions tracking. We
have been reporting on Scope 1 and 2
emissions since 2010, and will also start
tracking Scope 3 emissions, such as
business travel.
Secondly, as we grow our businesses
and portfolios, our investment
decisions will place greater focus on
environmental sustainability. We will
implement an internal carbon price to
evaluate all major investment decisions.
We have defined the kinds of pollutive
sectors we will not go into, such as
coal-fired plants, the businesses we will
maintain, and those which we will focus
more on, such as renewables. To
advance our interests in sustainable
solutions, we have established a new
business unit, Keppel Renewable Energy,
to pursue opportunities for Keppel as
a developer, owner and operator of
renewable energy infrastructure.
Thirdly, for our existing businesses and
assets, we will focus on enhancing
energy efficiency, including harnessing
renewable energy where possible.
For example, on 1 January 2020,
Keppel Bay Tower, where we are
headquartered, became Singapore’s
first commercial development to be
fully powered by renewable energy.
Finally, we will look into re-purposing
our technology for renewables.
Keppel O&M has already been doing
this but we can do more, including
exploring solutions for new energy
and carbon capture and reuse.
Our vision is to be a trusted global
company building a sustainable future.
This demands that we create value for
our stakeholders holistically, including
social, environmental and economic
dimensions. To this end, we are
making sustainability our business,
creating diverse solutions which are
good for the planet and for people,
and in the process, create new profit
pools for Keppel.
Q With all the changes taking place,
what will Keppel look like in 2030?
A Even as we work towards achieving
our Vision 2020 targets, we have set
our eyes on the future and are planning
for the next decade.
In 2019, we brought together a group
of about 30 younger Keppel leaders,
who are all below the age of 50.
We wanted to give the Group’s
future leaders a good runway to
imagine Keppel in 2030 and also
the opportunity to work with one
another to execute and realise
their proposals.
There were many interesting and
contrasting ideas presented, but also
significant areas of convergence.
We are in the process of finalising
Vision 2030, with interim targets
for 2025. We will share more details
later, but it is quite clear that we
see Keppel moving forward as
one integrated business providing
solutions for sustainable urbanisation,
with a repeatable model, a more
rationalised portfolio and a clear
growth trajectory.
We are making sustainability our business,
creating diverse solutions which are good
for the planet and for people, while creating
new profit pools for Keppel.
We will create value through our
business model, focusing on our key
strengths of engineering, project
development, operation and maintenance
of specialised assets, as well as capital
and asset management. We will also
continue tapping third-party funds to grow.
By further deepening collaboration
and drawing on our synergies, we will
work towards our targeted returns
and narrow the gap between our
share price and the inherent value
of Keppel’s businesses.
Keppel Corporation Limited
Report to Shareholders 2019
21
GROUP OVERVIEW
BUILDING A SUSTAINABLE FUTURE
WE DEVELOP, OPERATE AND MANAGE
A SPECTRUM OF SOLUTIONS TO MEET THE
NEEDS OF SUSTAINABLE URBANISATION.
MARINE
We serve the marine industry with an array
of vessel solutions and services.
16 Specialised vessels
1
2
16
3
4
9
13
5
6
11
12
14
7
17
19
18
15
8
10
ENERGY
We support the safe and efficient
harvesting of energy sources to power
the world’s needs.
Gas and Electricity Retail
Smart rigs
Offshore wind farm solutions
Floating production systems
FLNG vessels and LNG carriers
Floating power plants and FSRUs
LNG bunkering
Power plants
District cooling and heating plants
1
2
3
4
5
6
7
8
CONNECTIVITY
We connect people and businesses with
information, goods and services in an
increasingly digital economy.
Communications Solutions
9
Floating data centre parks
10 Data centres
11 Urban logistics
ENVIRONMENT
We green cities with solutions for waste
and water & wastewater treatment.
12 Waste-to-energy plants
13 Integrated waste management plants
14 Wastewater treatment plants
15 Desalination plants
URBAN LIVING
We shape skylines and lives through
vibrant urban developments and
smart cities.
17 Quality homes
18 Green office buildings
19 Smart townships
ASSET MANAGEMENT
We create enduring value with quality
investment products and platforms.
Private funds, REITs
and Business Trust
For more information, please refer
to our Operating & Financial Review
on page 44.
22 Report to Shareholders 2019
Keppel Corporation Limited
Keppel Corporation Limited
Report to Shareholders 2019
23
GROUP OVERVIEW
ECO-SYSTEM FOR VALUE CREATION
WE HARNESS THE STRENGTHS OF THE GROUP
TO MEET THE WORLD’S GROWING NEEDS FOR
SUSTAINABLE URBANISATION SOLUTIONS.
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 gas and offshore
renewables solutions, as well as
floating infrastructure.
For more information, please refer to page 44.
Property
We are a multi-faceted urban living
solutions provider with a sterling portfolio
of award-winning residential developments,
integrated townships and investment-grade
commercial properties.
For more information, please refer to page 48.
Infrastructure
We develop, own, operate and maintain
competitive energy and environmental
infrastructure solutions, as well as offer
connectivity solutions for businesses and
consumers in the areas of data centres
and urban logistics.
For more information, please refer to page 52.
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, communications and more.
For more information, please refer to page 57.
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 assets held as
investments by Keppel
and its private funds
contribute revaluation
gains to the Group.
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 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.
Mature 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.
The Group will continue
to earn fee income from
asset management, as
well as the operation and
maintenance of
the assets.
Employees
Customers
Governments
Shareholders
& Investors
Suppliers
Local
Communities
Income Streams
Project-based income
Recurring income
Revaluation &
divestment gains
Energy
Urban Living
Environment
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 and
water & wastewater treatment.
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.
For more information on the value
we create for our stakeholders,
please refer to our Sustainability
Report – to be published in
May 2020.
24 Report to Shareholders 2019
Keppel Corporation Limited
Keppel Corporation Limited
Report to Shareholders 2019
25
GROUP OVERVIEW
SUSTAINABILITY FRAMEWORK
WE PLACE SUSTAINABILITY AT THE HEART OF OUR STRATEGY, DELIVERING
SOLUTIONS FOR SUSTAINABLE URBANISATION WHILE CREATING
ENDURING VALUE FOR OUR STAKEHOLDERS – THROUGH ENVIRONMENTAL
STEWARDSHIP, RESPONSIBLE BUSINESS PRACTICES AND NURTURING
OUR PEOPLE AND THE COMMUNITIES, WHEREVER WE OPERATE.
We are committed to sustainability, and consider
environmental, social and governance (ESG) 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.
GOVERNANCE
MEASURING PERFORMANCE
OUR STAKEHOLDERS
RECOGNITION
HOW WE CREATE VALUE
Our Strategy
Keppel is an eco-system of companies, collaborating to provide solutions for a fast-urbanising
world. We regard sustainable urbanisation both as a corporate responsibility and a source of
business opportunities. We are harnessing the Group’s capabilities and proven track record
in engineering, project development, operating and managing specialised assets, capital and
asset management, and growing new businesses aligned with these competencies.
In 2019, Keppel Corporation’s sustainability reporting framework1 and material ESG factors
were updated and refined, taking into account changes in the external environment as well as
a comprehensive review of the Company’s material ESG factors which was conducted from
December 2018 to April 2019.
Reflecting our increased focus on environmental sustainability, the three strategic thrusts
under the framework are (1) Environmental Stewardship; (2) Responsible Business; and
(3) People and Community.
ENVIRONMENTAL STEWARDSHIP
We will do our part to combat climate change, and are committed
to resource efficiency and reducing our environmental impact.
We will avoid highly pollutive businesses such as coal-fired plants,
emphasise renewables and cleaner energy such as gas, and channel
our engineering capabilities as a solutions provider to contribute to
the fight against climate change. We have set targets to reduce waste,
water and carbon emissions intensity, and to invest in renewable
energy generation.
RESPONSIBLE BUSINESS
The long-term sustainability of our business is driven at the highest
level of the organisation through strong corporate governance and
prudent risk management.
Through our integrated business model, we seek to improve both the
magnitude and quality of our earnings with more recurring income,
while enhancing returns though active capital recycling. We work closely
with stakeholders in our value chain to enhance their sustainability
performance, and continue to drive innovation and seize new opportunities.
PEOPLE AND COMMUNITY
People are the cornerstone of our businesses. We are committed
to providing a safe and healthy workplace, as well as investing in
training and developing our people to help them reach their full potential.
As a global citizen, Keppel believes that as communities thrive,
we thrive. We are committed to uplifting communities wherever
we operate, and supporting initiatives that protect the environment,
promote education and care for the underprivileged, with the goal
of building a sustainable future together.
Management Structure
The key material ESG 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.
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 the Keppel Group
Code of Conduct; Health, Safety and
Environment Policy, and Supplier Code
of Conduct, translate our principles
into practice by setting standards
for both our Company and those
whom we work with.
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.
For more information, view our Sustainability Report on our website at www.kepcorp.com
For more information,
please refer to page 74.
1 We publish sustainability reports annually, and the next report will be published in May 2020. Our sustainability
reports draw on international standards of reporting, including the Global Reporting Initiative Standards, and are
externally assured. The reports are also aligned with sustainability reporting requirements by the Singapore Exchange.
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.
Key sub-targets within each of
the scorecard areas include key
financial indicators, safety goals,
risk management, compliance
and controls measures, employee
engagement, talent development and
succession planning. Environmental
sustainability has also been woven
into the performance appraisal
of senior management across
the Group.
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.
Employees
Customers
Governments
Shareholders
& Investors
FTSE4Good Index
Highest triple-A rating
in the MSCI ESG Ratings2
Euronext Vigeo World 120
iEdge SG ESG Leaders Index and
iEdge SG ESG Transparency Index
Singapore Environmental
Achievement Award
in the Services category
Forbes' Global 2000
Top 250 World’s Best Regarded
Companies 2019
Forbes’ Global 2000
Top 500 World’s Best Employers 2019
Suppliers
sg
Sustainable
Business
Awards
Singapore
Special Recognition
in the Workforce category
Local
Communities
18 Workplace Safety and Health Awards
Disclaimer Statement
2 The use by Keppel Corporation of any MSCI ESG Research LLC
or its affiliates (“MSCI”) data, and the use of MSCI logos,
trademarks, service marks or index names herein, do not
constitute a sponsorship, endorsement, recommendation,
or promotion of Keppel Corporation by MSCI. MSCI services
and data are the property of MSCI or its information providers,
and are provided “as-is” and without warranty. MSCI names
and logos are trademarks or service marks of MSCI.
26 Report to Shareholders 2019
Keppel Corporation Limited
Keppel Corporation Limited
Report to Shareholders 2019
27
GROUP OVERVIEW
SUSTAINABILITY FRAMEWORK
WE ARE COMMITTED TO THE INTERNATIONAL SUSTAINABLE DEVELOPMENT AGENDA,
AND WILL LEVERAGE COLLABORATION AND PARTNERSHIP TO SUPPORT THE ACHIEVEMENT
OF THE SUSTAINABLE DEVELOPMENT GOALS (SDGs). WE HAVE INCORPORATED 10 OF
THE SDGs AS A SUPPORTING FRAMEWORK TO GUIDE OUR SUSTAINABILITY STRATEGY.
Strategic Pillars
Material Issues
SDGs
Approach
Highlights
Strategic Pillars
Material Issues
SDGs
Approach
Highlights
Environmental
Stewardship
Climate Action
Our suite of solutions for energy, urban living,
clean environments and connectivity help
cities urbanise in a sustainable manner.
As part of our environmental sustainability
strategy, we will avoid highly polluting
businesses such as coal, and will work towards
growing and expanding renewables and circular
economy solutions.
We will be introducing an internal carbon price
in the evaluation of all major investment
decisions and enhancing our climate risk
assessment.
We support the Taskforce on Climate-related
Financial Disclosures (TCFD), and are working
towards incorporating its recommendations in
our reporting framework.
Environmental
Management
We are committed to minimising our
environmental impact, and are focused on
sustainable management and efficient use
of natural resources.
We aim to reduce waste generation through
resource efficiency, recycling and reuse of
natural resources.
To support the climate change agenda,
we have targets to reduce our carbon
emissions intensity. We have also set new
targets to reduce waste generation and water
consumptions, as well as invest in renewable
energy generation. We have been tracking our
Scope 1 and 2 emissions since 2010, and will
start tracking Scope 3 emissions from 2020.
Responsible
Business
Economic
Sustainability
We regard sustainability both as
a corporate responsibility and a source
of business opportunities.
Keppel’s business operations generate
employment, opportunities for suppliers and
tax revenues for governments.
We are committed to applying our knowledge,
skills and technology to drive innovation and
support economic development and the
well-being of our communities.
Corporate
Governance
& Risk
Management
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.
Supply Chain &
Responsible
Procurement
We work closely with our suppliers to make
a positive impact on their sustainability
performance.
Product Quality
& Safety
We exercise due care and diligence in the
design, construction and operation of our
products and services to ensure that they
do not pose hazards to customers.
The Keppel Technology Advisory Panel
is a key platform to advance the Group’s
technology leadership. Separately,
Keppel Technology & Innovation serves as
a Group-wide resource to sharpen focus
on innovation and be a catalyst for change.
We have set targets to invest in sustainability-
linked innovation.
Keppel Offshore & Marine has become one
of the first companies in Singapore to achieve
global ISO 37001 anti-bribery certification in 2019.
We will work progressively towards ISO 37001
certification for all other Keppel entities.
An e-training and assessment exercise covering
key policies, including Keppel’s Employee Code
of Conduct, is carried out on an annual basis.
All our suppliers are qualified in accordance
with our requisition and purchasing policies,
screened based on ESG criteria, and are
expected to sign and abide by the Keppel
Supplier Code of Conduct.
We consider proper design, handling, storage
and disposal of materials as early as the
planning stage of our projects. At the project
execution stage, we carry out project reviews
and quality assurance programmes.
We will continue to engage our customers for
continuous service improvements.
People and
Community
Occupational
Safety & Health
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.
We achieved our goal of zero fatalities across
our global operations in 2019.
Keppel also clinched 18 awards at the
Workplace Safety and Health Awards 2019,
which is the highest number of awards won
by a single organisation for the year.
Labour
Practices,
Talent
Management &
Human Rights
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.
Community
Development
We uphold and respect the fundamental
principles set out in the UN Universal
Declaration of Human Rights and the
International Labour Organisation’s declaration
on fundamental principles and rights at work.
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.
We encourage and promote effective public,
public-private and civil society partnerships
through the sponsorship and support of
thought leadership and dialogue platforms.
We achieved an Employee Engagement Score
of 86% in 2019, an improvement over our score
of 82% in 2017 and significantly higher than the
average of 76% among Singapore companies.
Our stance on human rights is articulated in
our corporate statement on human rights,
while our stance on diversity and inclusion
is articulated in our corporate statement on
diversity and inclusion, which was formalised
in early-2019. Both statements are publicly
available online.
Keppel commits up to 1% of the Group’s
net profit to worthy social causes.
We invested $9.6 million in social causes
in 2019. This included a donation to assist
deserving students from low income families
via the Institute of Technical Education (ITE)
Education Fund, a contribution to SPD,
a Singapore charity supporting persons with
disabilities, greening efforts in Singapore,
as well as to the China Foundation for Poverty
Alleviation as part of an ongoing partnership to
aid impoverished rural communities in China.
Keppel Volunteers achieved over 18,000 hours
of community work in 2019.
Keppel Care Foundation, the Group’s philanthropic
arm, has disbursed over $44 million since its
launch in 2012. The foundation supports care
for the underprivileged, education and
environmental causes.
SOCIAL INVESTMENT SPENDING BY
PROJECT TYPE IN 20191 (%)
Education2
Care for the Underprivileged/Healthcare
Arts/Sports/Community Development Projects
Industry Advancement
Environment
Total
$9.6 million
64.0
16.8
13.0
4.3
1.9
100.0
1 We expanded the scope of our reporting in 2019 to include contributions by M1.
2
Includes a $5 million donation (second 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 in 2018.
28 Report to Shareholders 2019
Keppel Corporation Limited
Keppel Corporation Limited
Report to Shareholders 2019
29
GROUP OVERVIEW
BOARD OF DIRECTORS
Board Committees
N
Nominating Committee
A Audit Committee
R
Remuneration Committee
BR Board Risk Committee
BS
Board Safety Committee
LEE BOON YANG, AGE 72
Chairman
Non-Executive and Independent Director
LOH CHIN HUA, AGE 58
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:
23 April 2019
Length of service as a director
(as at 31 December 2019):
10 years 8 months
Length of service as a director
(as at 31 December 2019):
6 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
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 2020):
Listed companies
Singapore Press Holdings Limited (Chairman)
Present Directorships (as at 1 January 2020):
Listed companies
Nil
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 2015 to
31 December 2019):
Nil
Others:
Former Minister for Information,
Communications and the Arts (May 2003 to
March 2009); Former Member of Parliament
(December 1984 to April 2011)
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 Telecommunication & Transportation
Ltd (Chairman); Keppel Care Foundation
Limited; M1 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 2015 to
31 December 2019):
KrisEnergy Ltd; Various fund companies
under management of Alpha Investment
Partners Limited
Others:
Nil
30 Report to Shareholders 2019
Keppel Corporation Limited
ALVIN YEO KHIRN HAI, AGE 58
Non-Executive and
Independent Director
TAN EK KIA, AGE 71
Non-Executive and
Independent Director
DANNY TEOH, AGE 64
Non-Executive and
Independent Director
A
N
BS
BR
A
A
R
BR
Date of first appointment as a director:
1 June 2009
Date of first appointment as a director:
1 October 2010
Date of first appointment as a director:
1 October 2010
Date of last re-election as a director:
23 April 2019
Date of last re-election as a director:
23 April 2019
Date of last re-election as a director:
21 April 2017
Length of service as a director
(as at 31 December 2019):
10 years 7 months
Length of service as a director
(as at 31 December 2019):
9 years 3 months
Length of service as a director
(as at 31 December 2019):
9 years 3 months
Board Committee(s) served on:
Audit Committee (Member);
Nominating Committee (Member)
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 2020):
Listed companies
United Industrial Corporation Limited;
United Overseas Bank Limited
Other principal directorships
Valencia C.F; GlobalORE Pte Ltd
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 2015 to
31 December 2019):
Thomson Medical Pte. Ltd.;
Neptune Orient Lines Limited
Others:
Past member:- the Senate of the Academy
of Law; the Council of the Law Society;
the board of the Civil Service College;
Former Member of Parliament (2006 to 2015)
Board Committee(s) served on:
Board Safety Committee (Chairman);
Board Risk Committee (Member);
Audit Committee (Member)
Board Committee(s) served on:
Audit Committee (Chairman);
Remuneration Committee (Member);
Board Risk Committee (Member)
Academic & Professional Qualification(s):
BSc Mechanical Engineering (First Class Hons),
Nottingham University, United Kingdom;
Management Development Programme,
International Institute for Management
Development, Lausanne, Switzerland;
Fellow of the Institute of Engineers, Malaysia;
Chartered Engineer of Engineering Council,
United Kingdom; Member of Institute of
Mechanical Engineers, United Kingdom
Present Directorships (as at 1 January 2020):
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 2015 to
31 December 2019):
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
Academic & Professional Qualification(s):
Associate member of the Institute of Chartered
Accountants in England & Wales
Present Directorships (as at 1 January 2020):
Listed companies
DBS Group Holdings Ltd
Other principal directorships
M1 Limited (Chairman); DBS Bank Ltd;
DBS Foundation Ltd; DBS Bank (Taiwan) Ltd
Major Appointments (other than directorships):
Nil
Past Directorships held over the preceding
5 years (from 1 January 2015 to
31 December 2019):
CapitaLand Mall Trust Management Limited
(Manager of CapitaLand Mall Trust);
JTC Corporation; Ascendas-Singbridge Pte. Ltd.;
DBS Bank (China) Limited; Changi Airport Group
(Singapore) Pte Ltd
Others:
Former Managing Partner, KPMG LLP,
Singapore; Past member of KPMG’s
International Board and Council;
Former Head of Audit and Risk Advisory
Services and Head of Financial Services,
KPMG LLP
Keppel Corporation Limited
Report to Shareholders 2019
31
GROUP OVERVIEW
BOARD OF DIRECTORS
TILL VESTRING, AGE 56
Non-Executive and
Independent Director
VERONICA ENG, AGE 66
Non-Executive and
Independent Director
JEAN-FRANÇOIS MANZONI, AGE 58
Non-Executive and
Independent Director
R N
BR
A
N
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:
23 April 2019
Length of service as a director
(as at 31 December 2019):
4 years 11 months
Length of service as a director
(as at 31 December 2019):
4 years 6 months
Length of service as a director
(as at 31 December 2019):
1 year 3 months
Board Committee(s) served on:
Remuneration Committee (Chairman);
Nominating Committee (Member)
Board Committee(s) served on:
Board Risk Committee (Chairman);
Audit Committee (Member)
Board Committee(s) served on:
Nominating Committee (Chairman);
Board Risk 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 2020):
Listed companies
Inchcape plc
Academic & Professional Qualification(s):
Bachelor of Business Administration
(First Class Honours), University of Singapore
Present Directorships (as at 1 January 2020):
Listed companies
Nil
Other principal directorships
Keppel Capital Holdings Pte. Ltd.
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 2020):
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 2015 to
31 December 2019):
Singapore Chinese Orchestra Company Limited
Others:
Nil
Major Appointments (other than directorships):
Professor (Practice), NUS Business School
Other principal directorships
IMD Foundation Board; IMD Scholarship
Foundation
Past Directorships held over the preceding
5 years (from 1 January 2015 to
31 December 2019):
Nil
Others:
Founding Partner of Permira (1985 to 2015);
Former Member of the Board and Executive
Committee of Permira
Major Appointments (other than directorships):
President and Nestlé Professor, International
Institute for Management Development (IMD),
Switzerland; Member of several International
Advisory panels, including Digital Switzerland
and Russian Presidential Academy of
National Economy and Public Administration
Past Directorships held over the preceding
5 years (from 1 January 2015 to
31 December 2019):
Singapore Civil Service College;
Association to Advance Collegiate Schools
of Business (AACSB) International
Others:
Nil
32 Report to Shareholders 2019
Keppel Corporation Limited
TEO SIONG SENG, AGE 65
Non-Executive and
Independent Director
THAM SAI CHOY, AGE 60
Non-Executive and
Independent Director
PENNY GOH, AGE 67
Non-Executive and
Independent Director
R
BS
A
BR
A
BR
Date of first appointment as a director:
1 November 2019
Date of first appointment as a director:
1 November 2019
Date of first appointment as a director:
2 January 2020
Date of last re-election as a director:
N.A.
Date of last re-election as a director:
N.A.
Date of last re-election as a director:
N.A.
Length of service as a director
(as at 31 December 2019):
2 months
Length of service as a director
(as at 31 December 2019):
2 months
Length of service as a director
(as at 31 December 2019):
N.A.
Board Committee(s) served on:
Remuneration Committee (Member);
Board Safety Committee (Member)
Board Committee(s) served on:
Audit Committee (Member);
Board Risk Committee (Member)
Board Committee(s) served on:
Audit Committee (Member);
Board Risk Committee (Member)
Academic & Professional Qualification(s):
Degree (First Class Honors) in Naval Architecture
and Ocean Engineering from the University of
Glasgow, United Kingdom
Present Directorships (as at 1 January 2020):
Listed companies
Singamas Container Holdings Ltd.; COSCO
Shipping Holding Co., Ltd.; COSCO Shipping
Energy Transportation Co., Ltd.; Wilmar
International Limited
Other principal directorships
Pacific International Lines (Pte) Ltd
Major Appointments (other than directorships):
Singapore Business Federation (Chairman);
Singapore Chinese Chamber of Commerce
& Industry (Honorary President); Business
China (Director); Enterprise Singapore
(Board Member); The United Republic of
Tanzania in Singapore (Honorary Consul)
Past Directorships held over the preceding
5 years (from 1 January 2015 to
31 December 2019):
The Standard Club Asia Ltd;
Singapore Maritime Institute;
China Shipping Container Lines Co. Ltd.
Academic & Professional Qualification(s):
Bachelor of Arts (Honours) in Economics,
University of Leeds, UK; Fellow of the Institute
of Singapore Chartered Accountants and the
Institute of Chartered Accountants in England
and Wales
Present Directorships (as at 1 January 2020):
Listed companies
DBS Group Holdings Limited
Other principal directorships
DBS Bank Ltd.; DBS Bank (China) Limited;
EM Services Pte Ltd (Chairman); Keppel
Offshore & Marine Ltd; Mount Alvernia Hospital;
Singapore International Arbitration Centre;
Singapore Institute of Directors (Chairman)
Major Appointments (other than directorships):
Accounting and Corporate Regulatory Authority
(Board Member); Housing and Development
Board (Board Member); Nanyang Polytechnic
(Board Member)
Past Directorships held over the preceding
5 years (from 1 January 2015 to
31 December 2019):
Singapore Accountancy Commission;
KPMG Group of Companies
Others:
Nil
Others:
Nil
Academic & Professional Qualification(s):
Bachelor of Law (Honours), University
of Singapore
Present Directorships (as at 1 January 2020):
Listed companies
Keppel REIT Management Limited (the Manager
of Keppel REIT); Mapletree Logistics Trust
Management Ltd (the Manager of Mapletree
Logistics Trust)
Other principal directorships
HSBC Bank (Singapore) Limited
Major Appointments (other than directorships):
Allen & Gledhill LLP (Senior Adviser)
Past Directorships held over the preceding
5 years (from 1 January 2015 to
31 December 2019):
Eastern Development Private Limited; Eastern
Development Holdings Pte Ltd; Allen & Gledhill
Regulatory & Compliance Pte. Ltd.
Others:
Former Co-Chairman and Senior Partner of
Allen & Gledhill LLP
Keppel Corporation Limited
Report to Shareholders 2019
33
GROUP OVERVIEW
KEPPEL GROUP BOARDS OF DIRECTORS
KEPPEL OFFSHORE & MARINE
KEPPEL LAND
KEPPEL INFRASTRUCTURE
Loh Chin Hua
Chairman
Chief Executive Officer,
Keppel Corporation
Dr Ong Tiong Guan
Chief Executive Officer
Chan Hon Chew
Chief Financial Officer,
Keppel Corporation
Khoo Chin Hean
Director
Lim Lu-Yi, Louis
Chief Operating Officer,
Keppel Land
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
Yap Chee Meng
Former Senior Partner,
KPMG Singapore and
COO of KPMG International
for the Asia Pacific Region
Tan Ek Kia
Chairman,
Star Energy Group Holdings Pte Ltd
Lim Chin Leong
Former Chairman of Asia,
Schlumberger
Robert D. Somerville
Vice Chairman,
Maine Maritime Academy Board of Trustees
Chan Hon Chew
Chief Financial Officer,
Keppel Corporation
Tham Sai Choy
Independent Director,
DBS Group Holdings Limited
Willy Shee Ping Yah
Senior Advisor and Former Asia Chairman,
CBRE
KEPPEL TELECOMMUNICATIONS
& TRANSPORTATION
Chan Hon Chew
Chief Financial Officer,
Keppel Corporation
Loh Chin Hua
Chairman
Chief Executive Officer,
Keppel Corporation
Thomas Pang Thieng Hwi
Chief Executive Officer
Prof Neo Boon Siong
Independent Director
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
34 Report to Shareholders 2019
Keppel Corporation Limited
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
KEPPEL DC REIT MANAGEMENT
(MANAGER OF KEPPEL DC REIT)
KEPPEL PACIFIC OAK US REIT
MANAGEMENT (MANAGER OF
KEPPEL PACIFIC OAK US REIT)
Christina Tan Hua Mui
Chairman
Chief Executive Officer,
Keppel Capital
Lee Chiang Huat
Independent Director
Dileep Nair
Independent Director
Dr Tan Tin Wee
Chief Executive,
National Supercomputing Centre, Singapore
Peter McMillan III
Chairman
Co-founder,
Pacific Oak Capital Advisors, LLC
Soong Hee Sang
Independent Director
John J. Ahn
Chief Executive Officer,
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)
Thomas Pang Thieng Hwi
Chief Executive Officer,
Keppel Telecommunications & Transportation
Thomas Pang Thieng Hwi
Chief Executive Officer,
Keppel Telecommunications & Transportation
Tow Heng Tan
Chief Executive Officer,
Pavilion Capital International Pte. Ltd.
Veronica Eng
Independent Director,
Keppel Corporation
Low Huan Ping
Independent Director
Kenny Kwan
Principal,
Baker & McKenzie
KEPPEL REIT MANAGEMENT
(MANAGER OF KEPPEL REIT)
KEPPEL INFRASTRUCTURE FUND
MANAGEMENT (TRUSTEE-MANAGER
OF KEPPEL INFRASTRUCTURE TRUST)
Mrs Penny Goh
Chairman
Senior Adviser,
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
Ian Roderick Mackie
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
Keppel Corporation Limited
Report to Shareholders 2019
35
GROUP OVERVIEW
KEPPEL TECHNOLOGY ADVISORY PANEL
THE KEPPEL
TECHNOLOGY
ADVISORY PANEL
IS A KEY PLATFORM
TO ADVANCE
THE GROUP’S
TECHNOLOGY
LEADERSHIP.
Established in 2004, the Keppel Technology
Advisory Panel (KTAP) includes 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 related to 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); PhD University of
Birmingham; PE(S); FIES; MSAEng
Professor Ng was the founding Executive
Director at the Nanyang Environment &
Water Research Institute, and President’s
Chair Professor at the School of Civil &
Environmental Engineering, Nanyang
Technological University. He has some
400 publications on water and wastewater
management, has founded spin-off companies
based on his IPs, and serves as technical
advisor to government agencies and various
environmental companies across ASEAN,
China and India. Professor Ng also operates
his own spin-off companies, which are active
in China, Indonesia and Malaysia, and guides
incubators and private equity funds.
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 CEO of Vertex Holdings, a
Singapore-headquartered venture capital
investment holding company.
Vertex Group is a global venture capital
network comprising four early stage
technology-focused funds (Vertex Ventures
China, Vertex Ventures Israel, Vertex Ventures US,
Vertex Ventures SEA & India), an early stage
healthcare-focused fund (Vertex Ventures HC)
and a growth stage fund (Vertex Growth).
Each of these funds are managed by
independent and separate General Partnerships
and investment teams, with Vertex Holdings
providing anchor funding alongside significant
third-party capital commitments. Mr Chua
is concurrently Managing Partner of Vertex
Ventures SEA & India, as well as Chairman of
Vertex Growth Fund.
Prior to joining Vertex, Mr Chua held
senior positions in Biosensors International
Group, Ltd, a developer/manufacturer of
medical devices; Walden International, a
US-headquartered venture capital firm;
NatSteel Ltd, a Singapore industrial products
company, and Intraco Ltd, a Singapore-listed
trading/distribution company.
He also co-founded MediaRing.com Ltd,
a provider of voice-over-internet services,
which later listed on Singapore’s stock
exchange. Mr Chua currently serves on the
boards of several companies, including
Yongmao, an SGX-listed company.
36 Report to Shareholders 2019
Keppel Corporation Limited
PETER NOBLE
Fellow, Land Medalist and Past-President,
Society of Naval Architects & Marine
Engineering, USA; Fellow and Vice President,
The Institute of Marine Engineering,
Science and Technology, UK;
Fellow, Canadian Academy of Engineering;
Offshore Technology Distinguished
Achievement Award for Individuals;
B.Sc. Naval Architecture, University of Glasgow
Mr Noble is a naval architect and ocean
engineer with a wide range of expertise
and experience in the marine and offshore
industries. His career has included positions
with shipyards, ship and offshore design
consultants, offshore and marine research
and development companies, major
classification societies and as chief naval
architect with an international oil company.
He currently undertakes consulting and
advisory assignments across a broad range
of topics relating to ocean engineering.
Mr Noble holds a number of patents and
is active on the advisory boards of a number
of universities and institutions.
DR ROMAIN DEBARRE
PhD, French Petroleum Institute (IFPEN)
and French National Centre for Scientific
Research (CNRS); MBA, HEC Paris;
MSc French Petroleum Institute (IFP School)
Dr Debarre is the Managing Director of
the A.T. Kearney Energy Transition Institute.
He brings a combined experience in energy,
business strategy and scientific research.
Dr Debarre is a recognised energy expert
who forges close ties between governments,
companies and academics to leverage
technological opportunities and reduce
carbon emissions.
Prior to joining A.T. Kearney, Dr Debarre
was with Schlumberger Business Consulting,
where he led the SBC Energy Institute.
He previously worked in corporate finance,
managed strategy consulting projects
in the energy sector in various countries
and spent several years in scientific
research and development. Dr Debarre
is the co-author of several reports on
energy technologies and energy
transition topics.
From left: Professor Stefan Thomke, Mr Loh Chin Hua (CEO of Keppel Corporation), Mr Peter Noble, Professor Ng Wun Jern, Mr Chua Kee Lock,
Dr Lee Boon Yang (Chairman of Keppel Corporation) and Dr Romain Debarre.
Keppel Corporation Limited
Report to Shareholders 2019
37
PROPERTY
Tan Swee Yiow
Chief Executive Officer
Keppel Land
Tan Boon Ping
Chief Financial Officer
Keppel Land
Louis Lim
Chief Operating Officer
Keppel Land
Ng Ooi Hooi
President, Singapore and
Regional Investments
Keppel Land
(effective 1 Jan 2020)
Ben Lee
President, China
Keppel Land
Linson Lim
President, Vietnam
Keppel Land
Goh York Lin
President, Indonesia
Keppel Land
Ho Kiam Kheong
President, India
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
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
Kenny Mok
General Manager
Group Risk & Compliance
Tay Guan Chew
General Manager
Group Tax
Jaggi Ramesh Kumar
General Manager
Group Health, Safety & Environment
Eric Goh
Chief Representative, China
Linson Lim
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
Chief Executive Officer
Keppel Offshore & Marine
Kevin Chng
Chief Financial Officer
Keppel Offshore & Marine
(effective 1 Jan 2020)
Chor How Jat
Managing Director
(Conversions & Repairs)
Keppel Offshore & Marine
Tan Leong Peng
Managing Director
(New Builds)
Keppel Offshore & Marine
(effective 1 Feb 2020)
Ron Maclnnes
President
Keppel Offshore & Marine USA
and Keppel LeTourneau
(effective 1 Feb 2020)
Mohd Sahlan Bin Salleh
President
Keppel AmFELS
(effective 1 Feb 2020)
Marlin Khiew
President
Keppel FELS Brasil
Leong Kok Weng
President
Keppel Philippines Marine
Edmund Lek
President
Keppel Nantong Shipyard
Keppel Nantong Heavy Industries
38 Report to Shareholders 2019
Keppel Corporation Limited
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
Alan Tay
Executive Director
(Business Development)
Keppel Infrastructure
Janice Bong
General Manager
(Energy Infrastructure)
Keppel Infrastructure
Thomas Pang
Chief Executive Officer
Keppel Telecommunications & Transportation
Tan Eng Hwa
Chief Financial Officer
Keppel Telecommunications & Transportation
Wong Wai Meng
Chief Executive Officer
Keppel Data Centres
Desmond Gay
Chief Executive Officer
Keppel Logistics
KEPPEL FELS EMPLOYEES’ UNION
Mahmood Bin Ali
President
Atyyah Binti Hassan
General Secretary
KEPPEL EMPLOYEES’ UNION
Razali Bin Maulod
President
Atan Enjah
General Secretary
SHIPBUILDING & MARINE
ENGINEERING EMPLOYEES’ UNION
Eileen Yeo
General Secretary
NTUC Central Committee Member
SINGAPORE INDUSTRIAL &
SERVICES EMPLOYEES’ UNION
Sazali Bin Zainal
President
Richard Sim
General Secretary
Sylvia Choo
Executive Secretary
UNION OF POWER & GAS EMPLOYEES
Tay Seng Chye
President
Abdul Samad Bin Abdul Wahab
General Secretary
S. Thiagarajan
Executive Secretary
Christina Tan
Chief Executive Officer
Keppel Capital
Ang Sock Cheng
Chief Financial Officer
Keppel Capital
Paul Tham
Chief Executive Officer
Keppel REIT Management
Matthew Pollard
Chief Executive Officer
Keppel Infrastructure Fund Management
Chua Hsien Yang
Chief Executive Officer
Keppel DC REIT Management
David Snyder
Chief Executive Officer
Keppel Pacific Oak US REIT Management
Alvin Mah
Chief Executive Officer
Alpha Investment Partners
Bridget Lee
Chief Executive Officer
Keppel Capital Alternative Asset
Devarshi Das
Chief Executive Officer
(Infrastructure)
Keppel Capital Alternative Asset
Manjot Singh Mann
Chief Executive Officer
M1
Lee Kok Chew
Chief Financial Officer
M1
Mustafa Kapasi
Chief Commercial Officer
M1
Denis Seek
Chief Technical Officer
M1
Willis Sim
Chief Corporate Sales and Solutions Officer
M1
Nathan Bell
Chief Digital Officer
M1
Keppel Corporation Limited
Report to Shareholders 2019
39
GROUP OVERVIEW
INVESTOR RELATIONS
WE ARE COMMITTED
TO CLEAR, TIMELY
AND CONSISTENT
COMMUNICATION
WITH THE
INVESTMENT
COMMUNITY.
SHAREHOLDING BY INVESTORS (%)
In 2019, we strengthened efforts to help the
investment community better understand
Keppel’s business strategy, the privatisation
of M1 and Keppel Telecommunications &
Transportation, as well as the synergies
across Keppel companies as they
collaborate to create value and advance the
Group’s mission to provide solutions for
sustainable urbanisation.
In October 2019, Temasek announced a
voluntary pre-conditional partial offer to
acquire an additional 30.55% of shares in
Keppel Corporation. If successful, the partial
offer will result in Temasek and the offeror
owning an aggregate 51% of Keppel.
Although Keppel Corporation is unable to
comment on the pre-conditional partial
offer, the Company holds the view that there
is long-term value in Keppel’s businesses,
a view which Temasek shares, and
remains committed to delivering value
to all shareholders.
INVESTOR AND
ANALYST ENGAGEMENT
During the year, we held about 160 meetings
and conference calls with institutional
investors, including non-deal roadshows
and conferences reaching out to investors
in Bangkok, Boston, Edinburgh, Hong Kong,
Kuala Lumpur, London and New York.
We also hosted investor tours of our
residential and commercial properties
in China and Vietnam.
Institutions
Retail
Total
53.9
46.1
100.0
We continued to improve on disclosures
as we engaged analysts and investors,
including providing more information
on the Property Division, as well as the
Return on Equity targets for Keppel
Corporation, and each business unit.
SHAREHOLDING BY GEOGRAPHY (%)
Singapore
Asia (ex Singapore)
North America
Europe
Others*
Total
33.3
4.6
9.4
10.6
42.1
100.0
* Others comprise the rest of the world, as well as
unidentified holdings and holdings below the
analysis threshold as at 11 February 2020.
Presently, 17 sell-side research houses,
with analysts based in Singapore
and Malaysia, provide coverage on
Keppel Corporation. In addition to
the quarterly results briefings, senior
management from Keppel Corporation
and M1 held a briefing for analysts on
M1’s transformation plans. We also hosted
a group of sell-side analysts on a property
familiarisation trip to Ho Chi Minh City
(HCMC). We continue to actively engage
and maintain close interactions with
our sell-side analysts, who contribute to
achieving balanced and fair valuations
of the Company.
As part of ongoing efforts to engage
retail shareholders, our top management
updated shareholders on the Company’s
developments at an annual briefing
organised by the Securities Investors
Association (Singapore) (SIAS), which
drew about 150 participants. Separately,
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.
On 7 February 2020, the Singapore Exchange’s
(SGX) regulation on risk-based quarterly
reporting came into effect, whereby listed
companies may, unless otherwise required
by the SGX, report their results semi-annually.
We welcome SGX’s move for companies to
take a longer-term perspective on growth.
In view of the voluntary pre-conditional
partial offer by Kyanite Investment Holdings
Pte. Ltd. (an indirect wholly-owned subsidiary
of Temasek Holdings (Private) Limited),
Keppel Corporation will continue quarterly
reporting for the duration of the offer period
until such time as appropriate, and move to
semi-annual reporting thereafter.
We stand committed to engaging shareholders
through clear, timely and consistent
communications and maintaining our
interactions with the investment community.
After the move to semi-annual reporting,
we plan to provide business updates to
shareholders in between our half-yearly
financial reports.
INVESTOR RELATIONS RESOURCES
To ensure fair and prompt dissemination
of information, we post all new material
announcements on our website immediately
after they are released on 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 SGX. A transcript of the
questions and answers session from each
webcast is also released on SGX and posted
on Keppel Corporation’s website before the
next trading day.
Corporate Website
Our mobile-friendly corporate website
www.kepcorp.com provides access to
company announcements, quarterly results
and annual reports, investor events, stock
and dividend information, and investor
presentation slides. Contact information
of our Investor Relations personnel can
also be found on the website.
In 2019, we refreshed our corporate
website with a new look and features to
improve users’ experience. The website’s
dynamic and rich content is structured to
provide the users with easy navigation and
access. Our solutions for sustainable
urbanisation and commitment to
sustainability are articulated throughout
40 Report to Shareholders 2019
Keppel Corporation Limited
the website to enable the investment
community to better appreciate the Group’s
businesses, solutions and strategic efforts.
Keppel Corporation’s top 20 shareholders and
research coverage, as well as more details on
the Company’s historical financial information.
The new website also features additional
disclosures such as minutes from the
Annual General Meeting (AGM), the lists of
SHAREHOLDER INFORMATION
As at 11 February 2020, institutions
formed 53.9% of our shareholder base,
while retail investors accounted for the
remaining 46.1%. Of the identified and
analysed shareholdings, shareholders in
Singapore held approximately 33.3% of our
issued capital, while those in the rest of
Asia held 4.6%, North America 9.4% and
Europe 10.6%.
INVESTOR RELATIONS CALENDAR
The following key events were held in 2019 to engage our investors and analysts:
Q1
4Q & FY 2018 results
conference and live webcast.
Credit Suisse Asian
Investment Conference 2019,
Hong Kong.
Q2
1Q 2019 live results webcast.
Non-deal roadshows to
New York and Boston,
as well as Kuala Lumpur,
hosted by CLSA and
CGS-CIMB respectively.
51st Annual General Meeting.
Q3
2Q & 1H 2019 results
conference and live webcast.
Q4
3Q & 9M 2019 live
results webcast.
Analyst visit to Keppel Land’s
operations in HCMC.
Analyst briefing on M1’s
business transformation.
UBS OneASEAN
Conference 2019, Bangkok.
Non-deal roadshow to
London and Edinburgh
hosted by Goldman Sachs.
Keppel Corporation’s Briefing
for Retail Shareholders
hosted by SIAS.
1
2
1
Dr Lee Boon Yang, Chairman of
Keppel Corporation’s CEO
Keppel Corporation (second from
left) addressed shareholders at
the Company’s 51st AGM.
2
Mr Loh Chin Hua (left) and CFO
Mr Chan Hon Chew (right) engaged
retail shareholders at the briefing
hosted by SIAS.
3
3
In September 2019, Keppel
Corporation hosted a group of
nine analysts in HCMC, Vietnam
for a familiarisation trip.
Keppel Corporation Limited
Report to Shareholders 2019
41
GROUP OVERVIEW
SIGNIFICANT MILESTONES
Q1
Q2
Offshore & Marine
Corporate
M1 and Keppel
Telecommunications &
Transportation (Keppel T&T)
were delisted from the
Singapore Exchange.
Keppel acquired a minority
stake in a leading electric
vehicle battery business for
US$50 million.
Offshore & Marine
Keppel O&M delivered two
dredgers to Jan De Nul,
a jackup rig to Valaris and
Borr Drilling each, and two
Floating Production Storage
and Offloading (FPSO)
conversion and modification
projects to SBM Offshore and
Woodside respectively.
Keppel O&M received final
notice to proceed for the
conversion of Gimi FLNG
from Golar LNG with enhanced
workscope worth an additional
US$242 million.
Keppel O&M secured contracts
worth over $800 million for
three newbuild offshore wind
projects, as well as integration
and upgrading works for an
FPSO and a semi.
Keppel O&M novated the
construction contract of the
jackup rig currently being built
for BOT Lease to Borr Drilling.
Keppel Offshore & Marine
(Keppel O&M) secured a
repeat order from Awilco for
a mid-water harsh environment
semisubmersible (semi) worth
US$425 million.
Keppel O&M delivered a jackup
rig, with its proprietary RigCare
digital solution, to Grupo R
on a sale and leaseback deal,
as well as a trailing suction
hopper dredger to Jan De Nul.
Property
Keppel Land announced the
divestment of a 70% stake in
Dong Nai Waterfront City in
Dong Nai Province, Vietnam
to Nam Long for a total
consideration of $136 million.
Infrastructure
Keppel Infrastructure secured
a contract to design, build and
operate pipe racks on Jurong
Island, Singapore for about
$40 million.
Investments
Keppel Capital announced an
agreement to subscribe for a
30% interest in Gimi MS
Corporation, which will undertake
the development, construction
and operation of Gimi FLNG.
Alpha Asia Macro Trends Fund
(AAMTF) III closed at about
US$1.1 billion, including
co-investments, exceeding its
initial target of US$1 billion.
AAMTF III, Keppel Land and
co-investors announced the
acquisition of Yi Fang Tower
in Shanghai, China, for a total
consideration of RMB4.6 billion.
Investments
Alpha DC Fund and
Keppel Data Centres, and
Keppel Infrastructure Trust
divested their respective stakes
in Keppel DC Singapore 4 and
DC1 to Keppel DC REIT for
$585 million.
Alpha DC Fund acquired
a freehold land plot in
Gore Hill Technology Park
to develop its first data centre
in Sydney, Australia.
Keppel REIT entered the
Seoul office market with the
acquisition of a Grade A building
for KRW253 billion.
AAMTF III announced the
acquisition of three Grade A
commercial buildings in Seoul,
South Korea.
FueLNG, a joint venture
between Keppel O&M and Shell,
achieved Singapore’s 100th
Liquefied Natural Gas (LNG)
bunkering operation with no
loss-time incidents.
Keppel O&M signed a
memorandum of understanding
with the Maritime and Port
Authority of Singapore and
Technology Centre for Offshore
and Marine, Singapore to develop
the first autonomous vessel
for operations in Singapore.
Property
Keppel Land secured its
first green loan facility of
$170 million from HSBC Group
China for the development
of Seasons City (Phase 1) in
Sino-Singapore Tianjin Eco-City
(Tianjin Eco-City), China.
Infrastructure
Keppel Infrastructure, together
with Asia Projects Engineering,
secured a contract worth about
$53 million to design and build
pipelines and ancillary facilities
on Jurong Island, Singapore.
Keppel Gas completed its
first LNG cargo import from
North America, diversifying its
gas supply portfolio beyond
Southeast Asia.
Keppel T&T, Alpha Data Centre
Fund (Alpha DC Fund) and
their partner broke ground for
a data centre in Johor, Malaysia.
Keppel O&M secured a repeat order
from Awilco for a mid-water harsh
environment semi.
Keppel O&M received final notice
to proceed for the conversion of
the Gimi FLNG.
Riding on demand for high-quality homes
in Vietnam, Keppel Land is partnering
Phu Long to develop three land parcels
in HCMC’s Southern corridor.
The Keppel Group broke ground for
its new data centre in Johor, Malaysia.
42 Report to Shareholders 2019
Keppel Corporation Limited
Q3
Q4
Corporate
Infrastructure
Corporate
Infrastructure
The Keppel Group clinched
18 awards at the Workplace
Safety and Health Awards 2019.
UrbanFox expanded its logistics
and e-commerce network to
Vietnam and Malaysia.
Keppel Corporation received
Bronze Award for Best Annual
Report for companies with a
market capitalisation of over
$1 billion at the Singapore
Corporate Awards 2019.
Keppel Corporation was
included as an index constituent
of the FTSE4Good Index Series
and won the SEC-STATS
Asia Pacific Singapore
Environmental Achievement
Award in the services category
at the Singapore Environment
Council’s (SEC) Environmental
Achievement Awards 2019.
Offshore & Marine
Keppel O&M secured contracts
from repeat customers worth
about $130 million for a
newbuild dredger from
Van Oord and an FPSO
modification from Yinson.
Keppel O&M delivered a
Floating Storage and
Re-gasification Unit
conversion project.
Property
Keppel Land acquired four
properties in China for about
RMB1.1 billion, and three land
plots in the Nha Be district of
Ho Chi Minh City (HCMC),
Vietnam for about $76 million.
Keppel Land and BDO Unibank
opened The Podium, an office
and retail mixed-use development
in Manila, the Philippines.
Keppel T&T divested its stakes
in Keppel Logistics (Foshan)
and Keppel Logistics (Hong
Kong) for about $39 million.
Keppel Electric was listed as
the top Open Electricity Market
retailer with 27% market share
of residential consumers.
Investments
Sino-Singapore Tianjin Eco-City
Investment and Development
Co., Ltd. sold two plots of land
located in the Tianjin Eco-City’s
Central District.
Keppel Pacific Oak US REIT
announced the acquisition of an
office complex in Irving, Dallas
for US$102 million.
Keppel Corporation was ranked
as one of the World’s Best
Regarded Companies 2019 and
World’s Best Employers 2019 in
the Forbes’ Global 2000 rankings.
It was announced that
Keppel Bay Tower would become
Singapore’s first commercial
building to be fully powered
by renewable energy from
1 January 2020.
Offshore & Marine
Keppel O&M delivered three
projects, namely a jackup rig to
Borr Drilling and Grupo R each,
as well as a trailing suction
hopper dredger to Jan De Nul.
Keppel O&M reached a
settlement agreement with
Sete Brasil, bringing closure to
the outstanding contracts for
the construction of the six rigs.
Prime US REIT was successfully
listed, with Keppel Capital as a
strategic partner in the REIT
and the Manager.
Keppel O&M secured over
100 scrubber and ballast water
treatment systems retrofit orders
worth $160 million.
Property
Keppel Land deepened its
presence in India with a
US$25 million investment in
Smartworks, a leading pan-India
flexible space solutions provider
and entered into a joint venture
with Rustomjee Group to jointly
develop additional homes
and retail units as part of the
Urbania integrated township
located in Thane.
Keppel Land and Keppel
Urban Solutions broke ground
for Saigon Sports City in
HCMC, Vietnam.
Keppel Infrastructure invested
$80 million for a 20% stake in
MET Holding, an integrated
European energy company.
Keppel Infrastructure
invested $5 million for an
18.18% stake in Zerowaste Asia,
a Singapore-based environmental
solutions provider.
Keppel Data Centres
announced a partnership with
National University of Singapore
and Singapore LNG Corporation to
develop novel, energy-efficient
and cost-effective cooling
technology for data centres.
Investments
Keppel Capital entered into
a conditional sales and purchase
agreement to acquire 50%
in Pierfront Capital Fund
Management for about
US$7.8 million.
Keppel REIT unlocked value
with the divestment of Bugis
Junction Towers in Singapore
for $548 million.
Keppel DC REIT entered into
a sale and purchase agreement
to acquire a data centre in
Kelsterbach, Germany for
$125 million.
Alpha Investment Partners,
on behalf of its funds under
management, including
AAMTF III, and Allianz entered
into agreements to acquire an
85% interest in a $1.5 billion
Grade A Office complex in
Beijing, China.
The Podium development is envisioned to
serve the growing demand for prime office
spaces in Manila, the Philippines.
Two land plots were sold in the
Central District of the Tianjin Eco-City.
Keppel Land and Keppel Urban Solutions
celebrated the groundbreaking of
Saigon Sports City in HCMC, Vietnam.
Keppel Bay Tower utilises renewable
energy to power all its operations.
Keppel Corporation Limited
Report to Shareholders 2019
43
PERFORMANCE REVIEW
OPERATING & FINANCIAL REVIEW
OFFSHORE
& MARINE
WE AIM TO BE
THE PREFERRED
SOLUTIONS PARTNER
OF THE GLOBAL
OFFSHORE AND
MARINE INDUSTRY.
EARNINGS HIGHLIGHTS ($ million)
Revenue
EBITDA
Operating Profit/(Loss)
Loss before Tax
Net Profit/(Loss)
Average Headcount (Number)
Manpower Cost
2019
2,220
181
60
(24)
10
11,560
561
2018
1,875
26
(73)
(113)
(109)
11,875
485
2017
1,802
(37)
(167)
(862)^
(826)^
15,571
623
^
Includes the one-off financial penalty and related costs of $619 million.
MAJOR DEVELOPMENTS IN 2019
FOCUS FOR 2020/2021
Secured over $2 billion worth of
new contracts.
Capture opportunities in new and
existing markets.
Delivered 13 newbuild and
conversion projects.
Enlarged footprint in the offshore
renewable energy industry with
two contracts from Tennet Offshore
and Ørsted.
Reached a settlement agreement
with Sete Brasil, bringing closure
to the outstanding contracts for the
construction of six rigs.
Became one of the first companies
in Singapore to achieve global
certification for the ISO 37001
Anti-Bribery Management System.
Leverage synergies across the
Keppel Group to build new capabilities
and expand solution offerings.
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.
Re-purpose offshore technology for
other applications, including renewables.
44 Report to Shareholders 2019
Keppel Corporation Limited
EARNINGS REVIEW
The offshore & marine (O&M) industry
continued to show signs of recovery in 2019,
with gradual improvements in rig utilisation
and dayrates. On the back of its diversification
strategy, Keppel Offshore & Marine
(Keppel O&M) secured over $2 billion worth of
new orders in 2019, compared to $1.8 billion
in 2018. Gas and offshore renewables
solutions made up over 60% of new orders.
Revenue from the O&M Division was
$2.2 billion for FY 2019, $345 million
higher than in FY 2018 mainly due to higher
revenue recognition from ongoing projects,
partly offset by the absence of revenue from
the sale of jackup rigs to Borr Drilling in 2018.
The Division’s operating profit before
revaluations, major impairments and
divestments for FY 2019 was $76 million,
more than double the $37 million for
FY 2018. The O&M Division returned to
profitability for the first time since FY 2016.
FY 2019 net profit was $10 million,
compared to the loss of $109 million for
FY 2018, underpinned by the increased
topline, cost management efforts and
lower impairment provisions.
OPERATING REVIEW
Over 2019, Keppel O&M continued
to execute its projects well, secure
new orders, expand capabilities and
seek new opportunities.
To manage the higher workload, Keppel O&M
increased its direct headcount to 13,500 as
at end-2019 from 10,700 as at end-2018.
The company expects to further increase its
direct headcount by 1,500 in 2020 and will
continue to adjust manpower requirements
in line with the workload.
During the year, Keppel O&M secured over
100 scrubber and ballast water treatment
system (BWTS) retrofit projects, as
shipowners sought to meet the IMO 2020
requirements for the sulphur content of
marine fuel, as well as the standards set
out by the Ballast Water Management
Convention. Keppel O&M is also scheduled
to deliver Singapore’s first liquefied natural
gas (LNG) bunkering vessel in 2020. Its joint
venture with Shell Eastern Petroleum, FueLNG,
has conducted over 200 truck-to-ship LNG
bunkering operations in Singapore.
In 2019, Keppel O&M became one of the
first companies in Singapore to achieve
global certification for the ISO 37001
Anti-Bribery Management System.
Having returned to profitability in 2019,
Keppel O&M will continue efforts to enhance
the performance of its business and seek
new opportunities in 2020. As the global
energy mix shifts toward cleaner energy,
Keppel O&M will continue to focus on
capturing opportunities in offshore
renewables and gas.
New Builds
During the year, Keppel O&M reached a
Settlement Agreement (SA) with Sete Brasil
(Sete), bringing closure to the outstanding
contracts for the construction of six
semisubmersibles (semis) for Sete. The SA
will become effective upon fulfilment of
certain conditions precedent, including
the successful sale of the first two rigs,
which are closest to completion, by Sete
to Magni Partners. As part of the SA,
the contracts for the other four remaining
rigs will be amicably terminated with
no penalties, refunds or additional amounts
due to any party. With full ownership over
the four remaining rigs, Keppel O&M will be
able to explore various options to extract
the best value for shareholders.
In 2019, Keppel O&M made significant strides
into the renewable energy sector, securing
major offshore wind projects worth about
$720 million. In May 2019, Keppel O&M,
through a consortium with Aibel AS, secured
a contract from TenneT Offshore for the
design, engineering, procurement, construction,
installation and commissioning of a
900MW offshore high voltage direct current
converter station and an onshore converter
station. Scheduled to be completed in 2024,
the two converter stations will be deployed
in the German sector of the North Sea.
Keppel O&M also secured a contract from
Ørsted for two offshore wind farm
substations, which will be deployed in
Ørsted’s Greater Changhua offshore wind
sites in Taiwan. The substations are
scheduled to be completed in 2021.
During the year, Awilco Drilling exercised
its option for the construction of a second
mid-water harsh environment semi worth
US$425 million. Keppel O&M is leveraging
the engineering and construction process of
the first rig to further improve productivity
on the second project.
In 2019, the New Builds division delivered
five jackup rigs to customers, namely Grupo R,
Borr Drilling and Valaris. The two jackup rigs
delivered to Grupo R are equipped with
Keppel’s proprietary RigCare solution, a
suite of digital services to support the rig’s
lifecycle needs, and are the industry’s first
drilling rigs with Smart Notations which
support a more data-centric approach to
post-construction works surveys, and assists
rig operators to optimise rig operations and
maintenance. During the year, Keppel O&M
was recognised by the American Bureau of
Shipping as the first shipyard to integrate
smart functions and services into rigs.
Keppel O&M also delivered four trailing
suction hopper dredgers to Jan De Nul
in 2019, and successfully delivered a
dual-fuel LNG bunker tanker to Sinanju
Tankers in January 2020. The ultra-low
emission dredgers for Jan De Nul are fitted
with dual exhaust emission filtering
During the year, Keppel O&M delivered two
jackup rigs equipped with its proprietary
RigCare solution to Grupo R.
Keppel Corporation Limited
Report to Shareholders 2019
45
PERFORMANCE REVIEW
OPERATING & FINANCIAL REVIEW
OFFSHORE & MARINE
technology and comply with EU Stage V and
IMO Tier III regulations.
In the Americas, work on two dual-fuel
containerships for Pasha Hawaii is ongoing
at Keppel O&M’s yard in Brownsville, Texas.
Built to Keppel’s proprietary design, the
Jones Act vessels are scheduled for delivery
in 2020 and will run on LNG from day one
in service. Keppel O&M will continue to
build on its track record for the construction
of Jones Act vessels in the United States,
newbuild offshore rigs and platforms,
as well as aftermarket services including
repairs, upgrades and modifications of rigs
for customers in the Gulf of Mexico.
Building on its engineering expertise in offshore platforms,
Keppel O&M will actively explore opportunities in
the renewables and gas-related sectors.
Keppel O&M will continue its digitalisation
journey, focusing on infrastructure and
product improvements through industrial
Internet of Things, smart sensors and
real time condition-based monitoring to
optimise operations. It is developing its
first autonomous vessel for operations
in Singapore in partnership with M1,
to deploy the latter’s ultra-low latency
4.5G network connectivity.
In line with the Group’s commitment to
sustainability, Keppel O&M is also driving
carbon reduction efforts in its operations
through the installation of solar panels
on rooftops and energy-saving lights,
amongst others.
Building on its engineering expertise
in offshore platforms, Keppel O&M will
1
actively explore opportunities in the
renewables and gas-related sectors,
as well as opportunities to re-purpose its
offshore technology for other applications
and collaborate with other Keppel business
units on floating infrastructure projects.
Conversions & Repairs
During the year, Keppel O&M continued to
execute its conversion and repair projects
well. Following the success of Hilli Episeyo,
Keppel Shipyard received the final notice
to proceed from Gimi MS Corporation,
a subsidiary of Golar LNG, to commence
full conversion works for the Gimi Floating
Liquefaction Vessel (FLNG) project.
Together with the enhanced workscope of
US$242 million, the total contract value for
Gimi FLNG is US$947 million. Upon delivery
in 1H 2022, Gimi FLNG will commence
a 20-year charter in BP’s Greater Tortue
Ahmeyim field, offshore West Africa. In 2019,
Keppel Capital acquired a 30% stake in
Gimi MS, which owns the Gimi FLNG project.
There are plans to inject interests in the Gimi
FLNG facility as a seed asset for the newly
launched Keppel Asia Infrastructure Fund.
In 2019, Keppel O&M completed two
Floating Production Storage and
Offloading (FPSO) conversion/modification
projects, namely for Ngujima-Yin for
Woodside Energy and FPSO Liza Destiny
for SBM Offshore, and one Floating Storage
and Re-gasification Unit conversion project,
BW GDF Suez Paris for BW Gas.
During the year, the company repaired
288 vessels in Singapore, including
75 scrubber retrofit projects and BWTS
installations and 40 LNG carriers. Although
this was lower compared to the 330 vessels
repaired in 2018, the revenue per vessel
in 2019 was higher due to adjacency work
on the scrubber and BWTS retrofits.
As at end-2019, Keppel O&M was executing
works on five FPSO conversion/modification
projects, including FPSO Liza Unity, a repeat
order from SBM Offshore for the Liza
project in offshore Guyana. Keppel O&M
was also executing fabrication of the
internal turret of Coral Sul FLNG for SOFEC.
In the Philippines, Keppel O&M repaired
about 150 vessels in 2019 for domestic
and foreign customers. In 2019, the Subic
yard secured three BWTS projects and is
primed to execute more scrubber and
BWTS projects as shipowners seek to
lower sulphur emissions.
