Keppel Infrastructure Trust (A7RU) Earnings Call Transcript & Summary

Good morning, everyone. On behalf of the Trustee Manager, we wish you all a very Happy Chinese New Year, and thank you for joining Keppel Infrastructure Trust Second Half and Full Year 2024 Financial Results Webcast. My name is Elaine from the Investor Relations team. Hosting the session this morning are CEO, Mr. Kevin Neo; CFO, Mr. Raymond Bay; and the Head of Portfolio Management and Optimization, Mr. Marc Liu. We will begin the session with an update on KIT's financial performance for FY 2024 before we open the session for questions. For analysts who are joining us on the Webex platform, please be reminded to only unmute your mic during the Q&A session. I will now hand the time over to Kevin for the presentation. Kevin, please.

All right. Thank you, Elaine. Good morning, and thank you for joining us today. I will start with Slide 4. KIT delivered a strong set of results in FY 2024 with solid growth in funds from operations of 10.3% growth to $282 million. FY 2024 DI was $203.7 million versus FY 2023 DI of $315.8 million, which included the special distribution from the excellent capital optimization of $131.2 million. Factoring the capital optimization and other one-offs and timing differences. FY 2024 DI after adjustment is $218.7 million, 4.3% higher year-on-year. For FY 2024, DPU was $0.039, an increase of 1% year-on-year, excluding the special distribution of $0.0233 in FY 2023. KIT's strong performance was supported by new acquisitions, which increased our AUM by 22% to SGD 9 billion. Testament to the Trustee-Managers' value creation capabilities, we saw record FY 2024 EBITDA performance at Ixom, City Energy and Philippine Coastal. Going to Slide 5. We acquired close to $2 billion in enterprise value of new acquisitions, expanding KIT's footprint across its 3 core business segments, which are aligned with the secular growth trend of energy transition, climate change as well as rapid urbanization. The accretive acquisitions are backed by long-term contracts or availability-based payments, providing stable cash flows, which enhances KIT's cash flow visibility. Moving to Slide 6. Record EBITDA was achieved across Ixom, City Energy and Philippine Coastal in FY 2024, a result of the Trustee-Manager's value creation capabilities. Our portfolio optimization plans, which include sharpening the existing businesses, growing market share, expansion through bolt-ons and new business segments, have resulted in the delivery of sustainable value. On Slide 7, it illustrates the acquisitions that we have announced or completed since KIT embarked on its growth strategy to build a global portfolio of best-in-class infrastructure businesses and assets. As a result of portfolio expansion with new acquisitions as well as our value creation activities, KIT portfolio continued to grow. With the acquisition of the German Solar Portfolio, which saw its fourth close in 3Q 2024, the completion of Ventura in June 2024 and the acquisition of Keppel Marina East Desal Plant in December 2024, KIT's AUM increased by approximately 22% to SGD 9 billion at 31st December 2024. Slide 8 shows KIT independent portfolio valuation of SGD 9 billion, categorized by business segments and geographies. We continue to invest in central businesses and assets across our core business segments of Energy Transition, Environmental Services, Distribution & Storage, which are aligned with strong secular tailwinds. In terms of geography, we remain focused on investment-grade jurisdictions with well-developed regulatory frameworks and strong sovereign credit rankings. With this, I will hand the time to Raymond, who will go through the business updates and financial performance in greater details.

