Keppel Ltd. (BN4) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Welcome to the conference for Keppel Limited's First Half Financial Results for 2026. We have on the panel this morning from your left, Mr. Manjot Singh Mann, CEO, Connectivity and CEO, M1; Mr. Lu-yi Lim, CEO, Real Estate; Ms. Christina Tan, CEO of Fund Management and Chief Investment Officer; Mr. Loh Chin Hua, CEO; Mr. Kevin Chng, CFO; and Ms. Cindy Lim, CEO, Infrastructure. We will begin the session with presentations by CEO, Mr. Loh Chin Hua; and CFO, Mr. Kevin Chng, followed by the question-and-answer session. Mr. Loh, please.

Thank you, Amira. Good morning, all. The new Keppel delivered strong results in the first half of 2026 amidst a highly volatile global environment. Despite geopolitical tensions, the demand for sustainable digital and energy infrastructure continues to rise with accelerating AI adoption. With our integrated ecosystem spanning capital, digital infrastructure and power, Keppel is well positioned to capture opportunities in this growing market. The new Keppel delivered net profit of SGD 530 million in the first half of 2026, up 25% year-on-year. This was driven by strong contributions from sponsor stakes and co-investments as well as higher recurring income from asset management and our operating platform. We also made significant progress on our 2 strategic priorities. We surpassed our end 2026 target of SGD 100 billion funds under management ahead of schedule, reaching SGD 106 billion in July. In addition, we announced about SGD 1.7 billion of asset monetization year-to-date on track towards our full year target of SGD 2 billion to SGD 3 billion. We also achieved key operating milestones across digital and energy infrastructure with Bifrost fully commercialized, while the Keppel Sakra Cogen plant, Singapore's first hydrogen compatible and most advanced power plant has commenced operations. Both assets are now contributing to Keppel's growing base of recurring income. In first half 2026, our recurring income expanded by 13% year-on-year to SGD 467 million. Starting from first half 2026, we will separately disclose profit contributions from our sponsor stakes and co-investments or SSCI, to provide greater clarity on the new Keppel's performance. The new reporting approach mirrors our business model where profits are earned as an asset manager, as a co-investor in our funds, REITs and trusts alongside our LPs and unitholders and as an operator. Beyond aligning our interests with those of our LPs, SSCI also provides an important source of earnings and cash flow for the company. In first half 2026, profit from SSCI increased significantly to SGD 175 million compared to SGD 18 million in first half 2025. As our FUM expands, SSCI will become an increasingly significant pillar of the new Keppel's earnings and growth. In the first half of 2026, the noncore portfolio recorded a net loss of SGD 375 million due mainly to impairments taken for our legacy rigs, interest costs attributable to the legacy rigs as well as depreciation and amortization adjustments with the termination of the M1 telco sale. Including these accounting losses, the company's overall net profit for the period was SGD 155 million. Importantly, our financial position continues to strengthen. Our free cash flow swung from an outflow of SGD 48 million in the first half of 2025 to an inflow of SGD 570 million. The new Keppel's annualized return on equity improved to 15% in first half 2026 compared to 14.7% in first half 2025, while the net debt-to-EBITDA remained steady at 1.5x. Across Keppel, AI is increasingly embedded into our investment, asset management and operating activities. This, coupled with continued streamlining has contributed to over SGD 100 million in recurring annual run rate cost savings. We are also using AI to improve our value proposition to our customers and LPs, expand revenue opportunities and look for new profit pools. Reflecting confidence in the company's progress, the Board has declared an interim cash dividend of SGD 0.15 per share for first half 2026, unchanged from a year ago, which will be paid out on the 21st of August 2026. We have made good progress in the monetization of noncore assets. The REIT transaction announced earlier this week is significant. We have secured a USD 1.5 billion commitment from our LP, Apollo, to the Keppel Offshore Fund, creating a clear pathway to monetize up to SGD 3.7 billion of legacy rigs while expanding our FUM and fee income. The divestment of the first 6 operational rigs is expected to generate cash proceeds of about SGD 611 million this year. As the remaining 4 rigs are completed, they can be divested to the fund, unlocking another approximately SGD 1.3 billion in cash over 2027 and 2028. This