In Brazil, BrasFELS successfully completed
inspection and repair works for BW FPSO
Cidade de Sao Vicente. BrasFELS is also
executing offshore service works on FPSO
Fluminense and on FPSO Cidade de
Sao Paulo, and is undertaking module
46 Report to Shareholders 2019
Keppel Corporation Limited
fabrication works on FPSO Carioca MV30
for MODEC. BrasFELS will continue to
actively pursue opportunities in the region.
1
First Lady of the Co-operative
Republic of Guyana,
Madam Sandra Granger (first row,
third from left), together with
senior management from Keppel
and SBM, celebrated the naming
of Liza Destiny, the first FPSO to
operate offshore Guyana.
2
In 2019, Keppel O&M delivered
four EU Stage V dredgers to
Jan De Nul.
MARKET REVIEW & OUTLOOK
There have been signs of recovery in the
offshore market, notwithstanding
geopolitical headwinds and slowing global
growth. Utilisation and dayrates
for jackups continue to improve, but it
would take time for these to translate
into new orders, given the continued
oversupply in the market. Meanwhile, the
outlook for the floater segment remains
positive, with activity and demand
expected to increase gradually over the
next few years.
In the near term, Keppel O&M will continue
to actively seek opportunities in the oil
and gas production market, where several
projects are expected to achieve Final
Investment Decision in 2020.
According to the BP Energy Outlook 2019,
the global energy mix is evolving, with
renewables being the fastest growing
source of energy and gas set to overtake
coal as the second-largest source of
energy by 2040. In particular, the offshore
wind sector is an interesting market, with
the Global Wind Energy Council (GWEC)
projecting for installed capacity to increase
to 190GW in 2030 from 23GW in 2018.
With its growing track record, Keppel O&M
is well poised to offer integrated solutions,
including offshore substations, foundations,
installation and support vessels to
support the growth of the offshore wind
energy industry.
New Builds
While newbuild capital expenditure is
expected to remain subdued, the market
has increased re-activation and contract
deployment of existing rigs. IHS Markit’s
data also reveals that utilisation across
drilling rigs has improved in 2019.
Moreover, dayrates for semis and
jackups have increased in 2019, while
dayrates for drillships remained steady.
Keppel O&M will continue to target
niche markets such as harsh environment
semis and seek opportunities from rising
demand for jackup rigs in Southeast Asia
(SEA), Middle East and Mexico. In line with
the Group’s sustainability targets, Keppel
O&M is looking to reduce the environmental
footprint of its products. With the industry
trending toward low carbon emissions and
clean energy solutions, the company will
continue to strengthen its presence in the
renewables and gas market.
2
from the Middle East, Indian subcontinent
and SEA. With the growing offshore
wind industry and the increasing need
for cross-continental subsea cables for data
transmission, Keppel O&M also continues
to see demand for cable-laying vessels.
Keppel O&M is also developing new
solutions to meet customers’ needs.
VesselCare, a proprietary remote vessel
monitoring and analytics system, has been
installed on a Keppel Smit Towage tug to
gather data from the vessel’s operations,
and is the initial phase of developing the
tug into an autonomous vessel. Through
VesselCare, Keppel O&M is able to perform
data consolidation and condition-based
monitoring and maintenance for
better analytics.
Leveraging its technology and construction
expertise, Keppel O&M is well positioned
to provide an extensive range of non-oil
related solutions. The company is also
capturing opportunities in the Jones Act market
through its presence in Brownsville, Texas.
Conversions & Repairs
With the enforcement of IMO’s 0.5%
global sulphur cap, shipowners are actively
pursuing alternative solutions, such as
the installation of scrubbers, to reduce
sulphur emissions.
continues to see increasing demand
for scrubbers, which is a proven and
cost-effective solution for shipowners.
The company will leverage its growing
experience in scrubber retrofits and
work to further lower turnaround time
by tapping on its regional yards.
The container shipping market is also
expected to improve, following the signing
of a Phase One trade deal between the US
and China. In the longer term, seaborne LNG
trade is likely to grow healthily as large
volumes of LNG export/import capacity
come online and natural gas supply and
demand continue to grow.
In the production market, Rystad Energy
forecasts that up to 24 FPSO projects
could be awarded in 2020, of which
South America is leading with 12 projects
planned by end-2020.
Keppel O&M will continue to pursue
opportunities, leveraging synergies
across the Group to provide value-added
solutions for customers. Keppel O&M’s
capabilities in non-drilling and gas solutions
will provide the company with new growth
areas and revenue streams, amidst
continuing challenges in the offshore
drilling sector. Keppel O&M will continue
to diversify its product offerings in line
with the changing global energy mix,
enhance its solutions through technology
and innovation, and boost efficiency
of its yards.
In specialised shipbuilding, the dredger
market remains a bright spot for
Keppel O&M, backed by rising demand
To date, about 10% of vessels worldwide
are or will be deemed compliant with
the IMO standards by 2020. Keppel O&M
Keppel Corporation Limited
Report to Shareholders 2019
47
PERFORMANCE REVIEW
OPERATING & FINANCIAL REVIEW
PROPERTY
WE ARE COMMITTED
TO PROVIDING
QUALITY AND
INNOVATIVE REAL
ESTATE SOLUTIONS.
EARNINGS HIGHLIGHTS ($ million)
Revenue
EBITDA
Operating Profit
Profit before Tax
Net Profit
Average Headcount (Number)
Manpower Cost
2019
1,336
546
508
707
517
2,792
176
2018*
1,340
1,077
1,044
1,193
942
3,059
204
2017
1,782
705
668
844
650
3,257
194
* 2018’s financial figures have been restated due to an IFRIC agenda decision on SFRS(I) 1-23 Borrowing costs
eligible for capitalisation.
MAJOR DEVELOPMENTS IN 2019
FOCUS FOR 2020/2021
Sold about 5,150 homes in Asia, mainly
in China and Vietnam.
Divested assets worth $400 million in
Singapore and Vietnam.
Completed acquisitions amounting
to about $500 million in China, Vietnam
and India.
Replenished residential landbank with
addition of about 2,500 units across
China and Vietnam.
Increased commercial portfolio with
addition of about 136,000 square metres
in China.
Invest strategically in key markets of
Singapore, China and Vietnam, while
continuing to scale up in other markets
such as Indonesia and India.
Increase the pace of capital recycling,
reinvesting for growth and higher returns.
Scale up commercial presence to provide
steady stream of recurring income.
Strengthen collaboration with strategic
partners to capture opportunities in the
region, as well as with Keppel Capital to
tap third-party funds for growth.
Invest in and develop property technology
and new real estate solutions.
48 Report to Shareholders 2019
Keppel Corporation Limited
TOTAL ASSET DISTRIBUTION BY COUNTRY (%)
as at 31 December 2019
Singapore
China
Vietnam
Indonesia
Others
Total
34.7
43.9
9.9
5.9
5.6
$14.2 billion
100.0
TOTAL ASSET DISTRIBUTION BY SEGMENT (%)
as at 31 December 2019
Property Trading
Property Investments
Others
Total
$14.2 billion
100.0
53.5
44.4
2.1
EARNINGS REVIEW
The Property Division generated revenue
of $1.3 billion for FY 2019, a $4 million
decrease from FY 2018 mainly due to lower
revenue from property trading projects in
Singapore, partly offset by higher revenue
from property trading projects in China.
The Division’s net profit of $517 million for
FY 2019 was $425 million lower than that of
the previous year due to fewer en-bloc sales
and divestments. This was partly offset by
higher contribution from China property
trading projects, higher investment income,
higher fair value gains on investment
properties and higher contribution from
associated companies.
Excluding en-bloc sales and the effects
of revaluations, major impairments and
divestments in both years, Keppel Land’s
net profit in FY 2019 was about $260 million,
an improvement over the $236 million
in FY 2018.
OPERATING REVIEW
Singapore
Keppel Land sold about 250 residential units
in Singapore in 2019, higher than the 160 units
sold in 2018. The sales were mostly from
The Garden Residences, which sold about
240 units as at end-2019. In January 2019,
the new Cross Island MRT line was
announced, and The Garden Residences will
benefit from the future Serangoon North MRT
station which will be a five-minute walk
away. Over at Keppel Bay, a total of 85 units
at Reflections and Corals were sold during
the year. The two projects were 94% and
86% sold respectively as at end-2019.
Keppel Land will redevelop Nassim Woods
into 19 Nassim, a luxurious condominium
comprising about 100 homes. 19 Nassim
will feature Singapore’s first smart home
to be powered by artificial intelligence with
machine learning capabilities. Keppel Bay
Plot 4, which is adjacent to Corals at Keppel
Bay, will be developed into a world-class
waterfront living development and launched
at an opportune time, depending on market
conditions. Keppel Land is also reviewing its
plans for Keppel Bay Plot 6, a residential site
located on Keppel Island.
On 1 January 2020, Keppel Bay Tower (KBT)
became the first commercial development
in Singapore to utilise renewable energy to
power all its operations. In addition to the
installation of photovoltaic (PV) panels on
the roof of KBT, Keppel Land, through
Keppel Electric, is purchasing renewable
energy certificates generated from PV panels
installed in Keppel Offshore & Marine’s
Singapore yards.
These initiatives, combined with the new
and emerging technologies, such as an
energy-efficient air distribution system and
intelligent building control system, are part
of the continuing efforts to transform KBT
into Singapore’s first Super Low-Energy
High-Rise Existing Commercial Building.
Keppel Land will continue to leverage
technologies to push the boundaries for
environmental sustainability across it’s
portfolio of assets.
Meanwhile, Keppel Land has submitted its
redevelopment plans for Keppel Towers and
Keppel Towers 2 to the Singapore authorities.
The retail mall, i12 Katong, will undergo
major asset enhancement works in 2020,
which are expected to be completed in 2021.
Keppel Land is also collaborating with
other Keppel entities to enhance customer
experience at i12 Katong, such as the
inclusion of online-to-offline and last-mile
solutions with UrbanFox and through working
with M1 on data analytics, amongst others.
China
In 2019, Keppel Land sold about 3,400 units in
China, more than the 2,240 units sold in 2018.
Sales were supported by healthy demand
from Waterfront Residences, Park Avenue
Heights and Seasons Residences in Wuxi,
Seasons Residences in Tianjin, City Park in
Chengdu and China Chic in Nanjing.
Keppel Land continued to deepen its presence
in China, focusing on the Jing-Jin-Ji region,
Yangtze River Delta, Greater Bay Area and
the Chengdu metropolis. In 2019, it grew its
commercial portfolio in Tier 1 cities in China
with the acquisitions of three commercial
properties in Beijing and Shanghai, and
entered the Guangzhou market with the
acquisition of a stake in Westmin Plaza.
Following the success of China Chic,
Keppel Land further expanded its presence
in Nanjing, acquiring a 25% stake in a
mixed-use development.
Harnessing synergies of the Group,
Keppel Land collaborated with Keppel Capital
to invest in prime properties with the latest
acquisition of Yi Fang Tower in Shanghai.
Leveraging the Group’s strong track record
in master development, Keppel Land,
Keppel Urban Solutions (KUS) and
Keppel Capital are exploring opportunities
in cities where the Group has a presence.
Keppel Land is also jointly working with
KUS to establish a smart precinct in the
Northern district of the Sino-Singapore
Tianjin Eco-City.
Vietnam
In Vietnam, Keppel Land sold about
950 units in 2019, compared to 910 units
sold in 2018. Sales were mainly from
The Infiniti (Riviera Point Phase 1C),
Palm Garden (Palm City Phase 2) and
Narra Residences (Empire City Phase 4)
Keppel Corporation Limited
Report to Shareholders 2019
49
PERFORMANCE REVIEW
OPERATING & FINANCIAL REVIEW
PROPERTY
in Ho Chi Minh City (HCMC). As at end-2019,
The Infiniti and Palm Garden were 93% and
98% sold respectively. Narra Residences,
which was launched in December 2019,
saw a strong take-up rate with 75% of its
278 launched units sold.
In January 2019, in line with its strategy
to recycle assets to seek higher returns,
Keppel Land divested a 70% stake in
Dong Nai Waterfront City to Nam Long.
With its remaining 30% stake, Keppel Land
is working closely with Nam Long to develop
the Dong Nai township.
Keppel Land will continue to turn its assets proactively through
residential sales, en-bloc sales and divestments, while investing
strategically for growth.
Keppel Land continued to expand its
footprint in Vietnam during the year,
acquiring a 60% stake in three land parcels
in Nha Be district, Saigon South, HCMC.
The three-phase project will yield over
2,300 premium apartments with ancillary
shophouses, with the first phase launch
expected in 2020.
In November 2019, Keppel Land and KUS
broke ground for the 64-hectare (ha)
Saigon Sports City. When completed,
the project will yield about 4,300 premium
homes located in a smart, vibrant and
integrated township with a focus on
sustainability, community, connectivity
and innovation.
Others
In Indonesia, Keppel Land sold about
300 homes in 2019. Phase 1 of Wisteria,
Keppel Land’s second joint development
with PT Metropolitan Land Tbk, was
launched and sold out within a day.
Keppel Land expects to launch Phase 2
of Wisteria in 2020.
In India, Keppel Land sold about 250 units
in Provident Park Square in Bangalore
in 2019. As at end-2019, the project was
72% sold. To further scale up in India,
Keppel Land entered into an agreement
in 2019 with the Rustomjee Group to jointly
develop an additional 7,400 homes and
retail units with a total gross floor area (GFA)
of about five million square feet in the
51.4-ha integrated township in Thane,
Mumbai. Keppel Land also invested in
Smartworks, a leading and fast-growing
home-grown flexible space operator with
presence across nine major cities in India.
In the Philippines, The Podium West Tower,
a landmark Grade A office tower in Manila,
was completed in May 2019 and the
integrated mixed-use development
was officially opened in September 2019
by Madam Halimah Yacob, President of the
Republic of Singapore. The Podium was
awarded the LEED Gold (Core & Shell)
pre-certification by the US Green Building
Council and is the first building in the
Philippines to receive the provisional
Green Mark Gold Award by Singapore’s
Building and Construction Authority.
Focused on Returns
Keppel Land adopts a proactive strategy
to turn its assets to generate the best
risk-adjusted returns.
In 2019, Keppel Land completed three
divestments totalling about $400 million,
including the sale of its 70% stake in
Dong Nai Waterfront City, Vietnam.
1
2
Riding on strong demand in HCMC,
Keppel Land expanded its footprint
into Nha Be district and plans
to launch Phase 1 of the project
in 2020.
During the year, Keppel Land
completed nine acquisitions,
including Shangdi Neo in
Zhongguancun, Haidian District
in Beijing, China.
50 Report to Shareholders 2019
Keppel Corporation Limited
1
Keppel Land also completed nine investments
totalling about $500 million, including
residential sites in Nanjing, China and in
HCMC, Vietnam; commercial properties in
Beijing, Shanghai and Guangzhou, China
and a commercial site in Bangalore, India.
Focused on generating higher returns,
Keppel Land will continue to turn its assets
proactively through residential sales, en-bloc
sales and divestments, while investing
strategically for growth.
MARKET REVIEW & OUTLOOK
Singapore
In 2019, Singapore’s economy grew by 0.7%,
the slowest pace in a decade. Singapore’s
residential property sector demonstrated
resilience despite the slowing economy and
cooling measures. The Urban Redevelopment
Authority reported that about 9,900 homes
were sold in 2019, 13% higher than in 2018.
Overall prices also increased by 2.7%, but
this was lower compared to the 7.9% growth
registered in 2018.
During the year, there continued to be
healthy demand for office space arising
from the agile space, as well as technology,
financial, consumer and industrial sectors.
According to CBRE Research, average
Grade A Core CBD office rent rose
6.9% year-on-year in 4Q 2019, and the
vacancy rate of 3.9% was lower compared
to the 5.0% in 4Q 2018. While future office
demand may moderate in view of the
macroeconomic uncertainties, the supply of
Grade A office remains limited. As such, the
office market is expected to remain stable.
Amidst the uncertain economic outlook
coupled with the COVID-19 outbreak, whose
effects are still unfolding, Keppel Land will
continue 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 this demand with over 16,000 overseas
launch-ready homes from 2020 to 2022.
In 2019, China’s Gross Domestic Product
(GDP) growth slowed to 6.1%. The People’s
Bank of China cut the cash reserve
requirement ratio in 2019 to free up more
funds to banks, and more support measures
are expected to be announced.
While cooling measures have subdued
transaction volumes in general, there have
been varying trends across the different
Chinese cities. With more stringent controls
on the residential sector in Tier 1 cities,
investor interest in the commercial sector
has increased, underpinned by strong
2
local economies. Meanwhile, rapid
urbanisation and a fast-growing middle
class continue to drive demand for
high-quality homes in Tier 2 cities.
In 2020, Keppel Land will continue to
watch the Chinese market closely,
especially following the COVID-19
outbreak, and time the release of its
2,600 launch-ready homes across
China accordingly.
In Vietnam, GDP growth in 2019 remained
strong at 7%. The residential market in
HCMC remains robust, underpinned by
urbanisation trends and a growing middle
class. Demand continued to outstrip
supply in the condominium sector in 2019.
According to CBRE, nearly 30,000 units
were sold in 2019 compared with
about 27,000 units launched in HCMC.
Average selling prices of homes in HCMC
increased across all segments in 2019.
Meanwhile, Grade A office supply in
HCMC’s CBD remains limited, driving up
rents by 1% in 2019.
In Indonesia, GDP growth was 5% in 2019.
With the uncertainty of the presidential
elections now over, investor sentiment
is anticipated to improve. While the
condominium and office markets are
facing headwinds due to oversupply,
the landed housing market remains stable.
In India, GDP growth softened to 4.9%
in FY 2019/20. Notwithstanding the
economic slowdown, the India
real estate market continues to remain
resilient, underpinned by stable
economic fundamentals in key cities.
With a pipeline of about 45,200 residential
units and a total commercial footprint of
1.6 million square metres of GFA in key
Asian cities, Keppel Land is well positioned
to capitalise on the long-term demand for
homes, office and retail spaces in its
target markets.
New Business Engines
With disruptions challenging the traditional
real estate business, Keppel Land is
developing new business engines to
cater to customers’ evolving needs.
Keppel Land is growing its co-working
platforms through KLOUD in Singapore,
Myanmar and Vietnam as well as through
Smartworks in India. Keppel Land is also
experimenting with co-living concepts
overseas via Waterfront Residences
in Wuxi, China, and West Vista in Jakarta,
Indonesia. Meanwhile, the retail mall
i12 Katong in Singapore is undergoing
major asset enhancements which,
when completed, will offer intuitive and
personalised services across a wide range
of retail offerings to complement customers’
lifestyles. With updated amenities and
leveraging technology, the mall will
also feature specially curated zones
with modular learning spaces and
open social areas to foster a sense
of community.
Keppel Corporation Limited
Report to Shareholders 2019
51
PERFORMANCE REVIEW
OPERATING & FINANCIAL REVIEW
INFRASTRUCTURE
WE DEVELOP, OWN
AND OPERATE QUALITY
INFRASTRUCTURE
ASSETS AND PROVIDE
CONNECTIVITY
SOLUTIONS.
EARNINGS HIGHLIGHTS ($ million)
Revenue
EBITDA
Operating Profit
Profit before Tax
Net Profit
Average Headcount (Number)
Manpower Cost
2019
2,927
172
114
188
169
2,521
201
2018
2,629
150
106
184
169
2,698
183
2017
2,207
169
125
170
134
2,618
180
MAJOR DEVELOPMENTS IN 2019
FOCUS FOR 2020/2021
Construction of Keppel Marina East
Desalination Plant is on track for
completion in 2020.
Expanded energy and environmental
capabilities with investments in
MET Holding and Zerowaste Asia.
Completed first LNG cargo import from
North America.
Maintained Keppel Electric’s position
as one of the largest OEM retailers
in Singapore.
Continued to grow the Group’s data
centre business, and injected Keppel DC
Singapore 4 into Keppel DC REIT.
Grew logistics network and omnichannel
solutions offerings to customers
beyond Singapore.
Continue to seek out value-enhancing
projects locally and overseas,
leveraging the Division’s project
development, engineering, operation
and maintenance expertise.
Harness the strength of an integrated
gas, power and district cooling platform
to pursue growth opportunities.
Continue to build up a portfolio of
quality data centre assets and provide
higher value services to customers.
Extend and develop new B2C retail and
marketing capabilities in electricity,
e-commerce and urban logistics,
adding value to product offerings and
improving customer experience.
Strengthen collaboration with
Keppel Capital to tap third-party funds
for growth.
52 Report to Shareholders 2019
Keppel Corporation Limited
EARNINGS REVIEW
The Infrastructure Division comprises the
Group’s businesses in energy, environment
and infrastructure services, as well as
data centres and logistics.
The Infrastructure Division’s revenue for
FY 2019 was $2.9 billion, an increase
of 11% or $298 million from FY 2018’s
net profit. This was mainly due to increased
sales in the power and gas business, as well
as higher progressive revenue recognition
from ongoing infrastructure projects.
The Division’s net profit of $169 million
for FY 2019 was comparable to the previous
year’s. Keppel Infrastructure continued to
grow as a steady contributor to the Group’s
earnings, with net profit improving to
$133 million for FY 2019, from $117 million
for FY 2018, due to improved performance
from Energy Infrastructure and
Environmental Infrastructure.
Attesting to the Group’s ability
to create value through its eco-system,
Alpha Data Centre Fund (Alpha DC Fund)
and Keppel Data Centres (KDCH) divested
Keppel DC Singapore 4 (KDC SGP 4) to
Keppel DC REIT in FY 2019, with KDC SGP 4
contributing about $50 million in revaluation
and divestment gains.
In FY 2019, the Infrastructure Division
contributed 24% to the Group’s net profit.
ENERGY INFRASTRUCTURE
Operating Review
Our Energy Infrastructure business achieved
commendable financial performance in 2019.
Keppel Electric continued to grow its
customer base across commercial,
industrial and residential users in 2019.
Keppel Electric is also one of the largest
Open Electricity Market (OEM) retailers,
with about 26% market share of residential
consumers as of December 2019.
During the year, Keppel Electric and M1
collaborated to bundle its services, thereby
enhancing customer experience and
allowing the Group to gain a bigger share
of customers’ wallets.
Keppel Gas remains focused on providing
customers with competitive, value-added
gas supply options. In 2019, the company
successfully completed its first Liquefied
Natural Gas (LNG) cargo import from
North America under Singapore’s Spot
Import Policy. The LNG cargo was
re-gasified as feedstock for downstream
customers and end users, including the
Keppel Merlimau Cogen plant.
In 2019, Pipenet was awarded two
contracts worth $100 million by JTC
Corporation to design and build pipe racks,
crude oil pipelines and ancillary facilities
on Jurong Island, Singapore. To be
completed in 2020, the facilities will enable
the transportation of crude oil between
the Jurong Rock Caverns and its users,
aiding commercial activity.
Meanwhile, Keppel DHCS remained active
during the year, increasing the customer
base for its one-north facility.
Keppel Electric is one of the largest OEM retailers,
with about 26% market share of residential consumers
as of December 2019.
In 2019, Keppel Infrastructure entered into
an agreement to acquire a 20% stake in
MET Holding (MET), an integrated European
energy company headquartered in
Switzerland. The investment marks
Keppel Infrastructure’s first foray into the
European energy market to gain exposure to
the growing energy platforms that MET is
active in. The two companies will enter into
a strategic partnership to jointly explore
investment opportunities focusing on
European energy infrastructure assets.
Market Review & Outlook
In 2019, LNG prices softened due to ample
supply and lacklustre demand resulting
from warmer-than-expected weather.
This provided opportunities for Keppel’s
integrated gas and power business to
optimise its fuel cost. The ample supply
of LNG is likely to continue in 2020.
During the year, Keppel DHCS expanded
the customer base in its one-north facility.
Keppel Corporation Limited
Report to Shareholders 2019
53
PERFORMANCE REVIEW
OPERATING & FINANCIAL REVIEW
INFRASTRUCTURE
Meanwhile, the district cooling systems
(DCS) sector continues to experience a steady
increase in demand, with a compounded
annual growth rate (CAGR) of 6.6% since
2010. This is driven by the Singapore
government’s intensification of land use
and promotion of sustainable cooling.
Keppel DHCS will continue to pursue
growth opportunities in Asia to expand its
geographical reach.
ENVIRONMENTAL INFRASTRUCTURE
Operating Review
Our Environmental Infrastructure business
performed well in 2019, underpinned by
contributions from infrastructure projects
in Hong Kong and Australia. During the year,
Keppel Seghers continued to execute its
infrastructure projects well, focusing on
safety and quality.
In Singapore, construction of the dual-mode
Keppel Marina East Desalination Plant
(KMEDP) is progressing well. The facility
is currently undergoing testing and
commissioning and is on track for completion
in 2020. Upon completion, KMEDP will
contribute to the resilience of Singapore’s
water supply. KMEDP’s design also blends
seamlessly into the environment, allowing
the public to enjoy the green space above
the plant along with the surrounding
greenery of the Marina Bay area.
Meanwhile, the engineering design work for
the Hong Kong Integrated Waste Management
Facility (IWMF) is making good progress
and key procurement packages have been
secured. Prefabrication works for the
Hong Kong IWMF have commenced and
reclamation works are ongoing.
In China, Keppel Seghers maintained its
position and track record as a leading
imported waste-to-energy (WTE) technology
solutions provider. In 2019, Keppel Seghers
successfully delivered WTE technology
solutions for three plants and is currently
executing six projects with a total incineration
capacity of over 14,000 tonnes per day (tpd).
Meanwhile, the Baoan III WTE plant in
Shenzhen is on track for completion in 2020.
Upon completion, the location will house
over 8,800 tpd of incineration capacity,
making it the world’s largest incineration
facility from a single technology provider.
Amidst rapidly depleting landfill
capacities and rising public awareness
of environmental and pollution issues,
governments around the world have
become more proactive in sourcing for
sustainable waste management solutions.
Thus, the adoption of WTE technology as
the preferred long-term waste management
solution has been gaining traction.
In Australia, engineering design work and
procurement of key packages are advancing
for the Kwinana WTE plant. The plant is
expected to be completed in 2021.
In December 2019, Keppel Seghers
entered into an agreement to acquire an
18.2% stake in Zerowaste Asia (Zerowaste).
The Singapore-based company offers
one-stop environmental solutions for
industrial solid waste and wastewater
treatment. The strategic investment of
Zerowaste complements and enhances
Keppel Seghers’ suite of environmental
solutions, creating new opportunities for
the Group as a provider of solutions for
sustainable urbanisation.
In 2020, Keppel Seghers secured
two contracts in Ahmedabad and Rajkot
in India with a total capacity of 1,700 tpd.
This signifies increasing interest in WTE
as a viable waste treatment option for
many states of India.
Market Review & Outlook
According to the United Nations’ World
Population Prospects 2019 report, the
global population is expected to reach
8.5 billion in 2030 from 7.7 billion in 2019.
Waste generation is also expected
to grow correspondingly. Concurrently,
growing social awareness on environmental
issues has led to increased pressure
on governments and corporations to
adopt more holistic and sustainable
economic development.
In China, as part of the nation’s focus on
sustainable waste management, the
Government plans to add over 100 WTE
facilities across the country over the
next few years.
In major cities across Southeast Asia (SEA),
the need to implement modern waste
management solutions before the end of
the lifespan of existing landfills has become
imperative. In Singapore, the inaugural launch
of its Zero Waste Masterplan saw significant
milestones including the passing of the new
Resource Sustainability Bill and National
Environment Agency’s tender launch for a
state-of-the-art IWMF which can treat up to
5,800 tpd of incinerable waste and recover
up to 250 tpd of recyclable waste.
The increasing global focus on zero waste
and a circular economy model will lead to
greater focus on investments into sustainable
and integrated waste management
solutions. Leveraging its advanced
technology and strong execution track
record, Keppel Seghers is well positioned
to support governments and industries with
its sustainable environmental solutions.
INFRASTRUCTURE SERVICES
Operating Review
Keppel Infrastructure Services (KIS)
continued to contribute steadily to the Group’s
recurring income base. KIS remained focused
on maintaining high operation standards
by maximising availability, reliability and
efficiency of its assets. Guided by the belief
1
The Hong Kong IWMF will add to
the Group’s recurring income when
it commences its 15-year operation
and maintenance contract in 2024.
During the year, KDC SGP 4 was
injected into Keppel DC REIT.
2
1
54 Report to Shareholders 2019
Keppel Corporation Limited
that every incident is preventable, KIS
operates and maintains assets in its
portfolio with a focus on safety.
In 2019, the Domestic Solid Waste
Management Centre in Doha, Qatar,
upgraded its Separation and Recycling plant,
improving its capacity and reliability, as well
as its recovery efficiency of ferrous and
non-ferrous metals and plastics.
Meanwhile, in Singapore, Keppel Seghers
Tuas WTE plant achieved its highest
availability and shortest overhaul period
since commencing operations in 2009.
Upon commencement of KMEDP’s
commercial operations in 1H 2020, KIS will
operate and maintain the plant for 25 years.
KMEDP, with its unique dual-flow feed, will
broaden KIS’ operation and maintenance
capability and portfolio of water solutions.
KIS will continue to set the benchmark for
high-quality infrastructure services, while
seeking to positively impact and improve
outcomes. Through knowledge sharing
across assets, KIS is able to design and
deploy unique solutions to create long-term
value for customers. Through the operation
and maintenance of assets in its portfolio,
KIS will continue to generate recurring
income for the Group.
Market Review & Outlook
Digitalisation, Industry 4.0 and climate
change have become integral parts
of government and industry blueprints,
creating exciting opportunities for KIS to
enhance its operation and maintenance
practices and solutions. KIS is actively looking
at automating selected processes across
the plants that it operates and maintains.
Supporting the Group’s commitment to
build a sustainable future, KIS will continue
to actively seek new projects spanning
DCS, water, WTE and power to deliver
high-quality, value-added operation and
maintenance services.
DATA CENTRES
Operating Review
In 2019, 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 25 high-quality data centres,
including four under development, across
14 cities in the Asia Pacific and Europe.
KDCH and Alpha DC Fund continued to grow
their portfolio and make headway in the
development of their assets during the year.
In 2019, Alpha DC Fund and KDCH divested
KDC SGP 4 to Keppel DC REIT. The asset
2
generated total gains of about $83 million for
the Group from 2016 through to divestment.
In addition, after the injection of KDC SGP 4
into Keppel DC REIT, the Keppel Group will
continue to earn recurring income from the
operation and maintenance of the asset,
as well as asset management fees.
The divestment of KDC SGP 4 is an example
of how the Keppel Group creates value
and generates different income streams
throughout the life cycle of its assets.
The divestment of KDC SGP 4 is an example of how
the Keppel Group creates value and generates different
income streams throughout the life cycle of its assets.
In Australia, Alpha DC Fund acquired a plot
of freehold land in Gore Hill Technology Park
to develop Keppel DC Sydney 1, the Fund’s
first greenfield data centre in Australia. The
construction of the data centre’s shell and
core, as well as initial fit-out, are expected to
be completed by 1H 2021.
In SEA, KDCH commenced construction
of its greenfield data centre in an industrial
park in Johor, Malaysia. Upon completion
in 2020, the data centre will be fully
committed by the customer. Meanwhile,
KDCH also commenced construction of
Keppel Corporation Limited
Report to Shareholders 2019
55
PERFORMANCE REVIEW
OPERATING & FINANCIAL REVIEW
INFRASTRUCTURE
IndoKeppel Data Centre 1, a greenfield
data centre located in Bogor, Indonesia.
The construction of the data centre’s core
and shell, as well as first phase fit-out,
are expected to be completed by 2H 2020.
KDCH and Alpha DC Fund entered into
several strategic partnerships in 2019
to strengthen their capabilities and
the Group’s position as the data centre
industry’s partner of choice.
With their high internal loads and the need
for continuous cooling and operations in
tightly-controlled environments, data centres
are large consumers of power. As a leading
provider of data centre solutions, KDCH is
focused on developing greener data centres.
In 2019, National University of Singapore’s
Faculty of Engineering, KDCH and Singapore
LNG Corporation announced a collaboration
to develop novel, energy-efficient and
cost-effective cooling technology for data
centres, which could pave the way for more
sustainable and compact data centres.
Harnessing synergies across the Group,
Keppel Telecommunications & Transportation
(Keppel T&T) is also pursuing innovative
new data centre solutions in collaboration
with other business units, including
high-rise green data centres and floating
data centre parks.
Market Review & Outlook
The proliferation of the Internet of Things,
big data, artificial intelligence and cloud-based
services continue to drive demand for
data centres.
According to GlobalData, a data analytics
and consulting company, Asia Pacific is
expected to become the second largest
region for data centre and hosting services,
reaching 30% by 2023, to be closely followed
by Europe. Within the colocation market,
Cushman & Wakefield expects Asia Pacific
and Singapore to record CAGRs of around 12%
and 5% respectively between 2019 and 2024.
Singapore is on track to roll out 5G mobile
networks by 2020, and Keppel is well
positioned to tap the resultant demand for
data centres arising from 5G developments.
KDCH will continue to work closely with
Alpha DC Fund to proactively seek new
development and acquisition opportunities
in the Asia Pacific and Europe. KDCH 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.
LOGISTICS
Operating Review
In 2019, Keppel Logistics continued to
build new capabilities and expanded its
omnichannel solution offerings to
customers in SEA.
warehouse is well positioned to support
the growth of Australia’s businesses.
Keppel Logistics maintained an
average warehouse occupancy rate in
Singapore of over 70% during the year.
The company also began upgrading
its Singapore facilities to better serve
its customers, especially in niche
sectors such as healthcare.
As part of Keppel T&T’s strategic review
of its logistics portfolio in China and to
streamline its operations and better allocate
resources, Keppel T&T divested Keppel
Logistics (Foshan) and Keppel Logistics
(Hong Kong) for a total consideration of
about $39 million in 2019.
In 2019, Keppel Logistics ramped up the
integration of UrbanFox which will allow
the Logistics division to capture new growth
opportunities in the e-commerce market
and provide omnichannel logistics solutions
to customers.
UrbanFox grew its customer base to over
500 brands as at end-2019 from over 200
brands as at end-2018. UrbanFox expanded
its presence in SEA, launching its channel
management services in Malaysia and
Vietnam in 2H 2019, and was appointed
as a cross-border e-commerce initiative
partner by the Malaysian Digital Economy
Corporation. The company will continue
to grow its suite of omnichannel logistics
services overseas.
In Vietnam, Indo-Trans Keppel Logistics
Vietnam improved its operational efficiency
through the consolidation of its warehouse
operations. Meanwhile, PT Keppel Puninar
Logistics established its first warehouse
operation in Surabaya, Indonesia and Keppel
Logistics’ Malaysia warehouse was digitally
enabled to perform B2C order fulfilment.
Further afield in Australia, Keppel Logistics
relocated its operations to a larger warehouse
in Rochedale, Brisbane. With better
connectivity and larger capacity, the new
In Anhui province, the Wuhu Sanshan Port
experienced an increase in cargo handling
in 2019 due to an increase in customers’
requirements. Meanwhile, the construction
of the Keppel Wanjiang International
Coldchain Logistics Park was completed
in April 2019, and the park has started
providing integrated third-party logistics
services to customers.
Market Review & Outlook
Despite headwinds in the macroeconomic
environment, the e-commerce market
in Asia remains promising. According
to a joint study by Google, Temasek and
Bain & Company published in 2019, SEA’s
internet economy reached US$10 billion
in 2019, driven mainly by e-commerce
and ride hailing. The study reported that
the internet economy would grow to
US$300 billion by 2025, with Indonesia and
Vietnam leading the way at growth rates
of over 40% per annum. Meanwhile, the
internet economies in Singapore, Malaysia,
Thailand and the Philippines are expected to
grow at between 20% and 30% per annum.
Leveraging the Group’s international
presence and its integrated end-to-end
services, Keppel Logistics is well
positioned to tap the growing demand
for e-commerce in the region.
During the year, Keppel Logistics built new
capabilities and expanded its omnichannel
solution offerings to customers in SEA.
56 Report to Shareholders 2019
Keppel Corporation Limited
PERFORMANCE REVIEW
OPERATING & FINANCIAL REVIEW
INVESTMENTS
WE CREATE VALUE
FOR SHAREHOLDERS
BY INVESTING
STRATEGICALLY AND
DEVELOPING NEW
GROWTH ENGINES.
EARNINGS HIGHLIGHTS ($ million)
Revenue
EBITDA
Operating Profit/(Loss)
Profit/(Loss) before Tax
Net Profit/(Loss)
Average Headcount (Number)
Manpower Cost
2019
1,097
353
195
83
11
1,424
249
2018
121
(16)
(22)
(19)
(54)
554
146
2017
173
177
175
290
238
416
110
MAJOR DEVELOPMENTS IN 2019
FOCUS FOR 2020/2021
Completed the privatisation
of M1, together with
Singapore Press Holdings (SPH).
Keppel Capital expanded alternative
asset classes with a debt
mezzanine platform.
Keppel’s listed REITs and Trust
continued to seize opportunities and
create value for Unitholders through
active investments and divestments
across Singapore, South Korea, Germany
and the United States.
Prime US REIT, of which Keppel Capital
is a strategic partner, was successfully
listed.
Keppel Capital will continue working
with other Keppel entities to co-create
real assets and grow the Group’s asset
management business.
Keppel and SPH will continue to work
with M1’s board and management to
drive M1’s transformation and growth.
Continue development of the
Sino-Singapore Tianjin Eco-City to
realise its vision of being a model for
sustainable urbanisation in China.
Keppel Urban Solutions will focus
on developing Saigon Sports City
in Vietnam into a smart, integrated
township, while exploring opportunities
in the Asia Pacific.
Keppel Corporation Limited
Report to Shareholders 2019
57
PERFORMANCE REVIEW
OPERATING & FINANCIAL REVIEW
INVESTMENTS
1
2
Alpha DC Fund completed its first
divestment in 2019 with the sale of
KDC SGP 4 to Keppel DC REIT,
creating value for the Group.
Saigon Sports City in Ho Chi Minh
City, which broke ground in 2019,
is jointly developed by Keppel Land
and Keppel Urban Solutions.
1
EARNINGS REVIEW
The Investments Division comprises mainly
Keppel Capital, Keppel Urban Solutions
(KUS) and M1, as well as the Group’s
investments in KrisEnergy and the
Sino-Singapore Tianjin Eco-City Investment
and Development Co., Ltd.
Revenue for the Investments Division
increased by $976 million to $1.1 billion
for FY 2019, mainly due to the consolidation
of M1 and higher revenue from the asset
management business.
Keppel Capital will continue to play a key role in working
with business units across the Keppel Group to co-create
real assets that the Group can develop, own and operate.
The Division generated a net profit of
$11 million for FY 2019, compared to
a net loss of $54 million for FY 2018,
mainly due to fair value gain from the
re-measurement of previously held interest
in M1 arising from the acquisition, higher
contribution from asset management and
consolidation of M1’s results, as well as
lower provision for impairment of an
associated company.
Excluding charges related to the acquisition
of M1, the Division’s net profit would have
been $56 million.
KEPPEL CAPITAL
Operating Review
2019 was an active year for Keppel Capital
as it continued to expand into new markets
and asset classes. Keppel Capital grew its
assets under management to about $33 billion
as at end-2019 from $29 billion as at end-2018,
on a fully leveraged and invested basis. In 2019,
the company completed about $8.4 billion
in acquisitions and divestments, and raised
equity and debt of over $9.5 billion.
Real Estate
In 2019, Keppel REIT Management continued
its portfolio optimisation strategy to position
Keppel REIT for long-term sustainable
growth. During the year, Keppel REIT entered
the Seoul office market with the acquisition
of T Tower, a freehold CBD Grade A building.
The geographical diversity of the REIT’s
assets across Singapore, Australia and
South Korea enables it to deliver sustainable
income over time. In Singapore, Keppel REIT
also unlocked value with the divestment of
Bugis Junction Towers for $547.7 million,
having achieved strong capital gains and
returns since acquiring the asset in 2006.
While seizing opportunities to unlock value
and capture growth, the Manager remains
focused on driving asset performance.
As at end-2019, Keppel REIT reported strong
portfolio committed occupancy of 99.1%
and a long portfolio weighted average lease
expiry (WALE) of 4.9 years, enhancing the
REIT’s income resilience.
Meanwhile, Keppel Pacific Oak US REIT
(KORE) delivered on its IPO forecast for
FY 2019. KORE also completed two strategic
acquisitions in Orlando and Dallas, expanding
its footprint in the United States (US). The
acquisitions are in line with KORE’s strategy
to focus on key growth markets with positive
leasing dynamics, strong office fundamentals
and high-quality tenants.
Driven by strong leasing from the technology
sector, KORE ended 2019 with positive rental
reversion of 14.3%, portfolio committed
occupancy of 93.6% and WALE by cash
rental income of 4.2 years.
2019 also saw the successful listing of
Prime US REIT, of which Keppel Capital is
a strategic partner. The acquisition of a 30%
interest in the Manager of Prime US REIT
allows Keppel Capital to deepen its participation
in the US commercial sector and continue to
grow recurring income for the Group.
58 Report to Shareholders 2019
Keppel Corporation Limited
In October 2019, the remaining lease value
in DC1 was realised with the divestment
of KIT’s 51% stake in the data centre.
KIFM expects to redeploy proceeds from
this divestment into quality acquisitions that
will strengthen KIT’s portfolio, as well as
for refinancing and working capital needs.
Alternative Assets
In February 2019, Keppel Capital entered
into a conditional share subscription
agreement with Golar LNG (Golar) and
Gimi MS Corporation (Gimi MS) to subscribe
for 30% of the total issued ordinary share
capital of Gimi MS, which owns the Gimi
floating liquefaction vessel (FLNG), currently
being converted by Keppel Offshore & Marine
(Keppel O&M).
In January 2020, Keppel Capital
launched and achieved first closing of
Keppel Asia Infrastructure Fund, a closed-end
infrastructure private equity fund with a
target size of US$1 billion. The Fund and its
co-investment vehicles have received initial
capital commitments of US$360 million
from investors including a sovereign wealth
fund and an endowment fund. The Gimi FLNG
project, which is intended to be a seed asset
for the Fund, is a testament of the Group’s
ability to create value by harnessing synergies
to create quality solutions for customers
that also serve as good investment assets
for both private and public investors.
In 2019, Keppel Capital also extended its
fund management capabilities beyond
the equity layer to include a private debt
mezzanine platform. This followed the
signing of a conditional sale and purchase
agreement in November 2019 to acquire
a 50% interest in Pierfront Capital
Fund Management.
Business Outlook
Looking ahead, Keppel Capital strives
to continue to be the choice partner for
investors looking to invest in high-quality real
assets in sectors fuelled by urbanisation
trends. These include cash-generating real
assets that the Group develops and operates
such as data centres, power and desalination
plants, as well as offshore vessels.
Keppel Capital will continue to play a key role
in working with business units across the
Keppel Group to co-create real assets that
the Group can develop, own and operate.
KEPPEL URBAN SOLUTIONS
KUS is an end-to-end master developer
of smart, sustainable urban townships
that leverages the Group’s wide-ranging
expertise and strong track record in the
planning and development of large-scale
projects in the Asia Pacific. 2019 was an active
year for KUS as it deepened its presence in key
markets and established new partnerships.
To meet the rapidly-changing aspirations
of urbanites, KUS owns and operates the
Keppel Smart City Operating System (KOS),
an integrated digital platform to be deployed
in KUS’ township projects. With KOS’ open
standards environment and insight-driven
data analytics, KUS can deliver greater
efficiency in designing, developing and
operating urban developments. The digital
platform will also connect the Group’s assets
and developments globally.
In November 2019, Keppel Land and
KUS broke ground for Saigon Sports City
in District 2, Ho Chi Minh City. Through
collaboration with best-in-class local and
international partners, Saigon Sports City
will offer innovative urban solutions and
Alpha Investment Partners’ (Alpha) private
funds were active during the year, completing
US$2.4 billion in divestments and committing
to over US$2.2 billion of investments in gross
asset value across Beijing, Brisbane, Jakarta,
Seoul, Shanghai, Singapore, Sydney, Taipei
and Tokyo. As at end-2019, Alpha Asia Macro
Trends Fund (AAMTF) III was almost fully
committed following several notable
investments during the year, including interests
in Yi Fang Tower in Shanghai, three Grade A
freehold commercial buildings in Seoul and
Ronsin Technology Center in Beijing.
Macrotrends including urbanisation,
consumerism, ageing population and the
drive for connectivity continue to present
exciting opportunities in the Asian real assets
space. Alpha continues to draw interest,
both from existing and new investors, for
its AAMTF series. It is looking to launch the
AAMTF IV and achieve first close in 2020.
Data Centres
Keppel DC REIT Management maintained
its focused investment strategy of
seeking quality income-producing assets
that complement the REIT’s portfolio.
In 2019, Keppel DC REIT strengthened its
Singapore footprint with the acquisitions
of Keppel DC Singapore 4 (KDC SGP 4)
and DC1, and announced the acquisition
of Kelsterbach DC, a shell and core purpose-
built data centre facility located near the
Frankfurt Airport in Germany.
As at end-2019, Keppel DC REIT’s portfolio
occupancy remained healthy at 94.9% with
a WALE by leased area of 8.6 years, providing
good income visibility to Unitholders.
In collaboration with Keppel Data Centres,
Alpha Data Centre Fund (Alpha DC Fund) is
developing Keppel DC Sydney 1 in Australia.
Expected to be completed in phases from
1H 2021, the data centre will be strategically
located adjacent to Gore Hill Data Centre,
an existing data centre in Keppel DC REIT’s
portfolio. In 2019, Alpha DC Fund completed
its first divestment with the sale of KDC SGP
4 to Keppel DC REIT.
Infrastructure
In February 2019, Keppel Infrastructure Fund
Management (KIFM), the Trustee-Manager of
Keppel Infrastructure Trust (KIT) completed
the acquisition of Ixom HoldCo Pty Ltd
(Ixom) in Australia. Bolstered by its leading
market position and defensive business
model supported by long-term industry
fundamentals, Ixom is well placed to deliver
steady cash flows to KIT.
During the year, KIFM successfully raised
gross proceeds of about $500.8 million
through a private placement cum preferential
offering to partially repay the bridge loan for
the acquisition of Ixom.
2
Keppel Corporation Limited
Report to Shareholders 2019
59
PERFORMANCE REVIEW
OPERATING & FINANCIAL REVIEW
INVESTMENTS
incorporate sustainable environmental
infrastructure. These include the adoption
of energy-efficient retail cooling systems
and street lighting; smart metering for
monitoring and predictive maintenance;
water-sensitive urban design features to
enhance flood resiliency and biodiversity;
smart Internet of Things (IoT) home devices,
smart car-parking solutions and an integrated
SSC mobile application to help create
engaged, active and inclusive communities.
In China, KUS and Keppel Land China
are jointly developing a 166-hectare (ha)
land plot in the Northern district of the
Sino-Singapore Tianjin Eco-City. The precinct
is envisioned to be a model for smart
sustainable development, which will apply
state-of-the-art technology and solutions
in domains such as mobility, security and
resource efficiency to enhance liveability
and connectedness within the township.
In Indonesia, KUS and Keppel Land
will collaborate to jointly develop
a 30-ha township strategically located
in Bogor, Indonesia. In December 2019,
Keppel Land signed a memorandum of
understanding (MOU) with the landowners
and construction of the township is
expected to commence in 2021.
The township is envisaged to be an iconic
river township in Bogor and greater Jakarta,
incorporating Singapore’s Active, Beautiful,
Clean Waters Design Guidelines, walkable
and self-sufficient town planning principles,
energy-efficient sustainable solutions
and innovative residential products.
In 2019, KUS signed an MOU with AECOM,
the world’s leading infrastructure firm,
to cooperate in the area of urban solutions.
This partnership enables both companies
to combine their respective strengths and
expertise to jointly explore development
opportunities in the Asia Pacific region.
M1
In FY 2019, M1’s total revenue grew
to $1.1 billion, 4% higher compared to
FY 2018’s revenue. Of this, mobile services
revenue decreased by 5% to $542 million
and accounted for 48% of M1’s revenue,
compared to $569 million a year ago.
M1 expanded its customer base
to 2.33 million as at end-2019,
of which mobile customers increased
by 152,000 year-on-year (y-o-y) to
2.11 million and fibre customers
increased by 13,000 y-o-y to 222,000.
Postpaid mobile customer base grew by
151,000 y-o-y to 1.54 million, driven by the
launch of the new One Plan in May 2019,
while prepaid mobile customer base rose
by 1,000 y-o-y to 573,000.
Strengthening its consumer business to
meet changing customer needs and
expectations, M1 refined its mobile offerings
by replacing all its 19 plans with one new
base plan each for SIM-only and handset
bundles in May 2019. Customers can also
build and personalise the plans over
the base plan according to their expected
usage and needs. The simplification
offers customers greater flexibility and
personalisation through a made-to-measure
mobile plan. To further improve customer
experience, M1 also revamped its website
to incorporate a streamlined interface that
is more intuitive for customers.
M1 is also actively collaborating with
other Keppel entities to create smarter,
future-ready offerings such as smarter rigs,
advanced yards of the future, autonomous
vessels and smarter urban solutions.
For example, Keppel O&M is partnering
M1 to leverage M1’s ultra-low latency
4.5G network connectivity to establish
standards and data transfer links
1
in terms of latency and reliability for
ship-to-shore communication, and support
mission-critical IoT maritime applications.
The enterprise business segment is a key
pillar of growth as M1 continues to harness
synergies as part of the Keppel Group, and
also enhance capabilities and offerings
across its connectivity, and information
and communications technology (ICT)
businesses through AsiaPac Distribution.
Since its privatisation, M1 has achieved
strong double-digit customer growth of
about 200% y-o-y for its mobile, fixed and
ICT business.
Tapping the $16 billion1 B2B Connectivity
and ICT market in Singapore, a key area of
focus for M1 is the development of platforms
and initiatives to support enterprise customers
such as governments, large corporations, as
well as small and medium-sized enterprises
(SMEs). In 2019, M1 participated in the Smart
Digital initiative launched by Infocomm Media
Development Authority (IMDA) and Enterprise
Singapore. This is part of M1’s plans to
participate in more of IMDA’s initiatives catered
for SMEs and introduce more customised
solutions for enterprise customers.
In 2019, M1 stepped up its efforts and made
significant headway into 5G developments,
embarking on several 5G trials and research
collaborations. Teaming up with institutes
of higher learning, M1 is partnering
Nanyang Technological University to
develop Singapore’s first standalone
5G C-V2X (cellular vehicle-to-everything)
research testbed and trials, and with
Singapore University of Technology and
Design to embark on a joint research
partnership around remote operation of
tactile robots using 5G technology.
M1 is also working closely with Singapore
government agencies, industry players
and enterprises to co-develop 5G use cases
for selected markets. In June 2019, M1
won a 5G trial tech call from IMDA and
Port of Singapore Authority to test 5G
technologies in a live Smart Port environment,
focused on early trials of 5G-enabled
innovative Smart Port use-cases including
tele-remote-controlled equipment and
automated guided vehicles. In addition,
M1 also announced its first F&B and retail
5G use-case collaboration with Haidilao to
set up a trial 5G network for the chain’s first
5G experimental smart restaurant.
In February 2020, M1 and StarHub
submitted a joint bid for a 5G licence.
1 Gartner Market Statistics – Forecast: IT Services,
Worldwide, 2017-2023, 3Q19 Update.
2 These figures include the Tourism District and
Central Fishing Port.
60 Report to Shareholders 2019
Keppel Corporation Limited
SINO-SINGAPORE TIANJIN ECO-CITY
In 2019, the Sino-Singapore Tianjin Eco-City
(Eco-City) built on the strong foundation
of its first decade by further integrating
smart city elements into its development,
with the launch of a smart city KPI
system and the establishment of a
Smart City Operations Centre.
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.
Since breaking ground in 2008,
the Eco-City has evolved into a thriving
community featuring three neighbourhood
centres, five libraries, three health services
centres, a hospital and 18 schools with
about 12,000 students. Over 100,000
people2 live and work in the Eco-City,
with over 8,800 registered companies2
to date.
Notwithstanding the property cooling
measures in Tianjin, the Eco-City remains
a highly sought-after residential township
within the Tianjin Binhai New Area.
Demand for homes in the Eco-City
remained healthy in 2019, with a total
of about 4,100 homes sold, up 49.5%
from 2018. With the development of the
Start-Up Area successfully completed,
SSTEC is focusing on developing the
Eco-City’s future city centre in the Central
District. Reflecting the continued market
confidence in the Eco-City’s growth,
SSTEC sold two residential land plots in
the Central District in 2019. In addition,
in 2019, projects developed by SSTEC sold
about 360 homes, while its JV projects sold
about 300 homes.
The Eco-City continues to be a key
government-to-government project
and platform for bilateral cooperation
between Singapore and China. At the
11th Tianjin Eco-City Joint Steering Council
(JSC) meeting in October 2019 co-chaired
by Singapore’s Deputy Prime Minister (DPM)
Heng Swee Keat and Chinese Vice Premier
Han Zheng, an MOU to promote the
replication of the Eco-City’s development
experience in other Chinese cities and along
the Belt and Road, was signed. DPM Heng,
together with other ministers and senior
officials, also made a visit to the Eco-City
after the JSC.
Different business units in the Keppel Group
are contributing to the Eco-City’s development.
In 2019, Keppel Land China sold about
300 homes in the Eco-City. As at end-2019,
Keppel Land China had launched about
5,000 homes in the Eco-City, of which
about 94% had been sold.
2
1
DPM Heng Swee Keat (seated, third
from left) visited the home of a
resident in Tianjin Eco-City. He was
accompanied by Singapore’s ministers
and officials, Keppel Corporation’s
Chairman Dr Lee Boon Yang
(standing, second from left) and senior
management from Keppel Land China.
2
M1 is actively collaborating with
other Keppel entities to create
smarter, future-ready solutions.
Seasons City, Keppel Land China’s
commercial development in the Eco-City,
is currently under construction. Phase 1,
comprising a five-storey retail complex
and a 10-storey office tower, is targeted
for completion in 2021. Reflecting Keppel’s
focus on sustainability, in June 2019,
Keppel Land secured its first green loan
facility amounting to RMB850 million from
HSBC Group China for the development of
Seasons City (Phase 1).
In October 2019, Keppel Land signed a
non-binding Smart City Strategic Cooperation
Agreement with the Sino-Singapore Tianjin
Eco-City Administrative Committee to
develop the Sino-Singapore Smart City
Innovative Research Cooperation Platform,
where both parties will conduct research and
explore smart applications in areas such as
smart buildings, smart energy management,
clean energy, community living and
environmental protection.
During the year, Keppel Telecommunications
& Transportation’s logistics distribution
centre in the Eco-City enhanced its customer
portfolio and increased the volume of cargo
handled by 25% y-o-y. The Sino-Singapore
Tianjin Eco-City Water Reclamation Centre,
a JV between Keppel Infrastructure
and Tianjin Eco-City Investment and
Development Co., Ltd, continued to perform
well in 2019. The Centre treats wastewater
effluent from an existing wastewater
treatment plant to produce recycled water
that meets China’s most stringent
standards for miscellaneous urban
water consumption.
KRISENERGY
2019 was a challenging year as KrisEnergy
continued to navigate headwinds arising
from macroeconomic factors and
oil price volatility.
On 14 August 2019, KrisEnergy applied
to the High Court of Singapore to
commence debt restructuring and to
seek a moratorium against enforcement
actions and legal proceedings by
creditors pursuant to Section 211B of
the Companies Act. A moratorium was
granted on 9 September 2019 and was
subsequently extended to 27 May 2020.
Keppel is a significant direct creditor of
KrisEnergy, arising from its holding of
zero coupon notes due 2024 issued
by KrisEnergy, issued with detachable
warrants. Keppel also holds an indirect
interest, through a bilateral contract
with DBS Bank (DBS), in a claim of about
$263 million of outstanding principal as
at 31 December 2019 owed by KrisEnergy
to DBS. In addition, Keppel also has
contract assets with carrying value of
about $21 million in relation to a construction
contract for a production barge for
KrisEnergy. As at the date of this report,
Keppel Corporation holds an approximate
40% equity interest in KrisEnergy.
Keppel Corporation Limited
Report to Shareholders 2019
61
PERFORMANCE REVIEW
OPERATING & FINANCIAL REVIEW
MANAGEMENT
DISCUSSION
& ANALYSIS
WE ARE CONFIGURED
FOR GROWTH,
BUILDING ON AN
INSTITUTIONAL
QUALITY
BALANCE SHEET.
Free Cash Outflow
$653m
As compared to inflow of
$515m for FY 2018.
Earnings Per Share
38.9cts
A decrease from 52.3cts
for FY 2018.
KEY PERFORMANCE INDICATORS
2019
$ million
19 vs 18
% +/(-)
Revenue
Net profit
Earnings Per Share
Return on Equity
Economic Value Added
Operating cash flow
Free cash flow3
Total cash dividend per share
7,580
707
38.9 cts
6.3%
188
(825)
(653)
20.0 cts
27
(25)
(26)
(25)
(29)
n.m.
n.m.
(33)
20181
$ million
5,965
948
52.3 cts
8.4%
263
125
515
30.0 cts4
18 vs 17
% +/(-)
2017
$ million
<0.1
384
384
394
n.m.
(90)
(71)
36
5,964
1962
10.8 cts2
1.7%2
(839)2
1,203
1,802
22.0 cts
1 2018’s financial figures have been restated due to an IFRIC agenda decision on SFRS(I) 1-23 Borrowing costs
eligible for capitalisation.
Includes the one-off financial penalty and related costs of $619 million.
2
3 Free cash flow excludes expansionary acquisitions and capital expenditure, and major divestments.
4 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.
n.m. = Not meaningful
GROUP OVERVIEW
Group net profit was $707 million,
a decrease of 25% from $948 million for
2018 largely due to lower earnings from the
Property Division. This was partly offset by
earnings from the Offshore & Marine (O&M)
and Investment divisions, as compared to
their losses in 2018.
Earnings Per Share was 38.9 cents, a
decrease of 26% from 52.3 cents for 2018.
Return on Equity was 6.3%, compared to
8.4% for 2018. Meanwhile, Economic Value
Added was positive $188 million for 2019,
compared to positive $263 million for 2018.
Free cash outflow was $653 million,
compared to free cash inflow of $515 million
for 2018, mainly due to working capital
requirements. Net gearing for 2019
was 0.85 times, compared to 0.48 times
for 2018.
Total cash dividend for 2019 will be
20.0 cents per share. This comprises a
proposed final cash dividend of 12.0 cents
per share as well as an interim cash
dividend of 8.0 cents per share paid in
the third quarter of 2019.
SEGMENT OPERATIONS
Group revenue of $7,580 million for 2019
was $1,615 million or 27% higher than
in 2018. Revenue from the O&M Division
improved by $345 million or 18% to
$2,220 million mainly due to higher revenue
recognition from ongoing projects, partly
offset by the absence of revenue recognised
62 Report to Shareholders 2019
Keppel Corporation Limited
in 2018 from the sale of jackup rigs to
Borr Drilling. Major jobs delivered in 2019
include five jackup rigs, three Floating
Production Storage and Offloading/
Floating Storage and Re-gasification Unit
conversions and four dredgers. Revenue
from the Property Division decreased
marginally by $4 million to $1,336 million
due mainly to lower revenue from Singapore
property trading projects, partly offset by
higher revenue from China property trading
projects. Revenue from the Infrastructure
Division grew by $298 million to
$2,927 million as a result of increased
sales in the power and gas businesses,
as well as higher progressive revenue
recognition from the Keppel Marina East
Desalination Plant project and the
Hong Kong Integrated Waste Management
Facility project. Revenue from the Investments
Division increased by $976 million to
$1,097 million due mainly to the
consolidation of M1 and higher revenue
from the asset management business.
Group net profit of $707 million for 2019
was $241 million or 25% lower than 2018.
The O&M Division’s profit was $10 million
as compared to loss of $109 million in 2018.
This was mainly due to higher operating
results, lower impairment provisions, lower
net interest expense and higher write-back
of tax provision, partly offset by share of
losses from associated companies and
absence of write-back of provisions for
claims in 2018.
REVENUE ($ million)
3,500
3,000
2,500
2,000
1,500
1,000
500
0
2017
2018
2019
Offshore & Marine
Property
Infrastructure
Investments
1,802
1,875
2,220
1,782
1,340
1,336
2,207
2,629
2,927
173
121
1,097
Total
5,964
5,965
7,580
NET PROFIT ($ million)
1,000
800
600
400
200
0
-200
-400
-600
-800
-1,000
Profit from the Property Division decreased
by $425 million to $517 million mainly
due to lower gains from the en-bloc sale
of development projects and absence of
gain from divestment in 2019 as compared
to 2018, lower contribution from Singapore
property trading projects and higher net
interest expense, partly offset by higher
contribution from China property trading
projects, higher investment income,
higher fair value gains on investment
properties and higher contribution from
associated companies.
Infrastructure Division’s profit of
$169 million in 2019 was flat compared
to 2018.
Profit from the Investments Division was
$11 million in 2019, as compared to loss
of $54 million in 2018. This was mainly due
to fair value gain from the re-measurement
of previously held interest in M1 at
acquisition date, higher contribution from
the asset management business, higher
contribution from M1 resulting from the
consolidation of M1 and lower provision
for impairment of KrisEnergy. This was
partly offset by lower share of profit from
the Sino-Singapore Tianjin Eco-City, higher
net interest expense, higher fair value loss
on KrisEnergy warrants, financing cost and
amortisation of intangibles arising from
acquisition of M1, as well as the write-off
of a receivable.
