Keppel mulls merging Keppel O&M, Sembcorp
Singaporean entities Keppel Corp and Sembcorp Marine on June 24 signed a non-binding memorandum of understanding to enter into exclusive negotiations with a view to merging Keppel O&M and Sembcorp Marine.
“The objective of these discussions is to create a stronger combined entity and sustainable value over the long term for Keppel O&M and Sembcorp Marine and their respective stakeholders, in response to dramatic changes in the global offshore and marine (O&M) engineering and energy sectors,” Keppel Corp said.
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Keppel Corp said that in recent years, there has been a sustained reduction in oil exploration and development activities, which caused a significant reduction in business for the O&M sector. The prolonged downturn has been exacerbated by the impact of COVID-19, the fall in oil demand and prices in 2020, and the global energy transition away from oil, it added.
“In response, several global peers of Keppel O&M and Sembcorp Marine have pursued consolidations to create scale, retain talent, and more effectively use their asset bases. In particular, such actions aim to position these peers for new opportunities arising from the energy transition,” the company said.
Keppel Corp said both Keppel O&M and Sembcorp Marine are pivoting to the renewables sector. Keppel O&M has secured multiple orders from leading players including two converter stations for TenneT Offshore, two offshore wind farm substations for Orsted, as well as one of the world’s largest offshore wind turbine installation vessels for Dominion Energy.
Sembcorp Marine’s wins include contracts for the Siemens’ Dudgeon offshore wind farm project, offshore substation and topsides for the Orsted’s Hornsea 2 offshore wind farm, and the HVDC offshore converter platform for the landmark RWE Renewables Sofia offshore wind farm.
“If completed, the potential combination would create a stronger player to capitalise on growing opportunities in the O&M, renewable and clean energy sectors,” Keppel Corp said.
Under the MoU between Keppel Corp and Sembcorp Marine, it is envisaged that Keppel and the 'combined entity' will enter into a strategic partnership, pursuant to which Keppel Corp will hold 50% of a 50-50 joint venture that will be established between Keppel Corp and the 'combined entity'.
Concurrent with the MoU on the potential combination, Keppel has also signed a non-binding MoU with Kyanite Investment Holdings, a wholly owned subsidiary of Temasek, for Keppel O&M’s legacy rigs and associated receivables to be sold to a separate Asset Co that would be majority owned by external investors. The two proposed transactions will be inter-conditional and pursued concurrently.