- Keppel O&M’s legacy rigs and associated receivables will be sold to a separate Asset Co that would be majority owned by external investors, and omitted from the Combined Entity.
- Combination would allow companies to bring together their best talent, engineering skills and know-how.
A recent news source published in the Keppel Corporation states that Keppel & Sembcorp Marine Commence Talks On Potential Combination Of Keppel O&M & Sembcorp Marine.
Non-binding MOU
Keppel Corporation Limited (“Keppel”) and Sembcorp Marine Ltd (“Sembcorp Marine”) have entered today into a non-binding memorandum of understanding (“MOU”) to enter into exclusive negotiations with a view to combining Keppel O&M and Sembcorp Marine (“Combined Entity”).
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.
Sustained reduction in oil exploration
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.
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.
Key perspectives of MOU
- Combined Entity better placed to compete for larger contracts and to pursue synergies arising from combined scale, footprint and capabilities.
- Opportunity to accelerate pivot to the energy transition, including offshore renewables, while capitalizing on gas and other production facilities.
- Keppel O&M’s legacy rigs and associated receivables will be sold to a separate Asset Co that would be majority owned by external investors, and omitted from the Combined Entity.
- Combination would allow companies to bring together their best talent, engineering skills and know-how.
- Keppel O&M and Sembcorp Marine to engage with workplace unions, to address labour considerations for the Combined Entity, and to continue to attract and retain O&M engineering talent.
Pledged to work cooperatively
Both Keppel O&M and Sembcorp Marine have also pledged to work cooperatively with their workplace unions on the future plans for the labour force, including continuing workforce development and training and the creation of higher value-adding jobs.
Concurrent with the MOU on the potential combination, Keppel has also signed a non-binding MOU with Kyanite Investment Holdings Pte Ltd, 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.
Further details on Asset Co will be provided in a separate SGXNET announcement issued by Keppel.
A strategic partnership
Under the MOU between Keppel and Sembcorp Marine, it is envisaged that Keppel and the Combined Entity will enter into a strategic partnership, pursuant to which Keppel will hold 50% of a 50-50 joint venture that will be established between Keppel and the Combined Entity (“Strategic Partnership JV”).
This would allow Keppel to continue accessing Keppel O&M’s capabilities required for its projects, on terms to be agreed.
The scope of the Strategic Partnership JV will be subject to final agreement between the parties concerned.
In addition, subject to regulatory review, the Combined Entity will be the preferred EPC partner for Keppel’s projects where the Combined Entity has the relevant expertise.
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Source: Keppel Corporation
