Keppel Proposes S\$128.1 Million Divestment of 39% Interest in Keppel Merlimau Cogen Plant to KIT

Key Highlights

• Transaction: Keppel Ltd. (“Keppel”) has announced a proposed divestment of its entire 39% indirect interest in Keppel Merlimau Cogen Pte. Ltd. (“KMC”) to Keppel Infrastructure Trust (“KIT”) via its subsidiary KCIF Investments Pte. Ltd.
• Consideration: The total aggregate cash consideration for the divestment is up to approximately S\$128.1 million, subject to completion adjustments.
• Asset Details: KMC owns the Keppel Merlimau Cogen Plant, a major combined cycle gas turbine generation facility with a licensed generation capacity of approximately 1,300 MW located on Jurong Island, Singapore.
• Post-Transaction Structure: Following completion, KIT’s stake in KMC will increase from 51% to 90%, while Keppel will retain a 10% interest in KMC through Keppel Energy Pte. Ltd.
• Completion Timeline: Expected completion date is 30 June 2026, with a long stop date of 30 September 2026.

Transaction Details and Structure

The divestment will be effected through the transfer of the following by KCIF Investments to KIT:

• The shareholder loans advanced by KCIF Investments to Kindle Energy Pte. Ltd. (“Kindle Energy”) (which holds the 39% KMC stake), and
• 100% of the ordinary shares in Kindle Energy (i.e., 1 ordinary share).

The consideration comprises a base purchase price of approximately S\$120.9 million, allocated as follows:

• Approximately S\$106.3 million for the shareholder loans, and
• Approximately S\$14.7 million for the purchase share.

In addition, a ticking fee estimated at S\$7.2 million (assuming completion at the long stop date) will be paid by KIT to KCIF Investments to compensate for the time value and opportunity cost from 31 December 2025 to completion. This fee will be reduced if the deal closes earlier (for example, S\$4.8 million if completed by 30 June 2026).

Conditions Precedent and Approvals

• The divestment is subject to the approval of KIT unitholders at an extraordinary general meeting and requisite regulatory approvals.
• Expected completion is set for 30 June 2026, or 8 business days after KIT unitholder approval, with a long stop date of 30 September 2026.

Proforma Financial Effects

• Net Tangible Assets (NTA) per share: If the divestment had completed on 31 December 2025, Keppel’s NTA per share would have increased from S\$5.58 to S\$5.66.
• Earnings Per Share (EPS): For the full year 2025, EPS would have risen from 43.5 cents to 50.9 cents if the divestment had taken place at the start of the year.

These improvements to both NTA and EPS are potentially significant for shareholders, reflecting a stronger balance sheet and improved profitability metrics.

Interested Person Transaction

• This deal is classified as an “interested person transaction” under Chapter 9 of the SGX Listing Manual, as both KCIF Investments and KIT are associated with Temasek Holdings, Keppel’s controlling shareholder.
• However, the value of this transaction, after aggregation with other relevant interested person transactions, does not exceed 3.0% of Keppel’s latest audited consolidated NTA as at 31 December 2025. Thus, the transaction does not require shareholders’ approval or separate announcement under SGX rules.

Disclosure of Interests

Based on available information, none of the directors or controlling shareholders of Keppel (other than their unitholdings in KIT, if any) has any direct or indirect interest in the proposed divestment.

Potential Share Price Impact & Key Takeaways for Investors

• This is a potentially price-sensitive transaction as it represents a material change in Keppel’s investment portfolio and will have an accretive impact on both NTA per share and EPS.
• The cash inflow from the divestment will provide Keppel with additional capital, improving financial flexibility for future investments or potential returns to shareholders.
• Investors should note the transaction remains subject to regulatory and unitholder approvals, and the final consideration may vary depending on the actual completion date.
• The transaction strengthens Keppel’s strategic position and refocuses the group’s infrastructure portfolio, aligning with ongoing efforts to unlock value through disciplined capital recycling.

Disclaimer

This article is for informational purposes only and does not constitute investment advice. Investors should exercise their own judgment and consult their financial advisors before making any investment decisions. The final terms and outcome of the proposed transaction may differ from the current announcement, and all information is subject to change.

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