Keppel Ltd. (BN4.SI) Earnings Call Transcript & Summary

Good evening. Welcome to the webcast on Keppel Corporation's first half 2021 results and performance. We are holding this briefing amidst COVID-19, and our panelists are spread out in accordance with safe management measures. Here today are Mr. Manjot Singh Mann, CEO of M1; Ms. Cindy Lim, CEO of Keppel Infrastructure; Mr. Chris Ong, CEO of Keppel O&M; Mr. Chan Hon Chew, CFO of Keppel Corporation; Ms. Christina Tan, CEO of Keppel Capital; Mr. Louis Lim, CEO of Keppel Land; and Mr. Thomas Pang, CEO of Keppel T&T. Let me now proceed with the briefing. The operating environment remained challenging in first half 2021. Despite the progressive rollout of COVID-19 vaccines around the world, the pandemic continues to spread in many countries. Following the emergence of new and more contagious strains of the virus, many countries and cities have escalated their pandemic-related restrictions and border controls, thus further impacting supply chains and the movement of people and slowing down economic recovery. Against a difficult backdrop, Keppel continued to push ahead to accelerate the execution of Vision 2030. It has been a very busy and active first half for the group. We announced in January the organic transformation of Keppel O&M to enhance its competitiveness and relevance amidst the global energy transition, and, more recently, the signing of nonbinding MOUs on the proposed combination of Keppel O&M and Sembcorp Marine and resolution of Keppel O&M's legacy rigs. We also announced plans to divest our Logistics business. We have received bids for the Logistics business, which we are currently evaluating. I've explained the strategic rationale for the 2 proposed transactions involving Keppel O&M and Keppel Logistics at earlier briefings and will not repeat the arguments. We continue to execute our asset monetization program. To date, we have announced over $2.3 billion of asset monetization since the program was unveiled in September 2020. About half of the transactions have been completed so far. We expect to surpass $3 billion in asset monetization ahead of schedule and will aim to achieve the higher end of our $3 billion to $5 billion target by end 2023. At the same time, we're continuing to grow our businesses in line with Vision 2030. Our new initiatives include the Bifrost Cable System, Keppel Infrastructure's collaboration with StarCharge to explore opportunities in electric vehicle infrastructure, M1's rolling out of its 5G stand-alone network as well as exploration of new energy solutions, among others. Beyond organic growth, we are also actively exploring M&A opportunities whether in renewables, urban development, asset management or other Vision 2030 focus areas to grow the group's business and improve the quality of our earnings more quickly. For first half 2021, the group achieved a net profit of $300 million, a marked improvement from first half 2020 and reversing last year's loss of $537 million. All key business units were profitable. All 4 segments also saw improvement -- improved performance, excluding the gains from the reclassification of Keppel Infrastructure Trust and sale of Keppel DC REIT units in first half 2020. The group's operating performance has improved not just compared to last year but even when compared with first half 2019. Excluding revaluations, impairments and divestments across all 3 years and COVID-19-related government grants in 2020 and 2021, the group achieved a net profit of $280 million in first half 2021 compared to a net loss of $72 million in first half 2020 and net profit of $149 million in first half 2019. With Vision 2030, we believe the group can emerge, post pandemic, stronger and on a new growth trajectory. In first half 2021, we received cash of $854 million from our asset monetization program. Free cash inflow was $499 million in first half 2021 compared to the outflow of $664 million in first half 2020, while net gearing improved to 0.85x as at end June 2021 compared to 0.91x as at end 2020 mainly due to the proceeds from asset monetization. We recognize that dividends are important to our shareholders. I mentioned earlier that some of the funds unlocked from our asset monetization program could be returned to shareholders over time. In appreciation of the support and confidence of our shareholders, the Board of Directors has approved an interim cash dividend of $0.12 per share for first half 2021 after ring-fencing the impairments related to KrisEnergy's liquidation. This interim dividend, which will be paid to shareholders on the 19th of August 2021, is significantly higher than last year's interim dividend of $0.03 and also higher than the interim dividend of $0.08 declared in 2019, reflecting the Board and management's confidence in our vision and strategy. We remain focused on growing