will not only improve our gearing, but also increase funds for higher return opportunities and to reward our shareholders. As at end June 2026, we have completed and realized monetization of noncore assets of approximately SGD 560 million, a portion of which would fund special dividends for the full year. At the same time, the gross asset value of the noncore portfolio, including M1's telco business was SGD 13.7 billion. These figures do not yet reflect the transactions announced in July. In the first half of 2026, we generated SGD 200 million of asset management fees. We also completed SGD 3.1 billion of acquisitions and another SGD 2.4 billion of divestments across our private funds and listed vehicles. As at end July, we received -- we achieved SGD 106 billion in FUM, surpassing our SGD 100 billion target for 2026. This marks an important inflection point in Keppel's growth as a global asset manager and operator. With greater scale, a stronger track record and a growing investor confidence, we are well positioned to accelerate the growth of our asset management business. Keppel's integrated digital infrastructure ecosystem has become an increasingly important differentiator in our fundraising efforts, supporting our next phase of growth. With deep cross-value chain operating expertise, we can originate differentiated assets, create alphas through operations and offer our LPs access to compelling investment opportunities supported by our private funds and listed evergreen Real Estate and Infrastructure Trust. In our Power business, the new 600-megawatt Keppel Sakra Cogen plant commenced operations smoothly at the end of May, increasing our generation capacity by 45%. Its first month earnings helped to offset softer spark spread and cost impact from the Middle East conflict in the first half 2026, contributing towards the 9% year-on-year EBITDA growth for the Power business. We're also developing a pipeline of proprietary energy transition and infrastructure projects across the low-carbon, hydrogen and ammonia value chains as well as the importation of up to 1 gigawatt of low-carbon energy into Singapore. Keppel's integrated capabilities in energy, cooling and water have enabled the planting of new AI-ready hyperscale data centers such as Keppel DC SGP 9 and our innovative floating data center. This -- they will also empower us to originate and develop the next generation of digital infrastructure projects. Following the commercialization of all 5 Bifrost fiber pairs, we are advancing discussions with joint build partners and selecting lending sites for 2 possible new subsea cable systems linking Singapore to the Middle East and Japan. We expect to take a decision on these projects by year-end. Our asset-light approach extends beyond digital infrastructure. Hanoi Center, our first retail mall in Vietnam's capital is one such example. Through a master lease arrangement, we repositioned the property through active asset and retail management, leveraging our deep operating expertise in Vietnam to earn a recurring profit from rents. We continue to explore opportunities for consolidation for M1, which we believe is needed for Singapore's telco sector. Based on what we have observed in the region, operators that have undergone consolidation have typically seen a 10% to 15% ARPU uplift, leading to more sustainable markets. In the meantime, we are focused on strengthening M1's performance to maximize its strategic value in any future industry consolidation. A 3-year business plan has been established to raise productivity and structurally reset M1's cost base. This will strengthen M1's profitability and competitiveness while maintaining resilience, cybersecurity and customer experience. Our initiatives are expected to deliver an annual run rate cost savings of SGD 70 million by 2028. Year-to-date, we have achieved cost savings of SGD 4 million per annum and aim to reach SGD 10 million per annum by the end of 2026. To conclude, the progress we have made reflects the strength of New Keppel. We have bolstered our earnings, expanded our asset management business to SGD 106 billion in FUM, delivered landmark assets like the Sakra Cogen plant and Bifrost and established a clear pathway to monetize the legacy rigs. As a global asset manager and operator, we have demonstrated that we are increasingly bringing together capital, operating capabilities and proprietary investment opportunities to create value for our LPs, shareholders and customers. Looking ahead, as demand for power and digital infrastructure accelerates, Keppel's integrated ecosystem positions us well to capture these opportunities and power our next phase of growth. Our CFO, Kevin, will now take you through details of the company's financial performance.

