Keppel Corporation Limited

Good evening. Welcome to the conference and webcast on our results and performance in the Third Quarter and Nine Months of 2019.

Amidst a volatile international environment marked by trade tensions and slowing global growth, Keppel has performed creditably, with stronger contributions from the O&M, Infrastructure and Investments divisions. For the first nine months of 2019, we achieved a net profit of 515 million, 37% lower than the 813 million in the same period last year.

In 2018, we benefited from the en-bloc sales of development projects in China and Vietnam, as well as gains from the divestment of a commercial property in Beijing, which had yielded profits of 544 million. On an annualized basis, our ROE was 6.1%.

We had free cash outflow of 1.029 billion in nine months 2019, compared to free cash inflow of 815 million in nine months 2018, due to higher working capital requirements in O&M and Property divisions, as well as lower proceeds from en-bloc sales. Our net gearing was 0.88 as at end-September 2019, compared to 0.82 as at end-June 2019, due to 145 million of interim cash dividend paid to shareholders in August 2019 and recent acquisitions by the Property Division.

Reflecting Keppel O&M’s progress in securing new orders and the increased workload in our yards, our O&M Division made a profit of 18 million for the first nine months of 2019, compared to a net loss of 38 million last year. In Brazil, Keppel O&M has reached a Settlement Agreement with Sete Brasil, bringing closure to the outstanding contracts for the construction of the six rigs.

The Settlement Agreement will become effective upon the fulfilment of certain conditions precedent, including the successful sale of two rigs, which are about 92% and 70% completed, by Sete Brasil to Magni Partners. As part of the agreement, the contracts for the other four uncompleted rigs are considered amicably terminated with no penalties, refunds or additional amounts due to any party.

We will have full ownership over these uncompleted rigs, and can explore various options to extract the best value from them. Keppel O&M continued its focus on executing projects well.

It delivered an FSRU in the third quarter and a jack-up earlier this week, and is on track to deliver Singapore’s first dual-fuel bunker tanker later this year. Our yards completed 47 scrubber and ballast water treatment system retrofit contracts in the first nine-months, worth over 80 million, as shipowners strive to meet the IMO 2020 and IMO Ballast Water Management Convention regulations.

We have received 100 scrubber orders since 2018 and continue to see more enquiries. Our efforts to build new capabilities and capture new opportunities are bearing fruit.

Over the past four years, gas solutions and offshore renewables have contributed 2.4 billion in new orders for Keppel O&M. Keppel O&M’s net orderbook currently stands at 5.1 billion as at end-September 2019, excluding our projects for Sete Brasil, compared to 4.3 billion as at the end of 2018.

New contracts secured by Keppel O&M year-to-date amount to about 1.9 billion, with close to 60% of these new orders for LNG and renewables-related projects. On the slide, we see The Podium in Manila, a mixed-use development, which is a joint venture between Keppel and the SM Group.

Last month, we were honored to have President Halimah Yacob open The Podium, during her state visit to the Philippines. Our Property business performed well, achieving a net profit of 340 million for nine months 2019.

This is lower than the 768 million for the nine months last year, mainly due to the absence of en-bloc sales and divestments, as mentioned earlier. In China, Keppel Land made four acquisitions this quarter, deepening our presence in Beijing, Shanghai, and Nanjing, and entering new, high-growth markets such as Guangzhou.

In the first nine months of 2019, the Property Division sold about 3,520 homes, with a total sales value of about 2.1 billion. Home sales were over 12% higher than the 3,150 homes sold over the same period last year, with significantly more homes sold in China and Vietnam.

Vietnam, especially Ho Chi Minh City, is a promising market for Keppel. Last month, we hosted a group of analysts to visit Keppel Land’s residential and commercial projects in HCMC, as well as the site for Saigon Sports City.

We continue to see strong demand for quality homes and commercial projects in Ho Chi Minh City, underpinned by growing affluence and urbanization trends in the city. Keppel Land currently has about 20 licensed projects in Vietnam, with a total registered investment capital of over U.S.