recurring income. For first half 2021, recurring income contributed $152 million or 51% of earnings, an increase from $119 million in first half 2020. I will now discuss the group's performance by segments. In first half 2021, Energy & Environment generated a net loss of $179 million an improvement from the net loss of $958 million for first half 2020. The key reason for the loss in this segment was the impairment of $318 million related to KrisEnergy's liquidation. Keppel O&M recorded a net profit of $107 million for first half 2021, reversing the net loss of $959 million for first half 2020. This includes the recognition of gains of $269 million from our share of Floatel's restructuring gain. Despite increased manpower costs and COVID-19-related manpower constraints at our Singapore yards, Keppel O&M was EBITDA positive in first half this year. When we announced the restructuring of Keppel O&M into Rig Co, Dev Co and Op Co in January, we said that we expected Op Co to be self-sustaining, financially independent and profitable over time. I'm pleased to share that Op Co was profitable in first half 2021 on the back of our cost management efforts. Keppel O&M started its rightsizing and overhead reduction in 2015 when we recognized the structural downturn in the oil market. To date, Keppel O&M has shaved off over $525 million per annum from its cost structure. Without these cost savings, Keppel O&M would not have been EBITDA positive. Oil prices have risen in recent months, but this has yet to translate into a significant improvement in the offshore rig market, which remains oversupplied. Nevertheless, utilization rates and day rates are slowly improving, and we expect to see improved demand in the longer term for Keppel O&M's new-generation stranded rigs, which are completed or close to completion, as oil companies increase E&P expenditure after years of underinvestment. In the meantime, Keppel O&M continues to see significant opportunities in gas and renewables in line with the energy transition. There is also continuing demand for production assets. In the year-to-date, Keppel O&M has secured total new orders of about 3 billion -- $3.1 billion, including a USD 2.3 billion newbuild P-78 FPSO project for Petrobras and an FPSO topside fabrication project. As at end June 2021, Keppel O&M's net order book was approximately $5.7 billion, significantly higher than the $3.3 billion at the end of 2020. Of the current order book, about 95% of the projects are cash flow neutral or positive. About 40% of the order book comprises gas and renewables solutions. Despite the challenging environment, Keppel O&M continued to execute its order book and delivered 3 LNG projects in the first half of this year. Keppel O&M is also progressing well on its offshore wind projects and is on track to deliver 2 offshore wind farm substations to Ørsted for Taiwan later this year. Keppel O&M is also accelerating the use of cleaner fuels and have signed MOUs with industry-leading companies to develop transportation solutions with ammonia and hydrogen as marine fuels. KI's net profit of $60 million in first half 2021 was stable year-on-year. KI is focused on strengthening the resilience of its power and gas business in response to the global energy transition. In Singapore, KI will diversify its energy mix into renewable sources and zero-carbon electricity import and also enhance the reliability and efficiency of its generation fleet. The waste-to-energy projects in Hong Kong and Singapore continue to make steady progress. While COVID-19 has affected supply chains and productivity, KI will continue to intensify efforts to execute these projects on time and safely. The increasing global focus on sustainability will create new opportunities for KI. Earlier this week, KI, together with its partner, was selected by Singapore LNG for our front-end engineering design study to codevelop a natural gas liquids extraction project on Jurong Island in Singapore. The project is part of the Singapore Green Plan 2030 to transform Jurong Island into a sustainable energy and chemicals park and would allow downstream off-takers to adopt cleaner feedstock for their processes. The global waste management market is also expected to grow rapidly, presenting opportunities for KI's environmental business to not only scale up but also expand into new and adjacent markets related to resource circularity. KI is also developing new energy solutions that can contribute to different decarbonization pathways. KI is working towards expanding its district cooling footprint both in Singapore and in the region. Beyond EV charging infrastructure, KI is also exploring opportunities in energy storage, distributed energy generation and alternative energy value chain. Urban Development recorded a net profit of $279 million for first half 2021, a 30% increase from between $215 