Thank you, CEO, and a very good morning to all. I shall now take you through Keppel's financial performance. While new Keppel performed well, our net profit for first half 2026 was SGD 155 million, 59% lower than the SGD 378 million for first half 2025 due to results from the noncore portfolio, which I will elaborate later. Consequently, annualized ROE decreased to 3.6% from 7.2% in first half 2025. Net debt to EBITDA increased to 6.7x as at end June 2026 from 5.8x at the end December 2025. Free cash inflow was SGD 570 million in first half 2026 compared to an outflow of SGD 48 million in first half 2025. This was underpinned by strong cash inflow from investing activities with higher divestment proceeds received during the first half of this year. This was partly offset by lower cash inflows from operating activities as a result of higher working capital requirements. Excluding noncore portfolio for divestment, new Keppel delivered profit of SGD 530 million, 25% higher than the SGD 424 million recorded in first half 2025. I will first cover noncore portfolio for divestment before presenting the financials of new Keppel to provide greater clarity on our performance, excluding the effects of noncore portfolio for divestment. Net loss from noncore portfolio for divestment was SGD 375 million in first half 2026. Net loss from legacy Offshore & Marine assets was SGD 278 million. As announced earlier this week, we have put in place a program to progressively monetize up to 10 legacy rigs through a new private fund, Keppel Offshore Fund. This marks a further milestone in our transformation as it establishes a clear pathway for the progressive monetization of our legacy rigs while improving gearing and unlocking capital for reinvestment and to reward shareholders. Arising from this, we have recognized an accounting loss of SGD 165 million from the impairment of 13 legacy rig assets, including recycling of foreign currency translation loss to profit and loss, net of write-backs in cost provisions. The impairment was based on the group's assessment of the recoverable amounts of the rigs, taking into account the monetization program through Keppel Offshore Fund of up to 10 rigs announced earlier this week and the business plans of the fund. The remaining loss on legacy O&M assets was due to interest costs attributable to legacy rigs and expected credit loss recognized on receivables from KrisEnergy, partly offset by gains on Seatrium shares, which have been fully divested. Net loss from property-related noncore assets was SGD 32 million, mainly from operating losses on investment properties and fair value loss on investments, partly offset by net fair value gain on investment properties. The first half of 2025 benefited from gains related to divestments in China and Vietnam. Investments, M1 telco and others recorded net loss of SGD 65 million. This was mainly due to the release of financial year 2025 suspended depreciation and amortization following the termination of M1 telco divestment, where M1 ceased to be classified as a disposal group held for sale as well as fair value losses on investments. Moving to new Keppel. New Keppel performed well with net profit increase of 25% year-on-year to SGD 530 million. Excluding the loss from dividend in specie of Keppel REIT units, otherwise known as DIS loss, all 3 segments were profitable with higher earnings from infrastructure and connectivity. Annualized ROE increased to 15% from 14.7% a year ago. Net debt to EBITDA was 1.4x as at end June 2026, unchanged from end December 2025. Free cash inflow was SGD 244 million in the first half of 2026 compared to an outflow of SGD 179 million in the same period last year. In line with growing recurring income, new Keppel generated healthy cash inflows from operating activities. Divestments and dividends received were reinvested to fund investments in sponsor stakes and capital expenditure. As mentioned by CEO earlier, starting from this period -- reporting period, we will separately disclose profit contributions from our sponsor stakes and co-investments or SSCI, to provide greater clarity on new Keppel 's performance as an asset manager and operator. At the same time, we continue to provide the breakdown between recurring operational earnings and market or event-driven valuation and divestment profits. Supported by stable performance from asset management and higher contributions from operations, recurring income rose 13% to SGD 467 million from SGD 414 million a year ago. Our fund management and investment platforms achieved net profit of SGD 247 million, more than double first half 2025, led by stronger contributions from SSCI. As a result of lower divestment and revaluation gains, net profit from operating platform was lower at SGD 349 million. Moving on to our segmental performance. Infrastructure segment achieved strong earnings with a net profit of SGD 538 million, 55% higher than the SGD 346 million a year ago. Asset Management net profit was higher than the prior year, mainly from higher asset management fee revenue and acquisition fees, partly offset by higher costs and the absence of divestment fees. Profit contributions from SSCI rose significantly to SGD 178 million, underpinned by gains from the disposal of a partial stake in Keppel Merlimau Cogen plant and our interest in 800 Super Holdings as well as higher distribution from Keppel Infrastructure Trust. These were partly offset by fair value loss from co-investments. Infrastructure division earnings grew SGD 339 million, supported by better performance from our integrated power as well as decarbonization and sustainable solutions businesses. Keppel Saka Cogen plant commenced commercial operations at the end of May and contributed positively to offset the softer spark spreads and cost impact from the Middle East conflict in first half 2026. Real Estate segment recorded a net loss of SGD 19 million in the first half of 2026 compared to a net profit of SGD 98 million in the previous year. Excluding the DIS loss, the segment would have been profitable at SGD 32 million. Asset Management net profit was lower at SGD 36 million, mainly due to lower contributions from Aermont arising from the change in Fund V fee basis as it reaches the end of its investment period as well as higher costs. These were partly offset by divestment fees and higher asset management fee revenues following acquisitions by Keppel REIT and fundraising by Keppel Education Asset Fund II. Net loss from sponsor stakes and co-investments was largely due to losses from dividend in specie of Keppel REIT units. Real Estate division recognized lower year-on-year earnings, mainly due to the absence of gain from the partial disposal of Saigon Centre Phase III that was recognized in first half 2025, lower fair value gains on investment properties and lower share of profits from SSTEC. Net profit from Connectivity segment was SGD 77 million, 54% higher than the SGD 50 million a year ago. The increase in asset management net profit reflected higher asset management fee revenue following acquisitions by Keppel DC REIT and funds raised by Keppel DC Fund III, partly offset by higher costs. Profit contributions from SSCI tripled from SGD 18 million to SGD 55 million, underpinned by gains from the customer commitments secured for the third and fourth fiber pairs of the Bifrost Cable system and higher contributions from Keppel DC REIT. These were partly offset by fair value losses from private funds. We expect to recognize gains from the fifth committed fiber pair when it is handed over to the customer in second half of 2026. Operating division's earnings were lower as the first half of 2025 had benefited from valuation gains from a data center investment. This was partly offset by higher year-on-year contributions from the Technology Solutions business as well as higher fees from data center project management and network operations and maintenance activities. With that, we have come to the end of the presentation, and I shall hand the time back to CEO for the Q&A session. Thank you.