3 billion. Earnings from Keppel Land Vietnam have grown steadily from 10 million in 2015 to 134 million in 2018, and made up almost 30% of Keppel Land’s net profit for the first nine months of this year.

We have over 17,000 homes in our residential landbank, about 153,000 square meters GFA of completed commercial projects in Ho Chi Minh City, and another 252,000 square meters GFA of commercial space under development. For first half this year, the absorption rate in the city for new condominium projects were 88% and occupancy rate for Grades A & B offices were more than 96%.

We expect to see further growth in Ho Chi Minh City, especially along its Eastern and Southern corridors. With our strong foothold in the country, other Keppel units are also actively exploring business opportunities to provide solutions as the country continues its urbanization trend.

We will continue to expand our presence in Vietnam, leveraging our decades of experience and strong capabilities in this market. Our Infrastructure Division achieved a net profit of 145 million for the first nine months this year, up 20% from 121 million over the same period last year, driven by higher contributions from Keppel Infrastructure and our data center business.

Keppel Infrastructure continued to achieve stable earnings growth, with a net profit of 94 million for nine months 2019, up from 82 million year-on-year. Strong earnings for the first nine months were underpinned by better performance from Energy Infrastructure and Environmental Infrastructure.

Just this week, the Energy Market Authority released statistics, which showed that Keppel Electric is the top Open Electricity Market retailer with 27% market share of residential consumers. To streamline its operations and better allocate resources, Keppel T&T has entered into agreements to divest its stakes in logistics facilities and operations in Foshan and Hong Kong.

The data center business continues to be an important growth area for Keppel. Last month, Alpha DC Fund and Keppel Data Centers entered into agreements to divest a 99% interest in Keppel DC Singapore 4 to Keppel DC REIT for about 385 million.

SGP 4 is the first divestment for Alpha DC Fund and demonstrates Keppel’s ability to create value for different stakeholders through our business model and hunt as a pack. The total gain to the Keppel Group from SGP 4 is about 83 million, including our share of fair value gains since 2016 and fees earned by Keppel Data Centers, Alpha and Keppel DC REIT Management.

Even after the asset’s injection into Keppel DC REIT, the Group will continue to earn recurring fees from rendering asset management, operations and maintenance services for SGP 4. Keppel DC REIT’s proposed acquisitions of SGP 4 and DataCentre One have also been well received by investors with the successful EFR exercise in which its preferential offering was about 75% oversubscribed.

Over the past five years from 2014 to 2018, the Keppel Group achieved earnings of about 430 million from the data center business, including profits from the development and management of data centers, fees, fair value gains and gains from the divestment of assets to Keppel DC REIT, share of profits from our interest in Keppel DC REIT, as well as gains arising from dilution or partial sale of interest in Keppel DC REIT. This does not include the approximately 270 million premium over the carrying value of Keppel’s stake in Keppel DC REIT as at the end of September.

Over this period, our average shareholder’s funds invested in the data center business was about [350 million]. We will continue to seek opportunities in the data center business, harnessing the Group’s ability to create good assets, which we can own, manage, and then recycle at the right time to earn the best risk-adjusted returns.

Data centers are critical for smart, connected cities, but they have a large carbon footprint. As a leading player in providing data center solutions, and with our engineering capabilities and rich history of innovation, Keppel is committed to building more energy-efficient data centers.

Our Investments Division made a net profit of 12 million for nine months 2019, compared to a net loss of 38 million in the same period last year. This has been another productive quarter for Keppel Capital as its listed entities and private funds continue to grow their portfolios, and at the same time realize value from existing assets.

Keppel REIT is divesting Bugis Junction Towers in Singapore, as part of its ongoing portfolio optimization strategy. As mentioned earlier, Keppel DC REIT is acquiring two data centers in Singapore, while Keppel Pacific Oak US REIT is expanding its portfolio with the acquisition of a Grade A office complex in the key growth market of Dallas.