Thank you, Kevin. Moving to Slide 10. In the next few slides, we have included information on funds from operations, which is net of interest expense and maintenance CapEx but before growth CapEx. FFO will better reflect the underlying operational performance of KIT's portfolio. Moving to City Energy. City Energy achieved record EBITDA in 2024 as the portfolio management strategies continue to bear fruit. The EBITDA performance was driven by strong contribution from City-OG and increase in installation and contract service income segment. Fund availability was 100% in 2024, and City Energy continued to maintain a sizable base of over 900,000 customers. City Energy's EV charging portfolio continued to expand with new sites secured using approximately 4,800 EV charging lots as at 31st December 2024. In November 2024, City Energy launched its own brand of smart gas water heater called Life, which has led to higher customer onboarding since its introduction. Moving to transition assets. KMC achieved 100% availability for 2024. The extension of KMC capacity tolling agreement led to the resumption of distribution from the second half of 2024. AGPC -- in the Middle East, stable gas demand at AGPC continues to be underpinned by the Kingdom's economic growth. Moving to the renewable portfolio. During the year, KIT made its first investment in the solar sector with acquisition of the German Solar Portfolio, which is expected to comprise over 60,000 solar systems. We completed 4 closings to date, representing deployment of approximately 57,000 solar systems. In Germany, BKR2 was granted additional grid capacity of 26 megawatts on top of its existing 450 megawatts grid capacity. BKR2 has an operating capacity of 465 megawatts, which can export an additional 5.5 megawatts effective from February 2024. Technical plans are being assessed to increase the output capacity to the maximum allowable 486 megawatts. Moving to Slide 11. EMK maintained high availability and utilization of its incineration business. In January 2025, EMK renewed a steam contract for 10 years with a major customer. This is expected to increase the EBITDA at the site by 26%. EMK's FY 2024 FFO was lower year-on-year due to near-term volatility in landfill prices. We continue to preserve landfill capacity due to softer prices. However, the prices are expected to improve gradually on the prospect of policy adjustments, which are favorable for the landfill business. EMK continues to seek opportunity to grow and has ventured into plastic recycling and asbestos treatment to expand its waste management solutions to capture new demand. Looking ahead, we will continue to drive organic and inorganic growth at EMK. Back in Singapore, our waste and water plants remain stable, fulfilling their contractual obligation in the quarter. The concession for the Senoko waste-to-energy plant was extended upon its expiry in August 2024 with nominal FFO contribution going forward. We continue to explore concession extension for the SingSpring Desalination Plant. On 27th December 2024, we completed the acquisition of Keppel Marina East Desalination Plant. Moving to Slide 12. Ixom achieved record EBITDA for its financial year ended 30th September 2024 at AUD 200.3 million. This is due to strong customer demand in its core business segments. To support continued growth in demand, Ixom has invested in capacity expansion projects. This includes construction of new bitumen facility in Queensland, which will double the existing daily capacity. In New Zealand, Ixom completed addition of a caustic tank, which has increased capacity in the region by 30%. Moving to Ventura. Ventura continues to deliver market-leading performance in functionality and reliability, outperforming the bus industry in Victoria. As a result of a strong operating performance, it has secured 2 years extension of its bus contract to 2028 upon achieving of certain key performance targets. We continue to evaluate strategic growth plans such as network expansion within and beyond Victoria, additional electrification revenue by utilizing unused charging capacity at the depots as well as expansion of its private chartering business. Moving to the Philippine Coastal. Philippine Coastal continued to benefit from its high utilization rate of 94% for FY 2024, achieving record EBITDA of USD 45.6 million. In October, we announced the sale of Philippine Coastal. This is to align with our longer-term strategy focused on lower carbon energy transition segments. The divestment is on track for completion in early 2025. Moving to Slide 14. We declared distribution per unit of $0.0125 for the period from 5th September 2024 to 31st December 2024. With the book closure date of 10th February, payment distribution will be on 18th February. Together with the first half 2024 distribution of $0.0195 and a stub distribution of $0.007 from 1st July to 4th September 2024, the total distribution paid for FY 2024 is $0.039. This represents 1% year-on-year compared to FY 2023 distribution of $0.0386 if we exclude the special distribution in 2023. Moving to Slide 15. The next 2 slides provide a breakdown of our second half 2024 DI. On Slide 15, DI was significantly higher in second half 2024 driven by positive contribution from acquisition of $26.9 million, the resumption of DI contribution from KMC of $19.7 million but offset by lower contribution from Senoko of $13.7 million. Moving to Slide 16. Although the asset DI was higher year-on-year, the lower year-on-year DI is due largely to the effects of special distribution in second half 2023. Adjusting for the other one-off and timing differences, second half 2024 DI would be $108.9 million or 14.7% higher year-on-year compared to second half 2023 DI of $94.9 million. The next slide provides a breakdown of the FY 2024 DI. For the full year FY '22, asset DI of $319.4 million was 4.9% higher year-on-year, mainly due to the positive contribution from new acquisitions of $36.6 million, resumption of KMC DI contribution of $37 million but offset by lower contribution from Senoko and the wind farms of $22.6 million. In the Energy Transition segment, City Energy full year 2024 DI was lower year-on-year on lower fuel cost recovery of $7 million. This is net of stronger performance from City-OG and higher town gas volume but offset by higher tax and CapEx expenses of $5.3 million. At the transition assets, if we exclude the resumption of KMC DI of $37 million, the lower contribution from AGPC was made due to one-off interest rate swaps gain in FY 2023. At the renewable portfolios, excluding the effects of debt repayment of $26 million, the remaining year-on-year variance of $10.2 million was due to lower wind production and grid outages and lower electricity price. For the Singapore assets, lower contribution from Senoko was partially offset by higher energy efficiency savings at SingSpring. EMK DI was lower due to softer prices for the landfill business. At Ixom, the impact of higher expenses of $20 million and higher CapEx expenses of $12.6 million was net off by the one-off upfront fee paid in 2023 of $10.4 million, lower tax paid of $7.6 million, CapEx funded by debt of $17.7 million with no one-off service income rendered in FY '23. Philippine Coastal's higher contribution was due to higher contract price of $4.4 million and lower CapEx of $3.8 million, net of higher debt repayment of $5.1 million and upfront financing costs of $2.2 million. Moving to Slide 18. FY 2024 DI was $203.7 million versus $316.8 million in FY 2023, where there was a special distribution of $131.2 million. Adjusting for one-offs and timing differences, FY 2024 DI was $218.7 million, 4.3% higher year-on-year. Slide 19 provides a step-up of our balance sheet position. We maintained a strong balance sheet that is well capitalized to support our growth aspirations. Calculated based on the book value of assets, KIT net gearing level increased to 40.9% from 40.1% as at 30th September 2024. This is due to additional loan drawdown to acquire KMEDP as well as funding the fourth close of the German Solar Portfolio. At this level, KIT financial position remains strong, maintaining sufficient debt headroom to support KIT's future growth. The Trustee-Manager continued to monitor risk exposure and safeguard against evolving market conditions to mitigate against fluctuating interest rate, and approximately 72.9% of KIT's total loans are fixed and hedged as at 31st December 2024. We have also hedged approximately 71% of the trust foreign income to mitigate the impact of currency fluctuations. Moving to Slide 20. During the year, KIT raised $200 million of perpetual and $200 million of placement. The $400 million total proceeds were utilized to repay the Ventura acquisition term loan. In 4Q 2024, we obtained a new $75 million multicurrency RCF facility to support KIT's growth and improve financial flexibility. Consequently, total undrawn committed facility as at 31st December 2024 totaled $608 million. Moving to Slide 21, KIT's CapEx plan for 2025, which will help provide our stakeholders with more information on maintenance and growth CapEx across business segments. Maintenance CapEx is the capital expenditure to sustain the operation of our businesses as well as to meet its health, safety and regulatory obligations. Under the Distribution & Storage segment, approximately half of the maintenance CapEx relates to Ventura replacement of bus to extend fleet life. The balance on the maintenance CapEx pertains to Ixom, where there is scheduled maintenance. Moving to growth CapEx. This is capital expenditure which will help grow the business and is value accretive to portfolio valuation. At the Energy Transition segment, the growth CapEx is substantially driven by the requirement at City Energy for plant life extension as well as its investment in solar and EV. The growth CapEx projected for the Environmental Service segment pertains to Senoko waste-to-energy plant life extension upon the extension of its concession as well as growth plan at EMK. At the Distribution & Storage segment, the growth CapEx is substantially due to ongoing capacity expansion plans at Ixom, which has been shared earlier in the business update section. With this, I hand the time back to Kevin, who will share more on our sustainability updates.