Thank you, Kevin. So, we'll move to Q&A. I see the first hand raised quite quickly from Mervin. So please Mervin from JPM.

So many congratulations to you this morning. So many wins in the first half, superb [ Appian ] growth, Sakra commencing, legacy rigs. It looks like you are shedding the view that Keppel is a conglomerate, you're now becoming a global asset manager. Perhaps you didn't even need to sell M1 this year.

Need to or don't need to? You didn't need to?

[indiscernible] 2 billion to 3 billion [indiscernible].

Okay.

Maybe a few questions. Obviously, the Infrastructure segment done quite well considering the lower spark spreads. But maybe can you disclose the growth that you're seeing within the decarbonization business in the first half? In the first half, were you forced to sort elevated gas from SLNG? And will this continue into the second half? And perhaps your thoughts in terms of spark spreads, difference between long-term contracts as you renew them and the shorter 1-3-year contracts. That's all for me.

Thank you, Mervin. I will ask my colleague, Cindy, to address these 3 questions.

Thank you, CEO. First question regarding the Decar and Sustainable Solutions performance in the first half. So, I think you have read that the total revenue under long-term contract has grown to SGD 8 billion to be delivered in the next 10 years or so. Such contracts are very interesting because it gives us visibility of the recurring income. And these contracts are also indexed against inflation. The first half DSS performance year-on-year has grown slightly. And the second question about the replacement gas, yes, you would have also read that there is a force majeure declared by the upstream supplier. So, in the month of April, we did source for replacement gas. Notwithstanding, we have very resilient gas supply infrastructure within Singapore. We work very closely with our customer, regulator as well as upstream supplier to ensure that our pipe natural gas remain resilient in supply. That's number one. And number two, our fuel backup strategy continue to be intact and robust. The timely commencement of Sakra Cogen has more than offset the cost impact of this replacement gas. Your third question about spark spread. I think it is known that we have seen normalizing of spread that was grossly escalated back in 2022 and 2023. Having said that, it is not very instructive to just look at short-term movement in the spark spread because it will continue to be volatile. What our integrated power business is focused on is really securing predictable and healthy long-term contract that will provide that income visibility for the entire 1.9 gigawatt of installed generation capacity.

Can I check the second half? Do you have to source slightly more elevated gas prices for SLNG given the force majeure conditions?

As of now, the answer is no. We didn't crystallize any sourcing of replacement gas at elevated level for second half.

I think to be fair, the situation is still quite fluid. But at this point in time, the answer is no. Rachel from UBS. And then after that, Brandon.

I have a couple. So, first, if we look at Slide 30, in terms of the power portfolio mix, how much capacity have you contracted? So, can we say that it is a full 1.9 gigawatts that has been contracted out? And how would you account for redundancy? That's the first question.

