Keppel Corporation and Keppel Infrastructure Trust (KIT), on July 13, announced that they will be jointly investing in a European onshore wind energy portfolio.
The transaction is KIT’s first investment in the renewable energy sector. Meanwhile, the transaction will also mark Keppel Corp’s expansion in the wind energy business.
Under the joint investment, both Keppel Corp and KIT will be putting in €160 million ($233.6 million) for a 33.33% stake in a joint investment vehicle (FundCo), of which Keppel Corporation will hold an effective stake of 6.0%. KIT will hold an effective stake of around 27.3%. These stakes are held through an 18:82 joint venture between Keppel Renewable Investments Pte. Ltd., a wholly-owned subsidiary of Keppel Corporation and KIT.
The joint investment will be made alongside Kommunal Landspensjonskasse (KLP) and Meag Munich Ergo Asset Management GmbH (Meag), which will be co-investing in 49% of a portfolio of existing and pipeline onshore wind energy assets across Norway, Sweden and the United Kingdom (projects) sponsored by Fred. Olsen Renewables AS (Foras).
KLP is Norway’s largest pension fund with assets under management (AUM) of over NOK900 billion ($127 billion) as at March 31. Meag is a leading global asset manager with AUM of €330 billion as at March 31. Both KLP and Meag will each commit €160 million for a 33.33% stake in the FundCo.
Foras, a leading developer, operator, and owner of renewable energy assets, will hold the remaining 51% stake in the projects.
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According to the joint statement by Keppel Corp and KIT, FundCo will initially co-invest in 49% of three operating wind farms in Sweden and Norway with a combined generating capacity of 258 MW (initial portfolio).
It will further have a five-year exclusive right and obligation to co-invest in 49% of all Foras’ eligible pipeline of onshore wind energy assets totalling 1.3GW in Sweden and the United Kingdom when they achieve final investment decision, up to a total capital commitment of €480 million.
The proposed co-investment in the initial portfolio is expected to be completed by 3Q2022.
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Once the investment is completed, the Keppel Group would have a total renewable energy portfolio of approximately 1.8 GW, including assets under development.
KIT intends to fund its commitment of approximately €131 million (approximately S$191.6 million) with an optimum combination of internal sources of funds, proceeds from equity and/or debt capital market issuances and/or external borrowings. Assuming all commitment is utilised, KIT's enlarged portfolio will grow from S$4.5 billion in March 2022 to S$4.7 billion.
As the European Union (EU) looks to cut net greenhouse gas emissions by at least 55% by 2030, along with rising demand for more electricity arising from the electrification of industrial and transport sectors, the outlook for wind, alongside other renewable energy sources, is expected to be positive.
“Keppel’s investment in this onshore wind portfolio, alongside other sterling investors, reflects our focus on making sustainability our business and contributing to the global efforts to combat climate change,” says Loh Chin Hua, CEO of Keppel Corp.
“The investment will provide Keppel not only with stable recurring income from the operating assets, but also a strong deal flow pipeline in well-established markets in the Nordics and the UK. We look forward to further strengthening our partnership with KLP and Meag, as well as Fred. Olsen to build a sustainable future,” he adds.
“This investment marks KIT’s first investment in the renewable energy sector, and our maiden acquisition in Europe. The Nordic region is one of the most mature renewables markets globally. This momentum of demand for green energy is growing rapidly and is reshaping the energy landscape worldwide. We will continue our focus to seek out quality investment opportunities in this space and help support economies with their energy transition journeys,” says Jopy Chiang, CEO of KIT’s manager.
This transaction is expected to support KIT’s overall distributable income per unit accretion. It is, however, not expected to have any material impact on Keppel Corp’s net tangible assets (NTA) per share or earnings per share (EPS) for the current financial year.
Shares in Keppel Corp closed 2 cents lower or 0.31% down at $6.53, while units in KIT closed flat at 56.5 cents on July 12.
