Simons Trading Research

Author: simonsg   |   Latest post: Mon, 6 Jun 2022, 4:02 PM


Keppel Corporation - Green Spark

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  • Keppel Corporation (SGX:BN4)’s asset-light strategy is at play with the exclusive framework signed with Electricite Du Laos (EDL) to import 100MW of renewable hydropower from Lao PDR.
  • Earnings impact could be minimal for now but ESG impact could be significant as carbon footprint reduction is a priority for Singapore.
  • Maintain ADD rating on Keppel Corporation with unchanged target price, still based on SOP valuations.
  • Catalysts: renewable energy investments, successful divestment of offshore & marine.

ESG Boost; Singapore’s First Hydro Renewable Energy Import

  • Keppel Electric, a subsidiary of Keppel Infrastructure Holdings, has signed an exclusive framework agreement with Electricite Du Laos (EDL) as part of the LaoPDR-Thailand-Malaysia-Singapore Power Integration Project (LTMS-PIP).
  • Keppel Electric will import up to 100MW of renewable hydropower from Lao PDR to Singapore via Thailand and Malaysia using existing interconnectors under an import trial.
  • This is in line with Keppel Corp’s Vision 2030 to provide innovative solutions for sustainable urbanisation, which enhances its ESG component. Since 2020, Keppel Corp has scored AAA, as rated by MSCI, and is a leader among global industrial conglomerates, being ranked among the top 8% in the MSCI All Country World Index.
  • In the bigger picture, this contributes to Singapore’s climate goals to halve its 2030 peak greenhouse gas emissions by 2050 and to achieve net zero emissions. In 2020, Singapore started talks with Malaysia to import 100MW of solar electricity over a trial of 2 years.

Not Just About Power Supply But Source of Greener Energy

  • Electricite Du Laos (EDL)’s switch to renewable energy can slash the carbon footprint of data centres (DCs) liquefied natural gas (LNG) power solutions in Singapore.

Levels Playing Field With Peers

  • Renewable energy’s versatile nature enables Keppel Corp to supplement the electricity supplied to customers through Keppel Electric Harlin Solar Pty Ltd to develop its first greenfield solar energy farm (~500MW) in Queensland, Australia.

Reiterate ADD Rating on Keppel Corp

  • We believe Keppel Corp’s sustained drive to green its business via opportunistic acquisitions and deals will help accelerate its Vision 2030 target achievement.
  • Key downside risk: 100MW supply of power on a trial basis does not translate into long-term supply.

Source: CGS-CIMB Research - 16 Sep 2021

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