Maybe we go one question at a time [indiscernible]

Thank you, Rachel. For the Singapore power market, there is obligatory reserve margin that's required from the installed capacity. So, whilst we have 1.9 gigawatt of installed generation capacity, not all will be fully contracted because of the regulatory obligation for reserve margin. Suffice to say, we have our own view of our generation strategy. We are fully contracted for Sakra Cogen 2026 and 2027. So, on a portfolio basis, we are healthily contracted with certain buffer to capture some volatility opportunities when it arises. Thank you.

The next question I have is that if you look at Slide 58, you laid out a definition of SSCI. So that is very helpful. Thank you for including that. So, there is a bit that says that SSCI includes funds that are 100% owned by Keppel. So could I know like which funds are still 100% owned by Keppel?

I think maybe when we refer to 100% funds owned by Keppel are those where we are still fundraising -- so yes. So, we include those as part of our SSCI distribution disclosure as we have articulated in the definitions.

But I think for -- but for the SSCI results you have seen, it's not -- there's no 100% funds owned by Keppel. It's just, I think, as a glossary they just included in part of the accounting definition.

Okay, thanks for that [indiscernible] clarification. So, the net profit contribution from SSCI represents a base on the underlying income stream. So, if the [indiscernible] gets put in the SSCI, does this mean that the underlying losses gets reflected there as well?

The current losses that we've taken, the impairments, the goal still stays at noncore. But when the 6 rigs go in, we will receive 50% in cash. The other 50% is still held by Keppel in the fund. So going forward, it will be accounted under the new Keppel or under SSCI. Brandon first, then…

[indiscernible] Just 3 questions. The first one is I think during the M1 [indiscernible] you have to bring forward some divestment [indiscernible] for next year and year after. So [indiscernible] does it mean that you don't have to do that [indiscernible] so that's the first question. The second question is on the [indiscernible] fund. I then when you look at Page 17 of the financials, there's quite [indiscernible]

Okay. So, on your first, I'll ask Kevin to respond to the second question. But on the first question, short answer is no. I think we are constantly looking to monetize the noncore portfolio. We have set a hard target of 2030 to substantially monetize the noncore portfolio, but there's nothing to stop us from doing it earlier if we can. Of course, by giving ourselves more time, will allow us to crystallize this monetization at the appropriate valuation. But it doesn't mean that if we have a chance to do it earlier, we wouldn't [ take it ]. I think the key is that we want -- we are very focused on new Keppel and growing new Keppel. But we also know that we are also required to take care of business as far as monetization of the noncore portfolio.

Brandon, I think if you're referring to Page 17, that's a disclosure around our approach to value those rigs. As we all know, the rigs are valued on a value-in-use basis. So, what actually happens basically is we will go out to industry experts to get rates and then we get another independent party to calculate the values for these rigs. This note just serves to basically explain to stakeholders on how we go about doing it. So, for example, to your point, where we refer to kind of sale values, we -- the business plans of the fund actually has considerations for sale at a certain point in time. So, we have to bake that into our valuation approach, right? And then the other part that you mentioned about if schedule delays by 12 months, there will be an impact of it. Well, that goes into the value and use calculation as to arrive at the value that we carry in our books for the uncompleted ones.

[indiscernible] nothing's mentioned that the [indiscernible] will be sold [indiscernible] so does that mean if there is a delay, [indiscernible]

Only if there is a delay, but we are taking -- we are starting off the constructions for those rigs. So, it's basically the model requires you to assume that there is a sensitivity to it, but we're not planning for any delays simply because we have a path forward now for those rigs as an option for the uncompleted rigs.

I think the other thing to bear in mind is that because these are all projections, it's very dependent on the market conditions. Our belief and the belief of Apollo as an LP in the fund is that the rig market, as we mentioned, is on the mend. It may still take time for the rates, the day rates and the value to reflect the underlying fundamentals. But the fundamentals are improving day by day. So, I think that's really -- so the assumptions can also change over time. But the basic thesis is that this gives us a chance to partially monetize our stake, but we can still also take advantage of any potential which we believe will happen improvement in the rig market.

A few questions from me. First of all, just in terms of asset management -- asset management business, you've had significant fundraising in July. How should we think about the deployment going forward and then associated fees that will come through? First half, I think fee increase is still sort of lagging behind. So that's my first question. Second question on noncore assets, the big impairment. If we -- going forward, are we still going to see more? There is one element of interest associated with the portfolio. So, we still carry the remaining part of the rigs, will we still have more interest to be impaired for the forward [indiscernible]

Chris, do you want to answer that one?