All right. Thanks, Raymond. We believe sustainability management is imperative to the continued success of KIT and its ability to create value. On Slide 23, we shared some sustainability performance highlights for FY 2024. Under environmental stewardship, with the acquisition of the German Solar Portfolio, we have expanded our exposure to renewables and increased our total renewable energy capacity to 1.3 gigawatts. Moving to responsible business. We continue to uphold high standards of ethical business conduct and strong corporate governance as a responsible business. We are also pleased to achieve an A rating in the MSCI ESG rating assessment for 2024, which measures an organization's management of financially relevant ESG risks and opportunities. In our commitment to people and community, KIT together with the Keppel Fund Management and Investment platforms dedicated more than 1,100 hours in volunteering to support community outreach efforts. We placed sustainability at the core of our strategy to create value and achieve growth and maintain a responsible approach to managing our portfolio to deliver long-term value to our stakeholders. Thank you.

Thank you, Kevin and Raymond. We will now open the session for questions, and we'll now proceed to take questions from the audience. [Operator Instructions] Can we have the first question, please?

Rahul, please go ahead and ask your questions.

Really appreciate the incremental disclosures related to CapEx outlook. So maybe just continuing this point about CapEx outlook. Could you help us understand these new disclosures better? How should we be comparing the disclosures in Slide 21 or 20 versus 2024? I see in Slide 36, we do have maintenance CapEx and growth CapEx. So are they right for right comparable? Like just as an example, right, for Energy Transition for 2025, the maintenance CapEx forecast is $17 million. Is the right comparable in Slide 36 is $6.274 million?

All right. I'll probably take your first question, right? So the information that we disclosed on Slide 21 of the CapEx is only for FY 2025. So for instance, the growth CapEx of $25 million, $8 million and $31 million, right, it's something specific from FY 2025. This number may be higher or lower for FY 2026 depending on the growth initiatives and our progress of the various growth initiatives at each project. So I don't think you should use that as a guide going forward.

Sorry, Kevin, maybe I'm not clear. I was asking for FY '24, like history, versus history.

Oh, history.

Yes, not 2026. Yes. So we have a Slide 36, right, where we have FY 2024 DI by division. In that, there is a line called maintenance CapEx.

Yes. Hold on. Let me just take a look. Yes. Slide 36?

Yes, Slide 36. FY 2024.

You mean the $34 million of maintenance CapEx in FY 2024. Is that what you're asking?

