Keppel Corporation Limited

Thomas Pang - Chief Executive Officer, Keppel Telecommunications & Transportation Chris Ong - Chief Executive Officer, Keppel Offshore & Marine Chan Hon Chew - Chief Financial Officer, Keppel Corporation Loh Chin Hua - Chief Executive Officer, Keppel Corporation and Executive Chairman, Keppel Land Ong Tiong Guan - Chief Executive Officer, Keppel Infrastructure Christina Tan - Chief Executive Officer, Keppel Capital

Conrad Werner - Macquarie

Good evening and welcome to the conference and webcast on Keppel Corporation’s results and performance for the fourth quarter and full year of 2017. 2017 was an eventful year.

The global resolution reached by Keppel O&M over past misdeeds in Brazil brings an end to what has been a painful chapter for Keppel. One that we have recognized and dealt firmly with.

This is not Keppel. We care not just about results, but also how they are obtained.

The Board and Management have thoroughly investigated the allegations and dealt with the issues that were uncovered. We have put in place enhanced compliance controls, including comprehensive training and certification, to prevent any repeat of such misdeeds.

Our core value of integrity prohibits Keppel from engaging in any unethical practices or behavior. This is absolutely clear to me as CEO.

We will not tolerate any behavior or action from Keppelites that deviates from this fundamental principle. The Board and management are determined to regain the trust that has been lost.

We will win business legally and ethically, based on our collective strengths of superior customer-centric solutions and good track record of execution. With this chapter now behind us, we look forward to continuing on our growth trajectory and building a more disciplined and sustainable business, a Keppel that will remain trusted and admired by all our stakeholders.

In the past year, amidst a challenging environment, Keppel delivered on projects, entered new markets, seized new opportunities, and established vehicles and engines for growth. These include the delivery of the world’s first converted Floating LNG vessel, commencement of construction of the iconic Keppel Marina East Desalination Plant, winning the bid for Hong Kong’s first integrated Waste Management Facility, and the successful listing of the new Keppel-KBS US REIT on the Singapore Exchange, to name a few examples.

For financial year 2017, the Group achieved a net profit of S$217 million, after taking into account the one-off financial penalty of 570 million and 49 million of related legal accounting and forensics cost. Excluding this one off items there group would have achieved a net profit of 836 million an increase of 7% over financial year 2016 underpinned by earnings growth in the property infrastructure and investments divisions.

The group's economic value added for the year was negative 834 million while our return on equity was 1.9%. Excluding the one of financial penalty and related cost our ROE would have been 7%.

Free cash flow for 2017 was 1.8 billion more than three times to 540 million for 2016. Net gearing was 0.46 at the end of 2017, lower than the 0.56 at the end of 2016, or 0.50 at the end of September 2017.

As we had announced earlier, the Company will ring-fence the one-off financial penalty and related costs when considering the dividend pay-out for the year. Taking into account the Group’s improved performance, excluding Keppel O&M’s one-off financial penalty and related costs, our stronger cash flow position and the lower gearing, the Board of Directors will be proposing a final dividend of $0.14 per share, compared to the final dividend of $0.12 declared for 2016.

We think this is a fiscally prudent proposal. Together with the interim cash dividend of $0.08 per share distributed last August, we will be paying out a total cash dividend of $0.22 per share to shareholders for FY 2017 compared to $0.20 cents per share for the whole of 2016.

During the year, recurring income continued to be a stable contributor to the Group. Recurring income amounted to S$319 million, down S$20 million from S$339 million in 2016.

This was mainly due to lower contributions from property investment and hospitality businesses, partly offset by higher contributions from our infrastructure and asset management businesses. I shall now take you through the developments in our business divisions.

There is growing optimism in the O&M industry, following the recovery of oil prices on the back of extended supply cuts by OPEC and other oil producers. The increase in offshore rig transactions has also helped to improve the outlook.

However, the rig market continues to be plagued by a supply overhang, and both utilization and day rates remain low. Whilst FIDs have doubled in 2017 compared to 2016, and are expected to gather momentum as oil companies restart their oil exploration and exploitation programs, it may be some time yet before they translate to orders for new drilling units.

However, we continue to see opportunities in the demand for production assets, LNG solutions and specialized vessels. Notwithstanding the current challenges, we remain confident about the long-term potential of the O&M business.

Energy demand remains strong, driven by global economic growth. The increasing efficiency by operators has also lowered the cost of E&P, while continued attrition will contribute to the eventual restoration of supply and demand equilibrium for the rig market.

In financial year 2017 Keppel O&M sustained a lot of 335 million, compared to the net profit of 29 million a year ago. This was mainly due to the one-off impact of the financial penalty and related costs and additional 81 million provision for losses made on the Sete Brazil project, and 54 million in impairment on other assets.

Keppel O&M secured new contracts worth about 1.2 billion from new and repeat customers including two LNG dual fuel container ships from Pasha Hawaii, FPSO jobs from SBM Offshore, Prosafe, and Petrobras, as well as three dredgers from Jan De Nul. As at 31 December, 2017, Keppel O&M’s orderbook stood at 3.9 billion, excluding the contracts from Sete Brasil, compared with 3.7 billion at the end of 2016.

Keppel O&M kept its focus on execution and 10 major projects were delivered in 2017. Earlier this month, Keppel FELS also delivered the first jackup of 2018 to Borr Drilling.

Meanwhile, we have reached agreement with our customer Golar LNG to extend the notice to proceed for the Gandria and Gimi FLNG vessel conversions to mid- and end-2018 respectively. Golar LNG has announced the FID for Gandria is expected in 2018, and they have provided funds to kick start some early work in the conversion of Gandria.

Other key developments in Keppel O&M are as shown on the slide. In the year ahead, our yards will continue to focus on executing both new and existing contracts.

About half of the orderbook to be delivered this year are non-drilling projects. We will continue to expand our offerings and capabilities, and explore new markets.

2017 marked another strong year for our Property Division, which has remained the largest contributor to the Group’s bottom line. The Division recorded a net profit of 685 million for financial year 2017, up 10% from 620 million a year ago.

We are transforming Keppel Land to be a multi-dimensional real estate player, with a strong focus on returns. For 2017, Keppel Land made a net profit of about 701 million, 25% higher than the net profit of 559 million in 2016.

