Infrastructure
We will focus on developing our energy-related infrastructure solutions, as well as logistics and data centre businesses.
Major Developments in 2014

K-Green Trust was renamed Keppel Infrastructure Trust (KIT) with an expanded investment mandate.

The combination of KIT with CitySpring Infrastructure Trust (CIT) was proposed along with the injection of 51% of Keppel Merlimau Cogen Pte Ltd into the enlarged trust.

The Greater Manchester Energy-from-Waste Plant and Doha North Sewage Treatment Works achieved significant milestones.

Keppel DC REIT was listed on the Main Board of the Singapore Exchange Securities Trading Limited (SGX-ST) raising $512.9 million through the initial public offering.


Focus for 2015/2016

Complete the proposed combination of KIT and CIT, enhance the asset portfolio and seek acquisition opportunities.

Complete the Engineering, Procurement and Construction (EPC) projects in the UK and Qatar.

Grow expertise in Waste-to-Energy (WTE) technology package deployment and expand market share in Singapore and China.

Expand logistics business in target markets in Asia Pacific, and grow a pipeline of quality data centre assets for injection into the newly-listed Keppel DC REIT.


Profit Before Tax
$452m
as compared to FY 2013's $73 million.
Net Profit
$320m
as compared to FY 2013's $15 million.


Earnings Review

The Infrastructure Division's revenue decreased by $525 million to $2,934 million due to lower revenue contributed by Keppel Infrastructure's (KI) power generation plant, partially offset by higher revenue from Keppel Telecommunications & Transportation's (Keppel T&T) logistics and data centre businesses. Profit before tax increased by $379 million to $452 million, due mainly to better operating results from both KI and Keppel T&T, as well as gains from divestments of data centre assets and Keppel FMO Pte Ltd. The Division contributed 17% to the Group's net profit for FY 2014.


Gas-to-Power
Market Review

In 2014, Singapore's average electricity demand grew at a year-on-year rate of 3.6%, higher than the 2.8% increase in 2013. However, competition intensified with the commercialisation of additional generation capacity from both new entrants and existing players. This has led to oversupply and margin pressures in the local energy sector.

The Energy Market Authority has launched several initiatives with intention to encourage further growth in the Singapore energy market. Such initiatives include the scaling back of electricity vesting levels, issuing Request for Proposals for the appointment of Liquefied Natural Gas importers, and further liberalising the electricity retail market.


Net Profit ($ million)
Earnings Highlights ($ million)
  2014 2013 2012
Revenue 2,934 3,459 2,832
EBITDA 570 150 101
Operating Profit 466 69 46
Profit before Tax 452 73 58
Net Profit 320 15 16
Manpower (Number) 2,728 3,358 4,175
Manpower Cost 231 244 278
Operating Review

Despite the industry headwinds, KI's Gas-to-Power business delivered another year of commendable results and maintained its lead in the electricity retail market, leveraging its integrated business platform.

Following the upgrading of Keppel Merlimau Cogen's generation capacity from 800 megawatt (MW) to 1,300 MW in 2013, we have been focused on improving the operational efficiency and flexibility of the power plant.

In line with its portfolio strategy, KI entered into a conditional agreement to divest a 51% stake of Keppel Merlimau Cogen Pte Ltd, which owns the 1,300 MW co-generation plant, to KIT for a cash consideration of $510 million. The proceeds from the divestment will help strengthen KI's balance sheet.


Business Outlook

The oversupply is expected to be sustained and weigh on the electricity market in the coming years.

On a positive note, the retail contestability threshold for consumers will be further lowered to 2,000 kilowatt per hour (kWh) on 1 July 2015, after the reduction from 10,000 kWh to 4,000 kWh in 2014. This will provide about 10,000 more non-residential consumers with the choice of procuring electricity from retailers apart from SP Services Ltd, adding to the current pool of 23,000 non-residential consumers.


Keppel Infrastructure Trust will acquire a 51% stake in Keppel Merlimau Cogen Pte Ltd, which owns the 1,300 MW co-generation plant on Jurong Island.
Waste-to-Energy
Market Review

Rapid urbanisation and stricter environment regulations will continue to underpin growth in the Waste-to-Energy (WTE) sector. For example, environmental issues emerging from China's rapid industrialisation are seen as one of the most pressing challenges. As part of its efforts to promote proper treatment of municipal solid waste, the Chinese National Environmental Bureau introduced a more stringent set of emission standards in 2014. The more stringent regulations of the WTE sector will benefit credible players with proven technologies, like Keppel.