No, above, maintenance CapEx, $6.274 million, which are the adjustments, $12.833 million, $44 million. So basically, we say that $63.6 million was the maintenance CapEx in FY 2024.

Yes.

Is this the right comparable? So basically, in 2025, our maintenance CapEx will be higher?

Yes. 2025 maintenance CapEx would be higher than 2024. You're comparing the correct metric. And maybe I can provide a bit more clarity. You'll probably see that one of the -- among the 3 segments, there's a big distribution -- a big maintenance CapEx required under Distribution & Storage. I would say about half-half from Ixom and Ventura. Ixom, there is a bit of a catch-up CapEx, maintenance CapEx from the COVID days because during COVID, a lot of -- because of the lockdown, et cetera, in Melbourne, some of the maintenance work cannot be done. So now we are progressively catching up on the maintenance CapEx. But this is not a level that we anticipate to be there or we do not anticipate maintenance CapEx to be at this level forever. It will come down at some point in time, in the next maybe 1 or 2 years. For FY 2024 for Ventura, which accounts for about the other half of the $70 million, a very big chunk is used to replace buses, right? So maybe just to recap a bit, under the Ventura framework, the company pays for the CapEx upfront with the regulator reimbursing us for the CapEx as well as the financing cost over a period of time. So there are some buses that's due for retirement. We are buying buses to replace them. And the CapEx is ultimately, in a way, like I say, backed by the government.

Right. I completely understand. And how about the growth CapEx? Like we have around $31 million plus $26 million plus $8 million. So we have a high growth CapEx of $65 million. And how -- what is the number for 2024?

Just get you the numbers. So Rahul, so whatever it is, if you go to Slide 26, you will be able to see there's 2 lines there, maintenance CapEx -- sorry, growth CapEx funded by FFO.

So basically from $14 million in 2024, we are going up to $65 million in 2025.

No. Maybe let us get you the right number. This is a growth CapEx that's funded by FFO. It does not include growth CapEx that's funded by a debt facility. So let us get you the total figures.

Sure. I understand. Yes, maybe I'll get back in -- sorry, yes.

So we will give you the numbers for the total growth CapEx for FY 2024. But -- and this is where -- I think we spoke about it last year. We wanted to give you more guidance on what we are incurring because in the past, our DI, there was some fluctuation due to growth CapEx that was not debt funded. And we want to give -- and I mentioned before, those CapEx is not a bad thing. I mean it's actually a good thing because we actually realize higher returns out of that. So -- and increasingly, going forward, we want to spend a bit more on growth CapEx as well. We have achieved record performance at Ixom, PCSPC and City Energy. And this will not have been possible if we do not put in some growth CapEx over there.

Right. Absolutely clear. Makes sense. Can I just check on this point, right? Like be it maintenance CapEx, be it growth CapEx, like we discussed at Q3, you always have an option to take this CapEx either at the asset level or at the corporate level. And depending upon where you take it, it might impact the DI. It would not impact, I think, fund from operations but will impact DI. So going forward, how you're going to balance this out?

Okay. Sure. So we think that the better metric to measure our performance, especially our ability to generate cash flow, in FFO, right? FFO is basically cash flow generated by the business after letting off maintenance CapEx because a business will always require maintenance CapEx. So -- and we will have some form of maintenance CapEx every year. It will not be the same. There will be some movements, but it's up there. And so therefore, we think that FFO is the best metric to reflect our ability to generate cash flows. And the difference between FFO and [indiscernible] is essentially the funding of growth CapEx, et cetera, and the debt repayment, et cetera, and so on. So I cannot give you specific or very prescribed as to how we're going to fund it because it depends on the country in question, right? So for example, right, in Korea, in Australia, right, there is some withholding tax that we have to pay if we bring that cash, right? So at KIT level, we are committed to providing a fixed increase to our DPU, which basically means that every single year -- every single half a year, we need to pay a certain amount of money, right? The amount of money can come from the Singapore assets. It can come from assets from various countries. But as much as possible, we would like to avoid taking cash from countries with high withholding taxes. It probably makes a lot more sense for us actually to cash over there to fund the growth capacity in that country, right? So that's one consideration that we have. We would generally want to fund growth CapEx with debt facility. It actually improved DI. But sometimes the question that we have is, if I have a lot of cash sitting in one business, why should I be drawing down additional cash -- additional debt to fund the growth CapEx? I'll be incurring interest expense for -- without a good reason. So which is why we always -- we want to encourage our investors to focus more on FFO as opposed to DI. I hope that...

Yes, this is very helpful. So just to confirm, so going forward, then I assume you would be sharing FFO by asset on a quarterly level so that we also focus on it?

I think we have been sharing FFO by...

Yes, we shared our FFO on a semiannual...

Semiannual basis.

Okay. Semiannual business. Okay. Very helpful. I'll get back in the queue.

Thanks, Rahul. Next up, we have [ Yukien ] from CLSA.

