THE trustee-manager of Keppel Infrastructure Trust (KIT) Kep Infra Tr : A7RU -0.88% has proposed new base fee and performance fee structures pegged to distributable income and distribution per unit (DPU) growth respectively.

 

The move will help the trustee-manager better align its interests with the business trust' s unitholders and support KIT' s growth plans, it said in a bourse filing on Monday (Mar 28).

 

The trustee-manager is proposing its base fee be amended to 10 per cent per annum of KIT' s distributable income, versus its existing base management fee of S$2 million per annum.

 

If approved, the proposed base fee will be implemented progressively over the financial year ending Dec 31, 2022, to reflect the progressive building-up of KIT&rsquo s portfolio of assets by the trustee-manager and allow it more time to build up its resources. 

 

Meanwhile, it has proposed an adjustment of its performance fee to 25 per cent per annum of any increase in DPU, multiplied by the weighted average number of issued units, instead of the present 4.5 per cent performance fee pegged to the trust' s income. The performance fee will only take effect from Q3 2022 onwards and be fully implemented in FY2023. 

 

The trustee-manager' s acquisition and divestment fee will remain unchanged at 0.5 per cent or 1 per cent of the acquired investment' s enterprise value, and 0.5 per cent of the divested investment' s enterprise value.

 

The proposed adjustments have been deemed by an independent financial adviser to be on " normal commercial terms and not prejudicial to the interests" of KIT and minority unitholders.

 

As such, the trustee-manager' s audit and risk committee, along with directors who are considered independent from the matter, recommend unitholders vote in favour of the proposed base fee and performance fee supplement.

 

The new proposed fee structures will give the trustee-manager more resources to manage KIT' s portfolio, bolstering its ability to " optimise and create greater value" . It will also enhance the trustee-manager' s ability to drive growth through new acquisitions and investments.

 

The trustee-manager noted that the proposed fee structure is widely adopted by Singapore real estate investment trusts (Reits) listed in the last 5 years. The fee quanta, as a percentage of assets under management, market capitalisation and revenue, are within the market range charged by selected business trusts, it said.

 

Jopy Chiang, chief executive of the trustee-manager, said the revised fee structure is the result of an extensive exercise that includes peer benchmarking and considers the alignment with unitholders&rsquo interests.

 

He said the company will broaden its global reach and expand its talent pool in investment origination, deal execution and portfolio management.

 

" To this end, we are looking to establish offices in key overseas markets to create new synergies and increase deal flow, which will allow us to scale up faster and accelerate KIT' s growth plans," he added.

 

The trustee-manager' s workforce has grown to 22 employees as at Dec 31, 2021, from 7 staff since its listing in 2010, along with its portfolio, which has grown to S$4.6 billion as at end-February 2022 from S$760 million at its listing.

 

The trustee-manager will seek unitholder approval for the proposed base and performance fee amendments at an extraordinary general meeting to be held on Apr 19.

 

THE manager of Keppel Infrastructure Trust (KIT) Kep Infra Tr : A7RU +0.9% on Thursday (Mar 24) said it is undertaking a strategic review of KIT' s wholly-owned Ixom business, with a view to potentially unlock value from the asset.

 

Ixom is the sole manufacturer of liquefied chlorine, as well as the leading manufacturer of caustic soda in Australia, the trustee-manager said in a bourse filing.

 

It was acquired by KIT in 2019 and is among the leading industrial infrastructure businesses in Australia and New Zealand, supplying and distributing critical water treatment chemicals and industrial and specialty chemicals key to fundamental industries.

 

These include the water treatment, dairy, agriculture, mining and construction sectors. Ixom' s chemical manufacturing and supplies were classified as essential services during the Covid-19 pandemic.

 

Through the strategic review, the trustee-manager is looking to further KIT' s growth and maximise long-term unitholder returns. The exercise is part of the diversified business trust' s regular asset review process.

 

The trustee-manager will appoint a financial adviser in connection with the strategic review. It may, through the financial adviser, enter preliminary discussions with various parties to evaluate the viability of any options.

 

" There is no assurance that any transaction will materialise from such a strategic review or that any definitive or binding agreement will be reached," it added.