ROE for Keppel Land was 8.2%, while its gearing was 0.25 in 2017. Over the past five years, Keppel Land achieved an average ROE of 9.4%.

In 2017, Keppel Land announced five divestments totaling more than 1 billion, including the sale of the Zhongshan residential cum marina development in China and the Tanah Lot site in West Bali, Indonesia in the fourth quarter. The divestment of the Zhongshan development is currently pending a decision by the Court of Appeal on a petition submitted by Sunsea Yacht Club Hong Kong Company.

During the year, we recognized total divestment gains of S$212 million in 2017. Just to be clear these divestment gains does not include the gains from the potential sale of Chong son which was not completed at the end of last year.

Keppel Land also seized opportunities to replenish its property portfolio and invest strategically across the region. We made investments amounting to about S$1.6 billion, including the acquisition of residential sites in Wuxi, Ho Chi Minh City and Bangkok in the fourth quarter.

Keppel Land continued to achieve strong home sales in 2017, transacting more than 5,480 units at a total sales value of about S$2.8 billion. Of these, some 3,725 homes were sold in China, 1,110 in Vietnam, 380 in Singapore and 270 in Indonesia.

Due to tightening measures in China and the timing of our launches in Vietnam, overall sales volume was marginally lower compared to the same period last year. We expect to recognize profits from some 7,740 overseas homes that had been sold for about S$2.4 billion as they come into completion from 2018 through to 2020.

In the current environment where land prices in key markets are high, a landbank with an estimated 10 year supply places Keppel Land in an enviable position. We are under no pressure to accumulate land, and can even choose to monetize part of this sizeable landbank in response to good opportunities.

In 2017, Keppel Land divested three projects, equivalent to about 4,330 homes sold en bloc, which is significantly higher than the 630 homes divested en bloc in 2016. In line with our goal to make Keppel Land a real estate company with one of the highest returns in Asia, we will continue working our assets hard to unleash the full potential of our property portfolio.

We are fortunate to have entered some markets early, particularly in China and Vietnam, where we have secured land at low cost. Today, about 70% of Keppel Land’s total residential landbank has been with the company for over 7 years.

In 2017, we replenished our pipeline with another 5,710 homes in our key markets, bringing Keppel Land’s total supply of homes to about 63,000 units. We currently have about 1,200 homes in our Singapore landbank.

We are also studying the redevelopment of Keppel Towers and Nassim Woods, which can potentially add another 500 homes in prime locations to our Singapore portfolio. On the commercial front, Keppel Land has about one and a half million square meters of gross floor area, either completed or under development.

When fully stabilized, this portfolio can generate an annual net operating income of about S$300 million. Our Infrastructure Division delivered a net profit of S$132 million for financial year 2017, up 33% year-on-year.

Keppel Infrastructure continued to perform well, with a net profit of S$109 million and ROE of 14.9%. KI’s net profit grew by 45% from 2016.

Earnings from energy, environment and infrastructure services increased to $100 million in 2017 compared to $66 million in 2016. The strong profit was achieved through better performance from the energy infrastructure business as well as growing contribution from the operations and maintenance of infrastructure assets.

Several key milestones marked the year for our Infrastructure Division. Keppel Seghers and Zhen Hua secured a $5.3 billion contract to design, build and operate Hong Kong’s first Integrated Waste Management Facility.

Our share of the total contract is approximately $1.95 billion for the EPC and O&M phases. Construction of the Keppel Marina East Desalination Plant is progressing well with over 30% completed.

In Qatar, the final handover of the Doha North Sewage Treatment Works was carried out in the fourth quarter. During the year, Keppel Seghers secured two new contracts to provide technology solutions to WTE plants in Beijing and Hunan, further reinforcing its position as a leading provider of WTE solutions in China.

Meanwhile, Keppel Data Centers has partnered with the Singapore Internet Exchange in support of Singapore's Smart Nation push. In an MOU signed between the two parties, Singapore Internet Exchange has set up its point of presence within Keppel DC Singapore 1 in Northeast Singapore.

Tapping on the growing demand for e-commerce, Keppel Logistics now offers more valueto customers with a comprehensive suite of omnichannel logistics and channel management solutions through the newly launched UrbanFox.Keppel T&T contributed $42 million to the Group’s net profit in 2017, 14% higher than itscontribution of $37 million in 2016. Keppel Infrastructure, as a developer, owner and operator of quality infrastructure assets, has contributed steadily to the Group’s bottom line.

Over the years, we have built up a comprehensive range of operating expertise in power, WTE, district cooling and heating as well as water and wastewater facilities. In 2017, Keppel Infrastructure earned a total revenue of about S$160 million from the operations and maintenance of infrastructure assets across Singapore and Qatar.

When the Keppel Marina East Desalination Plant and Hong Kong’s Integrated Waste Management Facility are completed in 2020 and 2024 respectively, they will augment recurring income from operations and maintenance, extending visibility into 2039. The Investments Division turned in a net profit of $235 million for Financial Year 2017, underscored by stronger contributions from Keppel Capital, and our investment in the Sino-Singapore Tianjin Eco-City.

The Eco-City, which marks its 10th anniversary this year, is on track with its growth plans and will continue to be a long-term contributor to Keppel as it matures. For 2017, our investment in SSTEC, the master developer of the Tianjin Eco-City, contributed $120 million to the Group’s net profit, a significant increase from the $34 million in 2016.

During the year, the REITs and Trust managed by Keppel Capital continued to deliver positive total returns to unitholders and made several strategic acquisitions that augmented their sustainable income streams. The latest addition to the stable of managed vehicles, Keppel-KBS US REIT, was successfully listed on the Singapore Exchange, raising about US$553 million.

Keppel REIT and Keppel DC REIT made three acquisitions totaling about S$670 million. Meanwhile, Alpha Investment Partners registered strong fundraising efforts through its private funds.

The Alpha DC Fund closed at US$1 billion, double the initial target size, while the Alpha Asia Macro Trends Fund III raised over US$560 million. Collectively, the private funds under Alpha invested in over US$910 million worth of real estate and data centre assets during the year, and also captured value through the divestment of 11 assets worth over US$880 million.

With an integrated asset management platform, Keppel Capital is delivering stronger performance. Total asset management fees of S$134 million earned in 2017 were higher than S$128 million the year before.