Kevin, just on the Ventura CapEx, you mentioned that it's reimbursable from the government. Can you maybe share more details? Like is this index linked? Or does the government -- will they pay any amount? Or is it a fixed fee over a certain period? And so is there any plans to like electrify the buses, make it all EV, which ultimately, I would guess, that would also incur some further CapEx?

Yes. So let me explain a bit more about the regulatory framework for Ventura in Australia. So what happened is that at the start of every contract, the business will agree with the regulator how much buses to purchase and replace each year. We will agree on the funding plans, how much debt to take on, right? And then in the revenues or in the fees that we receive from government, the government will actually build the reimbursement scheme to the total revenues or fees that we receive from the government. So let's take a bus for instance, right? Let's say -- let's assume a bus cost of $100, right? And let's say we debt fund the CapEx, the $100. And what the government each year will do is that they will actually look to repay us over X number of years. So you take $100 divided by X, that will be the amount that they will return us in that year. On top of that, they will also reimburse us or pay us back the interest expense that we incurred to fund those buses.

Also, it will be over several years before you can fully get the CapEx?

Yes. Generally, I'll say it's somewhat over the life of the bus, yes.

It should be like 10, 20 years. Would that be...

Between 10 to 20 years, yes. I mean I do not want to disclose the exact number, but it's between 10 to 20. Yes.

Thanks, [ Yukien ]. We have one question from the floor.

Maybe just one thing on -- I'd like to clarify on growth and maintenance CapEx for Ventura. If it's replacing an existing bus, it will fall maintenance CapEx, right? But if you are buying new buses, then it will fall under growth CapEx.

Thanks, Kevin, for the clarification. I'll move on to a question came from the floor. This is from [ Aaron ]. Could you share if the team has reviewed the portfolio on a holistic basis to identify if there are any underperforming assets in KIT's portfolio that are not generating sufficient yield and if there are consideration for divesting?

Okay. Sure. KIT is giving our investors a very high cash yield. I think we're quite famous for that. But I think we also want to note that we are not just a new counter. We want to focus on proper shareholder returns, which basically means that we're also trying to give our shareholders what we call share price appreciation, right? And in order to achieve our share price appreciation, we need growth in the underlying business. That's what we have done with Ixom, PCSPC and City Energy, right? So we are always -- every year, we do a portfolio assessment, right? But yield is not necessarily the only metric that we look at. We look at the long-term growth, right? And sometimes we are happy to -- for an asset, right, that has -- that generates value to the cash flow because we take more of the operating cash flow and putting back to growth CapEx to grow the business. And within our portfolio, we want to have a very ideal portfolio mix where we have some assets that is generating a lot of cash, right? Then we have some assets that may not generate cash but it's a good business. But there's a lot of growth CapEx, which we'd be very happy to fund and achieve increase in EBITDA, increase in cash flows in the time to come.

Thanks, Kevin. Next question, we will take from Ada from OCBC.

I have 3 questions from me. So first, I noted that KIT's weighted average cost of debt has actually improved over the past quarter. So I was wondering if you see any further financial cost savings going forward and whether you can provide some guidance on your cost of debt for 2025. Secondly, I think there's been quite a lot of noise around the distributable income figures due to one-offs and timing differences. And this is something that I've always struggled with, which is to reconcile the fact that your distributable income may be lower year-on-year, but GP is actually higher. So wondering if management can provide some guidance there. And my third question is a little bit more specific to EMK. And I was hoping that you can provide a little bit more color on what might be causing the volatility in landfill prices and what sort of favorable policy adjustments you are expecting there.

Okay. We probably have...

So let's start with the one that you asked about, interest rate, right? It has improved slightly. This is mainly due to the floating component of our loan portfolio that we did not hedge. So what happened was the benchmark rate has come down. When they started cutting rates in Singapore, you also do see SORA rate coming down. That's how -- that's where we see the benefits. And to answer your question whether we are able to give some guidance for 2025, as you may know now, the market condition, it really depends on what's going to happen in the U.S. So I think in terms of guidance, we should look at how FOMC is guiding us, guiding the market. That will be the right way to look at it. Yes. Then I think the second question was on DI movements. Yes. Okay. So you see, our assets like what Kevin has mentioned, all our assets are generating DI. Now whether we want to repatriate the DI back to Singapore for distribution, it's really a business decision. It depends on the business needs. It depends whether there's a growth CapEx requirement or maintenance requirement, right? So there will be timing differences as well. So it doesn't mean that if, for example, Ixom generates $100. I will repatriate $100 back. That's not efficient because there's a couple of components there, tax and so on and so forth, right? So the timing differences and also the gap between DI and [ DIPU ], if you call it, the gap will be largely funded by debt.