million year-on-year mainly due to stronger earnings from Keppel Land, which remains the highest contributor to the group. The significant discount to Keppel Land's RNAV that some analysts continue to ascribe suggests that the market has yet to fully appreciate the value and significance of our 100% ownership of Keppel Land. Since the privatization of Keppel Land in 2015 at a cost of $3.1 billion, Keppel Land has to date upstreamed $5.1 billion in dividends to Keppel Corporation, including $700 million in the first half of this year. Over this period, Keppel Land's total assets have only fallen by about $400 million from $14.5 billion as at end June 2015 to $14.1 billion as at end June 2021. With our ongoing asset monetization program, we expect to unlock even more value from Keppel Land going forward, which we will reinvest in new opportunities that can yield higher returns. For first half 2021, Keppel Land's performance improved 25% year-on-year to $252 million. This was mainly due to higher contributions from China and Vietnam property trading projects and gain from divestment of the 30% stake in Dong Nai Waterfront City, partially offset by impairment provision for Sedona Hotel Yangon. In the year-to-date, Keppel Land has announced $420 million of asset monetization, including the divestment of Serenity Villas in Chengdu earlier today, which will yield gains of $139 million for the group. Beyond asset monetization, Keppel Land also announced new partnerships to develop projects in Tianjin, China and Ho Chi Minh City, Vietnam. Keppel Land's home sales more than doubled to 2,650 homes in the first half 2021 compared to the same period last year, with improved performance across all key markets. In China, Keppel Land sold 1,550 homes, a 50% increase from the first half of last year mainly due to home sales in Shanghai and Wuxi. At the recent launch of a new phase of Upview, a joint venture project with Gemdale, in Shanghai this month, all 503 launch units were sold out within a day. In Singapore, The Reef at King's Dock saw strong demand with 86% of the projects sold in the first half, while The Garden Residences was sold out in the second quarter. Home sales in Vietnam have been impacted by COVID-19-related lockdowns, but we have nevertheless seen improved home sales year-on-year. As at end June 2021, Keppel Land's residential land bank stood at about 46,000 homes, while its commercial portfolio stands at about 1.6 million square meters of GFA following the divestment of Keppel Bay Tower and 75 King William Street. Looking ahead, Keppel Land will continue to evolve from a developer model to being an innovative real estate solutions provider. It will focus on accelerating capital recycling, lightening its balance sheet and growing recurring income. At the same time, Keppel Land is leveraging the diverse capabilities of the Keppel Group to explore innovative, new solutions such as climate-resilient near-shore developments or floating cities, which can address both land scarcity and rising sea levels in coastal cities. Separately, SSTEC contributed a net profit of $12 million for the first half this year, mainly due to the sale of a commercial and residential land plot in the Tianjin Eco-City in China. SSTEC will continue to drive the development of the Eco-City in line with our commitment to sustainable urbanization. Connectivity's net profit grew to $27 million for first half 2021 compared to breaking even for the first half 2020. Keppel Data Centres generated a net loss of $2 million, smaller than the loss of $12 million for first half 2020. To be clear, data centers are an important growth engine for the group. Earnings from our data centers business are reflected not just in this segment but include about $15 million in earnings for first half 2021 from Keppel Data Centres' REIT and private funds, which are recorded under Asset Management. In Singapore, we have commenced construction of the data center at Genting Lane. Meanwhile, the development of our data centers in Australia, Malaysia and Indonesia are progressing well despite the impact of COVID-19. Following our entry into the Chinese market last year with the development of a data center in Huizhou, we continue to expand our footprint with the acquisition by Keppel Data Centre Fund II of a site to develop a greenfield data center in Shanghai. When the 2 data centers are service ready in 2022, they will add to the group's recurring income. We're also exploring ways to make our data centers greener and more sustainable. In May, Keppel Data Centres signed an MOU with industry partners to jointly explore the development of supply infrastructure to bring green liquid hydrogen into Singapore to decarbonize our data centers and potentially power our floating data center park project. In line with Keppel's commitment to sustainability, we'll continue