Growing interest in the WTE projects have also been demonstrated in the Gulf Cooperation Council region.

On the technology front, KI has continued to develop its core technology catering for the increased demand of higher capacity incineration lines and better energy efficiency in the WTE market.


Singapore's Prime Minister Lee Hsien Loong (third from left) visited Keppel Seghers' booth at WasteMET Asia during the CleanEnviro Summit in Singapore.
Significant Events
January
  • Keppel Logistics increased its 40% stake in Indo-Trans Keppel Logistics Vietnam Co Ltd (ITKL) to 51%, making it a subsidiary of the company.
  • Keppel T&T ventured into Australia with the incorporation of a new subsidiary, Keppel Logistics (Australia) Pty Ltd.
March
  • Keppel Infrastructure Fund Management received unitholders' approval to rename K-Green Trust as Keppel Infrastructure Trust, and expand its investment mandate.
  • Keppel Datahub 2 became the first new data centre in Singapore to achieve Platinum Award for the BCA-IDA Green Mark.
May
  • ITKL broke ground for a new distribution centre located in the Vietnam-Singapore Industrial Park 1 in Binh Duong Province.
August
  • Keppel Logistics' first 10,000 sm warehouse in Brisbane, Australia commenced operations.
October
  • For the fourth time since 2009, Keppel Logistics was named the Singapore Domestics Logistics Service Provider of the Year at the annual Frost & Sullivan Asia Pacific Best Practices Awards 2014.
November
  • Keppel Data Centres Holding acquired Almere Data Centre 2 in the Netherlands.
  • Construction of ITKL's distribution centre in the Vietnam-Singapore Industrial Park 1 was completed.
December
  • Construction of the Tampines Logistics Hub in Singapore was completed.
  • Keppel DC REIT made a strong debut upon listing on the SGX-ST. It became the first data centre REIT listed in Asia and also the largest REIT IPO in Singapore in 2014 with $512.9 million raised.

Operating Review

In the UK, Phase 1 of the Greater Manchester EfW Plant has been handed over successfully. The handover of Phase 2 is expected to take place in 1H 2015.

In Qatar, the Doha North Sewage Treatment Works started commissioning with handover expected to be in 1H 2015. The Qatar Domestic Solid Waste Management Centre has completed its third year of operations with high performance in terms of plant availability and treatment capacity.

In China, we have been working on the installation of our proprietary WTE technology package in two projects in Beijing and Yangzhou, Jiangsu. Both projects are progressing within their contractual schedules and budgets.

In Bialystok, Poland, engineering work and procurement of the WTE plant, built by the consortium between Keppel Seghers and Budimex, were almost finished in 2014. The civil construction has been well advanced with all of the heavy lifting of key components completed during the year. The plant is scheduled to undertake pressure testing of its boiler in early-2015, followed by an extensive commissioning.


Business Outlook

The global municipal solid waste is estimated by the World Bank to increase from about 1.3 billion tonnes/year now to 2.2 billion tonnes/year by 2025, driven mainly by population growth. This, coupled with the limitation of landfill space, will lead to an ever-increasing demand of proper waste treatment solutions, such as WTE.

In Singapore, KI is one of the few players pre-qualified by the National Environment Agency (NEA) for the Design-Build-Own-Operate (DBOO) tender of a WTE plant with a minimum capacity of 2,400 tonnes/day.

Meanwhile, KIT had committed in September 2014 to enhance the contracted incineration capacity of the Senoko WTE plant by up to 10%. The upgrading works is expected to take place between 3Q 2015 and 3Q 2016.

In Hong Kong, we expect the government to proceed with the development of the HK$19.2 billion integrated waste management facility. It will be a state-of-the-art modern WTE plant built on a reclaimed island, with a capacity of 3,600 tonnes/day.

The demand of WTE solutions in Europe will also be driven by the replacement and upgrading of aging facilities, and the rapid development of newer European Union (EU) members, such as Poland.


X-to-Energy

The X-to-Energy Division comprises the Group's district cooling systems (DCS) business and infrastructure business trust.