The REITs and Trust contributed to about 60% of total asset management fees for the current period, while about 40% came from private funds. Keppel Capital recorded a net profit of S$83 million for 2017, helped by performance fees and mark-to-market gains from securities held for sale.

This was 30% higher than the S$64 million of net profit contributed by Keppel Capital in the previous year. Keppel Capital has been actively pursuing both organic and inorganic growth opportunities to increase recurring asset management income for the Group.

On a fully leveraged and invested basis, Keppel Capital’s assets under management grew to $29 billion as at end 2017 from S$25 billion in the preceding year. We will continue to grow our AUM to the target of S$50 billion by 2022, boosting the Group’s funding capabilities and expanding our funding base.

Last October, we announced the creation of Keppel Urban Solutions as a strategic move to harness the Keppel Group’s strengths and diverse solutions to pursue sustainable and smart urban development opportunities in the region. Since then, we have incorporated the company and appointed its management team, led by Cindy Lim as Managing Director.

The development plans for KUS’ pilot project, the Saigon Sports City, located in District 2 of Ho Chi Minh City, are progressing on schedule. A team of international consultants has been assembled to work on the design and development plans for the sports-orientated integrated hub, which offers a variety of lifestyle and recreational activities.

The 64-hectare development will comprise a total of 4,300 premium homes designed with emphasis on sustainability, connectivity, community and technology. The first phase will feature some 90,000 square meters GFA of commercial space and about 1,220 homes, of which 620 units are slated for launch in the second half of this year.

Apart from Saigon Sports City, KUS is also actively evaluating and pursuing other sustainable, smart urban development prospects in the region. The global economy is experiencing a broad based upturn, and we are excited about the many opportunities presented by strong urbanization trends across the businesses that we are in, whether it is the demand for offshore production assets or LNG solutions to meet growing energy needs, attractive urban environments and reliable infrastructure to support sustainable communities, or efficient datacenters and logistics solutions to buttress the digital economy and growing ecommerce.

Demand for homes and offices in our key markets remains robust, underpinned by strong growth prospects. Today, Keppel is not just a group of diverse companies who share a common name, but an ecosystem of companies working closely together with a common purpose, as One Keppel, to provide compelling solutions for sustainable urbanization.

We recently updated our mission to depict our shared goal guided by our operating principles and core values, we will deliver solutions for sustainable urbanization profitably, safely and responsibly. The refreshed mission reflects more closely the group’s current focus, and better prepares and positions us to compete internationally as we stride confidently into the future.

Thank you. I will now hand the time over to our CFO Hon Chew.

Thank you, Chin Hua, and a very good evening to all. I shall now take you through the group’s.

The group recorded a net loss of $495 million in the fourth quarter, against a net profit of $143 million in the same quarter last year. This is $638 million worse than last year.

The results of the fourth quarter and full year 2017 included the one-off financial penalty arising from Keppel Offshore & Marine’s global resolution with criminal authorities in the United States, Brazil and Singapore, and related legal, accounting and forensics costs amounting to $619 million. As a result, earnings per share was at negative 27.3 cents, while EVA was at negative $895 million.

Given the size of the impact of global resolution and its one-off nature, the analysis of the fourth quarter results in the following slides is normalized to exclude the global resolution penalty and related costs. This is done to allow a more meaningful analysis of the underlying performance of the Group.

On this basis, the group’s fourth quarter net profit at $124 million, was $19 million or 13% lower year-on-year. Earnings per share was 6.8 cents, while EVA was at negative $276 million.

Next, the summary Group profit and loss statement. The group's revenue for the fourth quarter of 2017 was 20% or $395 million lower than the same quarter in 2016.

All divisions except the Infrastructure Division registered lower revenues during the quarter. Operating profit increased 29% or $28 million to $126 million.

Higher profits from the Investments, Property and Infrastructure Divisions were partially offset by higher operating loss at the Offshore & Marine Division. However, profit before tax increased by 1%, a lower margin than the improvement in operating profit, due mainly to lower share of profits from associated companies.

The share of profits from associated companies in the same quarter last year benefited from higher contribution from the Sino-Singapore Tianjin Eco-City. Despite a higher pre-tax profit, net profit after tax and non-controlling interests at $124 million was 13% or $19 million lower, due mainly to higher effective tax rate this year, as a result of higher proportion of profits from operations in countries with higher tax rate and losses from companies in Keppel Offshore & Marine.

In the next slide, we take a closer look at the Group’s revenues by division. In the fourth quarter of 2017, the Group earned total revenues of $1.5 billion, 20% lower than in the same period in 2016.

This was driven largely by the 39% decrease in Offshore & Marine’s revenue as a result of lower volume of work. Revenues from the Property Division decreased by 26%, primarily due to lower revenues from China trading projects and The Glades, which were partly offset by higher revenues from the Reflections at Keppel Bay.

Infrastructure Division’s revenue grew 15%, driven by increased sales in the power and gas business and progressive revenue recognition from the Keppel Marina East Desalination Plant project. The Investments Division saw a slight decrease in revenue, due mainly to timing difference in certain performance fees earned by Keppel Capital, which were recognized in 3Q this year compared to 4Q last year.

Moving on to the Group pre-tax profit. Excluding the one-off financial penalty and related costs, the Group recorded a pre-tax profit of $208 million, comparable to the $206 million recorded in the same quarter in 2016.

The Offshore & Marine Division’s pre-tax loss was $253 million as compared to $142 million loss in the same quarter in 2016. This was due mainly to lower operating results and share of associated companies’ losses, partially offset by lower impairment provisions and lower net interest expense.

Pre-tax profit for the Property Division increased by 24% to $366 million, lifted mainly by higher fair value gains on investment properties, which were partially offset by the absence of write-back of impairment for hospitality assets compared to write-backs in respect of Sedona Yangon and Mandalay last year. Infrastructure Division reported a 75% increase in pre-tax profit, due mainly to higher profit from the power and gas business and recognition of fair value gains on investment during the quarter.

Pre-tax profit from the Investments Division was $22 million higher as a result of the absence of provision for impairment on investments in 2017, partly offset by lower contribution from the Sino-Singapore Tianjin Eco-City. After tax and non-controlling interests, the Group’s net profit for the quarter decreased by 13% or $19 million to $124 million.