In 2019, the Property Division was
the largest contributor to the Group’s
net profit with a 73% share, followed
by the Infrastructure Division’s 24%,
the Investments Division’s 2% and the
O&M Division’s 1%.
2017
20181
2019
Offshore & Marine
Property
Infrastructure
Investments
(826)2
(109)
10
650
942
517
134
169
169
238
(54)
11
Total
196
948
707
1 Net profit for 2018 has been restated due to an IFRIC agenda decision on SFRS(I) 1-23 Borrowing costs eligible
for capitalisation.
Includes the one-off financial penalty and related costs of $619 million.
2
Keppel Corporation Limited
Report to Shareholders 2019
63
PERFORMANCE REVIEW
OPERATING & FINANCIAL REVIEW
FINANCIAL REVIEW
& OUTLOOK
WE WILL SUSTAIN
VALUE CREATION
THROUGH EXECUTION
EXCELLENCE,
TECHNOLOGY
INNOVATION AND
FINANCIAL DISCIPLINE.
Total Assets
$31.3b
Up 18% from $26.6b for FY 2018,
mainly due to increase in
non-current assets.
Total Cash Dividend Per Share
20.0cts
This represents 51% of
Group net profit for FY 2019.
PROSPECTS
The Offshore & Marine (O&M) Division’s net
orderbook, excluding the Sete Brasil (Sete)
rigs, stood at $4.4 billion as at end-2019.
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 gas solutions, offshore renewables,
production assets, specialised vessels and
floating infrastructure, as well as exploring
ways to re-purpose its technology in the
offshore industry for other uses.
The Property Division sold about
5,150 homes in 2019, comprising about
250 in Singapore, 3,400 in China, 950 in
Vietnam, 300 in Indonesia and 250 in India.
Keppel REIT’s office buildings in Singapore,
Australia and South Korea maintained a
high portfolio committed occupancy rate of
99% as at 31 December 2019. The Division
will remain focused on strengthening
its presence in 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
the energy and environment-related
infrastructure as well as infrastructure
services businesses to pursue
promising growth areas. 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, it is
transforming its logistics business from
an asset-heavy business to an asset-light
service provider in urban logistics.
In the Investments Division, Keppel Capital
continues to leverage the Group’s core
competencies to create innovative
investment solutions and connect investors
with quality real assets in fast growing
sectors fuelled by urbanisation trends.
This includes seizing growth opportunities
across our chosen sectors, as well as
expanding into new markets and asset
classes including the infrastructure, senior
living and education sectors.
Keppel Urban Solutions (KUS) will
harness opportunities as an integrated
master developer of smart, sustainable
precincts. Starting with Saigon Sports City
in Ho Chi Minh City, Vietnam, KUS will also
explore opportunities in other cities across
Asia. The Sino-Singapore Tianjin Eco-City
Investment and Development Co., Ltd.
will continue the development of the
Sino-Singapore Tianjin Eco-City (Eco-City),
including selling land parcels to drive the
Eco-City’s further development.
The strategic acquisition of M1
complements the Group’s mission as
a solutions provider for sustainable
urbanisation, which includes connectivity.
M1 serves as a digital platform and
connectivity partner to complement and
augment the Group’s suite of solutions.
At the same time, M1 can benefit from
harnessing the synergies of the Group.
64 Report to Shareholders 2019
Keppel Corporation Limited
ROE & DIVIDEND
%
20
15
10
5
0
cents
60
45
30
15
0
ROE (%)
Full-Year Dividend (cts)
Interim Dividend (cts)
2014
18.8
48
12
2015
14.2
34
12
2016
2017
2018
2019
6.9
20
8
6.9
22
8
8.41
30
152
6.3
20
8
1 2018’s financial figures have been restated due to an IFRIC agenda decision on SFRS(I) 1-23
Borrowing costs eligible for capitalisation.
2 Comprises an interim cash dividend of 10.0 cents per share and a special cash dividend of 5.0 cents per share.
EVA ($ million)
2,000
1,500
1,000
500
0
-500
-1,000
2014
1,778
2015
648
2016
(140)
2017
(839)
2018
2631
2019
188
1 2018’s financial figures have been restated due to an IFRIC agenda decision on SFRS(I) 1-23
Borrowing costs eligible for capitalisation.
The Group will continue to execute its
integrated business strategy to provide
solutions for sustainable urbanisation,
and deepen collaboration across divisions,
while being agile and innovative, and
investing in the future.
Return on Equity decreased to 6.3%
in 2019 from 8.4% in the previous year,
mainly due to lower net profit.
The Company will be distributing a total
cash dividend of 20.0 cents per share for
2019, comprising a proposed final cash
dividend of 12.0 cents per share as well as
the interim cash dividend of 8.0 cents
per share distributed in the third quarter
of 2019. Total cash dividend for 2019
represents 51% of Group net profit.
On a per share basis, it translates into
a gross yield of 3.0% on the Company’s
last transacted share price of $6.77 as
at 31 December 2019.
Economic Value Added
In 2019, Economic Value Added (EVA)
decreased by $75 million to $188 million.
This was attributable to higher capital
charge, partially offset by higher net
operating profit after tax.
Capital charge increased by $92 million as
a result of higher Average EVA Capital
Employed and higher Weighted Average
Cost of Capital (WACC). WACC increased
from 5.42% to 5.47% due mainly to an
increase in risk-free rate and higher cost of
debt. Average EVA Capital Employed
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, amortization & other adjustments
Net Operating Profit After Tax (NOPAT)
Average EVA Capital Employed (Note 3)
WACC (%) (Note 4)
Capital Charge
2019
$ million
19 vs 18
+/(-)
20181
$ million
18 vs 17
+/(-)
20172
$ million
794
(103)
897
313
–
(53)
122
1,176
18,066
5.47
(988)
108
(20)
(14)
46
17
1,533
0.05
(92)
205
20
(39)
76
1,159
16,533
5.42
(896)
914
16
(6)
(1)
–
923
(17)
189
26
(38)
76
236
(2,158)
(0.33)
179
18,691
5.75
(1,075)
EVA
188
(75)
263
1,102
(839)
1 2018’s financial figures have been restated due to an IFRIC agenda decision on SFRS(I) 1-23 Borrowing costs eligible for capitalisation.
2
Includes the one-off financial penalty and related costs of $619 million.
Notes:
1. Profit/(loss) after tax excludes net revaluation gain on investment properties.
2. The reported current tax is adjusted for statutory tax impact on interest expenses.
3. Average EVA Capital Employed is derived from the averages of net assets, interest-bearing liabilities, timing of provisions, present value of operating leases and other adjustments.
4. WACC is calculated in accordance with the Keppel Group EVA Policy as follows:
a. Cost of Equity using Capital Asset Pricing Model with market risk premium set at 5.0% (2018: 5.0%);
b. Risk-free rate of 2.27% (2018: 2.06%) based on yield-to-maturity of Singapore Government 10-year Bonds;
c. Unlevered beta at 0.72 (2018: 0.75); and
d. Pre-tax Cost of Debt at 2.09% (2018: 1.85%) using 5-year Singapore Dollar Swap Offer Rate plus 60 basis points (2018: 60 basis points).
Keppel Corporation Limited
Report to Shareholders 2019
65
PERFORMANCE REVIEW
OPERATING & FINANCIAL REVIEW
FINANCIAL REVIEW & OUTLOOK
TOTAL ASSETS OWNED ($ million)
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
Fixed assets
Properties
Right-of-use assets
Investments
Stocks
Contract assets
Debtors & others
Bank balances, deposits & cash
Total
2017
2,433
3,461
–
6,575
5,780
3,643
4,520
2,274
20181
2,373
2,851
–
6,825
5,496
3,213
3,849
1,981
2019
2,902
3,022
760
7,121
5,543
3,497
6,693
1,784
28,686
26,588
31,322
1 2018’s financial figures have been restated due to an IFRIC agenda decision on
SFRS(I) 1-23 Borrowing costs eligible for capitalisation.
TOTAL LIABILITIES OWED AND CAPITAL INVESTED ($ million)
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
Lease liabilities
Other liabilities
Total
2017
20181
2019
11,443
11,268
11,211
530
6,635
1,950
7,793
–
335
309
5,355
1,918
7,549
–
189
435
5,795
1,825
11,060
597
399
28,686
26,588
31,322
1 2018’s financial figures have been restated due to an IFRIC agenda decision on
SFRS(I) 1-23 Borrowing costs eligible for capitalisation.
increased by $1,533 million from
$16.53 billion to $18.07 billion mainly
due to higher borrowings and recognition
of lease liabilities following the adoption
of SFRS(I) 16 Leases.
FINANCIAL POSITION
Group shareholders’ funds of $11.21 billion
at 31 December 2019 were $0.06 billion
or 1% lower than the previous year end.
The decrease was mainly attributable to
payment of final dividend of 15.0 cents
per share in respect of financial year 2018,
payment of interim dividend of 8.0 cents
per share in respect of half year ended
30 June 2019, adoption of SFRS(I) 16
Leases, and acquisition of the remaining
stake in Keppel T&T, foreign exchange
translation losses, decrease in value of
investments accounted for at fair value
through other comprehensive income,
partly offset by retained profits for 2019.
Group total assets of $31.32 billion at
31 December 2019 were $4.73 billion or
18% higher than the previous year end.
Non-current assets increased due mainly
to increase in fixed assets following the
consolidation of M1, recognition of
intangibles due to the M1 acquisition,
recognition of right-of-use assets arising
from the adoption of SFRS(I) 16 Leases and
increase in long-term assets. Increase
in current assets was due mainly to the
increase in contract assets and advances
to associated companies, partly offset by
decrease in bank balances, deposits
and cash.
Group total liabilities of $19.68 billion at
31 December 2019 were $4.66 billion or
31% higher than the previous year end.
This was largely attributable to the
increase in term loans, recognition of
lease liabilities arising from the adoption of
SFRS(I) 16 Leases, as well as deposits by
and advances from associated companies.
Group net debt of $9.87 billion at
31 December 2019 was $4.31 billion or
77% higher than the previous year end.
This was due mainly to the acquisition of
M1 of $1.23 billion, consolidation of M1’s
net debt of $0.34 billion, acquisition of
remaining interest in Keppel T&T of
$0.22 billion, payment of the final dividend
in respect of financial year 2018 of
$0.27 billion, payment of the interim dividend
in respect of half year ended 30 June 2019 of
$0.15 billion, the recognition of lease liabilities
arising from adoption of SFRS(I) 16 Leases
of $0.60 billion, as well as working capital
requirements of $1.44 billion.
Group net gearing ratio increased to
85% at 31 December 2019 from 48% at
31 December 2018. This was largely
driven by the increase in Group net debt.
66 Report to Shareholders 2019
Keppel Corporation Limited
TOTAL SHAREHOLDER RETURN (%)
50
40
30
20
10
0
-10
-20
-30
-40
-50
10-year annualised TSR as at 2019
3.7%
Keppel
4.4%
STI
Keppel
STI
Source: Bloomberg
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)
2019
18.5
9.4
TOTAL SHAREHOLDER RETURN
Keppel is committed to delivering
value to shareholders through earnings
growth. To achieve this, the Group
will rely on our multi-business strategy
and core strengths to build on what
we have done successfully, as well as
to proactively seize new opportunities.
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.
Our 2019 Total Shareholder Return (TSR)
of 18.5% was 9.1 percentage points above
the benchmark Straits Times Index’s (STI)
TSR of 9.4%. Our 10-year annualised
TSR growth rate of 3.7% was lower than
STI’s 4.4%.
Net cash used in operating
activities was $825 million for 2019
as compared to net cash from
operating activities of $125 million
for 2018, mainly to higher working
capital requirements.
After excluding expansionary acquisitions,
capital expenditure and major divestments,
net cash from investment activities was
$172 million. The Group spent $338 million
on investments and operational capital
expenditure. After taking into account the
proceeds from divestments and dividend
income of $413 million and net advances
from associated companies of $97 million,
free cash outflow was $653 million.
Total distribution to shareholders of the
Company and non-controlling shareholders
of subsidiaries for the year amounted to
$430 million.
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 (used in)/from operating activities
Investments & capital expenditure
Divestments & dividend income
Advances from/(to) associated companies
Net cash (used in)/from investing activities
Free cash flow1
2019
$ million
19 vs 18
+/(-)
877
117
994
(178)
611
433
(1,437)
(1,241)
(382)
(825)
(338)
413
97
172
(142)
(950)
112
(644)
314
(218)
(653)
(1,168)
20182
$ million
1,055
(494)
561
(196)
(240)
125
(450)
1,057
(217)
390
515
18 vs 17
+/(-)
2017
$ million
254
(212)
42
(1,297)
177
(1,078)
(263)
228
(174)
(209)
801
(282)
519
1,101
(417)
1,203
(187)
829
(43)
599
(1,287)
1,802
Dividend paid to shareholders of the Company & subsidiaries
(430)
116
(546)
(156)
(390)
1 Free cash flow excludes expansionary acquisitions and capital expenditure, and major divestments.
2 2018’s financial figures have been restated due to an IFRIC agenda decision on SFRS(I) 1-23 Borrowing costs eligible for capitalisation.
Keppel Corporation Limited
Report to Shareholders 2019
67
PERFORMANCE REVIEW
OPERATING & FINANCIAL REVIEW
FINANCIAL REVIEW & OUTLOOK
FINANCIAL RISK MANAGEMENT
The Group operates internationally and
is exposed to a variety of financial risks,
comprising market risk (including currency,
interest rate and price risks), credit risk and
liquidity risk. Financial risk management is
carried out by Keppel’s 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
US dollars, Brazilian Real and Renminbi.
Foreign currency exposures arise mainly
from the exchange rate movement of
these foreign currencies against the
functional currencies of the respective
Group entities, which are mainly in
Singapore dollars. The Group utilises
forward foreign currency contracts to
hedge its exposure to specific currency
risks relating to receivables and payables.
The bulk of these forward foreign
currency contracts are entered into to
hedge any excess US dollars arising from
the O&M contracts based on the expected
timing of receipts. The Group does not
engage in foreign currency trading.
• The Group hedges against price fluctuations
arising from the purchase of natural
gas that affect cost. Exposure to price
fluctuations is managed via fuel oil
forward contracts, whereby the price of
natural gas is indexed to benchmark fuel
price indices of High Sulphur Fuel Oil
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 excluding lease
liabilities as at end-2019 were $11.1 billion
(2018: $7.5 billion and 2017: $7.8 billion).
As at end-2019, 41% (2018: 20% and
2017: 22%) of Group borrowings were
repayable within one year with the balance
largely repayable more than three
years later.
Unsecured borrowings constituted 96%
(2018: 92% and 2017: 91%) 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 $0.96 billion
(2018: $1.07 billion and 2017: $1.89 billion).
Fixed rate borrowings constituted
63% (2018: 67% and 2017: 65%) of
total borrowings with the balance at
floating rates. The Group has cross
currency swap and interest rate swap
agreements with notional amount totalling
$2,752 million whereby it receives foreign
currency fixed rate (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 1.41% and 3.62% on the
notional amount. Details of these derivative
instruments are disclosed in the notes to
the financial statements.
NET GEARING
Net Gearing = Borrowings + Lease Liabilities – Cash
Total Equity
$ million
18,000
12,000
6,000
0
-6,000
-12,000
Net Debt
Total Equity
Net Gearing
Singapore dollar borrowings represented
78% (2018: 75% and 2017: 73%) 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.
The weighted average tenor of the Group’s
debt was about four years at the end of
2018 and about three years at the end of
2019 with a decrease in average cost of funds
as compared to end of 2018.
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,
risk management and environmental
impact. New investments will be structured
with an appropriate mix of equity and debt
after careful evaluation and management
of risks.
Capital Structure
Total equity as at the end-2019 was
$11.65 billion as compared to $11.58 billion
as at end-2018 and $11.97 billion as at
end-2017. The Group was in a net debt
(including lease liabilities) position of
$9,874 million as at end-2019, which was
above the $5,567 million as at end-2018
and the $5,519 million as at end-2017.
The Group’s net gearing ratio was
0.85 times as at end-2019, compared
to 0.48 times as at end-2018.
* Borrowings exclude lease liabilities.
No. of times
3
2
1
0
-1
-2
2017
20181
2019
(5,519)
11,973
(0.46)
(5,567)
(9,874)
11,577
11,646
(0.48)
(0.85)
1 2018’s financial figures have been restated due to an IFRIC agenda decision on SFRS(I) 1-23
Borrowing costs eligible for capitalisation.
68 Report to Shareholders 2019
Keppel Corporation Limited
the transfer, there was no other sale,
transfer, disposal, cancellation and/or
use of treasury shares during the year.
debt maturity profile and overall liquidity
position are actively reviewed on an
ongoing basis.
Interest coverage increased from 2.61 times in
2017 to 5.99 times in 2018 before decreasing
to 3.77 times in 2019. Interest coverage in
2019 was lower due to lower Earnings
before Interest expense and Tax (EBIT).
Cash flow coverage decreased from 5.98
times in 2017 to 1.52 times in 2018 before
decreasing to negative 1.46 times in 2019. This
was mainly due to operational cash outflow
in 2019, as compared to cash inflow in 2018.
At the Annual General Meeting in 2019,
shareholders gave their approval for
mandate to buy back shares. During the year,
770,000 shares were bought back and
held as treasury shares. The Company also
transferred 4,691,308 treasury shares to
employees upon vesting of shares released
under the KCL Share Plans and Share Option
Scheme. As at end-2019, the Company had
2,014,736 treasury shares. Except for
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
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,
INTEREST COVERAGE
Interest Coverage = EBIT
Interest Cost
$ million
1,500
1,000
500
0
EBIT
Total Interest Cost
Interest Cover
Note: EBIT = Profit before tax + Interest expense
No. of times
15
10
5
0
2017
631
241
2.61
20181
1,450
242
5.99
2019
1,266
336
3.77
1 2018’s financial figures have been restated due to an IFRIC agenda decision on SFRS(I) 1-23
Borrowing costs eligible for capitalisation.
CASH FLOW COVERAGE
Cash Flow Coverage = Operating Cash Flow + Interest Cost
Interest Cost
$ million
1,600
1,200
800
400
0
-400
-800
No. of times
8
6
4
2
0
-2
-4
Operating Cash Flow + Interest
Total Interest Expense + Interest Capitalised
Cash Flow Coverage
2017
1,444
241
5.98
20181
367
242
1.52
2019
(489)
336
(1.46)
1 2018’s financial figures have been restated due to an IFRIC agenda decision on SFRS(I) 1-23
Borrowing costs eligible for capitalisation.
As at end-2019, total available credit
facilities, including cash at Corporate
Treasury and bank guarantee facilities,
amounted to $8.19 billion (2018: $9.37 billion).
CRITICAL ACCOUNTING
POLICIES & ESTIMATES
The Group’s significant accounting policies
are discussed in more detail in the notes to
the financial statements. The preparation of
financial statements requires management
to exercise its judgment in the process of
applying the accounting policies. It also
requires the use of accounting estimates
and assumptions which affect the reported
amounts of assets, liabilities, income and
expenses. Critical accounting estimates and
judgment are described below.
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 debt investments
measured at fair value through other
comprehensive income (FVOCI). The
impairment methodology applied depends
on whether there has been a significant
increase in credit risk. Note 34 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.
The carrying amounts of trade, intercompany
and other receivables, and financial assets
at FVOCI are disclosed in the balance sheet.
Recoverability of contract assets
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
Keppel Corporation Limited
Report to Shareholders 2019
69
PERFORMANCE REVIEW
OPERATING & FINANCIAL REVIEW
FINANCIAL REVIEW & OUTLOOK
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. In October 2019, the Settlement
Agreement as well as the winning bid proposal
for Magni Partners (Bermuda) Ltd (Magni)
to purchase four Sete Brasil subsidiaries,
two of which are special-purpose entities
(SPEs) for uncompleted rigs constructed
by Keppel Offshore & Marine Ltd (KOM),
was approved by the creditors. As part of
the Settlement Agreement, which is subject
to fulfilment of certain conditions precedent,
the Group will take over ownership of the
remaining four uncompleted rigs and will
be able to explore various options to extract
the best value from these assets. The
engineering, procurement and construction
(EPC) contracts and related agreements
entered into in relation to these four rigs will
be deemed to be amicably terminated, with
no penalties, refunds and/or any additional
amounts being due to any party, and the
parties will waive all rights to any claims.
The Group has a receivable of approximately
US$260 million from Sete and this amount
has been included in Sete’s court-approved
Judicial Reorganisation Plan.The outstanding
amount will be paid to the Group proportionally
and pari passu with other creditors of
Sete as part of, and out of proceeds of,
the Judicial Reorganisation Plan.
Management has performed an assessment
to estimate the cost of discontinuance
of related agreements of the EPC contracts,
offset by possible options in extracting
value from the uncompleted rigs and
possible payout from the Judicial
Reorganisation Plan. In addition, management
has estimated the net present value of
the cash flows relating to the impending
construction contract for two rigs with Magni.
Arising from the above assessment,
management is of the opinion that
the loss allowance for trade debtors of
$183,000,000 (Note 12) (2018: $183,000,000)
and the provision for related contract costs of
$245,000,000 (Note 20) (2018: $245,000,000)
are adequate to address the cost of
discontinuance, salvage cost and unpaid
progress billings relating to these
EPC contracts.
Taking into consideration the 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
(2018: $476,000,000).
Other contracts
As at 31 December 2019, the Group had
several rigs that were under construction
FINANCIAL CAPACITY
$ million
Remarks
Cash at Corporate Treasury
397
22% of total cash of $1.78 billion
Available credit facilities to the Group
7,794 Credit facilities of $13.16 billion,
of which $5.37 billion was utilised
Total
8,191
for customers, where customers had
requested for deferral of delivery dates
of the rigs in prior years. See Note 15
on contract assets balances.
Management has assessed each deferred
construction project individually to make a
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 ECL 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 dayrates and
discount rates.
During the financial year ended
31 December 2019, no further (2018:
$21,000,000) ECL on contract assets
was recognised.
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 2019. Refer to Notes 6,
9, 10 and 13 to the financial statements
for more details.
KrisEnergy
As at 31 December 2019, the carrying value
of the Group’s investment in KrisEnergy
amounted to $74,284,000 in zero-coupon
notes. In addition, the Group also had
$20,541,000 of contract assets in relation
to a construction contract for a production
barge for KrisEnergy and, through a
bilateral agreement between the Group
and a bank, guaranteed $262,825,000
in respect of the bank loan granted to
KrisEnergy (Note 32). The zero-coupon
notes and guarantee are secured by
the assets of KrisEnergy.
On 14 August 2019, KrisEnergy made
an application to the High Court of the
Republic of Singapore to commence a
court-supervised process to reorganise its
liabilities and seek a moratorium against
enforcement actions and legal proceedings
by creditors against KrisEnergy pursuant
to section 211B of the Companies Act
(Cap. 50). It had also requested a
suspension of trading of its securities on
Singapore Exchange Securities Trading Ltd.
The High Court of Republic of Singapore
approved the application for an initial period
of three months up to 14 November 2019.
At the date of these financial statements,
the debt moratorium was extended to
27 May 2020. As at the end of the current
financial year, KrisEnergy had not presented
a restructuring plan.
Management performed an impairment
assessment to estimate the recoverable
amount of the Group’s exposure in
KrisEnergy as at 31 December 2019.
With assistance from its financial advisor,
management estimated the amount of
cash available from producing assets and
forecasted production from assets under
development, taking into consideration
the relative priority of each group of
stakeholders to these cash flows based
on their respective rights. Management
will evaluate the above assessment
when a restructuring plan is presented
by KrisEnergy in due course, which may
give rise to the adjustments to be made.
The estimates and assumptions used
are subject to risk and uncertainty.
70 Report to Shareholders 2019
Keppel Corporation Limited
Based on the assessment, the Group
recognised an impairment loss of
$37,000,000 during the financial year,
and the carrying value of the Group’s
equity investment was reduced to zero.
In 2018, management had performed an
assessment on the recoverable amount
using a DCF model based on a cash flow
projection and recognised an impairment
charge of $53,000,000.
Floatel
The carrying amount of the Group’s
investment in Floatel International
amounted to $476,874,000 as at
31 December 2019 (2018: $524,404,000),
comprising $311,000,000 in equity shares
(2018: $362,760,000), $10,449,000 in
preference shares (2018: $21,845,000)
(Note 11) and $155,425,000 in long-term
receivables (2018: $139,799,000) (Note 12).
In November 2019, credit rating agencies
downgraded Floatel’s credit rating, citing
market environment for accommodation
vessels remaining difficult with limited
activity and pressure on dayrates. The
rating agencies also commented that if
Floatel fails to contract work for its idle
vessels in the near future, it may not be
able to meet its leverage covenant at its
first test at the year-end 2020.
Floatel subsequently reported that its
financial situation is unsustainable as
liquidity is under pressure. There is a
material uncertainty as to whether
Floatel will be able to service its secured
financial liabilities and net working capital
requirements for the coming 12 months,
which casts significant doubt on Floatel’s
ability to continue as a going concern.
The long term viability of Floatel’s
business depends on it finding a solution
to its financial situation and Floatel’s
management has initiated discussions
with key creditors, in which, in the view
of Floatel’s board of directors, there is
reasonable expectations of success. In a
situation where going concern for Floatel
no longer can be assumed, there is a risk
for significant write down of its assets.
Management performed an impairment
assessment of the recoverability of the
Group’s total exposure in Floatel by first
performing an assessment to ascertain
whether Floatel would reasonably continue
as a going concern in the next 12 months.
If Floatel cannot reasonably continue as
a going concern in the next 12 months,
the carrying amount of the Group’s
investment in Floatel may be subject to
significant write down.
Management conducted a review of
the business and cash flow projections
through discussions with Floatel’s
management and corroborated those
information based on management’s
understanding of the business environment
that Floatel operates in. Management also
discussed with Floatel’s management to
understand the ongoing dialogue with
Floatel’s lenders and advisors. Based on
the results of the review, discussions
and information currently available,
management concurred with the judgment
made by Floatel’s management and board
of directors in relation to the going
concern matter.
In assessing impairment of the equity
shares, management had focused on
whether Floatel’s vessels were stated at
their appropriate recoverable amounts.
The Group’s carrying value of investment in
Floatel’s equity shares was reduced by its
share of loss of $50,724,000, which included
impairment loss on the carrying value of
three vessels amounting to $19,642,000.
The recoverable amounts of the vessels
were determined on their value-in-use, using
a DCF model. Management reviewed the
appropriateness of key inputs used in the
estimation of the recoverable amount of
Floatel’s vessels.
With respect to the preference shares,
management had performed an estimation
of its fair value as at 31 December 2019
using a dividend discount model, and
recognised a fair value loss of $11,395,000.
In assessing the ECL of the loan receivable
repayable on 31 December 2025,
management expects full recovery of
the receivable on the basis that Floatel
operates in a niche market and supply of
similar services should normalise over time.
Given the extended date before the loan is
due for repayment, management expects
Floatel to continue as a viable business in
the longer term and will be able to repay
the loan when due in 2025.
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 and
significant judgment is 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. 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 24.
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. 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.
Civil action by EIG funds
In February 2018, the Company’s subsidiary,
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
were seeking 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 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,
Keppel Corporation Limited
Report to Shareholders 2019
71
PERFORMANCE REVIEW
OPERATING & FINANCIAL REVIEW
FINANCIAL REVIEW & OUTLOOK
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.
Global resolution with criminal authorities
in relation to corrupt payments
In 2017, KOM reached a global resolution
with the criminal authorities in the
United States of America (USA), Brazil and
Singapore in relation to corrupt payments
made in relation to KOM’s various projects
with Petrobras and Sete in Brazil, which
were made with knowledge or approval
of former KOM executives. Fines in an
aggregate amount of US$422,216,980, or
equivalent to approximately S$570 million,
paid/payable had been allocated between
the three jurisdictions.
As part of the global resolution, KOM
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, entered into a Leniency
Agreement with the Public Prosecutor’s
Office in Brazil, the Ministerio Publico
Federal (MPF) which became effective
following the approval of the Fifth Chamber
for Coordination and Review of the MPF
in April 2018. In addition, Keppel Offshore
& Marine USA, Inc (KOM USA), also a
wholly-owned subsidiary of KOM, pleaded
guilty to one count of conspiracy to
violate the U.S. Foreign Corrupt Practices
Act and entered into a Plea Agreement
with the DOJ.
Pursuant to the DPA, KOM paid a monetary
penalty of US$105,554,245, of which
US$4,725,000 was paid as a criminal fine
by KOM USA, to the United States Treasury
in 2018. In addition, KOM paid a monetary
penalty of US$211,108,490 to MPF and a
monetary penalty of US$52,777,122.50 to
CPIB in 2018. A further US$52,777,122.50,
which amount payable has been included
as accrued expenses since FY 2017, will be
payable to CPIB within three years (or an
extended period as approved by CPIB
and DOJ) from the date of the Conditional
Warning (less any penalties that KOM may
pay to specified Brazilian authorities during
this period, for which discussions with the
specified authorities are ongoing).
As part of the global resolution with the
authorities, the Group had also 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. As of the
date of these financial statements,
KOM entities in Singapore, Brazil,
Bulgaria, China, India, Philippines,
United Arab Emirates and the USA had
secured certification of the ISO 37001
Anti-Bribery Management System.
Anti-bribery and corruption compliance
audits were also performed on entities
within the KOM Group. These audits
revealed enhanced policies and
procedures put in place to-date were,
in general, functioning as intended.
The audits performed in 2018 had,
however, identified certain matters
relating to contracts entered into
several years ago which required
follow-up actions and further review.
The follow-up actions and further
reviews were concluded in 2019.
Based on currently available information,
management is of the opinion that no
additional provision is required.
Useful lives of network and
related application systems
The cost of network and related application
systems is depreciated on a straight-line
basis over the assets’ estimated economic
useful lives. Management estimated
the useful lives of these fixed assets
to be within five to 25 years. These are
common life expectancies applied
in the telecommunications industry.
Changes in the expected level of usage
and technological developments could
impact the economic useful life and the
residual values of these assets, therefore,
future depreciation charges could be
revised. The carrying amounts of the
Group’s network and related application
systems at the end of the reporting
period are disclosed in Note 6 to the
financial statements.
Revaluation of investment properties
The Group carries its investment properties
at fair value with changes in fair value
being recognised in the profit and loss
account. In determining fair values, the
valuers have used valuation techniques
which involve certain estimates. The key
assumptions to determine the fair
value of investment properties include
market-corroborated capitalisation rate,
terminal yield and discount rate.
In relying on the valuation reports,
management has exercised its judgment
to ensure that the valuation methods
and estimates are reflective of current
market conditions. The carrying amount
of investment properties and the key
assumptions used to determine the fair
value of the investment properties are
disclosed in Notes 7 and 34.
Estimating net realisable value of stocks
The net realisable value (NRV) of stocks
represent the estimated selling price for
these stocks less all estimated cost of
completion and costs necessary to
make the sale.
For construction projects under
work-in-progress, the Group determines the
estimated selling price based on based on
recent sale transactions for similar assets or
DCF models where recent sale transactions
for similar assets were not available.
For properties held for sale, provision
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.
The Group has stocks (work-in-progress)
amounting to $598,800,000 (after a
provision of $50,000,000 made in the
prior year) (Note 14). The carrying amount
represented the estimated NRV of the
stocks. Management has determined the
NRV of the stocks based on arrangements
to market the asset and a DCF model.
72 Report to Shareholders 2019
Keppel Corporation Limited
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
• Communications
KEPPEL OFFSHORE &
MARINE LTD
KEPPEL LAND LIMITED
KEPPEL INFRASTRUCTURE
HOLDINGS PTE LTD
KEPPEL CAPITAL HOLDINGS
PTE LTD
Keppel FELS Limited
Keppel Shipyard Limited
100%
100%
100%
Keppel Singmarine Pte Ltd
100%
Keppel LeTourneau
Keppel Nantong Shipyard
Company Limited
China
Offshore Technology
Development Pte Ltd
100%
100%
100%
Keppel Marine &
Deepwater Technology Pte Ltd
100%
Keppel AmFELS LLC
United States
Keppel FELS Brasil SA
Brasil
Keppel Philippines Marine Inc
The Philippines
Keppel Subic Shipyard Inc
The Philippines
Floatel International Ltd
Bermuda
100%
100%
98%
86%
50%
Dyna-Mac Holdings Limited4
24%
100%
Keppel Land
– various holding companies
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%
49%
100%
100%
100%
100%
49%
ENVIRONMENTAL INFRASTRUCTURE
Keppel Seghers Pte Ltd
100%
INFRASTRUCTURE SERVICES
Keppel Infrastructure
Services Pte Ltd
100%
INVESTMENTS
Keppel REIT Management
Limited
100%
100%
Alpha Investment Partners Ltd 100%
Keppel Infrastructure Fund
Management Pte Ltd
Keppel DC REIT
Management Pte Ltd6
Keppel Pacific Oak US REIT
Management Pte Ltd
100%
100%
50%
Keppel Pacific Oak US REIT4
7%
KEPPEL URBAN SOLUTIONS
PTE LTD
Keppel Infrastructure Trust4
18%
M1 LIMITED2
KEPPEL TELECOMMUNICATIONS &
TRANSPORTATION LTD
100%
KEPPEL RENEWABLE
ENERGY PTE LTD
KRISENERGY LTD4
Cayman Islands
LOGISTICS & DATA CENTRES
Keppel Logistics Pte Ltd
Keppel Data Centres Holding
Pte Ltd7
UrbanFox Pte Ltd
Keppel DC REIT4
100%
100%
85%
23%
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
100%
100%
100%
40%
50%
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 wholly-owned subsidiary of Keppel Corporation, and Konnectivity (81%), a joint venture between
Keppel Corporation and Singapore Press Holdings.
3 Owned by Keppel Land Limited (44%) and Keppel Capital Holdings Pte Ltd (5%).
4 Public listed company.
5 Owned by Keppel Infrastructure Holdings Pte Ltd (49%) and Keppel Infrastructure Trust (51%).
6 Owned by Keppel Capital Holdings Pte Ltd (50%) and Keppel Telecommunications & Transportation Ltd (50%).
7 Owned by Keppel Telecommunications & Transportation Ltd (70%) and Keppel Land Limited (30%).
Updated as at 27 February 2020. The complete list of subsidiaries and significant associated companies is available at www.kepcorp.com/annualreport2019.
Keppel Corporation Limited
Report to Shareholders 2019
73
GOVERNANCE
CORPORATE GOVERNANCE
The Board and management of Keppel
Corporation (“KCL”, or the “Company”) firmly
believe that a genuine commitment to good
corporate governance is essential to the
sustainability of the Company’s business
and performance, and directors must at all
times act objectively in the best interests
of the Company.
This report sets out an overview of
our corporate governance practices
and adheres to the principles of the
Code of Corporate Governance 2018
(“2018 CG Code”), with references to
the accompanying Practice Guidance.
BOARD’S CONDUCT OF AFFAIRS
Principle 1:
The Company is headed by an effective
Board which is collectively responsible and
works with Management for the long-term
success of the Company.
Principle 3:
There is a clear division of responsibilities
between the leadership of the Board and
Management, and no one individual has
unfettered powers of decision-making.
Governance Framework: KCL’s governance
structure is as follows:
GOVERNANCE FRAMEWORK 2019
Board Risk
Committee
Board Safety
Committee
BOARD
CHIEF EXECUTIVE
OFFICER
Corporate
Functions
IMPAC
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.
in the Company’s drive to achieve and
maintain a high standard of corporate
governance with the full support of
the directors, Company Secretaries
and management.
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
(NEDs). 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 (AGMs) 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
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, and the Board is kept
updated on discussions of the committees
via circulation of minutes and regular updates
by the respective chairmen of the committees
at board meetings. The responsibilities and
authority of the board committees are set
out in their respective terms of reference
(see Appendix 1).
The CEO, assisted by the management
team, makes strategic proposals to the
Board and after robust and constructive
board discussions, executes the agreed
strategy, manages and develops the
Group’s businesses and implements the
Board’s decisions. He is supported by
management committees that direct and
Internal
Audit
Audit
Committee
Nominating
Committee
Remuneration
Committee
Group Regulatory
Compliance
Management
Committee
Group Regulatory
Compliance
Working Team
Management
Committees
Central Finance
Committee
IT Steering
Committee
Management
Development
Committee
Group
Sustainability
Steering Committee
Technology and
Data Risk Committee
74 Report to Shareholders 2019
Keppel Corporation Limited
guide management on operational policies
and activities, which include:
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 relevant
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 recommends the candidates
for the approval of the Nominating
Committee (NC). The MDC also
provides inputs, guidance and direction
on operational policies and human
resources/organisational matters;
3. Central Finance Committee, which reviews,
guides and monitors financial policies
and activities of Group companies;
4. Group Regulatory Compliance
Management Committee (Group RCMC),
which articulates the Group’s
commitment to regulatory compliance,
directs and supports the development
of over-arching compliance policies
and guidelines, and facilitates the
implementation and sharing of policies
and procedures across the 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 review training and
communication programmes;
6. Keppel IT Steering Committee, which
provides strategic information
technology (IT) leadership and ensures
IT strategy alignment in achieving
business strategies;
7. Group Sustainability Steering Committee,
which sets the sustainability strategy and
leads performance in key focus areas; and
standards programme that enhances
the Group’s safeguards, resilience and
responses to cyber threats.
BOARD MATTERS
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.
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.
Role: The principal functions of the
Board are to:
•
•
•
•
•
provide entrepreneurial leadership
and decide on matters in relation to
the Group’s activities which are of a
significant nature, including decisions
on strategic directions and guidelines
and the approval of periodic plans and
major investments and divestments;
oversee the business and affairs
of the Company and 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 the 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 mechanisms
to ensure such values, standards and
culture are complied with;
constructively challenge management
and hold them 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;
8. Technology and Data Risk Committee,
which operationalises the Technology
and Data Risk Management operating
•
be responsible for the governance of
risk and ensure that management
maintains a sound system of risk
management and internal controls,
to effectively monitor and manage risks
so as to safeguard the interests of the
Company and its stakeholders, and
achieve an appropriate balance between
risks and company performance; and
•
assume responsibility for corporate
governance and ensure transparency and
accountability to key stakeholder groups.
Independent Judgment: All directors
are expected to exercise independent
judgment in the best interests of the
Company. This is one of the performance
criteria for the peer and self-assessment
of the individual directors. Based on the
results of the peer and self-assessment
carried out by the directors for FY 2019,
all directors have discharged this duty well.
Mr Teo Siong Seng, Mr Tham Sai Choy
and Mrs Penny Goh were not part of
this assessment as they were only
recently appointed.
Conflicts of Interest: Each director must
promptly disclose conflicts of interest,
whether direct or indirect, in relation to
any transaction or proposed transaction.
In this connection, the Company has in
place a “Keppel Group – Directors’ Conflict
of Interest Policy” to guide directors in
identifying, disclosing and managing
situations of actual or potential conflicts,
as well as situations which may be perceived
to be 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, and recuse himself/herself 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 discussions,
and abstain from voting in relation to
conflict-related matters. On an annual basis,
each director is also required to submit
details of his/her associates for the purpose
of monitoring interested persons transactions.
Board Strategic Review: The Board
periodically reviews and approves the
Group’s strategic plans. A two-day off-site
board strategy meeting is organised
annually for in-depth discussions on strategic
issues and the direction of the Group,
to give NEDs a better understanding of the
Group and its businesses, and to provide
an opportunity for NEDs 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. In FY 2019,
the focus of the strategy meeting was to
track the progress towards the Group’s
Keppel Corporation Limited
Report to Shareholders 2019
75
GOVERNANCE
CORPORATE GOVERNANCE
Vision 2020 targets and to discuss the
strategic direction towards Vision 2030,
with a view to grow Keppel as one
integrated business providing solutions for
sustainable urbanisation. 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 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.
Meetings: The Board meets six times a year
and as warranted by particular circumstances.
Board meetings are scheduled and the
schedule is 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. Furthermore,
the NEDs meet without the presence of
management from time to time and on
a need-be basis, and any relevant feedback
would be shared and discussed with the
executive director. The attendance of each
Board member at the AGM and the board
and board committee meetings held in
FY 2019 are disclosed in the table below:
If a director was 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.
Non-executive Directors’ Meetings:
The NEDs 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,
risk and compliance matters, succession
planning and leadership development, as
well as performance management and
remuneration matters.
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.
Company Secretaries: 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 NEDs, as well
as facilitating orientation and assisting in
the professional development of the
directors) are followed and regularly
Access to 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 must be kept
well informed of the Company’s businesses
and affairs, and be knowledgeable about
the industries in which the businesses
operate. The Company has therefore
ATTENDANCE
Lee Boon Yang
Loh Chin Hua
Tow Heng Tan1
Alvin Yeo Khirn Hai
Tan Ek Kia
Danny Teoh
Tan Puay Chiang2
Till Vestring
Veronica Eng
Jean-François Manzoni3
Teo Siong Seng4
Tham Sai Choy5
Penny Goh6
No. of Meetings Held
2019 AGM7 Board Meetings
Audit
Nominating
Remuneration
Safety
Risk
Board Committee Meetings
1
1
1
1
1
1
1
1
1
1
–
–
–
1
12
12
10
9
10
12
11
12
12
12
–
1
–
12
–
–
–
4
5
5
–
–
5
–
–
–
–
5
4
–
3
3
–
–
4
4
–
–
–
–
–
4
5
–
3
–
–
5
–
5
–
–
–
–
–
5
4
4
–
–
4
–
4
–
–
–
–
–
–
4
–
–
4
–
4
4
–
–
4
4
–
–
–
4
Notes:
1 Mr Tow Heng Tan ceased to be a non-executive and non-independent director with effect from 1 November 2019, and concurrently ceased to be a member of the
Nominating Committee, Remuneration Committee and Board Risk Committee.
2 Mr Tan Puay Chiang ceased to be a non-executive and independent director with effect from 1 November 2019, and concurrently ceased to be the Chairman of the
Nominating Committee and a member of the Board Safety Committee. Mr Tan ceased to be a member of the Board Risk Committee with effect from 2 January 2019.
3 Prof Jean-François Manzoni was appointed as a member of the Board Risk Committee on 2 January 2019, and Chairman of the Nominating Committee with effect from
1 November 2019.
4 Mr Teo Siong Seng was appointed to the Board as a non-executive and independent director with effect from 1 November 2019, and was appointed as a member of the
Remuneration Committee and the Board Safety Committee with effect from 1 February 2020.
5 Mr Tham Sai Choy was appointed to the Board as a non-executive and independent director with effect from 1 November 2019, and was appointed as a member of the
Audit Committee and Board Risk Committee with effect from 1 February 2020.
6 Mrs Penny Goh was appointed to the Board as a non-executive and independent director with effect from 2 January 2020, and was appointed as a member of the Audit
Committee and Board Risk Committee with effect from 1 February 2020.
7 Refers to the AGM held on 23 April 2019.
76 Report to Shareholders 2019
Keppel Corporation Limited
adopted initiatives to put in place processes
to ensure that the NEDs 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. 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.
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
discussions 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 and
discussed. 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.
Regular informal meetings are conducted
for management to brief the directors
on prospective deals and potential
developments at an early stage before
formal board approval is sought, and
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 is circulated to the directors from
time to time. 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.
The Board also reviews the budget annually,
and any material variance between the
projections and actual results would be
disclosed and explained. Management also
provides the Board members with
management accounts monthly and as the
Board may require from time to time, to
keep the Board informed, on a balanced and
understandable basis, of the Group’s
performance, financial position
and prospects.
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: 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, corporate social
responsibility, risk governance and
management, the roles and responsibilities
of a director of a listed company and
industry-specific matters. In FY 2019,
some KCL directors attended talks on
topics relating to the digital economy, cyber
security governance and macroeconomic
trends. E-training was also conducted on
the Group’s policies on anti-corruption,
personal data protection, competition law,
and cyber security. Site visits are also
conducted periodically for directors to
familiarise themselves with the operations
of the various businesses so as to enhance
their performance as board or board
committee members. All induction,
training and development costs are at
the Company’s expense.
BOARD COMPOSITION AND
SUCCESSION PLANNING
Principle 2:
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.
Principle 4:
The Board has a formal and transparent
process for the appointment and
re-appointment of directors, taking into
account the need for progressive renewal
of the Board.
Nominating Committee
For FY 2019, the NC comprised entirely
NEDs, majority of whom (including the
Chairman) are independent, namely:
• Prof Jean-François Manzoni
(from 1 November 2019)
Independent Chairman
• Mr Tan Puay Chiang
(up to 31 October 2019)
Independent Chairman
• Dr Lee Boon Yang
Independent Member
• Mr Tow Heng Tan
(up to 31 October 2019)
Non-Executive and
Non-Independent Member
• Mr Alvin Yeo
Independent Member
• Mr Till Vestring
Independent Member
Following the retirement of
Mr Tan Puay Chiang and
Mr Tow Heng Tan on 1 November 2019,
the NC now comprises entirely
independent directors.
Keppel Corporation Limited
Report to Shareholders 2019
77
GOVERNANCE
CORPORATE GOVERNANCE
The NC is responsible for making
recommendations to the Board on
board appointments, overseeing
the Board and senior management’s
succession and leadership
development plans and conducting
annual reviews of board diversity,
board size, board independence and
directors’ commitment.
The detailed terms of reference of
this Committee is disclosed on
page 96 herein.
Process for appointment of new directors
and Board succession planning
The Board believes that orderly succession
and renewal are achieved as a result of
careful planning, where the appropriate
composition of the Board is continually
under review. In this regard, the Board
has put in place a formal process for
the renewal of the Board and the selection
of new directors 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.
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
would also take into account the needs
of the Group, the collective skills and
competencies of the Board and service
tenure spread of the directors.
b.
In the light of such reviews 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. The NC will, in all cases, take into
consideration the following objective
criteria identified as necessary for
the Board and board committees to
be effective:
i.
Integrity
Independent mindedness
ii.
iii. Able to commit time and
effort to carry out duties
and responsibilities effectively
iv. Track record of making
good decisions
v. Experience in
high-performing companies
vi. Financial literacy
d. 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.
e. 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.
f. NC makes recommendations to the
Board for approval.
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 AGM, and a newly
appointed director must submit him/herself
for re-election at the AGM immediately
following his/her appointment. Please refer
to Appendix 2 on pages 100 to 103 for
further details.
Alternate Director
The Company has no alternate directors
on the Board.
Annual Review of Board Diversity
and Independence
Board Diversity: The Company recognises
that diversity in relation to composition of
the Board provides a range of perspectives,
insights and challenges needed to support
good decision-making for the benefit of
the Group, and is committed to ensuring
that the Board comprises 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) so as to promote the
inclusion of different perspectives and
ideas, mitigate against groupthink and
ensure that the Company has the
opportunity to benefit from all available
talent. In identifying suitable candidates
for new appointments to the Board,
the NC would ensure that female
candidates are included for consideration.
The final decision on the appointment
of directors would be based on and
driven by merit against the objective criteria
set by the Board from time to time on the
recommendation of the NC, after having
regards to the benefits of diversity and
the needs of the Board.
The Company has in place a Board Diversity
Policy that sets out the framework and
approach for the Board to set its qualitative
and measurable quantitative objectives for
achieving diversity, and to annually assess
the progress in achieving these objectives.
The annual assessment is led by the NC as
part of the process for appointment of new
directors and Board succession planning.
To help the NC identify gaps (if any) in skills,
knowledge, experience and other aspects
of diversity in the board composition in any
given year of assessment, each member
of the Board is required to complete a Board
Diversity Matrix to indicate which of the list
78 Report to Shareholders 2019
Keppel Corporation Limited
of skills, knowledge, experience and other
aspects of diversity (identified by the NC,
and set out in the Board Diversity Matrix,
as being able to contribute to the Company’s
strategy and business) the board member
possesses. The returns from the board
members are then consolidated into a single
Board Diversity Matrix to highlight the
Board’s current mix of skills, knowledge,
experience and other aspects of diversity
and gaps therein, if any.
The Board will, taking into consideration
the recommendations of the NC, review
and agree annually on the qualitative and
measurable quantitative objectives for
achieving diversity on the Board. The
objectives identified in FY 2019, and the
progress towards achieving such objectives,
are set out below:
The NC conducted an assessment in
January 2020 and 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. 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, taking into
account the Company’s strategy
and business.
Board Independence: The NC determines
on an annual basis whether or not a director
is independent. In January 2020, the NC
carried out reviews on the independence
of each 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 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
on this matter) noted that Mr Alvin Yeo has
served on the Board beyond nine years and
is Senior Partner of WongPartnership LLP,
OBJECTIVES FOR FY 2019
Objectives
Progress
Appoint at least two additional independent
directors with some of the core competencies
already present on the Board by end-FY 2020
for succession planning purposes.
Broaden the skillset of directors on the Board
by appointing at least one director with the
relevant expertise and experience that would
complement those already on the Board and
which would help drive the Group’s strategy.
Mr Tham Sai Choy was appointed as a non-executive and independent director with effect from
1 November 2019. Mr Tham was Managing Partner of KPMG Singapore and then Chairman of
KPMG Asia Pacific before he retired in 2017. He was a member of KPMG’s global board, and
had served on its executive committee and risk committee, and chaired its compensation and
nominations committee. As a member of the executive committee, Mr Tham was responsible for
KPMG’s global strategies and planning, including developing the firm’s capabilities in cyber security,
data analytics and digital transformation. Mr Tham also worked with many of Singapore’s listed
companies in their audits and other consultancy work over his 36 years of practice. He was
appointed as a board member with a view of being the successor to Mr Danny Teoh in the roles
of Audit Committee Chairman and Board Risk Committee member.
Mrs Penny Goh was appointed as a non-executive and independent director with effect
from 2 January 2020. Mrs Goh was Co-Chairman and Senior Partner of Allen & Gledhill LLP,
where she had, for many years, headed the firm’s corporate real estate practice. She advises listed
corporations, private equity property funds, sovereign wealth funds and real estate investment
trusts, and has extensive experience in a broad range of corporate real estate transactions for
commercial, industrial and logistics projects in Singapore and the Asia Pacific, involving investment,
joint development and profit participation structures. Mrs Goh was appointed with a view to
succeeding Mr Alvin Yeo as a board member with legal expertise and to enhance the gender
diversity of the Board.
Mr Teo Siong Seng was appointed as a non-executive and independent director with effect
from 1 November 2019. His strong background, knowledge and experience in the China market;
experience in growing businesses in frontier countries such as East and West Africa, and his
knowledge and experience from serving as Chairman of the Singapore Business Federation,
Honorary President of the Singapore Chinese Chamber of Commerce & Industry and as director of
Business China, would enhance the balance and breadth of skills of the Board, and help drive the
Group’s strategy.
Improve gender diversity over a three-year period
by ensuring that at least 20% of the Board will
comprise female directors by end-FY 2021.
With the recent appointment of Mrs Penny Goh, together with Ms Veronica Eng, the female
representation on the Board is currently 18%. This objective will be met with the appointment of an
additional female director by end-FY 2021.
Keppel Corporation Limited
Report to Shareholders 2019
79
GOVERNANCE
CORPORATE GOVERNANCE
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 objective criteria. In addition,
the NC noted that with WongPartnership
LLP being one of the top law firms
in Singapore, it was not unexpected
that its services would be sought by
the Group from time to time. Taking these
factors into consideration, along with
his invaluable contributions on 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
judgment in the best interests of
the Company in the discharge of
his director’s duties and should
therefore continue to be deemed
an independent director.
The NC also noted that Mr Tan Ek Kia has
served on the Board beyond nine years
and is a non-executive and independent
director on the board of TransOcean Ltd
and Chairman of KrisEnergy Ltd, both of
which have business dealings with the
Keppel Offshore & Marine (Keppel O&M)
Group. Mr Tan had declared to the NC
that he recused himself where there was
potential conflict of interest and continued
to exercise independent judgment.
The NC also took into account Mr Tan’s
invaluable contributions on 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
judgment in the best interests of the
Company in the discharge of his director’s
duties and should therefore continue to be
deemed an independent director.
The NC noted that Mr Danny Teoh had
declared his shareholding in Workflowww
International Limited which could be a
supplier of services to M1 Limited (“M1”),
and his directorship on DBS Group Holdings
Ltd (“DBS”), which provided services to
the Group. The NC considered that both
interests were declared to the Board, and
that Mr Teoh has abstained from voting
whenever there was potential conflict of
interest. The NC further considered that,
as DBS was a leading bank in Singapore
and Southeast Asia, it was not unexpected
that its services would be sought by
the Group from time to time. Noting also
that Mr Teoh has served on the Board
beyond nine years, but taking into
account his invaluable contributions on
the Board and board committees and
the outcome of the recent self and peer
Individual Director Performance Assessment,
the NC unanimously agreed that Mr Teoh has,
at all times, exercised independent
judgment in the best interests of the
Company in the discharge of his director’s
duties and should therefore continue to be
deemed an independent director.
The NC noted that Mr Tham Sai Choy had
declared his directorship on DBS which
provided services to the Group. The NC
considered that such interest was declared
to the Board, and Mr Tham would abstain
from voting when there was potential
conflict of interest. The NC further
considered that, as DBS was a leading
bank in Singapore and Southeast Asia,
it was not unexpected that its services
would be sought by the Group from time
to time. Taking into account these factors
and his participation and actual performance
on the Board and board committees in
discharge of his duties since his appointment
on 1 November 2019, the NC unanimously
agreed that Mr Tham should continue to be
deemed an independent director.
The NC noted that Mrs Penny Goh was
former Co-Chairman and Senior Partner
and now non-executive Senior Adviser of
Allen & Gledhill LLP (A&G) which provided
legal services to the Group. She had
declared that she was not involved in the
selection and appointment of legal advisors
of the Group and did not regard the business
relationship with A&G as something that
could affect her independent judgment.
The NC further considered that, as A&G was
one of the top law firms in Singapore, it was
not unexpected that its services would be
sought by the Group from time to time,
and Mrs Goh did not hold 5% or more stake
in A&G. Taking into account the above
factors, the NC unanimously agreed that
Mrs Goh should continue to be deemed
an independent director.
The NC noted that Dr Lee Boon Yang has
served on the Board beyond nine years.
Taking into consideration, among other
things, his invaluable contributions on
the Board and board committees and his
outstanding rating in respect of his
performance as Board Chairman and director
in the recent board, Chairman and individual
director performance assessment exercise,
and that there were no other circumstances
that would deem him non-independent,
the NC (save for Dr Lee who abstained
from deliberation on this matter) agreed
unanimously that Dr Lee has at all times
exercised independent judgment in the
best interests of the Company in the
discharge of his director’s duties and
should therefore continue to be deemed
an independent director.
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 Till Vestring, Ms Veronica Eng,
Prof Jean-François Manzoni,
Mr Teo Siong Seng, Mr Tham Sai Choy
and Mrs Penny Goh 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 a majority of independent
directors, with a total of 11 directors
of whom 10 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.
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.
Annual Review of Board Size
The Board, in concurrence with the NC,
is of the view that the current Board size
was appropriate to facilitate effective
decision-making, 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. Nevertheless, the NC will
continue to search for additional directors
to be appointed in FY 2021 to enhance
the Board’s diversity and for succession
planning purposes. No individual or small
group of individuals dominate the Board’s
decision-making.
Annual Review of Directors’ Commitments
The NC assesses annually whether a
director is able to and has been adequately
carrying out his/her duties as a director
of the Company. 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
80 Report to Shareholders 2019
Keppel Corporation Limited
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 listed company
board representations and/or 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. 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.
For the recently appointed directors namely,
Mr Teo Siong Seng, Mr Tham Sai Choy and
Mrs Penny Goh, the NC had met with them
prior to their appointments to ensure that
they were aware of the expectations and the
level of commitment required as directors
on the Board, and taking into account the
level of commitment required of their other
listed company board representations and
other principal commitments, was of the
view that they should be able to adequately
discharge their duties.
For the other directors, 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, 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 2019,
all the directors performed well. The NC
was therefore satisfied that in FY 2019,
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 the Company,
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 the Company’s investment in
the company.
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 30 to 33: 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 details of
their membership on board committees.
Page 115: Shareholding in the Company and
its subsidiaries.
BOARD PERFORMANCE
Principle 5:
The Board undertakes a formal annual
assessment of its effectiveness as a whole,
and that of each of its board committees
and individual directors.
The Board has implemented formal
processes for assessing the effectiveness
of the Board as a whole, each of its
board committees, the contribution
by the Chairman, as well as peer and
self-assessment of the individual
director to the effectiveness of
the Board.
Independent Co-ordinator: To ensure that
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 of PricewaterhouseCoopers
and Land Transport Authority, and currently
Chairman of Nomura Singapore Limited,
was appointed to 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 judgment.
Formal Process and Performance Criteria:
The evaluation processes and performance
criteria are disclosed in Appendix 1 on
pages 95 to 98 of this report.
The purpose of the policy is to highlight
certain obligations of a person while acting
in his/her capacity as a Nominee Director.
Objectives and Benefits: The board
assessment exercise provides an
Keppel Corporation Limited
Report to Shareholders 2019
81
GOVERNANCE
CORPORATE GOVERNANCE
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 AGM,
and in determining whether directors with
multiple board representations are
nevertheless able to and have adequately
discharged their duties as directors of
the Company.
REMUNERATION REPORT
Principle 6:
The Board has a formal and transparent
procedure for developing policies on director
and executive remuneration, and for fixing
the remuneration packages of individual
directors and key management personnel.
No director is involved in deciding his/her
own remuneration.
Principle 7:
The level and structure of remuneration
of the Board and key management personnel
are appropriate and proportionate to the
sustained performance and value creation
of the Company, taking into account
the strategic objectives of the Company.
Principle 8:
The Company is transparent on its remuneration
policies, level and mix of remuneration,
the procedure for setting remuneration,
and the relationships between remuneration,
performance and value creation.
Remuneration Committee
For FY 2019, the Remuneration Committee
(“RC”) comprised entirely NEDs, majority
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
(up to 31 October 2019)
Non-Executive and
Non-Independent Member
• Mr Teo Siong Seng
(from 1 February 2020)
Independent Member
Following the retirement of Mr Tow Heng Tan
on 1 November 2019, the RC now
comprises entirely independent directors.
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, thereby maximising 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 end-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 detailed terms of reference of this
Committee are disclosed on page 96 herein.
Access to expert advice: The RC has
access to expert advice from external
remuneration consultants where required.
In FY 2019, the RC sought views from external
remuneration consultants, Aon Hewitt, on
market practice and trends, and benchmarks
against comparable organisations. 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.
Policy in respect of Non-Executive
Directors’ Remuneration
Each NED’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 NEDs 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 since FY 2017, is set out in the table below.
DIRECTORS’ FEE STRUCTURE
Board Chairman
Board Member
Audit Committee
Board Risk Committee
Remuneration Committee
Board Safety Committee
Nominating Committee
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
82 Report to Shareholders 2019
Keppel Corporation Limited
Each of the NEDs (including the Chairman)
will receive 70% of his/her total directors’
fees in cash (“Cash Component”), and 30%
in the form of shares in the Company
(“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 AGM provided that it does not fall
within any applicable restricted period
of trading (in the event that the first
trading day after the date of the AGM
falls within a restricted period of trading,
the Remuneration Shares will be purchased
on the first trading day after the end of the
restricted period of trading) (“Trading Day”)
for delivery to the respective NEDs, 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 NEDs is intended
to achieve the objective of aligning the
interests of the NEDs with those of the
shareholders’ and the long-term interests
of the Company. The aggregate directors’
fees for NEDs for FY 2019 are subject to
shareholders’ approval at the AGM.
The Chairman and the NEDs will abstain
from voting and will procure their respective
associates to abstain from voting in
respect of this resolution.
The directors’ fees to NEDs are currently
paid in arrears after the end of the year.
From FY 2020 onwards, approval of
the shareholders will be sought for
the payment of directors’ fees on a
half-yearly basis in arrears instead of
once per year after the end of the
financial year. The payment of fees on
a half-yearly basis in arrears will allow
the payment schedule to be more aligned
with the period of service that the NEDs
discharge their service for.
The amount of fees has been computed
taking into consideration the number
of board committee representations
by the NEDs and also caters for
additional fees (if any) which may be
payable due to the formation of additional
board committees, or additional Board or
board committee members being appointed
in the course of FY 2020. In the event
that the amount proposed is insufficient,
approval will be sought at the next AGM
before payments are made to the NEDs for
the shortfall amount.
The RC is of the view that the remuneration
of NEDs is appropriate to their level
of contribution, taking into account
factors such as effort, time spent and
responsibilities, and to attract, retain and
motivate the directors to provide good
stewardship of the Company.
Remuneration policy in respect
of Executive Director 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’ and other
stakeholders’ 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, and
appropriate to attract, retain and
motivate key management personnel
to successfully manage the Company
for the longer term.
The total remuneration structure reflects
the following four key objectives:
a. Shareholder Alignment: To incorporate
performance measures that are
aligned to shareholders’ interests;
b. Long-term Orientation: To motivate
employees to drive sustainable
long-term growth;
c. Simplicity: To ensure that the
remuneration structure is easy to
understand and communicate to
stakeholders; and
d. Synergy: To facilitate talent
mobility and enhance collaboration
across businesses.
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. The
Company performs regular benchmarking
reviews on employees’ total remuneration
to ensure market competitiveness.
