GROUP OVERVIEW INTERVIEW WITH THE CEO

WE ARE COLLABORATING AND HARNESSING SYNERGIES AS ONEKEPPEL TO CREATE GREATER VALUE FOR OUR STAKEHOLDERS.

one of the first companies in Q How is Keppel’s progress towards to achieve global ISO 37001 its Vision 2020, which was adopted anti-bribery certification. We will work six years ago? progressively towards ISO 37001 certification for all other Keppel business units. A We have made good progress towards Vision 2020, which includes We have developed a common digital comprehensive targets related to spine running through the organisation financial performance, people, that will enable us to further enhance processes and stakeholders. process automation and continuous monitoring across IT, finance and The past few years have been an human resources. exciting journey of transformation and growth, as we steered the Group We have also made good progress through a difficult macro environment, in safety – one of Keppel’s core values. especially following the sharp downturn For the first time in over 25 years, in the oil and gas sector. The world we achieved zero fatalities across today is characterised by slowing our global operations in 2019. This is global growth, trade tensions and not only a significant milestone, but also growing geopolitical risks. Since the an impetus for us to work even harder start of the year, many countries to maintain this record and ensure that have also been affected by the everyone who comes to work goes COVID-19 outbreak, whose full impact home safe. is still unfolding. In 2019, Keppel was named one of Against a challenging backdrop, the the world’s best regarded companies Group has remained resilient, united and best employers by Forbes’ Global behind our common mission to provide 2000 rankings. I am encouraged that solutions for sustainable urbanisation. our employee engagement score has risen steadily from 80% in 2015 In FY 2019, earnings contributions to 86% in 2019, 10 percentage across Keppel Offshore & Marine points higher than the average (Keppel O&M), Keppel Infrastructure score among Singapore companies. and Keppel Capital grew, even though We have also deepened our bench net profit of $707 million at Group-level strength and enhanced succession was lower year-on-year, mainly because planning with an average of two our property business had benefitted successors for each key position from a few lumpy divestments and in the Group. en-bloc sales in 2018. Excluding such gains from both years, Keppel Land too, We will continue to make Keppel fared slightly better in 2019 than it did a great place to work, offering in 2018. Keppelites purposeful and varied careers, and developing them to We have strengthened processes their full potential. I am confident within the Group. Compliance, that the spirit and tenacity of controls and risk management are our people will stand us in good now well entrenched in our corporate stead to achieve the Group’s targets culture. In 2019, Keppel O&M became and ambitions.

16 Report to Shareholders 2019 Keppel Corporation Limited Q How successful have you been at getting the business units to collaborate with one another?

A We have worked hard in the last few years to get our businesses to hunt as a pack, with collaboration increasingly becoming a part of our DNA.