Next, I shall take you through the performance for the financial year of 2017. The Group recorded a net profit of $217 million for the financial year 2017, this was 72% lower as compared to the previous year.

As noted earlier, the results for 2017 was affected by the impact of the global resolution with criminal authorities in the United States, Brazil and Singapore. The resultant earnings per share decreased by the same extent to $0.119.

This translates to a ROE of 1.9%, and EVA was also lower at negative 834 million. Similar to the fourth quarter, the analysis for the financial year of 2017 in the following slides is normalized to exclude the one-off financial penalty from the global resolution and related costs to allow a more meaningful analysis of the underlying performance of the Group.

On this basis, the Group net profit was 7% higher at $836 million as compared to 2016. As a result, earnings per share increased by the same extent to $0.46.

This translates to a higher ROE of 7%, while EVA was lower at negative 215 million. Free cash flow for the year was an inflow of 1.8 billion, compared to an inflow of 540 million in the prior year, due mainly to lower working capital requirements from the Offshore & Marine and Property Divisions.

Consequently, net gearing decreased from 56% at the end of 2016 to 46% this year. We are pleased to propose a final dividend of $0.14 per share for this year.

Together with the interim cash dividend of $0.08, total cash dividend for 2017 will amount to $0.22 per share. Next, the summary Group profit and loss statement.

During the year, the Group earned a total revenue of 6 billion, a decrease of 12% or 803 million from 2016. Lower revenues from Offshore & Marine and Property Divisions were partially offset by higher revenues from Infrastructure and Investments Divisions.

Operating profit at 776 million was 2% or 19 million lower than last year. All divisions reported higher operating profits, except for Offshore & Marine Division, which turned in a full year operating loss.

Despite lower operating profits, profit before tax was 8% or 80 million higher than in 2016, due mainly to lower interest expense and higher share of profits from associated companies. The higher profits from associated companies was contributed largely by the Sino-Singapore Tianjin Eco-City from the sale of three land parcels in 2017.

After tax and non-controlling interests, net profit was 7% higher at 836 million, translating to earnings per share of $0.46. In the next slide, we take a closer look at the Group’s revenue by division.

Overall, the Group’s revenue of 6 billion was 12% lower as compared to 2016. This was driven largely by the 37% decrease in Offshore & Marine revenues as a result of lower volume of work and deferment of some projects.

Property revenues dropped by 12%, due mainly to lower revenues from China trading projects and The Glades. The Infrastructure Division saw a 27% growth in revenue, led by increase in sales in the power and gas business, and progressive revenue recognition from the Keppel Marina East Desalination Plant project.

Revenue from the Investments Division was 29% higher, resulting from sales of equity investments, as well as performance and acquisition fees earned by Keppel Capital. Moving on to the Group pre-tax profit.

The Group recorded a pre-tax profit of $1.1 billion for 2017, which was 8% higher than in the preceding year. The Offshore & Marine Division’s pre-tax loss was $243 million as compared to a pre-tax profit of $90 million in 2016.

As revenues continued to fall by another 37% this year, Offshore & Marine Division incurred a full year operating loss in 2017. In addition, share of associated companies’ profits was also lower.

These were partially offset by lower impairment provisions and lower net interest expense. Provisions, mainly for impairment of fixed assets, stocks & work in progress, investments and an associated company, and restructuring costs, amounted to $135 million in 2017.

This is lower than the $277 million impairment provisions recorded in 2016. The division’s operating margin for the year, was a negative3.3%, compared to a positive 14.4% in 2016.

Pre-tax profit from the Property Division rose 14%, driven mainly by higher fair value gains on investment properties and gains from en-bloc sales of development projects in China and Indonesia. This was partially offset by lower contribution from associated companies, primarily resulting from the absence of the gains from the divestment of the stakes in LifeHub @ Jinqiao and 77 King Street last year as well as the absence of write-back of impairment for hospitality assets in 2016.

The Infrastructure Division saw an increase of 36% in pre-tax profit, due to higher operating results, progressive recognition of Keppel Marina East Desalination Plant Project, fair value gains on investment and gains from the divestment of GE Keppel Energy Services Private Limited. The Investments Division’s pre-tax profit was $260 million higher, led mainly by higher share of profit of associated companies including the Sino-Singapore Tianjin Eco-City and K1 Ventures, write back of provisions for impairment of investments and profit on the sale of equity investments.

These were partially offset by fair value loss on KrisEnergy warrants and share of loss in KrisEnergy. After tax and non-controlling interests, the Group’s earnings increased by 7% or $52 million, with the Property Division being the top contributor at 82%, followed by Investments at 28% and Infrastructure at 16%, while the Offshore & Marine Division contributed negative 26% to the Group’s net profit.

The Group’s net profit for the financial year 2017 was $836 million, which translated to earnings per share of $0.46. ROE increased to 7% in 2017 from 6.9% in 2016.

Our proposed final dividend to our shareholders for 2017 will be $0.14 per share, including the interim dividend paid, the total distribution for '17 will be $0.22 per share. In 2017, cash flow from operations was $463 million as compared to $1.2 billion in 2016.

After accounting for working capital changes, interest and tax, net cash inflow and operating activities was $1.3 billion, as compared to $294 million in 2016. This is due mainly to lower working capital requirements in Offshore & Marine and Property Divisions.

Net cash generated from investing activities amounted to $425 million, comprising dividend income from associated companies and divestment of $655 million, less investments, operational capital expenditure and advances to associated companies of $230 million. As a result, there was an overall cash inflow of $1.8 billion for 2017, $1.3 billion higher than in 2016.

With that, we have come to the end of the results presentation segment, and I shall hand the time back to our CEO, Chin Hua, for the Q&A section. Thank you.

Thank you, Hon Chew. Again very warm welcome to all the participants to this result review to today at KLI.

We have a very large -- including a number of our friends from the local and foreign media. Some of you may have specific questions concerning the global resolution.

I just want to say that when we announce the global resolution at the end of last year, we also provided a fairly comprehensive fact sheet. The company in its agreement with the different authorities on the global resolution.

We also under quite specific restrictions in terms of any public statements that we make. So to that extent, we can't say much more then what is already in the public announcement in the factsheet, nor can we comment on the statement of the facts release by the authorities or to comment on identities of individual offices.