The RC exercises broad discretion and
independent judgment in ensuring that the
amount and mix of remuneration is aligned
with the interests of shareholders and
promotes the long-term success of the
Company. The mix of fixed and variable
reward is considered appropriate for the
Group and for each individual role.
The remuneration structure is directly linked
to corporate and individual performance,
both in terms of financial and non-financial
performance. This link is achieved in the
following ways:
a. by placing a significant portion of
executives’ remuneration at risk
(“At Risk component”) and subject to
a vesting schedule;
b. by incorporating appropriate key
performance indicators (“KPIs”) for
awarding of annual performance bonus:
i. There are four scorecard areas
that the Company has identified as
key to measuring the performance
of the Group – (i) Financial and
Business Drivers; (ii) Process;
(iii) Stakeholders; and (iv) People.
Some of the key sub-targets within
each of the scorecard areas include
key financial indicators, safety goals,
risk management, compliance and
controls measures, sustainability
efforts, employee engagement,
talent development and
succession planning; and
ii. The four scorecard areas have been
chosen because they support how
the Group achieves its strategic
objectives. The framework provides
a link for staff to understand how
they contribute to each area of the
scorecard, and therefore to the
Company’s overall strategic goals.
This is designed to achieve a
consistent approach and
understanding across the Group.
The RC reviews and approves
the scorecard annually.
Keppel Corporation Limited
Report to Shareholders 2019
83
GOVERNANCE
CORPORATE GOVERNANCE
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 vested; 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
the variable component of remuneration,
the RC has 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 2019.
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 ranging from 1.5 to
more times of their annual fixed pay under
the share ownership guideline so as to
maintain a beneficial ownership stake in
the Company, thus further aligning their
interests with shareholders.
The directors, the CEO and the key
management personnel (who are not
directors or the CEO) are remunerated on an
earned basis and there are no termination,
retirement and post-employment benefits
that are granted over and above what has
been disclosed.
Long-Term Incentive Plans
KCL Share Plans
The KCL Share Plans are put in place to
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 select 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.
Following the delisting of M1 in April 2019,
a six-year M1 transformation plan was
put in place to enhance and drive M1’s
long-term performance. Through the
transformation plan, the Group seeks to
develop and implement new strategic
and operational plans to sharpen M1’s
competitive edge, increase its momentum
in digital transformation and undertake
growth initiatives.
Given the highly stretched goals set out
in the M1 transformation plan, the Board
has approved a remuneration model to
align the transformation plan and key
M1 executives’ remuneration. The one-time
Transformation Incentive Plans (“3-Year
PSP-TI M1” and “6-Year PSP-TI M1”),
which are awarded under the KCL PSP,
are long-term incentive plans with
three- and six-year performance periods
respectively. Subject to meeting the
performance conditions set, the vesting
dates are in 2022 and 2025.
Executives will only benefit from the
two PSP-TI M1 awards if M1 meets the
stretched financial and non-financial targets
linked to the M1 transformation plan,
and if the executives meet or exceed their
individual performance targets. In addition,
the vested shares are subject to a selling
moratorium of one year.
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 the RC’s discretion before further
payment or vesting can occur.
Details of the KCL Share Plans are set out
on pages 116 to 118.
84 Report to Shareholders 2019
Keppel Corporation Limited
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 2019
The level and mix of each of the director’s remuneration are set out below:
Base/Fixed
Salary
($)
Performance-Related
Cash Bonuses Earned1
($)
Directors’ Total Fees2
($)
Cash
component4
Shares
component4
Benefits-
in-Kind
($)
Contingent
Awards of Shares3
($)
Total
Remuneration
($)
Remuneration &
Name of Director
Loh Chin Hua
1,255,360
1,923,899
Lee Boon Yang
Tow Heng Tan7
Alvin Yeo Khirn Hai
Tan Ek Kia
Danny Teoh
Tan Puay Chiang8
Till Vestring
Veronica Eng
Jean-François Manzoni9
Teo Siong Seng10
Tham Sai Choy10
Penny Goh11
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
525,000
116,019
117,600
158,900
169,400
104,429
125,300
147,700
105,410
12,634
12,634
–
–
225,000
49,723
50,400
68,100
72,600
44,755
53,700
63,300
45,176
5,415
5,415
–
n.m.5
–
–
–
–
–
–
–
–
–
–
–
–
PSP
RSP
2,044,000
1,956,228
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
7,179,4876
750,000
165,742
168,000
227,000
242,000
149,184
179,000
211,000
150,586
18,049
18,049
–
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 2019 were met.
2 Based on the NEDs’ fee structure set out earlier, the total fees amount to $2,278,610. The directors’ total fees are subject to shareholders’ approval at the Company’s AGM.
3 Shares awarded under the KCL PSP are subject to pre-determined performance targets over a three-year performance period. As at 30 April 2019, being the grant date for
the contingent awards under the KCL PSP, the estimated value of each share was $5.60. As at 17 February 2020, being the grant date for the contingent deferred shares
award under the KCL RSP, the estimated value of each share was $6.48. For the KCL PSP, the figures are based on the value of the PSP shares at 100% of the award and
the figures may not be indicative of the actual value at vesting which can range from 0% to 150% of the award.
4 The amounts stated may be adjusted as indicated on page 83 of this report.
5 n.m. – not material
6 Total remuneration shown above for Mr Loh Chin Hua does not include vested share of carried interests for funds created during the time he was Managing Director at
Alpha Investment Partners. These carried interests are only earned at the end of the fund life and depend entirely on the actual performance of the funds after they have
been liquidated.
7 Mr Tow Heng Tan retired from the Board with effect from 1 November 2019. Concurrently, Mr Tow ceased to be a member of the Nominating Committee, Remuneration
Committee and Board Risk Committee. Fees are prorated accordingly.
8 Mr Tan Puay Chiang retired from the Board with effect from 1 November 2019. Concurrently, Mr Tan ceased to be the Chairman of the Nominating Committee and a
member of the Board Safety Committee. He ceased to be a member of the Board Risk Committee with effect from 2 January 2019. Fees are prorated accordingly.
9 Prof Jean-Francois Manzoni was appointed as a member of the Board Risk Committee with effect from 2 January 2019 and the Chairman of the Nominating Committee
with effect from 1 November 2019. Fees are prorated accordingly.
10 Mr Teo Siong Seng and Mr Tham Sai Choy were appointed to the Board with effect from 1 November 2019. Fees are prorated accordingly.
11 Mrs Penny Goh was appointed to the Board with effect from 2 January 2020.
Keppel Corporation Limited
Report to Shareholders 2019
85
GOVERNANCE
CORPORATE GOVERNANCE
PSP and RSP Shares granted and vested for the Executive Director are shown below:
PSP
Awards
Vesting
Date
Contingent
Awards
of PSP
Shares
Number of
PSP Shares
Vested
Value of
PSP Shares
Vested
($)1
RSP
Awards
Vesting
Date
Contingent
Awards
of RSP
Shares
Number of
RSP Shares
Vested
Value of
RSP Shares
Vested
($)1
Name of
Executive Director
Loh Chin Hua
2016
Awards
2017
Awards
28 Feb
2019
28 Feb
2022
28 Feb
2020
0 to 1,125,0003
0 to 495,000
0 to 450,0002
177,000
1,102,710
2018
Awards
26 Feb
2021
0 to 480,000
2019
Awards
28 Feb
2022
0 to 547,500
–
–
–
–
–
–
–
–
2016
Awards
9 Mar 2017
28 Feb 2018
28 Feb 2019
180,000
2018
Awards
2019
Awards
2020
Awards
28 Feb 2018
28 Feb 2019
28 Feb 2020
28 Feb 2019
28 Feb 2020
26 Feb 2021
28 Feb 2020
26 Feb 2021
28 Feb 2022
272,352
262,403
301,887
60,000
60,000
60,000
90,784
90,784
–
87,467
–
–
–
–
–
405,000
472,200
373,800
714,470
565,584
–
544,919
–
–
–
–
–
Notes:
1 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 2019 were met.
2 Refers to contingent shares awarded under the KCL PSP.
3 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 2019 was $16,584,212. 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 Earned1 (%)
Benefits-
in-Kind (%)
Contingent Awards of Shares
PSP (%)
RSP (%)
Remuneration Band & Name of Key Management Personnel
Above $3,500,000 to $3,750,000
Chan Hon Chew
Above $3,250,000 to $3,500,000
Ong Tiong Guan
Above $2,750,000 to $3,000,000
Tan Hua Mui, Christina2
Above $2,000,000 to $2,250,000
Tan Swee Yiow
Above $1,750,000 to $2,000,000
Ong Leng Yeow, Chris
Above $1,500,000 to $1,750,000
Pang Thieng Hwi, Thomas
Above $1,250,000 to $1,500,000
Manjot Singh Mann
21
19
22
31
27
28
48
27
28
26
23
19
26
31
n.m.
n.m.
n.m.
n.m.
n.m.
n.m.
6
24
25
26
22
35
20
–3
28
28
26
24
19
26
15
Notes:
1 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 2019 were met.
2 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.
In addition to the remuneration disclosed above, Mr Manjot Singh Mann was granted performance shares on a one-off basis under the 3-year and 6-year KCL PSP-TI M1
awards on 17 February 2020. The total allocation value of the awards is estimated at $600,000.
3
86 Report to Shareholders 2019
Keppel Corporation Limited
Remuneration of employees who are
immediate family members of a Director or
the Chief Executive Officer
No employee of the Company and its
subsidiaries was an immediate family
member of a director or the CEO and whose
remuneration exceeded $100,000 during the
financial year ended 31 December 2019.
“Immediate family member” means the
spouse, child, adopted child, step-child,
brother, sister and parent.
AUDIT COMMITTEE
Principle 10:
The Board has an Audit Committee
which discharges its duties objectively.
The Audit Committee (AC) comprises all
independent directors, namely:
• Mr Danny Teoh
Independent Chairman
• Mr Alvin Yeo
Independent Member
• Ms Veronica Eng
Independent Member
• Mr Tan Ek Kia
Independent Member
• Mr Tham Sai Choy
(from 1 February 2020)
Independent Member
• Mrs Penny Goh
(from 1 February 2020)
Independent Member
The AC’s primary role is to assist the
Board with ensuring the integrity of
financial reporting and the adequacy
and effectiveness of the system of
internal controls and risk management.
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
responsibilities properly.
Mr Danny Teoh, Ms Veronica Eng and
Mr Tham Sai Choy have recent, relevant
and in-depth experience in accounting and
related financial management expertise.
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. Mrs Penny Goh has extensive
experience in a broad range of corporate
real estate transactions for commercial,
industrial and logistics projects in Singapore
and the Asia Pacific, involving investment,
joint development and profit participation
structures, and has practical knowledge
of issues and considerations affecting the
Committee to discharge her responsibilities as
a member of the Committee. Mr Danny Teoh,
Mr Tan Ek Kia, Ms Veronica Eng,
Mr Tham Sai Choy and Mrs Penny Goh
are also members of the Board Risk
Committee (BRC), with Ms Veronica Eng
being the Chairperson 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 holds any financial interest in the
auditing firm.
The detailed terms of reference of the
Committee are set out on page 95 herein.
AUDIT
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’s
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 audit and 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 26 of the Notes to the
Financial Statements on page 181.
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 Company also has an in-house internal
audit team (“Group Internal Audit”), which
together with the external auditors, report
their findings and recommendations to the
AC independently. 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. In this aspect, Group Internal Audit
conducts regular reviews of the adequacy
and effectiveness of the Group’s material
internal controls, including financial,
operational, compliance and IT controls
and risk management. Any significant
non-compliance or failures in internal
controls and recommendations for
improvements are reported to the AC.
They also undertake investigations as
directed by the AC.
Group Internal Audit has direct access to
the AC and unfettered access to all the
Group’s documents, records, properties
and personnel. The AC approves the hiring,
removal, evaluation and compensation of
the Head of Group Internal Audit, whose
primary line of reporting is to the Chairman
of the AC, with an administrative reporting
line to the CEO of the Company. The AC also
reviewed the adequacy and effectiveness of
Group Internal Audit and is satisfied that the
team is independent and adequately
resourced with persons with relevant
qualifications and experience, and has
appropriate standing within the Company.
Group Internal Audit 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 programmes attended
by Group Internal Audit to ensure that their
technical knowledge and skill sets remain
current and relevant.
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
(Standards). Group Internal Audit staff
perform a yearly declaration of
independence and confirm their adherence
to Keppel’s Code of Conduct as well as
the Code of Ethics established by the IIA,
from which the principles of objectivity,
competence, confidentiality and integrity
are based.
The purpose, authority and responsibility of
Group Internal Audit are 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.
Keppel Corporation Limited
Report to Shareholders 2019
87
GOVERNANCE
CORPORATE GOVERNANCE
The Charter mandates that Group Internal
Audit to maintain a quality assurance and
improvement programme that cover 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 was developed using
a structured risk and control assessment
framework, and this plan was reviewed and
approved by the AC 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.
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, significant audit findings and
recommendations put up by the internal
and external auditors are reported to the AC
and discussed at AC meetings. To ensure
timely and adequate disclosure of audit
findings, the status of implementation of
the actions agreed by management is
tracked and discussed with 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.
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, 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.
In 2019, the AC performed an independent
review of the financial statements of the
Company before the announcement of the
Company’s quarterly and full-year results.
In the process, the Committee reviewed the
key areas of management judgment applied
for adequate provisioning and disclosure,
critical accounting policies and any
significant changes made that would
have a material impact on the financials.
In its review of the financial statements of
the Group and the Company for FY 2019,
the AC reviewed the key areas of
management’s estimates and judgment
applied for key financial issues, including
valuation and assessment of impairment
of assets, recoverability of contract assets
and stocks, financial exposure in relation
to contracts with Sete Brasil, global
resolution with criminal authorities in
relation to corrupt payments, revenue
recognition, and the purchase price
allocation and impairment assessment of
goodwill arising from the acquisition of M1,
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 2019.
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 cash flow estimates
relating to the settlement agreement
between the Group and Sete Brasil, as well
as a proposal by Magni Partners (Bermuda)
Ltd, assessment on whether there was a
potential for any additional provision in
relation to the corrupt payments, as well as
estimates of the total costs and physical
proportion of work completed in determining
the stage of completion. Furthermore,
external independent valuations as well as
opinions from internal and external legal
counsels, 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.
Whistle-Blower Policy
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 actions. 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. Significant matters
raised through the whistle-blowing channel
are reported to the Board.
The details of the Policy are set out on
page 99 hereto. The AC reviews the Policy
yearly to ensure that it remains current.
Interested Person Transaction
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.
RISK MANAGEMENT AND
INTERNAL CONTROLS
Principle 9:
The Board is responsible for the governance
of risk and ensures that Management
maintains a sound system of risk management
and internal controls, to safeguard the
interests of the Company and its shareholders.
Board Risk Committee
For FY 2019, the BRC comprised entirely
NEDs, majority of whom (including the
Chairman) are independent, namely:
• Ms Veronica Eng
Independent Chairperson
• Mr Danny Teoh
Independent Member
• Mr Tow Heng Tan
(up to 30 October 2019)
Non-Executive and
Non-Independent Member
• Mr Tan Ek Kia
Independent Member
• Mr Tan Puay Chiang
(up to 1 January 2019)
Independent Member
• Prof Jean-François Manzoni
Independent Member
• Mr Tham Sai Choy
(from 1 February 2020)
Independent Member
• Mrs Penny Goh
(from 1 February 2020)
Independent Member
Following the retirement of Mr Tow Heng Tan
on 1 November 2019, the BRC now
comprises entirely independent directors.
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
88 Report to Shareholders 2019
Keppel Corporation Limited
KEPPEL’S SYSTEM OF MANAGEMENT CONTROLS
POLICIES
4
Board Oversight
Board of Directors
3
Assurance
Business Unit
Representation
Internal
Audit
External
Audit
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2
1
Management &
Assurance Frameworks
Self Assessment
Process
Enterprise Risk
Management
Regulatory
Compliance
IT Governance
Framework
Business Governance/
Rules of Governance
Core Values, Corporate & Employee Conduct
Policy
Management
Compliance
Governance
Operational
Governance
Financial
Governance
P
R
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PEOPLE
the Group’s assets, and ensure corporate
sustainability. The Committee reports to
the Board on critical risk issues, material
matters, findings and recommendations.
The detailed terms of reference of this
Committee are disclosed on page 95 herein.
Group Risk and Compliance, working
in conjunction with the business teams,
have supported management in applying
the Enterprise Risk Management (ERM)
Framework to ensure that significant
risks across the Group are assessed and
adequately mitigated. This is performed
through the monitoring of risk matters
across the Group, conduct of training,
site visits, participation at IMPAC meetings,
and implementation of risk-related policies
and standards. The ERM Framework was
established to guide Group entities in
managing risks and also facilitate the
Board’s assessment of the adequacy and
effectiveness of the Group’s systems and
processes in managing risks. It lays out the
governance mechanisms and principles, as
well as the policies, processes and systems
pertaining to how Group entities should
identify, assess, mitigate, communicate and
monitor or escalate significant risk matters.
Risk assessments are performed at each
business unit and agreed with senior
management before being consolidated to
form the Group risk assessment. Further
assessments are performed at the Group and
articulation of each key risk area, grouped
by sub-groups within Strategic, Operational,
Compliance and Financial risk, and the
mitigation plans where applicable,
are provided to the Board and BRC at
quarterly meetings. This is complemented
by education and awareness, resources
and expertise, as well as assessment or
feedback, which are ongoing in nature.
The Group’s approach to risk management
and the key risks of the Group are set out in
the Risk Management section on page 106
of this report. The Group is guided by a set
of Risk Tolerance Guiding Principles, as
disclosed on page 106.
The Group also has in place Keppel’s System
of Management Controls Framework
(the “Framework”) outlining the Group’s
internal controls and risk management
processes and procedures. The Framework
comprises three Lines of Defence towards
ensuring the adequacy and effectiveness
of the Group’s system of internal controls
and risk management.
Under the first Line of Defence, management
is required to ensure good corporate
governance through the implementation and
management of policies and procedures
relevant to the Group’s business scope and
environment. Such policies and procedures
govern financial, operational, 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 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 processes via
self-assessment. Where required, action
plans are developed to remedy identified
control gaps. As described under the Group’s
ERM Framework, significant risk areas of
the Group are also identified and assessed,
with systems, policies and processes
put in place to manage and mitigate the
identified risks beyond internal thresholds
of appetite. It includes the reporting and
oversight structure involving both boards
and management of the Group and business
divisions and seeks to embed sound
risk management practices in business
decisions and operations across Group
entities. Regulatory Compliance supports
and works alongside management to
ensure that relevant policies, processes and
controls are effectively designed, managed
and implemented to ensure compliance risks
and controls are effectively managed.
Under the third Line of Defence, to assist
the Group to ascertain the adequacy and
effectiveness of the Group’s internal controls,
business units’ CEOs and Chief Financial
Officers (CFOs) 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.
Keppel Corporation Limited
Report to Shareholders 2019
89
GOVERNANCE
CORPORATE GOVERNANCE
Enhancements to Compliance Programme
in FY 2019
At Keppel, accountability 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
by enhancing our regulatory compliance
process and reminding every Keppelite of
that value is a focus of attention for us, our
boards, officers and line managers globally.
vi. regular discussions on compliance
issues and matters at meetings of
senior management, core functions,
and board (or board committee) levels;
vii. compliance procedures, processes and
controls were subject to independent
reviews by Group Internal Audit, in
particular within their scope of thematic
audits conducted during the year;
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 110 to 112 of this 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.
implementing a Group Culture
Survey in the fourth quarter of 2019,
which is designed to measure
compliance-related awareness
and gauge the culture towards risk,
compliance and internal controls.
It will be used to ascertain areas for
improvement as part of the Group’s
ongoing monitoring and enhancement
of its compliance programme;
ii. hiring an additional full-time compliance
manager at Keppel O&M who comes
with experience from two of the Big
Four accounting firms in the areas of
forensics, anti-bribery and corruption
investigations and compliance, and
anti-money laundering compliance;
iii. strengthening its control assurance
function with the hire of a senior
manager, as well as hiring and
integrating professional and
experienced compliance officers
in each business unit and increasing
the Group’s internal audit headcount;
iv. formally adopting a Group Mergers &
Acquisitions Compliance Due Diligence
Policy, which sets forth the roles
and responsibilities of stakeholders,
provides guidance as to mandatory
due diligence during the mergers and
acquisitions process, including guidance
as to what to look for, and provides
a mechanism for consultations
and exceptions;
v.
regular messaging by the Group’s
and each business unit’s senior
management stressing the importance
of compliance;
viii. updating of the Group Gifts and
Hospitality Policy and the Group
Donations and Sponsorship Policy;
ix. operationalising the Group Disciplinary
Procedure Guide, which provides a
practical guide for the handling of
allegations of employee misconduct
in a fair, rational, and consistent
manner across the Group. It sets
forth the various stages of disciplinary
process and provides possible
consequences for violations of
Group policies, depending on the
severity of the infraction;
x.
instituting a quarterly Group-wide risk,
compliance and controls newsletter; and
xi. enhancements to the Group’s
Whistle-Blower Policy with centralised
procedures and whistle-blower reporting
channels, including an email hotline,
local toll-free whistle-blower hotlines for
Singapore, Brazil, China, USA, Vietnam,
Indonesia, Philippines, Australia, UK and
Germany respectively, and an online
reporting portal. New whistle-blower
posters were also rolled out across
all of the Group’s business units.
The manning of these reporting
channels has been outsourced to
a third party (KPMG).
In 2019, Keppel O&M also completed
the ISO 37001 (Anti-Bribery Management
System) certification for its global
operations in USA, Brazil, Middle East,
China, Philippines, India and Bulgaria,
thus completing the attainment of ISO
37001 certification at all Keppel O&M
operating entities in Singapore and globally.
The Group’s Compliance Programme
The Group’s 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. risk-based due diligence process
for all third-party associates
who represent Keppel Group in
business dealings, including our
joint venture partners, to assess
the compliance risk of the business
partner; and
iv. 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 CFO
of the Company.
The Group’s compliance programme is
and will be subjected to periodic reviews to
ensure it meets the following standards:
1. Board and Senior Management
Commitment
The Group’s senior management,
including members of the Board,
provide continuous, clear and
explicit support to the
compliance programme.
2. Policies and Procedures
The Group continuously implements
and communicates its corporate policy
against violations of any anti-corruption
laws. This policy has been and will
continue to be documented in writing,
include appropriate measures to
reduce the prospect of violations of
anti-corruption laws, and encourage and
support the observance of compliance
policies and procedures by personnel
at all levels of the Group. These
anti-corruption policies and procedures
apply to all directors, officers and
employees and, where necessary
and appropriate, outside parties acting
on behalf of Keppel, including but not
limited to, agents and intermediaries,
consultants, representatives, partners
and suppliers.
Individuals at all levels of Keppel comply
with Keppel’s Code of Conduct and its
compliance policies and procedures.
90 Report to Shareholders 2019
Keppel Corporation Limited
Such policies and procedures address,
among other areas:
a. gifts;
b. hospitality, entertainment
and expenses;
c. agent fees;
d. political contributions;
e. 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.
3. Periodic Risk-Based Review
The Group continues to enhance its
compliance policies and procedures on
the basis of a periodic risk assessment
to ensure their continued effectiveness,
taking into account relevant developments
such as international and industry
standards, and addressing the individual
circumstances of the Group, and in
particular corruption risks, including but
not limited to its geographical organisation
and sectors of industrial operation.
4. Training and Orientation
The Group continuously ensures that
its compliance policies and procedures
are communicated effectively to all
employees, including officers, directors,
and where necessary, 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,
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
importance of the senior management
member (including directors) or
employee. Where misconduct is
discovered, measures are taken
promptly to cease the misconduct or
irregularities and remedy the harm
resulting from such misconduct.
7. Third-Party Relationships
The Group continues to implement the
following procedures with reference to
its agents and business partners:
a. due diligence relating to the hiring
of third-parties;
b. corresponding certifications by
b. appropriate oversight of
such senior management members
(including directors), employees,
agents and business partners,
acknowledging their understanding
of policies and conformity with
training requirements.
third-parties; and
c. seeking reciprocal commitments
regarding ethical conduct from
third-parties, associates and
business partners.
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, procedures and applicable
laws. When necessary, the Group
undertakes independent investigations
of the alleged violations.
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 laws
by any third-party, agent or
business partner.
6. Enforcement and Discipline
8. Mergers, Acquisitions and Corporate
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. In 2019,
the Group operationalised its Group
Disciplinary Procedure Guide which
provides a practical guide for the
handling of allegations of employee
misconduct in a fair, rational and
consistent manner across the Group.
The Group institutes disciplinary
measures with reference to, among
other things, violations of compliance
policies and procedures and applicable
laws by its senior management
(including directors) and employees.
Such procedures are applied
consistently and fairly, regardless of
the position held by, or the perceived
Restructuring
The Group implemented a Mergers and
Acquisitions Compliance Due Diligence
process which gives guidance and
sets out requirements for compliance
due diligence checks and steps to be
performed on potential mergers and
acquisitions target entities.
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, procedures and applicable law.
Keppel Corporation Limited
Report to Shareholders 2019
91
GOVERNANCE
CORPORATE GOVERNANCE
Annual Assurance
The Board has received assurance:
risks which the Group considers relevant
and material to its operations.
Principle 12:
a.
b.
from the CEOs and CFOs of each of
the Group’s business divisions and
the CEO and CFO of the Company that,
as at 31 December 2019, the financial
records of the Group have been properly
maintained and the financial statements
for the year ended 31 December 2019
give a true and fair view of the Group’s
operations and finances; and
from CEO and CFO of the Company,
CEOs and CFOs of each of the Group’s
business divisions, and other key
management personnel responsible for
risk management and internal control
systems that, as at 31 December 2019,
the Group’s internal controls (including
financial, operational, compliance and
IT controls) and risk management
systems are adequate and effective
to address the risks which the Group
considers relevant and material to
its operations.
Based on the internal controls and
enterprise-wide risk management framework
established and maintained by the Group,
work performed by internal and external
auditors, and reviews performed by
management, the AC and BRC, as well as
the assurances set out above, the Board is
of the view that, as at 31 December 2019,
the Group’s internal controls (including
financial, operational, compliance and
IT controls) and risk management systems
were adequate and effective to address the
The Board notes that 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
could be reasonably foreseen as it strives
to achieve its business objectives. In this
regard, the Board also notes that no system
of internal controls and risk management
can provide absolute assurance against
the occurrence of material errors, poor
judgment in decision-making, human error,
losses, fraud and other irregularities.
The AC and BRC concur with the Board’s
view that, as at 31 December 2019,
the Group’s internal controls (including
financial, operational, compliance and IT
controls) and risk management systems
were adequate and effective to address
the risks which the Group considers relevant
and material to its operations.
SHAREHOLDER RIGHTS AND
COMMUNICATION WITH
SHAREHOLDERS
Principle 11:
The Company treats all shareholders fairly
and equitably in order to enable them to
exercise shareholders’ rights and have
the opportunity to communicate their
views on matters affecting the Company.
The Company gives shareholders a balanced
and understandable assessment of its
performance, position and prospects.
The Company communicates regularly
with its shareholders and facilitates the
participation of shareholders during general
meetings and other dialogues to allow
shareholders to communicate their views
on various matters affecting the Company.
Principle 13:
The Board adopts an inclusive approach by
considering and balancing the needs and
interests of material stakeholders, as part of
its overall responsibility to ensure that the
best interests of the Company are served.
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 (AR) is accessible on the
Company’s website, and can be viewed
or downloaded from the AR microsite at
www.kepcorp.com/annualreport2019,
and shareholders are encouraged to
read the AR on the Company’s website.
Shareholders may, however, request for
a physical copy at no cost.
The Company’s Corporate Communications
Department (with assistance from the Group
Finance and Group Legal departments,
when required) regularly communicates
with shareholders and receives and attends
to their queries and concerns.
The Company treats all its shareholders
fairly and equitably and keeps all its
shareholders and other stakeholders
informed of its corporate activities, including
changes in the Company or its business
which would be likely to materially affect the
price or value of its shares, on a timely basis.
The Company has in place an Investor
Relations Policy which sets out the
Senior management of Keppel addressed
questions from media and analysts at the
Company’s 4Q & FY 2019 results briefing.
92 Report to Shareholders 2019
Keppel Corporation Limited
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. This is to allow
for an ongoing exchange of views so as
to actively engage and promote regular,
effective and fair communication
with shareholders.
The Company’s mobile-responsive
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, as well as information on general
meetings including presentations and
minutes. Contact details of the Investor
Relations department are also set out
on the website to facilitate any queries
from investors. In FY 2019, the Company
revamped its corporate website with added
features and content to enhance user
experience and access to information.
The Company employs various platforms
to effectively engage stakeholders and the
investment community, with an emphasis
on timely, accurate, fair and transparent
disclosure of information. Engagement with
stakeholders takes many forms, including
live webcasts of financial results and
presentations, email communications,
publications and content on the Company’s
corporate website, as well as visits to
the Company’s facilities and projects.
On 7 February 2020, the SGX’s rule on
risk-based quarterly reporting came into
effect, whereby listed companies may,
unless otherwise required by the SGX,
report their results semi-annually.
The Company welcomes SGX’s move
for companies to take a longer-term
perspective on growth. In view of the
voluntary pre-conditional partial offer by
Kyanite Investment Holdings Pte. Ltd.
(an indirect wholly-owned subsidiary of
Temasek Holdings (Private) Limited),
the Company will continue quarterly
reporting for the duration of the
offer period and move to semi-annual
reporting thereafter.
The Company stands committed to
engaging shareholders through clear,
timely and consistent communications,
and maintaining our interactions with the
investment community. After the move to
semi-annual reporting, the Company plans
to provide business updates to shareholders
in between its half-yearly financial reports.
In addition to shareholder meetings,
senior management meets investors,
analysts and the media, as well as travels
on roadshows, and participates in industry
conferences organised by major brokerage
firms to solicit and understand the views
of the investment community. In FY 2019,
the Company hosted about 160 meetings
and conference calls with institutional
investors, including several site visits to
its residential and commercial properties
in China and Vietnam. Management
also travelled for non-deal roadshows
and conferences to meet overseas
investors in Bangkok, Boston, Edinburgh,
Hong Kong, Kuala Lumpur, London and
New York.
The Company engages retail shareholders
at the general meeting. In addition,
the Company has, since 2017, been
collaborating with the Securities Investors
Association (Singapore) to hold briefings
for retail shareholders. In FY 2019,
senior management briefed about
150 retail shareholders on the
Company’s strategy and performance.
All materials presented on these occasions
are also made available on SGXNET and
the Company’s website in a timely manner,
to ensure fair disclosure of information for
the benefit of all shareholders.
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 NEDs.
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 NEDs.
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
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.
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
To ensure transparency, the Company
conducts electronic poll voting for
shareholders/proxies present at the
meeting for all the resolutions proposed
at the general meetings. 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 is 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
Keppel Corporation Limited
Report to Shareholders 2019
93
GOVERNANCE
CORPORATE GOVERNANCE
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 incorporate
substantial and relevant comments or
queries from shareholders relating to the
agenda of the meeting and responses from
the Board and management. These minutes
are available to shareholders upon request.
All minutes of the general meeting will be
published on the Company’s website as
soon as practicable.
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 for 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 2019,
the Company will be paying out a total
cash dividend of 20.0 cents per share
to shareholders. The total dividend
for FY 2019 represents a payout ratio
of 51%.
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 26
to 29 of this report.
The Company defines its stakeholders
to be individuals, groups of individuals or
organisations that affect and/or could be
affected by Keppel’s activities, products
or services and associated performance.
The Company engages its stakeholders
regularly in the determination of its material
areas of focus. Materiality assessments
are important components of Keppel’s
sustainability strategy and reporting.
The Company’s materiality assessments
are based on the Global Reporting Initiative
(GRI) Principles for Defining Report Content
– stakeholder inclusiveness, sustainability
context, materiality and completeness.
Materiality with respect to sustainability
reporting, as defined by GRI Standards,
includes topics and indicators that reflect
the organisation’s significant economic,
environmental and social impacts;
and would substantively influence the
assessments and decisions of stakeholders.
In FY 2019, the Company enhanced its
sustainability reporting framework and
material environmental, social and
governance factors, taking into account
findings from a comprehensive stakeholder
consultation exercise, conducted from
December 2018 to April 2019.
More details of the Company’s
management approach, priorities,
targets and performance reviews in
key areas will be made available through
its externally audited Sustainability Report,
prepared in accordance with the GRI
Standards, published 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 of 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. The Company had, in FY 2019,
issued circulars to its directors and
officers informing them 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.
94 Report to Shareholders 2019
Keppel Corporation Limited
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 judgments 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 reviews 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.
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.
1.14 Report to the Board on material 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
well-supported with adequate
measures to safeguard corporate
information, operating assets
and effectively monitor the
performance, quality and integrity
of IT service delivery.
1.4 Receive and review quarterly reports
from Management on the Group’s risk
profile and major risk exposures and
the steps taken to monitor, control
and mitigate such risks, to ensure
that such risks are managed within
acceptable levels.
1.5 Review the Group’s risk management
capabilities to identify capacity,
resourcing, system, training,
communication channels, as well as
competencies in identifying and
managing new risk types.
1.6 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.
Board may determine.
1.7 Through interactions with the
1.5 Review the nature and extent of
non-audit services performed by
the external auditors, to ensure their
independence and objectivity.
1.17 Ensure that the internal auditors and
external auditors have direct and
unrestricted access to the Chairman
of the Committee.
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.
1.10 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.
1.11 Review the Company’s procedures
for detecting fraud, its Whistle-Blower
Policy, the arrangements by which
employees of the Company and any
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.
B. Board Risk Committee
1.1 Obtain recommendations on risk
tolerance and strategy from
Management, and where appropriate,
report and recommend to the Board
for its determination the nature and
extent of significant risks which the
Group overall may take in achieving
its strategic objectives and the overall
Group’s levels of risk tolerance and
risk policies.
1.2 Review and discuss, as and when
appropriate, with Management the
Group’s risk governance structure
and framework including risk policies,
risk strategy, risk culture, risk
assessment, risk mitigation and
monitoring processes and procedures.
1.3 Review the IT governance and
cyber security framework to ascertain
alignment with business strategy
and Group risk tolerance including
monitoring the adequacy of
IT capability and capacity to
ensure business objectives are
Compliance Lead, who has a direct
reporting line to the Committee,
review and oversee performance of
the Group’s implementation of
compliance programmes.
1.8 Review and monitor the Group’s
approach to ensuring compliance
with regulatory commitments,
including progress of remedial
actions where applicable.
1.9 Review the adequacy, effectiveness
and independence of the Group’s
Risk and Compliance function, at least
annually, and report the Committee’s
assessment to the Board.
1.10 Review and monitor Management’s
responsiveness to the risks
and matters identified, and
recommendations of the Group
Risk and Compliance function.
1.11 Provide timely input to the Board
on critical risk and compliance
issues, material matters, findings
and recommendations.
1.12 Review Management’s proposals
in respect of strategic transactions
and new risk-focused products,
focusing on the risk and compliance
aspects and implications of
the proposed action for the
risk tolerance of the Group,
and make recommendations
to the Board.
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Report to Shareholders 2019
95
GOVERNANCE
CORPORATE GOVERNANCE
the effectiveness of the Board as a whole
and the contribution of each director.
1.6 Annual assessment of the
effectiveness of the Board as a
whole and individual directors.
1.7 Review the succession plans for the Board
(in particular, the Chairman) and senior
management (in particular, the CEO).
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 SGX 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 SGX or any
other stock exchange; and
iii. parent companies of the
Company’s core businesses
which are unlisted.
1.11 Report to the Board on material
matters and recommendations.
1.12 Review the Committee’s terms of
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.
D. Remuneration Committee
1.1 Review and recommend to the
Board a framework of remuneration
for Board members and key
management personnel, and the
specific remuneration packages
for each director as well as for the
key management personnel.
1.2 Review the Company’s obligations
arising in the event of termination of
the executive directors’ and key
management personnel’s contracts
of service, to ensure that such clauses
are fair and reasonable and not
overly generous.
Keppel’s Board Safety Committee
regularly conducts site visits to the Group’s
projects such as The Garden Residences
in Singapore.
1.13 Review the assurance and steps taken
by the CEO and other key management
personnel for their relevant areas of
responsibilities, regarding the
adequacy and effectiveness of the
Group’s risk management system.
1.14 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 IT controls.
1.15 a. Review the Board’s comment on the
adequacy and effectiveness of the
Group’s risk management systems
and state whether it concurs
with the Board’s comments; and
b. Where there are material
weaknesses identified in the
Group’s risk management
systems, to consider and
recommend the necessary steps
to be taken to address them.
1.16 Ensure that the Head of Group
Risk and Compliance function has
direct and unrestricted access to
the Chairman of the Committee.
1.17 Perform such other functions as the
Board may determine.
1.18 Review the Committee’s terms of
reference annually and recommend
any proposed changes to the Board.
1.19 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 NC 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
96 Report to Shareholders 2019
Keppel Corporation Limited
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 schemes).
Board Safety Committee
E.
1.1 Ensure there is a set of Group Health,
Safety and Environment (“HSE”)
policies and standards to guide HSE
operation and performance across
the Group.
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.
1.2 Monitor HSE performance of the
Group companies, analyse trends and
accident root causes, and recommend
or propose Group-wide initiatives
for improvement, where appropriate,
to ensure a robust HSE management
system is maintained.
1.3 Structure an audit programme of
Group companies’ HSE management
programmes to verify effectiveness
and use its resources to lead the
execution of such audits, drawing
additional resources from the line
where needed.
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.
1.4 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
in a timely manner to understand
underlying root causes and introduce
Group-wide initiatives or remedial
measures where appropriate.
1.6 Ensure that each Group company
complies with HSE legislation in
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.
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.
1.4 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.
1.6 Review the Committee’s terms of
reference annually and recommend
any proposed changes to the Board.
1.7 Perform such other functions as the
Board may determine.
1.8 Sub-delegate any of its powers within
its terms of reference as listed above,
from time to time as the Committee
may deem fit.
Save that a member of this Committee
shall not be involved in the deliberations
in respect of any remuneration,
compensation, award of shares or
any form of benefits to be granted
to him/her.
MEMBERSHIP ON BOARD COMMITTEES
Director
Audit
Nominating
Remuneration
Risk
Committee Membership
–
–
–
Member
Member
Chairman
–
–
Member
Lee Boon Yang
Loh Chin Hua
Tow Heng Tan1
Alvin Yeo
Tan Ek Kia
Danny Teoh
Tan Puay Chiang2
Till Vestring
Veronica Eng
Jean-François Manzoni3 –
Teo Siong Seng4
–
Tham Sai Choy5
Member
Penny Goh6
Member
Member
–
Member
Member
–
–
Chairman
Member
–
Chairman
–
–
–
Member
–
Member
–
–
Member
–
Chairman
–
–
Member
–
–
–
–
Member
–
Member
Member
Member
–
Chairman
Member
–
Member
Member
Safety
Member
Member
–
–
Chairman
–
Member
–
–
–
Member
–
–
Notes:
1 Mr Tow Heng Tan ceased to be a non-executive and non-independent director with effect from 1 November 2019, and concurrently ceased to be a member of the
Nominating Committee, Remuneration Committee and Board Risk Committee.
2 Mr Tan Puay Chiang ceased to be a non-executive and independent director with effect from 1 November 2019, and concurrently ceased to be the Chairman of the
Nominating Committee and a member of the Board Safety Committee. Mr Tan ceased to be a member of the Board Risk Committee with effect from 2 January 2019.
3 Prof Jean-Francois Manzoni was appointed as a member of the Board Risk Committee on 2 January 2019, and Chairman of the Nominating Committee with effect from
1 November 2019.
4 Mr Teo Siong Seng was appointed to the Board as a non-executive and independent director with effect from 1 November 2019, and was appointed as a member of the
Remuneration Committee and Board Safety Committee with effect from 1 February 2020.
5 Mr Tham Sai Choy was appointed to the Board as a non-executive and independent director with effect from 1 November 2019, and was appointed as a member of the
Audit Committee and Board Risk Committee with effect from 1 February 2020.
6 Mrs Penny Goh was appointed to the Board as a non-executive and independent director with effect from 2 January 2020, and was appointed as a member of the Audit
Committee and Board Risk Committee with effect from 1 February 2020.
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Report to Shareholders 2019
97
GOVERNANCE
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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 NC
Chairman 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.
Board Committees
Each member of a board committee is
required to complete a Board Committee
Questionnaire and send the Questionnaire
directly to the IC within five working days.
Based on the returns from each of the
members of a board committee, the IC
prepares a consolidated report and
briefs the Chairmen of the respective
board committees.
Individual Directors
The Board differentiates the assessment of
an executive director from that of an NED.
In the case of the assessment of the
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,
standards of conduct, 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 performance criteria for the board
committee evaluation are in respect of
the committee size and composition,
meeting frequency and procedures,
training and resources, and board
committee performance in relation to
discharging their responsibilities set out
in their respective terms of reference.
The executive 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 is responsive
to comments raised by the Board are
taken into account); (2) knowledge
(under which factors as to the director’s
industry and business knowledge,
whether he provides valuable inputs,
his understanding of finance and accounts,
and his knowledge of the Company and
its strategies are taken into consideration);
(3) director’s duties (under which factors
as to whether the director provides insights
on the Company’s day-to-day operation,
whether the director takes his role of
director seriously and works to further
improve his own performance, whether
the director listens and discusses
objectively, whether the director provides
management’s view without undermining
management accountability and whether
he assists to inform NEDs of pertinent
issues or developments are taken into
consideration); and (4) availability (under
which the director’s attendance at Board
and board committee meetings, whether he
is available when needed, and his informal
contribution via email, telephone, written
notes etc. are considered).
The NED’s performance criteria are
categorised into four segments; namely,
(1) interactive skills (under which factors as
to whether the director works well with other
directors, and participates actively are taken
into account); (2) knowledge (under which
factors as to the director’s industry and
business knowledge, functional expertise,
whether he/she provides valuable inputs,
his/her ability to analyse, communicate and
contribute to the productivity of meetings,
and his/her understanding of finance and
accounts, are taken into consideration);
(3) director’s duties (under which factors
as to the director’s board committee work
contribution, whether the director takes his/
her role of director seriously and works to
further improve his/her own performance,
whether he/she listens and discusses
objectively and exercises independent
judgment, meeting preparation and
whether he/she constructively challenges
management and helps to develop proposals
on strategy 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
leadership, whether he established proper
procedures to ensure the effective
functioning of the Board, whether he
ensured that the time devoted to board
meetings were appropriate 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
98 Report to Shareholders 2019
Keppel Corporation Limited
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, whether he
encouraged constructive relations between
Board and management and between
directors, whether he ensured constructive
dialogue with shareholders and other
stakeholders, whether he promoted
high standards of corporate governance,
and set the right ethical and behavioural
tone, 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 and
1 May 2019 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;
fraudulent;
b.
c. corrupt;
d.
e. other serious improper conduct;
f. an unsafe work practice; or
g. any other conduct which may
illegal;
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
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 (Group Internal Audit)
is the Receiving Officer for the purposes
of the Policy and is responsible for the
administration, implementation and
oversight of ongoing compliance with
the Policy. She reports directly to the
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 online
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
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 his/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 Human Resources, Group Legal
and Group Risk & Compliance departments),
or such other representatives as the AC may
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 good faith
in accordance with the Policy or having
participated in the investigation.
Any reprisal suffered may be reported to the
Receiving Officer (who shall refer the matter
to the AC Chairman) or directly to the AC
Chairman. The AC Chairman shall review
the matter and determine the appropriate
actions to be taken. Any protection does not
extend to situations where the whistle-blower
or witness has committed or abetted the
Reportable Conduct that is the subject of
allegation. However, the AC Chairman will
take into account the fact that he/she has
cooperated as a whistle-blower or a witness
in determining the suitable disciplinary
measure to be taken against him/her.
Keppel Corporation Limited
Report to Shareholders 2019
99
GOVERNANCE
CORPORATE GOVERNANCE
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 AGM to be held in 2020 is set out below.
Name of Director
Date of Appointment
Danny Teoh
1 October 2010
Date of last re-appointment (if applicable)
21 April 2017
Age
64
Country of principal residence
Singapore
Veronica Eng
1 July 2015
20 April 2018
66
Singapore
Till Vestring
16 February 2015
21 April 2017
56
Singapore
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.)
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 on page 78 of this Annual Report.
Non-Executive
Non-Executive
Non-Executive
Non-Executive and Independent
Director; Audit Committee (Chairman);
Remuneration Committee (Member);
Board Risk Committee (Member)
Non-Executive and
Independent Director;
Board Risk Committee (Chairman);
Audit Committee (Member)
Non-Executive and Independent
Director; Remuneration
Committee (Chairman);
Nominating Committee (Member)
Professional qualifications
Associate member of the Institute
of Chartered Accountants in
England & Wales
Bachelor of Business
Administration (First Class
Honours), University of Singapore
Master of Economics, University
of Bonn, Germany; Master of
Business Administration, Haas
School of Business, University of
California, Berkeley
Working experience and occupation(s)
during the past 10 years
Managing Partner, KPMG LLP,
Singapore (2005 to 2010)
Founding Partner of Permira
(1985 to 2015) and Professor
(Practice), NUS Business School
Advisory Partner, Bain &
Company Southeast Asia
Shareholding interest in the listed issuer
and its subsidiaries
83,825 (direct interests)
28,000 (direct interests)
81,000 (direct interests)
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
No
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
Yes
Other Principal Commitments
including Directorships
- Past (for the last 5 years)
Other Principal Commitments including
Directorships
- Present
CapitaLand Mall Trust Management
Limited (manager of CapitaLand
Mall Trust); JTC Corporation;
Ascendas - Singbridge Pte. Ltd.;
DBS Bank (China) Limited; Changi
Airport Group (Singapore) Pte Ltd
DBS Group Holdings Ltd;
M1 Limited (Chairman);
DBS Bank Ltd;
DBS Foundation Ltd;
DBS Bank (Taiwan) Ltd
No
No
Yes
Nil
No
No
Yes
Singapore Chinese Orchestra
Company Limited
Keppel Capital Holdings Pte. Ltd.;
Professor (Practice),
NUS Business School
Inchcape plc;
Leap Philanthrophy Ltd;
Banteasy Srey
Development Limited;
Advisory Partner, Bain & Company
Southeast Asia
100 Report to Shareholders 2019
Keppel Corporation Limited
Name of Director
Date of Appointment
Teo Siong Seng
1 November 2019
Tham Sai Choy
1 November 2019
Penny Goh
1 January 2020
Date of last re-appointment (if applicable)
Age
N.A.
65
N.A.
60
N.A.
67
Country of principal residence
Singapore
Singapore
Singapore
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
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 on page 78 of this Annual Report.
Non-Executive
Non-Executive
Non-Executive
Non-Executive and Independent
Director; Remuneration
Committee (Member); Board
Safety Committee (Member)
Non-Executive and
Independent Director;
Audit Committee (Member);
Board Risk Committee (Member)
Non-Executive and
Independent Director;
Audit Committee (Member);
Board Risk Committee (Member)
Degree (First Class Honours)
in Naval Architecture and
Ocean Engineering from
the University of Glasgow, UK
Working experience and occupation(s)
during the past 10 years
Nil
Shareholding interest in the listed issuer
and its subsidiaries
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
Nil
No
No
Yes
Bachelor of Arts (Honours) in
Economics, University of Leeds,
UK; Fellow of the Institute of
Singapore Chartered Accountants
and the Institute of Chartered
Accountants in England and Wales
Partner, KPMG in Singapore
including the following roles:
Head of Corporate Finance
(2000 to 2005); Head of Audit
(2005 to 2010); Managing Partner
(2010 to 2016); Head of Audit,
KPMG in Asia Pacific (2007 to
2010); Chairman, KPMG in Asia
Pacific (2013 to 2017)
Bachelor of Law (Honours),
University of Singapore
Co-Chairman and Senior Partner,
Allen & Gledhill LLP
(2017 to 2019);
Partner, Allen & Gledhill LLP
(Prior to 2017)
155,570 (direct interests)
30,000 (direct interests)
No
No
Yes
No
No
Yes
Nil
Other Principal Commitments
including Directorships
- Past (for the last 5 years)
The Standard Club Asia Pte Ltd;
Singapore Maritime Institute;
China Shipping Container Lines
Co., Ltd
Singapore Accountancy
Commission;
KPMG Group of Companies
Other Principal Commitments including
Directorships
- Present
DBS Group Holdings Limited;
DBS Bank Ltd.; DBS Bank (China)
Limited; EM Services Pte Ltd
(Chairman); Keppel Offshore &
Marine Ltd; Mount Alvernia
Hospital; Singapore International
Arbitration Centre; Singapore
Institute of Directors (Chairman);
Accounting and Corporate
Regulatory Authority;
Housing and Development Board;
Nanyang Polytechnic
Allen & Gledhill LLP
(Senior Adviser);
Keppel REIT Management
Limited (the Manager
of Keppel REIT) (Chairman);
Mapletree Logistics Trust
Management Ltd (the Manager
of Mapletree Logistics Trust)
(Up to March 2020);
HSBC Bank (Singapore) Limited
Singamas Container Holdings Ltd.
(Executive Chairman/Chief
Executive Officer); COSCO
Shipping Holding Co., Ltd.; COSCO
Shipping Energy Transportation
Co., Ltd.; Wilmar International
Limited; Pacific International Lines
(Pte) Ltd (Executive Chairman/
Managing Director); Singapore
Business Federation (Chairman);
Singapore Chinese Chamber
of Commerce & Industry
(Honorary President); Business
China (Director); Enterprise
Singapore (Board Member);
The United Republic of Tanzania
in Singapore (Honorary Consul)
Keppel Corporation Limited
Report to Shareholders 2019
101
GOVERNANCE
CORPORATE GOVERNANCE
APPENDIX 2
Rule 720(6) of the Listing Manual of the SGX-ST
Name of Director
Danny Teoh
Veronica Eng
Till Vestring
a. Whether at any time during the last 10 years, an application or a petition under any
bankruptcy law of any jurisdiction was filed against him or against a partnership of which
he was a partner at the time when he was a partner or at any time within 2 years from
the date he ceased to be a partner?
b. Whether at any time during the last 10 years, an application or a petition under any law of
any jurisdiction was filed against an entity (not being a partnership) of which he was a
director or an equivalent person or a key executive, at the time when he was a director or an
equivalent person or a key executive of that entity or at any time within 2 years from the date
he ceased to be a director or an equivalent person or a key executive of that entity, for the
winding up or dissolution of that entity or, where that entity is the trustee of a business trust,
that business trust, on the ground of insolvency?
c. Whether there is any unsatisfied judgment against him?
d. Whether he has ever been convicted of any offence, in Singapore or elsewhere, involving fraud or
dishonesty which is punishable with imprisonment, or has been the subject of any criminal
proceedings (including any pending criminal proceedings of which he is aware) for such purpose?
e. Whether he has ever been convicted of any offence, in Singapore or elsewhere, involving
a breach of any law or regulatory requirement that relates to the securities or futures
industry in Singapore or elsewhere, or has been the subject of any criminal proceedings
(including any pending criminal proceedings of which he is aware) for such breach?
No
No
No
No
No
f. Whether at any time during the last 10 years, judgment has been entered against him in
No
any civil proceedings in Singapore or elsewhere involving a breach of any law or regulatory
requirement that relates to the securities or futures industry in Singapore or elsewhere,
or a finding of fraud, misrepresentation or dishonesty on his part, or he has been the
subject of any civil proceedings (including any pending civil proceedings of which he is
aware) involving an allegation of fraud, misrepresentation or dishonesty on his part?
g. Whether he has ever been convicted in Singapore or elsewhere of any offence in connection
No
with the formation or management of any entity or business trust?
h. Whether he has ever been disqualified from acting as a director or an equivalent person of any
entity (including the trustee of a business trust), or from taking part directly or indirectly in
the management of any entity or business trust?
i. Whether he has ever been the subject of any order, judgment or ruling of any court, tribunal
or governmental body, permanently or temporarily enjoining him from engaging in any type
of business practice or activity?
j. Whether he has ever, to his knowledge, been concerned with the management or conduct,
in Singapore or elsewhere, of the affairs of:-
No
No
i. any corporation which has been investigated for a breach of any law or regulatory
No
requirement governing corporations in Singapore or elsewhere; or
ii. any entity (not being a corporation) which has been investigated for a breach of any law
No
or regulatory requirement governing such entities in Singapore or elsewhere; or
iii. any business trust which has been investigated for a breach of any law or regulatory
No
requirement governing business trusts in Singapore or elsewhere; or
iv. any entity or business trust which has been investigated for a breach of any law or
No
regulatory requirement that relates to the securities or futures industry in Singapore
or elsewhere;
in connection with any matter occurring or arising during that period when he was so
concerned with the entity or business trust?
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
k. Whether he has been the subject of any current or past investigation or disciplinary
No
No
No
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?
Any prior experience as a director of an issuer listed on the Exchange?
Yes
Yes
Yes
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).
Please see above in relation to Other Principal
Commitments including Directorships
(both Past and Present)
N.A.
N.A.
N.A.
102 Report to Shareholders 2019
Keppel Corporation Limited
Name of Director
Teo Siong Seng
Tham Sai Choy
Penny Goh
a. Whether at any time during the last 10 years, an application or a petition under any
bankruptcy law of any jurisdiction was filed against him or against a partnership of which
he was a partner at the time when he was a partner or at any time within 2 years from
the date he ceased to be a partner?
b. Whether at any time during the last 10 years, an application or a petition under any law of
any jurisdiction was filed against an entity (not being a partnership) of which he was a
director or an equivalent person or a key executive, at the time when he was a director or an
equivalent person or a key executive of that entity or at any time within 2 years from the date
he ceased to be a director or an equivalent person or a key executive of that entity, for the
winding up or dissolution of that entity or, where that entity is the trustee of a business trust,
that business trust, on the ground of insolvency?
c. Whether there is any unsatisfied judgment against him?
d. Whether he has ever been convicted of any offence, in Singapore or elsewhere, involving fraud or
dishonesty which is punishable with imprisonment, or has been the subject of any criminal
proceedings (including any pending criminal proceedings of which he is aware) for such purpose?
e. Whether he has ever been convicted of any offence, in Singapore or elsewhere, involving
a breach of any law or regulatory requirement that relates to the securities or futures
industry in Singapore or elsewhere, or has been the subject of any criminal proceedings
(including any pending criminal proceedings of which he is aware) for such breach?
No
No
No
No
No
f. Whether at any time during the last 10 years, judgment has been entered against him in
No
any civil proceedings in Singapore or elsewhere involving a breach of any law or regulatory
requirement that relates to the securities or futures industry in Singapore or elsewhere,
or a finding of fraud, misrepresentation or dishonesty on his part, or he has been the
subject of any civil proceedings (including any pending civil proceedings of which he is
aware) involving an allegation of fraud, misrepresentation or dishonesty on his part?
g. Whether he has ever been convicted in Singapore or elsewhere of any offence in connection
No
with the formation or management of any entity or business trust?
h. Whether he has ever been disqualified from acting as a director or an equivalent person of any
entity (including the trustee of a business trust), or from taking part directly or indirectly in
the management of any entity or business trust?
i. Whether he has ever been the subject of any order, judgment or ruling of any court, tribunal
or governmental body, permanently or temporarily enjoining him from engaging in any type
of business practice or activity?
j. Whether he has ever, to his knowledge, been concerned with the management or conduct,
in Singapore or elsewhere, of the affairs of :-
No
No
i. any corporation which has been investigated for a breach of any law or regulatory
No
requirement governing corporations in Singapore or elsewhere; or
ii. any entity (not being a corporation) which has been investigated for a breach of any law
No
or regulatory requirement governing such entities in Singapore or elsewhere; or
iii. any business trust which has been investigated for a breach of any law or regulatory
No
requirement governing business trusts in Singapore or elsewhere; or
iv. any entity or business trust which has been investigated for a breach of any law or
No
regulatory requirement that relates to the securities or futures industry in Singapore or
elsewhere;
in connection with any matter occurring or arising during that period when he was so
concerned with the entity or business trust?
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
k. Whether he has been the subject of any current or past investigation or disciplinary
No
No
No
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?
Any prior experience as a director of an issuer listed on the Exchange?
Yes
Yes
Yes
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).
Please see above in relation to Other Principal
Commitments including Directorships
(both Past and Present)
N.A.
N.A.
N.A.
Keppel Corporation Limited
Report to Shareholders 2019
103
GOVERNANCE
CORPORATE GOVERNANCE
APPENDIX 3
Summary of Disclosures of 2018 CG Code
Rule 710 of the SGX Listing Manual requires Singapore-listed companies to describe their corporate governance practices with specific
reference to the 2018 CG Code in their annual reports for financial years commencing on or after 1 January 2019. This summary of
disclosures describes our corporate governance practices with specific reference to the disclosure requirement under the 2018 CG Code.
BOARD MATTERS
The Board’s Conduct of Affairs
Principle 1
Provision 1.1
Provision 1.2
Provision 1.3
Provision 1.4
Provision 1.5
Provision 1.6
Provision 1.7
Board Composition and Guidance
Principle 2
Provision 2.1
Provision 2.2
Provision 2.3
Provision 2.4
Provision 2.5
Chairman and Chief Executive Officer
Principle 3
Provision 3.1
Provision 3.2
Provision 3.3
Board Membership
Principle 4
Provision 4.1
Provision 4.2
Provision 4.3
Provision 4.4
Provision 4.5
Board Performance
Principle 5
Provision 5.1
Provision 5.2
REMUNERATION MATTERS
Procedures for Developing Remuneration Policies
Principle 6
Provision 6.1
Provision 6.2
Provision 6.3
Provision 6.4
Level and Mix of Remuneration
Principle 7
Provision 7.1
Provision 7.2
Provision 7.3
Page Reference in this Report
Page 75
Page 77
Page 75
Pages 77 to 92 and 95 to 98
Pages 76, 80 and 81
Pages 76 and 77
Pages 76 and 77
Pages 76, 79 and 80
Pages 76, 79 and 80
Pages 76, 79 and 80
Pages 76, 79 and 80
Pages 76, 79 and 80
Page 74
Page 74
Page 80
Pages 77 to 81 and 96
Pages 77 to 81
Pages 77 to 81
Pages 77 to 81
Pages 77 to 81
Pages 81, 98 and 99
Pages 81, 98 and 99
Page 82
Page 82
Page 82
Page 82
Pages 83 to 86
Pages 83 to 86
Page 82
104 Report to Shareholders 2019
Keppel Corporation Limited
APPENDIX 3
Summary of Disclosures of 2018 CG Code
Disclosure on Remuneration
Principle 8
Provision 8.1
Provision 8.2
Provision 8.3
ACCOUNTABILITY AND AUDIT
Risk Management and Internal Controls
Principle 9
Provision 9.1
Provision 9.2
Audit Committee
Principle 10
Provision 10.1
Provision 10.2
Provision 10.3
Provision 10.4
Provision 10.5
SHAREHOLDER RIGHTS AND RESPONSIBILITIES
Shareholder Rights and Conduct of General Meetings
Principle 11
Provision 11.1
Provision 11.2
Provision 11.3
Provision 11.4
Provision 11.5
Provision 11.6
Engagement with Shareholders
Principle 12
Provision 12.1
Provision 12.2
Provision 12.3
MANAGING STAKEHOLDER RELATIONSHIPS
Engagement with Stakeholders
Principle 13
Provision 13.1
Provision 13.2
Provision 13.3
Page Reference in this Report
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Page 87
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Page 88
Page 92
Pages 87, 88 and 95
Pages 87, 88 and 95
Pages 87, 88 and 95
Pages 87, 88 and 95
Pages 87, 88 and 95
Page 93
Page 93
Pages 76 and 94
Page 94
Page 94
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Pages 92 to 94
Page 93
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Keppel Corporation Limited
Report to Shareholders 2019
105
GOVERNANCE
RISK MANAGEMENT
WE UNDERTAKE ONLY
APPROPRIATE AND
WELL-CONSIDERED
RISKS, CONSIDERING
THEIR IMPACT
TO OUR BUSINESS,
STAKEHOLDERS,
AND LONG-TERM
CORPORATE
SUSTAINABILITY.
Keppel adopts a balanced approach to risk
management, undertaking only appropriate
and well-considered risks to optimise
business returns while considering their
holistic impact on corporate sustainability.
This approach stems from the philosophy
of seeking sustainable growth opportunities
and creating economic value by 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 grounded in
our operating principles and belief that a
balanced and holistic risk-reward approach
is key to corporate sustainability, particularly
our commitment to key material issues
relating to environmental, social and
governance, and to delivering long-term
value for our stakeholders.
Our Risk-Centric Culture and Enterprise
Risk Management (ERM) Framework
enables the Group to continue to respond
effectively to the dynamic business
environment and shifting business demands
to seize new value-added opportunities
for stakeholders. As a Group, we prudently
seek new opportunities, innovation and
revenue streams to safeguard shareholders’
interests and the Group’s assets.
RISK-CENTRIC CULTURE
Mindsets and attitudes are key to effective
risk management. The Group fosters a
risk-centric culture through several aspects.
ENTERPRISE RISK
MANAGEMENT FRAMEWORK
Keppel’s Board is responsible for risk
governance and ensures that management
maintains a sound system of risk
management and internal controls.
Through the Board Risk Committee (BRC),
the Board advises management in formulating
and implementing the risk management
framework, policies and guidelines.