to work towards reducing the carbon footprint of our data centers. Following the announcement in March this year of the Bifrost Cable System, we are close to finalizing the design of the cable system and expect to commence manufacturing in 2022. We continue to explore opportunities for M1 and Keppel Data Centres to work with Bifrost to grow the group's connectivity solutions. In first half 2021, M1's contribution was lower year-on-year at $21 million as COVID-19 continued to impact roaming and prepaid revenues. The pandemic's impact on M1 was smaller in the equivalent period last year as the full impact of COVID-19 was only felt in the second quarter 2020. First half 2020 had also benefited from the Jobs Support Scheme, which was reduced this year. Despite COVID-19, M1's postpaid customer base grew 5% year-on-year to over 1.6 million as at end June 2021, entrenching M1's position as a telco with the second largest postpaid customer base. Earlier this year, we announced plans to realize the value of M1's current network assets with a net book value of $580 million. This is in line with the group's asset-light business model under Vision 2030 and will free up capital that can be used to help M1 invest in new capabilities and fund other growth initiatives. Meanwhile, M1's transformation and adoption of a new platform are showing early signs of improving postpaid customer ARPU while driving higher digital adoption. We have announced the commencement of M1's 5G Standalone network trial this week. M1 and Samsung also recently launched the Voice over 5G New Radio service on M1's 5G Standalone network. This is a first in the world and will provide high-quality calls and better 5G experiences for M1's customers. Looking ahead, M1 will continue to collaborate with industry leaders to conduct trials of 5G use cases that will help to advance Singapore's Smart Nation ambition. Net profit from the Asset Management segment was $117 million for first half 2021 compared to $258 million for first half 2020. First half 2020 had benefited from $177 million in gains from the reclassification of KIT and sale of Keppel DC REIT units. Keppel Capital's net profit of $64 million grew 23% year-on-year mainly due to stronger operating results as well as gains from mark-to-market of investments. Excluding the gains mentioned previously, contributions from our listed REITs and trusts were relatively stable while private funds' contributions were higher year-on-year due to gains from disposal of investments. Keppel Capital's asset management fees grew 35% to $111 million for the first half compared to $82 million for the equivalent period last year. This was due mainly to more acquisitions and divestments completed in first half 2021 as well as Keppel Capital's larger assets under management and new funds launched in 2020 and 2021. In the year-to-date, Keppel Capital has raised total equity of over $2 billion from global institutional investors across various funds and separate account mandates, reflecting continued strong interest from investors in cash flow-generating real assets, including logistics and core infrastructure. Keppel Capital has also completed over $2 billion in acquisitions and divestments in the year-to-date. Keppel Capital will continue to harness synergies of the group in the co-creation of quality assets while tapping third-party funds to drive the group's growth. In conclusion, I'd like to leave you with some key takeaways from our first half 2021 results briefing. We have made a good start in executing our Vision 2030 to transform the group and put us on a new growth trajectory. The group has returned to profitability compared to first half 2020. But more importantly, we have also done better than pre-COVID first half 2019, excluding RIDs and COVID-19-related government grants. As we execute Vision 2030, we believe Keppel will emerge at a new place post pandemic stronger, more relevant and on a faster growth path. The monetization program has gone very well. And we expect to hit the lower end of the $3 billion to $5 billion monetization target earlier than the 3 years we had initially envisaged. We will now aim to deliver closer to the higher end of the $3 billion to $5 billion range by end 2023. The significant balance sheet space released from the monetization program will allow us to undertake inorganic options to reposition our portfolio for new growth. Lastly and most critically, we'll continue to work with all our stakeholders to ensure that the very interests that the group serves will not only be fulfilled but hopefully exceed it. For our supportive shareholders, rest assured that we will, as we have always done, look at how we can improve shareholder returns in a sustainable way as Vision 2030 begins to bear fruit. Our CFO, Hon Chew, will now take you through the group's financial performance.

