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Keppel Infrastructure Trust and other Keppel units to acquire South Korean waste management firm for $666 mil

Jovi Ho
·3-min read

The proposed acquisition is expected to be completed by 2H2022.

Keppel Infrastructure Trust, Keppel Asia Infrastructure Fund and Keppel Infrastructure are acquiring a South Korean waste management company for some $666 million.

In an Aug 8 press release, Keppel Infrastructure Fund Management (KIFM), the Trustee-Manager of Keppel Infrastructure Trust (KIT); Keppel Asia Infrastructure Fund (KAIF), together with a co-investor; and Keppel Infrastructure Holdings(KI), wholly owned subsidiary of Keppel Corporation and sponsor of KIT, announced a special purpose vehicle that will takeover Eco Management Korea Holdings (EMK) for ₩626.1 billion.

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KIT will hold a 52% interest in the SPV, while KAIF and KI will hold a 30% and 18% interest respectively.

EMK is a leading integrated waste management services player in South Korea, serving the national market, reads the press release. “Operating six waste-to-energy (WTE) plants and five sludge drying facilities, EMK has the third largest incineration capacity (404 tonnes per day) in the nation. It is also the largest waste oil refiner (154 tonnes per day) in South Korea and manages and owns a landfill, which has the fourth largest capacity in the nation (1.5 million cubic metres).”

The proposed acquisition is expected to be completed by 2H2022.

KIT, KAIF and KI will fund the proposed acquisition in proportion to their shareholdings in the SPV. KIFM intends to fund the investment with an optimum combination of internal sources of funds, equity and/or debt capital market issuances and/or external borrowings.

“Upon completion of the proposed acquisition, KIT's assets under management are expected to grow from approximately $4.7 billion as at June 30, 2022 to approximately $5.3 billion,” reads the press release. “This proposed acquisition is expected to support KIT’s overall distributable income per unit accretion.”

Jopy Chiang, CEO of KIFM, says South Korea is primed for companies with a vision of sustainable urbanisation. “The acquisition of a majority stake in EMK is in line with KIT’s strategy of investing in good quality environmental businesses that generate long-term stable cash flows with the potential for growth, given the positive sectorial tailwinds for waste management in South Korea. The strategic addition of this waste management platform will enable KIT to grow its income base and improve portfolio resiliency with an evergreen business. In addition, the proposed acquisition will also diversify KIT’s income geographically, enhancing the resilience of our portfolio.”

Christina Tan, CEO of Keppel Capital, the parent company of the manager of KAIF, says: “We are pleased to tap on the Keppel Group’s collective strengths to acquire KAIF’s first environmental investment since the Fund’s launch in January 2020. As a leader in the South Korean waste management market, EMK will be a strong addition to our portfolio. We are confident that EMK, a company providing essential services, will deliver strong and sustainable returns to our investors.”

Meanwhile, Cindy Lim, CEO of Keppel Infrastructure, says: “Keppel Infrastructure’s co-investment with KIT and KAIF in EMK is a prime example of how we can collaborate and unlock value as OneKeppel to grow our sustainable infrastructure business using an asset-light model, in line with Keppel’s Vision 2030. We hope to not only leverage EMK’s scale, expertise and leadership position in South Korea to grow our environmental as well as energy-as-a-service business in the region, but also synergise with EMK, through Keppel Seghers’ leading WTE technology, to complement its growth in the South Korean market.”

The action is not expected to have any material impact on the net tangible assets per share or earnings per share of Keppel Corporation, the parent company of Keppel Capital and KI, for the current financial year.

Shares in Keppel Corporation closed 2 cents higher, or 0.28% up, at $7.05 on Aug 5; while units in Keppel Infrastructure Trust closed flat at 57 cents at Aug 5.

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