Significant risk issues are surfaced for
discussion with the BRC and the Board to
keep them apprised in a timely manner.
The terms of reference for the BRC are
disclosed on pages 95 and 96 of this
report. The Board has defined three risk
tolerance guiding principles for the
Group which determines the nature
and extent of the significant risks which
the Board is willing to take in achieving
strategic objectives.
These principles are:
1. Risk taken should be carefully evaluated,
and 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; and
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.
Ownership &
Accountability
We advocate ownership
and accountability
of risks across all
employees via the
performance evaluation
process. Surveys are
regularly conducted
across the Group to
assess staff ownership
and accountability
towards a strong risk,
compliance and control
culture. The survey results
have been encouraging,
indicating a strong
risk and control culture
across the Group.
Leadership & Governance
Our management is fully committed
to fostering a strong risk-centric
culture and consistently supports the
review and management of risks in
all areas of business. Key messages
encouraging prudent risk-taking
in decision-making and business
processes are interwoven into major
meetings, speeches and publications.
Framework & Values
The Group’s management and staff
are guided by our ERM framework;
our core values of accountability,
people-focus and safety, as well as
our mission and vision, in all
daily activities.
Risk-Centric Culture
Transparency & Competency
We promote transparency in
information sharing and escalation
of risk-related matters, incidents,
near-misses or events of interest.
Risk identification and assessment
are embedded in key control
processes. Group-wide surveys are
conducted periodically to assess
risk awareness amongst employees.
Training & Communications
Training and communications are
conducted regularly to enhance
competency through various forums,
in-house publications and sharing of
lessons learnt. Risk management is
regularly reinforced as a discipline
and developed through awareness
and practice.
Process & Methods
Risk management
methodologies are applied
alongside requisite domain
knowledge and capabilities.
An integral aspect of
strategic and operational
decision-making includes
considering and managing
risks at all levels of business.
One part of the process
is the identification and
assessment of risks
deploying the five-step
method: (1) identifying;
(2) assessing; (3) mitigating;
(4) communicating; and
(5) monitoring risks.
Underlying the five-step method
is a detailed risk definition
and reporting framework
and for risk oversight at
senior management and
Board levels.
106 Report to Shareholders 2019
Keppel Corporation Limited
Figure 1:
ERM FRAMEWORK INCORPORATING SUSTAINABILITY RISKS
Sustainability-Related Material Issues and Key Business Risks
Strategic
External environment
and execution of
business strategy
Operational
People, processes,
systems and
Health, Safety and
Environment (HSE)
Compliance
Compliance with laws
and regulations;
license to operate
Financial
Internal financial
management
and controls
Emerging
Evolving or emerging
threat(s) that
affect business
Opportunities
Potential areas
of competitive
advantage arising
from various risks
Sustainability-related risks (e.g. Climate change physical risks and transition risks)
Keppel’s risk governance framework,
set out on pages 88 to 92 under Principle 9
(Risk Management and Internal Controls),
facilitates management and the BRC in
determining the adequacy and effectiveness
of the Group’s risk management system.
As a Group, we are cognisant of the
dynamic environment in which we operate.
We constantly enhance the framework and
systems where necessary, to ensure risk
management remains an integral part of
decision-making and operations.
Keppel’s ERM framework, a component of
Keppel’s System of Management Controls,
provides the Group with a systematic
approach to identifying, measuring and
monitoring risks. It outlines the requirement
for each business unit (BU) to recognise
key risk areas affecting their operations
and to classify the impact and likelihood
of these risks in a register for prioritisation
and management by both BU and the Group.
The ERM framework also provides the
reporting structure, monitoring mechanisms,
processes and tools used, as well as
any policies, standards or limits to
be applied in managing the Group’s
key risk areas.
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 BU. The framework
takes reference from the Singapore Code of
Corporate Governance, the COSO Enterprise
Risk Management – Integrated Framework,
ISO 22313, ISO 31000 and the Guidebook
for Board Risk Committees.
Our Risk and Compliance Committee,
comprising risk leads across BUs, drives
and coordinates Group-wide 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 peers
and other subject-matter experts.
The below outlines what we have broadly
identified as key risks for 2019. The period
chosen follows our financial reporting year,
and while we recognise that not all identified
risks can be eliminated, we remain committed
to addressing every risk as they arise
and undertake only appropriate and
well-considered risks to optimise returns in
a balanced and holistic manner to deliver
long-term value for our stakeholders.
STRATEGIC RISKS
Market & Competition
A large part of the Group’s strategic risks
includes market driven forces, evolving
competitive landscapes, changing customer
demands and disruptive innovation.
The Group remains vulnerable to other
external factors including volatility in the
global economy, implications of geopolitical
developments, intense competition in
core markets and disruptive technology.
These risks receive constant high-level
attention and strategy meetings are held
across the Group to review business
strategies, formulate responses and
take pre-emptive action.
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.
Sustainability and Climate Change
Sustainability covers a broad range of
material issues, many of which have been
identified and managed according to
the Group’s ERM framework. In addition,
risks and opportunities relating to climate
change have been recognised as
fundamental to the Group. These relate to
physical and transitional risks stemming
from climate change and environmental
management, which present both risks
and opportunities for the Group. We support
the Taskforce on Climate-related Financial
Disclosures, and are working towards
incorporating its recommendations in our
reporting framework. Details on the material
issues can be found on pages 28 and 29 of
this report.
A Sustainability Risk Framework (Figure 1),
aligned to the ERM framework, guides
the Group on the specific processes and
methods applied in identifying, assessing
and managing sustainability-related risks
and opportunities. We are also committed
to strengthening our organisational
capabilities in responding to climate-related
risks and opportunities. More details will
be provided in our Sustainability Report,
which will be published in May 2020.
Strategic Ventures, Investments
& Divestments
We have an established process for
evaluating investment and divestment
decisions including strategic ventures.
These activities 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 Group-wide investment parameters.
Together with the Board, the Investment
and Major Project Action Committee 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
Keppel Corporation Limited
Report to Shareholders 2019
107
GOVERNANCE
RISK MANAGEMENT
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. We have defined the kinds of
businesses that we will strictly avoid, those
that we will maintain, and those which we
will grow and expand, taking into account
their respective environmental impacts.
We will also be introducing an internal carbon
price in the evaluation of all major investment
decisions. The investment portfolio is
constantly monitored to ensure that
performance is on track to meet the Group’s
strategic intent and investment returns.
Customer & Stakeholder Experience
We recognise the increasing profile of
consumer risks given the Group’s expansion
into telecommunications and growing
portfolios in the retail electricity, e-commerce
and gas businesses. The key issues of
consideration include areas such as brand
trust and reputation, product/service quality/
reliability, after-sales service/support,
customer data privacy, product safety and
other related matters such as customer
responsiveness and the channel management
across various platforms.
Human Resources
We continue to maintain a strong emphasis
on attracting and building a deep talent
pool. This includes nurturing employees,
maintaining good industrial relations and
fostering a conducive work environment.
We are 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 to inculcate the ability
to identify and assess risks, develop and
implement mitigating actions, and monitor
residual risks. Keppel Leadership Institute
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 key risks in projects.
Attention is given to technically challenging
and high-value projects, including greenfield
developments and the 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.
During project execution, we conduct
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.
A Project Operational Set-up Guide detailing
the key risk areas is also available for BUs.
We also 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 on safety, quality
and contract obligations.
Health, Safety & Environment
Maintaining a high level of HSE standard
is of paramount importance to the Group.
We constantly strive to raise awareness
and maintain vigilance to foster a strong
HSE-centric culture across the Group,
particularly at the ground level where
the risks are greatest.
Key initiatives include 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 Root Cause
Analysis investigation standards across the
Group, as well as developing more proactive
and leading risk indicators/matrices to
monitor HSE performance standards.
The Group achieved zero fatalities across
our global operations in 2019.
Environmental management is a major area
of focus and key operating sites are closely
monitored for compliance to environmental
standards. In 2019, the Group clinched
18 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. The Group also leverages
technology to improve HSE processes
and systems.
Business & Operational Processes
We have established a common shared
services platform which enables us to better
manage costs while enhancing efficiency,
productivity, compliance and controls.
Recognising the need to constantly
harness technology, we have embarked
on digitalisation initiatives and continue to
take measured steps, applying a risk-based
approach to optimise our processes.
We have adopted ISO standards and
certifications in specific business areas
to standardise our processes and keep up
with best practices. In addition, procedures
relating to defect management, operations,
project control and supply chain management
continue to be refined to improve quality
of deliverables. We conduct regular reviews
of policies and authority limits to ensure
that they remain relevant in meeting
business needs.
Business Continuity
We are committed to operational resilience
with a robust Business Continuity Management
(BCM) programme that seeks to equip us
with the capability to respond effectively
to business disruptions and to safeguard
critical business functions from major risks.
We are cognisant of the risks of natural
disasters, pandemics, terrorism and cyber
threats, as well as the failure of critical
equipment/systems. We maintain a close
watch and keep abreast of emerging threats.
The Group BCM Steering Committee
provides sponsorship, direction and guidance
to ensure that we maintain operational
resilience and readiness against business
disruptions to ensure that our business
continuity plans remain current
and relevant.
For coordinated escalation and management
of major incidents, the Group Incident
Reporting and Crisis Management operating
standard was rolled out in 2019 to guide
BUs on how they should evaluate and
escalate major incidents to the Group,
and how the Group Crisis Management
team can effectively render assistance to
affected BUs or manage/respond to major
incidents directly. The Group Cyber Incident
Response plan is also part of our crisis
management approach which details
response protocols to cyber incidents/
threats. We continually evaluate our plans
to gauge the effectiveness and timeliness
of response.
During the year, the Group has also
formalised the Business Psychological
Readiness Programme, an initiative led by
Temasek Foundation Cares. The initiative
focuses on psychological support in the
event of traumatic/adverse workplace events.
We continually extend and strengthen
our capabilities in responding to major
incidents/crises with the aim of safeguarding
our people, assets and stakeholders’ interests.
The full impact of the COVID-19 outbreak
is still unfolding. We have implemented
business continuity plans to minimise
disruptions to our operations and supply
chain, especially in our key markets of China
and Singapore. As we continue to assess
and respond to the evolving situation, we
are proactively implementing measures to
mitigate the impact.
108 Report to Shareholders 2019
Keppel Corporation Limited
As we deal with the economic impact of the
COVID-19 outbreak, we are also focused on
the well-being of our staff and stakeholders
across our businesses. We have also taken
a multi-pronged approach to assist those
affected by COVID-19 in our communities.
Cyber Security & Data Protection
As Keppel moves into a more technology-
focused and data-driven era, we recognise
the integral importance and concerns of
cyber threats globally. Technology and data
security risks and the related processes/
services in all forms are an integral part
of the Group’s business risks. We have
established a technology governance
structure and security risk framework to
address both general technology and data
security controls, covering key areas such
as cyber security, business disruption, theft/
loss of confidential data and data integrity.
In 2019, we formalised and implemented
a Technology and Data Risk Management
standard which identifies, assesses and
manages critical technology and data
assets according to leading industry
guidelines such as those given by the
Cyber Security Agency of Singapore and
the National Institute of Standards and
Technology. The programme not only
seeks to improve technology and data
security standards but also to inculcate
a culture of cyber hygiene in employees
across the Group.
The Group has also embarked on various
initiatives to continually strengthen our
technology security, governance and
controls through the refinement and
alignment of our policies, processes and
systems, as well as the consolidation
of servers and storages. We work
closely with industry professionals and
consultants to enhance our policies
and practices on end-user computing,
safeguarding information, as well as
security self-assessments to identify
critical gaps.
In terms of innovations and emerging
threats, our pool of dedicated Information
Technology (IT) experts enable us to keep
abreast of IT matters. They are assisted
by Keppel Technology and Innovation which
drives the adoption of new technology and
innovation across the Group. Extensive
training and assessment exercises have
been conducted to heighten overall
awareness of technology and data threats.
We have also taken steps to safeguard
corporate data assets against the loss of
availability of critical systems to ensure
resilience against disruptions.
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.
Significant risks issues, such as risks
relating to corruption in all areas of operations
within the Keppel Group where we have
operational control, are surfaced by
management and assessed by the Board.
With respect to corruption, significant
risks include areas where external agents
are used for business development.
We are committed to enhancing our
regulatory compliance policies and
processes to ensure 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 2019, we continued to make improvements
to our regulatory compliance programme,
ensuring that compliance awareness and
principles are further entrenched in all our
activities. More details can be found on
page 90 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 the
accuracy of financial statements and
adequacy of the internal control framework
supporting the statements. Where required,
we leverage the expertise of 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, please
refer to page 89 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. Details can be found on
page 68 of this report. 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
most optimal 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
potential financial exposure to changing
market situations, to enable informed
decision-making and the 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 diversified
against the systemic risks of operating
in a specific geography.
Proactive Risk Management
Effective risk management requires
a dynamic approach. We recognise the
need to continually evolve our framework
and processes to ensure our risk
identification, assessment, mitigation,
communication and monitoring remains
effective. However, much of these depend
on our ability to remain vigilant against
evolving or emerging threats that may
affect our different businesses. Our BU
risk teams identify, discuss and analyse
emerging risks which may have an impact
on the Group’s activities in meetings
throughout the year. Where applicable,
these are escalated for discussion and
consideration at the various governance
committees for review.
Through close collaboration with
stakeholders and constant vigilance,
the Group continues to proactively
assess our risks so as to respond
effectively. We constantly review our
systems and processes to ensure that
our ability to manage and respond to
threats remains adequate and effective.
Keppel Corporation Limited
Report to Shareholders 2019
109
GOVERNANCE
REGULATORY COMPLIANCE
THE TONE FOR
REGULATORY
COMPLIANCE IS
DRIVEN FROM THE
TOP AND RESONATES
WITH OUR EMPLOYEES
AT EVERY LEVEL.
WE REMAIN VIGILANT
AND DETERMINED TO
BUILD A DISCIPLINED
AND SUSTAINABLE
COMPANY.
We are guided by our core values and code
of conduct. We will do business the right
way and comply with all applicable laws and
regulations wherever we operate. We strive
to deliver outstanding performance, whilst
maintaining the highest ethical standards.
We are clear with our tone for regulatory
compliance, which is consistently emphasised
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
We have made significant progress
in embedding a robust compliance
framework and processes throughout
the Group. With Keppel Offshore & Marine
having obtained ISO 37001 Anti-Bribery
Management Systems certification for
all units globally in 2019, we are
progressively implementing the same
standard throughout the Group. This
will ensure consistency in application
and operational effectiveness of the
compliance programme.
We have a compliance framework that is
commensurate with the size, role and
activity of each business unit (BU), including
appropriate compliance control systems,
to be able to effectively detect and remedy
gaps. 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 compliance
and governance systems. Group Risk &
Compliance serves as a secretariat
to the BRC, assessing and reporting on
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 include
all 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
(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 reviews
training and communication programmes.
Each BU has a dedicated Compliance Lead.
He/she is 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. We continue
to strengthen the Group’s Compliance
teams with additional professional and
experienced officers.
Under the direction of Group RCMC and
Group RCWT, BUs 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 of material
regulatory compliance risks are conducted,
and that control measures are adequate
and effective.
REGULATORY COMPLIANCE
FRAMEWORK
Our regulatory compliance framework
focuses on critical pillars covering
the areas of 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.
The Head of Group Risk & Compliance
reports directly to the Chairman of the BRC.
Similarly, the Compliance Leads of the
BUs have direct reporting lines to the
respective BU Audit Committee or BRCs.
Furthermore, BU Compliance Leads
110 Report to Shareholders 2019
Keppel Corporation Limited
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, and credence to
the Group’s compliance programme.
CULTURE
Culture and mindset are critical in
ensuring effectiveness and durability of
our compliance programme. Management
has a key role in setting the right tone
and walking the talk. This helps to embed
a strong and robust regulatory compliance
programme and culture that permeates
all levels.
Posters on anti-bribery, anti-corruption
and reporting mechanisms are exhibited
in our offices globally and we issue
Group-wide bulletins on relevant topical
issues to apprise, inform and reinforce
compliance principles and messages.
Key messages are also delivered
periodically by BU heads to employees.
We continue to roll out initiatives to foster
a positive compliance-centric culture.
POLICIES & PROCEDURES
Employee Code of Conduct
We have a strict Code of Conduct (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 business 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 continue to review and enhance our
Code to ensure that it stays updated and
properly instructive. Appropriate disciplinary
action, including suspension or termination
of employment, is taken if an employee is
found to have violated the Code.
We have procedures to ensure that disciplinary
actions are carried out consistently and
fairly across all levels of employees. All third
parties who represent Keppel in business
dealings, including joint venture partners,
are also required to comply with and follow
the requirements of the Code.
Compliance
Resources
Culture
Compliance,
Risk Assessment,
Review & Monitoring
Regulatory
Compliance
Framework
Policies &
Procedures
Key Compliance
Processes
Training &
Communications
Supplier Code of Conduct
The acknowledgement to abide by our
Supplier Code of Conduct is mandatory
for all key suppliers across the Group.
The areas covered within the Supplier
Code of Conduct include proper
business conduct, human rights,
fair labour practices, stringent safety
and health standards, and responsible
environmental management.
Whistle-Blower Policy
Keppel’s Whistle-Blower Policy
encourages the reporting of suspected
bribery, violations or misconduct through
a clearly-defined process and reporting
channel, by which reports can be made
in confidence and without fear of reprisal.
The whistle-blower reporting channels
are widely communicated and made
accessible to all.
Personal Data Privacy Act
Guidance is provided to employees on the
Personal Data Protection Commission’s
advisory guidelines to ensure that the
Group complies with the requirements of
the Personal Data Privacy Act.
Compliance Policies
We maintain a comprehensive list of
policies covering compliance-related
matters including anti-bribery, gifts and
hospitality, agent fees, donations and
sponsorships, solicitation and extortion,
conflict of interest and insider trading,
amongst others. These policies are
reviewed periodically to ensure that
they are 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
standards for the Group. Concerted
efforts were taken to ensure all compliance
policies, including translated versions,
are made available and accessible
to employees.
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.
Keppel Corporation Limited
Report to Shareholders 2019
111
GOVERNANCE
REGULATORY COMPLIANCE
We have a comprehensive annual e-learning
training programme which is mandatory
for directors, officers and employees. The
content of the training covers the Code and
key principles underlying our compliance
policies. Directors, officers and employees
are required to complete assessments
to successfully mark completion of the
training. In addition, directors, officers and
employees are also required to formally
acknowledge their understanding of policies
and declare any potential or actual conflicts
of interest. Trainings on anti-bribery and the
Code in multi-languages are also carried out
for industrial/general workers.
We continue to refine our compliance
training programmes and curriculum.
We are also focused on developing and
tailoring training content to varying target
groups and training needs.
In addition to policy-related training
programmes, we conduct trainings focused
on the line manager’s responsibilities in
developing the desired culture and mindset
regarding compliance. These responsibilities
include the need to establish and maintain
effective internal controls to ensure that
processes are robust, and that potential
gaps are identified and mitigated in a
timely manner.
Our training aims to engender positive
compliance mindsets and culture, and we
see this guiding our employees in critical
facets of their work. 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 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
the Code.
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 BUs, focusing
on risk assessments including specific
compliance risks identified for each BU.
Separately, independent reviews of compliance
risks are executed within the scope of internal
audits including thematic reviews of the
effectiveness of key aspects of our compliance
programmes. These reviews provide valuable
insights and opportunities for us to improve
our processes and 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 and members of the
Board are fully committed to ensuring that
we sustain a strong compliance function.
112 Report to Shareholders 2019
Keppel Corporation Limited
DIRECTORS’ STATEMENT & FINANCIAL STATEMENTS
113 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
211 OTHER INFORMATION
Interested Person Transactions
Key Executives
Major Properties
Group Five-Year Performance
Group Value-Added Statements
Share Performance
Shareholding Statistics
Corporate Information
Financial Calendar
114
119
129
130
131
132
135
138
201
211
212
217
222
226
227
228
229
230
Keppel Corporation Limited
Report to Shareholders 2019
113
DIRECTORS’ STATEMENT
For the financial year ended 31 December 2019
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 2019.
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 129 to 134, 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 2019, 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)
Alvin Yeo Khirn Hai
Tan Ek Kia
Danny Teoh
Till Bernhard Vestring
Veronica Eng
Jean-François Manzoni
Teo Siong Seng (appointed on 1 November 2019)
Tham Sai Choy (appointed on 1 November 2019)
Penny Goh (appointed on 2 January 2020)
2.
Audit Committee
The Audit Committee of the Board of Directors comprises six independent non-executive Directors. Members of the Committee are:
Danny Teoh (Chairman)
Alvin Yeo Khirn Hai
Tan Ek Kia
Veronica Eng
Tham Sai Choy (appointed on 1 February 2020)
Penny Goh (appointed on 1 February 2020)
The Audit Committee carried out its function in accordance with the Singapore Companies Act, including the following:
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Reviewed financial statements and announcements relating to financial performance, and significant financial reporting issues
and judgments contained in them;
Reviewed the adequacy and effectiveness of financial, operational, compliance and information technology controls, as well as
risk management in relation to financial reporting and other financial-related risks;
Reviewed the Board’s comment on the adequacy and effectiveness of the Group’s internal control systems, and state whether it
concurs with the Board’s comments; and if there are material weaknesses identified in the Group’s internal controls, to consider
and recommend the necessary steps to be taken to address them;
Reviewed the assurance from the CEO and CFO on the financial records and financial statements and the assurance and steps
taken by the CEO and other key management personnel who are responsible, regarding the adequacy and effectiveness of the
Group’s internal control systems;
Reviewed audit scopes, plans and reports of the Company’s external and internal auditors and considered effectiveness of
actions taken by management on the recommendations and observations;
Reviewed the adequacy, effectiveness, independence and objectivity of the external auditors and internal auditors annually;
Reviewed the scope and results of the external audit function and internal audit function;
Reviewed the nature and extent of non-audit services performed by external auditors;
Met with external auditors and internal auditors, without the presence of management, at least annually;
Ensured that the internal audit function is adequately resourced and staffed with persons with the relevant qualifications and
experience, and has appropriate standing within the Company, at least annually;
Reviewed the whistle-blower policy and the Company’s procedures for detecting and preventing fraud and other arrangements
for concerns about possible improprieties in financial reporting or other matters to be safely raised, independently investigated
and appropriately followed up on;
Reviewed interested person transactions;
Investigated any matters within the Audit Committee’s terms of reference, whenever it deemed necessary;
Reported to the Board on material matters, findings and recommendations;
Reviewed the Audit Committee’s terms of reference annually and recommended proposed changes to the Board for approval; and
Ensured the Head of Internal Audit and external auditors have direct and unrestricted access to the Chairman of the Audit
Committee.
The Audit Committee has recommended to the Board of Directors the nomination of PricewaterhouseCoopers LLP for re-appointment
as independent auditors and approved the remuneration and terms of engagement at the forthcoming Annual General Meeting of the
Company.
114
Report to Shareholders 2019
Keppel Corporation Limited
FINANCIAL REPORT
3.
4.
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.
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)
Alvin Yeo Khirn Hai
Alvin Yeo Khirn Hai (deemed interest)
Tan Ek Kia
Danny Teoh
Till Bernhard Vestring
Veronica Eng
Jean-François Manzoni
Tham Sai Choy
Penny Goh
(Unvested restricted shares to be delivered after 2016)
Loh Chin Hua
(Unvested restricted shares to be delivered after 2017)
Loh Chin Hua
(Unvested restricted shares to be delivered after 2018)
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
(Contingent award of performance shares issued in 2019 to be
delivered after 2021)1
Loh Chin Hua
(Contingent award of performance shares – Transformation Incentive Plan
issued in 2016 to be delivered after 2021)1
Loh Chin Hua
Holdings At
1.1.2019
or date of
appointment,
if later
31.12.2019
21.1.2020
290,000
895,341
322,000
322,000
1,310,592
1,310,592
38,500
44,225
42,000
42,825
73,825
74,000
19,000
-
38,500
51,225
42,000
51,825
83,825
81,000
28,000
1,000
155,570
155,570
-
60,000
-
-
38,500
51,225
42,000
51,825
83,825
81,000
28,000
1,000
155,570
30,000
-
181,568
90,784
90,784
-
174,936
174,936
300,000
-
-
330,000
330,000
330,000
320,000
320,000
320,000
-
365,000
365,000
750,000
750,000
750,000
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.
Keppel Corporation Limited
Report to Shareholders 2019
115
DIRECTORS’ STATEMENT
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 44,000 Shares issued by virtue
of exercise of options and options to take up 935,285 Shares were cancelled during the financial year. At the end of the financial year,
there were 910,900 Shares under option as follows:
Date of grant
05.02.09
06.08.09
09.02.10
Balance at
1.12019
68,600
688,385
1,133,200
1,890,185
Number of Share Options
Exercised
(44,000)
-
-
(44,000)
Cancelled
(24,600)
(688,385)
(222,300)
(935,285)
Balance at
31.12.2019
-
-
910,900
910,900
Exercise
Price
$3.07
$6.86
$6.89
Date of
expiry
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.
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
29.4.2016
28.4.2017
30.4.2018
30.4.2019
KCL PSP-TIP
29.4.2016
28.4.2017
Awards:
Date of Grant
KCL RSP-
Deferred shares
15.2.2019
18.4.2019
Balance at
1.1.2019
645,000
1,070,000
1,180,000
-
2,895,000
3,935,967
2,030,000
5,965,967
Number of Shares
Contingent
awards
granted
Adjustments
upon
release
Released
Cancelled
-
-
-
1,635,000
1,635,000
(264,400)
(380,600)
-
-
-
-
-
-
(264,400)
(380,600)
-
-
-
-
-
Balance at
31.12.2019
-
1,070,000
1,180,000
1,635,000
3,885,000
-
-
-
-
-
-
-
-
-
(350,000)
(30,000)
(380,000)
3,585,967
2,000,000
5,585,967
Balance at
1.1.2019
Awards
granted
Adjustments
upon
release
Released
Cancelled
Balance at
31.12.2019
Number of Shares
-
-
-
3,908,536
325,635
4,234,171
-
-
-
(3,908,536)
(325,635)
(4,234,171)
-
-
-
-
-
-
116
Report to Shareholders 2019
Keppel Corporation Limited
FINANCIAL REPORT
Awards released but not vested:
Date of Grant
KCL PSP
29.4.2016
KCL RSP
31.3.2014
31.3.2015
29.4.2016
KCL RSP-
Deferred shares
23.2.2018
15.2.2019
18.4.2019
Balance at
1.1.2019
Released
Vested
Cancelled
Other
adjustments
Balance at
31.12.2019
Number of Shares
-
-
380,600
380,600
(380,600)
(380,600)
-
-
-
-
(1,565,032)
(1,565,032)
(600)
(3,700)
(34,545)
(38,845)
4,200
11,000
1,614,918
1,630,118
2,586,237
-
-
-
-
-
-
-
-
-
-
-
-
-
3,600
7,300
15,341
26,241
(1,276,901)
-
-
3,908,536
(1,312,115)
325,635
(112,660)
(94,045)
(106,166)
(3,300)
(492)
(2,165)
-
1,214,799
2,488,090
209,675
No Director of the Company received any contingent award of Shares granted under the KCL RSP and KCL PSP except for the
following:
2,586,237
4,234,171
(2,701,676)
(203,511)
(2,657)
3,912,564
Contingent awards:
KCL RSP
Executive Director
Loh Chin Hua
KCL PSP
Executive Director
Loh Chin Hua
KCL PSP-TIP
Executive Director
Loh Chin Hua
Awards:
KCL RSP-Deferred shares
Executive Director
Loh Chin Hua
Contingent
awards
granted since
Aggregate Aggregate other
adjustments
since
Aggregate
awards
released since
awards commencement commencement commencement
granted
of plans
to the end of
during the
financial year
financial year
of plans
to the end of
financial year
of plans
to the end of
financial year
Aggregate
awards
not released as
at the end of
financial year
-
644,757
- (644,757)
-
365,000 1,885,814
(624,014) (246,800) 1,015,000
-
750,000
-
-
750,000
awards
granted since
Aggregate Aggregate other
adjustments
since
Aggregate
awards
released since
Awards commencement commencement commencement
granted
of plans
to the end of
during the
financial year
financial year
of plans
to the end of
financial year
of plans
to the end of
financial year
Aggregate
awards
not released as
at the end of
financial year
262,403
534,755
- (534,755)
-
Keppel Corporation Limited
Report to Shareholders 2019
117
DIRECTORS’ STATEMENT
6.
Share plans of the Company (continued)
Awards released but not vested:
KCL RSP
Executive Director
Loh Chin Hua
KCL RSP-Deferred shares
Executive Director
Loh Chin Hua
KCL PSP
Executive Director
Loh Chin Hua
Aggregate
awards
released since
commencement
of plans
to the end of
financial year
Aggregate
awards
vested since
commencement
of plans
to the end of
financial year
Aggregate
awards
released but
not vested as
at the end of
financial year
644,757
(644,757)
-
534,755
(269,035)
265,720
246,800
(246,800)
-
No Director or employee received 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:
Executive Director
Loh Chin Hua
Contingent
shares granted
during the
financial year (%)
Aggregate
contingent
shares granted
to date (%)
10.7%
6.5%
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.
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, 27 February 2020
LOH CHIN HUA
Chief Executive Officer
118
Report to Shareholders 2019
Keppel Corporation Limited
FINANCIAL REPORT
INDEPENDENT AUDITOR’S REPORT
to the Shareolders of Keppel Corporation Limited
For the financial year ended 31 December 2019
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 2019, 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 2019;
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 judgments; for example, in respect of significant accounting
estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also
addressed the risk of management override of internal controls, including among other matters consideration of whether there was evidence
of bias that represented a risk of material misstatement due to fraud.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements for
the financial year ended 31 December 2019. 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 the Offshore and Marine (“O&M”)
business unit
(Refer to Notes 2.27(iii), 14 and 15 to the financial statements)
As at 31 December 2019, the Group has:
(i) Stocks (work-in-progress) (“WIP”) amounting to $599 million
(after a provision of $50 million made in prior year); and
(ii) contract assets relating to certain rigbuilding contracts where
the scheduled delivery dates of the rigs had been deferred and
have higher counterparty risks, amounting to $1,432 million
(after a provision for expected credit loss of $21 million made
in prior year).
We focused on this area because significant judgment 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.
We reviewed management’s assessment of the NRV of the WIP
and the recovery of the contract assets balance.
We assessed the most significant inputs to the Discounted Cash
Flow (“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 judgment
around the NRV of the WIP and the recovery of contract assets to
be appropriate.
Keppel Corporation Limited
Report to Shareholders 2019
119
FINANCIAL REPORT
INDEPENDENT AUDITOR’S REPORT
to the Shareolders of Keppel Corporation Limited
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 the 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 its 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 dayrates
and discount rates.
Arising from management’s assessment, no additional expected
credit loss provision was required against contract assets in
2019.
2.
Impairment assessment of investments in associated
companies
(Refer to Note 10 to the financial statements)
As at 31 December 2019, the Group has investments in
associated companies with a carrying value amounting to $6,351
million. Significant associated companies where impairment
indicators exist included KrisEnergy Limited and Floatel
International Limited.
Investment in KrisEnergy and related exposures
The Group has a 40% equity interest in KrisEnergy Limited
(“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.
As at 31 December 2019, the carrying amount of the Group’s
investment in KrisEnergy amounted to $74 million (after a full
impairment write down of $37 million in the current year on
equity shares), comprising zero-coupon notes. In addition, the
Group also has $21 million of contract assets in relation to a
construction contract for a production barge for KrisEnergy and,
through a bilateral agreement between the Group and a bank,
guaranteed $263 million in respect of the bank loan granted to
KrisEnergy (Note 10). The zero-coupon notes and guarantee are
secured on the assets of KrisEnergy.
On 14 August 2019, KrisEnergy requested for a suspension of
trading of its shares on the Singapore Exchange and applied for
a debt moratorium. The High Court of Republic of Singapore
approved the application for an initial period of three months up
to 14 November 2019. At the date of these financial statements,
the debt moratorium was extended to 27 May 2020.
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 valuation.
We also found the disclosures in the financial statements in
respect of the critical judgment and sources of estimation
uncertainty to be adequate.
We 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.
For cash flows estimated by KrisEnergy from an asset under
development, we evaluated the reasonableness of the estimates
and assumptions in the cash flow projections, with focus on the
estimates of reserves available and estimated future oil prices of
US$63 to US$70 per barrel for 2020 to 2028.
For cash flows relating to producing assets, we evaluated
the reasonableness of the estimates by assessing historical
performance. For non-performing or underperforming assets, we
obtained an understanding on the progress of each proposed sale
transaction and the bid prices received.
In respect of the financial advisor for the Group, we assessed that
it possessed the requisite competency and experience to assist
management in the assessment of the recoverable amount of
KrisEnergy.
120
Report to Shareholders 2019
Keppel Corporation Limited
FINANCIAL REPORT
Key Audit Matter
How our audit addressed the Key Audit Matter
In November 2019, KrisEnergy announced that a restructuring
plan was in the process of being developed by KrisEnergy’s
management together with its consultants.
We also considered the adequacy of the disclosures in the
financial statements in respect of this matter.
Management performed an impairment assessment to estimate
the recoverable amount of the Group’s exposure in KrisEnergy
as at 31 December 2019. With assistance from its financial
advisor, management estimated the amount of cash available
from producing assets and forecasted production from assets
under development, taking into consideration the relative priority
of each group of stakeholders to these cash flows based on their
respective rights.
Based on the result of the assessment, an impairment loss of $37
million was recognised in 2019 to fully write down the carrying
amount of the investment. No impairment allowances were
made against the zero-coupon notes and contract assets and no
liabilities were recorded for the Group’s guarantee given to the
bank for the loan granted to KrisEnergy as the Group has priority
over the cash flows on the assets of KrisEnergy.
Management will continue to evaluate the above assessment
when a restructuring plan is presented by KrisEnergy in due
course, which may give rise to adjustments to be made.
We focused on this area as the assessment of the recoverable
amount required management to make projections of cash flows
arising from producing assets and assets under development in
which several estimates and key assumptions were applied.
Investments in Floatel International Limited
The Group has a 49.92% equity interest in Floatel International
Limited (“Floatel”). Floatel operates a fleet of five semisubmersible
accommodation and construction support vessels for the
offshore oil and gas industry.
The carrying amount of the Group’s investment in Floatel
amounted to $477 million as at 31 December 2019 (2018: $524
million), comprising $311 million in equity shares (2018: $362
million), $10 million in preference shares (2018: $22 million) and
$156 million in long term receivables (2018: $140 million).
Based on our procedures, we found the significant estimates and
key assumptions in determining the available cash flows for the
Group’s investment in KrisEnergy to be reasonable and the related
disclosures to be adequate.
We evaluated the appropriateness of the key inputs used in the
estimation of the recoverable amount of Floatel’s vessels as part
of the impairment review of the vessels.
We read recent public announcements made by the credit rating
agencies to obtain an understanding of circumstances and
impact arising from the credit downgrading.
We read the public announcement made by Floatel on its financial
results for the year ended 31 December 2019.
During the financial year ended 31 December 2019, the Group had
equity accounted for $51 million as their share of loss of Floatel’s
results (2018: profit of $11 million) which included impairment
losses on the carrying value of Floatel’s three vessels amounting
to $20 million (2018: $nil). The recoverable amount of the vessels
were determined on their value-in-use, using a DCF model.
We discussed with management to obtain an understanding of
the basis of the going concern assumption, as well as the cash
flow projections. We corroborated the information obtained to
the cash flow projections used in the vessel impairment review,
reports and analyses from advisors, as well as our understanding
of the business environment that Floatel is operating in.
In November 2019, credit rating agencies downgraded Floatel’s
credit rating, citing market environment for accommodation
vessels remaining difficult with limited activity and pressure on
dayrates. The rating agencies also commented that if Floatel fails
to contract work for its idle vessels in the near future, it may not
be able to meet its leverage covenant at its first test at the
year-end 2020.
We discussed with management their evaluation of the going
concern assessment made by Floatel.
We also assessed the adequacy of the disclosures in the financial
statements in respect of this matter.
Keppel Corporation Limited
Report to Shareholders 2019
121
INDEPENDENT AUDITOR’S REPORT
to the Shareolders of Keppel Corporation Limited
Key Audit Matter
How our audit addressed the Key Audit Matter
2.
Impairment assessment of investments in associated
companies (continued)
Investments in Floatel International Limited (continued)
Floatel subsequently reported that its financial situation is
unsustainable as liquidity is under pressure. There is a material
uncertainty as to whether Floatel will be able to service its
secured financial liabilities and net working capital requirements
for the coming 12 months, which cast significant doubt on
Floatel’s ability to continue as a going concern. The long term
viability of Floatel’s business depends on it finding a solution
to its financial situation and Floatel management has initiated
discussions with key creditors, in which, in the view of Floatel’s
board of directors, there is reasonable expectations of success.
In a situation where going concern for Floatel no longer can be
assumed, there is a risk for significant write down of its assets.
Based on information currently available, the Group’s
management concurred with the judgment made by Floatel’s
management and board of directors in relation to this matter.
If Floatel could not continue to be a going concern, the carrying
amount of the Group’s investment in Floatel may be subject to
significant write down.
We focused on this area as the assessment of the going concern
of Floatel required management to evaluate the basis used
by Floatel management in which several estimates and key
assumptions were applied.
3. Financial exposure in relation to contracts with Sete Brasil
(Refer to Note 12 to the financial statements)
The Group’s customer, Sete Brasil (“Sete”) filed for bankruptcy
protection on 21 April 2016. The Group had previously entered
into Engineering, Procurement and Construction (“EPC”)
contracts with Sete for the construction of six semisubmersible
drilling rigs. Sete stopped making payments to the Group under
these contracts since November 2014. The Group suspended
construction of these six rigs in November 2015. The total
cumulative expected losses recognised on these contracts
amounted to $476 million.
On 3 October 2019, Sete’s creditors approved a settlement
agreement between the Group and Sete, as well as a proposal by
Magni Partners (Bermuda) Ltd (“Magni”) to purchase Sete’s four
subsidiaries, of which two have EPC contracts with the Group.
Under the settlement agreement with Sete, which is subject
to fulfilment of certain conditions precedent, the Group would
take over ownership of four uncompleted rigs arising from the
performance of the above EPC contracts. When the settlement
agreement comes into effect, the EPC contracts and related
agreements entered for these uncompleted rigs will be deemed
to be amicably terminated, with no penalties, refunds and/or any
additional amounts being due to any party, and the parties will
waive all rights to any claims.
The Group has a receivable of approximately US$260 million
included in Sete’s court-approved Judicial Reorganisation Plan.
The outstanding amount will be paid to the Group proportionally
and pari passu with other creditors of Sete as part of, and out of
proceeds of, its Judicial Reorganisation Plan.
Based on the procedures performed, we found management’s
assessment to be consistent with the results of the audit
procedures performed. We also found the disclosures in the
financial statements in respect of this matter to be adequate.
We reviewed the terms of each contract and correspondences
with Sete or its authorised representatives to validate the
assumptions applied by management.
For the two impending EPC contracts with Magni, we assessed
the amount and timing of gross cash inflows from Magni to
the term sheet. We also assessed the total cost of completing
the construction of the rigs through discussions with project
managers and corroborating the amounts to an approved budget
plan. We obtained management’s calculation of the discount
rate used and evaluated its reasonableness based on our
understanding of the settlement agreement with Magni.
For the remaining four undelivered rigs, 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 provisions for expected credit loss and contract
related costs from these contracts to be reasonable. We also
found that the disclosures in the financial statements in respect
of this matter to be adequate.
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FINANCIAL REPORT
Key Audit Matter
How our audit addressed the Key Audit Matter
As at the date of these financial statements, management
is in discussions with Magni on the terms to complete the
construction of the two rigs with EPC contracts with the Group.
Management estimated the net present value of the cash flows
relating to the impending construction contracts for the two rigs
with Magni. In addition, management performed an assessment
to estimate the cost of discontinuance of related agreements of
the EPC contracts for four undelivered rigs, offset by possible
options in extracting value from the uncompleted rigs and
possible payout from the Judicial Reorganisation Plan.
Arising from the above assessment, management is of the
opinion that the provision of $183 million (included in provision
for loss allowance in trade debtors (Note 12) (2018: $183 million)
and $245 million (included in sundry creditors, Note 20) (2018:
$245 million) are adequate to address the cost of discontinuance,
salvage cost and unpaid progress billings relating to these EPC
contracts.
4. Global resolution with criminal authorities in relation to
corrupt payments
(Refer to Note 2.27(iii) 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 global resolution with the authorities, the Group had
also 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. As of the date of these financial
statements, Keppel O&M entities in Singapore, Brazil, Bulgaria,
China, India, Philippines, UAE and USA had secured certification of
the ISO 37001 Anti-Bribery Management System.
Anti-bribery and corruption compliance audits were also
performed 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. The audits
performed in 2018 had, however, identified certain matters
relating to contracts entered into several years ago which
required follow-up actions and further review.
The follow-up actions and further review were concluded in 2019.
Based on currently available information, management is of the
opinion that no additional provisions is required.
We focused on this area because of the management judgment
required in determining whether additional provision is required.
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 results 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.
Based on our procedures and representations obtained from
management, we found management’s assessment of the matter
to be appropriate.
Keppel Corporation Limited
Report to Shareholders 2019
123
INDEPENDENT AUDITOR’S REPORT
to the Shareolders of Keppel Corporation Limited
Key Audit Matter
How our audit addressed the Key Audit Matter
5. Revenue recognition based on measurement of progress
towards performance obligation
(Refer to Note 2.20 and 24 to the financial statements)
During the year, the Group recognised $2,419 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
judgment required in:
•
the estimation of the physical proportion of the contract work
completed for the contracts; and
the estimation of total costs on the contracts, including
contingencies that could arise from variations to original
contract terms, and claims.
•
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.
6. Valuation of properties held for sale
(Refer to Note 14 to the financial statements)
At 31 December 2019, the Group had residential properties held
for sale of $4,632 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 carrying value and
whether to recognise any foreseeable losses for properties held
for sale is highly dependent on the estimated cost to complete
each development and the estimated selling price.
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 judgment in determining the appropriate
valuation methodology to be used, and in estimating the
underlying assumptions to be applied. The valuations are highly
sensitive to key assumptions applied in deriving the discount rate
and price of comparable plots and properties.
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.
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FINANCIAL REPORT
Key Audit Matter
How our audit addressed the Key Audit Matter
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.
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
computations of the foreseeable losses.
We also considered the adequacy of the disclosures in the
financial statements, in describing the allowance for foreseeable
losses made 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.
7. Valuation of investment properties
(Refer to Note 7 and Note 34 to the financial statements)
At 31 December 2019, the Group owns a portfolio of investment
properties of $3,022 million comprising office buildings, hotels,
retail malls 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 judgment in determining the appropriate valuation
methodology to be used, and in estimating the underlying
assumptions to be applied. The valuations are highly sensitive to
key assumptions applied such as the capitalisation rate, discount
rate, net initial 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, 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.
Keppel Corporation Limited
Report to Shareholders 2019
125
INDEPENDENT AUDITOR’S REPORT
to the Shareolders of Keppel Corporation Limited
Key Audit Matter
How our audit addressed the Key Audit Matter
8. Purchase price allocation (“PPA”) and impairment
assessment of goodwill arising from acquisition of
subsidiary – M1 Limited (“M1”)
(Refer to Note 2.27(ii) and Note 36 to the financial
statements)
Purchase price allocation
On 15 February 2019, the Group obtained controlling interest in
M1 for a purchase consideration of $1,232 million through an
80% owned subsidiary. The Group performed a PPA exercise for
the acquisition, where the purchase consideration was allocated
to the fair value of the identifiable assets acquired and liabilities
assumed, resulting in the recognition of goodwill of $988 million
on the investment in M1.
As part of the PPA exercise, management identified intangible
assets relating to brand, and subscriber relationships and
contracts, and performed an estimation of the fair value of
the identifiable assets acquired and liabilities assumed. In this
exercise, management engaged independent valuers to perform
the valuation of certain assets of M1, including spectrum rights
and licenses, network assets, application systems and leasehold
buildings.
We focused on this area as the determination of fair values of
the identifiable assets acquired and liabilities assumed, including
the identification of intangible assets, required significant
management judgment in estimating the underlying assumptions
to be applied.
Impairment assessment – Goodwill on acquisition
An annual impairment assessment was performed on the
goodwill of $988 million, which represented the amount of
purchase consideration in excess of the fair value of the
identifiable assets acquired and liabilities assumed on acquisition
date. The recoverable value of the investment in M1 was
determined on a value-in-use basis using a DCF model.
The assessment by the Group required significant judgment in
estimating the underlying assumptions including the revenue
growth rate, long term growth rate and discount rate. Based on
management’s assessment, no impairment was required as the
recoverable amount was higher than the carrying value (including
goodwill) of the investment in M1.
We obtained and read the Sales and Purchase Agreement and
identified critical terms with accounting impact, including the
purchase consideration and determined the acquisition date to be
15 February 2019.
We engaged our valuation specialists in assessing the
methodology applied in the PPA exercise and the appropriateness
of the key assumptions used in determining the valuation of
intangible assets, including brand and subscriber relationships.
In respect of the independent professional firms engaged by the
Group, we found that they possessed the requisite competency
and experience to assist management in the valuation of the
spectrum rights and licenses, network assets, application
systems and leasehold buildings of M1.
We also assessed the appropriateness of the disclosures in the
financial statements in respect of this matter.
Based on our audit procedures, we found management’s basis of
estimating the fair value to allocate the purchase consideration of
the Group’s investment in M1 to be reasonable. We also found the
disclosures in the financial statements to be adequate.
We involved our valuation specialists in evaluating the valuation
methodology and the key assumptions applied by management.
We assessed the appropriateness of the underlying assumptions
made by management in their cash flow projections, including
the revenue growth rate, long term growth rate and discount rate
based on the economic and industry conditions relevant to M1’s
business.
We checked whether the cash flow projections were based on the
approved business plan.
We assessed the sensitivity of the cash flow projections and
other key assumptions including discount rate and long term
growth rate on the impairment assessment and the impact on the
headroom over the carrying value.
Based on the audit procedures performed, we found
management’s assessment to be appropriate.
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 2019 (“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.
126
Report to Shareholders 2019
Keppel Corporation Limited
FINANCIAL REPORT
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.
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.
Keppel Corporation Limited
Report to Shareholders 2019
127
INDEPENDENT AUDITOR’S REPORT
to the Shareolders of Keppel Corporation Limited
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, 27 February 2020
128
Report to Shareholders 2019
Keppel Corporation Limited
FINANCIAL REPORT BALANCE SHEETS
As at 31 December 2019
Share capital
Treasury shares
Reserves
Share capital & reserves
Non-controlling interests
Total equity
Represented by:
Fixed assets
Investment properties
Right-of-use assets
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
Lease liabilities
Taxation
Net current assets
Non-current liabilities
Term loans
Lease liabilities
Deferred taxation
Other non-current liabilities
Note
31 December
1 January
31 December
Group
Company
2019
$’000
2018
$’000
2018
$’000
2019
$’000
2018
$’000
1 January
2018
$’000
3
3
4
5
6
7
8
9
10
11
12
13
14
15
16
16
17
18
19
1,291,722
1,291,722
1,291,310
1,291,722
1,291,722
1,291,310
(14,009)
(45,073)
(74)
(14,009)
(45,073)
(74)
9,933,140
10,021,113
9,901,249
11,210,853
11,267,762
11,192,485
435,178
308,930
529,970
6,772,318
8,050,031
-
6,396,589
7,643,238
-
6,341,656
7,632,892
-
11,646,031
11,576,692
11,722,455
8,050,031
7,643,238
7,632,892
2,901,845
3,022,091
759,929
-
2,372,560
2,851,380
2,432,963
3,460,608
-
-
-
-
6,350,845
6,239,053
5,915,379
649,069
1,656,362
1,682,981
449,515
679,464
129,007
417,792
603,792
132,594
7,273
-
12,833
6,676
-
-
296
-
-
7,962,528
7,867,959
7,972,849
-
19,230
23,469
-
-
16,957
8,801
-
-
15,012
14,346
-
17,023,122
12,720,979
12,963,128
8,025,333
7,900,393
8,002,503
5,542,755
3,497,476
5,495,904
3,212,712
5,755,725
3,643,495
-
-
-
-
-
-
-
-
-
7,280,724
4,043,121
3,498,920
563,578
291,729
342,960
2,748,484
2,702,300
3,062,683
41,050
121,581
45,976
136,587
181,226
202,776
1,783,514
1,981,406
2,273,788
705
8,844
18,544
-
1,047
548
6,229
23,217
27,400
370
733
4,590
93,530
-
2,213
14,298,438
13,866,614
15,462,653
7,309,864
4,100,885
3,599,986
20
4,604,544
4,391,023
5,720,165
119,481
119,405
37,969
1,824,965
1,918,547
1,950,151
36,448
69,614
115,972
78,725
19,988
-
-
76,172
27,796
-
-
68,585
29,528
-
-
-
-
-
156,867
162,611
236,403
490,286
115,824
253,331
-
-
-
4,555,237
1,480,757
1,714,084
3,400,430
460,657
551,530
67,387
248,425
-
-
297,922
220,761
4,154
31,523
11,946,773
8,393,092
10,012,433
3,691,687
-
43,519
770,755
-
33,955
920,001
2,351,665
5,473,522
5,450,220
3,618,177
3,330,130
2,679,985
6,504,394
6,067,752
6,078,919
3,498,203
3,495,610
2,939,800
530,052
399,028
295,282
-
188,340
361,717
-
11,498
-
325,359
286,615
-
-
-
-
83,778
91,675
109,796
15
21
16
16
22
8
28
22
8
23
20
Net assets
11,646,031
11,576,692
11,722,455
8,050,031
7,643,238
7,632,892
7,728,756
6,617,809
6,690,893
3,593,479
3,587,285
3,049,596
The accompanying notes form an integral part of these financial statements.
Keppel Corporation Limited
Report to Shareholders 2019
129
FINANCIAL REPORT
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the financial year ended 31 December 2019
Revenue
Materials and subcontract costs
Staff costs
Depreciation and amortisation
Impairment loss on financial assets
Other operating income - net
Operating profit
Investment income
Interest income
Interest expenses
Share of results of associated companies
Profit before tax
Taxation
Profit for the year
Attributable to:
Shareholders of the Company
Non-controlling interests
Earnings per ordinary share
- basic
- diluted
Note
2019
$’000
2018
$’000
24
7,579,703
5,964,781
(5,266,594)
(4,175,035)
25
(1,163,231)
(375,294)
(74,367)
176,284
876,501
64,594
177,675
(312,716)
147,413
953,467
(987,830)
(182,386)
(99,713)
535,345
1,055,162
9,991
164,260
(204,824)
220,895
1,245,484
(192,329)
(284,776)
761,138
960,708
706,975
54,163
761,138
948,392
12,316
960,708
38.9 cts
38.7 cts
52.3 cts
52.0 cts
26
27
27
27
10
28
5
29
The accompanying notes form an integral part of these financial statements.
130
Report to Shareholders 2019
Keppel Corporation Limited
FINANCIAL REPORT
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the financial year ended 31 December 2019
Profit for the year
Items that may be reclassified subsequently 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
- 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
2019
$’000
2018
$’000
761,138
960,708
(91,161)
115,750
(238,794)
132,017
(100,310)
(132,866)
7,345
5,574
(18,898)
(76,952)
20,031
(42,821)
(164,226)
(256,859)
(78,459)
(31,566)
(1,936)
(3,545)
342
581
(80,053)
(34,530)
(244,279)
(291,389)
516,859
669,319
462,946
53,913
516,859
660,866
8,453
669,319
The accompanying notes form an integral part of these financial statements.
Keppel Corporation Limited
Report to Shareholders 2019
131
FINANCIAL REPORT
STATEMENTS OF CHANGES IN EQUITY
For the financial year ended 31 December 2019
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
Group
2019
As previously reported at
31 December 2018
Effects of change in accounting
policy on capitalisation of
borrowing costs
1,291,722
(45,073)
194,943 10,330,287
(493,669) 11,278,210
308,930 11,587,140
-
-
-
(10,448)
-
(10,448)
-
(10,448)
As restated at 31 December 2018
1,291,722
(45,073)
194,943 10,319,839
(493,669) 11,267,762
308,930 11,576,692
Adoption of SFRS(I) 16
-
-
-
(78,201)
-
(78,201)
(2,797)
(80,998)
As adjusted at 1 January 2019
1,291,722
(45,073)
194,943 10,241,638
(493,669) 11,189,561
306,133 11,495,694
-
706,975
-
706,975
54,163
761,138
(74,112)
-
(169,917)
(244,029)
(250)
(244,279)
(74,112)
706,975
(169,917)
462,946
53,913
516,859
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 30)
Share-based payment
Dividend paid to non-controlling
shareholders
Purchase of treasury shares
Treasury shares reissued
pursuant to share plans and
share option scheme
Transfer of statutory, capital
and other reserves 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 a subsidiary
Acquisition of additional interest
in subsidiaries
Disposal of interest in subsidiaries
Effects of acquiring part of
non-controlling interests in
a subsidiary
Total change in ownership
interests in subsidiaries
Total transactions with owners
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(4,543)
-
(417,938)
34,991
-
-
-
-
-
-
35,607
(35,472)
-
-
-
-
9,821
(9,821)
-
(4,041)
(31)
-
-
-
31,064
5,268
(427,759)
-
-
-
-
-
-
-
-
-
-
-
(50,227)
-
-
(50,227)
31,064
5,268
(477,986)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(417,938)
34,991
-
(417,938)
125
35,116
-
(11,623)
(11,623)
(4,543)
135
-
-
-
-
-
(4,543)
135
-
1,207
1,207
(4,041)
(31)
(415)
(4,456)
-
(31)
(391,427)
(10,706)
(402,133)
-
308,001
308,001
(50,227)
(173,390)
(223,617)
-
-
(50,864)
(50,864)
2,091
2,091
(50,227)
(441,654)
85,838
75,132
35,611
(366,522)
As at 31 December 2019
1,291,722
(14,009)
126,099 10,470,627
(663,586) 11,210,853
435,178 11,646,031
*
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.
132
Report to Shareholders 2019
Keppel Corporation Limited
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
1,291,310
(74)
281,407
10,193,647
(323,556) 11,442,734
530,225
11,972,959
-
-
-
(15,011)
-
(15,011)
-
(15,011)
Group
2018
As previously reported at
31 December 2017
Effects of change in accounting
policy on capitalisation of
borrowing costs
As restated at 1 January 2018
1,291,310
(74)
281,407
10,178,636
(323,556) 11,427,723
530,225
11,957,948
Adoption of SFRS(I) 9
-
-
1,058
(236,296)
-
(235,238)
(255)
(235,493)
As adjusted at 1 January 2018
1,291,310
(74)
282,465
9,942,340
(323,556) 11,192,485
529,970
11,722,455
-
948,392
-
948,392
12,316
960,708
(117,413)
-
(170,113)
(287,526)
(3,863)
(291,389)
(117,413)
948,392
(170,113)
660,866
8,453
669,319
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 30)
Share-based payment
Dividend paid to non-controlling
shareholders
-
-
-
-
-
-
Shares issued
412
-
-
-
-
-
-
-
(90,758)
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
-
(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
10,319,839
(493,669) 11,267,762
308,930
11,576,692
*
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 2019
133
STATEMENTS OF CHANGES IN EQUITY
Company
2019
As at 1 January 2019
Total comprehensive income for the year
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners, recognised
directly in equity
Dividends paid
Share-based payment
Purchase of treasury shares
Treasury shares reissued pursuant to
share plans and share option scheme
Total transactions with owners
Share
Capital
$000
Treasury
Shares
$000
Capital
Reserves
$000
Revenue
Reserves
$000
Total
$000
1,291,722
(45,073)
202,141
6,194,448
7,643,238
-
-
-
-
-
-
-
-
-
-
-
-
-
(4,543)
35,607
31,064
-
790,696
2,273
2,273
-
790,696
790,696
2,273
792,969
-
(417,938)
(417,938)
36,170
-
(35,472)
-
-
-
36,170
(4,543)
135
698
(417,938)
(386,176)
As at 31 December 2019
1,291,722
(14,009)
205,112
6,567,206
8,050,031
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
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
The accompanying notes form an integral part of these financial statements.
134
Report to Shareholders 2019
Keppel Corporation Limited
FINANCIAL REPORT
CONSOLIDATED STATEMENT OF CASH FLOWS
For the financial year ended 31 December 2019
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
Loss/(gain) on disposal of associated companies
Impairment of fixed assets
Impairment of associated companies
Fair value gain on investment properties
Profit on sale of investments
Gain from change in interest in associated companies
Fair value gain on remeasurement of previously held interest upon acquisition of subsidiary
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 (used in)/from operating activities
Investing activities
Acquisition of a subsidiary
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 (used in)/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
Principal element of lease payments
Purchase of treasury shares
Dividend paid to shareholders of the Company
Dividend paid to non-controlling shareholders of subsidiaries
Net cash from/(used in) financing activities
Net decrease 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
2019
$’000
2018
$’000
876,501
1,055,162
375,294
37,255
(6,277)
(64,469)
22
8,432
35,915
(101,020)
-
(27,114)
(158,376)
17,434
993,597
(72,104)
(159,551)
(806,164)
(15,610)
(77,990)
(274,421)
(662)
(30,093)
(442,998)
179,503
(298,099)
(263,856)
(825,450)
A
B
(1,143,012)
(652,576)
(516,794)
27,117
106,117
16,094
96,625
378,422
(1,688,007)
182,386
34,885
(2,795)
(604,638)
(48,783)
6,911
60,782
(84,886)
(2,232)
(63,622)
-
27,622
560,792
(408,506)
357,046
543,245
(694,363)
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
(223,652)
-
(3,337)
412
135
1,178
4,392,341
(1,342,450)
(47,306)
(4,543)
(417,938)
(11,623)
2,346,142
5,324
-
1,549,445
(1,939,475)
-
(90,758)
(526,152)
(20,321)
(1,024,862)
(167,315)
(223,214)
1,971,844
2,241,448
(27,285)
(46,390)
C
1,777,244
1,971,844
Keppel Corporation Limited
Report to Shareholders 2019
135
FINANCIAL REPORT
CONSOLIDATED STATEMENT OF CASH FLOWS
Reconciliation of liabilities arising from financing activities
2019
1 January 2019
$’000
Net proceeds/
(payment) of
principal
$’000
Adoption
SFRS(I) 16
$’000
Addition during
the year
$’000
Acquisition of
subsidiaries
$’000
Disposal of
subsidiaries
$’000
Non-cash changes
Term loans
7,548,509
3,049,891
-
-
Lease
liabilities
2018
-
(47,306)
573,363
47,508
1 January 2018
$’000
Principal
payments (net
of proceeds)
$’000
Acquisition of
subsidiaries
$’000
Term loans
7,793,003
(390,030)
297,923
451,418
44,771
Non-cash changes
Disposal of
subsidiaries
$’000
(171,380)
Notes to Consolidated Statement of Cash Flows
A.
Acquisition of a subsidiary
During the financial year, net assets of subsidiaries acquired at their fair values were as follows:
Fixed assets
Investment properties
Right-of-use assets
Intangible assets
Stocks
Contract assets
Debtors and other assets
Bank balances and cash
Creditors and other liabilities
Borrowings and lease liabilities
Current and deferred taxation
Non-controlling interests consolidated
Total identifiable net assets at fair value
Non-controlling interests measured at fair value
Amount previously accounted for as associated companies
Goodwill arising from acquisition
(Gain)/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
Foreign
exchange
movement
$’000
9,813
31 December
2019
$’000
11,059,631
-
(6,713)
(14,184)
597,439
Foreign exchange
movement
$’000
18,993
31 December
2018
$’000
7,548,509
2019
$’000
772,654
2018
$’000
47
-
360,000
44,324
610,516
34,745
163,121
197,211
88,991
(241,555)
(496,189)
(251,498)
(2,091)
920,229
(308,001)
(210,137)
988,288
(158,376)
1,232,003
1,232,003
-
-
-
-
530
18,521
(6,778)
(297,923)
(3,827)
-
70,570
-
(32,484)
-
18,487
56,573
56,573
(88,991)
(18,521)
1,143,012
38,052
During the year, the Group’s 80% owned subsidiary, Konnectivity Pte Ltd, acquired approximately 81% equity interest in M1 Limited.
The Group’s wholly-owned subsidiary, Keppel Telecommunications & Transportation Ltd, holds the remaining 19% equity interest in M1
Limited.
Acquisition in prior year relates 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.
136
Report to Shareholders 2019
Keppel Corporation Limited
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
Right-of-use assets
Stocks
Debtors and other assets
Bank balances and cash
Creditors and other liabilities
Borrowings and lease liabilities
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
Less: Advance payments received in prior year
Less: Bank balances and cash disposed
Less: Proceeds receivables
Cash inflow on disposal
2019
$’000
(80,973)
-
(4,433)
(95,065)
(17,350)
(26,053)
41,357
6,713
1,891
50,099
2018
$’000
(4,272)
(948,613)
-
(692,651)
(7,939)
(39,194)
446,973
171,380
139,863
210,166
(123,814)
(724,287)
26,984
(96,930)
(64,469)
(7,335)
-
(724,287)
(604,638)
(7,575)
(168,634)
(1,336,500)
-
26,053
115,464
174,538
39,194
37,097
(27,117)
(1,085,671)
During the year, disposal relates to the sale of 70% interest in Dong Nai Waterfront City LLC, Keppel Logistics (Foshan Sanshui Port) Company
Ltd and Keppel Logistics (Hong Kong) Ltd.