Thanks, Chin Hua, and a very good evening to all. I shall now take you through the group's financial performance. In the first half of 2021, the group recorded a net profit of $300 million as compared to net loss of $537 million in the same period last year. Earnings per share for half year was $0.165 as compared to loss per share of $0.295 in the same period last year. Annualized ROE was 5.5%. Free cash inflow of $499 million was an improvement over the free cash outflow of $664 million in the first half of 2020. This was mainly due to lower working capital requirements, proceeds from divestments of Keppel Bay Towers Pte. Ltd., First King Properties Limited, Chengdu Hilltop Development and interests in Dong Nai Waterfront City as part of our asset monetization program; higher dividend income; as well as lower investment and capital expenditure. Net gearing, as a result, decreased from 0.91x at the end of 2020 to 0.85x at the end of June 2021. This was mainly due to cash proceeds from asset monetization completed during the 6 months, partly offset by payment of the final dividend for financial year 2020. The group's revenue of $3.7 billion for the first half was 16% or $495 million higher than the same period last year. Urban Development, Asset Management and Energy & Environment recorded higher revenues. Operating profit was $188 million as compared to operating loss of $149 million in the same period last year, largely due to lower impairments at Energy & Environment and stronger operating performance from Urban Development. Profit before tax was $516 million as compared to loss before tax of $357 million for the same period in 2020, mainly due to higher investment income and share of profits from associated companies as compared to share of loss from associated companies in the first half of 2020, partly offset by higher net interest expense. After tax and noncontrolling interests, net profit was $300 million, translating to earnings per share of $0.165. In the next slide, we take a closer look at the group's revenue by segment. The group's revenue at $3.7 billion was 16% higher than the same period last year. Revenue from Energy & Environment increased by 4% to $2.1 billion led by higher electricity sales, revenue recognition from the Tuas Nexus Integrated Waste Management Facility project in Singapore, which was secured in April last year, as well as higher progressive revenue recognition from the Hong Kong Integrated Waste Management Facility project. These were partly offset by the lower revenue in the offshore & marine business, the completion of Keppel Marina East Desalination Plant project in June last year as well as the absence of revenue from the Doha North Sewage Treatment Works due to cessation of operation and maintenance contract in July 2020. The lower revenue in the offshore & marine business was mainly due to the suspension of revenue recognition on Awilco contracts and deferment of some projects. Urban Development saw a 78% improvement at the top line mainly due to higher revenue from Seasons Residences and Waterfront Residences in Wuxi, Sheshan Riviera, Seasons Residences at 8 Park Avenue in Shanghai, partly offset by lower revenue from Tianjin Eco-City residential projects and Singapore trading projects, namely Corals at Keppel Bay. Revenue from Connectivity remained stable at $586 million. Lower service revenue at M1 was partly offset by the higher contributions from logistics and data center businesses. Revenue from Asset Management increased by $18 million to $78 million largely due to higher acquisition, divestment and asset management fees. Moving on to the group's pretax profit. The group recorded $516 million of pretax profit for the half year of 2021 as compared to pretax loss of $357 million for the same period in 2020. Energy & Environment's pretax loss was $177 million as compared to a pretax loss of $942 million in the corresponding period in 2020. This was largely due to share of Floatel's restructuring gain amounting to $269 million and lower impairments. The segment recognized $372 million impairments, mainly from exposure related to KrisEnergy, in the first half of this year as compared to $909 million impairments in the same period last year. Excluding revaluations, impairments and divestments, or in short RIDs, and COVID-19-related government grants in both years, pretax loss was $89 million as compared to pretax loss of $97 million in the first half of 2020. The improved results were largely driven by savings from further overheads reduction and lower share of losses from associated companies from the offshore & marine business. These were partly offset by higher net interest expense, lower contributions from the power and gas business, environment and new energy businesses as well as the absence of contribution from the Doha North Sewage Treatment Works due to cessation of the operation and maintenance contract in July last year. Pretax profit from Urban Development rose by $104 million to $451 million driven by higher contribution from property trading projects in China, higher contribution from associated companies as well as the gain from disposal of remaining interest in Dong Nai Waterfront City project in Vietnam. These were partly offset by lower fair value gains from investment properties, impairment provision for a hotel in Myanmar as well as lower contribution from the Sino-Singapore Tianjin Eco-City. Connectivity's pretax profit of $38 million was $25 million higher year-on-year mainly due to the gain from divestment of interest in Keppel Logistics (Foshan) following the agreement reached with local authorities on the Lanshi port closure compensation and lower net interest expense, which were partly offset by lower pretax profit from M1. Pretax profit from Asset Management decreased by 50% to $135 million mainly due to absence of mark-to-market gain recognized in the first half of 2020 from the reclassification of the group's interest in KIT from an associated company to an investment following the loss of significant influence over KIT. Excluding the reclassification gain, pretax profit was $4 million lower year-on-year. In first half of 2020, there was a recognition of gains from the sale of units in Keppel DC REIT and divestment of interest in Gimi Corporation. For the current half year, the segment recorded higher fee income, mark-to-market gains and investments, dividend income from KIT as well as higher contributions from Keppel REIT and Alpha Data Centre Fund. Corporate & Others consist mainly of corporate costs, research and development costs, treasury operations, investment holdings and provision of management and other support services. Pretax profit was $69 million as compared to a pretax loss of $45 million in the first half of 2020 mainly due to higher investment income and fair value gains on investments. After tax and noncontrolling interests, the group's net profit was $300 million as compared to net loss of $537 million in the first half of 2020. Profits from Urban Development, Connectivity and Asset Management were partly offset by losses at Energy & Environment. There were quite a number of lumpy items in the group's financial results for both first half '21 and first half 2020. Besides fair value gains on investment properties and divestment gains, the group also recognized significant impairments, one-off gains and COVID-19-related government grants in both periods. Excluding RIDs and COVID-19-related government grants in both years, the group achieved a net profit of $280 million in the first half of 2021 as compared to a net loss of $72 million in the same period of 2020. This was underpinned by strong operational performance from Urban Development and Asset Management, overhead reductions achieved by our offshore & marine business as well as higher investment income. The group's net profit of $300 million for the first half translated to earnings per share of $0.165. In the first half of 2021, our annualized ROE was 5.5%. Our interim cash dividend to our shareholders for the period will be $0.12 per share. Net cash used in operating activities was $333 million as compared to $379 million in the same period last year mainly due to lower working capital requirements for Energy & Environment and Urban Development. Net cash from investing activities was $832 million comprising divestment proceeds and dividend income from associated companies totaling $1.1 billion as well as net receipts of advances from associated companies of $66 million, partly offset by investments and capital expenditure of $306 million. Net cash used in investing activities in the first half of 2020 was at $285 million, largely due to investments and capital expenditure. As a result, there was an overall free cash inflow of $499 million for the first half of 2021 as compared to free cash outflow of $664 million in the first half of 2020. With that, we've come to the end of the presentation, and I shall now hand the time back to our CEO, Chin Hua, for Q&A. Thank you.

