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Infrastructure
Earnings review Environmental engineering Market review
Operating review In 2006, the company secured two contracts amounting to QR3.9 billion (approximately $1.7 billion) from the Ministry of Municipal Affairs and Agriculture in Qatar. This project is the largest environmental engineering undertaking that a Singaporean company has won in the international market. The two contracts, of about equal value, were for the Engineering, Procurement and Construction (EPC) of an integrated solid waste management facility in Qatar, and the operation and maintenance of this facility for 20 years. The plant is expected to be operational in 2009. This will be the first such integrated solid waste treatment facility in the Middle East, and one of the few in the world. In Singapore, Keppel Seghers clinched its second public private partnership (PPP) project, the Tuas South Waste-to-Energy (WTE) Plant, last year. This came on the back of the first PPP project, the Ulu Pandan NEWater Plant, that it secured in 2004. The WTE Plant is under a 25-year Design-Build-Own-Operate (DBOO) contract arrangement with the National Environment Agency (NEA). Located at Tuas South, the WTE Plant, Singapore’s fifth, is the first incineration plant to be built under the PPP initiative. Overseas, Keppel Seghers made significant progress in securing contracts in both water and WTE solutions sectors. It secured a contract from InBev, the world’s largest brewer, to upgrade its existing wastewater treatment plant in Jupille, southern Belgium. Work involved the provision of engineering services, civil works as well as supply and installation of equipment. The company also made further inroads with its proprietary technology solution – UNITANK® – into Argentina with two new contracts worth US$1.3 million from new customers. This added on to Keppel Seghers’ track record of 20 UNITANK® projects in the country. In the thermal solutions market, Keppel Seghers secured a significant breakthrough in Finland with its first WTE plant for municipal solid waste. The Kotka Energy WTE project signified the acceptance of WTE solutions in the country with its move towards meeting EU’s ban on landfill through the adoption of WTE as a viable and environment-friendly alternative. It secured two separate contracts of approximately $13 million each to provide technologies and services for the first WTE plants to be built in Jiangyin and Changzhou, Jiangsu Province, China. For both plants, Keppel Seghers will provide its state of-the-art equipment design and technical services for the grate, atomiser, automation control and flue gas cleaning components of the plant. When completed, each WTE plant will be able to treat 800 tonnes of municipal waste a day to generate 12 MW of green energy. Both plants were repeat orders from China Everbright International, which affirmed the strength and reliability of Keppel Seghers’ proprietary technologies. These projects reaffirmed the position of Keppel Seghers as the market leader for imported WTE solutions in China where it has 60% of the market. Meanwhile, Keppel Seghers has completed the construction of its Ulu Pandan NEWater DBOO project, the largest and newest NEWater plant in Singapore, which would supply half of Singapore’s NEWater needs. The plant was officially opened by Singapore’s Prime Minister Lee Hsien Loong on 15 March 2007. As for Keppel FMO Pte Ltd (Keppel FMO), the facilities management and operations company made successful inroads into the Middle East airport operations market with its first maintenance project in Qatar’s Doha International Airport. In Singapore, the firm secured maintenance contracts from new customers Workforce Development Agency, the National Library Board and the Supreme Court during the year. In addition, Keppel FMO continues to retain high renewal rate of operation and maintenance contracts from its existing clients. FELS Cranes, a wholly-owned unit of KIE, completed the installation and delivery of five Rubber Tyred Gantry (RTG) cranes to Kolkata Port Trust, India’s oldest and only riverine port, in May 2006. Business outlook The challenge ahead is for the group to leverage its expertise and experience to secure new opportunities for environmental engineering services. This is set against the global backdrop of the need for more efficient waste and water management systems, and growth potential for alternative waste disposal methods such as WTE plants. Given also that the outlook for energy costs are expected to remain at levels considerably higher than seen in the previous decade, industrial producers are looking at how to safeguard their long-term energy needs at an acceptable cost. Some of the major energy consumers started to look into solid waste and waste-derived fuels as an alternative for conventional fuel for power, steam and heat generation. As a leading supplier of WTE equipment, Keppel Seghers is positioning itself as a reliable partner to enter into long-term contracts to supply steam, heat or power from waste.
Power Generation Market review In Ecuador, Keppel Energy’s power barges are well-positioned to
support the country’s rising power demand. Ecuador relies on hydroelectric
power plants for more than half of the country’s generation capacity.