A case in point is Keppel DC Singapore 4, which was jointly developed by Alpha Data Centre Fund and Keppel Data Centres to meet the growing demand for quality data centres in Asia. When the asset was stabilised in 2019, a 99% interest in the data centre was injected into Keppel DC REIT. The Group continues to earn recurring fees from rendering asset management, operation and maintenance services for the asset, even after its injection. LOH CHIN HUA More recently, Keppel Capital launched Chief Executive Officer the US$1 billion Keppel Asia Infrastructure Fund (KAIF) in January 2020 to seize opportunities in the fast-growing energy and sustainable infrastructure sectors. We plan to seed our interest in the and in the process, open up new more than 45,000 homes, and we will Gimi Floating Liquefaction Vessel opportunities that each business unit proactively explore opportunities to (FLNG) facility, which is being converted might not have been able to capture unlock value. by Keppel O&M, into the Fund. Keppel on its own. We will continue to drive O&M’s involvement in the Gimi project such OneKeppel projects that involve We are also looking at how we can was very helpful to Keppel Capital’s two or more business units. I am better tap Keppel Land’s established fundraising efforts, which drew initial confident that over time, our synergistic capabilities and regional presence to capital commitments of US$360 million efforts will show that OneKeppel is earn fees and carried interest that can from investors, including a sovereign much more than the sum of its parts. generate higher returns in the property wealth fund and an endowment fund. Along the way, we will also increase the business. For example, Keppel Land magnitude and quality of our earnings, and Keppel Capital are exploring how Another notable example is the with more recurring income. they can work with investors, who are partnership between Keppel Land seeking trusted partners, to explore and Keppel Urban Solutions (KUS) opportunities in Vietnam. to develop Saigon Sports City. In Q What will it take for Keppel to November 2019, we broke ground achieve its mid to long term Return We achieved a significant milestone for the project, which will be developed on Equity (ROE) target of 15%? in FY 2019 with Keppel O&M returning into a smart, integrated township in to profitability for the first time the prime District 2 of Ho Chi Minh City since FY 2016, on the back of its (HCMC). Saigon Sports City provides A To achieve Keppel’s full potential, diversification and cost management an interesting platform where we can all our engines must be firing. We will strategy. Keppel O&M was also able to involve other businesses in and beyond focus on improving the profits of our find solutions for some of the stranded the Group to co-create and test bed various businesses, as well as turning rigs that it was saddled with over the innovative solutions and services. our assets and divesting non-core last few years. businesses more quickly. These are just some examples where Meanwhile, businesses such as different units are coming together Keppel Land and Keppel O&M presently Keppel Capital, Keppel Infrastructure, to create and capture value. Keppel is make up the largest part of our balance Keppel Data Centres and are already more than just a property developer, sheet. For an asset-heavy business achieving ROEs above 15% and with an offshore & marine (O&M) company, such as Keppel Land’s, I believe that relatively low gearing levels. M1 is being or a provider of infrastructure solutions. 12% is a realistic long-term ROE target, transformed into a digital platform for What differentiates Keppel is our ability considering that it had achieved an connectivity solutions, while Keppel to integrate our diverse capabilities average ROE of 14.3% over the last Capital’s and Keppel Infrastructure’s to create value for stakeholders at decade. There is inherent potential in contributions to the Group have been different stages of the value chain, Keppel Land’s sizeable landbank of growing steadily. Keppel Data Centres

Keppel Corporation Limited Report to Shareholders 2019 1 7 GROUP OVERVIEW INTERVIEW WITH THE CEO

Keppel O&M has commenced conversion works on the Gimi, its second FLNG project. During the year, Keppel O&M also clinched 104 scrubber and ballast water treatment systems retrofit orders worth some $160 million on the back of the IMO 2020 and Ballast Water Management Convention requirements.

Looking ahead, we will focus on capturing opportunities in oil production, gas and renewables where we have received active enquiries. We are hopeful about winning a fair share of projects in these sectors as we continue to execute and deliver on our strategy.