Meanwhile, Alpha continued to actively pursue acquisitions and divestments totaling about US$1 billion in this quarter. These initiatives will contribute to building up Keppel Capital to be a steady pillar of income for the Group.

Yesterday, we welcomed Singapore’s DPM Heng Swee Keat when he visited the Sino-Singapore Tianjin Eco-City, which is developing well as a model for sustainable urbanization. Our joint venture, SSTEC, has further accelerated the Eco-City’s development with the sale of two residential land plots in the quarter.

Profits from the sale of one plot have been recognized in this quarter, while the second will be recognized upon the completion of the sale expected in the fourth quarter this year. M1 continues its transformation, harnessing the synergies of being part of the Keppel Group to enhance its B2C and B2B offerings, strengthen its digital capabilities, and explore new markets.

Following the launch of its new One Plan in May, more than 50,000 new customers have signed up for the plan. M1 is working closely with different business units across the Keppel Group to enhance the connectivity of our different solutions, whether they are new, smarter rigs, advanced yards of the future, data centers or urban solutions.

We are also expanding the cross-selling of services across the Group’s different consumer businesses, including M1, Keppel Electric, and City Gas. Analyses of publicly available data suggest that only less than 2% of Singapore households currently use all three of the Group’s services.

There is therefore significant scope to expand our share of customer wallet. M1 is also actively exploring opportunities with SPH to leverage its extensive media consumer base for new value-added services.

M1 has also started multi-vendor 5G trials and will be working closely with Government agencies, enterprises, and institutes of higher learning to co-develop used cases for selected markets and jointly bring new, innovative and smart applications that leverage 5G technology to the market. This include, for example, M1 and NTU’s partnership to integrate standalone 5G technology into cellular vehicle-to-everything communications around NTU’s smart campus to enhance road safety and optimize road usage, a first-of-its-kind in Singapore.

In September, global leaders met in New York City for the UN Climate Action Summit, where they announced concrete steps to deal with the climate crisis. Keppel is committed to sustainability, which is at the core of not just how we run our business, but our strategy as a provider of solutions for sustainable urbanization.

Today, Keppel is contributing to a cleaner and greener world with our suite of solutions, including green buildings and townships, environmental infrastructure, water treatment, and offshore wind infrastructure, amongst others. At a board strategy meeting last month, Keppel reaffirmed our commitment to environmental sustainability, which will be woven into the performance appraisal of senior management across the Group.

We have set targets to reduce carbon emissions, waste generation and water consumption, as well as invest in renewable energy generation. To this end, we have recently established a new business unit, Keppel Renewable Energy, to pursue opportunities for Keppel as a developer, owner and operator of renewable energy infrastructure.

We have also defined the kinds of businesses that we will strictly avoid, such as coal-fired plants, those that we will maintain, and those which we will grow and expand, taking into account their respective environmental impacts. These are part of our efforts to build Keppel into a stronger, more sustainable company.

According to a recent survey conducted by Mercer, Keppel’s employee engagement score has risen steadily from 80% in 2015, to 82% in 2017, to 86% this year, compared to the current average of 76% among Singapore companies. This is an encouraging reflection of Keppel’s organizational health, and the passion and commitment of Keppelites, which will stand us in good stead to achieve the company’s targets, and not only generate good returns, but build a sustainable future for all.

I will now invite our CFO, Hon Chew, to take you through the Group's financial performance. Thank you.

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

In the third quarter of 2019, the Group recorded a net profit of 159 million, which was 30% lower than the same quarter last year. Correspondingly, the earnings per share decreased by 30% to $0.88 in this quarter.

The Group’s revenue for the third quarter was 60% or 772 million higher than the same quarter last year. All divisions registered higher revenues during the quarter.

However, operating profit fell by 35% or 100 million despite higher revenues, largely due to absence of gain from divestment of Beijing Aether, as compared to the same quarter last year. Profit before tax at 227 million, decreased by a slightly lower percentage of 32%, due mainly to higher share of profits from associated companies, partly offset by net interest expense in the current period, as compared to net interest income in the corresponding period last year.