Significant disposal in the prior 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.
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
2019
$’000
2018
$’000
1,783,514
1,981,406
(6,270)
(9,562)
1,777,244
1,971,844
The accompanying notes form an integral part of these financial statements.
Keppel Corporation Limited
Report to Shareholders 2019
137
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 31 December 2019
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;
investments and asset management; and
telecommunications services, international call services and fixed services, retail sales of telecommunications equipment and
accessories, as well as customer services.
The financial statements of the Group for the financial year ended 31 December 2019 and the balance sheet and statement of changes
in equity of the Company at 31 December 2019 were authorised for issue in accordance with a resolution of the Board of Directors on
27 February 2020.
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, 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 New and Revised Standards
The Group adopted the new/revised SFRS(I)s, SFRS (I) Interpretations and amendments to SFRS(I)s that are effective for annual
periods beginning on or after 1 January 2019. Changes to the Group’s accounting policies have been made as required, in accordance
with the transitional provisions in the respective SFRS(I)s, SFRS (I) Interpretations and amendments to SFRS(I)s.
The following are the new or amended SFRS(I)s, SFRS (I) Interpretations and amendments to SFRS(I)s, that are relevant to the Group:
•
•
•
•
•
•
•
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 capitalisation
The adoption of the above new or amended SFRS(I)s, SFRS (I) Interpretations and amendments to SFRS(I)s did not have any
significant impact on the financial statements of the Group except for the adoption of SFRS(I) 16 Leases and Amendments to SFRS (I)
1-23 Borrowing costs eligible for capitalisation.
Adoption of SFRS(I) 16
SFRS(I) 16 is effective for financial years beginning on or after 1 January 2019. Adoption of SFRS(I) 16 has resulted in almost all leases
being recognised on the balance sheet, as the distinction between operating and finance leases is removed. Prior to the adoption of
SFRS(I) 16, non-cancellable operating lease payments were not recognised as liabilities in the balance sheet. These payments were
recognised as rental expenses over the lease term on a straight-line basis. Following the adoption, 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 has not changed significantly.
Lease liabilities are included as part of net debt and are taken into consideration when deriving the net gearing ratio.
The Group’s accounting policy on leases after adoption of SFRS(I) 16 is as disclosed in Note 2.18.
On initial application of SFRS(I) 16, the Group has elected to apply the following practical expedients:
i)
For all contracts entered into before 1 January 2019 and that were previously identified as leases under SFRS(I) 1-17 Lease and
SFRS(I) INT 4 Determining whether an Arrangement contains a Leases, the Group has not reassessed if such contracts contain
leases under SFRS(I) 16; and
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Keppel Corporation Limited
FINANCIAL REPORT
ii)
On a lease-by-lease basis, the Group has:
a)
b)
c)
d)
e)
Applied a single discount rate to a portfolio of leases with reasonably similar characteristics;
Relied on previous assessments on whether leases are onerous as an alternative to performing an impairment review;
Accounted for operating leases with a remaining lease term of less than 12 months as at 1 January 2019 as short-term
leases;
Excluded initial direct costs in the measurement of the right-of-use (“ROU”) asset at the date of initial application; and
Used hindsight in determining the lease term where the contract contains options to extend or terminate the lease.
There were no onerous contracts as at 1 January 2019.
For leases previously classified as operating leases on 1 January 2019, the Group has applied the following transition provisions:
i)
On a lease-by-lease basis, the Group chose to measure its ROU assets (except for ROU assets which meet the definition
of investment property) at a carrying amount as if SFRS(I) 16 had been applied since the commencement of the lease but
discounted using the incremental borrowing rate at 1 January 2019. For ROU assets which meet the definition of an investment
property, the Group had measured the ROU assets at their fair values at 1 January 2019.
ii)
The difference between carrying amounts of the ROU assets and lease liabilities as at 1 January 2019 is adjusted directly to
opening retained profits. Comparative information is not restated.
For leases previously classified as finance leases, the carrying amount of the leased asset and finance lease liability as at 1 January
2019 are determined as the carrying amount of the ROU assets and lease liabilities.
There are no material changes to accounting by the Group as a lessor.
The adoption of SFRS(I) 16 resulted in adjustments to the balance sheet of the Group as at 1 January 2019. The differences from the
balance sheet as previously reported at 31 December 2018 are as follows:
Group Balance Sheets
Increase in right-of-use assets
Increase in investment properties
Decrease in fixed assets
Decrease in debtors
Increase in lease liabilities
Decrease in creditors
Increase in deferred tax assets
Decrease in net assets
Decrease in revenue reserves
Decrease in non-controlling interests
Decrease in total equity
01.01.2019
$’000
592,126
5,765
(127,120)
(14,213)
(573,363)
14,687
21,120
(80,998)
(78,201)
(2,797)
(80,998)
The difference between the operating lease commitments previously disclosed in the Group’s financial statements as at 31 December
2018 of $909,035,000 and the lease liabilities recognised in the balance sheet as at 1 January 2019 of $573,363,000, was due mainly to
the discounting effect using weighted average incremental borrowing rate of $316,532,000, the committed non-cancellable leases with
lease terms commencing after 1 January 2019 of $39,352,000 and other adjustments of $1,501,000, partially offset by adjustments
relating to changes in the index or rate affecting variable payments of $21,713,000.
The weighted average lessee’s incremental borrowing rate applied to the lease liabilities recognised in the balance sheet on 1 January
2019 ranges from 1.5% to 12.8% per annum.
Clarification on SFRS(I) 1-23 Borrowing Costs
In 2018, the International Financial Reporting Standards Interpretations Committee (“Interpretations Committee”), which works with
the International Accounting Standards Board in supporting the application of IFRS Standards, received a submission on whether a
real estate developer capitalises borrowing costs as part of the cost of units for a residential multi-unit real estate development, for
which the developer recognises revenue over time for the sale of individual units in the development based on IFRS 15 Revenue from
Contracts with Customers.
In November 2018, the Committee issued a Tentative Agenda Decision containing explanatory material for the decision and how
the applicable principles and requirements in IAS 23 Borrowing Costs apply to the fact pattern in the submission. The Interpretations
Committee tentatively concluded that such an entity should not capitalised borrowing costs. This tentative agenda decision was
finalised in its original form on 20 March 2019.
Keppel Corporation Limited
Report to Shareholders 2019
139
NOTES TO THE FINANCIAL STATEMENTS
2.
Significant accounting policies (continued)
As the financial reporting framework applied by the Group is equivalent to International Financial Reporting Standards, the agenda
decision has relevant impact to the Group’s Property Division. Following this Agenda Decision, borrowing costs on portion of property
where control is capable of being transferred to customers are expensed off as incurred to the profit and loss account. Borrowing
costs on the portion of the property not ready for transfer of control to customers are capitalised until the time when control is capable
of being transferred to customers. As this constitutes a change in accounting policy, comparatives were restated accordingly.
Impact on the comparatives for the 31 December 2019 Financial Statements
The financial effects of the change in accounting policy:
Group Profit and Loss Account
Decrease in materials & subcontract costs
Increase in interest expenses
Decrease in share of results of associated companies
Increase in taxation
Increase in profit for the period attributable to
shareholders of the Company
Increase in basic EPS
Increase in diluted EPS
Group Balance Sheets
Decrease in associated companies
Decrease in stocks
Decrease in deferred taxation
Decrease in net assets
Decrease in revenue reserves
Decrease in total equity
31.12.2018
$’000
12,596
(6,381)
(623)
(1,029)
4,563
0.3 cts
0.3 cts
31.12.2018
$’000
01.01.2018
$’000
(632)
(18,102)
8,286
(10,448)
(9)
(24,317)
9,315
(15,011)
(10,448)
(15,011)
(10,448)
(15,011)
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.
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.
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FINANCIAL REPORT
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
Buildings on leasehold land
Vessels & floating docks
Plant, machinery & equipment
Networks and related application systems
Furniture, fittings & office equipment
Cranes
Small equipment and tools
20 to 50 years
Over period of lease (ranging from 10 to 50 years)
10 to 30 years
3 to 30 years
5 to 25 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 and right-of-use assets relating to leasehold land that is held for long term capital appreciation or for a currently
indeterminate use. 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.
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.
Keppel Corporation Limited
Report to Shareholders 2019
141
NOTES TO THE FINANCIAL STATEMENTS
2.
Significant accounting policies (continued)
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 consolidated statement of 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.
Spectrum Rights
These comprise expenditure relating to one-time charges paid to acquire spectrum rights and telecommunications licenses or access
codes. These intangible assets are measured initially at cost and subsequently carried at cost less any accumulated amortisation and
any accumulated impairment losses. Spectrum rights are amortised on a straight-line basis over the estimated economic useful life of
4 to 17 years.
Brand
The brand was acquired as part of a business combination completed during the financial year. The brand value will be amortised over
the useful life which is estimated to be 30 years based on the purchase price allocation exercise finalised during the year.
Customer Contracts and Customer Relationships
Customer contracts and customer relationships are identified and recognised separately from goodwill. The cost of customer
contracts and relationships is at their fair value at the acquisition date and subsequently carried at cost less accumulated amortisation
and accumulated impairment losses. 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 2 to 20 years.
Other Intangible Assets
Other intangible assets include development expenditure and internet protocol (IP) address, 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.
Other intangible assets also include management rights which is initially recognised at cost upon acquisition 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.
2.9 Service Concession Arrangement
The Group has an existing 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.
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Keppel Corporation Limited
FINANCIAL REPORT
2.10 Investments
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.
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 objectives 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 (excluding prepayments) 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
which are subject to an insignificant risk of change 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.
Keppel Corporation Limited
Report to Shareholders 2019
143
NOTES TO THE FINANCIAL STATEMENTS
2.
Significant accounting policies (continued)
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 or over the period of the contract, 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.
2.15 Impairment of Assets
Financial Assets
The Group assesses on a forward looking basis the expected credit losses associated with its debt financial assets carried at amortised
cost and fair value through other comprehensive income. The impairment methodology applied depends on whether there has been a
significant increase in credit risk. Note 34 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, the 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.
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.
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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
(i)
Before 1 January 2019
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.
(ii)
From 1 January 2019
When a group company is the lessee
At the inception of the contract, the Group assesses if the contract contains a lease. A contract contains a lease if the contract convey
the right to control the use of an identified asset for a period of time in exchange for consideration. Reassessment is only required
when the terms and conditions of the contract are changed.
Right-of-use assets
The Group recognises a right-of-use asset and lease liability at the date which the underlying asset is available for use. Right-of-use
assets are measured at cost which comprises the initial measurement of lease liabilities adjusted for any lease payments made at or
before the commencement date and lease incentive received. Any initial direct costs that would not have been incurred if the lease
had not been obtained are added to the carrying amount of the right-of-use assets. The right-of-use asset is subsequently depreciated
using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the
end of the lease term.
Right-of-use assets (except for those which meets the definition of an investment property) are presented as a separate line on the
balance sheets. Right-of-use assets which meets the definition of an investment property is presented within “Investment properties”
and accounted for in accordance with Note 2.5.
Lease liabilities
The initial measurement of lease liability is measured at the present value of the lease payments discounted using the implicit rate in
the lease, if the rate can be readily determined. If that rate cannot be readily determined, the Group uses its incremental borrowing rate.
Lease payments include the following:
-
-
Fixed payment (including in-substance fixed payments), less any lease incentives receivables;
Variable lease payment that are based on an index or rate, initially measured using the index or rate as at the commencement
date;
Amount expected to be payable under residual value guarantees;
The exercise price of a purchase option, if is reasonably certain to exercise the option; and
Payment of penalties for terminating the lease, if the lease term reflects the Group exercising that option.
-
-
-
For contract that contain both lease and non-lease components, the Group allocates the consideration to each lease component on the
basis of the relative stand-alone price of the lease and non-lease component.
Lease liabilities are presented as a separate line on the balance sheets.
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2.
Significant accounting policies (continued)
Lease liability is measured at amortised cost using the effective interest method. Lease liability shall be remeasured when:
-
-
-
There is a change in future lease payments arising from changes in an index or rate;
There is a change in the Group’s assessment of whether it will exercise an extension option; or
There is a modification in the scope or the consideration of the lease that was not part of the original term.
Lease liability is remeasured with a corresponding adjustment to the right-of-use asset, or is recorded in profit or loss if the carrying
amount of the right-of-use asset has been reduced to zero.
Short term and low value leases
The Group has elected to not recognise right-of-use assets and lease liabilities for short-term leases that have lease terms of 12
months or less and low value leases. Lease payments relating to these leases are expensed to profit or loss on a straight-line basis
over the lease term.
Variable lease payments
Variable lease payments that are not based on an index or a rate are not included as part of the measurement and initial recognition
of the lease liability. The Group recognises these lease payments in profit or loss in the periods that triggered such lease payments.
Details of the variable lease payments are disclosed in Note 8.
When a group company is the lessor
Operating leases
The accounting policy applicable to the Group as a lessor in the comparative period was the same under SFRS(I) 16.
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.
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 based on the estimation of the
physical proportion of the contract work completed for the contracts with reference to 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.
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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, operations and maintenance under service
concession arrangements, and telecommunication services is recognised over the period in which the services are rendered, by
reference to completion of the specific transaction assessed on the basis of the actual services provided as a proportion of the total
services to be performed.
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.
Rental income from operating leases on investment properties is 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.
For Singapore trading properties which the Group recognises revenue over time, borrowing costs on the portion of the property
not ready for transfer of control to the purchasers are capitalised until the time when control is capable of being transferred to the
purchasers.
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.
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NOTES TO THE FINANCIAL STATEMENTS
2.
Significant accounting policies (continued)
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 associated company 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 associated companies 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.
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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 49% (2018: approximately 47%) gross ownership interest of units in Keppel REIT as at 31
December 2019. 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 Limited
The Group has approximately 40% gross ownership interest of shares in KrisEnergy Limited (“KrisEnergy”) as at 31 December
2019. The management assessed whether 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% interest held by two other
shareholders 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) Acquisition of M1 Limited – purchase price allocation (“PPA”)
Accounting of business combinations requires the purchase consideration to be allocated to the fair value of the identifiable
assets acquired and liabilities assumed at their fair values, with the unallocated portion being recognised as goodwill. The Group
makes judgments on the identification of assets acquired and liabilities assumed and significant estimates in relation to the fair
valuation of these identifiable assets and liabilities. The result of the purchase price allocation exercise is disclosed in Note 36.
(iii) 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 debt investments measured at fair value through other comprehensive income (“FVOCI”). The
impairment methodology applied depends on whether there has been a significant increase in credit risk. Note 34 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.
The carrying amounts of trade, intercompany and other receivables, and financial assets at FVOCI are disclosed in the balance
sheet.
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NOTES TO THE FINANCIAL STATEMENTS
2.
Significant accounting policies (continued)
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. In October 2019, the Settlement
Agreement as well as the winning bid proposal for Magni Partners (Bermuda) Ltd (“Magni”) to purchase four Sete subsidiaries,
two of which are special-purpose entities (“SPEs”) for uncompleted rigs constructed by the Group, was approved by the
creditors. As part of the Settlement Agreement, which is subject to fulfilment of certain conditions precedent, the Group will take
over ownership of remaining four uncompleted rigs and will be able to explore various options to extract the best value from
these assets. The EPC Contracts and related agreements entered into in relation to these four rigs will be deemed to be amicably
terminated, with no penalties, refunds and/or any additional amounts being due to any party, and the parties will waive all rights
to any claims. The Group has a receivable of approximately US$260 million from Sete and this amount has been included in
Sete’s court-approved Judicial Reorganisation Plan. The outstanding amount will be paid to the Group proportionally and pari
passu with other creditors of Sete as part of, and out of proceeds of, its Judicial Reorganisation Plan.
Management has performed an assessment to estimate the cost of discontinuance of related agreements of the EPC contracts,
offset by possible options in extracting value from the uncompleted rigs and possible payout from the Judicial Reorganisation
Plan. In addition, management has estimated the net present value of the cash flows relating to the impending construction
contract for two rigs with Magni.
Arising from the above assessment, management is of the opinion that the loss allowance for trade debtors of $183,000,000
(Note 12) (2018: $183,000,000) and the provision for related contract costs of $245,000,000 (Note 20) (2018: $245,000,000) are
adequate to address the cost of discontinuance, salvage cost and unpaid progress billings relating to these EPC contracts.
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 (2018:
$476,000,000).
Other contracts
As at 31 December 2019, 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 15 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 ECL 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 dayrates and discount
rates.
During the financial year ended 31 December 2019, no further (2018: $21,000,000) ECL on contract assets was recognised.
Impairment of non-financial assets
Determining whether the carrying value of a non-financial asset is impaired requires an estimation of the value in use of the
CGUs. This requires the Group to estimate the future cash flows expected from the 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 associated companies and joint ventures, and intangibles are disclosed in the balance sheet.
Management performed impairment tests on these non-financial assets as at 31 December 2019. Refer to Notes 6, 9, 10 and 13
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 and significant judgment is 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. 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 24.
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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.
Civil action by EIG funds
In February 2018, the Company’s subsidiary, Keppel Offshore & Marine Ltd (“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, 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.
Global resolution with criminal authorities in relation to corrupt payments
In 2017, KOM reached a global resolution with the criminal authorities in the United States of America, Brazil and Singapore in
relation to corrupt payments made in relation to KOM’s various projects with Petrobras and Sete Brasil in Brazil, which were
made with knowledge or approval of former KOM executives. Fines in an aggregate amount of US$422,216,980, or equivalent to
approximately S$570 million, paid/payable had been allocated between the three jurisdictions.
As part of the global resolution, KOM 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, entered into a Leniency Agreement with the Public Prosecutor’s
Office in Brazil, the Ministerio Publico Federal (“MPF”) which became effective following the approval of the Fifth Chamber for
Coordination and Review of the MPF in April 2018. In addition, Keppel Offshore & Marine USA, Inc (“KOM USA”), also a wholly
owned subsidiary of KOM, pleaded guilty to one count of conspiracy to violate the U.S. Foreign Corrupt Practices Act and entered
into a Plea Agreement with the DOJ.
Pursuant to the DPA, KOM paid a monetary penalty of US$105,554,245, of which US$4,725,000 was paid as a criminal fine by
KOM USA, to the United States Treasury in 2018. In addition, KOM paid a monetary penalty of US$211,108,490 to MPF and a
monetary penalty of US$52,777,122.50 to CPIB in 2018. A further US$52,777,122.50, which amount payable has been included
as accrued expenses since FY2017, will be payable to CPIB within three years (or an extended period as approved by CPIB and
DOJ) from the date of the Conditional Warning (less any penalties that KOM may pay to specified Brazilian authorities during this
period, for which discussions with the specified authorities are ongoing).
As part of the global resolution with the authorities, the Group had also 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. As of the date of these
financial statements, KOM entities in Singapore, Brazil, Bulgaria, China, India, Philippines, UAE and USA had secured certification
of the ISO 37001 Anti-Bribery Management System.
Anti-bribery and corruption compliance audits were also performed on entities within the KOM Group. These audits revealed
enhanced policies and procedures put in place to-date were, in general, functioning as intended. The audits performed in 2018
had, however, identified certain matters relating to contracts entered into several years ago which required follow-up actions and
further review. The follow-up actions and further reviews were concluded in 2019.
Based on currently available information, management is of the opinion that no additional provision is required.
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NOTES TO THE FINANCIAL STATEMENTS
2.
Significant accounting policies (continued)
Useful lives of network and related application systems
The cost of network and related application systems is depreciated on a straight-line basis over the assets’ estimated economic
useful lives. Management estimated the useful lives of these fixed assets to be within 5 to 25 years. These are common
life expectancies applied in the telecommunications industry. Changes in the expected level of usage and technological
developments could impact the economic useful life and the residual values of these assets, therefore, future depreciation
charges could be revised. The carrying amounts of the Group’s network and related application systems at the end of the
reporting period are disclosed in Note 6 to the financial statements.
Revaluation of investment properties
The Group carries its investment properties at fair value with changes in fair value being recognised in profit and loss account.
In determining fair values, the valuers have used valuation techniques which involve certain estimates. The key assumptions to
determine the fair value of investment properties include market-corroborated capitalisation rate, terminal yield and discount
rate.
In relying on the valuation reports, management has exercised its judgment to ensure that the valuation methods and estimates
are reflective of current market conditions. The carrying amount of investment properties and the key assumptions used to
determine the fair value of the investment properties are disclosed in Notes 7 and 34.
Estimating net realisable value of stocks
The net realisable value of stocks represent the estimated selling price for these stocks less all estimated cost of completion
and costs necessary to make the sale.
For construction projects under work-in-progress, the Group determines the estimated selling price based on recent sale
transactions for similar assets or discounted cash flow models where recent sale transactions for similar assets were not
available. For properties held for sale, provision 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.
The Group has stocks (work-in-progress) amounting to $598,800,000 (after a provision of $50,000,000 made in prior year) (Note
14). The carrying amount represented the estimated net realisable value of the stocks. Management has determined the NRV of
the stocks based on arrangements to market the asset and a DCF model.
3.
Share capital
Group and Company
Number of Ordinary Shares (“Shares”)
Issued Share Capital
Treasury Shares
2019
2018
2019
2018
Balance at 1 January
1,818,394,180
1,818,334,180
(5,936,044)
(10,788)
Issue of shares under the share option scheme
Treasury shares transferred pursuant to
share option scheme
Treasury shares transferred pursuant to share plans
Treasury shares purchased
Balance at 31 December
-
-
-
-
60,000
-
-
-
-
-
44,000
4,647,308
731,500
4,643,244
(770,000)
(11,300,000)
1,818,394,180
1,818,394,180
(2,014,736)
(5,936,044)
Balance at 1 January
1,291,722
1,291,310
(45,073)
Amount ($’000)
Issued Share Capital
Treasury Shares
2019
2018
2019
Issue of shares under the share option scheme
Treasury shares transferred pursuant to
share option scheme
Treasury shares transferred pursuant to share plans
Treasury shares purchased
Balance at 31 December
-
-
-
-
412
-
-
-
-
334
35,273
(4,543)
(14,009)
1,291,722
1,291,722
2018
(74)
-
6,253
39,506
(90,758)
(45,073)
Fully paid ordinary shares, which have no par value, carry one vote per share and carry a right to dividends declared by the Company.
In the prior year, the Company issued 60,000 Shares at an average weighted price of $6.86 per Share for cash upon exercise of options
under the KCL Share Option Scheme.
152
Report to Shareholders 2019
Keppel Corporation Limited
FINANCIAL REPORT
During the financial year, 4,266,708 (2018: 4,643,244) Shares under the KCL Restricted Share Plan (“KCL RSP”) and 380,600 (2018: Nil)
Shares under the KCL Performance Share Plan (“KCL PSP”) were vested.
During the financial year, the Company transferred 4,691,308 (2018: 5,374,744) treasury shares to employees under vesting of Shares
released under the KCL Share Option Scheme and KCL Share Plans. The Company also purchased 770,000 (2018: 11,300,000) treasury
shares in the Company in the open market during the financial year. The total amount paid was $4,543,000 (2018: $90,758,000). Except
for the transfer, there was no other sale, disposal, cancellation and/or use of treasury shares during the financial year.
KCL Share Option Scheme
The KCL Share Option Scheme (“Scheme”), which has been approved by the shareholders of the Company, is administered by the
Remuneration Committee whose members are:
Till Bernhard Vestring (Chairman)
Lee Boon Yang
Danny Teoh
Teo Siong Seng (appointed on 1 February 2020)
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
2019
2018
Number of
options
1,890,185
(44,000)
(935,285)
910,900
Weighted
average
exercise
price
$6.74
$3.07
$6.77
$6.89
Number of
options
6,088,785
(791,500)
(3,407,100)
1,890,185
Exercisable at 31 December
910,900
$6.89
1,890,185
Weighted
average
exercise
price
$7.83
$7.25
$8.57
$6.74
$6.74
The weighted average share price at the date of exercise for options exercised during the financial year was $6.03 (2018: $8.15). The
options outstanding at the end of the financial year had a weighted average exercise price of $6.89 (2018: $6.74) and a weighted
average remaining contractual life of 0.1 year (2018: 0.9 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 2019
153
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
-
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
(c) Relative Total
Shareholder’s Return to
MSCI Asia Pacific Ex-
Japan Industrials Index
(MXAPJIN)
(a) Absolute Total
Shareholder’s Return
(b) Corporate Scorecard
Achievement comprising
pre-determined stretched
financial and non-
financial targets for the
Group
(2016 awards)
(c) Individual Performance
Achievement
(a) Absolute Total
Shareholder’s Return
(b) Return on Capital
Employed
(c) Net Profit
(2017, 2018 and 2019
awards)
Final Award
0% to 100% of the contingent
award granted, depending
on achievement of pre-
determined targets
100% of the awards granted
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
Vesting
Condition
and Schedule
If pre-determined targets
are achieved, awards will
vest equally over three years
subject to fulfilment of
service requirements
Awards will vest equally
over three years subject
to fulfilment of service
requirements
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:
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
2019
2018
KCL RSP-
Deferred
Shares
KCL PSP
KCL PSP-TIP
KCL RSP
KCL PSP
KCL PSP-TIP
-
4,234,171
-
(4,234,171)
2,895,000
1,635,000
(264,400)
(380,600)
5,965,967
-
-
-
-
4,099,369
2,525,000
1,180,000
-
(575,000)
(4,097,507)
-
6,747,491
-
-
-
-
-
-
(380,000)
(1,862)
(235,000)
(781,524)
3,885,000
5,585,967
-
2,895,000
5,965,967
2019
2018
KCL RSP
KCL RSP-
Deferred
Shares
KCL RSP
KCL RSP-
Deferred
Shares
1,630,118
-
2,586,237
4,234,171
5,102,365
-
-
4,097,507
(1,565,032)
(2,701,676)
(3,278,043)
(1,365,201)
(38,845)
(203,511)
-
(2,657)
(178,604)
(15,600)
(111,969)
(34,100)
26,241
3,912,564
1,630,118
2,586,237
154
Report to Shareholders 2019
Keppel Corporation Limited
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 2019, there were 26,241 (2018: 1,630,118) Shares under the KCL RSP and 3,912,564 (2018: 2,586,237) Shares
under the KCL RSP-Deferred Shares that were released but not vested. At the end of the financial year, the number of contingent award
of Shares granted but not released was 3,885,000 (2018: 2,895,000) under the KCL PSP and 5,585,967 (2018: 5,965,967) 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 5,827,500 under the KCL PSP and zero to a maximum of 8,378,951 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 15 February 2019 and 18 April 2019 (2018: 23 February 2018), the Company granted awards of 3,908,536 and 325,635 (2018:
4,099,369) Shares respectively under the KCL RSP-Deferred Shares and the estimated fair values of the Shares granted were $5.84 and
$6.51 respectively (2018: $7.76). On 30 April 2019 (2018: 30 April 2018), the Company granted contingent awards of 1,635,000 (2018:
1,180,000) Shares under the KCL PSP and the estimated fair value of the Shares granted was $5.60 (2018: $6.59).
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
*
Expected dividend yield is based on management’s forecast.
2019
KCL RSP-
Deferred Shares
KCL RSP-
Deferred Shares
KCL PSP
15.02.2019
18.04.2019
30.04.2019
$6.08
21.29%
$6.74
21.24%
$6.77
21.29%
0.00 - 2.00 years
0.00 - 1.86 years
2.84 years
1.94% - 1.95%
1.90% - 1.93%
*
*
1.92%
*
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%
*
2.05%
*
The expected volatilities are based on the historical volatilities of the Company’s share 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.
Keppel Corporation Limited
Report to Shareholders 2019
155
NOTES TO THE FINANCIAL STATEMENTS
4.
Reserves
Capital reserves
Share option and share plan reserve
Fair value reserve
Hedging reserve
Bonus issue by subsidiaries
Others
Revenue reserves
Foreign exchange
translation account
Group
Company
31 December
1 January
31 December
2019
$’000
2018
$’000
2018
$’000
2019
$’000
2018
$’000
1 January
2018
$’000
210,412
(17,300)
203,926
69,700
202,048
100,227
187,032
19,230
177,529
16,957
177,599
15,012
(192,864)
(198,816)
(111,930)
40,000
85,851
126,099
40,000
80,133
194,943
40,000
52,120
282,465
-
-
-
-
-
-
(1,150)
205,112
7,655
202,141
16,895
209,506
10,470,627
10,319,839
9,942,340
6,567,206
6,194,448
6,132,150
(663,586)
(493,669)
(323,556)
-
-
-
9,933,140
10,021,113
9,901,249
6,772,318
6,396,589
6,341,656
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
2019
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
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
(27,498)
7,474
(18,628)
(84,976)
(152,690)
(13,659)
(198,816)
(91,161)
18,700
(2,301)
(8,274)
-
1,213
261
-
-
-
34,479
(20,111)
-
-
73,146
-
-
-
-
18,700
70,845
(8,274)
34,479
(18,898)
261
(10,425)
(89,236)
(93,203)
(192,864)
(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 recognised in profit or loss. Fair value loss arising from hedge ineffectiveness for cash flow hedges of
$15,877,000 (2018: $16,513,000) was recognised in profit or loss during the year.
156
Report to Shareholders 2019
Keppel Corporation Limited
FINANCIAL REPORT
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
Konnectivity Pte. Ltd.
Beijing Aether Property
Development Limited
Keppel Telecommunications &
Transportation Ltd
Other subsidiaries with
immaterial NCI
2019
$’000
20%
-
-
2018
$’000
2018
$’000
2019
$’000
2018
$’000
-
310,858
-
-
49%
-
-
2018
$’000
-
2019
$’000
9,308
2018
$’000
-
199,716
-
(277)
-
-
21%
21%
184,067
174,572
739
12,728
124,320
124,863
155,682
44,116
(135)
Total
435,178
308,930
529,970
54,163
12,316
Summarised financial information before inter-group elimination
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Net assets
Less: NCI
Revenue
Profit for the year
Total comprehensive income
Net cash flow from operations
Total comprehensive income allocated to NCI
Dividends paid to NCI
Konnectivity Pte. Ltd.
31 December
Keppel
Telecommunications
& Transportation
Ltd (1)
31 December
2019
$’000
2,433,048
488,817
481,089
508,007
1,932,769
(378,477)
1,554,292
950,002
62,306
77,305
194,903
11,729
8,900
2018
$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
2018
$’000
1,360,166
326,630
490,930
194,919
1,000,947
(115,160)
885,787
183,223
69,236
61,326
4,123
11,387
6,804
(1) During the financial year, the Group acquired all non-controlling interest in Keppel Telecommunications & Transportation Ltd, bringing the Group’s ownership to
100%.
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
2019
$’000
(223,617)
173,390
2018
$’000
(9,758)
1,426
(50,227)
(8,332)
Keppel Corporation Limited
Report to Shareholders 2019
157
NOTES TO THE FINANCIAL STATEMENTS
Freehold
Land &
Buildings
$’000
Buildings on
Leasehold
Land
$’000
Vessels &
Floating
Docks
$’000
Networks
and Related
Application
Systems
$’000
Plant,
Machinery,
Equipment
& Others (1)
$’000
Capital
Work-in-
Progress
$’000
Total
$’000
6.
Fixed assets
Group
2019
Cost
At 1 January
Adoption of SFRS(I) 16
Additions
Disposals
Write-off
Subsidiaries acquired
Subsidiaries disposed
Reclassification
Accumulated Depreciation
At 1 January
Adoption of SFRS(I) 16
Depreciation charge
Disposals
Impairment
Write-off
Subsidiaries disposed
Reclassification
114,301
2,054,952
355,159
-
(177,261)
247
(165)
-
-
-
5,723
(2,549)
(120)
73,042
(102,844)
-
333
-
-
2,037,569
347,618
4,909,599
-
-
(177,261)
57,575
76,791
71,322
211,991
(393)
(11,069)
(24,388)
(16)
(38,580)
-
-
-
-
-
(3,883)
-
(4,003)
546,496
103,805
49,311
772,654
-
-
(31,349)
(200)
(134,393)
-
-
58,764
184,778
52,961
17,359
(327,842)
-
-
Investment properties
- Other fixed assets categories
-
210
58,764
72,534
Exchange differences
198
(13,430)
(6,273)
-
(13,786)
(2,621)
(35,912)
At 31 December
114,791
1,968,811
533,604
645,963
2,162,118
137,572
5,562,859
62,927
906,189
151,155
-
(50,141)
3,167
(160)
-
-
-
54,820
(1,627)
7,456
(120)
(30,597)
-
12,097
(393)
-
-
-
-
(2,982)
-
-
68,606
(5,130)
-
-
-
-
-
1,369,949
46,819
2,537,039
-
127,315
(22,287)
893
(3,875)
(22,823)
(2,222)
(6,110)
-
-
-
75
-
-
-
(50,141)
266,005
(29,597)
8,424
(3,995)
(53,420)
-
(448)
(13,301)
- Other fixed assets categories
Exchange differences
(135)
236
2,357
(3,997)
At 31 December
Net Book Value
66,035
884,340
159,877
63,476
1,440,840
46,446
2,661,014
48,756
1,084,471
373,727
582,487
721,278
91,126
2,901,845
Included in freehold land & buildings are freehold land amounting to $7,295,000 (31 December 2018: $7,812,000, 1 January 2018:
$8,726,000).
Certain fixed assets with carrying amount of $123,940,000 (31 December 2018: $159,996,000, 1 January 2018: $155,748,000) are
mortgaged to banks for loan facilities (Note 22).
Interest capitalised during the financial year amounted to $436,000 (2018: $2,009,000).
Each rigbuilding, shipbuilding and repair facilities in the Offshore & Marine Division has been identified as individual 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 2018: 6% to 11%, 1 January 2018: 6% to 13%) per annum, depending on the location of the facilities.
During the year, the Group recognised an impairment loss of $4,910,000 for fixed assets in the Property Division in China, which was
based on the difference between the recoverable amount and the net book value of the fixed assets. The recoverable amount was
based on fair value determined using the income approach.
The Group also recognised an impairment loss of $3,514,000 on certain buildings and equipment in the Infrastructure Division in China,
due to lower recoverable amounts subsequent to sustained losses generated from these assets, as a result of weaker economic
outlook which adversely affected fair values and expected returns of these assets. The recoverable amounts were assessed to be fair
value less costs of disposal.
158
Report to Shareholders 2019
Keppel Corporation Limited
FINANCIAL REPORT
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
115,711
202
(18)
-
-
-
-
812
(2,406)
2,068,595
1,269
(7,946)
-
-
-
-
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)
(319)
30,693
(22,342)
368,501
104,134
-
(4,388)
-
(557)
-
(116,716)
(3,356)
Total
$’000
4,860,976
160,412
(49,057)
(10,572)
47
(6,349)
(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)
-
-
10
(5,915)
139,400
9,667
(8,234)
-
(979)
12,410
(1,109)
1,303,505
110,111
(30,262)
(3,661)
(1,098)
59,787
-
-
-
-
2,428,013
177,699
(45,988)
(3,661)
(2,077)
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
(1) Others comprise furniture, fittings and office equipment, cranes and small equipment and tools.
Company
2019
Cost
At 1 January
Additions
Disposals
Reclassification to other fixed asset categories
At 31 December
Accumulated Depreciation
At 1 January
Depreciation charge
Disposals
At 31 December
Net Book Value
2018
Cost
At 1 January
Additions
Disposals
At 31 December
Accumulated Depreciation
At 1 January
Depreciation charge
Disposals
At 31 December
Net Book Value
Freehold
Land &
Buildings
$’000
Plant,
Machinery,
Equipment
& Others (2)
$’000
Capital
Work-in-
Progress
$’000
1,233
-
-
-
1,233
1,233
-
-
1,233
-
1,233
-
-
1,233
1,231
2
-
1,233
-
8,791
2,617
(9)
6,139
17,538
8,254
2,020
(9)
10,265
7,273
8,693
550
(452)
8,791
8,399
307
(452)
8,254
537
6,139
-
-
(6,139)
-
-
-
-
-
-
-
6,139
-
6,139
-
-
-
-
6,139
Total
$’000
16,163
2,617
(9)
-
18,771
9,487
2,020
(9)
11,498
7,273
9,926
6,689
(452)
16,163
9,630
309
(452)
9,487
6,676
(2) Others comprise furniture, fittings and office equipment.
Keppel Corporation Limited
Report to Shareholders 2019
159
NOTES TO THE FINANCIAL STATEMENTS
7.
Investment properties
At 1 January
Adoption of SFRS(I) 16
Development expenditure
Fair value gain (Note 26)
Disposal
Subsidiary acquired
Subsidiary disposed
Reclassification
- Stocks (Note 14)
- Fixed assets (Note 6)
- Right-of-use assets (Note 8)
Exchange differences
At 31 December
Group
31 December
2019
$’000
2018
$’000
2,851,380
3,460,608
5,765
304,803
101,020
(834)
-
-
-
(58,764)
(158,357)
(22,922)
-
94,099
84,886
(2,870)
360,000
(948,613)
(158,300)
-
-
(38,430)
3,022,091
2,851,380
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 2019:
-
-
-
-
-
-
Savills Valuation and Professional Services (S) Pte Ltd and Knight Frank Pte Ltd for properties in Singapore;
Cushman & Wakefield Valuation Advisory Services (HK) Limited and Vincorn Consulting and Appraisal Limited for properties in
China;
Savills Vietnam Co. Ltd for properties in Vietnam;
Cushman & Wakefield VOF 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 within development expenditure during the financial year amounted to $12,751,000 (2018: $3,408,000).
The Group has mortgaged certain investment properties of up to an aggregate amount of $828,355,000 (31 December 2018:
$905,656,000, 1 January 2018: $552,684,000) to banks for loan facilities (Note 22).
In 2019, the Group reclassified from investment properties to fixed assets and right-of-use assets for the owner-occupied portion of the
property amounting to $58,764,000 and $158,357,000 respectively.
In 2018, 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.
8.
Right-of-use assets (leases)
Leases
The Group as lessee
Leasehold land & building
The Group leases several lands, offices, retail stores and shipyards for use in its operations.
Plant, machinery, equipment & others
The Group leases equipment and vehicles for office and operation use, mainly in the Offshore & Marine and Infrastructure Divisions.
Base station sites
The Group leases base station sites to facilitate transmission of telecommunication services.
There are no externally imposed covenants on these lease arrangements.
160
Report to Shareholders 2019
Keppel Corporation Limited
FINANCIAL REPORT
Right-of-use assets
Group
2019
Net Book Value
At 1 January
Adoption of SFRS(I) 16
Additions
Depreciation
Subsidiaries acquired
Subsidiaries disposed
Reclassification
-
Investment properties (Note 7)
Exchange differences
Leasehold
Land &
Buildings
$’000
Plant,
Machinery,
Equipment
& Others (1)
$’000
-
583,181
43,522
(55,054)
24,101
(4,433)
158,357
(14,326)
-
8,945
3,669
(3,453)
240
-
-
(25)
Base
Station
Site
$’000
-
-
760
(5,538)
19,983
-
-
-
Total
$’000
-
592,126
47,951
(64,045)
44,324
(4,433)
158,357
(14,351)
At 31 December
735,348
9,376
15,205
759,929
(1) Others comprise furniture, fittings, office equipment and motor vehicles.
The right-of-use asset relating to the leasehold land presented under investment properties (Note 7) is stated at fair value and has a
carrying amount at balance sheet date of $5,765,000.
Total cash outflow for all the leases in 2019 was $83,038,000, comprising repayment of principal of $47,306,000 and interest payment
of $35,732,000.
Certain right-of-use assets with carrying amount of $11,689,000 are mortgaged to banks for loan facilities (Note 22).
Company
2019
Net Book Value
At 1 January
Adoption of SFRS(I) 16
Depreciation
At 31 December
(1) Others comprise office equipment.
Leasehold
Land &
Buildings
$’000
Plant,
Machinery,
Equipment
& Others (1)
$’000
Total
$’000
-
15,902
(3,282)
-
279
(66)
-
16,181
(3,348)
12,620
213
12,833
Total cash outflow for all the leases in 2019 was $4,197,000, comprising repayment of principal of $3,822,000 and interest payment of
$375,000.
Lease expense not capitalised in lease liabilities
Short-term leases
Low-value leases
Variable lease payments which do not depend on an index or rate
Group
31 December
2019
$’000
29,987
1,992
327
As at 31 December 2019, future cash outflows to which the Group is potentially exposed that are not reflected in the measurement of
lease liabilities include variable lease payments and $623,194,000 for extension options. The leases for retail stores contain variable
lease payments that are based on a percentage of sales generated by the stores ranging from 0.3% to 3.0%, on top of fixed payments.
The Group negotiates variable lease payments for a variety of reasons, including minimising the fixed costs base for newly established
stores. Such variable lease payments are recognised to profit or loss when incurred and amounted to $327,000 for the financial year
ended 31 December 2019. The extension options are for certain properties of the Group. The Group negotiates extension options to
optimise operational flexibility in terms of managing these assets in the Group’s operations.
Keppel Corporation Limited
Report to Shareholders 2019
161
NOTES TO THE FINANCIAL STATEMENTS
8.
Right-of-use assets (leases) (continued)
The following table details the liquidity analysis for lease liabilities of the Group and the Company based on contractual undiscounted
cash flows.
Within one year
Within one to two years
Within two to five years
After five years
Total
Group
Company
31 December
2019
$’000
31 December
2019
$’000
79,224
116,712
209,894
452,642
4,140
4,047
8,021
-
858,472
16,208
The Group as lessor
The Group leases out commercial space to non-related parties under non-cancellable operating leases. At the end of the reporting
period, the Group’s undiscounted future minimum lease receivables under non-cancellable operating leases contracted for at the end
of the reporting period but not recognised as receivables are as follows:
Within one year
In the second year
In the third year
In the fourth year
In the fifth year
After the fifth year
Total
9.
Subsidiaries
Quoted shares, at cost
Market value: $6,204,000 (2018: $829,294,000)
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
Group
31 December
2019
$’000
92,565
76,988
37,549
30,409
24,071
50,821
312,403
Company
31 December
2019
$’000
2018
$’000
1 January
2018
$’000
493
8,442,604
8,443,097
398,140
7,821,604
8,219,744
398,140
7,821,594
8,219,734
(480,569)
(351,785)
(246,885)
7,962,528
7,867,959
7,972,849
Company
31 December
2019
$’000
351,785
128,784
2018
$’000
246,885
104,900
1 January
2018
$’000
163,070
83,815
480,569
351,785
246,885
Impairment of $128,784,000 (2018: $104,900,000) made during the year mainly relates to an investment holding subsidiary that holds
equity investments in the Oil & Gas segment. Impairment loss was made arising from the impairment exercise performed (Note 10). Due
to the economic downturn in that segment, recoverable amount of the equity investments was projected to be below the Company’s
cost of investment. Management had performed an assessment on the recoverable amount based on the cash flow estimates of the
underlying assets. In 2018, 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 2018 VIU calculation was discounted at 11.7% per annum.
Information relating to significant subsidiaries consolidated in the financial statements is given in Note 38.
162
Report to Shareholders 2019
Keppel Corporation Limited
FINANCIAL REPORT
10. Associated companies
Quoted shares, at cost
Market value: $3,508,132,000
(31 Dec 2018: $3,149,785,000;
1 Jan 2018: $3,484,189,000)
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
2019
$’000
2018
$’000
1 January
2018
$’000
2,878,117
2,773,439
5,651,556
3,149,917
2,096,656
5,246,573
3,105,919
1,784,809
4,890,728
(197,392)
(161,367)
(100,297)
5,454,164
5,085,206
4,790,431
238,251
533,474
528,184
5,692,415
5,618,680
5,318,615
319,284
339,146
315,787
304,586
310,242
286,522
6,350,845
6,239,053
5,915,379
Notes issued by an associated company of $245,000,000 are unsecured and will mature in 2040. The remaining Notes are
denominated in SGD, secured and will mature in 2024. Interest is charged at rates ranging from 0% to 17.5% (31 December 2018 and
1 January 2018: 0% to 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 2.5% to 7.0% (31 December 2018 and 1 January 2018: 3.0% to 7.0%) per annum on interest-bearing advances.
Movements in the provision for impairment of associated companies are as follows:
At 1 January
Impairment loss
Exchange differences
At 31 December
Group
2019
$’000
161,367
35,915
110
2018
$’000
100,297
60,782
288
197,392
161,367
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.
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
2019
$’000
2018
$’000
262,127
(114,714)
317,076
(96,181)
147,413
220,895
Keppel Corporation Limited
Report to Shareholders 2019
163
NOTES TO THE FINANCIAL STATEMENTS
10. Associated companies (continued)
The carrying amount of the Group’s material associated companies, all of which are equity accounted for, 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
(a)
(b)
(c)
(d)
(e)
(f)
31 December
2019
$’000
2018
$’000
1 January
2018
$’000
1,960,518
1,972,303
1,850,409
301,669
74,284
449,964
570,384
311,000
254,035
196,311
377,616
560,818
362,760
267,169
321,562
396,152
541,837
342,694
2,683,026
6,350,845
2,515,210
6,239,053
2,195,556
5,915,379
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:
(a)
Keppel REIT
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
**
Based on the quoted market price at 31 December (Level 1 in the fair value hierarchy).
31 December
2019
$’000
2018
$’000
1 January
2018
$’000
142,317
7,307,046
7,449,363
159,690
2,125,893
2,285,583
5,163,780
274,529
7,509,922
7,784,451
134,156
2,314,699
2,448,855
5,335,596
208,307
7,395,981
7,604,288
492,865
2,196,165
2,689,030
4,915,258
(578,931)
(578,311)
(151,834)
4,584,849
4,757,285
4,763,424
49%
47%
45%
2,245,659
2,255,429
2,146,723
(285,141)
(283,126)
(296,314)
1,960,518
1,972,303
1,850,409
164,053
141,670
(82,772)
58,898
165,858
154,588
3,028
157,616
164,516
180,154
(49,789)
130,365
2,044,903
1,834,206
1,914,043
90,144
87,247
80,011
164
Report to Shareholders 2019
Keppel Corporation Limited
FINANCIAL REPORT
(b)
Keppel Infrastructure Trust
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/(loss) after tax
Other comprehensive (loss)/income
Total comprehensive (loss)/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).
(c)
KrisEnergy Limited *
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net (liabilities)/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 income/(loss)
Total comprehensive loss
Fair value of ownership interest (if listed) **
Dividends received
31 December
2019
$’000
2018
$’000
1 January
2018
$’000
1,029,248
3,974,027
5,003,275
1,706,097
1,583,009
3,289,106
1,714,169
521,616
3,283,391
3,805,007
1,233,598
1,393,153
2,626,751
1,178,256
(389,763)
(125,780)
1,324,406
1,052,476
18%
241,042
60,627
301,669
18%
191,761
62,274
254,035
1,566,715
637,387
10,194
(92,591)
(82,397)
(2,358)
13,876
11,518
490,886
30,134
341,023
26,134
174,986
699,330
874,316
878,467
82,323
960,790
(86,474)
-
147,702
761,267
908,969
103,342
671,960
775,302
133,667
-
488,154
3,468,262
3,956,416
919,010
1,725,512
2,644,522
1,311,894
(158,959)
1,152,935
18%
209,949
57,220
267,169
632,476
13,776
(10,051)
3,725
403,858
26,126
191,987
869,374
1,061,361
74,604
653,172
727,776
333,585
-
(86,474)
133,667
333,585
40%
-
-
-
74,284
74,284
40%
53,213
72,311
125,524
70,787
196,311
40%
133,067
123,253
256,320
65,242
321,562
148,591
(220,060)
176
216,454
(201,924)
(132)
196,612
(293,277)
32
(219,884)
(202,056)
(293,245)
n.a.
43,673
60,425
-
-
-
*
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). KrisEnergy Limited had suspended trading of its securities on the
Singapore Exchange Securities Ltd with effect from 14 August 2019 (the last closing price before trading suspension was $0.03 per share). Therefore, the
Level 1 fair value hierarchy is no longer applicable as at 31 December 2019.
Keppel Corporation Limited
Report to Shareholders 2019
165
NOTES TO THE FINANCIAL STATEMENTS
10. Associated companies (continued)
Investments in KrisEnergy Limited and related exposures
Equity interest
Zero-coupon notes
Warrants
Carrying amount
Other related exposures:
Contract assets 1
Guarantee 2
Note 10(c)
Note 10(c)
Note 11
31 December
2019
$’000
-
74,284
-
74,284
2018
$’000
125,524
70,787
29,332
225,643
Note 15
Note 32
20,541
262,825
1,216
223,680
¹
²
In relation to a construction contract for a production barge for KrisEnergy.
In relation to a bilateral agreement between the Group and a bank, on the bank loan granted to KrisEnergy.
On 14 August 2019, KrisEnergy has made an application to the High Court of the Republic of Singapore to commence a court-
supervised process to reorganise its liabilities and seek a moratorium against enforcement actions and legal proceedings by
creditors against KrisEnergy pursuant to section 211B of the Companies Act (Cap. 50). It has also requested a suspension of trading
of its securities on Singapore Exchange Securities Trading Ltd. The High Court of Republic of Singapore approved the application for
an initial period of 3 months up to 14 November 2019. At the date of these financial statements, the debt moratorium was extended
to 27 May 2020. As at the end of the current financial year, KrisEnergy has not presented a restructuring plan.
Management performed an impairment assessment to estimate the recoverable amount of the Group’s exposure in KrisEnergy
as at 31 December 2019. With assistance from its financial advisor, management estimated the amount of cash available from
producing assets and forecasted production from assets under development, taking into consideration the relative priority
of each group of stakeholders to these cash flows based on their respective rights. Management will evaluate the above
assessment when a restructuring plan is presented by KrisEnergy in due course which may give rise to adjustments to be made.
The estimates and assumptions used are subject to risk and uncertainty.
Based on the assessment, the Group recognised an impairment loss of $37,000,000 during the financial year, and the carrying
value of the Group’s equity investment has been reduced to zero. In 2018, management had performed an assessment on the
recoverable amount using a discounted cash flow model based on a cash flow projection and recognised an impairment charge
of $53,000,000.
(d)
Keppel DC REIT
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
31 December
2019
$’000
279,952
2,648,042
2,927,994
108,157
917,289
1,025,446
1,902,548
(34,530)
1,868,018
23%
434,688
15,276
449,964
194,826
111,108
(33,789)
77,319
709,231
31,898
2018
$’000
220,244
2,032,687
2,252,931
186,779
590,158
776,937
1,475,994
(31,155)
1,444,839
25%
364,244
13,372
377,616
175,535
146,009
(4,628)
141,381
459,925
27,876
1 January
2018
$’000
178,078
1,585,204
1,763,282
53,224
593,556
646,780
1,116,502
(26,786)
1,089,716
35%
380,617
15,535
396,152
139,050
70,274
21,044
91,318
562,990
20,958
**
Based on the quoted market price at 31 December (Level 1 in the fair value hierarchy).
166
Report to Shareholders 2019
Keppel Corporation Limited
FINANCIAL REPORT
(e)
Sino-Singapore Tianjin Eco-City Investment and Development Co., Limited
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
(f)
Floatel International Limited
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 (loss)/income
Total comprehensive (loss)/income
Dividends received
Investments in Floatel International Limited
Equity interest
Preference shares
Loan receivable
Carrying amount
31 December
2019
$’000
1,073,996
478,339
2018
$’000
889,954
438,662
1 January
2018
$’000
816,431
458,652
1,552,335
1,328,616
1,275,083
324,787
29,261
354,048
190,317
16,668
206,985
165,498
25,912
191,410
1,198,287
1,121,631
1,083,673
-
-
-
1,198,287
1,121,631
1,083,673
50%
599,144
(28,760)
570,384
475,001
155,705
-
50%
560,815
3
50%
541,836
1
560,818
541,837
492,503
111,222
-
1,247,882
267,163
-
155,705
111,222
267,163
27,351
22,493
-
31 December
2019
$’000
137,367
1,655,424
1,792,791
79,669
1,105,306
1,184,975
607,816
-
2018
$’000
186,613
1,771,181
1,957,794
104,714
1,141,620
1,246,334
711,460
-
1 January
2018
$’000
334,668
1,818,093
2,152,761
48,606
1,432,657
1,481,263
671,498
-
607,816
711,460
671,498
50%
303,422
7,578
311,000
250,286
(100,572)
(1,039)
(101,611)
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
-
-
-
Note 10(f)
Note 11
Note 12
31 December
2019
$’000
311,000
10,449
155,425
476,874
2018
$’000
362,760
21,845
139,799
524,404
Keppel Corporation Limited
Report to Shareholders 2019
167
NOTES TO THE FINANCIAL STATEMENTS
10. Associated companies (continued)
In November 2019, credit rating agencies downgraded Floatel’s credit rating, citing market environment for accommodation
vessels remaining difficult with limited activity and pressure on dayrates. The rating agencies also commented that if Floatel
fails to contract work for its idle vessels in the near future, it may not be able to meet its leverage covenant at its first test at the
year-end 2020.
Floatel subsequently reported that its financial situation is unsustainable as liquidity is under pressure. There is a material
uncertainty as to whether Floatel will be able to service its secured financial liabilities and net working capital requirements for
the coming 12 months, which cast significant doubt on Floatel’s ability to continue as a going concern. The long term viability
of Floatel’s business depends on it finding a solution to its financial situation and Floatel management has initiated discussions
with key creditors, in which, in the view of Floatel’s board of directors, there is reasonable expectations of success. In a situation
where going concern for Floatel no longer can be assumed, there is a risk for significant write down of its assets.
Management performed an impairment assessment of the recoverability of the Group’s total exposure in Floatel by first
performing an assessment to ascertain whether Floatel would reasonably continue as a going concern in the next 12 months. If
Floatel cannot reasonably continue as a going concern in the next 12 months, the carrying amount of the Group’s investment in
Floatel may be subject to significant write down.
Management conducted a review of the business and cash flow projections through discussions with Floatel’s management
and corroborated those information based on management’s understanding of the business environment that Floatel operates
in. Management also discussed with Floatel’s management to understand the on-going dialogue with Floatel’s lenders and
advisers. Based on the results of the review, discussions and information currently available, management concurred with the
judgment made by Floatel’s management and board of directors in relation to the going concern matter.
In assessing impairment of the equity shares, management had focused on whether Floatel’s vessels were stated at their
appropriate recoverable amounts. The Group’s carrying value of investment in Floatel’s equity shares was reduced by its share
of loss of $50,724,000 which included impairment loss on the carrying value of three vessels amounting to $19,642,000. The
recoverable amounts of the vessels were determined on their value-in-use, using a discounted cash flow model. Management
reviewed the appropriateness of key inputs used in the estimation of the recoverable amount of Floatel’s vessels.
With respect to preference shares, management had performed an estimation of its fair value as at 31 December 2019 using a
dividend discount model and recognised a fair value loss of $11,395,000.
In assessing the expected credit loss of the loan receivable repayable on 31 December 2025, management expects full recovery
of the receivable on the basis that Floatel operates in a niche market and supply of similar services should normalise over time.
Given the extended date before the loan is due for repayment, management expects Floatel to continue as a viable business in
the longer term and will be able to repay the loan when due in 2025.
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
31 December
2019
$’000
224,984
(81,978)
(12,439)
130,567
2018
$’000
171,934
(56,897)
(26,215)
88,822
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 38.
168
Report to Shareholders 2019
Keppel Corporation Limited
FINANCIAL REPORT
11.
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 equity shares
- Quoted warrants
- Unquoted equity shares
- Unquoted - others
Total investments at fair value
through profit or loss
Group
Company
31 December
1 January
31 December
2019
$’000
2018
$’000
2018
$’000
2019
$’000
2018
$’000
1 January
2018
$’000
12,336
107,396
95,227
6,527
96,903
104,927
4,123
86,768
185,187
-
-
-
19,230
16,957
15,012
-
-
-
214,959
208,357
276,078
19,230
16,957
15,012
82,399
-
330,143
21,568
-
29,332
189,559
22,267
-
31,647
87,811
22,256
434,110
241,158
141,714
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total investments
649,069
449,515
417,792
19,230
16,957
15,012
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
2019
$’000
2018
$’000
2018
$’000
2019
$’000
95,227
104,927
185,187
-
2018
$’000
-
1 January
2018
$’000
-
39,381
48,115
31,062
19,230
16,957
15,012
39,477
40,874
34,235
21,080
37,740
22,089
-
-
-
-
-
-
214,959
208,357
276,078
19,230
16,957
15,012
Quoted warrants were issued by an associated company, KrisEnergy Limited.
Unquoted investments included a bond amounting to $21,568,000 (31 December 2018: $39,868,000, 1 January 2018: $39,256,000)
bearing interest at 4% (31 December 2018 and 1 January 2018: 4%) per annum which is maturing in 2027.
Unquoted equity shares included preference shares issued by Floatel International Limited, an associated company, amounting to
$10,449,000 (2018: $21,845,000).
Keppel Corporation Limited
Report to Shareholders 2019
169
NOTES TO THE FINANCIAL STATEMENTS
12. Long term assets
Staff loans
Derivative assets
Contract assets
Call option
Service concession receivable
Trade receivables
Long term receivables and others
Less: Amounts due within one year
and included in debtors (Note 17)
Group
Company
31 December
1 January
31 December
2019
$’000
277
14,791
99,523
157,518
351,041
638,973
404,379
1,666,502
2018
$’000
633
2018
$’000
933
2019
$’000
50
22,002
26,780
11,918
-
150,500
235,959
-
313,350
722,444
-
137,200
115,835
-
365,238
645,986
-
-
-
-
11,535
23,503
2018
$’000
105
8,751
-
-
-
-
-
1 January
2018
$’000
386
14,101
-
-
-
-
-
8,856
14,487
(10,140)
(42,980)
(42,194)
(34)
(55)
(141)
1,656,362
679,464
603,792
23,469
8,801
14,346
Included in staff loans are interest-free advances to directors of related corporations amounting to $30,000 (31 December 2018:
$47,000, 1 January 2018: $179,000) under an approved car loan scheme.
Contract assets primarily relate to the Group’s right to consideration for development units delivered to customers under the pay-and-
stay scheme, as well as for handset and equipment delivered and accepted by customers but not yet billed at the reporting date.
The call option granted to the Group is in connection with the disposal of its 87.51% equity interest in Ocean Properties LLP (f.k.a.
Ocean Properties Private 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 2019, 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 842-year leasehold and 91-year leasehold (31 December 2018: based on the remaining 843-year
leasehold and 92-year leasehold, 1 January 2018: based on the remaining 844-year leasehold and 93-year leasehold). The details of the
valuation techniques and inputs used for the call option are disclosed in Note 34.
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 rate of 4.22% (31 December 2018: 4.30%, 1 January
2018: 4.33%) per annum were used to discount the future expected cash flows.
Trade receivables are related to financing arrangements for delivered rigs where the Group has retained title. $125,444,000 is due from
one customer and bears floating interest at LIBOR plus a margin, and repayable in October 2024. The remainder is due from another
customer, bears fixed interest and repayable in February 2024 and 2029. The customer has options for early repayment.
Long term receivables are unsecured, largely repayable after five years (31 December 2018 and 1 January 2018: five years) and bears
effective interest ranging from 2.00% to 12.00% (31 December 2018: 2.00% to 9.00%, 1 January 2018: 2.00% to 6.00%) per annum.
Included in other receivables are claims receivable which represents claims from customer for long term contracts. For the financial
year ended 31 December 2019, the Group recognised $15,021,000 (31 December 2018 and 1 January 2018: $nil) loss allowance on
claims receivable arising from the discounting effects due to changes to the expected timing of receipt.
Included in the long term receivables is an unsecured, interest-bearing USD loan amounting to $155,425,000 (31 December 2018:
$139,799,000) which is repayable in 2025 by Floatel International Limited, an associated company.
170
Report to Shareholders 2019
Keppel Corporation Limited
FINANCIAL REPORT
13.
Intangibles
Group
2019
At 1 January
Additions
Acquisition of a subsidiary
Amortisation
Exchange differences
Goodwill
$’000
Development
Expenditure
$’000
Brand
$’000
Customer
Spectrum Contracts and
Rights Relationships
$’000
$’000
Others
$’000
Total
$’000
59,270
18,017
-
988,288
-
-
662
-
(1,693)
(175)
-
-
-
-
34,963
16,757
129,007
-
-
662
277,563
156,670
175,167
1,116
1,598,804
(7,710)
(14,735)
(21,032)
(74)
(45,244)
-
-
(73)
-
(248)
At 31 December
1,047,558
16,811
269,853
141,935
189,025
17,799
1,682,981
Cost
1,047,558
36,885
277,563
156,670
228,334
17,873
1,764,883
Accumulated amortisation
-
(20,074)
(7,710)
(14,735)
(39,309)
(74)
(81,902)
1,047,558
16,811
269,853
141,935
189,025
17,799
1,682,981
Group
2018
At 1 January
Additions
Amortisation
Exchange differences
59,270
-
-
-
19,073
561
(1,760)
143
At 31 December
59,270
18,017
Cost
Accumulated amortisation
59,270
-
38,808
(20,791)
59,270
18,017
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
37,494
16,757
132,594
-
(2,927)
396
-
-
-
561
(4,687)
539
34,963
16,757
129,007
53,305
(18,342)
16,757
-
168,140
(39,133)
34,963
16,757
129,007
Impairment testing of goodwill
For the purpose of impairment testing, goodwill is allocated to cash-generating units.
Out of the total goodwill of $1,047,558,000, goodwill allocated from the acquisition of M1 Limited amounted to $988,288,000.