So this is a result briefing. And I would like to think that we are here to try to answer questions on the results.

So to the extent that the questions relating to the global resolution has an impact on our financial results, we'll be more than happy to address them. So with that, I open the floor.

We will take questions from the floor. We also take questions from the net.

So maybe I start off with any questions from the floor?

Yes Cheryl?

Hey, Cheryl from UBS. I have four questions.

The first one is regard to the global resolution. The number in the accounts or the page number 24 of the SGX releases are $618 million is different from original amount with --.

Could you just help us understand what the differences are? My second question is about offshore and marine.

During the fourth quarter, the operating loss is $215 million. Although the quarter-on-quarter revenue is comparable, as even if I take into account the one off charges it's still a loss.

Could you help us also understand what's the cause of the $80 million loss in the fourth quarter? My third question is just to clarify whether your group gearing of 46% already reflects the financial penalties that you will have pay.

And the fourth question sorry is about your property portfolio and it refers to slide number 14, where in the comparable slides from the previous quarter you see that annual income on a stabilized basis would be $75 million. And in this quarter if the net operating income on a stabilized basis of $300 million.

So could you just help us define the different metrics used? And what accounts for the I suppose the increase in number?

Thanks Cheryl. I'll ask the CFO Hon Chew to answer the first three questions.

So thanks for the question, the first on the 619 million that comprises two components. The fund 517 million which you have just mentioned and the remaining is in respect of accounting, forensic and other costs related to the global resolution.

I think the question is compared first quarter to third quarter, the difference is for the first quarter there were lower contribution from associated companies. A couple of the associated companies also made some provision, so the share of profit was also lower.

As for the gearing, yes, the answer is it includes the P&L impact of the global resolution. In other words, the 619 million you clearly see in the P&L is actually net.

So that has really been factored into the 46% gearing. But do take note that we have yet to pay the fine as of December, the fine we paid in the first half of 2018, 87.5% of the fine we paid in 2018 and the remaining 12.5% will be paid two years later in 2020.

So assuming all the fines are paid as of December 2017, the gearing would have been 51% so the impact is another 5 percentage points.

Okay. Thank you.

I think on the fourth question Cheryl if you don’t mind I will ask my GCC team to get in touch with you and run through the differences between the assumptions for the [indiscernible].

Hi. Mayuko from Nikkei.

Firstly, when is going to be the payment of the 422 million the charge and can I understand that this is going to be the last time that we see in terms of the payment or is there a possibility that depending on the investigation going on with individuals, there may be possibility that you may have to have to some more payment on that? And other thing is about Offshore & Marine business.

You have 84 -- 81 million loss from Sete and 54 million of impairments from other assets. Can you please give me more details on that?

Sete, you have took up the provision some years back, so are we going to see more losses in the future, how -- why is it coming out and can you give us the market outlook a little bit more and whether this -- you are saying this year something coming in as a revenue?

Okay. Thank you for your question.

The US$422 million in financial penalties of S$570 million about 25% of that has already of that has already been paid in January. We expect to pay another 12.5% sometime in March and 50% in probably May, and then the balance will be paid probably at the end of the third year -- towards the end of the third year.

We certainly -- this is global settlement of the three criminal authorities. So this should be the final as far this penalties are concerned.

On [Sete] I think we made a provision in 2016 and I think since with the quarter we will check on the adequacy of the provision and this quarter we did a update on the scenarios and we came up with a necessity for us would take further provision of 81 million. We believe this provision is enough but off course we will have to continuously study the situation it's quite fluid at a moment.

On your question on the outlook maybe I ask Chris maybe he can address your question as it's relating to the offshore industry in general or the offshore industry in Brazil. Maybe both okay.

I think for the outlook for the offshore and marine business we are having diversification drive which we updated or during the previous results. As you can see this year's delivery 50% of the delivery is non-driven products.

That is obviously taking bearing fruit and we will continue to work on our guest strategy, our LNG products if all of what we are targeting comes in we are hopeful that the 2018 would be a more powerful year than '17. I think you also had a question on the provisions of 135 million, the 81 million I think CEO has already explained this in respect of the [Sete] rigs, and there is the remaining 54 million inclusive number of items but the last items are actually pertaining to provisions at a sourcing level or impairment that's one of the biggest item, and also impairment in respect of investment in the associate.

And lastly also losses arising from closure of one of the yards. Maybe now I'll turn to the one of the first questions from the web.

Good evening with management he has three questions. First question would management consider a periodic revaluation of Keppel Land changing JV Land.

Second question what are the examples of enhanced compliance controls and third question what sort of strategies were urban for undertake to gain market share in Singapore?

I think on the first question is the Keppel Land Bank is deemed or is the Land in Tianjin is land that's held for sale is part of our inventory. Then we will not we will always keep it at a booked cost so we will not revalue that, so that will not change.

I suppose over a period of time you can get a sense from the sales of land as aspect continues to develop Tianjin off course so you can get a sense of what valuation of the land in Tianjin eco city is. On the second question can I invite CFO to give some examples.

I'll just give you some specific examples I think we've have enhanced could have conduct containing very detail anticorruption provision and also guidance on dealing with intermediaries. Also includes establishment of a group wide compliance and governance frame work.

We also have establish an independent group wise compliance function with clear reporting lines to the respective [top] committees and also addition of experience compliance personal. We’ve also introduce extensive risk base due diligence of third parties who represent capital in business dealings.

Of course very important is training program, we have vigorous and regular training program to enhance the compliance culture across the group including very comprehensive and compliance related e-learning and attach patients exercise. Other examples are new supplier code of conduct with very specific and the bribery provisions, we’ve also updated our group [lower] policy with centralize procedures and also a new receive lower community.

Last but not least also a group policy on agencies to strengthen procedures and requirements while hiring agents, this are some of the [indiscernible].

Thomas can I invite you take the third question on [forward].

Thank you [indiscernible]. Urban provides end to end e-commerce solutions, the services range from Omni channel management on e-commerce, warehousing and inventory control as far as last mile fulfillment services, so it is differentiated from lot of the logistics company out there.

And to go to market urban work closely with parent company Capital Logistics to approach existing customers, so they have existing strong relationship with potential customer already. Thank you.