After tax and non-controlling interests, net profit was 30% or $68 million lower at 159 million, translating to an earnings per share of $0.88. In the next slide, we take a closer look at the Group’s revenues by division.

In the third quarter of 2019, the Group’s revenue at 2.1 billion was 60% higher than the same quarter last year. Revenue from the Offshore & Marine Division increased by 52% to 632 million, mainly attributable to higher revenue recognition from ongoing projects.

The Property Division’s revenue increased by 114% from last year, mainly due to more units handed over during the quarter from trading projects in China such as Seasons Garden in Tianjin Eco-City and 8 Park Avenue in Shanghai, and from Vietnam, the Riviera Point in Ho Chi Minh City, as well as more units sold from Singapore trading projects, the Reflections and Corals at Keppel Bay. Infrastructure Division saw a 10% growth in revenue as a result of increased sales in the power and gas business, as well as progressive revenue recognition from the Hong Kong Integrated Waste Management Facility project.

Revenue from the Investments Division increased by 283 million to 308 million largely due to the consolidation of M1’s revenues. Moving on to the Group’s pre-tax profit.

The Group recorded 227 million of pre-tax profit for the third quarter of 2019, 32% lower than the same period last year. The Offshore & Marine Division’s pre-tax profit was 20% lower at 8 million despite higher operating profit, mainly due to net interest expense in the current period, as compared to net interest income in the same period last year and also higher share of associated company losses.

The Property Division’s pre-tax profit decreased by 121 million to 123 million, due mainly to the absence of gain from divestment of Beijing Aether, compared to the same quarter last year, and higher net interest expense. These were partly offset by higher profits from property trading projects in China and Singapore, as well as higher contribution from associated companies.

The Infrastructure Division’s pre-tax profit of 92 million was 53% higher than last year, benefiting from higher share of profits from associated companies, mainly arising from fair value gains on a datacenter investment property, the Keppel DC Singapore 4, which will be divested to Keppel DC REIT. In addition, the Division’s profits were boosted by a dilution gain arising from Keppel DC REIT’s private placement exercise.

Excluding the charges relating to the acquisition of M1, the Investments Division registered a pre-tax profit of 21 million, an increase of 1 million from last year, mainly due to higher contribution from M1 resulting from the consolidation of its results and higher share of profit from Sino-Singapore Tianjin Eco-City. This was partly offset by higher net interest expense, higher share of loss in Kris Energy, and fair value loss instead of fair value gain on Kris Energy warrants.

After tax and non-controlling interests, the Group’s net profit decreased by 30% to 159 million, with Infrastructure Division being the top contributor to the Group’s earnings, followed by the Property and Offshore & Marine Divisions. I shall now take you through the performance for the first nine months of 2019.

Compared to the same period last year, net profit for the first nine months was 37% lower at 515 million. Consequently, annualized ROE decreased to 6.1%.

Free cash outflow for the period was 1.029 billion, as compared to an inflow of 815 million in the same period last year. This is mainly due to higher working capital requirements with the construction progress of Offshore & Marine’s major projects, and Keppel Land’s additional property development and land acquisition costs, as well as lower proceeds from en-bloc sales.

Net gearing increased from 0.48 at the end of 2018 to 0.88 at the end of September 2019. This was due mainly to borrowings drawn down for the acquisition of M1 and the privatization of Keppel Telecommunications & Transportation, working capital requirements, payment of the final dividend for 2018 and interim dividend for 2019, as well as the recognition of lease liabilities following the adoption of Singapore Financial Reporting Standards 16 on leases.

The Group earned a total revenue of about 5.4 billion in the first nine months of 2019, an increase of 26% or 1.1 billion compared to the same period last year. All divisions registered higher revenues during the first nine months of 2019.