Yes, sure. In terms of our asset management, I think like we said, I think Joo has mentioned earlier, this is -- the fundraise has actually -- is a significant inflection point for us in terms of asset management business. And I think because of the strong track record that we have actually shown to investors, whether it's in the sale of our data centers, the sale of Bifrost, the infrastructure as well as 800 Super, I think the strong track record actually attached really well to and positioned Keppel really well in terms of global asset manager and operator. In terms of the deployment, I think the team is working hard to look -- they are all working on the different transactions. There's a lot of transactions that we're looking at in the digital infrastructure space. I think as we have earlier alluded to, we have to make decisions on the -- after Bifrost, we have 2 more likely cable systems that we're looking at. So, we have to make decisions on that. We also have significant infrastructure, renewable energy projects that we're looking at. So, these are all coming into place. So, in terms of deployments, I think the team is working hard to look at these. And I think for the fees that you would be expecting, I think you can look at the fund raise, which is SGD 13.5 billion, and you can use the annualized fee rate to roughly compute the kind of increase in fees and magnitude of fees.

Maybe just to add to what Chris has just said, a significant part of the FUM raise, the 13-point-something billion was done in July. So, it actually falls outside the first half accounting period. So, you will expect that the fees would start to kick in, in the second half. Now your second -- your question is on...

Rigs.

Rigs.

[indiscernible]

Well, we cannot -- unfortunately, we can't forecast impairments. As I mentioned earlier, the belief is that the market is improving. But at the same time, there is this exercise that we have to take every 6 months to test for impairment, but we can't forecast the impairment. But as I mentioned earlier, the rig fundamentals are improving. As far as the interest rates -- the interest cost is concerned, the 6 rigs that have been monetized -- when it's completed monetized into the fund, then they will be deconsolidated from our balance sheet. So at least part of the interest cost for the rigs would then not be a factor. Sorry, I got to go back to [indiscernible] and then... So after [indiscernible] is [indiscernible], sorry.

My first question is on FUM growth. [indiscernible] Can you really talk about how do you assess whether and acquisition is [indiscernible] and what other financial consideration that you will think about?

Yes, sure. In terms of our FUM growth, I think as we said, we are always looking out for good M&A opportunities besides just the platform increasing our FUM and in terms of our asset management platform. We're also looking at M&As in all whether it's for infrastructure deals for digital, for our connectivity divisions as well. So, there are always a lot of platforms out there for sale. And we -- the funds are actually able to participate in such platforms' acquisitions. So, the M&A activities are quite broad-based. Besides looking at just Keppel Limited, we are also looking at it from a deals perspective for the various funds that we have.

Second question is on noncore [indiscernible] divestments. I think there is a good SGD 2.4 billion of cash in [indiscernible].

Yes.

Can you break it up into [indiscernible].

Maybe I'll ask Kevin to address.

Sure. I don't have the immediate detailed breakdown of cash and receivable. Maybe just to answer your question, what those represent. If you think about the noncore portfolio for divestment, the way we disclose it is gross asset value. Included in some of these are basically cash associated with these assets. So to give you an example, and we've made this statement before, the costs required for us to complete the remaining completed rigs are sitting as part of this SGD 2.4 billion because they are in noncore portfolio for divestment, which is why we have always said that in order for us to complete these rigs, we won't be pumping any more cash in there because the cash is in there. Now the other parts of the cash and receivables are in some of our property projects. For example, if they still continue to run, there's still receivables there. So, all of these basically will wash out once we divest them. When the cash are utilized or they need to be utilized to realize the value, the excesses will then come back once we monetize those assets.

Just one last question on cost. I see that there's actually a guaranteed return on the fund. Can you share if the guaranteed return is above or below what the current asset yield is? I'm trying to understand, are there any [indiscernible] scenarios whereby there will be recourse to Keppel or you actually need to recognize [indiscernible] beyond your [indiscernible].

Sure. Currently, the yield that will -- Apollo will receive will be roughly matched by the day rates that we work at. So, which means that we don't believe there will be a scenario where -- currently, we don't believe there's a scenario where we will have to -- there will be a recourse to Keppel. Okay. We get Mayank and then I will go to the online. Then I think James and then Siew Khee. Siew Khee looks a bit unhappy.

My first question was on LNG sourcing. Now that the power plant started up and obviously, you have a bit more on the City Gas as well. So, can you just talk to us about the long-term LNG sourcing portfolio that you have and how it kind of pans out over the next 1 to 3 years, how we are thinking about the geographies and diversification of the LNG portfolio?