Yes. So just to maybe add to that, at the KIT level, we have committed, like I say, to providing a certain amount of distribution to our unitholders. As much as possible, we want to draw cash or dividends from assets from countries where there is no withholding tax on dividend. So a very ideal candidate is actually all the Singapore assets. We like to fund our cash flow from Singapore assets. Korea, there's some withholding tax over there. Australia as well, depending on how much franking credits we have. So that's more of the tax optimization question. I think it is more to like what are causing the fluctuations, right, or the movements in DI, right? A few things that will cause it. DI is basically the amount of income that we can ultimately distribute to unitholders. But it's a very confusing number, right, for a few reasons why. First, DI is also after one-off costs, right? So for example, in 2024, there's a certain amount of fee expense of about $13 million, right? So these costs that we do not expect to incur, when it comes to setting our DPU, right, we are committed to growing our DPU by 1% to 2% annual. And we have done so at least 1% in the last couple of years. And this is something that we probably will continue doing going forward. We take a very long-term view to debt position. We take a look at assessing the long-term growth of DPU. We look at, over a long period of time, how much can our cash flow increase by. The fact that we increased the DPU means that we are actually very comfortable and confident in our ability to generate cash flow. I would say that maybe the better way to look at it is to look at FFO, right, because FFO is operating -- cash from operations, cash from our assets after maintenance CapEx. So our FFO is probably at 280 plus, which is higher than our distributions. And I'll say one of the key -- one of the key differences between FFO and DI is really growth CapEx. And growth CapEx to me is sometimes discretionary. If we need cash, we can turn it off. If we do not need the cash, we can turn on. But like I said, growth CapEx is good, and we want to spend them to increase or growth our business going forward. Yes. Did I cover all the questions? Because I may have missed out some of your queries.

Yes, I think that very helpful. I think it also sends a more positive sign to the market as well to have a metric that is a bit more accurately representing the underlying businesses and is something a little bit more stable because I think the noise that has been caused by especially all the CapEx and one-off has been quite distracting as well. Then it really caused a lot of questions in terms of whether or not it is sustainable.

All right. So like last year, like I said, there is a one-off transaction cost, fee payment transaction. We've acquired a few businesses in that year. We do a bit more refinancing in that year. There will be certain transaction costs, upfront costs, financing costs. That will help to reduce DI, but we do not expect them to recur every single year. Financing, upfront costs probably happens only when we refinance, which is going to be every 5 to 7 years. Yes.

Okay. That's helpful. I think I had one last question about -- more color about EMK as well.

Yes. So on the landfill, right? So what happened was that, 2024, I would say from a macro perspective, it's not too great in Korea. The macro is a bit weaker. They had issues with the construction industry, right? So for example, right, our landfill, right, and like all other landfills in Korea, they had less what I call industrial and construction waste. So with the construction industry showing some lower performance in Korea last year, less construction waste was produced. Less industrial was produced. That actually led to a decrease in the ASP for landfill. This is not something specific to EMK. It's something that is applied across all players in the whole Korea. However, having said that, right, we think we actually have a very positive long-term view or even midterm view of Korea. The current macroeconomic issues at Korea will go away. And I think we are starting to see some signs, right, of improvement right to the sector. So what do I mean by that? So for example, again, this is something that we are monitoring very closely. There will be 2 policy change in Korea, right, come end of the year and early next year. This pertains to the closure of public landfills in the Seoul metropolitan area. It also pertains to no direct way from households to the landfill and so on. This basically means -- this will have a few impacts. It means that ASP for incineration -- incinerators located near the Seoul metropolitan area, it could probably see a higher ASP increasing. And then regional landfills outside of the Seoul metropolitan area could also see ASP increases because the country is urbanizing. The country is growing, right, the way they produce. And not always can be recycled. Korea has a very high level of recycling rate. Over 90%, almost -- I think above 95%. So the waste must go somewhere, right, and which is why we actually have a positive view of the business in the next -- over the mid-term and long term.

Thanks, Ada. I'll move on to another question from the floor from Aditya Salim of Chartwell Capital. Can you share some color on Ventura's strong DI in the fourth quarter 2024? And how should we think about the DI run rate for Ventura in 2025? I'll repeat the question. Aditya is asking for some color on Ventura's DI performance in 4Q 2024 and how should we think about the DI run rate for Ventura in 2025.

I'll say Ventura is a very stable business. The number of buses that we have is projected to grow at somewhat a multiple of the particular growth rate in Australia. The DI that you see, I think $20 million plus, I think that's about 6 months' worth of contribution. So for 2025, you could probably see a higher number based on -- because once it contributes on a full year basis to KIT.

Thanks, Kevin. The next question comes from Goola from The Edge. How should we think about value given that NAV decline year-on-year? How can asset growth yield better value in terms of NAV? Or should we just focus on DPU growth?