1 Q The Singapore, China and Vietnam markets have contributed comparably to property earnings in 2019. What are your plans for has also become more asset-light these markets in the year ahead? through opportune and strategic Q Looking ahead, where do you see recycling of its assets and working with most of the demand in the O&M Keppel Capital to attract co-investors. industry coming from? A The Singapore, China and Vietnam markets have done well for us, collectively When all our engines are firing, I am underpinning a 16% increase in home confident that the Group would be able A We see gradual signs of recovery in sales to 5,150 homes in 2019. to reach our target ROE of 15%. the O&M industry. Utilisation and dayrates have been on the mend, The Singapore market has been resilient though capital spending on newbuild despite the property cooling measures. Q Now that the Offshore & Marine rigs is likely to remain subdued. At Keppel Bay, we have seen an increase business has become profitable in units sold following the Government’s again, how confident is Keppel Consistent with industry reports of announcements on the exciting of improving on its performance a pickup in the contract deployment of developments along the Greater in 2020? existing fleets, Keppel O&M has received Southern Waterfront. Looking ahead, more enquiries year-on-year for the we plan to launch 19 Nassim later in reactivation and repair of jackup rigs. 2020, and will also consider launching A Today, Keppel O&M is a more This is an encouraging development, Plot 4 at Keppel Bay depending on resilient and agile company with the which should help to improve the jackup market conditions. competencies to serve a wider spectrum oversupply situation progressively. of the offshore market, be it in gas, Meanwhile, activity levels, and Despite the slowdown in the Chinese renewables or floating infrastructure. consequently demand for floating economy, we continued to see healthy In 2019, Keppel O&M secured new orders production solutions, are expected demand in the cities where we operate. worth over $2 billion, far surpassing the to increase in the next couple of Our home sales in China grew by more trough of about $440 million in 2016. years as more projects reach their than 50% year-on-year to 3,400 units Notably, non-drilling solutions Final Investment Decisions. in 2019. During the year, Keppel Land made up over 70% of the new orders also deepened its commercial presence won over this period, bolstered by As the global energy mix evolves, in first-tier cities through acquisitions substantive contracts for gas and renewables are expected to be the across Beijing, Shanghai and Guangzhou. offshore wind projects. fastest growing source of energy from In 2020, we will continue to watch now till 2040, while gas is set to outplace the Chinese market closely, especially Keppel O&M’s underlying performance coal as the second-largest fuel source. following the COVID-19 outbreak, for the period was positive. Excluding In diversifying with the evolving energy and time the release of our revaluations, major impairments and mix, we have prepared Keppel O&M 2,600 launch-ready homes across divestments (RID), its operating profit to compete effectively in the liquefied China accordingly. for FY 2019 was $76 million, natural gas (LNG) and offshore wind representing an operating margin of sectors, which are drawing interest and Vietnam, where Keppel Land has been 3.4%, compared to about 2% a year ago. investments from a deepening global present for about 30 years, is a bright The toll on the Division’s performance focus on environmental sustainability. spot for us. Contributions from Vietnam should ease in the coming years once have grown steadily from just $10 million the issues with the remaining stranded In 2019, we made significant strides in 2015 to $165 million or about 31% of rigs and associates have been resolved. into the renewable energy sector, Keppel Land’s net profit in FY 2019. As we continue to win more contracts securing about $720 million worth of We continue to see strong demand for and execute our projects efficiently, offshore wind projects for Germany quality homes and commercial projects this will contribute positively to the and Taiwan. Since receiving the green in HCMC, underpinned by growing Division’s performance. light from Golar LNG in April 2019, affluence and urbanisation trends.

18 Report to Shareholders 2019 Keppel Corporation Limited We are also deepening our presence in funds of about $365 million. This does India, which has good long-term potential. not include the approximately $335 million Q The asset management business In December 2019, Keppel Land premium over the carrying value of has been active over the past announced a joint venture with the Keppel’s stake in Keppel DC REIT as at year. What is the outlook for Rustomjee Group, to develop about end-2019. this business? 7,400 homes and retail units as part of the 51.4-hectare Urbania integrated We are seizing inorganic opportunities township in Mumbai, India. Expanding to grow our market share and technology A Our asset management business had its presence in the co-working space, expertise for energy and environmental a good run in 2019, with creditable Keppel Land has also invested solutions. Keppel Infrastructure invested improvements in profit contributions US$25 million in Smartworks, a about $85 million in 2019 to acquire to the Group as well as assets under leading pan-India flexible space stakes in integrated European energy management (AUM), which grew by solutions provider. company, MET Group, and industrial 14% to $33 billion. During the year, waste and wastewater treatment Keppel Capital completed about Given our sizeable property portfolio, solutions provider, Zerowaste Asia. $8.4 billion in acquisitions and we will continue to focus on unlocking divestments and raised equity value through home and en-bloc sales, Data centres are critical for smart, and debt amounting to $9.5 billion. as well as divestments. We will make connected cities, and demand for them It also expanded into a new asset strategic acquisitions only where pricing is growing. But they also have a large class through a joint debt mezzanine and market conditions are attractive. carbon footprint. As a leading provider platform with Pierfront Capital and of data centre solutions, Keppel Data took a strategic stake in Prime US REIT, Centres will continue to develop and which was listed on the Singapore Q Can you elaborate on Keppel’s launch more energy-efficient and Exchange in July 2019. approach to en-bloc sales greener concepts including floating and property divestments? and high-rise data centres. Keppel Capital will continue to seek Will these be a regular feature growth opportunities, both organically of Keppel’s earnings? New opportunities for energy as well as externally. In January 2020, infrastructure, environmental we formed an equal joint venture with infrastructure and data centres abound, Australian Unity Limited to create funds A The short answer to the question fuelled by rising urbanisation trends. focused on the Australian metropolitan is yes. We will push for en-bloc sales We will continue to seize opportunities office sector. The joint venture has and divestments more deliberately in these sectors in partnership with also acquired the REIT manager of as part of our strategy. Our team at co-investors, and without relying just Australian Unity Office Fund, which Keppel Land is working proactively on our own balance sheet. has an AUM of about A$668 million. to seize the right opportunities to turn our assets, or co-develop some of the landbank with our partners, if there are suitable opportunities. Following the success of Hilli When operational in 1H 2020, 1 Episeyo, Keppel O&M received 2 Keppel Marina East Desalination final notice to proceed on Plant will add to the Group’s Q The infrastructure businesses have the conversion of Gimi FLNG, recurring income stream. which will be deployed in BP’s generated stable profits of about Greater Tortue Ahmeyim project. $169 million annually in the past two years. What are the growth plans for these businesses?