Keppel Seghers has successfully handed over Phase 1 of the Greater Manchester EfW Plant.
Market Review

The demand for district cooling services in Singapore remained strong, achieving a compound annual growth rate of 11% since 2010. The government-led drive for energy efficiency and legislative changes, e.g. requiring more buildings to obtain Green Mark certifications, provides greater impetus for growth in this sector.

Keppel DHCS has broadened its market segment to include office, biomedical, research & development, wafer fabrication, media, communications & information, and aviation training facilities. It has also expanded its modus operandi by offering retail cooling systems within customers' premises.


Operating Review

Keppel DHCS' retail cooling facilities for Keppel Logistics commenced operations in 3Q 2014. It also expanded its clientele at the Changi Business Park to include Haite High-Tech Aviation Training Centre, Rigel Innovation Hub and Soo Kee Jewellery Group.

Development of the DCS plant at Mediapolis is slated for completion in 3Q 2015. The plant will be connected to the existing DCS plant in Biopolis to form an integrated DCS network at the one-north precinct. During the year, Keppel DHCS rolled out several initiatives to improve energy efficiency and cost competitiveness of its plants, such as the implementation of linear programming to optimise operations and the retirement of inefficient equipment.

In November 2014, Keppel DHCS' Tianjin plant started supplying to Huang Wei Zhi Jia. This has not only brought its total number of customers to six in Tianjin, but also lowered its carbon footprint by increasing the utilisation of its geothermal heating system to meet 80% of the heating demand.


Business Outlook

Despite the stiff competition in the retail cooling segment due to the relatively low entry barriers for smaller and new entrants, Keppel DHCS is optimistic about acquiring new customers in Singapore and Southeast Asia, riding on its competitive cooling solutions.

Keppel Infrastructure Fund Management, in its capacity as trustee-manager of KIT, entered into agreements to combine KIT and CitySpring Infrastructure Trust (CIT), and to acquire KI's 51% stake in Keppel Merlimau Cogen Pte Ltd, which owns a 1,300 MW co-generation plant in Singapore. Upon completion of both transactions, KIT's total assets will increase from around $600 million to over $4 billion, making it the largest Singapore infrastructure-focused business trust listed on the SGX-ST. This will place KIT in a better position to capture asset enhancement opportunities for its enlarged asset portfolio, and to work with its sponsor for further acquisition opportunities.


Logistics
Market Review

The Southeast Asian economy performed well amidst uneven recovery in the global economy. Strong domestic demand and increasing foreign direct investments continued to drive the region's growth.

China's economic growth rate tapered to 7.4% in 2014. Moderate growth is seen as the Chinese economy matures and shifts towards service oriented industries.


Operating Review

Keppel Logistics continued to achieve high occupancy rates in its logistics facilities across Southeast Asia and China.

In Singapore, the Tampines Logistics Hub's construction was completed in December 2014 and is expected to commence operations in 2Q 2015. The BCA Green Mark award-winning warehouse facility will add 32,400 sm of warehouse space to its Singapore portfolio.

Meanwhile, Indo-Trans Keppel Logistics completed its new warehouse facility in the Vietnam-Singapore Industrial Park 1 in November 2014. It also embarked on the expansion of its Tien Son warehouse facility in Bac Ninh Province with an additional 3,500 sm.

In Malaysia, Keppel Logistics bolstered its warehousing capacity with the lease of a new 4,200 sm warehouse adjacent to its Shah Alam facility.

During the year, Keppel Logistics entered into the Australian market. Its wholly-owned subsidiary, Keppel Logistics (Australia), commenced operations in August 2014, managing a 10,000 sm warehouse in Brisbane.

In China, Keppel T&T's Sanshui Port in Guangdong Province maintained a high throughput volume despite the slowdown in the country's economic growth. The preliminary works for the expansion of Sanshui Port have also commenced.

The river port in Wuhu, Anhui Province also achieved a better throughput volume of over 4.4 million tonnes in FY 2014. However, throughput at the Lanshi Port continued to be affected by the traffic restrictions in Foshan City.

The integrated distribution centre in the Sino-Singapore Tianjin Eco-City is close to completion and is expected to commence operations in 2015. The food logistics parks in China are being developed.


Keppel Logistics' newly-completed Tampines Logistic Hub is well-positioned to serve high value-added industries.
Business Outlook

The economic growth in Southeast Asia is expected to accelerate, as the gradual recovery in advanced economies boosts demand for the region's exports. In addition, the region's economic integration is set to deepen with the proposed establishment of the ASEAN Economic Community. This will further encourage cross-border trade and fuel demand for logistics services.

