• Creating the largest Singapore infrastructure-focused business trust with total assets of over S$4 billion• Attractive portfolio of core infrastructure assets• Increased scale and liquidity, better positioned for future growth • Keppel Infrastructure to become sponsor of the Combined Trust • Keppel and Temasek to remain the two largest unitholders in the Combined Trust
Keppel Infrastructure Fund Management Pte. Ltd. ("KIFM") and
CitySpring Infrastructure Management Pte. Ltd. ("CSIM") in their
capacity as trustee-manager of Keppel Infrastructure Trust ("KIT") and
CitySpring Infrastructure Trust ("CIT"), respectively, have agreed to
combine KIT and CIT ("Combination").
In addition, KIT has today agreed
to acquire a 51% stake in Keppel Merlimau Cogen Pte. Ltd. ("KMC") ("KMC
Acquisition") which will form an integral part of the Combination.
The Combination will be effected by CIT acquiring all the business
undertakings and assets of KIT in exchange for 1,326 million new units
of CIT. The swap ratio has been arrived at based on the market
capitalizations of S$658 million of KIT and S$753 million of CIT, based
on their units' respective volume weighted average prices ("VWAP") for
the 180-day period ended on 13 November 20141. Each KIT
unitholder will receive 2.106 new CIT units for every KIT unit held. The
swap ratio is fixed and is not subject to any adjustment.
Upon completion of the Combination, Keppel Corporation Limited
("Keppel"), via its wholly-owned subsidiary, Keppel Infrastructure
Holdings Pte. Ltd. ("KI") will become the largest unitholder and Temasek
Holdings (Private) Limited ("Temasek"), through its wholly-owned
subsidiaries, will become the second largest unitholder with
approximately 22.9%2 and 19.97%3 ownership in the
Combined Trust respectively.
CIT will be renamed Keppel Infrastructure
Trust ("Combined Trust") and KIFM (or another related entity of KIFM)
will be appointed trustee-manager of the Combined Trust.
KMC owns a 1,300 MW combined cycle gas turbine power generation
facility on Jurong Island, Singapore. The aggregate purchase
consideration for the KMC Acquisition will be S$510 million in cash
which is planned to be financed by an equity fund raising exercise.
Each of KIFM and CSIM believe the transactions to be DPU accretive4
for existing unitholders of KIT and CIT, respectively. In addition,
prior to the completion of the Combination, existing CIT unitholders
will receive a one-time distribution of S$30 million. After the
completion of the Combination but before the equity fund raising, the
Combined Trust will make a one-time S$30 million distribution to its
expanded base of unitholders.
These transactions are subject to the approval of minority
unitholders of KIT and CIT, and Keppel and Temasek will abstain from
After the Combination and KMC Acquisition, the Combined Trust will be
the largest Singapore infrastructure-focused business trust listed on
the SGX-ST with a market capitalization that is expected to exceed S$1.9
billion5 and proforma total assets in excess of S$4 billion.
Mr Khor Un-Hun, CEO of KIFM said, "With the support of the
unitholders, the transactions will combine KIT and CIT into an
attractive flagship infrastructure investment vehicle in Singapore
sponsored by KI, offering investors exposure to its large and
diversified core infrastructure portfolio."
Mr Tong Yew Heng, CEO of CSIM added, "The Combination and the KMC
Acquisition are transformational. With greater scale and critical mass,
the Combined Trust will be able to better access the capital markets to
pursue meaningful growth opportunities in the future. Such future growth
opportunities could include assets incubated by KI in addition to other
infrastructure assets that meet our investment criteria."
The Combination and the KMC Acquisition will create the largest Singapore infrastructure-focused business trust.
KIT's portfolio: • Senoko Waste-to-Energy Plant, the only incineration plant servicing the eastern, northern and central areas of Singapore, • Keppel Seghers Tuas Waste-to-Energy Plant, the newest of the four waste incineration plants currently operating in Singapore, • Ulu Pandan NEWater Plant, the second largest NEWater plant in Singapore, and • The proposed acquisition of the 51% stake in KMC, a top-tier gas-fired power plant in Singapore.
CIT's portfolio: • City Gas, the sole producer and retailer of town gas in Singapore, • SingSpring, Singapore's first large-scale seawater desalination plant, •
Basslink, the only electricity interconnector between Tasmania and
mainland Australia (including the Basslink Telecoms fibre optics
telecommunications cable), • CityNet, trustee-manager of Netlink Trust6,
which owns, installs, operates and maintains the fibre network for
Singapore's Next Generation Nationwide Broadband Network, and • DataCentre One, an Uptime Institute Tier 3 datacentre (estimated completion in 1Q CY2016).