Thank you, Hon Chew. So we are at the Q&A segment. My colleagues and I are ready to take any questions that you might have. So please submit the questions online, and we will address them.

Okay. It looks like we have a first question from -- I think on the right -- on the left -- on the right, okay. Okay, first question is from Anita Gabriel of Business Times Singapore. "Keppel's industry peer, SembMarine, had mentioned severe manpower crunch plus risk of project delays among its woes. However, the pain appears to be less acute for KOM. Are you able to explain the disparity? Is that partly also because KOM has done some significant rightsizing?" Well, I would tell you that, Anita, the pain is shared by all in the industry and that -- of course, I've mentioned the significance of the rightsizing and how that has helped keep KOM EBITDA positive. But I also like to ask my colleague, Chris Ong, to elaborate on this particular question, Chris?

Thank you, CEO. Well, first of all, we can't comment on our peer what happened because we do not know the details. The other part is that manpower crunch and project delay due to COVID reasons, I think that is commonly felt throughout the industry. The way that we have approached it, we have always announced that we are streamlining our operations, and our rightsizing operation has started since 2015. And just as CEO has mentioned in his slide, since 2015 comparatively until now, we actually have shaved off $525 million of overheads costs. And on top of that, with COVID restriction, we do have the same manpower restriction. But we go about managing it with our clients very closely to make sure that we prioritize the right work with the right skill sets of people. Take, for example, our client Ørsted who came across and we worked with them on the delivery schedule. With the limited manpower, what we did is to subcontract the jacket out to [ Korea ], and it is now completed on time and installed in Taiwan, and we are on schedule to deliver our top side in Singapore. So by working together with the client, we are able to mitigate certain restrictions. But on top of that, we have also participated in the bubble wrapping of some of foreign workers import, but we will do it and balance the need for that.

Thank you, Chris. There is -- there are 2 questions submitted by Chang Kwok Wei of Citi Singapore. First question, "Could you please share more details on targeted markets, geographies for Keppel to grow its renewables portfolio and achieve its 2030 7-gigawatts target?" Maybe I can ask Chris, who is the Head of Keppel Renewable Energy, to address this.

Well, the target of 7 gigawatt by 2030 is a group collective target. So our targets are actually shared, and it's been targeted to grow our renewable energy asset both organically and inorganically so that we can grow our portfolio and generate recurring income quickly. KRE, together with the rest of the group, looks at onshore, offshore wind, solar and also some specific run-of-river hydro space in APAC region. We have a focus on markets in Australia, India, Philippines, Korea, Malaysia and Vietnam. So we have new solar and wind projects that's been added to the pursuit pipeline, all of which are targeted to achieve commercial operation by the end of 2025.

Thanks, Chris. I think just to supplement on that, what Chris has said, besides looking at greenfield development, the group is also looking at acquiring platforms, so-called inorganic options. And some of these platforms could also be in Europe and in the U.S. So we are looking at all the options. And this is a group-wide effort comprising Keppel Renewable Energy, Keppel Infrastructure as well as Keppel Capital. Next question -- second question from Kwok Wei. "For KI's co-development of a natural gas liquids extraction project on Jurong Island, could you share other details such as project size, time line and CapEx?" This is still a bit early days, but maybe I ask Cindy, our CEO of KI, to elaborate or to answer this question.

We are embarking on a FEED study, so it is too premature for us to comment on details such as project size, time line and CapEx. Suffice to say there are multiple pathways to decarbonization. So for this particular FEED, ourselves and our partners will focus on optimizing decarbonization solution at the intersection of sustainability, cost competitiveness as well as energy security.