During the year, the Group’s 80% owned subsidiary, Konnectivity Pte Ltd, acquired approximately 81% equity interest in M1 Limited. The
Group’s wholly-owned subsidiary, Keppel Telecommunications and Transportation Ltd holds the remaining 19% equity interest in M1
Limited.
The recoverable amount of M1 as a CGU was determined based on its value-in-use using a discounted cash flow model based on cash
flow projections by management covering a 5-year period, and cash flows beyond the 5-year period were extrapolated using a terminal
growth rate of 1.47%, premised on the estimated long term growth rate for the country where the CGU operates. Cash flows were
discounted using a discount rate of 8% per annum.
The recoverable amount was estimated to be higher than the carrying value of the M1 CGU. Accordingly, no impairment of goodwill
was recognised in 2019. The calculation of value-in-use for the CGU is sensitive to the terminal growth rate and the discount rate
applied. Any possible reasonable change in the terminal growth rate and discount rate used in the calculation of the value-in-use
amount would not cause any impairment to goodwill.
Keppel Corporation Limited
Report to Shareholders 2019
171
NOTES TO THE FINANCIAL STATEMENTS
14. Stocks
Consumable materials and supplies
Finished products for sale
Work-in-progress (net of provision)
Properties held for sale
Group
31 December
2019
$’000
141,876
114,854
653,814
2018
$’000
162,445
103,995
594,312
1 January
2018
$’000
110,434
96,978
763,255
(a)
4,632,211
4,635,152
4,785,058
5,542,755
5,495,904
5,755,725
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 to write down its carrying value to its net realisable
value at the end of the financial year was $50,000,000 (31 December 2018: $53,697,000, 1 January 2018: $52,483,000).
(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
2019
$’000
2018
$’000
1 January
2018
$’000
2,770,384
2,587,958
2,380,942
585,200
252,501
3,608,085
1,049,343
4,657,428
548,764
222,467
3,359,189
1,304,119
4,663,308
871,205
286,261
3,538,408
1,284,426
4,822,834
(25,217)
(28,156)
(37,776)
4,632,211
4,635,152
4,785,058
28,156
37,776
72,416
-
34
799
(33)
(2,973)
(10,386)
-
-
-
(383)
(28,866)
(5,391)
25,217
28,156
37,776
The provision for properties held for sale is arrived at after taking into account estimated selling prices and estimated total construction
costs. Estimated selling prices are based on recent selling prices for the development project or comparable projects and the prevailing
market conditions. 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 $24,258,000 (2018: $30,460,000) at rate of 2.18% to 3.97% (2018: 3.30%) per
annum for Singapore properties and 2.74% to 7.00% (2018: 2.60% to 15.00%) per annum for overseas properties.
172
Report to Shareholders 2019
Keppel Corporation Limited
FINANCIAL REPORT
15. Contract assets/liabilities
Contract assets
Contract liabilities
Group
31 December
2019
$’000
2018
$’000
1 January
2018
$’000
3,497,476
3,212,712
3,643,495
1,824,965
1,918,547
1,950,151
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 $1,431,744,000 (31 December 2018: $1,383,286,000, 1 January 2018: $1,127,566,000).
Contract liabilities included proceeds received from sale of properties of $847,317,000 (31 December 2018: $890,139,000,
1 January 2018: $677,997,000). Remaining contract liabilities of $977,648,000 (31 December 2018: $1,028,408,000, 1 January 2018:
$1,272,154,000) are recorded when receipts from customers exceed the value of work transferred where the customer is invoiced on a
milestone payment schedule.
Revenue recognised during the financial year ended 31 December 2019 in relation to contract liability balance at 1 January 2019 was
$583,878,000 (2018: $544,361,000).
The aggregate amount of the transaction price allocated to the remaining performance obligation is $5,568,204,000 and the Group
expects to recognise this revenue over the next 1 to 5 years.
Movements in the provision for contract assets are as follows:
At 1 January
Charge to profit and loss account
At 31 December
16. Amounts due from/to
Subsidiaries
Amounts due from
- trade
- advances
Provision for doubtful debts
Amounts due to
- trade
- advances
31 December
2019
$’000
21,000
-
21,000
2018
$’000
-
21,000
21,000
1 January
2018
$’000
-
-
-
Company
31 December
2019
$’000
2018
$’000
1 January
2018
$’000
88,028
7,199,296
7,287,324
163,800
3,885,921
4,049,721
97,984
3,407,536
3,505,520
(6,600)
(6,600)
(6,600)
7,280,724
4,043,121
3,498,920
6,045
150,822
8,130
154,481
4,726
231,677
156,867
162,611
236,403
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% (2018: up to
4.00%) per annum on interest-bearing advances.
Keppel Corporation Limited
Report to Shareholders 2019
173
NOTES TO THE FINANCIAL STATEMENTS
16. Amounts due from/to (continued)
Group
Company
31 December
1 January
31 December
2019
$’000
2018
$’000
2018
$’000
2019
$’000
2018
$’000
1 January
2018
$’000
Associated Companies
Amounts due from
- trade
- advances
140,502
439,556
580,058
84,201
223,526
307,727
66,482
291,735
358,217
Provision for doubtful debts
(16,480)
(15,998)
(15,257)
Amounts due to
- trade
- advances
563,578
291,729
342,960
78,187
412,099
51,979
63,845
34,110
219,221
490,286
115,824
253,331
Movements in the provision for doubtful
debts are as follows:
At 1 January
Charge to profit and loss account
15,998
482
15,257
741
1,131
14,126
At 31 December
16,480
15,998
15,257
705
-
705
-
705
-
-
-
-
-
-
548
-
548
-
548
-
-
-
-
-
-
733
-
733
-
733
-
-
-
-
-
-
Advances to and from associated companies are unsecured and are repayable on demand. Interest is charged at rates ranging from
0.75% to 11.50% (31 December 2018: 0.45% to 11.50%, 1 January 2018: 0.25% to 8.00%) per annum on interest-bearing advances.
17. Debtors
Group
Company
31 December
1 January
31 December
2019
$’000
2018
$’000
2018
$’000
Trade debtors
1,947,537
1,831,028
2,214,444
Provision for doubtful debts
(261,680)
(246,879)
(147,761)
1,685,857
1,584,149
2,066,683
Long term receivables due within
one year (Note 12)
Sundry debtors
Prepayments
Tax recoverable
Value Added 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
10,140
238,128
210,550
6,057
107,177
14,002
30,600
-
49,493
219,599
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
115,801
50,406
37,097
47,736
61,228
73,455
26,528
26,705
41,081
1,078,481
1,135,289
1,009,906
(15,854)
(17,138)
1,062,627
1,118,151
(13,906)
996,000
Total
2,748,484
2,702,300
3,062,683
2019
$’000
1
-
1
34
464
87
-
-
21
380
-
7,702
155
-
-
-
8,843
-
8,843
8,844
2018
$’000
2
-
2
55
478
104
-
83
21
279
-
5,207
-
-
-
-
6,227
-
6,227
6,229
1 January
2018
$’000
7
-
7
141
3,902
112
-
-
20
408
-
-
-
-
-
-
4,583
-
4,583
4,590
174
Report to Shareholders 2019
Keppel Corporation Limited
FINANCIAL REPORT
Movements in the provision for doubtful debts are as follows:
Group
Company
31 December
1 January
31 December
At 1 January
Charge to profit and loss account
Amount written off
Company acquired
Subsidiary disposed
Exchange differences
Reclassification
2019
$’000
2018
$’000
264,017
161,667
16,015
(7,443)
9,225
(4,296)
16
-
95,457
(5,959)
-
-
8
12,844
2018
$’000
29,550
141,514
(7,361)
-
(1,926)
(110)
-
Total
277,534
264,017
161,667
2019
$’000
2018
$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1 January
2018
$’000
-
-
-
-
-
-
-
-
In the prior year, a provision of $102,000,000 was recognised for the rig contracts with Sete Brasil.
18. Short term investments
Group
Company
31 December
1 January
31 December
2019
$’000
2018
$’000
2018
$’000
2019
$’000
2018
$’000
1 January
2018
$’000
Total investments at fair value through
other comprehensive income:
Quoted equity shares
Investments at fair value through
profit or loss:
Quoted equity shares
Unquoted equity shares
Unquoted debt instrument
Total investments at fair value through
profit or loss
Total investments at amortised cost:
Unquoted - others
27,821
34,428
55,048
74,300
74,759
147,654
-
19,460
-
-
74
-
93,760
74,759
147,728
-
27,400
-
Total short term investments
121,581
136,587
202,776
Investments at fair value through other comprehensive income are mainly in the oil and gas industry.
-
-
-
-
-
-
-
-
-
-
-
-
27,400
27,400
-
-
-
-
-
-
-
The unquoted investment at amortised cost was repaid during the year upon the repayment of a short term borrowing of an associated
company.
Keppel Corporation Limited
Report to Shareholders 2019
175
NOTES TO THE FINANCIAL STATEMENTS
19. 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
2019
$’000
843,519
760,421
2018
$’000
2018
$’000
779,003
1,042,052
590,248
1,515,887
6,270
9,562
32,340
173,304
150,789
135,313
2019
$’000
1,047
-
-
-
2018
$’000
370
-
-
-
2018
$’000
2,213
-
-
-
1,783,514
1,981,406
2,273,788
1,047
370
2,213
Fixed deposits with banks of the Group mature on varying periods, substantially between 1 day to 6 months (31 December 2018: 1
day to 6 months, 1 January 2018: 1 day to 12 months). This comprises Singapore Dollars fixed deposits of $75,752,000 (31 December
2018: $34,824,000, 1 January 2018: $121,525,000) at interest rates ranging from 0.75% to 1.98% (31 December 2018: 0.60% to 1.59%,
1 January 2018: 0.35% to 1.24%) per annum, and foreign currency fixed deposits of $684,669,000 (31 December 2018: $1,007,228,000,
1 January 2018: $1,394,362,000) at interest rates ranging from 0.01% to 7.20% (31 December 2018: 0.02% to 7.55%, 1 January 2018:
0.01% to 13.15%) per annum.
The bank balances at 31 December 2019 include an amount of $384,000 (31 December 2018: $99,450,000, 1 January 2018:
$102,000,000) pledged to a bank in relation to certain banking arrangement.
Cash and cash equivalents of $492,026,000 (31 December 2018: $684,375,000, 1 January 2018: $857,168,000) 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.
20. Creditors
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
Group
Company
31 December
1 January
31 December
1 January
2019
$’000
854,892
117,673
650,300
2,595,432
149,200
179,982
57,065
2018
$’000
486,278
87,102
896,743
2,584,096
145,998
148,895
41,911
2018
$’000
579,371
89,656
1,380,955
3,274,077
177,151
176,850
42,105
2019
$’000
4,816
-
3,124
40,749
-
-
30,036
4,604,544
4,391,023
5,720,165
78,725
168,176
127,106
191,990
169,727
204,121
82,494
25,000
58,778
2018
$’000
3,139
-
3,007
47,020
-
-
23,006
76,172
48,372
43,303
2018
$’000
161
-
4,070
39,074
-
-
25,280
68,585
49,275
60,521
295,282
361,717
286,615
83,778
91,675
109,796
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 1.83% to 4.94% (31 December 2018: 2.00% to 4.75%, 1 January 2018: 2.00% to 4.35%) per annum on interest-
bearing advances.
In the prior year, 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. The Group had assessed, including seeking
legal opinion, its position in respect of these potential claims and concluded that there were reasonable grounds for the write-back.
In the prior year, 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 2019,
31 December 2018 and 1 January 2018.
176
Report to Shareholders 2019
Keppel Corporation Limited
FINANCIAL REPORT
21. Provisions for warranties
2019
At 1 January
(Write-back)/Charge to profit and loss account
Amount utilised
Subsidiary disposed
Exchange differences
At 31 December
22. Term loans
Group
31 December
2019
$’000
2018
$’000
1 January
2018
$’000
69,614
(14,365)
(18,601)
-
(200)
115,972
(1,550)
(43,640)
-
(1,168)
81,879
39,280
(4,205)
(397)
(385)
36,448
69,614
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
2019
2018
1 January
2018
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
500,000
99,904
1,900,000
629,507
-
1,700,000
342,316
729,196
-
100,000
273,240
-
-
-
100,000
274,000
-
-
-
-
1,700,000
916,027
100,000
269,800
98,599
310,859
3,583,494
3,564,028
412,412
726,029
185,874
150,591
580,825
3,078,682
1,563,493
2,512,267
4,555,237
6,504,394
1,480,757
6,067,752
1,714,084
6,078,919
Company
Keppel Corporation Medium
Term Notes
(a)
500,000
1,900,000
-
1,700,000
-
1,700,000
Unsecured bank loans
(f)
2,900,430
1,598,203
460,657
1,795,610
551,530
1,239,800
3,400,430
3,498,203
460,657
3,495,610
551,530
2,939,800
(a)
(b)
At the end of the financial year, notes issued under the US$5,000,000,000 Multi-Currency Medium Term Note Programme by
the Company amounted to $2,400,000,000 (31 December 2018 and 1 January 2018: $1,700,000,000). The notes denominated
in Singapore Dollars, are unsecured and comprised fixed rate notes due from 2020 to 2042 (31 December 2018 and 1 January
2018: from 2020 to 2042) with interest rates ranging from 3.00% to 4.00% (31 December 2018 and 1 January 2018: 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 $399,737,000
(31 December 2018: $642,060,000, 1 January 2018: $486,696,000). The notes denominated in Singapore Dollars, are unsecured
and comprised fixed rate notes due from 2020 to 2023 (31 December 2018: 2019 to 2023, 1 January 2018: 2019 to 2023), with
interest rates ranging from 2.68% to 2.84% (31 December 2018: 2.68% to 3.26%, 1 January 2018: 2.84% to 3.26%) per annum.
At the end of the financial year, notes issued under the US$800,000,000 Multi-Currency Medium Term Note Programme by
Keppel Land Limited amounted to $329,674,000 (31 December 2018: $429,452,000, 1 January 2018: $429,331,000). The notes
denominated in Singapore Dollars, are unsecured and comprised fixed rate notes due from 2022 to 2024 (31 December 2018
and 1 January 2018: 2020 to 2024) with interest rates ranging from 3.80% to 3.90% (31 December 2018 and 1 January 2018:
2.83% to 3.90%) per annum.
(c)
At the end of the financial year, notes issued under the $500,000,000 Multi-Currency Medium Term Note Programme by Keppel
Telecommunications & Transportation Ltd, amounted to $100,000,000 (31 December 2018 and 1 January 2018: $100,000,000).
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 2018 and 1 January 2018:
2.85% per annum from September 2017 to September 2022 and 3.85% per annum from September 2022 to September 2024).
Keppel Corporation Limited
Report to Shareholders 2019
177
NOTES TO THE FINANCIAL STATEMENTS
22. Term loans (continued)
(d)
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 $273,240,000 (31 December 2018: $274,000,000, 1 January 2018: $269,800,000). 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 2.92% to 3.69% (31 December 2018: 2.24% to 3.30%, 1 January 2018:
1.75% to 2.24%) per annum.
(e)
The secured bank loans consist of:
-
-
-
-
A term loan of $50,000,000 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 2.32% per annum.
A term loan of $46,880,000 drawn down by a subsidiary. The term loan is repayable in 2032 and is secured on certain
assets of the subsidiary. Interest is based on money market rates range of 2.38% to 4.43% per annum.
A term loan of $44,132,000 drawn down by a subsidiary. The term loan is repayable in 2033 and is secured on certain
assets of the subsidiary. Interest is based on money market rates range of 2.38% to 4.43% per annum.
Other secured bank loans comprised $268,446,000 (31 December 2018: $297,363,000, 1 January 2018: $474,918,000) of
foreign currency loans. They are repayable within one to eight (31 December 2018: one to fifteen, 1 January 2018: one to
sixteen) 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 1.82% to 12.50% (31 December 2018: 1.59% to
9.59%, 1 January 2018: 1.49% to 7.23%) per annum.
The secured bank loans as of 31 December 2018 included a term loan of $300,923,000 (1 January 2018: $256,498,000) which
was drawn down by a subsidiary. The term loan was repaid in 2019 and was previously secured on certain assets of the
subsidiary. Interest was based on money market rates of 2.89% (1 January 2018: 1.35% to 1.94%) per annum.
(f)
The unsecured bank and other loans of the Group totalling $7,147,522,000 (31 December 2018: $3,804,711,000, 1 January 2018:
$4,075,760,000) comprised $5,113,132,000 (31 December 2018: $2,604,736,000, 1 January 2018: $2,823,820,000) of loans
denominated in Singapore Dollars and $2,034,390,000 (31 December 2018: $1,199,975,000, 1 January 2018: $1,251,940,000)
of foreign currency loans. They are repayable within one to twelve (31 December 2018: one to thirteen, 1 January 2018: one
to fourteen) years. Interest on loans denominated in Singapore Dollars is based on money market rates ranging from 1.08%
to 3.38% (31 December 2018: 2.13% to 3.08%, 1 January 2018: 1.18% to 3.38%) per annum. Interest on foreign currency loans
is based on money market rates ranging from 0.96% to 9.41% (31 December 2018: 0.50% to 9.30%, 1 January 2018: 0.48% to
10.69%) per annum.
The unsecured bank loans of the Company totalling $4,498,633,000 (31 December 2018: $2,256,267,000, 1 January 2018:
$1,791,330,000) comprised $3,186,162,000 (31 December 2018: $1,707,050,000, 1 January 2018: $1,550,000,000) of loans
denominated in Singapore Dollars and $1,312,471,000 (31 December 2018: $549,217,000, 1 January 2018: $241,330,000) of
foreign currency loans. They are repayable within one to five years (31 December 2018: one to six years, 1 January 2018: one to
seven years). Interest on loans denominated in Singapore Dollars is based on money market rates ranging from 1.08% to 3.38%
(31 December 2018: 2.13% to 3.08%, 1 January 2018: 1.46% to 3.38%) per annum. Interest on foreign currency loans is based
on money market rates ranging from 0.96% to 3.24% (31 December 2018: 0.50% to 3.96%, 1 January 2018: 0.50% to 2.10%) per
annum.
The Group has mortgaged certain properties and assets of up to an aggregate amount of $963,984,000 (31 December 2018:
$1,065,652,000, 1 January 2018: $1,894,728,000) to banks for loan facilities.
The fair values of term loans for the Group and Company are $10,875,283,000 (31 December 2018: $7,672,894,000, 1 January 2018:
$7,864,285,000) and $6,723,252,000 (31 December 2018: $3,935,905,000, 1 January 2018: $3,556,370,000) respectively. These fair
values, under Level 2 of the fair value hierarchy, are computed on the discounted cash flow method using discount rates based upon
the borrowing rates 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
Group
Company
31 December
1 January
31 December
2019
$’000
2018
$’000
2018
$’000
2019
$’000
2018
$’000
1 January
2018
$’000
1,191,134
4,048,673
1,264,587
1,153,733
3,686,101
1,227,918
1,403,471
3,174,902
1,500,546
550,000
1,798,203
1,150,000
705,500
2,069,580
720,530
-
1,900,000
1,039,800
6,504,394
6,067,752
6,078,919
3,498,203
3,495,610
2,939,800
178
Report to Shareholders 2019
Keppel Corporation Limited
FINANCIAL REPORT
23. Deferred taxation
Deferred tax liabilities:
Accelerated tax depreciation
Investment properties valuation
Offshore income & others
Deferred tax assets:
Other provisions
Unutilised tax benefits
Lease liabilities
Group
31 December
2019
$’000
2018
$’000
1 January
2018
$’000
295,789
75,175
79,430
450,394
(18,043)
(11,692)
(21,631)
(51,366)
116,707
49,843
80,163
246,713
(34,740)
(23,633)
-
108,936
184,429
90,502
383,867
(32,778)
(25,730)
-
(58,373)
(58,508)
Net deferred tax liabilities
399,028
188,340
325,359
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 $100,797,000 (31 December 2018: $84,027,000, 1 January 2018: $105,725,000)
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.
The Group has unutilised tax losses and capital allowances of $902,989,000 (31 December 2018: $695,449,000, 1 January 2018:
$886,858,000) 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 $193,577,000 (31 December 2018: $158,309,000, 1 January 2018: $227,747,000) can be carried forward for a period of one to nine
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 Adoption of
At
SFRS(I) 16 31 December
$’000
$’000
differences
$’000
Group
2019
Deferred Tax Liabilities
Accelerated tax depreciation
116,707
(20,122)
Investment properties valuation
Offshore income & others
Total
49,843
80,163
26,857
(81)
246,713
6,654
-
-
(23)
(23)
(2,307) 203,666
-
-
-
-
(2,307) 203,666
23
-
(294)
(271)
(108)
(2,070) 295,789
(1,525)
(335)
-
-
75,175
79,430
(1,968)
(2,070) 450,394
Deferred Tax Assets
Other provisions
Unutilised tax benefits
Lease liabilities
Total
(34,740)
16,726
(23,633)
10,811
-
(2,567)
(58,373)
24,970
4
-
-
4
-
-
580
580
-
-
-
-
78
1,196
(1,454)
(180)
(111)
(66)
860
683
-
-
(18,043)
(11,692)
(19,050)
(21,631)
(19,050)
(51,366)
Net Deferred Tax Liabilities
188,340
31,624
(19)
(1,727) 203,666
(451)
(1,285)
(21,120) 399,028
Keppel Corporation Limited
Report to Shareholders 2019
179
NOTES TO THE FINANCIAL STATEMENTS
23. Deferred taxation (continued)
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 Adoption of
At
SFRS(I) 16 31 December
$’000
$’000
differences
$’000
Group
2018
Deferred Tax Liabilities
Accelerated tax depreciation
Investment properties valuation
108,936
184,429
4,262
6,263
-
-
-
3,670
(139,774)
-
-
Offshore income & others
90,502
(9,437)
(243)
-
Total
383,867
1,088
(243)
(139,774)
3,670
Deferred Tax Assets
Other provisions
Unutilised tax benefits
Total
(32,778)
(25,730)
(58,508)
(3,045)
1,046
2,274
(771)
-
1,046
-
-
-
-
-
-
Net Deferred Tax Liabilities
325,359
317
803
(139,774)
3,670
24. Revenue
Revenue from contracts with customers
Revenue from construction contracts
Sale of property
Sale of goods
Sale of electricity, utilities and gases
Revenue from telecommunication services
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
-
-
-
-
-
-
-
-
(161)
(1,075)
(659)
(1,895)
37
(177)
(140)
(2,035)
-
-
-
-
-
-
-
-
116,707
49,843
80,163
246,713
(34,740)
(23,633)
(58,373)
188,340
Group
2019
$’000
2018
$’000
2,418,931
1,207,359
373,728
1,875,712
1,248,798
43,553
2,172,045
2,068,292
620,475
661,233
-
637,379
7,453,771
5,873,734
122,500
678
2,684
70
86,011
2,232
2,703
101
7,579,703
5,964,781
Sales are made with credit terms that are consistent with market practice. In 2018, 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.
25. 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
Group
2019
$’000
924,839
86,486
37,255
114,651
2018
$’000
780,104
68,357
34,885
104,484
1,163,231
987,830
180
Report to Shareholders 2019
Keppel Corporation Limited
FINANCIAL REPORT
26. Operating profit
Operating profit is arrived at after charging/(crediting) the following:
Included in materials and subcontract costs:
Fair value (gain)/loss 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 plans granted
Included in impairment loss on financial assets:
Provision for doubtful debts (Note 12 & 17)
Bad debts written-off
Included in other operating income - net:
Rental expense
- operating leases
Impairment/write-off of fixed assets
Impairment of associated companies (Note 10)
Provision for stocks
Provision for related contract costs (Note 20)
Provision for contract assets (Note 15)
Write-back of provision for claims (Note 20)
Fair value gain on investment properties (Note 7)
Fair value (gain)/loss on
-
investments
- forward foreign exchange contracts
(Gain)/loss 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
Loss/(gain) on disposal of associated companies
Gain from change in interest in associated companies
Fair value gain on remeasurement of previously held interest upon acquisition of a subsidiary
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
Group
2019
$’000
2018
$’000
(4,462)
13,675
1,094,686
942
18,095
771,465
42,258
23,818
11,471
105
9,943
31,036
43,331
-
8,432
35,915
7,571
-
-
-
(101,020)
15,328
2,028
(39,632)
(6,277)
(164)
9,015
95
7,771
95,457
4,256
84,854
6,911
60,782
6,271
65,000
21,000
(96,380)
(84,886)
(13,823)
(6,966)
42,070
(2,795)
-
(64,469)
(604,638)
22
(27,114)
(158,376)
2,537
(48,783)
(63,622)
-
2,373
2,332
3,510
3,343
1,833
611
150
3,121
2,001
486
154
Keppel Corporation Limited
Report to Shareholders 2019
181
NOTES TO THE FINANCIAL STATEMENTS
27.
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
Interest expenses on lease liabilities
Fair value gain on interest rate caps and swaps
28. Taxation
(a)
Income tax expense
Tax expense comprised:
Current tax
Adjustment for prior year’s tax
Others
Deferred tax (Note 23)
Land appreciation tax:
Current year
Group
2019
$’000
42
64,552
64,594
2018
$’000
34
9,957
9,991
101,548
63,664
12,463
100,376
56,760
7,124
177,675
164,260
(277,143)
(35,732)
159
(205,845)
-
1,021
(312,716)
(204,824)
Group
2019
$’000
175,880
(88,696)
790
2018
$’000
245,091
(32,200)
10,958
31,624
317
72,731
60,610
192,329
284,776
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% (2018: 17%)
Income not subject to tax
Expenses not deductible for tax purposes
Unrecognised tax benefits / (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
2019
$’000
2018
$’000
953,467
1,245,484
(147,413)
(220,895)
806,054
1,024,589
137,029
(89,266)
125,067
32,169
21,478
(88,696)
-
72,731
(18,183)
174,180
(170,942)
232,272
(17,314)
39,861
(32,200)
13,461
60,610
(15,152)
192,329
284,776
182
Report to Shareholders 2019
Keppel Corporation Limited
FINANCIAL REPORT
(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
- tax recoverable and others
- deferred tax
Group
2019
$’000
297,922
(6,506)
175,880
(88,696)
72,731
2018
$’000
220,761
(4,291)
245,091
(32,200)
60,610
(263,856)
(195,904)
47,832
(164)
12,831
451
157
(89)
3,787
-
Company
2019
$’000
2018
$’000
43,519
33,955
-
15,800
(27,796)
-
10,200
(636)
-
-
-
-
-
-
-
-
-
-
-
-
At 31 December
248,425
297,922
31,523
43,519
29. Earnings per ordinary share
Group
2019
$’000
2018
$’000
Basic
Diluted
Basic
Diluted
Net profit attributable to shareholders
706,975
706,975
948,392
948,392
Weighted average number of ordinary shares
(excluding treasury shares)
Adjustment for dilutive potential ordinary shares
Weighted average number of ordinary shares used
Number of Shares
$’000
Number of Shares
$’000
1,815,701
1,815,701
1,814,159
1,814,159
-
9,668
-
10,728
to compute earnings per share (excluding treasury shares)
1,815,701
1,825,369
1,814,159
1,824,887
Earnings per ordinary share
38.9 cts
38.7 cts
52.3 cts
52.0 cts
30. Dividends
A final cash dividend of 12.0 cents per share tax exempt one-tier (2018: final cash dividend of 15.0 cents per share tax exempt one-tier)
in respect of the financial year ended 31 December 2019 has been proposed for approval by shareholders at the next Annual General
Meeting to be convened.
Together with the interim cash dividend of 8.0 cents per share tax exempt one-tier (2018: 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), total distributions paid and proposed in
respect of the financial year ended 31 December 2019 will be 20.0 cents per share (2018: 30.0 cents per share).
During the financial year, the following distributions were made:
A final cash dividend of 15.0 cents per share tax exempt one-tier on the issued
and fully paid ordinary shares in respect of the previous financial year
An interim cash dividend of 8.0 cents per share tax exempt one-tier on the issued
and fully paid ordinary shares in respect of the current financial year
In the prior year, total distributions of $526,152,000 were made.
$’000
272,568
145,370
417,938
Keppel Corporation Limited
Report to Shareholders 2019
183
NOTES TO THE FINANCIAL STATEMENTS
31. 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’ share
Group
31 December
2019
$’000
2018
$’000
1 January
2018
$’000
130,682
6,777
329,685
357,634
372,292
13,034
406,662
388,093
175,759
17,341
174,311
450,247
155,213
246,436
19,665
158,677
105,115
224,903
175,658
77,260
36,509
1,402,085
1,435,683
1,184,185
(33,225)
(65,018)
(69,698)
1,368,860
1,370,665
1,114,487
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
2018
$’000
1 January
2018
$’000
31 December
2018
$’000
1 January
2018
$’000
81,555
255,324
572,156
89,315
300,506
684,204
909,035
1,074,025
199
179
-
378
40
-
-
40
As disclosed in Note 2.2, the Group has adopted SFRS(I) 16 Leases on 1 January 2019. Under the new standard, an asset (the
right to use the leased item) and a financial liability to pay rentals are recognised on balance sheet. The right-of-use assets and
lease liabilities are disclosed in Note 8.
(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
2018
$’000
1 January
2018
$’000
31 December
2018
$’000
1 January
2018
$’000
98,856
159,497
60,457
88,087
166,553
61,638
318,810
316,278
-
-
-
-
-
-
-
-
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.
184
Report to Shareholders 2019
Keppel Corporation Limited
FINANCIAL REPORT
32. Contingent liabilities and guarantees (unsecured)
Guarantees in respect of banks and other loans
granted to subsidiaries and associated companies
Bank guarantees
Group
31 December
Company
31 December
2019
$’000
2018
$’000
2019
$’000
2018
$’000
615,611
73,319
493,286
70,030
1,685,269
1,376,427
-
-
688,930
563,316
1,685,269
1,376,427
See Note 2.27 for further disclosures relating to the Group’s claims and litigations.
Included in the above guarantees is a bilateral agreement between the Group and a bank which guaranteed a bank loan granted to
KrisEnergy Limited, an associated company, amounting to $262,825,000 as at 31 December 2019. The guarantee is secured on the
assets of KrisEnergy Limited.
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.
33. 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
34. Financial risk management
Group
2019
$’000
2018
$’000
246,684
73,164
183,486
63,544
319,848
247,030
145,853
126,981
105,056
61,321
272,834
166,377
36,378
21,412
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.
Keppel Corporation Limited
Report to Shareholders 2019
185
NOTES TO THE FINANCIAL STATEMENTS
34. Financial risk management (continued)
As at the end of the financial year, the Group has outstanding forward foreign exchange contracts with notional amounts
totalling $4,333,439,000 (31 December 2018: $5,284,557,000, 1 January 2018: $6,344,009,000). The net positive fair value of
forward foreign exchange contracts is $3,796,000 (31 December 2018: net negative fair value of $4,778,000, 1 January 2018:
net positive fair value of $58,266,000) comprising assets of $30,022,000 (31 December 2018: $28,143,000, 1 January 2018:
$105,511,000) and liabilities of $26,226,000 (31 December 2018: $32,921,000, 1 January 2018: $47,245,000). 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 $4,205,443,000 (31 December 2018: $5,203,754,000, 1 January 2018: $6,269,592,000). The net positive fair value of
forward foreign exchange contracts is $4,839,000 (31 December 2018: net negative fair value of $4,972,000, 1 January 2018:
net positive fair value of $56,859,000) comprising assets of $30,022,000 (31 December 2018: $27,731,000, 1 January 2018:
$104,045,000) and liabilities of $25,183,000 (31 December 2018: $32,703,000, 1 January 2018: $47,186,000). These amounts are
recognised as derivative assets and derivative liabilities.
Other than the above hedged foreign currency contracts, the unhedged currency exposure of financial assets and financial
liabilities denominated in currencies other than the respective entities’ functional currencies are as follows:
USD
$’000
2019
RMB
$’000
BRL
$’000
Others
$’000
Group
Financial Assets
Debtors
Investments
Bank balances, deposits & cash
Financial Liabilities
Creditors
Term loans
Lease liabilities
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
Lease liabilities
USD
$’000
579
-
612
1,191
4,333
965,903
-
970,236
2019
RMB
$’000
54
-
219
273
207
9,683
215
10,105
535,178
474,060
47,303
1,056,541
136,595
997,104
-
1,133,699
USD
$’000
22,038
197,976
134,222
354,236
88,895
611,546
700,441
Others
$’000
-
-
1
1
10
89,370
-
1,629
318,767
-
41,209
42,838
1,052
9,683
215
10,950
-
53
318,820
18,542
-
-
119,434
114,741
38,380
272,555
12,362
180,882
726
18,542
193,970
2018
RMB
$’000
BRL
$’000
Others
$’000
19,388
360,479
-
186,215
205,603
-
1,823
362,302
7,878
-
7,878
USD
$’000
776
27,400
78
28,254
3,757
294,550
-
5,393
-
5,393
2018
RMB
$’000
83
-
236
319
246
-
-
13,645
92,244
25,286
131,175
20,481
131,718
152,199
Others
$’000
-
-
-
-
69
13,607
-
89,380
298,307
246
13,676
186
Report to Shareholders 2019
Keppel Corporation Limited
FINANCIAL REPORT
Sensitivity analysis for currency risk
If the relevant foreign currency change against SGD by 5% (2018: 5%) with all other variables held constant, the effects will be as
follows:
Group
USD against SGD
- Strengthened
- Weakened
RMB against SGD
- Strengthened
- Weakened
BRL against SGD
- Strengthened
- Weakened
Company
USD against SGD
- Strengthened
- Weakened
RMB against SGD
- Strengthened
- Weakened
Profit before tax
2019
$’000
2018
$’000
Equity
2019
$’000
2018
$’000
(11,518)
11,518
1,594
(1,594)
12,462
(12,462)
(25,195)
25,195
9,886
(9,886)
14,812
(14,812)
(48,801)
48,801
(13,602)
13,602
(474)
474
3
(3)
7,631
(7,631)
7,759
(7,759)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(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 22). As at the end of the financial year, the Group has interest rate swap agreements
with notional amount totalling $2,752,273,000 (31 December 2018: $1,667,483,000, 1 January 2018: $1,778,962,000) whereby it
receives variable rates equal to SOR and LIBOR (31 December 2018 and 1 January 2018: SOR and LIBOR) and pays fixed rates of
between 1.41% and 3.62% (31 December 2018: 1.33% and 3.62%, 1 January 2018: 1.27% and 3.62%) on the notional amount.
The net negative fair value of interest rate swaps for the Group is $108,661,000 (31 December 2018: net negative fair value
of $62,841,000, 1 January 2018: net negative fair value of $58,025,000) comprising assets of $444,000 (31 December 2018:
$4,677,000, 1 January 2018: $4,339,000) and liabilities of $109,105,000 (31 December 2018: $67,518,000, 1 January 2018:
$62,364,000). These amounts are recognised as derivative assets and derivative liabilities.
Sensitivity analysis for interest rate risk
If interest rates increase/decrease by 0.5% (2018: 0.5%) with all other variables held constant, the Group’s profit before tax would
have been lower/higher by $24,025,000 (2018: $10,827,000) 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, 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 $690,044,000 (31 December 2018: $938,774,000, 1 January 2018: $542,679,000) and
$63,885,000 (31 December 2018: $10,001,000, 1 January 2018: $nil) respectively. The net negative fair value of HSFO forward
contracts for the Group is $96,885,000 (31 December 2018: net negative fair value of $147,250,000, 1 January 2018: net positive
fair value of $89,599,000) comprising assets of $7,592,000 (31 December 2018: $25,568,000, 1 January 2018: $97,957,000)
and liabilities of $104,477,000 (31 December 2018: $172,818,000, 1 January 2018: $8,358,000). These amounts are recognised
as derivative assets and derivative liabilities. The net negative fair value of Dated Brent forward contracts for the Group of
$2,361,000 (31 December 2018: net negative fair value of $14,138,000, 1 January 2018: $nil) comprising assets of $2,305,000
(31 December 2018: $nil, 1 January 2018: $nil) and liabilities of $4,666,000 (31 December 2018: $14,138,000, 1 January 2018:
$nil). These amounts are recognised as derivative assets and derivative liabilities.
Keppel Corporation Limited
Report to Shareholders 2019
187
NOTES TO THE FINANCIAL STATEMENTS
34. Financial risk management (continued)
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 $142,980,000 (31 December 2018: $80,055,000, 1 January 2018: $47,042,000). The net
positive fair values of electricity futures contracts is $5,447,000 (31 December 2018: net positive fair value of $7,857,000,
1 January 2018: net negative fair value of $2,297,000) comprising assets of $7,560,000 (31 December 2018: $9,002,000,
1 January 2018: $199,000) and liabilities of $2,113,000 (31 December 2018: $1,145,000, 1 January 2018: $2,496,000). These
amounts 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. 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 2018 and 1 January 2018: 5%) with all other
variables held constant, the Group’s hedging reserve in equity would have been higher/lower by $29,658,000 (31 December 2018:
$39,366,000, 1 January 2018: $30,635,000) and $3,075,000 (31 December 2018: $252,000, 1 January 2018: $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 2018 and 1 January 2018: 5%) with all other
variables held constant, the Group’s hedging reserve in equity would have been lower/higher by $6,877,000 (31 December 2018:
$2,849,000, 1 January 2018: $2,467,000) as a result of fair value changes on cash flow hedges.
If prices for quoted investments increase/decrease by 5% (2018: 5%) with all other variables held constant, the Group’s profit
before tax would have been higher/lower by $7,835,000 (2018: $5,205,000) 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 $2,008,000 (2018: $2,047,000) as a result of higher/lower fair value gains on investments at fair value
through other comprehensive income.
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 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.
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.
188
Report to Shareholders 2019
Keppel Corporation Limited
FINANCIAL REPORT
The Group’s credit risk exposure in relation to debtors under SFRS(I) 9 as at 31 December 2019 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
Investments
Expected loss rate
Trade receivables
Loss allowance
Current
$’000
1 to 3 months
$’000
3 to 6 months
$’000
> 6 months
$’000
6.1%
2,902
178
0.1%
178,600
125
2.0%
266,978
5,451
13.3%
758
101
0.5%
28,999
153
8.0%
27,995
2,238
12.3%
1,265
155
1.0%
11,814
118
15.2%
4,862
739
69.4%
3,308
2,295
45.5%
4,946
2,248
20.4%
27,555
5,609
Total
$’000
8,233
2,729
224,359
2,644
327,390
14,037
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 ECL, 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 ECL 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.
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.
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.
Keppel Corporation Limited
Report to Shareholders 2019
189
NOTES TO THE FINANCIAL STATEMENTS
34. Financial risk management (continued)
Information relating to the maturity profile of loans is given in Note 22. 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 2019
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 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
1 January 2018
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 2019
Gross-settled forward foreign exchange contracts
- Receipts
- Payments
Borrowings
31 December 2018
Gross-settled forward foreign exchange contracts
- Receipts
- Payments
Borrowings
1 January 2018
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
3,113,245
(3,107,938)
773,921
(766,231)
478,026
(468,296)
5,583
(91,720)
2,305
(3,581)
1,808
(11,095)
-
(1,085)
200
(1,661)
-
-
-
-
-
-
-
-
6,701
(1,639)
(4,775,144)
859
(474)
(1,403,358)
-
-
(4,359,758)
-
-
(1,597,868)
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)
2,986,032
(2,979,943)
(3,525,789)
773,921
(766,231)
(656,062)
478,026
(468,296)
(1,986,035)
-
-
(1,455,148)
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)
In addition to the above, creditors (Note 20) of the Group and the Company have a maturity profile of within one year from the balance
sheet date.
190
Report to Shareholders 2019
Keppel Corporation Limited
FINANCIAL REPORT
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 2019. 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 risk based on the Group’s net gearing. Net gearing is calculated as net debt divided by total equity. Net
debt is calculated as total term loans (Note 22) and total lease liabilities (Note 8) less bank balances, deposits & cash (Note 19).
Net debt
Total equity
Net gearing ratio
Group
31 December
2019
$’000
2018
$’000
1 January
2018
$’000
9,873,556
5,567,103
5,519,215
11,646,031
11,576,692
11,722,455
0.85x
0.48x
0.47x
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 2019
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
-
-
12,336
82,399
27,821
74,300
55,841
-
-
22,958
-
19,460
-
157,518
202,623
328,753
-
-
55,841
157,518
214,959
434,110
27,821
93,760
196,856
98,259
688,894
984,009
-
-
-
-
246,587
-
246,587
-
-
-
1,667,822
1,354,269
1,667,822
1,354,269
3,022,091
3,022,091
Keppel Corporation Limited
Report to Shareholders 2019
191
NOTES TO THE FINANCIAL STATEMENTS
34. Financial risk management (continued)
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
Group
1 January 2018
Financial assets
Derivative financial instruments
Call option
Investments
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
208,006
-
-
43,250
-
-
-
137,200
271,955
66,817
-
74
208,006
137,200
276,078
141,714
55,048
147,728
-
-
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
4,123
31,647
55,048
147,654
Financial liabilities
Derivative financial instruments
Non-financial assets
Investment Properties
- Commercial and residential, completed
- Commercial, under construction
238,472
251,256
476,046
965,774
-
-
-
-
120,463
-
120,463
-
-
-
1,404,294
2,056,314
1,404,294
2,056,314
3,460,608
3,460,608
192
Report to Shareholders 2019
Keppel Corporation Limited
FINANCIAL REPORT
Company
31 December 2019
Financial assets
Derivative financial instruments
Investments
-
Investments at fair value through other comprehensive income
Financial liabilities
Derivative financial instruments
Company
31 December 2018
Financial assets
Derivative financial instruments
Investments
-
Investments at fair value through other comprehensive income
Financial liabilities
Derivative financial instruments
1 January 2018
Financial assets
Derivative financial instruments
Investments
-
Investments at fair value through other comprehensive income
Financial liabilities
Derivative financial instruments
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total
$’000
-
-
-
-
-
-
-
-
-
-
-
-
30,462
-
30,462
-
19,230
19,230
30,462
19,230
49,692
78,766
31,968
-
-
78,766
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
-
90,049
There have been no significant transfers between Level 1, Level 2 and Level 3 for the Group and Company in 2019 and 2018.
The following table presents the reconciliation of financial instruments measured at fair value based on significant unobservable inputs
(Level 3).
At 1 January
Co acquired
Purchases
Sales
Fair value (loss)/gain recognised in other comprehensive income
Fair value gain recognised in profit or loss
Reclassification
Exchange differences
Distribution
Return on capital
At 31 December
Group
2019
$’000
520,356
23,884
225,294
(39,171)
(73,059)
6,802
43,245
(332)
(10,366)
(7,759)
2018
$’000
Company
2019
$’000
2018
$’000
471,982
16,957
15,012
-
105,664
(122,034)
(1,124)
47,785
16,877
1,206
-
-
-
-
-
-
-
-
2,273
1,945
-
-
-
-
-
-
-
-
-
-
688,894
520,356
19,230
16,957
Keppel Corporation Limited
Report to Shareholders 2019
193
NOTES TO THE FINANCIAL STATEMENTS
34. Financial risk management (continued)
The following table presents the reconciliation of investment properties measured at fair value based on significant unobservable
inputs (Level 3).
At 1 January
Adoption of SFRS(I) 16
Development expenditure
Fair value gain
Disposal
Subsidiary acquired
Subsidiary disposed
Reclassification
- Stocks
- Fixed assets
Exchange differences
At 31 December
Group
2019
$’000
2018
$’000
2,851,380
3,460,608
5,765
304,803
101,020
(834)
-
-
-
(217,121)
(22,922)
-
94,099
84,886
(2,870)
360,000
(948,613)
(158,300)
-
(38,430)
3,022,091
2,851,380
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
Fair value
as at
31 December
2019 Valuation
$’000
Techniques
Unobservable
Inputs
Range of
Unobservable
Inputs
531,376 Net asset value, discounted cash flow, Net asset value *
Not applicable
and/or market comparative
Call option
157,518 Direct comparison method and
investment method
Discount rate
11%
Adjusted market multiple
1.4x
Terminal growth rate
2.5%
Transacted price of
comparable properties
(psf)
$2,200 to $2,865
Capitalisation rate
3.5%
*
Fair value of unquoted equity instruments is determined by reference to the underlying assets value of the investee companies, which comprise mainly
investments and investment properties stated at fair value.
194
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Keppel Corporation Limited
FINANCIAL REPORT
Description
Investment Properties
- Commercial and residential,
completed
Fair value
as at
31 December
2019 Valuation
$’000
Techniques
Unobservable
Inputs
Range of
Unobservable
Inputs
1,667,822
Investment method, discounted
cash flow method and/or direct
comparison method;
Residual Method
Discount rate
5.60% to 12.76%
Capitalisation rate
3.75% to 9.00%
Net initial yield
3.93% to 5.85%
Price of comparable land
plots (psm)
$5,032 to $6,773
Transacted price of
comparable properties
(psf)
$1,616 to $3,502
- Commercial, under construction
1,354,269 Direct comparison method,
Price of comparable land
$8,121 to $19,219
discounted cash flow method, and/or plots (psm)
residual value method
Gross development
value ($’million)
$510 to $1,897
Description
Investments
Call option
Investment Properties
- Commercial and residential,
completed
Fair value
as at
31 December
2018 Valuation
$’000
Techniques
Unobservable
Inputs
Range of
Unobservable
Inputs
369,856 Net asset value and/or discounted
Net asset value *
Not applicable
cash flow
150,500 Direct comparison method and
investment method
Discount rate
11%
Transacted price of
comparable properties
(psf)
$2,500 to $3,200
Capitalisation rate
3.5% to 3.65%
1,716,314 Direct comparison method,
Discount rate
10.25% to 12.45%
investment method, cost
replacement method and/or
discounted cash flow method
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
Price of comparable land
plots (psm)
$6,737 to $11,990
Gross development value
($’million)
$636 to $1,898
- Commercial, under construction
1,135,066 Direct comparison method, and/or
residual method
*
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 2019
195
NOTES TO THE FINANCIAL STATEMENTS
34. Financial risk management (continued)
Description
Investments
Call option
Investment Properties
- Commercial and residential,
completed
Fair value
as at
1 January
2018 Valuation
$’000
Techniques
Unobservable
Inputs
Range of
Unobservable
Inputs
338,846 Net asset value and/or discounted
Net asset value *
Not applicable
cash flow
137,200 Direct comparison method and
investment method
Discount rate
11%
Transacted price of
comparable properties
(psf)
$2,600 to $3,200
Capitalisation rate
3.5% to 3.75%
1,404,294 Direct comparison method,
Discount rate
11.50% to 13.00%
investment method, cost
replacement method and/or
discounted cash flow method
Terminal yield
7.00%
Capitalisation rate
2.80% to 12.50%
Net initial yield
3.8%
Price of comparable land
plots (psm)
$7,627 to $12,463
Transacted price of
comparable properties (psf)
$1,321 to $2,500
Price of comparable land
plots (psm)
$7,627 to $12,463
Gross development value
($’million)
$588 to $1,866
- Commercial, under construction
2,056,314 Direct comparison method, and/or
residual method
*
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.
35. 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. M1 Limited, which was
part of Investments prior to the acquisition, continues to be reported under Investments segment as it is currently undergoing
transformation of its business. M1 contributed about 32% of the Group’s total depreciation and amortisation, and contributed
about 13% and 10% of the Group’s total revenue and net profit respectively for the financial year ended 31 December 2019. M1
accounted for about 5% of the Group’s total assets and total liabilities as at 31 December 2019.
196
Report to Shareholders 2019
Keppel Corporation Limited
FINANCIAL REPORT
Management monitors the results of each of the above operating segments for the purpose of making decisions about resource
allocation and performance assessment. Segment performance is evaluated based on net profit or loss. Information regarding the
Group’s reportable segments is presented in the following table:
Offshore
& Marine
$’000
Property
$’000
Infrastructure
$’000
Investments
$’000
Elimination
$’000
Total
$’000
2019
Revenue
External sales
Inter-segment sales
Total
Segment Results
Operating profit
Investment income
Interest income
Interest expenses
Share of results of
associated companies
(Loss)/profit before tax
Taxation
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
Other sources of revenue
Total
Other information
Segment assets
Segment liabilities
Net assets
Investment in associated companies
Additions to non-current assets
Depreciation and amortisation
Impairment loss/(write-back of
impairment loss)
Geographical information
2,219,397
1,336,236
2,927,331
1,096,739
-
7,579,703
323
11,187
31,018
112,809
2,219,720
1,347,423
2,958,349
1,209,548
(155,337)
(155,337)
-
7,579,703
60,041
4,988
74,444
507,740
48,131
48,776
113,612
1,410
63,443
194,988
10,065
356,896
(107,123)
(85,966)
(28,753)
(456,638)
120
-
(365,884)
365,764
(56,823)
(24,473)
33,182
8,709
188,189
706,870
(179,055)
527,815
38,079
187,791
(23,982)
163,809
(22,032)
83,279
(22,474)
60,805
10,050
(1,341)
8,709
517,373
10,442
527,815
168,391
(4,582)
163,809
11,161
49,644
60,805
96,640
2,122,757
2,219,397
-
999,497
223,302
1,222,799
113,437
23,005
2,895,665
2,918,670
8,661
363,757
729,148
1,092,905
3,834
2,219,397
1,336,236
2,927,331
1,096,739
-
-
-
-
-
-
-
-
-
-
-
-
876,501
64,594
177,675
(312,716)
147,413
953,467
(192,329)
761,138
706,975
54,163
761,138
1,482,899
5,970,872
7,453,771
125,932
7,579,703
9,493,583
14,081,759
3,960,727
12,028,650
(8,243,159)
31,321,560
6,663,302
2,830,281
6,435,784
7,645,975
2,552,695
12,266,907
(8,243,159)
19,675,529
1,408,032
(238,257)
-
11,646,031
645,946
95,440
121,126
3,443,534
1,067,436
1,193,929
- 6,350,845
622,622
38,275
188,819
58,393
297,711
157,500
- 1,204,592
- 375,294
6,827
(10)
(776)
37,445
-
43,486
Singapore
$’000
5,704,097
8,741,671
China/
Hong Kong
$’000
1,005,803
3,111,521
Other Far East
& ASEAN
countries
$’000
429,351
1,891,462
Brazil
$’000
83,769
286,862
Other
countries
$’000
356,683
686,175
Elimination
$’000
Total
$’000
-
-
7,579,703
14,717,691
External sales
Non-current assets
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 2019.
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 2019.
Note: Pricing of inter-segment goods and services is at fair market value.
Keppel Corporation Limited
Report to Shareholders 2019
197
NOTES TO THE FINANCIAL STATEMENTS
35. Segment analysis (continued)
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
Other sources of revenue
Total
Other information
Segment assets
Segment liabilities
Net assets
Offshore
& Marine
$’000
Property
$’000
Infrastructure
$’000
Investments
$’000
Elimination
$’000
Total
$’000
1,874,571
1,340,235
2,628,571
-
6,139
22,729
1,874,571
1,346,374
2,651,300
121,404
60,872
182,276
-
5,964,781
(89,740)
(89,740)
-
5,964,781
(73,433)
1,044,448
1,199
53,675
(102,630)
3,976
57,268
(77,250)
8,001
164,688
(113,188)
1,193,130
2,523
(110,665)
(254,992)
938,138
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)
942,459
(4,321)
938,138
169,584
6,936
176,520
(54,401)
11,116
(43,285)
97,835
1,776,736
1,874,571
-
828,021
433,529
1,261,550
78,685
28,642
2,592,846
2,621,488
7,083
1,874,571
1,340,235
2,628,571
10,470
105,655
116,125
5,279
121,404
1,834
1,055,162
-
(299,181)
297,347
-
-
-
-
-
-
-
-
-
-
-
-
9,991
164,260
(204,824)
220,895
1,245,484
(284,776)
960,708
948,392
12,316
960,708
964,968
4,908,766
5,873,734
91,047
5,964,781
8,461,013
5,556,134
2,904,879
13,831,333
5,684,310
8,147,023
3,649,336
2,248,589
1,400,747
7,596,099
8,472,056
(875,957)
(6,950,188)
26,587,593
(6,950,188)
15,010,901
-
11,576,692
Investment in associated companies
706,189
3,206,355
1,066,849
1,259,660
- 6,239,053
Additions to non-current assets
Depreciation and amortisation
Impairment loss
Geographical information
87,478
99,091
32,503
461,857
32,762
796
61,394
44,930
1,754
28,225
5,603
53,000
- 638,954
- 182,386
-
88,053
Singapore
$’000
4,370,849
6,119,072
China/
Hong Kong
$’000
741,759
2,747,668
Other Far East
& ASEAN
countries
$’000
374,430
1,648,108
Brazil
$’000
224,573
229,917
Other
countries
$’000
253,170
847,235
Elimination
$’000
Total
$’000
-
-
5,964,781
11,592,000
External sales
Non-current assets
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.
198
Report to Shareholders 2019
Keppel Corporation Limited
FINANCIAL REPORT
36. Business combinations
On 15 February 2019, the Group’s 80% owned subsidiary, Konnectivity Pte Ltd, acquired approximately 81% interest in M1 Limited,
bringing to a total of 100% as at 31 December 2019. The principal activities of M1 Limited are the provision of telecommunications
services, international call services and fixed services, retail sales of telecommunications equipment and accessories, and customer
services. The acquisition seeks to drive the business transformation in M1 to enable it to compete effectively. The acquisition will also
complement the Group’s mission as a solutions provider for sustainable urbanisation, which includes connectivity. M1 can serve as a
digital and connectivity platform to complement and augment the Group’s current suite of solutions.
In the prior year, acquisition of subsidiaries relates mainly to the acquisition of 77.6% interest in PRE 1 Investments Pte Ltd.
Net assets of subsidiaries acquired at their fair values were as follows:
Fixed assets
Investment Properties
Right-of-use assets
Intangible assets
Stocks
Contract assets
Debtors and other assets
Bank balances and cash
Creditors and other liabilities
Borrowings and lease liabilities
Current and deferred taxation
Non-controlling interests consolidated
Total identifiable net assets at fair value
Non-controlling interests measured at fair value
Amount previously accounted for as associated companies
Goodwill arising from acquisition
(Gain)/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
2019
$’000
772,654
2018
$’000
47
-
360,000
44,324
610,516
34,745
163,121
197,211
88,991
(241,555)
(496,189)
(251,498)
(2,091)
920,229
(308,001)
(210,137)
988,288
(158,376)
1,232,003
1,232,003
-
-
-
-
530
18,521
(6,778)
(297,923)
(3,827)
-
70,570
-
(32,484)
-
18,487
56,573
56,573
(88,991)
(18,521)
1,143,012
38,052
The fair value of the acquired identifiable intangible assets of $610,516,000 was finalised during the year.
The fair value of debtors and other assets acquired during the year was $197,211,000 and it includes trade receivables with a fair value
of $121,794,000. The gross contractual amount for trade receivables due was $131,019,000, of which $9,225,000 is expected to be
uncollectible.
The non-controlling interests at its fair value of $308,001,000 represents the 16% effective non-controlling interest in M1 Limited,
which was measured based on the $2.06 offer price per M1 Limited’s share under the voluntary conditional general offer, which was
concluded during the year.
The goodwill of $988,288,000 arising from the acquisition during the year was attributable to M1 Limited arising from the synergies
that is expected to be harnessed as a multi-business group. The goodwill was not deductible for tax purposes.
The revenue and net profit of the acquired business for the period from 15 February to 31 December 2019 were $950,002,000 and
$46,543,000 respectively. In addition, the Group recognised a net gain on the remeasurement of previously held equity interest at fair
value at acquisition date of $125,261,000, after taking into consideration the non-controlling interests share of $33,115,000. Had M1
Limited been acquired from 1 January 2019, the revenue and net profit of the Group for the year ended 31 December 2019 would have
been $7,764,708,000 and $715,255,000 respectively.
Acquisition-related costs of $4,800,000 was included in the other operating expense in the consolidated profit and loss account for the
year.
Keppel Corporation Limited
Report to Shareholders 2019
199
NOTES TO THE FINANCIAL STATEMENTS
37. 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:
•
Amendments to SFRS(I) 3 Business Combination (effective for annual periods beginning on or after 1 January 2020)
The amendments provide new guidance on the assessment of whether an acquisition meets the definition of a business under
SFRS(I) 3. To be considered a business, an acquisition would have to include an output and a substantive process that together
significantly contribute to the ability to create outputs. A framework is introduced to evaluate when an input and substantive
process are present. To be a business without outputs, there will now need to be an organised workforce.
The definition of the term ‘outputs’ is narrowed to focus on goods and services provided to customers, generating investment
income and other income, and it excludes returns in the form of lower costs and other economic benefits.
It is also no longer necessary to assess whether market participants are capable of replacing missing elements or integrating
the acquired activities and assets.
Entities can apply a ‘concentration test’ that, if met, eliminates the need for further assessment. Under this optional test, where
substantially all of the fair value of gross assets acquired is concentrated in a single asset (or a group of similar assets),
the assets acquired would not represent a business. These amendments are applied to business combinations and asset
acquisitions with acquisition date on or after 1 January 2020. Early application is permitted.
•
Amendments to SFRS(I) 9, SFRS(I) 1-39 and SFRS(I) 7 Interest Rate Benchmark Reform (effective for annual periods beginning
on or after 1 January 2020)
In December 2019, the ASC issued ‘Amendments to SFRS(I) 9, SFRS(I) 1-39 and SFRS(I) 7 Interest Rate Benchmark Reform’
(effective 1 January 2020). The amendments provide exceptions that allow entities to continue hedge accounting for existing
hedge relationships under the assumption that Inter Bank Offer Rate (IBOR) based hedged cash flows are not altered as a result
of the IBOR Reform.
These amendments are issued due to global reform of interest rate benchmarks such as IBORs. IBORs are key reference rates
for financial instruments such as derivatives, loans and bonds. In response to cases of attempted manipulation in relation to
key IBORs, and to the decline in liquidity in key interbank unsecured funding markets, the Financial Stability Board made several
recommendations relating to:
a.
b.
strengthening of IBORs by anchoring them to a greater number of transactions, where possible, and improving the
processes and controls around submissions;
identifying alternative near-risk-free rates (RFRs) and, where suitable, encouraging market participants to transition new
contracts to an appropriate RFR.
Regulators in a number of jurisdictions, including Singapore, are in the midst of phasing out IBORs and replacing them with more
suitable alternative reference rates. There is currently uncertainty around the timing and precise nature of these changes.
For the current financial year, the Group has determined that hedge relationships that include IBORs as a hedged risk continue to
qualify for hedge accounting without early adoption of the amendments. The Group continues to monitor the developments of
IBOR reform and it will assess the impact for the Group as further information becomes available.
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.
38. 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.