Okay. I would say that NAV is not the correct metric to measure KIT. Our -- the total assets, our statutory asset value is not the correct metric to value KIT. Let me give you an example why. I think the REITs there are allowed to revalue their assets every single year. We are not allowed to revalue our assets. So for instance, we bought Ixom in 2019. EBITDA has increased from $130 million then to slightly over $200 million as of last year. That's a $50 million or $70 million increase over the last 4 to 5 years. And we still carry Ixom at the historical acquisition costs. So our total asset does not reflect the market value of our assets. Likewise, City Energy, City Energy track record, City Energy has grown a lot in the last 2 or 3 years after we have repositioned it for growth. EBITDA increasing from $47.4 million in 2021 to $84.5 million for last year. There's like a 38% increase, right? Again, we are still carrying at the original book value. There is certain fixed line assets concession assets in Singapore that will fall off. Those will depreciate over time. That's true. But I think our strategy is to focus a lot more on every single asset. And we have been growing our every single asset such that they increase in valuation, right, of our every single asset. We actually outweigh the effect of any decline in the value of fixed line assets. And I would encourage our investors, shareholders to look at our independent portfolio valuation as a better proxy, right, for the market value of our assets. Just to add on, you can look at our AUM number. That's on Slide 4. It's $9 billion AUM.

Thanks, Kevin and Raymond. I'll move on to the next question from the floor. This question is on Ixom song from [ Aaron and Terence ]. Will KIT consider a more proactive approach on seeking potential buyers for Ixom to realize capital gains, which could then be reallocated towards loan repayment and potentially new investment opportunities?

Yes. I think we got this question a lot. So we are, at this stage, committed to growing Ixom. It's a great business. We are confident that we can grow it strongly in the year to come. If -- as and when someone comes to us with a price that we cannot say no to, we will consider selling. And this is an approach that we take to our other assets.as well. So ultimately, we believe that we wanted to do what's right first, grow the business, build a strong business. And then over time, people will recognize the value that we created, and then they will offer us -- if they offer us a price that we cannot say no to, then we can sell.

Thanks, Kevin. We have a question from [indiscernible].

Just 2 quick questions. First one on portfolio reassessment. I think some of it has already been asked earlier, but I'll just check again. Based on your current portfolio base, is there any asset that is absolutely ripe for you to consider divesting? Second question is, you had 4 pillars in your business segments. There is an empty pillar called digital. Given the recent news flow from Keppel Corp. on the optic fiber, any possibility of you considering offtake of the optic fiber from Keppel Corp. anytime soon?

Okay. Sure. I think you have 3 questions over there. I'll probably take the first question first. I think the first question is, are there any assets that is prime for monetization? I think that's probably not something that I will provide a direct answer to, right? So like I said, we -- well, we have -- going forward, we are building a more active approach at monetizing, grow our business and then recycling our capital. That's something that we will do going forward. We have said that last year. But like I said, our permit -- we are also very long-term investor, right? The decision that we always make is that whether -- should we hold or should we sell. If we feel that someone is offering us a value that's higher than the intrinsic value of the business, then we'll do a sell decision, right? There is probably no [indiscernible] in our portfolio. If someone comes to us with a price that we cannot say no to, like I said, we will probably consider debt, right? And I'll say we have some good businesses there. And sometimes we do get inbound notice or inbound inquiries about our assets. Okay. You had 2 more questions, right?

He had a question on -- given the news flow on digital assets, the subsea cable at company level, is there any consideration to offtake any of these?

Yes. So digital infra is a sector that we are very keen on. We see a lot of growth over there. And our sponsor, Keppel, right, on the Keppel data center side, they're building the subsea cables. It's still under construction, probably come online, I don't believe, in a couple of years' time. I think that's an interesting asset. I think at the right time, we probably want to have conversations with them.

Thanks, Kevin. I have one more question from Aditya Salim. Can you share if there's any progress on the concession extension at SingSpring?

Okay. So the SingSpring concession will expire end of the year. The land lease can run for [ 8 ] more years from end of 2025. We have been having discussions with PUD over possible extension. We are still in discussions, and at the right time, we will make the necessary disclosure.

Thanks, Kevin. We have further questions from the analysts. [Operator Instructions] I have one question from [ Peggy Mark ] from [ Whitefield Capital Management ]. [ Peggy ] is asking, can I clarify the workout of FFO? Is FFO after interest expense and maintenance CapEx? I think that since we are disclosing FFO for the first time in the first in such detail, perhaps you can clarify this.

Yes. FFO is after interest expense and after maintenance CapEx. That's the question, right? Yes.

I have one more question from [ Terence ] of Mizuho. Can I check what is the trajectory of your weighted interest rates in 2025?

Trajectory -- I will not be able to give a guidance on this. As you can see on the presentation slide, we are 70% hedged. So the movement will be -- remain on the 30% hedged portion. And that's -- our margin is fixed, right, with the bank. So the movement is really the benchmark rate. And I would say that the entire market takes cue what happens in the U.S.

