Keppel Infrastructure Trust eyes Europe for acquisitions

Singapore 50 dollar bill

Keppel Infrastructure Trust is looking to enter new markets, including Europe, and new sectors, Jopy Chiang, CEO of the REIT’s manager, said in a question and answer session with the Securities Investors Association (Singapore) (SIAS). 

“We see compelling investment opportunities in Europe, and we are looking to move into new sectors and new markets, tapping on strong megatrends such as decarbonisation and digitalisation,” Chiang said. 

“Some of these new sectors that we have identified, such as renewable energy, are ones that we see favourable megatrends of decarbonisation, providing supportive tailwinds that we want to increase exposure to,” he said. “When you think about socio-economic infrastructure, this encapsulates subsectors such as healthcare and education, which are similarly supported by strong demographics and underlying growth.”

The session, which was on the trust’s plan to change its fee structure, was held Wednesday, and the transcript was filed to SGX Friday. 

Boosting AUM

Chiang said the trust planned to increase its assets under management (AUM) to S$18 billion within the decade, from around S$4.6 billion currently. 

“A larger and diversified portfolio across geographies and sectors will allow us to improve the cashflow resiliency,” Chiang said, noting KIT made its first investment in the Middle East in February, when it was among investors buying a minority stake in Aramco Gas Pipelines, which generates cash flows from the gas pipelines network of Saudi Arabian Oil (Aramco).

Keppel pipeline

“There is a strong acquisition pipeline ahead of us across stable, developed economies with strong legal and regulatory frameworks,” he said, pointing to the Keppel ecosystem’s pipeline for potential acquisitions, once the assets are fully operational.

For example, Keppel Telecommunications & Transportation is building a subsea fiber cable system from Singapore to North America’s West Coast, in partnership with Facebook and Telin, he noted. 

“This is an example of an attractive digital infrastructure asset with a long-term revenue contract denominated in U.S. dollars, and could potentially be a suitable asset for KIT once fully operational,” Chiang said. 

He also noted Keppel Offshore & Marine’s Keppel Shipyard had delivered Hilli, which was converted into a floating liquefaction vessel (FLNG) from a liquefied natural gas carrier (LNGC). That was estimated to save around 33 percent of greenhouse gas (GHG) emissions compared with a FLNG new build, Keppel has said

The successor project, Gimi, a US$1.5 billion FLNG currently under construction at Keppel Shipyard, has a 20-year U.S.-dollar-denominated lease deal with British Petroleum, offering strong cash-flow visibility, Chiang noted. 

He said KIT was “highly unlikely” to consider data center acquisitions as that would be under Keppel DC REIT‘s remit.

When asked about fund-raising plans, Chiang said it would be dependent on a transaction emerging. But he added, the trust is “very well-capitalised,” with its gearing level at end-2021 at 20.3 percent and more than S$800 million of cash on the balance sheet which can be tapped before any equity fundraising.

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