With increasing demand for power, the long lead time needed to install
the hydroelectric plants and the variability of water reserve levels available
for the hydroelectric plants due to seasonal fluctuations, thermal Operating review Construction of the 500 MW Keppel Merlimau Cogen (KMC) project, a combined cycle gas turbine power plant designed with the capability to operate with natural gas or oil firing, began in March 2005. It progressed according to schedule during 2006. The plant commenced commissioning in October 2006 and is on schedule to start operations in 1H 2007. In August 2006, Keppel Energy’s wholly-owned subsidiary, Pipenet
Pte Ltd (Pipenet) completed and put into operation its service corridor
on Jurong Island. Pipenet has since signed up key customers including
Ciba Speciality Chemicals Industries (Singapore) Pte Ltd and Petrochemical
Corporation of Singapore (Private) Limited. The completion of the Pipenet
service corridor enables pipeline transfer of backup fuel/diesel from
the Singapore Refinery Company to the KMC plant site at Tembusu. The 8-km
long pipe-rack and pipe-bridge
Following a successful redeployment from Brazil, the power barges commenced generation on 1 December 2006 in Ecuador. Under this arrangement, Termoguayas Generation S.A. (TGSA), Keppel Energy’s wholly-owned subsidiary in Ecuador is on a 15-year concession contract with the National Council of Electricity to operate in Esclusas, in the southern part of the city of Guayaquil, Ecuador. TGSA receives capacity payments in addition to revenue from selling the power into the national grid under a competitive market. The deployment not only enhances the value of the barge assets but Keppel Energy’s entry into Ecuador also contributes towards enhancing the security of power supply in the country. In Nicaragua, Keppel Energy’s 64 MW power plant continued to be positioned to meet the growing demand for electricity in the country. Business outlook Keppel Energy is keen to explore further opportunities which may arise from further liberalisation of both the gas and electricity markets. These include the anticipated opening of the gas market and the privatisation of Temasek-owned generation assets in Singapore as well as opportunities in the region. In the Americas (Ecuador and Nicaragua), Keppel Energy will focus on operating the plants efficiently and positioning itself to meet the growing energy demands in those countries. Network Engineering and Logistics Market review
For more developed regional markets like Singapore and Malaysia, the focus was on upgrading networks to support new services and cater for growing data traffic and technology convergence. The Singapore government launched in October 2006 a nation-wide wireless broadband network initiative offering free WiFi connection in key public hotspots. The intent was to promote more broadband applications and services in the marketplace. In response, telecommunications companies also expedited work in the area of High-Speed Downlink Packet Access (HSDPA) to meet the expected growth in demand for mobile connectivity. In Europe and the US, cable operators upgraded their network to support “triple play” services of video, voice and broadband. Responding to keen competition from satellite television and Internet protocol televisions (IPTVs) in their traditional cable TV space, cable operators were increasingly bundling traditional cable programmes with voice and broadband services to improve the competitiveness of their service offerings. With good cashflow generated from their traditional businesses, cable operators were ploughing back some of the cash to upgrade their network to support triple play. Implementation of the upgrading process would have been speedier had the cable operators not been partially preoccupied with the consolidation phase that the industry went through. In the adjacent customer segment of utility providers, which uses the same Geographical Information System (GIS) services as cable operators, there are growing demands to digitise manual records of assets and migrate these records to a GIS platform. Several tenders for such work were issued during the year. Logistics In Singapore, market occupancy for industrial warehouses improved in tandem with the economy. Although there was some new warehouse supply that came to the market during the year, the overall market occupancy across the island for industrial warehouses averaged above 85%. Rental rates were generally stable, with rates in the eastern part of Singapore rising marginally. China maintained its position as a major manufacturing powerhouse, with strong growth in exports to major markets like North America and Europe. Operating review Keppel T&T participated in the emerging WiFi arena by acquiring a strategic 30% stake in iCELL Networks in 2006. iCELL was one of the three parties that was awarded the tender by Infocomm Development Authority (IDA) to install and operate a nationwide network of Internet hotspots for public wireless broadband services. iCELL was awarded the tender for the eastern zone of Singapore. ECHO Broadband Gmbh (ECHO) continued to digitise and migrate records of ish’s network infrastructure in Germany for its new owners. In addition, it also secured similar contracts from Cablevision in the US. After successful extension into the adjacent customer segment of utility providers requiring the same GIS services as cable operators, ECHO won multi-year GIS work from EnBW, the main utility provider for the German state of Baden Wurttenberg, and Tenaga in Malaysia. Logistics The company acquired several new customers, including the contract for Brother Singapore’s finished goods distribution. The company also successfully expanded into the high-value goods segment, providing total inventory management and airfreight services of mobile phone equipment and accessories for several new customers. Conscious efforts to grow the delivery and distribution business paid off. Keppel Logistics was awarded the local distribution contract for Watsons Singapore, for which it serves about 100 Watsons outlets across the island. Although rental rates in the general warehousing market have improved, rates in the western part of the island have generally remained sluggish. As such, Keppel Logistics continued to focus on productivity improvement. In China, Keppel Logistics’ Foshan port operations showed a 30% increase in cargo throughput, handling more than 150,000 TEUs in 2006 on the back of increased trade volume in the country. The port operated at near full capacity last year. In 2006, the division also acquired a 35% stake in Wuhu Annto Logistics Company (Annto) to enhance its services and footprint in China. Building on the division’s track record and experience, the acquisition enables Keppel Logistics to leverage Annto’s extensive network of more than 100 logistics points and tap growth opportunities in land transportation and warehousing needs in China. Business outlook Logistics |
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