200
Report to Shareholders 2019
Keppel Corporation Limited
FINANCIAL REPORT
SIGNIFICANT SUBSIDIARIES AND ASSOCIATED COMPANIES
Gross
Interest
Effective Equity
Interest
Cost of Investment
2019
%
31 December
2019
%
2018
%
1 January
2018
%
31 December
2019
$’000
2018
$’000
1 January
2018
$’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
Angra Propriedades &
Administracao Ltda(1a)
Estaleiro BrasFELS
Ltda(1a)
100
100
100
100
100
100
100
100
FELS Offshore Pte Ltd
100
100
100
100
Fernvale Pte Ltd
100
100
100
100
FSTP Brasil Ltda(1a)
75
75
75
75
FSTP Pte Ltd
75
75
75
75
Guanabara Navegacao
Ltda(1a)
100
100
100
100
Keppel AmFELS, LLC
100
100
100
100
Keppel FELS Brasil SA(1a)
100
100
100
100
Keppel Letourneau USA,
100
100
100
100
Inc
Keppel Offshore &
Marine USA Inc
KV Enterprises BV(3)
KVE Adminstradora
de Bens Imoveis
Ltda(1a)
100
100
100
100
100
100
100
100
100
100
100
100
Lindel Pte Ltd
100
100
100
100
Offshore Partners Pte
Ltd
Offshore Technology
Development Pte Ltd
Regency Steel Japan
Ltd(1a)
Willalpha Limited(3)
FELS Asset Co Pte Ltd
100
100
100
100
100
100
100
100
51
51
51
51
100
100
100
100
100
100
100
100
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
Construction, fabrication and
repair of offshore production
facilities and drilling rigs, power
barges, specialised vessels and
other offshore production
facilities
Holding of long term investments
and property management
Engineering, construction and
fabrication of platforms for the oil
and gas sector, shipyard works
and other general business
activities
# Brazil
# Brazil
# 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
# Brazil
Ship owning
# USA
# Brazil
# USA
# USA
Construction and repair of
offshore drilling rigs and offshore
production facilities
Engineering, construction and
fabrication of platforms for the oil
and gas industry
Design and license of various
offshore rigs and platforms
Offshore and marine-related
services
# Netherlands Holding of long term investments
# Brazil
Holding of long term investments
and property management
# Singapore
Project management, engineering
and procurement
# Singapore
Arrange, syndicate and/or provide
financing to customers of Keppel
Group
# Singapore
Production of jacking systems
# Japan
Sourcing, fabricating and supply
of specialised steel components
# BVI
Holding of long term investments
# Singapore
Chartering of ships, barges and
boats with crew
Keppel Corporation Limited
Report to Shareholders 2019
201
FINANCIAL REPORT
SIGNIFICANT SUBSIDIARIES AND ASSOCIATED COMPANIES
Gross
Interest
Effective Equity
Interest
Cost of Investment
2019
%
31 December
2019
%
2018
%
1 January
2018
%
31 December
2019
$’000
2018
$’000
1 January
2018
$’000
Country of
Incorporation
/Operation
Principal Activities
FELS Asset Co 2 Pte
Ltd(n)
100
100
Offshore Partners 2 Pte
Ltd(n)
100
100
Lenity Pioneer Pte Ltd(n)
100
100
-
-
-
-
-
-
Associated Companies
Asian Lift Pte Ltd
50
50
Floatel International
Ltd(1a)
50
50
50
50
50
50
Blue Tern Ltd
(fka Seafox 5 Ltd)(2)
49
49
49
49
Marine
Subsidiaries
Keppel Shipyard Ltd
100
100
100
100
Keppel Philippines
Marine Inc(1a)
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
#
#
#
#
#
#
#
#
#
#
#
-
-
-
#
#
#
#
#
#
#
#
- Singapore
Chartering of ships, barges and
boats with crew
- Singapore
Chartering of ships, barges and
boats with crew
- Singapore
Service activities related to oil
and gas extraction
# Singapore
Provision of heavy-lift equipment
and related services
# Bermuda
Operating accommodation and
construction support vessels
(floatels) for the offshore oil and
gas industry
#
Isle of Man
Owning and leasing of multi-
purpose self-elevating platforms
# Singapore
Ship repairing, shipbuilding and
conversions
# Philippines
Shipbuilding and repairing
# 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
100
100
100
100
Associated Companies
Arab Heavy Industries
PJSC(1a)
Dyna-Mac Holdings Ltd
Keppel Smit Towage
Pte Ltd
Maju Maritime Pte Ltd
Nakilat - Keppel
Offshore & Marine
Ltd(2)
33
24
33
24
51
51
51
20
51
20
PV Keez Pte Ltd(2)
20
20
FueLNG Pte Ltd(2)
50
50
33
24
51
51
20
20
50
33
24
51
51
20
20
50
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
# Singapore
Holding of long term investments
# UAE
Shipbuilding and repairing
# Singapore
Fabrication & assembly of
topside modules for FPSOs and
FSOs
# Singapore
Provision of towage services
# Singapore
Provision of towage services
# Qatar
Ship repairing
# Singapore
Chartering of ships, barges and
boats with crew
# Singapore
Provide end-to-end LNG
bunkering supply solution
202
Report to Shareholders 2019
Keppel Corporation Limited
FINANCIAL REPORT
Gross
Interest
Effective Equity
Interest
Cost of Investment
2019
%
31 December
2019
%
2018
%
1 January
2018
%
31 December
2019
$’000
2018
$’000
1 January
2018
$’000
Country of
Incorporation
/Operation
Principal Activities
PROPERTY
Subsidiaries
Keppel Land Ltd
100
100
100
100 4,793,367 4,793,367 4,793,367 Singapore
Holding, management and
investment company
Keppel Land China Ltd
Keppel Land Estate
Pte Ltd
100
100
100
100
100
100
100
100
Keppel Bay Pte Ltd
100
100
100
100
#
#
#
#
#
#
# Singapore
Investment holding
# Singapore
Investment holding
# Singapore
Property development
87+
87+
87+
87+
493
493
493 Philippines
Investment holding
Keppel Philippines
Properties Inc(1a)
Agathese Pte Ltd
Aintree Assets Ltd(3)
Bayfront Development
Pte Ltd
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
Domenico Pte Ltd(n)
Double Peak Holdings
Ltd(3)
Eternal Commercial
Ltd(1a)
Evergro Properties Ltd
First King Properties
Ltd(3)
Floraville Estate Pte Ltd
Greenfield Development
Pte Ltd
Keppel Bay Tower Pte
Ltd
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
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
-
100
98
100
100
100
100
100
100
98
-
100
100
100
100
100
100
100
100
Estella JV Co Ltd(1a)
98
98
Hillwest Pte Ltd
Jencity Ltd(3)
100
100
100
100
100
100
100
90
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
-
#
#
#
#
#
#
#
#
#
#
# Singapore
Investment holding
# BVI
Investment holding
# Singapore
Investment holding
# 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
- Singapore
Investment holding
# BVI
Investment holding
# Vietnam
Property development and
investment
- HK
Investment holding
# Singapore
Investment holding
# Jersey
Property investment
# Singapore
Investment holding
# Singapore
Investment holding
# Singapore
Property investment
# Singapore
Investment holding
# BVI
Investment holding
Keppel Corporation Limited
Report to Shareholders 2019
203
SIGNIFICANT SUBSIDIARIES AND ASSOCIATED COMPANIES
Gross
Interest
Effective Equity
Interest
Cost of Investment
Country of
Incorporation
/Operation
Principal Activities
31 December
2019
%
2018
%
1 January
2018
%
31 December
2019
$’000
2018
$’000
1 January
2018
$’000
2019
%
100
100
100
100
99
99
99
100
100
100
100
100
100
-
100
100
100
100
100
100
100
100
100
100
100
100
100
100
#
#
#
#
#
#
#
#
#
#
#
#
#
#
# China
Property development
- Singapore
Investment trust
# Singapore
Investment holding
# 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
100
100
100
100
100
100
100
100
84
84
84
84
84
84
84
84
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
-
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
# China
Property development
# HK
Investment holding
# Singapore
Investment holding
# Singapore
Financial services
# Singapore
Property development
# Vietnam
Property development
# Vietnam
Property development
# Singapore
Investment holding
- China
Property development
# Singapore
Investment holding
# Singapore
Investment holding
# Singapore
Investment holding
# Singapore
Investment holding
- China
Property services
Jiangyin Evergro
Properties Co Ltd(1a)
Katong Retail Trust
KeplandeHub Ltd
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 (Saigon
Centre) Ltd(1a)
Keppel Land
(Singapore) Pte Ltd
Keppel Land Financial
Services Pte Ltd
Keppel Land Realty
Pte Ltd
Keppel Land Watco IV
Co Ltd(1a)
Keppel Land Watco V
Co Ltd(1a)
Keppel REIT
Investment Pte Ltd
Keppel Seasons
Residences Property
Development (Wuxi)
Co., Ltd(1a)
Keppel Tianjin Eco-City
Holdings Pte Ltd
Keppel Tianjin Eco-City
Investments Pte Ltd
Keppel Tianjin Eco-City
Three Pte Ltd
Keppel Tianjin Eco-City
Two Pte Ltd
Keppel Yongxiang
Corporate
Management
(Shanghai)
Company Ltd(1a)
Tosalco Pte Ltd
100
100
100
100
#
#
# Singapore
Investment holding
204
Report to Shareholders 2019
Keppel Corporation Limited
FINANCIAL REPORT
Gross
Interest
Effective Equity
Interest
Cost of Investment
2019
%
31 December
2019
%
2018
%
1 January
2018
%
31 December
2019
$’000
2018
$’000
1 January
2018
$’000
Country of
Incorporation
/Operation
Principal Activities
Krystal Investments
Pte Ltd
Joysville Investment
Pte Ltd
Main Full Ltd(1a)
Mansfield
Developments
Pte Ltd
Merryfield Investment
Pte Ltd
Oceansky Pte Ltd
OIL (Asia) Pte Ltd
Oscario Pte Ltd
Parksville Development
Pte Ltd
Pasir Panjang Realty
Pte Ltd
Peplamo Pte Ltd(n)
Pembury Properties
Ltd(3)
Pisamir Pte Ltd
Portsville Pte Ltd
Pre-1 Investments Pte
Ltd
PT Harapan Global
Niaga(1a)
PT Kepland
Investama(1a)
PT Puri Land
Development(1a)
PT Sukses Manis
Indonesia(1a)
PT Sukses Manis
Tangguh(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
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
100
100
100
100
Riviera Point LLC(1a)
75
75
75
75
Saigon Centre
Investment Ltd(3)
Saigon Sports City
Ltd(1a)
Beijing Changsheng
Consultant Co
Ltd(n)(1a)
Beijing Changsheng
Property
Management Co
Ltd(n)(1a)
Shanghai Floraville
Land Co Ltd(1a)
Shanghai Hongda
Property
Development Co
Ltd(1a)
Shanghai Ji Xiang
Land Co Ltd(1a)
100
100
100
100
100
100
100
90
100
100
100
100
99
99
100
99
-
-
99
99
-
-
99
99
100
100
100
100
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
-
#
#
#
#
#
#
#
#
#
#
#
#
-
-
#
#
#
# Singapore
Investment holding
# Singapore
Investment holding
# HK
Investment holding
# Singapore
Property development
# Singapore
Investment holding
# Singapore
Investment holding
# Singapore
Investment holding
# Singapore
Investment holding
# Singapore
Property development
# Singapore
Investment holding
- 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
Property development
#
Indonesia
Property development
# Vietnam
Property development
# BVI
Investment holding
# Vietnam
Property development
- China
Property investment
- China
Property investment
# China
Property investment
# China
Property development
# China
Property development
Keppel Corporation Limited
Report to Shareholders 2019
205
SIGNIFICANT SUBSIDIARIES AND ASSOCIATED COMPANIES
Gross
Interest
Effective Equity
Interest
Cost of Investment
Country of
Incorporation
/Operation
Principal Activities
31 December
2019
%
2018
%
1 January
2018
%
31 December
2019
$’000
2018
$’000
1 January
2018
$’000
2019
%
100
99
99
99
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)
Spring City Golf & Lake
Resort Co Ltd(1a)
Spring City Resort
Pte Ltd
Straits Greenfield Ltd(2)
Straits Property
Investments Pte Ltd
West Gem Properties
Ltd(3)
Associated Companies
Bellenden Investments
Ltd(3)
Chengdu Taixin Real
Estate Development
Co Ltd(2)
Chengdu Wanji Real
Estate Development
Co Ltd(n)(2)
City Square Office Co
Ltd(2)
Davinelle Ltd(3)
Dong Nai Waterfront
City LLC(1a)
Empire City Limited
LLC(2)
EM Services Pte Ltd
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
Nam Long Investment
Corporation(2)
Nanjing Jinsheng Real
Estate Development
Co Ltd(2)
Nanjing Zhijun Property
Development Co
Ltd(n)(2)
100
99
99
99
99
99
99
99
80
69
99
99
69
99
99
69
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
67
67
35
35
67
35
67
35
30
30
-
-
40
40
67
30
67
30
40
40
25
60
25
60
61
61
61
61
61
61
49
10
49
10
40
40
40
67
50
40
25
60
61
61
61
47
10
40
25
25
-
40
67
50
40
25
60
61
61
61
46
5
-
-
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
-
#
#
#
#
#
#
#
#
#
#
#
#
-
# China
Property development
# China
Investment holding
# China
Property development
# China
Property development
# China
Golf club operations and
development and property
development
# Singapore
Investment holding
# Myanmar
Hotel ownership and operations
# Singapore
Investment holding
# Jersey
Investment holding
# BVI
Investment holding
# China
Property investment
- China
Property investment
# Myanmar
Property development
# BVI
Investment holding
# Vietnam
Property development
# Vietnam
Property development
# Singapore
Property management
# Singapore
Property development
# Vietnam
# Vietnam
# Vietnam
Property investment and
development
Property investment and
development
Property investment and
development
# Singapore
Real estate investment trust
# Vietnam
Trading of development
properties
- China
Property development
- China
Property development
206
Report to Shareholders 2019
Keppel Corporation Limited
FINANCIAL REPORT
Gross
Interest
Effective Equity
Interest
Cost of Investment
Country of
Incorporation
/Operation
Principal Activities
31 December
2019
%
2018
%
1 January
2018
%
31 December
2019
$’000
2018
$’000
1 January
2018
$’000
2019
%
30
33
30
33
-
33
-
33
40
40
40
40
40
40
40
-
42
42
25
25
30
30
30
30
42
25
30
-
42
25
30
-
#
#
#
#
#
#
#
#
-
#
#
#
#
#
#
-
- Singapore
Investment holding
# Singapore
Property management
# Malaysia
Property investment
- China
Property development
# Vietnam
Property development
# Singapore
Property development
# Singapore
Investment holding
- China
Investment holding
100
100
100
100
445,892
445,892
445,892 Singapore
Investment holding
North Bund Pte Ltd(n)(2)
Raffles Quay Asset
Management Pte
Ltd(2)
Renown Property
Holdings (M)
Sdn Bhd(1a)
Nanjing Jinsheng Real
Estate Development
Co Ltd(2)
South Rach Chiec
LLC(1a)
Suzhou Property
Development
Pte Ltd(1a)
Vision (III) Pte Ltd(2)
Win Up Investment
Ltd(n)(2)
INFRASTRUCTURE
Subsidiaries
Keppel Infrastructure
Holdings Pte Ltd
Energy Infrastructure
Subsidiaries
Keppel Energy Pte Ltd
100
100
100
100
Keppel Electric Pte Ltd
100
100
100
100
Keppel Gas Pte Ltd
100
100
100
100
Keppel DHCS Pte Ltd
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
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)
Keppel Seghers UK
Ltd(1a)
Marina East Water
Pte Ltd
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
#
#
#
#
#
#
#
#
#
#
# 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
# United
Kingdom
Design and construction of
waste-to-energy plants
# Singapore
Design and construction of
desalination plant
Keppel Corporation Limited
Report to Shareholders 2019
207
SIGNIFICANT SUBSIDIARIES AND ASSOCIATED COMPANIES
Gross
Interest
Effective Equity
Interest
Cost of Investment
2019
%
31 December
2019
%
2018
%
1 January
2018
%
31 December
2019
$’000
2018
$’000
1 January
2018
$’000
Country of
Incorporation
/Operation
Principal Activities
Associated Companies
Tianjin Eco-City Energy
20
20
20
20
#
#
# China
Investment &
Construction Co
Ltd(2)
Infrastructure Services
Subsidiaries
Keppel Infrastructure
Services Pte Ltd
Keppel Seghers
Engineering
Singapore Pte Ltd
Keppel Seghers O&M
Pte Ltd(3)
Investments
Subsidiaries
Keppel Integrated
Engineering Ltd
Keppel XTE
Investments Pte Ltd
Keppel Seghers
Hong Kong Ltd(1a)
Associated Companies
Keppel Infrastructure
Trust(2)
Logistics & Data Centres
Subsidiaries
Keppel
Telecommunications
& Transportation Ltd
Investment and implementation
of energy and utilities related
infrastructure
Provision of technical support
including engineering,
construction, operations and
maintenance of plants and
facilities
100
100
100
100
#
#
# Singapore
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
18
18
18
18
#
#
#
#
#
#
#
#
#
#
#
#
# Singapore
Engineering works, construction
and O&M of plants and facilities
# Singapore
Dormant
# Singapore
Investment holding
# Singapore
Investment holding
# Hong Kong
Investment holding
# Singapore
Public trust
100
100
79
79
621,299
397,647
397,647 Singapore
Investment, management and
holding company
Keppel Logistics Pte Ltd
100
100
Keppel Data Centres
Pte Ltd
Keppel Data Centres
Holding Pte Ltd
Keppel DC Investment
Holdings Pte Ltd
100
100
100
100
Keppel Communications
Pte Ltd
100
100
79
79
79
79
79
79
79
79
100+
100+
85+
85+
Keppel Telecoms Pte Ltd
100
100
79
79
Associated Companies
Computer Generated
Solutions Inc(2)
21
21
17
17
Keppel DC REIT(2)
23+
23+
20+
29+
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
# Singapore
Integrated logistics services and
supply chain solutions
# Singapore
Investment holding
# Singapore
Investment holding and
management services
# Singapore
Investment holding
# Singapore
Trading and provision of
communications systems and
accessories
# Singapore
Investment holding
# USA
IT consulting and outsourcing
provider
# Singapore
Data centre facilities and
colocation services
208
Report to Shareholders 2019
Keppel Corporation Limited
FINANCIAL REPORT
Gross
Interest
Effective Equity
Interest
Cost of Investment
2019
%
31 December
2019
%
2018
%
1 January
2018
%
31 December
2019
$’000
2018
$’000
1 January
2018
$’000
Country of
Incorporation
/Operation
Principal Activities
24
24
32
32
50
50
19
25
40
17
25
40
#
#
#
#
#
#
# Thailand
# Thailand
# China
Online information service
provider
Distribution of IT products and
telecommunications services
Integrated logistics services and
port operations
100
100
100
100
783,000
783,000
783,000 Singapore
Investment holding
Business Online Public
Company Limited1(2)
SVOA Public Company
Ltd(2)
Wuhu Sanshan Port
Co Ltd(2)
INVESTMENTS
Subsidiaries
Keppel Capital Holdings
Pte Ltd
Keppel Capital
100
100
100
100
100
100
100
100
100+
100+
90+
90+
100
100
100
100
100
100
-
-
100
100
100
100
100
100
100
100
99
99
99
99
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
# Singapore
Investment holding
# Singapore
Fund management
# Singapore
Real estate investment trust
management and investment
holding
- Singapore
Investment holding
- Singapore
Investment holding
# Singapore
Trust management
# Singapore
Investment advisory and property
fund management
# Singapore
Investment holding
100
100
100
100
90,000
90,000
90,000 Singapore
Investment holding
100
100
100
-
10
10
- Singapore
Investment holding
100+
100+
100+
100+
126,744
126,744
126,744 Singapore
Investment holding
Investment Holdings
Pte Ltd
Alpha Investment
Partners Ltd
Keppel DC REIT
Management Pte Ltd
Keppel Capital Three
Pte Ltd(3)
First FLNG Holdings
Pte Ltd(3)
Keppel Infrastructure
Fund Management
Pte Ltd
Keppel REIT
Management Ltd
Alpha Real Estate
Securities Fund
Kephinance Investment
Pte Ltd
Kepinvest Holdings
Pte Ltd
Keppel Group Eco-City
Investments Pte Ltd
Keppel Konnect Pte
Ltd(n)
Konnectivity Pte Ltd(n)
80
80
100
100
-
-
-
-
1
#
-
#
- Singapore
Investment holding
# Singapore
Investment holding
Keppel Point Pte Ltd
100+
100+
100+
100+
122,785
122,785
122,785 Singapore
Property development and
investment
100
100
100
100
Keppel Funds
Investment Pte Ltd
Keppel GMTN Pte Ltd
Keppel Investment Ltd
Keppel Oil & Gas Pte Ltd
Kepventure Pte Ltd
M1 Limited(n)
M1 Shop Pte Ltd(n)
100
100
100
100
100+
100+
100
100
100
100
84+
84+
M1 Net Ltd(n)
100+
84+
100
100
100
100
15
15
15
#
10
#
#
#
10
#
#
# Singapore
Investment company
10 Singapore
Investment holding
# Singapore
Investment company
# Singapore
Investment holding
100
100
100
100
594,922
594,922
594,922 Singapore
Investment holding
15
15
15
#
#
#
#
#
#
# Singapore
Telecommunications services
# Singapore
Retail sales of telecommunication
equipment and accessories
# Singapore
Provision of fixed and other
related telecommunication
services
Keppel Corporation Limited
Report to Shareholders 2019
209
SIGNIFICANT SUBSIDIARIES AND ASSOCIATED COMPANIES
Gross
Interest
Effective Equity
Interest
Cost of Investment
2019
%
31 December
2019
%
2018
%
1 January
2018
%
31 December
2019
$’000
2018
$’000
1 January
2018
$’000
Country of
Incorporation
/Operation
Principal Activities
Singapore Tianjin
Eco-City Investment
Holdings Pte Ltd
Substantial Enterprises
Ltd(3)
90+
90+
90+
90+
100+
100+
100+
100+
#
#
#
#
# Singapore
Investment holding
# BVI
Investment holding
Travelmore Pte Ltd
100
100
100
100
265
265
265 Singapore
Travel agency
Associated Companies
Keppel Pacific Oak US
REIT (fka Keppel-KBS
US REIT)(2)
7
7
7
7
KrisEnergy Ltd(2)
40
40
40
40
50
45
45
45
30
30
30
30
Sino-Singapore Tianjin
Eco-City Investment
and Development
Co., Ltd(2)
Vietcombank Tower 198
Ltd(2)
Total Subsidiaries
Notes:
#
#
#
#
#
#
#
#
# Singapore
Real estate investment trust
# Cayman
Islands
Exploration for, and the
development and production
of oil and gas
# China
Property development
# Vietnam
Property investment
8,383,528 8,159,875 8,159,865
(i)
All the companies are audited by PricewaterhouseCoopers LLP, Singapore except for the following:
(1a) Audited by overseas practice of PricewaterhouseCoopers LLP;
(2) Audited by other firms of auditors; and
(3) Not required to be audited by law in the country of incorporation and companies disposed, liquidated and struck off.
In accordance to Rule 716 of The Singapore Exchange Securities Trading Limited – Listing Rules, the Audit Committee and Board of Directors of the Company
confirmed that they are satisfied that the appointment of different auditors for its subsidiaries and significant associated companies does 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 215 significant subsidiaries and associated companies as at 31 December 2019. 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.
210
Report to Shareholders 2019
Keppel Corporation Limited
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 23 April 2019. During the financial year, the following interested person transactions were entered into by the Group:
Name of Interested Person
Nature of relationship
Transaction for the Sale of Goods and Services
Temasek Holdings Group (other than the below)
Temasek Holdings
PSA International Group
SembCorp Marine Group
Singapore Power Group
Singapore Technologies Engineering Group
Singapore Telecommunications Group
Starhub Group
(Private) Limited
is a controlling
shareholder of the
Company. The other
named interested
persons are its
associates.
Transaction for the Purchase of Goods and Services
Temasek Holdings Group (other than the below)
Temasek Holdings
(Private) Limited
is a controlling
shareholder of the
Company. The other
named interested
persons are its
associates.
Certis CISCO Security Group
Mapletree Investments Group
Pavilion Gas Pte Ltd
PSA International Group
Singapore Power Group
Starhub Group
MediaCorp Group
SembCorp Marine Group
Singapore Technologies Engineering Group
Singapore Telecommunications Group
SMRT Corporation 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)
2019
$’000
2018
$’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)
2019
$’000
470
4,319
869
876
988
8,276
3,349
1,377
801
–
62,000
151
126
19,791
442
327
4,632
38,111
1,258
2018
$’000
–
208
2,202
923
1,272
–
–
336
549
773
52,000
501
43
28
–
–
418
6,776
209
148,163
66,238
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 2019
211
OTHER INFORMATION
KEY EXECUTIVES
Chan Hon Chew, 54
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, Keppel Capital Holdings Pte Ltd and M1 Limited.
Past principal directorships in the last five years
KrisEnergy Ltd and Keppel DC REIT Management Pte Ltd (the Manager of Keppel DC REIT).
Christina Tan Hua Mui, 54
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.
Ms Tan’s principal directorships include Keppel Capital, Keppel REIT Management Limited (the Manager of Keppel REIT), Keppel DC REIT
Management Pte Ltd (the Manager of Keppel DC REIT), Keppel Infrastructure Fund Management Pte Ltd (the Trustee-Manager of Keppel
Infrastructure Trust) and the two private fund managers under Keppel Capital, being Alpha and Keppel Capital Alternative Asset Pte Ltd
(KCAA). She also sits on the Investment Committees for the private funds managed by Alpha and KCAA.
Past principal directorships in the last five years
Nil.
Ong Tiong Guan, 61
Bachelor of Engineering (First Class Honours), Monash University; Doctor of Philosophy (Ph.D.) under Monash Graduate Scholarship, Monash
University, Australia.
Dr Ong was appointed Keppel Energy Pte Ltd’s Executive Director in November 1999. He became Managing Director of Keppel Energy Pte Ltd
with effect from 1 May 2003 and was appointed Deputy Chairman of Keppel Integrated Engineering Ltd on April 2013.
Upon reorganisation of Keppel Energy Pte Ltd and Keppel Integrated Engineering Ltd under Keppel Infrastructure Holdings Pte Ltd in May
2013, Dr Ong was appointed Chief Executive Officer of Keppel Infrastructure Holdings Pte Ltd, responsible for the Keppel Group’s energy
infrastructure business.
Dr Ong’s career spans across the energy industry from engineering and contracting to investment and ownership of energy assets.
His principal directorships include Keppel Infrastructure Holdings Pte Ltd, Keppel Energy Pte Ltd, Keppel Electric Pte Ltd, Keppel Gas Pte Ltd,
Keppel DHCS Pte Ltd, Keppel Infrastructure Services Pte Ltd, Keppel Seghers Pte Ltd, Keppel Capital Holdings Pte Ltd and MET Holding AG.
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 (Trustee-Manager of
Keppel Infrastructure Trust) and Energy Studies Institute.
212
Report to Shareholders 2019
Keppel Corporation Limited
OTHER INFORMATION
Tan Swee Yiow, 59
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). Prior to 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 a Director of the World
Green Building Council Board and Immediate Past President of the Singapore 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
Committee of Real Estate Developers’ Association of Singapore.
Past principal directorships in the last five years
Nil.
Chris Ong Leng Yeow, 44
Bachelor and Master Degree in Electrical and Electronics Engineering, National University of Singapore.
Mr 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 in 1999 as a Commissioning Superintendent
(E&I) and he has held appointments such as Project Engineer, Section Manager, Deputy Engineering Manager, Assistant General Manager
(Engineering), General Manager (Engineering), Acting Executive Director (Operations), Executive Director (Commercial) and Managing Director
of Keppel FELS Limited.
In addition to his current appointment, Mr Ong is also board member of Maritime and Port Authority of Singapore and The Institute of
Technical Education Board of Governors, and a member of the 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; 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 Amfels LLC, Keppel Nantong Heavy Industry Co Ltd, Keppel Nantong Shipyard Co
Ltd, Asian Lift Pte Ltd, Keppel FELS Brasil S.A. and FueLNG Pte Ltd. He is also a Director of various subsidiaries or associated companies of
Keppel O&M. He 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.
Thomas Pang Thieng Hwi, 55
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 subsidiaries, associates and joint venture companies of Keppel T&T. 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), Keppel
Technology Innovation Pte Ltd and M1 Limited.
Past principal directorships in the last five years
Keppel Infrastructure Fund Management Pte Ltd (the Trustee-Manager of KIT) and various subsidiaries and associated companies of
Keppel T&T.
Keppel Corporation Limited
Report to Shareholders 2019
213
KEY EXECUTIVES
Manjot Singh Mann, 55
Master of Management Studies (Marketing and Sales Management), University of Bombay; Bachelor of Engineering (Mechanical Engineering),
University of Jabalpur.
Mr Manjot Singh Mann assumed the Chief Executive Officer role at M1 Limited (M1) on 6 December 2018 and was appointed to the Board of
M1 on 11 June 2019.
Mr Mann has about 30 years of operational leadership experience across diverse geographical markets and a unique blend of insights and
perspectives in the rapidly evolving telecommunications industry.
Prior to joining M1, Mr Mann served as CEO at Pareteum Asia, a leading cloud software platform company, where he was appointed to
expand NASDAQ-listed Pareteum Corporation’s footprint in Asia. He was previously Global CEO (Communications and Convergence) of
Lebara Mobile (UK), one of the largest multinational, pan-European mobile virtual network operators in the world. He was also former CEO of
Hutchison Telecommunication in Jakarta, Indonesia.
Past principal directorship in the last five years
Pareteum Asia Pte Ltd and Lebara Service Centre Limited.
Chua Hsien Yang, 42
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.
Paul Tham Wei Hsing, 38
Bachelor of Science in Civil & Environmental Engineering, Cornell University; Master 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 finance, compliance, legal and investor relations. 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 strategies. 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 Pacific Oak US REIT Management Pte. Ltd. (the Manager of Keppel-Pacific Oak US REIT).
Past principal directorships in the last five years
Nil.
214
Report to Shareholders 2019
Keppel Corporation Limited
OTHER INFORMATION David Eric Snyder, 49
Bachelor of Science in Business Administration, Biola University.
Mr Snyder was part of the management team that led the successful listing of Keppel Pacific Oak US REIT and has been the Chief Executive
Officer and Chief Investment Officer since its listing on 9 November 2017. Prior to his current appointment, Mr Snyder was a consultant to
KBS Capital Advisors where he managed the AFRT portfolio.
From 2008 to 2015, Mr Snyder was the Chief Financial Officer (CFO) of KBS Capital Advisors and five of its non-traded REITs. In addition to
his CFO responsibilities, he led the negotiation for the transfer of the AFRT portfolio comprised of over 800 properties valued at over US$1.7
billion. He subsequently managed that portfolio for KBS Real Estate Investment Trust.
From 1998 to 2008, Mr Snyder was the Financial Controller for Nationwide Health Properties, a publicly traded healthcare REIT. Prior to that
he was the Director of Financial Reporting for Regency Health Services.
Mr Snyder started his career as an auditor at Arthur Andersen LLP after graduating from Biola University.
Past principal directorships in the last five years
Nil.
Matthew R. Pollard, 52
Bachelor of Arts Degree, Columbia University; Master 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
DataCentre One Pte. Ltd., Keppel Capital Ventures Pte. Ltd. and various subsidiaries and associated companies of Honiton Energy.
Alvin Mah, 48
Bachelor of Business Administration (Honours), National University of Singapore; CFA® charterholder.
Mr Mah is the Chief Executive Officer of Alpha Investment Partners Limited. He currently sits on the Investment Committee for various
funds under management and is also an Executive Director of Alpha’s Board. Prior to his current appointment, Mr Mah served as the Chief
Investment Officer, leading all investment efforts including crafting the investment strategies.
Mr Mah has been active in Asian finance and investment activities for more than 20 years and has conducted investments in key Asian
markets. He is well-versed in various aspects of investment and finance, having played key leadership roles in investment and banking. With
a wide-ranging exposure to finance, he has been able to customise structured solutions to meet specific investment objectives and has done
pioneering work for structured real estate investments, including Real Estate Investment Trusts and securitisation.
Past principal directorships in last five years
Nil.
Keppel Corporation Limited
Report to Shareholders 2019
215
KEY EXECUTIVES
Bridget Lee Siow Pei, 48
Master of Business Administration, JL Kellogg Graduate School of Management, Northwestern University; Bachelor of Accountancy, Nanyang
Technological University
Ms Lee is the Chief Executive Officer (CEO) and Executive Director of Keppel Capital Alternative Asset Pte Ltd, a wholly-owned subsidiary of
Keppel Capital Holdings Pte Ltd (Keppel Capital). Prior to assuming the role of CEO, Ms Lee helped to spearhead the efforts in the investment
of new platforms and initiatives in Keppel Capital. Ms Lee has more than 20 years of experience in investment, corporate finance and mergers
and acquisitions with various financial institutions in Asia and the United States. Her track record in transactions ranges from private equity,
joint ventures, capital market transactions, listed companies’ merger and acquisitions to funds and real assets investments.
Prior to joining Keppel Capital, Ms Lee was with Mapletree Investments as Senior Vice President of Investment overseeing the China market.
She was also with other global financial organisations including Temasek International Pte Ltd.
Past principal directorships in last five years
Nil.
Devarshi Das, 48
Master of Business Administration, University of Chicago, Booth School of Business; Master of Science in Civil Engineering, Purdue University;
Bachelor of Technology in Civil Engineering, Indian Institute of Technology.
Mr Das is the Chief Executive Officer (CEO), Infrastructure, Keppel Capital Alternative Asset Pte Ltd, a wholly-owned subsidiary of Keppel
Capital Holdings Pte Ltd (Keppel Capital). He joined Keppel Capital in Jan 2019 and is focused on building the private infrastructure fund
business. Mr Das has more than 20 years of private equity, principal investment and financial services experience.
Prior to Keppel Capital, Mr Das was the CEO of Capital Advisors Partners Asia Pte Ltd (CapAsia). Mr Das joined CapAsia, an infrastructure
private equity fund manager specialising in mid-market energy and infrastructure companies and assets, at the launch of its first fund in
2006. Over a tenure of more than 12 years in CapAsia, Mr Das was involved in all aspects of fund management of multiple funds and a key
executive of their funds. He was on the board of various portfolio companies representing the power, transportation, renewable energy and
telecommunications sectors.
Prior to CapAsia, Mr Das was with Australia and New Zealand Bank in their Project and Structured Finance group in Singapore. Mr Das also
has principal investment experience in the United States (US). He worked in the US energy industry for Enron Energy Services as an asset
investment manager. He also worked for Sempra Energy Solutions on investments into their contracted energy assets. Mr Das has also
acted as a product manager for the commercial auto insurance product of Progressive Insurance where he was responsible for the product
profitability across various midwestern states in the US.
Past principal directorships in last five years
Nil.
216
Report to Shareholders 2019
Keppel Corporation Limited
OTHER INFORMATION MAJOR PROPERTIES
Held By
Completed properties
Effective
Group
Interest
Location
Description and
Approximate
Land Area
Tenure
Usage
Keppel REIT
49%
Keppel DC REIT
23%
Ocean Financial
Centre
Collyer Quay,
Singapore
One Raffles Quay,
Singapore
Marina Bay
Financial Centre
Towers 1 and 2,
and Marina Bay
Link Mall
Marina Boulevard,
Singapore
Marina Bay
Financial Centre
Tower 3
Marina Boulevard,
Singapore
275 George Street
Brisbane,
Australia
Commercial office
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: 33,220 sqm
Two office towers of
33-storey and 50-storey
with ancillary retail space
999 years leasehold
Commercial office building with
rentable area of 81,450 sqm
99 years leasehold
Commercial office building with
rentable area of 123,187 sqm
99 years leasehold
Commercial office building with
rentable area of 161,348 sqm
Land area: 9,710 sqm
46-storey office tower
with retail podium
99 years leasehold
Commercial office building with
rentable area of 124,171 sqm
Land area: 3,655 sqm
31-storey office tower
Freehold
Commercial office building with
rentable area of 41,720 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 45,011 sqm
8 Chifley Square
Sydney,
Australia
David Malcolm
Justice Centre
Perth,
Australia
T Tower
Seoul,
South Korea
Keppel DC
Singapore 1
Serangoon,
Singapore
Keppel DC
Singapore 2
Tampines,
Singapore
Keppel DC
Singapore 3
Tampines,
Singapore
Keppel DC
Singapore 4
Tampines,
Singapore
Keppel DC
Singapore 5
Jurong,
Singapore
DC1
Riverside Road,
Singapore
Land area: 1,581 sqm
30-storey office tower
99 years leasehold
Commercial office building with
rentable area of 19,334 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: 5,346 sqm
28-storey office tower
Freehold
Commercial office building with
rentable area of 21,215 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
Land area: 6,805 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
30 years lease with
option for another
30 years
Data centre with rentable area
of 10,193 sqm
Data centre with rentable area
of 3,575 sqm
Data centre with rentable area
of 5,103 sqm
Data centre with rentable area
of 7,854 sqm
Land area: 7,742 sqm
5-storey data centre
30 years lease
Data centre with rentable area
of 9,176 sqm
Land area: 8,538 sqm
5-storey data centre
70 years and
5 months lease
Data centre with rentable area
of 19,864 sqm
Keppel Corporation Limited
Report to Shareholders 2019
217
OTHER INFORMATION
MAJOR PROPERTIES
Held By
Effective
Group
Interest
Location
Description and
Approximate
Land Area
Gore Hill Data Centre Land area: 6,692 sqm
Sydney,
Australia
4-storey data centre
Tenure
Freehold
Usage
Data centre with rentable area
of 8,450 sqm
Almere Data Centre
Amsterdam,
Netherlands
Keppel DC Dublin 2
Dublin,
Ireland
maincubes Data
Centre
Offenbach am Main,
Germany
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 2,383 sqm
Land area: 5,596 sqm
4-storey data centre
Freehold
Data centre with rentable area
of 9,016 sqm
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
Office campus featuring
24th Street, Bellevue, 9 multi-tenanted office
Washington,
USA
buildings
The Westpark
Portfolio
8200-8644
154th Avenue
NE Redmond,
Washington,
USA
Land area: 167,621 sqm
Business campus
comprising 19 office
buildings and 2 flex
buildings which are
multi-tenanted
Westmoor Center
Westmoor Drive,
Colorado,
USA
Land area: 176,953 sqm
Business campus featuring
6 multi-tenanted office
buildings
Freehold
Commercial office building with
rentable area of 45,615 sqm
Freehold
Commercial office buildings
with rentable area of 30,705 sqm
Freehold
Commercial office and
flex buildings with rentable area
of 72,667 sqm
Freehold
Commercial office building with
rentable area of 56,939 sqm
1800 West Loop
South
Houston,
USA
Maitland
Promenade I & II
485 & 495
N Keller Road,
Florida,
USA
Land area: 7,627 sqm
A 21-storey high rise office
multi-tenanted property
Freehold
Commercial office building with
rentable area of 37,171 sqm
Land area: 78,379 sqm
Office campus featuring
2 multi-tenanted office
buildings
Freehold
Commercial office building with
rentable area of 42,804 sqm
One Twenty Five
125 East John
Carpenter Freeway,
Texas,
USA
Land area: 25,594 sqm
Office complex comprising
2 office buildings and
a 7-storey parking garage
which are multi-tenanted
Keppel Towers and
Keppel Towers 2
Hoe Chiang Road,
Singapore
Land area: 9,127 sqm
27-storey and 13-storey
office towers
Freehold
Commercial office building with
rentable area of 41,371 sqm
Freehold
Commercial office building with
rentable area of 45,355 sqm
Reflections at
Keppel Bay
Singapore
Corals at
Keppel Bay
Singapore
Keppel Bay Tower
HarbourFront
Avenue,
Singapore
Land area: 83,538 sqm
99 years leasehold
Land area: 38,830 sqm
99 years leasehold
A 1,129-unit waterfront
condominium development
A 366-unit waterfront
condominium development
Land area: 17,267 sqm
18-storey office tower
99 years leasehold
Commercial office building with
rentable area of 35,916 sqm
Keppel Pacific Oak US REIT 7%
(f.k.a. Keppel-KBS US REIT)
Mansfield Developments
Pte Ltd
100%
Keppel Bay Pte Ltd
100%
100%
100%
Keppel Bay Tower Pte Ltd
(f.k.a. HarbourFront One
Pte Ltd)
218
Report to Shareholders 2019
Keppel Corporation Limited
OTHER INFORMATION
Held By
Katong Retail Trust
Beijing Changsheng
Property Management
Co Ltd
Effective
Group
Interest
100%
100%
Win Up Investment Ltd
30%
Spring City Golf &
Lake Resort Co
(owned by Kingsdale
Development Pte Ltd)
69%
North Bund Pte Ltd
30%
Vision (III) Pte Ltd
30%
PT Kepland Investama
100%
100%
Tanah Sutera Development 18%
Sdn Bhd
Location
I12 Katong
East Coast Road,
Singapore
Linglong Tiandi
Beijing,
China
Westmin Plaza
Guangzhou,
China
Spring City Golf
& Lake Resort
Kunming,
China
North Bund Plaza
(f.k.a. Yi Fang Tower)
Shanghai,
China
Trinity Tower
Shanghai,
China
International
Financial Centre
(Tower 1)
Jakarta,
Indonesia
International
Financial Centre
(Tower 2)
Jakarta,
Indonesia
Taman Sutera and
Taman Sutera
Utama
Johor Bahru,
Malaysia
City Square Office Co Ltd
40%
Junction City Tower Land area: 26,406 sqm
(Phase 1)
Yangon,
Myanmar
Land area: 32,000 sqm
Straits Greenfield Ltd
100%
First King Properties Ltd
100%
Keppel Land Watco I Co Ltd 61%
Keppel Land Watco II & III
Co Ltd
61%
Sedona Hotel
Yangon
Yangon,
Myanmar
75 King William
Street London,
United Kingdom
Saigon Centre
(Phase 1)
Ho Chi Minh City,
Vietnam
Saigon Centre
(Phase 2)
Ho Chi Minh City,
Vietnam
Description and
Approximate
Land Area
Tenure
Usage
Land area: 7,261 sqm
99 years leasehold
A 6-storey shopping mall
Land area: 3,546 sqm
Land area: 9,278 sqm
Land area: 2,507,653 sqm
Two 18-hole golf courses
50 years lease (office) A 11-storey office tower with
40 years lease (retail) ancillary retail space in Haidian
District
50 years lease (office) A 17-storey office tower with
40 years lease (retail) ancillary retail space in Liwan
District
70 years lease
(residential)
50 years lease
(golf course)
Integrated resort comprising
golf courses, resort homes and
resort facilities
Land area: 13,373 sqm
50 years lease (office) A mixed-use development in
40 years lease (retail) Hongkou District
Land area: 16,427 sqm
50 years lease (office) A mixed-use development in
40 years lease (retail) Hongkou District
Land area: 10,428 sqm
20 years lease with
option for another
20 years
A prime office development
with rentable area of 27,933 sqm
Land area: 10,428 sqm
20 years lease with
option for another
20 years
A prime office development
with rentable area of 50,200 sqm
Land area: 2,018,390 sqm
Freehold
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
789 rooms
50 years BOT with
option for another
two 10-years
50 years BOT with
option for another
two 10-years
Land area: 1,940 sqm
9-storey office tower
Freehold
Commercial office building with
rentable area of 11,731 sqm
Land area: 2,730 sqm
25-storey office,
retail cum serviced
apartments development
50 years leasehold
Land area: 8,355 sqm
50 years leasehold
Commercial building with
rentable area of 11,683 sqm
office and 89 units of
serviced apartments
Commercial building with
rentable area of 37,600 sqm
retail, 34,000 sqm office and
195 units of serviced
apartments
Keppel Corporation Limited
Report to Shareholders 2019
219
MAJOR PROPERTIES
Held By
Effective
Group
Interest
Location
Description and
Approximate
Land Area
Tenure
Usage
Properties under development
Keppel REIT
Gardens Development
Pte Ltd
49%
60%
Parksville Development
Pte Ltd
100%
311 Spencer Street
Melbourne,
Australia
The Garden
Residences
Serangoon,
Singapore
19 Nassim
Nassim Hill,
Singapore
Land area: 5,136 sqm
Freehold
Land area: 17,189 sqm
99 years leasehold
Land area: 5,785 sqm
99 years leasehold
Keppel Bay Pte Ltd
100%
Keppel Bay Plot 6
Singapore
Land area: 43,701 sqm
99 years leasehold
An office development located
in CBD
*(2020)
A 613-unit condominium
development
*(2021)
A 101-unit condominium
development
*(2023)
A proposed 86-unit waterfront
condominium development
Shanghai Floraville Land
Co Ltd
99%
Park Avenue Central Land area: 27,958 sqm
Shanghai,
China
40 years lease (retail) An office and retail development
50 years lease (office) *(2023)
Shanghai Jinju Real Estate
Development Co Ltd
99%
Chengdu Hilltop
Development Co Ltd
100%
Chengdu Shengshi Jingwei
Real Estate Co Ltd
100%
Chengdu Wanji Real Estate
Development Co Ltd
30%
Keppel Lakefront (Wuxi)
Property Development
Co Ltd
100%
Keppel Seasons Residences 100%
Property Development
(Wuxi) Co Ltd
Keppel Hong Da
(Tianjin Eco-City) Property
Development Co Ltd
100%
100%
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
Nanjing Jinsheng Real
Estate Development Co Ltd
40%
Nanjing Zhijun Property
Development Co Ltd
25%
Sheshan Riviera
Shanghai,
China
Hill Crest Villas
Chengdu,
China
Serenity Villas
Chengdu,
China
City Park
Chengdu,
China
Waterfront
Residences
Wuxi,
China
Seasons
Residences
Wuxi,
China
Development in
Sino-Singapore
Tianjin Eco-City
Tianjin,
China
Seasons City in
Sino-Singapore
Tianjin Eco-City
Tianjin,
China
China Chic
Nanjing,
China
Xuanwu
Mixed-use Devt
Nanjing,
China
Land area: 175,191 sqm
70 years lease
(residential)
40 years lease
(commercial)
A 217-unit landed development
in Sheshan
*(2022 Phase 2)
Land area: 249,330 sqm
70 years leasehold
Land area: 286,667 sqm
70 years leasehold
Land area: 47,261 sqm
70 years leasehold
Land area: 215,230 sqm
Land area: 180,258 sqm
Land area: 313,265 sqm
70 years lease
(residential)
40 years lease
(commercial)
70 years lease
(residential)
40 years lease
(commercial)
70 years lease
(residential)
40 years lease
(commercial)
Land area: 40,451 sqm
40 years leasehold
A 274-unit landed development
in Xinjin County
*(2020 Phase 2)
A 867-unit landed development
in Xinjin County
*(2020 Phase 2)
A 772-unit landed development
in Tianfu New Area
*(2021)
A 1,403-unit residential
development with commercial
and SOHO facilities in Binhu
District
*(2020 Phases 5 & 6)
A 2,904-unit residential
development with integrated
facilities in Xinwu District
*(2020 Phases 1 & 2)
A 4,297-unit residential
development with retail space
*(2020 Seasons Garden Plot 8,
Seasons Heights)
A commercial sub-centre
comprising a retail complex and
three office towers
*(2020 Phase 1)
Land area: 87,790 sqm
Land area: 37,285 sqm
70 years lease
(residential)
40 years lease
(commercial)
70 years lease
(residential)
40 years lease
(commercial)
A 1,589-unit residential
development in the core of
Nanjing Jiangbei New Area
*(2021 Phases 1 & 2)
A mixed-used development with
about 181 residential units and
419 commercial units in
Xuanwu District
*(2022)
220
Report to Shareholders 2019
Keppel Corporation Limited
OTHER INFORMATION
Held By
Effective
Group
Interest
Location
Description and
Approximate
Land Area
Tenure
Usage
PT Harapan Global Niaga
100%
Tanah Sutera Development 18%
Sdn Bhd
City Square Tower Co Ltd
40%
Saigon Sports City Ltd
100%
Empire City LLC
40%
West Vista at Puri
Jakarta,
Indonesia
Taman Sutera and
Taman Sutera
Utama
Johor Bahru,
Malaysia
Junction City
Tower
(Phase 2)
Yangon,
Myanmar
Saigon Sports City
Ho Chi Minh City,
Vietnam
Empire City
Ho Chi Minh City,
Vietnam
Land area: 28,851 sqm
30 years lease with
option for another
20 years
A 2,855-unit residential
development with ancillary
shop houses
Land area: 2,850,774 sqm
Freehold
A township comprising
residential units, commercial
space and recreational facilities
in Skudai
Land area: 26,406 sqm
50 years BOT with
option for another
two 10-years
A mix-used development in CBD
*(2023)
Land area: 638,737 sqm
50 years leasehold
Land area: 146,000 sqm
50 years leasehold
A township with about 4,300
apartments, commercial
complexes and public sports
facilities
*(2023 Phase 1)
A residential development with
commercial space in Thu
Thiem New Urban Area,
District 2
*(2020 Phase 1)
A residential township with
about 6,600 units and
commercial space in Long
Thanh District
*(2023 Phases 1A & 1B)
Dong Nai Waterfront City
LLC (owned by Portsville
Pte Ltd)
30%
Dong Nai
Waterfront City
Dong Nai Province,
Vietnam
Land area: 1,974,000 sqm
50 years leasehold
Industrial properties
Keppel FELS Limited
100%
Estaleiro BrasFELS Ltda
100%
Keppel Shipyard Limited
100%
*
Expected year of completion
Pioneer and
Crescent Yard,
Singapore
Land area: 522,097 sqm
buildings, workshops,
building berths, drydocks
and wharves
Angra dos Reis,
Rio de Janeiro,
Brazil
Land area: 409,020 sqm
buildings, workshops,
drydock, berths and wharf
Benoi and
Pioneer Yard,
Singapore
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
Keppel Corporation Limited
Report to Shareholders 2019
221
GROUP FIVE-YEAR PERFORMANCE
Selected Profit & Loss Account Data
($ million)
Revenue
Operating profit
Profit before tax
Net profit attributable to shareholders
of the Company
Selected Balance Sheet Data
($ million)
Fixed assets, properties &
right-of-use assets
Investments
Stocks, contract assets, debtors, cash &
long term assets
Intangibles
Total assets
Less:
Creditors
Borrowings & lease liabilities
Other liabilities
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)
2015
2016
2017
2018#
2019
10,296
1,576
1,991
6,767
901
1,088
1,525
784
5,964
801
442^
196^
6,118
6,030
16,672
100
28,920
7,925
8,259
810
11,926
11,096
830
11,926
104.2
84.0
34.0
6.13
6.07
17.6
14.2
2.5
(0.53)
6,195
6,076
17,532
141
29,944
8,034
9,053
512
12,345
11,668
677
12,345
57.1
43.2
20.0
6.43
6.35
9.1
6.9
2.2
5,894
6,575
16,084
133
28,686
8,298
7,793
622
11,973
11,443
530
11,973
23.3^
10.8^
22.0
6.29
6.22
3.7
1.7
0.5
(0.56)
(0.46)
5,965
1,055
1,245
948
5,224
6,825
14,410
129
26,588
6,912
7,549
550
11,577
11,268
309
11,577
67.7
52.3
30.0*
6.22
6.15
10.8
8.4
1.7*
(0.48)
7,580
877
954
707
6,684
7,121
15,834
1,683
31,322
7,325
11,657
694
11,646
11,211
435
11,646
48.8
38.9
20.0
6.17
5.25
7.9
6.3
1.9
(0.85)
36,153
1,662
28,879
1,282
21,862
1,107
18,186
1,018
18,297
1,187
^
#
*
Includes the one-off financial penalty from the global resolution and related costs of $619 million.
The 2018 financial figures have been restated due to an IFRIC agenda decision on SFRS(I) 1-23 Borrowing costs eligible for capitalisation.
Includes the special dividend paid of 5.0 cents per share.
Notes:
1.
Earnings per share are calculated based on the Group profit by reference to the weighted average number of shares in issue during the year.
2.
In calculating return on shareholders’ funds, average shareholders’ funds has been used.
222
Report to Shareholders 2019
Keppel Corporation Limited
OTHER INFORMATION
2019
Group revenue of $7,580 million for 2019 was $1,615 million or 27% higher than in the preceding year. Revenue from the O&M Division
improved by $345 million or 18% to $2,220 million due mainly to higher revenue recognition from ongoing projects, partly offset by the
absence of revenue recognised in 2018 from the sale of jackup rigs to Borr Drilling Limited. Major jobs delivered in 2019 include five jackup
rigs, three FPSO/FSRU conversions and four dredgers. Revenue from the Property Division decreased marginally by $4 million to $1,336
million due mainly to lower revenue from property trading projects in Singapore, partly offset by higher revenue from property trading projects
in China. Revenue from the Infrastructure Division grew by $298 million to $2,927 million as a result of increased sales in the power and
gas business as well as higher progressive revenue recognition from the Keppel Marina East Desalination Plant project and the Hong Kong
Integrated Waste Management Facility project. Revenue from the Investments Division increased by $976 million to $1,097 million due mainly
to the consolidation of M1 and higher revenue from the asset management business.
Group pre-tax profit for the current year was $954 million, $291 million or 23% below the previous year. The O&M Division’s pre-tax loss was
$24 million as compared to pre-tax loss of $113m in 2018. The lower loss was due mainly to higher operating results arising from higher
revenue, lower impairment provisions and lower net interest expense, partly offset by share of losses from associated companies, and the
absence of write-back of provisions for claims in 2018. Pre-tax profit from the Property Division decreased by $486 million to $707 million
due mainly to the lower gains from the en-bloc sale of development projects in 2019 (disposal of a partial interest in the Dong Nai project
in Vietnam) as compared to 2018 (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), the absence of gain from divestment as compared
against 2018 (Aether Limited), lower contribution from property trading projects in Singapore and higher net interest expense, partly offset by
higher contribution from property trading projects in China, higher investment income, higher fair value gains on investment properties and
higher contribution from associated companies. Pre-tax profit of the Infrastructure Division was $188 million, $4 million above that in 2018. This
was due mainly to higher fair value gains on data centres, higher contributions from Energy Infrastructure and Environmental Infrastructure,
partly offset by lower contribution from Infrastructure Services and the logistics business, as well as the absence of gain arising from the sale of
stake in Keppel DC REIT in 2018. Pre-tax profit of the Investments Division was $83 million as compared to pre-tax loss of $19 million in 2018.
This was due mainly to fair value gain from the remeasurement of the previously held interest in M1 at acquisition date, higher contributions
from asset management business as well as from M1 resulting from the consolidation of M1, lower provision for impairment of an associated
company, partly offset by lower share of profit from the Sino-Singapore Tianjin Eco-City, higher net interest expense, higher fair value loss on
KrisEnergy warrants, financing cost and amortization of intangibles arising from acquisition of M1, as well as write-off of a receivable.
Taxation expenses decreased by $92 million or 32% due mainly to lower taxable profits. Non-controlling interests were $42 million higher than
in the preceding year. Taking into account income tax expenses and non-controlling interests, net profit attributable to shareholders for 2019
was $707 million, a decrease of $241 million from $948 million in 2018. The Property Division was the largest contributor to the Group’s net
profit with a 73% share, followed by the Infrastructure Division’s 24%, the Investments Division’s 2% and the O&M Division’s 1%.
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 $1,245 million, $803 million or 182% 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 $1,245 million was $184 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 $349 million to $1,193 million due mainly to en-bloc sales of development projects (Keppel
Revenue ($ billion)
Pre-Tax Profit ($ million)
Net Profit ($ million)
12
9.6
7.2
4.8
2.4
0
2,000
1,600
1,200
800
400
0
2,000
1,600
1,200
800
400
0
2015
10.3
2016
2017
2018
2019
2015
2016
2017
2018
6.8
6.0
6.0
7.6
1,991
1,088
442^
1,245*
2019
954
2015
1,525
2016
784
2017
196^
2018
948*
2019
707
*
^
The 2018 financial figures have been restated due to an IFRIC agenda decision on SFRS(I) 1-23 Borrowing costs eligible for capitalisation.
Includes the one-off financial penalty and related costs of $619 million.
Keppel Corporation Limited
Report to Shareholders 2019
223
GROUP FIVE-YEAR PERFORMANCE
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. Pretax 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 $948 million, an increase of $133 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.
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 $31 million from last year. The
Property Division was the largest contributor to the Group’s net profit with an 80% share, followed by the Investments Division’s 29% and
Infrastructure Division’s 16% while the O&M Division contributed negative 25% to the Group’s net profit.
Shareholders’ Fund ($ billion)
Total Equity ($ billion)
Market Capitalisation ($ billion)
12
9.6
7.2
4.8
2.4
0
15
12
9
6
3
0
15
12
9
6
3
0
2015
11.1
2016
11.7
2017
11.4
2018
11.3
2019
11.2
2015
11.9
2016
12.3
2017
12.0
2018
11.6
2019
11.6
2015
11.8
2016
10.5
2017
13.4
2018
10.7
2019
12.3
224
Report to Shareholders 2019
Keppel Corporation Limited
OTHER INFORMATION 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. Pretax 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.
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, $360 million
or 19% lower than last year. The Property Division was the largest contributor to Group net profit at 43%, followed by the O&M Division’s 32%,
the Infrastructure Division’s 13% and the Investments Division’s at 12%.
Keppel Corporation Limited
Report to Shareholders 2019
225
GROUP VALUE-ADDED STATEMENTS
($ million)
Value added from:
Revenue earned
Less: purchases of materials and services
Gross value added from operation
In addition:
Interest and investment income
Share of associated companies’ profits
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 and related costs
2015
2016
2017
2018*
2019
10,296
(7,303)
2,993
134
436
402
3,965
1,600
398
155
83
872
1,110
-
6,767
(4,287)
2,480
139
272
(187)
2,704
1,155
266
225
77
545
847
-
5,964
(4,119)
1,845
158
291
196
2,490
1,027
244
189
27
364
580
619
5,965
(3,926)
2,039
174
221
186
2,620
988
285
205
20
526
751
-
7,580
(5,379)
2,201
242
147
215
2,805
1,163
192
313
12
418
743
-
Total Distribution
3,108
2,268
2,470
2,024
2,098
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:
220
(15)
652
857
236
(39)
239
436
212
(25)
(167)
20
182
(8)
422
596
375
43
289
707
3,965
2,704
2,490
2,620
2,805
36,153
28,879
21,862
18,186
18,297
Gross value added per employee ($’000)
Gross value added per dollar employment cost ($)
Gross value added per dollar sales ($)
83
1.87
0.29
86
2.15
0.37
84
1.80
0.31
112
2.06
0.34
120
1.89
0.29
*
The 2018 financial figures have been restated due to an IFRIC agenda decision on SFRS(I) 1-23 Borrowing costs eligible for capitalisation.
($ million)
4,000
3,000
2,000
1,000
0
3,965
2,704
2,490
2,620
2,805
One-off financial penalty and related cost
Depreciation & Retained Profit
Interest Expenses & Dividends
Taxation
2015
2016
-
857
1,110
398
-
436
847
266
2017
619
20
580
244
Wages, Salaries & Benefits
1,600
1,155
1,027
2018
2019
-
596
751
285
988
-
707
743
192
1,163
226
Report to Shareholders 2019
Keppel Corporation Limited
OTHER INFORMATION
SHARE PERFORMANCE
Turnover
(million)
Share Prices
($)
400
300
200
180
160
140
120
100
80
60
40
20
0
40
30
20
18
16
14
12
10
8
6
4
2
0
2015
2016
2017
2018
2019
Turnover
High and Low Prices
Share Price ($)*
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)
2015
2016
2017
2018*
2019
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
52.3 #
30.0 @
4.1 @
14.1
6.15
5.91
5.1 @
11.3 #
1.0
6.77
6.97
5.67
6.38
38.9
20.0
3.1
16.4
5.25
6.77
3.0
17.4
1.3
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.
The 2018 financial figures have been restated due to an IFRIC agenda decision on SFRS(I) 1-23 Borrowing costs eligible for capitalisation.
Includes the special dividend paid of 5.0 cents per share.
Keppel Corporation Limited
Report to Shareholders 2019
227
OTHER INFORMATION
SHAREHOLDING STATISTICS
As at 5 March 2020
Issued and Fully paid-up capital
: $1,305,667,320.62
Number of Issued shares
: 1,820,557,767
: 0 (0%)
Number/Percentage of Treasury Shares
Number/Percentage of Subsidiary Holdings 1 : 0 (0%)
Class of Shares
Voting Rights
: 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
DBS Nominees Pte Ltd
Citibank Nominees Singapore Pte Ltd
DBSN Services Pte Ltd
HSBC (Singapore) Nominees Pte Ltd
Raffles Nominees (Pte) Limited
United Overseas Bank Nominees Pte Ltd
BPSS Nominees Singapore (Pte.) Ltd.
OCBC Nominees Singapore Pte Ltd
Morgan Stanley Asia (Singapore) Securities Pte Ltd
OCBC Securities Private Ltd
Societe Generale Singapore Branch
BNP Paribas Nominees Singapore Pte Ltd
Shanwood Development Pte Ltd
UOB Kay Hian Pte Ltd
Phillip Securities Pte Ltd
Maybank Kim Eng Securities Pte. Ltd.
Chen Chun Nan
DB Nominees (Singapore) Pte Ltd
CGS-CIMB Securities (Singapore) Pte Ltd
Total
No. of
Shareholders
202
16,063
44,038
9,863
33
%
0.29
22.88
62.73
14.05
0.05
No. of
Shares
7,273
13,010,432
174,080,367
301,659,697
1,331,799,998
%
0.00
0.72
9.56
16.57
73.15
70,199
100.00
1,820,557,767
100.00
No. of
Shares
371,408,292
281,790,102
269,296,016
104,319,966
75,206,057
52,912,620
48,906,443
22,751,884
13,851,505
12,375,806
9,312,252
8,171,836
7,428,624
7,040,000
6,629,295
5,102,097
4,491,928
3,618,100
3,584,255
3,252,460
%
20.40
15.48
14.79
5.73
4.13
2.91
2.68
1.25
0.76
0.68
0.51
0.45
0.41
0.39
0.36
0.28
0.25
0.20
0.20
0.18
1,311,449,538
72.04
Substantial Shareholders (as shown in the Register of Substantial Shareholders)
Temasek Holdings (Private) Limited²
371,408,292
20.40
18,850,337
1.03
390,258,629
21.43
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 18,850,337 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 2020, approximately 78.09% 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.
228
Report to Shareholders 2019
Keppel Corporation Limited
OTHER INFORMATION
CORPORATE INFORMATION
BOARD OF DIRECTORS
Lee Boon Yang (Chairman)
Loh Chin Hua (Chief Executive Officer)
Alvin Yeo
Tan Ek Kia
Danny Teoh
Till Vestring
Veronica Eng
Jean-François Manzoni
Teo Siong Seng
Tham Sai Choy
Penny Goh
AUDIT COMMITTEE
Danny Teoh (Chairman)
Alvin Yeo
Veronica Eng
Tan Ek Kia
Tham Sai Choy
Penny Goh
REMUNERATION COMMITTEE
Till Vestring (Chairman)
Lee Boon Yang
Danny Teoh
Teo Siong Seng
NOMINATING COMMITTEE
Jean-François Manzoni (Chairman)
Lee Boon Yang
Alvin Yeo
Till Vestring
BOARD RISK COMMITTEE
Veronica Eng (Chairman)
Danny Teoh
Tan Ek Kia
Jean-François Manzoni
Tham Sai Choy
Penny Goh
BOARD SAFETY COMMITTEE
Tan Ek Kia (Chairman)
Lee Boon Yang
Loh Chin Hua
Teo Siong Seng
COMPANY SECRETARIES
Caroline Chang
Kenny Lee
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 2019
229
OTHER INFORMATION FINANCIAL CALENDAR
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
31 December 2019
18 April 2019
18 July 2019
17 October 2019
23 January 2020
230
Report to Shareholders 2019
Keppel Corporation Limited
OTHER INFORMATION NOTES
NOTES
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9
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