Despite higher revenues, operating profit at 665 million was 37% or 384 million, lower than the corresponding period last year. This was due mainly to lower gains from en-bloc sales of development projects and absence of gain from divestment of Beijing Aether, as compared to the same period last year, partially offset by fair value gain from the re-measurement of previously held interest in M1 arising from the acquisition this year.

Profit before tax, at 716 million, decreased by a slightly lower percentage of 34%, due mainly to higher investment income and higher share of profits from associated companies, partly offset by higher net interest expense, as a result of higher borrowings and the adoption of Singapore Financial Reporting Standards 16. After tax and non-controlling interests, net profit at 515 million was 37% or [298 million] lower translating to earnings per share of [$0.284].

In the next slide, we take a closer look at the Group’s revenues by division. For the first nine months of 2019, the Group earned total revenues of about 5.4 billion, 26% higher than last year.

The Offshore & Marine Division recorded an increase in revenue of 90 million, due mainly to higher revenue recognition from ongoing projects, partly offset by absence of revenue recognized from the sale of jack-up rigs to Borr Drilling, compared to the same period last year. The Property Division’s revenues increased by 5% from last year, mainly due to higher revenue from China and Vietnam trading projects, partly offset by the absence of revenue from Highline Residences, which was fully sold by the first quarter of last year, as well as lower revenues from Reflections at Keppel Bay.

Infrastructure Division saw a 15% growth in revenue as a result of increased sales in the power and gas business, as well as progressive revenue recognition from the Keppel Marina East Desalination Plant project and Hong Kong Integrated Waste Management Facility project. Revenue from the Investments Division increased by 676 million to 757 million, largely due to the consolidation of M1’s revenues and higher revenue from the asset management business.

Moving on to the Group’s pre-tax profit. The Group recorded 716 million of pre-tax profit for the first nine months of 2019, 34% lower than the same period last year.

The Offshore & Marine Division’s pre-tax profit was 13 million as compared to a pre-tax loss of 16 million in the same period last year. This was mainly due to higher operating profit and higher investment income.

The Property Division’s pre-tax profit was 52% lower at $465 million, due mainly to lower gains from en-bloc sales of development projects and absence of gain from divestment of Beijing Aether, as mentioned earlier. The lower pre-tax profit was also a result of lower contribution from Singapore trading projects and higher net interest expense.

These were partly offset by higher contribution from property trading projects in China, higher investment income and higher contribution from associated companies arising mainly from fair value gains on investment properties. The Infrastructure Division’s pre-tax profit of 163 million was 22% higher than last year, due mainly to higher contribution from associated companies, as well as higher contribution from Energy Infrastructure and Environmental Infrastructure.

Excluding the charges relating to the acquisition of M1, the Investments Division registered a pre-tax profit of 119 million as compared to a pre-tax loss of 15 million last year. This was mainly due to the fair value gain from the re-measurement of previously held interest in M1 arising from the acquisition, higher contribution from M1 upon consolidation of its results, and higher share of profits from SSTEC, partly offset by higher interest expense, fair value loss on KrisEnergy warrants and provision for impairment of an associated company.

After tax and non-controlling interests, the Group’s net profit decreased by 37% to 515 million, with Property Division being the top contributor to the Group’s earnings, followed by the Infrastructure, Offshore & Marine and Investments Divisions. The Group’s net profit of $515 million for the first nine months of 2019 translated to an earnings per share of [$0.284].

Cash flow from operations was 729 million in the first nine months of this year, as compared to 512 million in the same period last year. After accounting for working capital changes, interest and tax, net cash outflow from operations was 1.1 billion, as compared to an inflow of 164 million last year, due mainly to increase in working capital requirements, with the construction progress of Keppel Offshore & Marine’s major projects such as the Borr jack-up rigs, Awilco semi and Golar Gimi FLNG vessel, as well as Keppel Land’s additional property development costs and acquisition costs of a land plot in Tianjin.