Cindy?

Thanks, CEO. From the Singapore context, future long-term LNG sourcing will be via [ GasCo ]. But specific to Keppel Infrastructure division, our gas supply portfolio, to your question for the next 1 to 3 years has already been spoken for. So, whatever that we require for our generation capacity will be fulfilled through our existing pipe natural gas contract as well as our existing LNG contract. In fact, we were very diligent in extending our PNG contract panel even pre-crisis. So that part gave us a pretty resilient and cost competitive fuel supply for the next 1 to 3 years.

I think just a follow-up on that because for the next 1 or 2 years, can we kind of think about most of the contracts being now cost plus incrementally for you because there is still 1 year -- there are around 8% to 10% of the contracts which are expiring over the next 1 year. How are you kind of thinking about the contracts renegotiations around that, what you're seeing in the market?

So, I think the -- in terms of the power plans that's available in the market, there's either the fuel pass-through or index against commodities, in this case, Brent or it could be fixed price contract or in this case, we will then do our own diligent hedging. So, this wouldn't change in the context of having GasCo. The pricing plan is still out there, either fixed or fuel cost pass-through.

Okay. The second question was more on Aermont Fund VI and the SGD 13 billion overall that you kind of raised during the second quarter. If you can give us broad strokes in terms of where will you deploy that capital, how you are thinking about it more at the Aermont level as well as the sovereign wealth fund that you kind of raised capital from, like where do you see over the next few years this deployed in which parts?

I think maybe for the Aermont Fund VI, just to be clear, it is for Europe, so it will be deployed in Europe. And the fees are earned on a committed basis, so which means that the deployment -- the pace of deployment will actually not affect the asset management fees. You basically charge fees based on committed capital. So, as the fund raise -- they're not fully closed yet. They have a first closing. So, as the fund raise continues, then you will expect that the asset management fees they attract will grow as well. On the second question, maybe I ask to speak on the sovereign wealth fund.

Yes. On the sovereign wealth fund, actually, even though they have given us a very strong FUM, about SGD 3.3 billion, part of it is allocated to our flagship funds. So, you will go into our connectivity data center funds, we will go into our infrastructure funds. So those funds also attract fees on a committed basis. Yes. But then there are also separate parts that's available for us to do direct co-investments. So, we will also earn fees on those funds deployed directly. Yes.

My last question was on the balance sheet. There has been a big increase in working capital in the first half this year. Is it largely driven by infrastructure because of energy prices and startup of the power plant? Or is something else that we need to look at?

Maybe Kevin?

Well, our working capital changes comes from different parts. I mean, okay, infra is one of them, but we also have areas like for M1 and Keppel Technology solutions that are part of the working capital. So, I think that's main driver for the increase in working capital requirements. But I think coming back to the whole working capital requirement, if you look at what I've said earlier on, on our free cash flows, we're still generating pretty healthy free cash flows from both operating and investing activities. So, they are all within the expectation around how those businesses are growing. So, I don't think we're seeing any abnormal increases in working capital requirements across the businesses that we have.

Okay. Thank you. So, I'll go to the online, a couple of questions. Thank you for being very patient. First question is from [ Alexander Han ] of [ Yon ] Global Singapore. What is the utilization rate of Sakra Cogen for the 1-month contribution? And what is the ramp-up schedule? I think you've heard from Cindy that it's fully committed other than for the spinning reserves. The next question from the same gentleman. For SSCI, what drove the increase of infra operational net profit from SGD 7 million to SGD 27 million, I guess that's million. What is the split between base fees and any performance-driven fees? How much of the FUM is equity versus debt? So, Kevin?

Yes. Thanks for the question, Alexander. So, in terms of the increase of the infra operational net profit, it's driven mainly by higher distributions from Keppel Infrastructure Trust, lower interest and also higher returns from a private fund. As it relates to a split between base and performance fees, I don't think we...

We don't give the…

Yes.

I think generally, performance fees are still a small proportion of our base fees. But of course, we would expect that this will continue to grow as the funds mature over time. And then the last question around -- if you're asking about leverage, our [ IEM ] is on a gross asset value basis. On a portfolio basis, it will not exceed more than 60% leverage. Maybe I take the next question is from Tom Taylor of Infrastructure Investor in Australia. What key updates can you share on Keppel Infrastructure Fund and on Keppel Data Center Fund III? Chris?

