Breaking the Arctic ice - Keppel Corporation

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10 Business ...continued from page 9. gives rise to a steady and stable earnings stream to our Property Division. Its portfolio of prime office buildings in the CBD is poised to benefit from upside rental reversion as its rentals were mostly signed at lower rates a few years ago. Our portfolios of residential properties in Singapore are located in strategically prime locations. Sales in the third quarter, albeit at lower volume, were achieved at relatively high prices. The softer market sentiment has affected demands in the regional property market. However the fundamentals in the markets that we operate in, especially China and Vietnamm are expected to underpin demand for home ownership. Keppelite I November 2008 Infrastructure The Infrastructure Division continues to pursue its environmental initiatives through various sustainable business operations and green projects. These include the formation of joint ventures with Tianjin partners to explore opportunities for infrastructure projects in the Sino-Singapore Tianjin Eco- City. A framework agreement with an established Guangdong company for the joint development and investment of environmental projects in Guangdong Province was also signed. The Infrastructure Division intends to set up and eventually list the world’s first green business trust. It will play the role of a sponsor, a key strategic investor in the Trust as well as the Trustee- Manager of the Trust. The Trust would hold assets of waste-to-energy plants including the Senoko Incineration Plant sold by the Singapore Government, which will assure the Division of recurring revenues for 15 years. Our Infrastructure Division has made good progress in both its water and solid waste treatment projects, including the Doha North Wastewater Treatment Facility and the Tuas wasteto-energy plant. We will continue to step up on our efforts in bringing more sustainable development projects locally and to other parts of the world. Located in Singapore’s prime southern waterfront district, Reflections at Keppel Bay will rise to be an iconic landmark when completed in 2013 GROUP OUTLOOK We are living through turbulent times with loss of confidence in the global financial system and the world is grappling with the prospects of slower economic growth. We do not expect this situation to have a significant adverse impact on our performance for the full financial year 2008. We have a low gearing and will continue to be disciplined in providing healthy cashflow and a strong balance sheet. Capital expenditure and acquisitions will have to pass through a higher hurdle rate and risk analysis while seizing opportunities to acquire good assets as valuations moderate. keppelite
Creating value Senior management outlined the Group’s outlook on its various businesses and resilience for the long term. Keppelite sets out some of the topics addressed during the 3Q2008 results webcast. ON OFFSHORE & MARINE CCB: We expect a slowdown in rig orders due to the current credit situation. However, we think that even if the slowdown lasts 12 to 15 months, we should still be in a healthy position because we have a large orderbook. In fact, in 2009, Keppel Offshore & Marine will be busier than this year executing the projects that we have obtained. Currently, our production facilities are not ideal for building hulls or drillships. We prefer to use our facilities to build jackups and semisubmersibles. However, we have projects at Keppel Shipyard where the hull is an existing one or built in China. The owners supply the hulls and we outfit, complete and commission the drillships in Singapore. We have three such projects by Keppel Shipyard for Frontier Drilling. We will continue to work closely with our customers and monitor their situation. So far, we have no cancellations and do not expect any in the immediate future. We do see some clients under stress because of the credit situation and we will see how to work with them. ON REAL ESTATE LCO: Prices have so far been affected by demand because of the financial crisis affecting the overall economic situation. People are becoming more cautious and this impacts the demand for real estate. If the economy should recover, we expect demand for real estate to also increase, particularly in countries where the citizenry and the governments are keen to promote home ownership. I am referring to places like China, Vietnam, India and the Middle East. ON REFINING MARGINS CCB: We see a slowdown or reduction in the refining margins due to slowdown in demand as the oil price and financial crisis have taken a toll on demand in the oil and gas sector. In the long run, energy use and demand will remain, as developing and newly emerging countries continue to develop and grow. Business 11 Despite the challenging conditions, Keppel continues to show growth in earnings and EVA ON INFRASTRUCTURE TSH: Infrastructure’s revenue is contributed by two areas. One is from the cogeneration power plant and the other is from the Qatar solid waste project. The bulk of the turnover increase and net profit had come from the Keppel Merlimau cogeneration plant. The second Qatar project is the water treatment project. We have not commenced recognition of profit and will only do so in the early part of 2009. ON OPERATING EXPENSES TSH: They are largely foreign exchange loss or what we also call fair value loss of investments. There had been lower writedowns of provisions of work-inprogress in our Property Division and they also contained higher overheads from our Offshore & Marine (O&M) Division, which are largely in the form of yard rentals and maintenance costs. These are what have caused the ‘other operating expenses’ to go up. The foreign exchange loss is in respect of foreign exchange which we have secured or prepared to buy equipment for our O&M business because we have to pay for these in foreign Continues on page 12... Keppelite I November 2008
Page 1 and 2: Keppel Group Newsletter Keppelite D
Page 3 and 4: Editorial Training in tough times W
Page 5 and 6: contribution from Offshore & Marine
Page 7 and 8: The Tuas South waste-to-energy plan
Page 9: HEALTHY FREE CASHFLOW Free cashflow
Page 13 and 14: Reigning safety records Keppel achi
Page 15 and 16: The Centre will be a one-stop train
Page 17 and 18: Star performer Focused on deliverin
Page 19 and 20: SPC awarded for good corporate gove
Page 21 and 22: Green stamp for Keppel Land Keppel
Page 23 and 24: Varandey was named by Mrs Lyudmila
Page 25 and 26: Innovation rewards Innovation stars
Page 27 and 28: the Uniquely Singapore yacht in the
Page 29 and 30: Expanding technological premises Th
Page 31 and 32: Strengthening foundations Robust an
Page 33 and 34: Fired up to be first-class Knowing
Page 35 and 36: Over a hundred children hand-painte
Page 37 and 38: United colours of a family Celebrat
Page 39 and 40: Keppelites Abroad Siew far, so good
Page 41 and 42: Nurturing communities Through conti
Page 43 and 44: Community 43 volunteers Keppel Plan

Breaking the Arctic ice - Keppel Corporation

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