Net cash generated from investing activities was 99 million comprising divestment proceeds and dividend income from associated companies totaling 257 million, and net advances from associated companies of 94 million, partly offset by investments and operational capital expenditure of 252 million. Net cash generated from investing activities last year was higher at 651 million largely due to the cash inflow from en-bloc sales in China and Vietnam.

As a result, there was an overall free cash outflow of 1 billion for the first nine months of 2019, as compared to an inflow of 815 million last year. With that, we have come to the end of the slides for the results presentation.

I shall hand the time back to our CEO, Chin Hua, for Q&A section. Thank you.

Thank you, Hon Chew. So, now we will go to the Q&A.

Please submit your questions through the web and we will be delighted to address them. Okay, So the first question is from Angela Chan who is a shareholder in Singapore.

Her question. Did O&M continue to increase hiring in this quarter?

And second related question, were the new highest in Singapore. For that, can I ask Chris Ong to address that question please.

Okay, thank you, Chin Hua. Year-to-date Keppel Offshore & Marine has increased its headcount by 2,120 personnel, more than 1,800 headcount initially envisaged.

And the bulk of the increase was overseas, while about 250 were in Singapore. So, quarter-to-quarter in third quarter 2019, we hired 1,354 personnel, and this include new hires to fill new positions and to replace those who have left due to natural attrition.

So, comparing quarter-to-quarter the net increase in Keppel Offshore & Marine Global direct headcount was about 1,190.

Thank you. Second question is from Cheryl Lee of UBS.

On Tianjin Eco-City were the profits from the sale of Plot 30c or Plot 34 recognized.

The answer is, Plot 34 has been recognized. 30c will be recognized when the due is closed in the fourth quarter.

Are there plans to launch any more sites? Are there anymore plans to launch anymore sites at Tianjin Eco-City for the rest of the year?

We are constantly looking at the market conditions to see whether there are good opportunities for us to launch any new sites. Should there be any cites that are launched, likely the closing will be for next year in any case.

There is a second question from Cheryl Lee.

The annualized ROE of 6.1% is quite far away from the Group’s medium-term target of 15%. Are the targets set for each of the business units still achievable?

The short answer is yes. We believe the 15% target ROE is achievable as when we first unveiled this target, we have said that this is a medium to long-term target and we believe that this is an achievable target for the group.

It is a stretch. These are all stretch goals.

But if you look at the group’s recent history, we have achieved returns well in excess of that. But of course, to get the 15% all engines of the group must be firing.

Indeed today, I think if you look at some of the group’s businesses like KI, Keppel Capital, et cetera, we are actually really hitting those targets above costs. In order for the whole group to hit 15%, we would need to see a KOM come up.

We also would need to see Keppel Land improve on its performance from last year, which is a really quite good 11%. So, all-in-all, we believe that this 15% can be achieved.

Okay, I think Gerald Wong of Credit Suisse has a similar question.

Well, it is actually related to the property business. Property annualized ROE is at about 6%, the lower since several years.

Are you still confident of achieving true cycle ROE target of 12% and what is required to achieve the ROE target?

I think as I had alluded to earlier, this 12% is a stretch target for Keppel Land, but again we have seen in the recent past Keppel Land has been able to achieve these returns on a consistent basis for quite a number of years. Of course, this year as was explained in the results, for the first nine months we have seen less divestments.

So, this stands to be more lumpy to – in order for us to hit our 12% I think we need to turn our assets faster. We are also looking to see how we can leverage on our experience in the various markets like Vietnam and China to collaborate with different positive group to earn higher returns through fees and other besides development profits.

Okay, a follow-up question from Gerald Wong of Credit Suisse.

O&M new order momentum appears to have slowed down in recent months driving a quarter-on-quarter decline in your order book, are there signs of decline in customer enquiries and awards because of the uncertain macro environment?

For that maybe I invite Chris Ong to address this.

Well, as mentioned the FID of projects itself is not driven by quarters and on top of that, although there are still challenges in certain segment of the oil and gas market, for example the drilling units, we continue to see opportunities in offshore renewables in LNG market. So, there are still fresh enquiries going on in those market and we continue to chase and improve the quality of our order book.

