Keppel Acquires 39% Stake in Keppel Merlimau Cogen Plant

Keppel’s Infrastructure Fund Acquires 39% Stake in Singapore’s Keppel Merlimau Cogen Plant

Keppel’s Flagship Infrastructure Fund Expands Portfolio with Established Asset and Stable Cash Flows

Keppel’s flagship open-ended infrastructure fund, Keppel Core Infrastructure Fund (KCIF), has acquired a 39% stake in the Keppel Merlimau Cogen Plant (KMC) from the asset manager. This transaction marks the fund’s first asset and allows it to anchor its portfolio with an established asset and stable cash flows as it expands.

Plant Details

The Keppel Merlimau Cogen Plant (KMC) is a 1,300-megawatt combined-cycle gas turbine power plant on Jurong Island, which supplies about 14% of Singapore’s electricity. The plant has been operational since 2007. In 2022, Keppel’s infrastructure division completed a significant upgrade of one of KMC’s gas turbines to boost its efficiency, reduce emissions, and enable hydrogen compatibility. A high-efficiency upgrade of a second gas turbine unit is planned, with completion expected in the second half of this year.

Capacity Tolling Agreement

KMC receives monthly capacity payments for making the plant’s full capacity available to Keppel’s electricity retail arm through a long-term capacity tolling agreement. The agreement is expected to last until 2040, with the capacity payment paid monthly regardless of the actual power generated by the plant. The payment also does not vary with electricity demand or prices.

Extension of Capacity Tolling Agreement

The capacity tolling agreement was proposed to be extended by 10 years, from 2030 to 2040, in April 2024. This is expected to generate up to nearly S$1.1 billion in long-term capacity payments for KMC.

Keppel’s Infrastructure Division

Keppel’s infrastructure division will continue to operate and maintain the plant. Janice Bong, managing director of power and renewables at Keppel’s infrastructure division, stated, "As the operator of KMC and sponsor of both KCIF and KIT, Keppel will continue to earn recurring distributions and fees."

Keppel Core Infrastructure Fund

KCIF has an initial target size of US$2.5 billion. In October 2023, it achieved its first close, with initial capital and co-investment commitments of US$575 million. The fund focuses on highly-defensive infrastructure assets across the Asia-Pacific’s developed markets, with the aim of providing stable, long-term cash flows.

Conclusion

The acquisition of a 39% stake in the Keppel Merlimau Cogen Plant marks a significant milestone for Keppel’s flagship infrastructure fund, KCIF. This transaction provides a stable and established asset, allowing the fund to anchor its portfolio and generate long-term cash flows.

FAQs

Q: What is the Keppel Core Infrastructure Fund?
A: Keppel Core Infrastructure Fund (KCIF) is Keppel’s flagship open-ended infrastructure fund.

Q: What is the Keppel Merlimau Cogen Plant?
A: The Keppel Merlimau Cogen Plant (KMC) is a 1,300-megawatt combined-cycle gas turbine power plant on Jurong Island, which supplies about 14% of Singapore’s electricity.

Q: What is the capacity tolling agreement?
A: The capacity tolling agreement is a long-term agreement between Keppel’s electricity retail arm and KMC, providing monthly capacity payments for making the plant’s full capacity available.

Q: What is the extension of the capacity tolling agreement?
A: The capacity tolling agreement was proposed to be extended by 10 years, from 2030 to 2040, in April 2024. This is expected to generate up to nearly S$1.1 billion in long-term capacity payments for KMC.