We have second question on the web this post, posted by Anglia Ting of Media [Cop] Singapore, she wishes to ask [indiscernible] about the recent bribery scandal Keppel Offshore and Marine and the questions are any customer stop relationship with the company or is the company still receiving orders from existing customer. Any strategies from the company to maintain working relationship with this customer post bribery situation.

We have been engaging with all customers, I think so we found that some of them ask certain questions to get a better understanding of our enhance compliance frame work and we're working with our customers on that. But by enlarge we've not seen any of our customers spot working with us, of course will have to continue to work very hard to demonstrate that, we have very strict compliance regime and that we will only engage in ethical and legal activities.

So this is something that we will have to work very hard on but that’s has not stop customers from working with us. Yes.

I got two quick questions.

Can you please give you name please.

Saurabh Chaturvedhi from Wall Street Journal. Just two very quick questions, is it the first ever quarterly loss for Keppel?

And second would be how important is Brazilian operations in terms of its contribution to overall revenue or overseas revenue, what is the percentage of -- what percentage comes from the Brazilian operations?

First question is…

Whether is the first quarter in loss…?

Whether it's the first quarter we loss for Keppel [indiscernible] Group? And the answer is no.

I think we -- is it..?

[indiscernible]

Every quarter.

Every quarter, so it's the first for the Group.

[indiscernible] and if I can just add [indiscernible] you have had losses in the past, [indiscernible]

I think the key here is that this 619 million that we have to take for the fourth quarter is very significant amount and therefore and is a one-off, so yes, led to this loss. I am not sure where your question is going but I think we should focus on now and going forward as explained by our colleagues since 2003, when quarterly reporting was put in place, this would have been first loss but as I said the key that this is one-off and it’s a very significant amount 619 million.

Can you please repeat your second question?

What is the contribution of Brazilian operations to the overseas revenue and the all Group revenue?

We don't…

And I am talking about offshore…?

Maybe just explain the financial first and then Chris can talk about just the…

We don't actually disclose by country in terms of the revenue contribution.

How important is Brazil to KOM?

Okay, I think the operation in Brazil remains important part of our near customer -- near market near customer operation, and I think right now besides the Sete projects our teams are still working hard to deliver projects like P-69 and we just delivered last year P-66 which is ahead of schedule and while we're trying to basically enhance our presence is by our on-time, on-budget operation to our customer. So, if I answer your question correctly, that is a very important part, still remain relevant to our global presence in terms of operation for Offshore, yes.

I think this is also perhaps important point to make that global resolution will also allow the company to draw a line and we can continue to work in all these markets including Brazil and the U.S. and as Chris said Brazil remains a very important offshore market and we intend to be engaged in the Brazilian market.

Yes, there is a question I can't see who it is, can you check?

Hi, this is Gerald Wong, Credit Suisse. I have got three questions.

The first is on Offshore and Marine just wanted a follow up on the additional 80 million of provisions. What has really changed over the last 12 months to lead you to take this additional provision, especially since there were no provisions taken back in 2016?

Second question is property, for the retail gain of 180 million for overseas properties which market did you change or can make assumption and what is the key change that was made? Third question also relating to property, when you acquired Keppel Land you mentioned that the true cyclic ROE for property division can be 12%, given the ROE of 8% in 2017, [indiscernible] over the last five years do you think that this 12% [indiscernible] is still achievable?

I think I'll try to answer the first question and then [indiscernible]. As I mentioned earlier to an answer earlier to the question from [Nike] the [indiscernible] situation is [indiscernible] so every quarter we will go through the scenarios to make sure that the provisions that we have provided for is adequate.

And the key change I suppose this quarter or the fourth quarter of last year is that as we discussed on the restructuring with the [indiscernible] who is working with [statue of brazil] doing the restructuring, we have come to a certain conclusion on where the scenario might go. And that has resulted in the shifts in the way that we look at the outcomes, and this has resulted in the provision.

Of course, [indiscernible] we will look at the assumptions [indiscernible] in terms of the [indiscernible] in terms of exchange rates et cetera. So all this affected in and we will review this every quarter.

On the property you mentioned the 118 million mostly from I think on the overseas properties to revaluation, the bulk of it would be [indiscernible] to development that is reach a certain stage and we will then factor in revaluation of both the original cost. So some of this land was purchased some time ago and as the land value has gone up this will be reflected in the increase in the value of the investment -- this is for investment property just to be clear, not for land that is part of our landbank for development for sale.

Third question on 12% ROE you are right, good that you remind all of us. I always constantly remind it my colleagues at Keppel Land that is still something that we are targeting for 12%.

We believe through the cycle it is possible. Our net gearing you will notice that our net gearing for 2017 is actually not very high, its only about -- for Keppel Land I mean -- it was only about 25%.

So we will be looking to see how we can turn our assets a bit faster. And if appropriate we might also look at the gearing at Keppel Land.

So we believe [indiscernible] tricks we should be able to hit that 12% true cycle ROE, that will be the target. I think -- have a question.

You raised your hand.

I've got a few question. On lower end you mentioned that I know that there were some provision depending on the -- level.

But at the EBIT level excluding the -- also losses this quarter. Is that mainly because of cost incurred to close the --.

Sorry, interest provision for the -- weakening. That's why there is a loss in O&M this quarter.

Yeah. And also because their top-line has also come down by another 39% this year.

Okay. So how much was the cash that you incurred for -- closure?

The -- closure is part of the $55 million, so it's roughly about $10 million.

Okay. And the $26 million provision for --, that is not related to Sete?

No, that's not related to Sete.

What is it related to?

It's related to O&M division. A number of customers.

But I don't think it's appropriate for us to mention which are the customers.

Is it related to other undelivered REIT?

No. it's not related to the undelivered REITs.

Okay. Do you have can you revisit comment on the potential plans to sale the undelivered REITs to book.

I'll ask Chris, you want to take that?

Well on the bar engagement, we have made SGX announcement. We are in discussion that there is no terms and conditions that firmed yet.

And the discussion will continue. And when there is a material contract in view we will make the appropriate announcement.

Okay. So -- you might have mentioned that you haven't seen any customers that have stopped working with you.

But do you think was this kind of event it might actually put you at a slightly disadvantage position when you tender for jobs.