Yes. I think on Keppel Infrastructure Fund, I think the team is looking at -- we have actually invested our first deal in Global Marine, which is a subsea cable link vessels company. And I think the business is doing really well because of the number of marine cables that is split, not only by Keppel, but by a lot of telcos and a lot of hyperscalers. So that business is doing really beyond our expectations. So, we like that. So, we like the full ecosystem. As we said, whenever we invest, we look at the full ecosystem and where there are essential services, monopolistic criteria, I think that's where we like in terms of our infrastructure play. For data centers, I think there's huge interest in the funds as well by investors, largely because of AI, that's what we are seeing in AI as well as the demand from whether it's inference and training and all that requirements by hyperscalers. So, I think we are doing deals now in South Korea as well. We are also looking at deals in Japan. And so, we are actually quite focused in the key markets for Singapore, Australia, where we announced a 720 megawatts power land as well as in places in Japan and South Korea.

Anyway, for Fund III, Data Centre Fund III, our target fund size is USD 2 billion, and we should be getting very close to that, if not exceeding that. Okay. I think the next question is from the same gentleman is, is Keppel Infrastructure Fund beginning to look beyond Asia for opportunities? Well, she just explained. Christina just explained that GMG. So -- if so, what triggered this change? I think it has -- maybe you want to?

Yes. I guess for infrastructure, it's very hard to just closet it within like specific geographies because like cables, it's actually global. like even Bifrost, it was from the U.S. to Guam to Singapore. So, you cannot really label it like it's the Asia infrastructure fund because -- it's actually quite global. Our cable link vessels are also very global because GMG also works very much in the Atlantic zone where they have very long-term good contracts with the telcos. So, it's a bit difficult for us to lock it up in terms of like infrastructure fund that is just Asia related.

Okay. Maybe now I switch back to the people that are present here, James?

James Druce, CLSA. There's been a few questions on the SGD 13.5 billion fund raise and you provided some color on where some of that's come from, Aermont and the SWF fund. Are you able to provide any more color on that because it is a big number? And the other question that I have is just how much of the fee cap for that SGD 13.5 billion can you earn on a committed basis? I think roughly so far, it's just those 2 funds that you talked about.

I think for Aermont it's like [indiscernible] has said, it's actually -- if you take the SGD 13.5 billion is [indiscernible] approximately like 45% of it is for the Aermont fund, and that is really on a committed basis. On the sovereign wealth fund itself, as we said, part of it is allocated to the data center fund as well as the infrastructure fund. So those are also on a committed basis. And as I mentioned earlier, it's about SGD 3.3 billion out of the SGD 13.5 billion raise. So that will be the percentage roughly that you can use.

And I think the core fund is [indiscernible]

So, core fund, actually, you get actually very interesting. You get upfront fees because we have advisory and structuring as well as the ongoing asset management fees, which is based off typically like 2% of the committed capital.

Okay. And one more, if I may. If you look at the write-down for the rigs this period, how much of that was allocated to rigs 10 to 13?

We -- I mean, we don't give the breakdown. But I think earlier this week when we announced the sale of the first 6 rigs into the fund, we did give a number. And I think it's just below SGD 100 million, yes. So now we've announced this number, which includes that number and the total is SGD 165. Okay. I'm back to Siew Khee and then later back to Rachel.

For [indiscernible] what is the average day rate that you assume for the semis, high-spec [ JU ] and [ Candu ]?

We don't disclose that.

Can you give us the market rate?

Market rate, you must understand ours is a bareboat charter. So, the market rate, if you are referring to market rate, you still have to figure out what to back out from the operation. So, we typically don't take the operating risk.

Do you need to find charters for the 4 rigs before you sell or start construction? And who is helping you to find charters?

Okay. Maybe I refer to Cindy, who's been quite actively helping us do this.

So, for the rigs, we have seen very active inquiry in the course of last 4 quarters. In fact, the last 2 quarters have intensified a short list of potential charterer to support their tendering campaigns. And that is why we are very cautiously optimistic in terms of restarting the completion of the advanced spec offshore rigs, in particular, the [ drill ] ships and potentially in sequence the semis for harsh environment.

Just on infra, without Sakra, just to confirm that without even Sakra, your original plan, the operating profit has actually grown.

That's correct.

Yes. So that's quite impressive [indiscernible].

Thank you.

Yes I saw a question [indiscernible].