Keppel announces mega deals to boost plan to turn assets into cash; shares rise 2.1%

SINGAPORE - Keppel on Nov 19 announced two major deals to boost its monetisation drive and elevate its position as a major global asset manager.

One deal is to secure control over 13 legacy rigs held by Rigco Holding, in which Keppel owns a 10 per cent stake. This will be done following a selective capital reduction (SCR) exercise to be completed by Rigco.

Keppel currently holds $139 million in perpetual securities and approximately $4.3 billion in vendor notes issued by Rigco. When the SCR exercise is completed by end-2024, the shares in Rigco not held by Keppel will be cancelled, resulting in Rigco becoming a wholly owned subsidiary of Keppel.

Keppel will have control of $843 million of cash in Rigco as at end-September, which it can utilise to complete the unfinished rigs.

Keppel noted that it has “no intention of re-entering the offshore and marine business”. 

Instead, chief executive Loh Chin Hua said a successful capital reduction by Rigco would put Keppel in the driver’s seat to exert better control of the cash in Rigco and accelerate the monetisation of the rigs.

This will unlock funds that can be used to reduce debt, reinvest for growth and reward shareholders, he said.

Keppel is planning to establish a new offshore infrastructure private fund to own and manage the legacy rigs, as well as hold its 49 per cent stake in Floatel International.

It also aims to use the fund to attract third-party capital.

Keppel said this arrangement would provide it with greater strategic flexibility to respond to market opportunities via directly managing the rig assets through the fund, while potentially earning asset management fees.

The fund would have the option of selling the rigs or exiting through a securitisation route in the future.

Mr Loh said that securing control over management and monetisation of the legacy rigs would reduce Keppel’s risks as a substantial creditor to Rigco, as well as better realise the potential of Rigco’s assets.

In another deal, Keppel announced the spin-off of its data centre joint venture (Keppel JV) to Keppel DC Reit for a total gross divestment price of $1.38 billion – making it one of the largest data centre transactions in South-east Asia.

The Keppel JV, a 60-40 partnership between Keppel’s connectivity division and Cuscaden Peak Investments, owns the Keppel Data Centre Campus (KDCC) in Genting Lane in Singapore.

This comprises two completed and fully contracted data centres, namely Keppel DC Singapore 7 and Keppel DC Singapore 8, as well as a vacant land plot earmarked for a third data centre, which has been carved out from the proposed transaction.

Keppel’s share of the total gross divestment price will be about $280 million, based on Keppel’s effective stake in the Keppel JV, which includes both its interests in the Keppel JV and indirect interests via Keppel’s private fund, Alpha Data Centre Fund.

While Keppel DC Reit will have ownership of the data centres, Keppel will continue to earn recurring income from asset management and operation and maintenance of the two data centres, and will also develop the third data centre in the KDCC with Keppel’s private funds.

This proposed acquisition is expected to be 8.1 per cent DPU-accretive to Keppel DC Reit and will bolster its portfolio with two artificial intelligence-ready hyperscale data centres within a campus in Singapore, which is Asia’s top data centre hub.

Keppel shares rose strongly on Nov 19, after the deals were announced. The stock closed 14 cents, or 2.1 per cent, higher at $6.72 on Nov 19.

Keppel DC Reit called a trading halt before the market opened on Nov 19. The counter closed at $2.19 the previous day.