Mr Khor commented, "The transactions will enable KIT unitholders to
gain exposure to an attractive portfolio of assets which generate
regular and predictable cashflows under existing long-term contracts. In
addition, the value and cashflow generating capability of long-term
infrastructure businesses such as City Gas, Basslink and KMC are not
constrained by existing contract lives."
KIT has agreed to acquire 51% of KMC from Keppel Energy Pte. Ltd., a
wholly-owned subsidiary of KI, the sponsor of KIT, for a cash
consideration of S$510 million. The equity value of KMC is based on an
enterprise value of S$1.7 billion, less a S$700 million loan to be
raised by KMC.
As part of the KMC Acquisition, KMC will enter into a 15-year
capacity tolling agreement with Keppel Electric Pte. Ltd. ("Keppel
Electric"), a wholly-owned subsidiary of KI. Under the tolling
agreement, KMC will contract its full capacity with Keppel Electric. The
maximum capacity fee is S$108 million a year as long as KMC meets the
availability and capacity test targets, with most of KMC's operating
costs being passed through. With this arrangement, volatility caused by
movements in electricity prices and demand in the Singapore merchant
power market typically experienced by independent power producers will
be mitigated for KMC. KI will guarantee Keppel Electric's payment
obligations to KMC. To ensure continuity of operations, KMC will enter
into a long-term service contract with KMC O&M Pte. Ltd., also a
wholly-owned subsidiary of KI, and will continue to be operated and
maintained by the same team which has operated the plant since 2007.
Mr Khor said, "An operating power plant such as Keppel Merlimau Cogen
Plant is a highly attractive and strategic asset in Singapore. The
15-year capacity tolling arrangement with Keppel Electric will generate
stable and predictable operating cash flows for the Combined Trust. This
acquisition demonstrates our sponsor's commitment to grow KIT by
delivering investments that are suitable for unitholders."
Benefits from Keppel Sponsorship
Upon completion of the Combination, KI will be the sponsor to the
Combined Trust and KIFM will be the trustee-manager. KI has an
established track record of developing, owning and operating
infrastructure assets and will be able to support the Combined Trust in
its growth strategies, whether by developing and warehousing suitable
assets or by co-investing alongside the Combined Trust.
The proposed adoption of a revised trustee-manager fee structure for
the Combined Trust, based on KIT's existing trustee-manager fee
structure, would have resulted in a reduction in trustee-manager fees of
approximately S$3.6 million7 for the Combined Trust.
In support of the Combination, KI as sponsor of KIT has agreed that
KIFM shall waive its divestment fee for the Combination. Similarly,
Temasek, as sponsor of CIT and owner of CSIM, will not receive
compensation for relinquishing its role as trustee-manager.
Mr Tong added, "The Combined Trust will benefit from KI's sponsorship
and growth plans given its track record as a developer, owner and
operator of infrastructure assets. Keppel's sponsorship commitment,
demonstrated through the KMC Acquisition, the Combined Trust having
first rights over the remaining 49% of KMC, and the first right of
refusal to acquire assets developed or incubated by KI, will benefit the
Combined Trust's acquisition pipeline."
The Equity Fund Raising
To fund the KMC Acquisition and its related expenses, an equity fund raising of up to S$525 million8
will be undertaken by issuing new units through a combination of
placement to institutional and other investors, as well aspreferential offering to existing unitholders. The offering price, as
well as further details of the equity fund raising, will be determined
Keppel and Temasek intend to subscribe for their pro-rata
entitlements under the preferential offering and do not intend to
dispose of their units in the Combined Trust from the date of completion
of the Combination to a date no earlier than 12 months following the
completion of the equity fund raising exercise.
In addition to the approval of the Combination by CIT and KIT
minority unitholders, it should be noted that the Combination is
conditional upon the approval of the KMC Acquisition by KIT unitholders.
However, if the Combination is not approved or does not close, KIT will
proceed to conduct the equity fund raising to complete the KMC
Acquisition if the KMC Acquisition is approved.
The two transactions are subject to conditions precedent including
unitholder and regulatory approvals. The Combination is an "interested
person transaction" of each of KIT and CIT and the KMC Acquisition is an
"interested person transaction" of KIT which will require separate
approvals of each of KIT's and CIT's unitholders at their respective
extraordinary general meetings to be convened. Each of Keppel, Temasek
and their respective related parties, will be required to abstain from
voting at the relevant extraordinary general meetings.
Based on the timeline for obtaining the requisite consents and
approvals, the completion of the transactions is expected to take place
in the second calendar quarter of 2015.
Last updated : 14 Sep 2019
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