A Our businesses under Keppel Infrastructure and Keppel Data Centres, although relatively young compared to Keppel O&M and Keppel Land, have strong track records in the development, operation and maintenance of critical infrastructure assets. They are not only key to our solutions for sustainable urbanisation but also important growth engines for the Group.

Over the past six years from 2014 to 2019, Keppel Infrastructure had contributed total earnings of about $667 million to the Group, on average shareholders’ funds of about $637 million. Across the same period, our data centre business, through the collaboration of Keppel Data Centres and Keppel Capital, generated total earnings of about $515 million, on average shareholders’ 2

Keppel Corporation Limited Report to Shareholders 2019 19 GROUP OVERVIEW INTERVIEW WITH THE CEO

Keppel Bay Tower, where Keppel is headquartered, is the first commercial building in Singapore to be fully powered by renewable energy.

We are excited by the prospects as as OneKeppel. Keppel Capital and KUS from 2018, leveraging the launch of Keppel Capital moves steadily towards allow the Keppel Group to connect all its new made-to-measure One Plan. its AUM target, carving its niche as our different businesses into one We are also working to improve the a manager of multi-asset portfolios powerful end-to-end enterprise, cross-selling of services among across sectors fuelled by sustainable something that differentiates us from the Group’s different consumer urbanisation trends. Through ongoing our peers. businesses, where there is significant collaboration with Keppel Land, scope to expand our share of wallets Keppel Telecommunications & by improving customer experience Transportation, Keppel Infrastructure Q How would you describe and stickiness. and Keppel O&M, Keppel Capital has the progress of the business also expanded its repertoire from real transformation at M1 a year On the B2B front, M1 is actively estate to data centre and infrastructure following its privatisation? partnering other Keppel businesses assets, of which the Group is an active to create smarter, future-ready developer and operator. offerings, be it smart rigs and yards A Acquiring M1 was an opportunity for of the future, data centres or urban Keppel Capital’s private funds, as in us to build on a business that Keppel solutions. In efforts to gain early the case of KAIF, enable us to grow knows well and has long been invested insights and knowledge on 5G, our infrastructure business by tapping in. We are cognisant of the risks and M1 has embarked on multi-vendor third-party funds, whilst reducing the challenges, but with a clear plan laid out trials and is working closely with burden on our balance sheet. The and a capable management team in Government agencies, enterprises capabilities of the Group in creating place to drive the necessary changes, and institutes of higher learning to and operating such real assets are an we are confident of overcoming the co-develop use cases and launch attractive proposition for the investors obstacles to create value. smart applications empowered by of Keppel Capital’s funds. They see 5G technology. Keppel Capital not just as a financial The privatisation of M1 in 2019 contributed investor, but more importantly, as part a total of $153 million to the Group’s We firmly believe that M1’s potential of a larger Group that can create real earnings for the year. This included a as a connectivity solutions provider assets from green and brown fields and re-measurement gain from our previously can be fully unleashed within the who also has an eco-system of REITs held interests in M1 and offsetting Keppel eco-system, and will continue and a business trust that can help to charges related to the acquisition. to work with ’ monetise the assets when they mature. and M1’s management to drive the The M1 team, led by its CEO necessary changes to enhance its Keppel Capital is not just an asset Manjot Singh Mann, has made good competitiveness. M1 and StarHub management business. Together headway since launching into its have submitted a joint bid for a 5G with units like KUS, it plays an important multi-year transformation plan. Despite licence in Singapore, and if successful, horizontal role in bringing together our a challenging competitive landscape, would avail even more exciting different businesses to create unique M1 grew its postpaid customer base opportunities to realise the potential and value-enhancing propositions, to about 1.5 million in 2019, up 11% of Keppel’s solutions.