So, we will inform everybody when there is a material development in the new orders that is to come.

Thank you. There is a question from [indiscernible] of JP Morgan in India.

His question, could you please share with us what were the gains related to the sale of SSTEC land parcel recognized in third quarter 2019 and fourth quarter, I think you only had third quarter, maybe I ask Hon Chew to address this.

Well, I think for the third quarter as CEO mentioned, we did recognize the gain from the sale of Plot 34 and as for the last quarter there is one more Plot that is 30c, which I think has been listed and closed by completion likely to be in the fourth quarter. So, the profit will be recognized in fourth quarter.

Of course, at this point we can’t say what is the number until next quarter when we announce the results.

Thank you. There is a question from Anita Gabriel of Morgan Stanley Asia, Singapore.

She has two questions, both related to Sete Brasil.

First question, since there is a clearer picture arising from the settlement agreement with Sete Brasil can you indicate if the 476 million provisions by Keppel in relation the six rigs are adequate and there will not likely be more? The second question also, can you let us know what are the expectations on possible write-backs?

I’m sorry, I understand that it is not – it is – [Anita Gabriel] is from The Business Times. Can I invite Hon Chew to address the two questions?

Thank you, Chin Hua. Well, I think as we have explained in past quarters, we have made a number of provisions and you rightly pointed out in total.

Indeed, we have made 476 million in provisions for the six rigs. And in making those provisions we have considered a number of different scenarios, different outcomes and based on those scenarios and outcomes we believe 476 million in provisions is sufficient and looking at the information we have today based on the settlement agreement these provisions are still sufficient.

To your next questions, whether there is any possible write-backs, I think at this point it is too premature. As you know the settlement agreement is still under discussion, it is not yet settled.

At this point, we believe the provisions are adequate and also reasonable.

Okay. We have now four questions on – from Lim Siew Khee of CIMB, Singapore.

The first question, what’s the reason for the strong operating profit of 50 million in 3Q 2019 in infrastructure, where there any exceptional items?

I think the KI has performed very well during the quarter, but there was a dilution gain from the placement of shares in KDCR. There is a Keppel DC REIT.

So, the second question, can you comment on the losses in associated company in offshore and marine?

Maybe this one I ask Hon Chew; you want to address?

Yes, indeed I think for the third quarter the associated companies of offshore marine did not perform well and in particular one of them is Floatel. Floatel has incurred losses in three quarter, in fact we have seen the profits in the earlier quarters because of the five vessels for [indiscernible] so Floatel is facing quite a bit of headwinds and as a result they have incurred losses in the third quarter.

Third question, I would direct to Chris Ong, the question is when do you foresee final resolution of the Sete Brasil rigs?

Well, right now we have the first hurdle, which means that the creditors are agreeable with the settlement. There are still condition precedent to the final settlement and we – they have up to 120 days to actually come to a final settlement.

Okay. Thank you.

Siew Khee’s fourth question is, what’s your plan with Chris Energy and for that Hon Chew can [I address you].

Thanks Chin Hua. I think as you know Siew Khee Chris Energy has filed for a moratorium protection.

And at this point in time, we have yet to receive any proposal for the restructuring. So, we are waiting for the proposal before we evaluate the options available to us.

So, I think at this point there is no further update from that.

Thank you. Okay.

There is a question from Gerald Wong of Credit Suisse Singapore.

There was a 40 million charge on the acquisition of M1 in third quarter this year, is this going to be recurring and what is the run rate going forward?

I will ask Hon Chew to address that.

Well. This relate mainly through a number of different items that have a reason from M1 acquisition, including other things interest because that is the funding cost related to the acquisition.

At the same time, there are also some intangibles that were recognized because of the acquisition. So, those intangibles have to be amortized and as a result there is a total 14 million in charges.

Yes, these recurring charges.