I don't believe so. I think as I said in my opening remarks, Keppel O&M has a lot of strengths in terms of our solutions in terms of our on time and safe delivery.

We can rely on this strengths to win contracts legally and ethically. And I believe that many of our customers appreciate us for this strengths.

So as I think Chris mentioned, we are still and very engaged in Brazil. We're working with SBM, we're working with Petrobras, we're working with different parties in Brazil.

So of course it's really up to us to continue to see a very disciplined company. Make sure that we do things right and do the right things.

And I think if we can do that and we can continue to focus on our strength in execution and in solutions, I think we'll be fine.

Okay thanks. Chris just as you mentioned that this year will be put through.

I actually missed that, but I wanted to understand all potential for any delivery, new order at all.

We don't give forecast. But I think…

Whether you have any inquiries. I know there are -- tax is well documented.

But just on the ground relatively.

You can give great broad outlook for the market.

I think as mentioned in CEO's speech. Uptick in terms of sentiment for the market clearly from the economics and also the oil price.

Nonetheless, as mentioned we are always quite vocal about -- we think that rates and utilization will have to recover before we see a meaningful uptick in the new construction for building rigs. And that’s the reason why through the few quarterly reviews we have always mentioned that we are looking at diversification.

We are looking at our LNG strategy and we are engaging our customers to make sure that we have different verticals and different products to service all our customers.

Two questions. The investment decision that the loss in share associates in 4Q, why?

Is that just purely KrisEnergy?

Okay, may be you ask the fourth -- your last question.

Okay. There’s no land sale in Tianjin 4Q, any hope that or have you seen in January or -- region.

Well, the land sale program in Tianjin Eco-City on a quarter-by-quarter basis is very lumpier because we sell -- we don’t sell every quarter. But I think over the cost of the year ahead we expect that it will provide a very steady contribution to the Group.

So to answer your question, we would expect to see some -- in fact it will be part of the business plan. We expect to see land sales in the first half and the second half of this year.

On the associate for first quarter, yes, there’s a loss from associate investment division. KrisEnergy is one of the main contributor.

I think I have to go back to earlier question, I don’t know whether I got the question correct, you were asking revenue profit, it is revenue, it is actually in the segment report. Brazil revenue is about 7% of the Group revenue, as such is it’s about 2% of the Group asset.

But we don’t disclose profit, we only disclose revenue.

Okay, thank you. I will take a question from the web, this is the question from Tan Hui Yee of SPH Singapore.

Your published SGX statement reflects the 6.5 million provision for doubtful debts. Can you provide more color towards the nature of this doubtful debt?

I think this has been addressed by our CFO 5 minutes ago. Also where the Keppel O&M stand today with respect to impairments for the undelivered jackup rigs?

So far we have not made any impairments. The jackup rigs or the strength -- the so called undelivered jackup rigs, they go through the same process every quarter as we do for Sete.

We will evaluate to see whether the -- whether there’s a need to make provisions and as it stands today we do not believe that there’s a need for us to make provisions for the jackup rigs.

Hi. Two from [indiscernible].

I have two questions. One related to property and other related to infrastructure.

On the first question I think for property you are seeing quite a bit development in China. First part is where Chinese are you talking policy shift towards a more rental model, and then there’s also a lot activity in the first month first few weeks of this year where there are I think Chinese vendor they saw a lot sales.

So I was just curious what Keppel has it basically on what strategies Keppel has done to be the adaptive shipment landscape as well as the capitalized on this higher property share during the first few weeks of this month. The second part is on our infrastructure and I think in your previous quarter as you talked how you are going to make infrastructure a key earnings driver and it has done well this quarter I can see that we can see I mean this year we are seeing.

But wondering just what else contribute effects going forward I suppose datacenter is one event but if they are bit quite on this front I think your alpha discipline is something typical for that wondering where we can get update here?

I think on the property side China is one of our key markets and we certainly over actively involve as we have seen in 2017, we have sold over 3,000 units in China, and we know we will continue to look for opportunities to been our Land Bank there faster. We have also taken opportunities in 2017 to sell some of our projects on block when the opportunity there is better than for us the whole and sale.

And you can see that we have also replenish land as in when in I think late December, we bidded for and successfully for a site in Wuxi. During the year Keppel Land has also entered into the Shanghai office market to acquire an office building in Shanghai and this is also part of our multidimensional approach to property, so we don’t just buy land to develop sometimes when you make sense we can sell the project on block, sometimes when you make sense we can also buy an existing investment and add value through asset management as we have done very successfully with Jinqiao shopping mall a couple of years ago.

So I think the market in China you will go through a quite a lot of ups and downs there will be a lot of policy risks that we have to be watchful for. But at the end I think there is a market that we are quite well and trenched.

We've been in china for Keppel Land for more than 20 years, we've developed capabilities and the network in those area and ability to execute well. And most importantly we have also built-up quite a significant Land Bank, so that possess in an advantage that we don’t have to we can be more selective when we approach this land and more recently as I said we have also started to look at not just buying land but also buying finished assets when you make sense.

Now for infrastructure I think TGs Group has had a very busy 2017 not only he has the key eye delivered in terms of higher net profits significantly higher than the year before. TGs Group KI has also been very active in securing projects this is the capital marina east desalination plant as well as more recently the Hong Kong integrated wealth management facility.

So we would expect that overtime this new projects will also to KI, we're also announce early part of last year the [project], so of course there is a bit longer term because it would take us a bit more time to get to FID but again this project would also be significant contributor to the group, anything else. Thomas do you want to talk about data center.

Data center market continue to be growing at a very fast pace due to the demand from the top service provider and we're not just seeing the interest from American top service providers but also increasingly from the Chinese [law]. So capital data center with the support from the alpha data center fund we will be able to capture the opportunities that are coming into the tier 1 cities around Europe and Asia and the team is targeting new development and so as brown field development in all the tier 1 cities.

Thank you.

Just one question at the back of the room.

[Radhna from Writers News], firstly one clarification I wanted to check, is there subsequent quarterly results from 2003 or was it 2001.

2003, my collogues told me.

Alright thank you and the second thing as a company that’s gone through this now do you think, its time now for Singapore to sort of strengthen these anti corruption laws that have been around for a long time.