20 Report to Shareholders 2019 Keppel Corporation Limited social, environmental and economic Q With sustainability becoming dimensions. To this end, we are a bigger focus for the Group, making sustainability our business, how is that changing the way creating diverse solutions which are you look at Keppel’s businesses? good for the planet and for people, and in the process, create new profit pools for Keppel. A When we look at sustainability and what it means for us, we see an intrinsic link to Keppel’s vision, Q With all the changes taking place, mission, strategy and core capabilities. what will Keppel look like in 2030? In 2019, we conducted a comprehensive review of our material environmental, social and governance factors A Even as we work towards achieving and enhanced our sustainability our Vision 2020 targets, we have set framework and environmental our eyes on the future and are planning sustainability strategy. for the next decade.

Moving forward, we will focus our In 2019, we brought together a group efforts on four key areas. Firstly, of about 30 younger Keppel leaders, we have set targets to reduce carbon who are all below the age of 50. emissions, waste generation and water We wanted to give the Group’s consumption and will be enhancing future leaders a good runway to the Group’s emissions tracking. We imagine Keppel in 2030 and also have been reporting on Scope 1 and 2 the opportunity to work with one emissions since 2010, and will also start another to execute and realise tracking Scope 3 emissions, such as their proposals. business travel. There were many interesting and Secondly, as we grow our businesses contrasting ideas presented, but also and portfolios, our investment significant areas of convergence. decisions will place greater focus on We are in the process of finalising environmental sustainability. We will Vision 2030, with interim targets implement an internal carbon price to for 2025. We will share more details evaluate all major investment decisions. later, but it is quite clear that we We have defined the kinds of pollutive see Keppel moving forward as sectors we will not go into, such as one integrated business providing coal-fired plants, the businesses we will solutions for sustainable urbanisation, maintain, and those which we will focus with a repeatable model, a more more on, such as renewables. To rationalised portfolio and a clear advance our interests in sustainable growth trajectory. solutions, we have established a new business unit, Keppel Renewable Energy, to pursue opportunities for Keppel as a developer, owner and operator of renewable energy infrastructure. We are making sustainability our business,

Thirdly, for our existing businesses and creating diverse solutions which are good assets, we will focus on enhancing for the planet and for people, while creating energy efficiency, including harnessing renewable energy where possible. new profit pools for Keppel. For example, on 1 January 2020, Keppel Bay Tower, where we are headquartered, became Singapore’s first commercial development to be We will create value through our fully powered by renewable energy. business model, focusing on our key strengths of engineering, project Finally, we will look into re-purposing development, operation and maintenance our technology for renewables. of specialised assets, as well as capital Keppel O&M has already been doing and asset management. We will also this but we can do more, including continue tapping third-party funds to grow. exploring solutions for new energy and carbon capture and reuse. By further deepening collaboration and drawing on our synergies, we will Our vision is to be a trusted global work towards our targeted returns company building a sustainable future. and narrow the gap between our This demands that we create value for share price and the inherent value our stakeholders holistically, including of Keppel’s businesses.

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