We have a question next from [Jeffery Thump] a retail shareholder from Singapore.

Hi, thank you for taking my question. In line with your commitment to sustainability are there any businesses that you exit such as oil?

Jeffrey, we are committed as a business to sustainability. We will – as I have mentioned in my opening remarks, we will not go into any business that is polluted and that would for example, coal-fired power plants.

But the oil business by itself, you know although it has a carbon footprint the world is still requires fossil fuel. And you can see that from our business outcome, we have also started to move and this is also partly driven by the market.

In the last few years we have moved – not just moved away or pivoted away from oil, we are still doing oil, but we are pivoted away a little bit and we are focused now on renewables and on gas and as I have shared in my opening remarks, this has actually paid off for us. For these nine months, renewables is about 720 million of the 1.9 billion in the new orders that KOM has secured.

So, in short, we are taking a portfolio approach, we are looking to emphasize renewables gas etcetera, but there is no plans currently to exit any business.

Okay. There are three questions from Jason Yeo of Goldman Sachs.

First question. Are there any updates on the redevelopment possibility for Keppel Towers?

Second question, do you see any opportunities for further asset divestments or en-bloc sales in fourth quarter? And third question, what drove others in the investment division from the 39 million profit in first half to a 19 million in nine months.

The first two questions, I would like to invite Swee Yiow, the CEO of Keppel Land to address. And the third question, I will ask Hon Chew to address that.

As for capitals we have started design, redevelopments as processed. We are in the process of consulting different approving authorities on this redevelopment possibility.

We will make announcement when the plan is formal. For asset divestments and en-bloc sales, it's very much an ongoing, we call it, portfolio optimizations and it will be on a case by case basis.

So, it is difficult for us to make a forecast for future divestments or en-bloc sales.

Thank you, Swee Yiow. Hon Chew?

Yes. In deed I think in the first half and others there was a 39 million profit [indiscernible] to a 19 million loss in nine months, mainly because in the third quarter there was a further share of losses in KrisEnergy, which you can also see from the charts of up to 7 million in the third quarter.

In addition to that, there were further interest cost and also the M1 charges we talked about earlier on. In the first half of costs, we benefitted from the one-time remeasurement gain relating to the acquisition of M1.

Okay. Another question from Anita Gabriel of The Business Time Singapore.

What are your expectations on the direction of oil prices?

Sorry, we don’t give forecast on oil prices, but I think it is useful to note that for Keppel, I mentioned earlier, KOM, in the last few years we have diversified our business in KOM, whereas in the past, I think we were very dependent on building oil rigs and oil solutions. In today’s world, I mean if you look at the order book that we have, of course we still have a lot of production assets that are oil related, but KOM has increasingly a lot of renewable projects, as well as guest solutions.

So, I think oil price was important to us is not as critical as it was in the past. And so, our focus is, you know, if we look at renewables, offshore renewable win the demand there is quite incredible if you believe the projections and certainly if we look at the enquiries that we have been getting this is a market that we believe will grow.

Okay. Next question is from [Wei Kyang] of Singapore.

Presumably a retail investor. I read now you have a target to grow your fund management business to 50 billion by 2022, can you provide an update on this, what is the progress?

For this question, may I invite Christina to address please.

Thanks, [Wei Kyang]. With regards to your question on the funds management business, we are confident in terms of our target to achieve 50 billion.

This is because actually given the volatile market right now. Actually investors are looking for real assets, which can provide long-term cash flows, which is actually more valuable to them given the stability of these cash flows and actually Keppel is very well placed in this creation of these assets, but able to actually through our sister companies develop infrastructure projects, off shore rigs and guest FLNG’s, which provide long-term cash flows for investors.

So, we are quite fortunate that Keppel Capital is actually part of this ecosystem and with the demand from the sovereign wealth funds and institutional investors we’re very confident that we’re able to achieve this target.

Okay. Thank you, Christina.

I believe that’s the last question posted. Thank you very much for your attention.