I think [ Terence ] had a follow-up question. Are you expecting any interest relief?

I think if FOMC were to cut rate and Singapore were to follow soon by devaluing the currency, I would expect to see some savings on interest rate.

Thanks, Kevin. I have a question from Suvro of DBS.

Yes. Just wanted to follow up on this conversation around the -- what to focus on? Is it distributable income? Or is it FFO? But at the end of the day, I guess given that we are a business trust, distributions will continue to be an important metric for investors. So in terms of KIT, is it KIT's ability to sustain distributions or grow distribution? So as an investor, what should they be looking at? Is it DI? Because DI may not then give the best picture? Or is it FFO? Does FFO get impacted by your timing of growth CapEx? Then again, it may not provide the right picture. So what should -- how should investors then judge KIT's ability to sustain distribution?

So yes, I know the REITs and business trends in Singapore, we tend to focus a lot on cash yield. And we do want to provide our unitholders with strong, stable and increasing cash yield. At the same time, we do not just want to be a cash yield component stock, right? We want to provide total shareholder return to our unitholders. So our objective is always to grow our DPU in a very sustained manner, right? That's somewhat benchmarked to inflation. And then hopefully, the growth in our portfolio will catalyze increase in our share price. As to what metric, I will say that the better metric to determine the sustainability of our distribution is actually FFO. There is a lot of noises in our DI, right? Some are one-offs. So are growth CapEx. SO it's hard, right, from an outside-in perspective to assess from DI whether our DPUs are -- distributions are sustainable, which is why I think we wanted to focus a bit more on FFO. FFO is the cash flow from operations from underlying assets after maintenance CapEx. So long this number is higher, right, then the distributions that we are making, I think, we are in a good position. Our cash flows are very strong, recurring, sustainable. And so therefore, the DPU that we make are also quite sustainable.

Okay. So even if DI is lower than the distributions you're looking, it's not a point of concern in terms of...

It's not a point of concern for us.

Okay. And so going forward into next year, if you look at your portfolio, where do you think you're expecting incremental growth? And is there any areas where you think there is risk to the cash flows? So if you look at that -- if you look at your portfolio, are there any particular assets that you think will be your main focus areas? And are there any areas where you think there is risk to the cash flow?

Yes. So I would say I will divide our portfolio into 2, right? We have a good blend of actively managed assets where we own a controlling stake of 100%. Then we have a portfolio or sub portfolio where we own a minority interest and so on. So our efforts are always focused on those assets that we control and have a lot of expertise in, right? So that will be Ixom, Ventura, City Energy, EMK and so on. And these assets all happen to be in asset classes or sectors where the broader Keppel group has a lot of operating expertise in, right? So which is why we want to leverage on the group operating expertise, knowledge within the group to grow this business. And where do we see incremental growth in KIT's portfolio? I'll say we do see increase in growth in our portfolio across time. So even from the -- I'll say, the [ passive ] assets, I think there are some growth over there as well. So for instance, right, let's say using the German Solar Portfolio as an example, the number of solar systems -- the amount of systems we have in that portfolio is fixed, right? But because that -- because of the way the debt amortization is structured, it's not a bullet loan. It's an amortizing loan. So over time, as we amortize the debt or pay down debt, the [ FCFE ] coming out from this portfolio will actually increase over time even when the number of systems remains the same. Then I think Ventura, I think we have spoken a lot about the growth that we achieved at Ixom, City Energy and PCSPC. Maybe I can say a bit more about, let's say, Ventura, right? I think this is a question that I forgot to answer earlier on, right? We do not just see Ventura as a transportation play, but we also see it as an energy transition play, right? The world going forward, the direction is very clear. They will switch to electric buses, and that's definitely a journey that we want to be part of, right? So that's the first point I'd make. There's also good growth in Ventura as well because if you look at Australia, Melbourne is one of the biggest city over there, if 3not the biggest. They are also probably one of those that have the highest level of propylene growth through -- both through natural growth as well as immigration. So we do see more buses being required over time in Melbourne. And that's certainly something -- a trend that we want to tap upon.

Thank you. I think we'll take one last question on the wire, [ Terence ] from Mizuho asked, can we get what your acquisition pipeline is for this year?

Okay. Good question, right? We see a lot of infrastructure opportunities that are out there, and we are always on the lookout and chasing a number of deals. But I will say that we are very, very disciplined. We want to buy correct assets at the right price and so on. So if we can find one that meets our requirements and where we can get our mind in terms of prices, we'll definitely transact. Yes. But like I said, we do expect to do a couple of deals this year, right? I probably cannot commit or comment on the number of deals, the size that we can do, but we do see opportunities coming up.

Thanks, Kevin. This comes to the end of our results webcast this morning. Happy Lunar New Year again to everyone who participated, and thank you for joining us this morning, and have a nice day. You can disconnect. Thank you.