Okay. Thank you, Cindy. Cheryl Lee of UBS has a question also for Keppel Infrastructure. "Could management share some of the short-term and medium-term targets set for the team at Keppel Infrastructure, both financial and nonfinancial targets? For instance, are they expected to secure a certain amount of contracts per year?" Well, Cheryl, you know that we will not be disclosing any financial targets. Definitely, there are both financial and nonfinancial targets that Cindy and the KI team are following. But maybe I can ask Cindy to discuss a bit about the nonfinancial things or objectives that you're working on?

So for Keppel Infrastructure, we are now organized in 3 key line of businesses: the power and gas, environment as well as new energy. The power and gas business will focus on building up the resilience as well as defending the market share that we have built up over the years. So we will continue to diversify our energy sources besides clean gas together with renewable, as shared by Group CEO earlier, including that of clean and low-carbon energy importation. For the environment business, we have a very strong and healthy order book, and we are witnessing pretty healthy level of inquiry. So we'll focus on scaling up our environmental business, particularly in leveraging our proprietary technology in waste to energy as well as our ability to integrate waste management from that of upstream as well as downstream resource management. For our new energy business, we see very promising tailwind in particular for demand of energy efficiency in the district cooling as well as, as shared earlier, distributed energy generation, energy storage and alternative clean energy like that of hydrogen value chain and potentially carbon capture utilization and storage.

Thank you, Cindy. There's a follow-up question, another question from Anita Gabriel of The Business Times Singapore. "Which of Keppel's focus area could possibly see the earliest M&A activity?" Well, we've just been discussing about renewable energy. I think that's certainly one of the growth engines that we are looking to get a good headstart. Also, besides the normal organic greenfield build, we are also looking at numerous platforms. The different segments that I mentioned, whether it is Connectivity, Urban Development, Asset Management, those would also be areas that we'll be looking at. There's a gentleman. I think he's a -- I suppose he's a retail investor, Mr. [ Teo ] from Singapore. Mr. [ Teo ] has 2 questions. First question, "How would the combination of KOM and SembMarine affect Keppel's value system in the area of Asset Management and the various funds? Keppel has expertise in O&M vessels that can be seeded into funds to earn fees. Example, [ Gimi ]. This won't be possible if the combination occurs." Actually, we have also announced, as part of the 2 nonbinding MOUs, one of the MOUs concerning the potential combination of KOM with SembMarine. We recognize that there is quite a lot of IP and expertise residing in KOM. And so as far as the offshore & marine side, the usual rig design, et cetera, that would go to the combined entity when the transaction is done. But there are also some technology and IP that remains relevant to Keppel's pursuit of projects such as what you mentioned here. It could be gas solutions, could be near shore, floating cities. It could be hydrogen value chain. So those areas, we will form a joint venture, I would say a strategic joint venture, with the -- a new combined entity so that Keppel can continue to avail itself to the expertise that reside currently in KOM for those areas that we remain interested in, particularly nearshore infrastructure development. There's a second question. "Keppel rigs are deemed as legacy assets. Has the discussion with SembMarine so far touched on them letting go of their rigs as well and having them under the same Asset Co so that the combined entity, if it comes to reality, can charge a hit without any legacy baggage?" So far, the discussion is -- I mean, this second MOU is -- with an entity linked to Temasek has been strictly only on our legacy rigs. So okay. Mr. [ Teo ] has submitted 2 further questions, okay. First question, "Keppel Capital targets to grow its AUM to $50 billion by 2022. Are we on track? Will Asset Management and, more importantly, fund management increasingly be a key focus of the company going forward?" Can I ask Christina Tan, CEO of Keppel Capital, to address this?

Yes. We are confident of reaching our $50 billion in terms of assets under management by 2022. We are definitely on track with more funds raised as well as more acquisitions that we have done in this first half year. So Chin, you want to answer the -- or you'll read...

Let me read the question so that they know. Mr. [ Teo ] has a second question also related to Keppel Capital. "Is there any coherent team or strategy adopted by Keppel Capital Alternative Asset, which is a private fund manager that focuses on establishing, offering and managing private funds investing in new alternative assets? Or is it more of an opportunistic in nature? Any ability to scale moving forward?" Chris?