Well your question is very broad, I think all I can see for capital is that, I think as I made in my opening remarks, we have a very strong call value of integrity, so what integrity means is that we have to do business legally and ethically. So for capital it is very clear to ask that as I said earlier we have the capabilities and the solutions that will allow us to win business legitimately.

Within the loss, within the loss and also ethically and there will be something that we will pursue.

Okay I will take a question from West; this is from [indiscernible] of Deutsche Bank. He has two questions which I will ask Chris to answer.

The first question is, why capital in takes with [indiscernible] check ups is. Second question is with reference to slide 48, this six checkups in question are predominantly of later to be delivered in 2018?

Chris?

Okay I will try to answer the two question and one go, why capital is [indiscernible] for this is the secondary check up in the market, both has their own strategy to basically look for premium checkups to [indiscernible] feet. And not to forget they are also a customer in the [indiscernible] we have five related contracts [indiscernible] to them.

So we're in daily booking relationship with both. But I must say that the jackups, with each of the jackups, the term and conditions are not firm, so we are not confirming that there are six, we are just in talks on opportunities that we want to take a look, so the next question on whether all of them are slated to be delivered in 2018 as mentioned we're looking at opportunities where they want to increase their fleet with premium built jackups with good construction and performance track record.

So, we have not landed on which are the jackups that they're looking at, in fact most of -- all the jackups in the yard are still valid contract with the current customers. So, we cannot more than that.

No question. I'll take the next question on the web, this is from Derrick Heng of Maybank, Singapore.

Now that the global resolution is settled will the construction of the balance orderbook from Sete commence again soon? We -- with global resolution, it means that, as I said earlier we draw a line underneath this.

We're able to operate in Brazil, with this resolution but whether this signals or this would lead to the Sete rigs commencing construction, commencing again will depend on other methods including the restructuring of Sete. And this would also of course depend on the negotiations with Petrobras.

A question here, there are some reports of a potential merger between Keppel O&M and Sembcorp Marine, are you able to comment on that and where is your threshold at least where Keppel O&M is concerned?

I think this question comes up everyone's in a while. And the way I have looked at it and have addressed is that if you look at KOM we have undertaken quite a significant rightsizing exercise starting from 2015.

At the peak we had about 36,000 direct employees, today we are down to about 16,000. So, it's quite significant reduction.

And now footprint has also been made more efficient. So, we believe that this is the right size for us in light of the market outlook and we do not see at this point in time any upside in terms of having capacity but that of course is at our evaluation at this present time.

So, in other words if there's no value in adding capacity, a merger or any merger, not necessarily with Sembcorp, so I am not commenting directly but any merger or any acquisition for that matter may not make sense for us at this point in time.

Hi there, it's Conrad from Macquarie. Just a quick question on the property volumes which are down in 2017 over 2016 and the ongoing reason for that is measures in -- especially in China and Vietnam, I am just wondering could you just give us a bit more color on the outlook for 2018 both in terms of volumes and the overall health of Chinese and Vietnamese property markets from your perspective maybe specifically in the areas where your projects are also located.

And is there any risk that if these measures continue that some of the completion dates for some of these projects which also trigger profit recognition get pushed out?

First of all I'll answer your second question first. The measures may not have a direct impact on the completion.

They particularly, if a project is really sold I think you know we would be substantially sold, we would be very motivated to get it completed on time. There wouldn’t be any recognition of cooling measures to affect that pace of construction.

As far as the market is concern I think Vietnam is still remains very constructive. We see very good demand, not just for our projects but also for other developers projects.

The fact that our sales rate in Vietnam for 2017 is slightly lower compared to 2016. Its more to do with the timing of the launches that we had, rather than a reflection of the market demand there.

As far as China is concern we are in China for the long term. We have quite significant projects in number of cities like [indiscernible] Shanghai Wuxi et cetera.

And we will continue to develop this. but if you look at the market the cooling measures are still very much in place.

But the demand size actually still quite constructive if we see. Some developers are holding back on their sales because they may not be able to achieve the targeted sales price that they have in mind in the sense of not because of market couldn’t support it but they may not be able to get presales permit from the authorities.

So they would be a bit holding back to try and get better pricing. So when you see the sales in China being a bit lower I'm talking about SM market it is not because -- at least at this point it's not because the demand is weak.

It's just that supply -- on the supply side some of the developers are holding back on their launches.

I have a question -- I'm sorry -- [indiscernible] from CNBC. You mentioned [indiscernible] speech you said this is not Keppel.

Can you elaborate on your message to shareholders about this Q4 net loss.

Sorry, comment on what?

Can you elaborate on your message to shareholders about this loss about this fine?

About this fine is it? Okay.

I think its very clear, as I said earlier Keppel has a set of core values and integrity is very much center in that core value. And that core value does not allow us to act unethically or illegally.

So I think we do want to encourage all our Keppelites as we call ourselves to continue to take legitimate business risk for which we hope we will get suitable return for taking those risks. But there are some bright lines that we should not cross.

And it's very clear to me to the board, to the management and to the team here that just we cannot engage in anything that’s illegal or unethical. So that’s why I say its not Keppel.

May I finally if any of the current board members or management members are under the investigation well this is just a final if there was any uncertainty in terms of the risk uncertainty in terms of the management in the coming year?

Well the management team I think the investigation that we embark on was very thorough when this allegations came up in 2015. And this is lead by external councils and you can also are suppose receive from the fact that the cost of the other costs associated with this which last year was up 48 million this is how we add up to the 619 million that there was a lot of legal fees this was forensic that was employed.

So it was read thorough investigation we have reached resolutions with the three criminal authorities and we are only able to do that if it has been thorough and I think this is really about looking drawing a line and looking forward. So the management team is that you see here those effected persons as you can read from the statement effects have already been separated from the group.

To follow-up on net question and your reply. As you mention that you were thorough in the way you have investigated the incident so we first said the internal enquiries that in 2015 but management spends kind of changed in October 2016 so and exactly do you fall resources into the defined reporting and investigations?

I think we are getting a bit to find to this so I will no answer to that question but I think as I said this is a ongoing process and so this is something that the group is has done taken his responsibility very seriously and we have made the announcement in 2016 October when we found a suspicious transaction, so we promptly acted on that. So I think we have done our part and as the very responsible organization.

If there are no further questions. Thank you all for coming.