In October 2014, the Chinese government unveiled its six-year plan to develop the country's infrastructure and improve the efficiency of its domestic supply chain. Coupled with strengthened domestic demand, the outlook of China's logistics sector remains positive.

Keppel T&T is well-positioned for future growth, riding on increasing demand for quality logistics services in countries where it operates. It will continue to leverage its core competencies and explore opportunities to further expand its business in target markets in Asia Pacific.


Data Centres
Market Review

Global demand for data centre services remained strong in 2014, backed by growth in e-commerce, cloud computing and big data. Expansion and acquisition activities in the industry have intensified. Research shows that the global co-location market has surpassed US$25 billion in revenue in 2014 and market expansion has begun to take off in the Asia-Pacific and EMEA (Europe, the Middle East and Africa) regions.


Keppel DC REIT debuted strongly on the SGX-ST as its largest REIT IPO in 2014 with $512.9 million raised.
Operating Review

In 2014, Keppel T&T's data centres continued to operate at near full occupancies. As part of its efforts to address existing clients' capacity expansion requirements and to enjoy greater economies of scale, Keppel Data Centres Holding (KDCH) completed the development of Keppel Datahub 2, an award-winning green data centre facility with a lettable area of approximately 47,000 sf.

In November 2014, Keppel T&T expanded its footprint in Europe by entering into a conditional sale and purchase agreement with Borchveste Almere 2 BV for the acquisition of Almere Data Centre 2 (Almere 2). Almere 2 is located next to Almere 1, a fully occupied data centre acquired in 2013. The facility will have a lettable area of 53,800 sf when fully fitted out.

In December 2014, Keppel T&T marked a new milestone with the successful listing of Keppel DC REIT, the first data centre REIT listed in Asia. Keppel DC REIT Management (KDCRM), the manager of Keppel DC REIT, currently manages a diversified portfolio of eight high-quality data centre assets in Europe and Asia-Pacific, with an aggregate appraised value of approximately $1 billion as at 30 September 2014.


Business Outlook

With the increasing digitisation of the global economy, demand of data creation and storage is expected to grow. Other drivers include growing adoption of cloud computing, greater compliance and regulatory requirements on data security, and increasing outsourcing of data centre services.

These trends present opportunities for Keppel T&T's data centre business to grow via its REIT-development company strategy in its target markets. Besides acquiring high-occupancy, income-producing data centre assets through Keppel DC REIT, Keppel T&T also looks to expand its portfolio by developing green and brown field projects when opportunities arise. Upon attaining near full occupancy, the new assets will be offered to the REIT for capital recycling.


Keppel T&T's data centre business is set to grow via its newly-listed REIT platform in the target markets of Asia, Australia and Europe (Almere 1 & 2 in picture).
Significant Events
January
  • Keppel Logistics increased its 40% stake in Indo-Trans Keppel Logistics Vietnam Co Ltd (ITKL) to 51%, making it a subsidiary of the company.
  • Keppel T&T ventured into Australia with the incorporation of a new subsidiary, Keppel Logistics (Australia) Pty Ltd.
March
  • Keppel Infrastructure Fund Management received unitholders' approval to rename K-Green Trust as Keppel Infrastructure Trust, and expand its investment mandate.
  • Keppel Datahub 2 became the first new data centre in Singapore to achieve Platinum Award for the BCA-IDA Green Mark.
May
  • ITKL broke ground for a new distribution centre located in the Vietnam-Singapore Industrial Park 1 in Binh Duong Province.
August
  • Keppel Logistics' first 10,000 sm warehouse in Brisbane, Australia commenced operations.
October
  • For the fourth time since 2009, Keppel Logistics was named the Singapore Domestics Logistics Service Provider of the Year at the annual Frost & Sullivan Asia Pacific Best Practices Awards 2014.
November
  • Keppel Data Centres Holding acquired Almere Data Centre 2 in the Netherlands.
  • Construction of ITKL's distribution centre in the Vietnam-Singapore Industrial Park 1 was completed.
December
  • Construction of the Tampines Logistics Hub in Singapore was completed.
  • Keppel DC REIT made a strong debut upon listing on the SGX-ST. It became the first data centre REIT listed in Asia and also the largest REIT IPO in Singapore in 2014 with $512.9 million raised.