Okay. So Mr. [ Teo ], I think for us, we focus on what Keppel's capabilities are. And I think you have heard from my colleagues earlier that we are quite focused on infrastructure and renewables. This is also an actually asset class under the alternative assets. And we are looking to grow to -- we had a target of 7 gigs -- gigawatts. So this is something which we can actually scale in terms of opportunities. We're looking to acquire more in terms of platforms rather than just build organically. So I think in many ways, with Keppel's monetization, the reinvestments into some of these asset classes will be pretty important for Keppel Capital. And with that, that will help us grow our fee income as well as our AUM. Thank you, Mr. [ Teo ].

Thanks, Chris. Next question is from Adrian Loh of UOB Kay Hian Singapore. "How has the Chinese government's clamping down on property prices to manage affordability affected Keppel Land? And can you share how it will affect Keppel Land going forward?" For that question, maybe I ask Louis. Can you address this? Thank you.

Thank you. Sorry. Can you hear me? Yes? Thank you very much, Adrian, for the question. I think as Chin Hua shared earlier, our home sales in China for the first half was 1,550, and that was a 50% increase on last year. I think as with any of the markets in which we play, how governments view property prices and our ability and -- very much is a necessity for us to navigate the real estate landscape. And so I think for us at Keppel Land, the way that we look at this is as in Singapore or China and all the markets that we play in, we have to be nimble and agile to be able to create the value that we can as well as the products and services and solutions for our customers. With Keppel Land, the way that we are trying to differentiate ourselves and which we've spoken about is to focus on sustainability, digitalization, customer experience and building platforms that really can absorb a lot of information and data about our customers so that we can produce the right solutions for them. And I believe this is the way that we'll need to play going forward in spite of the challenges that the regulatory environment might bring.

Thank you, Louis. Next question is from Rahul Bhatia of HSBC in Singapore. Rahul has 2 question. First question, "Can you share any status updates on Asset Co?" We're having ongoing discussions, looking at business plan, looking at cash flows and continuing on looking at how we can turn this nonbinding MOU into a definitive agreement. So work is in progress. Second question, "Could you talk about what kind of EV opportunities you are looking at?" So maybe I ask Cindy.

One of the very important aspect of decarbonization is end use electrification. So Keppel Infrastructure has been in the electrification business for nearly 2 decades. So we saw good opportunity in the EV evolution, and we seek to participate in building up a meaningful EV business from end to end within Singapore as well as Asia Pacific. So we will provide updates as and when we have new and significant developments.

Maybe just to add to that, the group has also taken a small investment in EV battery company, some -- a couple of years ago, and we are looking to see whether this can potentially develop into not just for EVs but also potentially for energy storage, which is quite relevant to various things that the group is looking at, including renewables. I have a question from Kang Wan Chern of The Straits Times in Singapore. "Mr. Loh, what are your views on the outlook for the property and O&M business given the uncertainty related to COVID-19? What are the key risks and opportunities you are looking out for?" Wow, that's a very big question covering quite a lot -- quite a big topic. I'll try to address it. And maybe on -- I'll start off with the property side. I think clearly, the pandemic has created quite a lot of challenges in terms of how we live our life, including where -- how we shop, working from home and also even how we spend our leisure time. So I think there is certainly immediate impact. But at the same time, I think there is a view that while things may not necessarily go back to where it was before, we do expect that with the vaccination drive, that some form of normalcy will return. And we're certainly hoping to see that. And so there will be, we believe, a return to some normalcy. And of course, in the meantime, asset classes like data centers, logistics assets have benefited. There have been some challenges on retail and offices. But even then, I will say that we have also seen quite strong demand for investment properties worldwide, and this has led to cap rates for these properties remaining quite low. So we haven't really seen a huge downward shift in values to date. So I think there's a -- there are both -- as your question is alluding to, there are both risks as well as opportunities. On the O&M business, I presume you're referring to the offshore & marine business. I guess the big impact is really on supply chain disruption as well as manpower restrictions. And of course, the safe distancing efforts, which is very important, have added costs and also have reduced productivity. Chris, I don't know whether you want to add anything else to this?

Maybe I supplement there. Opportunities, we are -- we have always said that we have pivoted towards offshore renewable projects. With the pandemic, it actually have accelerated the growth of that area. And one area that we are looking closely would be the U.S. market whereby we have some presence. And on the usual production market, we do have our presence in Brazil to take full advantage of that. In terms of risk, of course, as what Group CEO has mentioned, the new supply chain disruption and labor supply, we will look at how to use our network of yards in different countries and also partners, external partners, to mitigate all the risks and capture opportunities.