Keppel Infrastructure and Keppel Infrastructure Fund Management (KIFM), as Trustee-Manager of Keppel Infrastructure Trust (KIT), have signed a non-binding term sheet with the intention to enter into definitive agreements with respect to the sale and purchase of a 50% equity stake in Marina East Water (MEW), which owns the Keppel Marina East Desalination Plant (KMEDP), for an enterprise value of approximately $355 million.
Keppel Infrastructure is the sponsor of KIT.
The proposed transaction is subject to customary closing conditions including approvals by shareholders and PUB, as well as the receipt of applicable regulatory approvals.
Upon the completion of the proposed transaction, it is expected that Keppel Infrastructure and KIT will each hold a 50% joint-controlling stake in MEW, with KIT receiving 100% of the economic interest from MEW.
KMEDP will continue to be operated and maintained till 2045 by Marina East Water O&M, a wholly owned subsidiary of Keppel Infrastructure, allowing MEW to benefit from proven water services and diverse operating capabilities of Keppel Infrastructure while contributing to Keppel Infrastructure’s long-term, recurring income from the operating and maintenance (O&M) fees.
KMEDP is Singapore’s fourth desalination plant, capable of producing 137,000 cubic metres of fresh drinking water per day. The plant commenced commercial operations on June 29, 2020 and has a 25-year concession, from 2020 to 2045, under a Design, Build, Own and Operate (DBOO) arrangement with National Water Agency, PUB.
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Located at Marina East, the plant is Singapore’s first and only large-scale dual mode plant, which can treat seawater or rainwater drawn from the Marina Reservoir.
“The proposed transaction involving the KMEDP is part of the Keppel Group’s asset monetisation strategy and asset light business model under Vision 2030,” says Cindy Lim, CEO of Keppel Infrastructure. “By unlocking value from KMEDP, the group will be able to redeploy capital towards other growth initiatives, such as renewables and environmental infrastructure, as well as low carbon and decarbonisation solutions in line with Vision 2030.”
Jopy Chiang, CEO of KIFM, believes that the “highly anticipated acquisition” will enhance the strength and resilience of the KIT portfolio. “Besides being one of the key assets contributing to Singapore’s water resilience, KMEDP has a long-term contract with a strong counterparty, which will improve KIT’s cash flow visibility,” says Chiang.
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“The strategic addition of KMEDP is expected to support the overall distributable income per unit accretion to our unitholders,” Chiang adds.
Units in KIT closed at 57 cents on June 30.