THE trustee-manager of Keppel Infrastructure Trust (KIT) is investing US$250 million in a BlackRock-led consortium that will acquire a 49 per cent stake in Aramco Gas Pipelines Company, a unit of Saudi Arabian Oil Company (Aramco) that holds 20-year leasing rights for Aramco' s gas pipelines network.

 

The consortium is co-led by Hassana Investment Co.

 

In a bourse filing on Tuesday (Feb 8), the trustee-manager said it expects its indirect minority and non-controlling stake in the consortium' s special purpose vehicle (SPV) will provide long term, predictable cash flows to KIT as it is " investing into a strong and growing business that is underpinned by one of the world' s largest reserves of natural gas" .

 

KIT' s trustee-manager intends to fund its part of the acquisition with internal sources of funds and existing debt facilities, including a 2-year bridge facility taken up by KIT. It also plans to evaluate different funding options to repay the bridge facility, which may include proceeds from equity or debt capital market issuances.

 

Following completion of the consortium' s acquisition, the trust' s total assets under management (AUM) is estimated to grow to S$4.6 billion from S$4.5 billion as at Dec 31, 2021.

 

Post KIT' s investment, pro-forma net asset value per unit is expected to fall to 21.7 Singapore cents from 22.3 cents due to estimated acquisition expenses, assuming the transaction is fully funded by existing cash and external debt.

 

Gearing for the financial year ended December 2021 is estimated to rise to 27.7 per cent from 20.3 per cent had the investment been completed on Dec 31, 2021.

 

" The strategic addition of this gas pipeline business will allow KIT to diversify its income base geographically, as well as provide greater stability in the long term by replenishing the portfolio through the addition of another resilient business," said Jopy Chiang, chief executive of the trustee-manager.

 

THE trustee-manager of Keppel Infrastructure Trust Kep Infra Tr: A7RU -0.9% (KIT) on Wednesday (Jan 26) reported a distribution per unit (DPU) of S$0.0192 for the second half of fiscal year 2021 ended December, up 3.2 per cent from a DPU of S$0.0186 for the corresponding period in FY2020.

 

With this, KIT' s DPU for FY2021 stands at S$0.0378, up 1.6 per cent from FY2020' s DPU of S$0.0372.

 

FY2021' s DPU marks the first time there has been an increase from the trust' s historical annual payout of S$0.0372 since FY2016. KIT' s trustee-manager attributed this to " strong and stable" performance at Australian chemicals group Ixom since its acquisition in 2019, as well as a resilient cashflow contribution by the trust' s portfolio over the last 2 years.

 

Unitholders can expect to receive their H2 DPU on Feb 11.

 

" (This) signifies our commitment to grow distributions for unitholders," chief executive officer of the trustee-manager Jopy Chiang said at a briefing accompanying the results announcement. " We are cognisant that long-term and sustainable growth in DPU is something that we' re targeting and this is the start of something that we will be working hard to continue going forward."

 

However, in response to a question on whether this level of DPU can be maintained, Chiang said that it was " hard&hellip to answer this directly" .

 

" We have not put a target payout ratio in place and that' s something that we are still considering at this juncture," he added.

 

The increase in DPU comes despite an 18.5 per cent drop in free cash flow to equity (FCFE) to S$91.6 million in H2, from S$112.4 million in the year-ago period.

 

The broad-based decline across all segments saw FCFE fall 14.8 per cent to S$192.2 million for the full year.

 

The trust' s loss attributable to unitholders for H2 widened to S$112.2 million from S$72.4 million in the year-ago period. This brought KIT' s loss for the full FY2021 to S$107.3 million, versus just S$20.2 million in FY2020.

 

The group attributed the higher losses to the de-recognition of Australian subsidiary Basslink, which were slightly offset by higher contributions from Ixom.

 

Ebitda (earnings before interest, taxes, depreciation, and amortisation) for H2 was up marginally by 0.1 per cent to S$161 million. For the full year, Ebitda was down 3.2 per cent to S$317.6 million.

 

This excludes one-off items, including a S$161.9 million loss on the de-recognition of Basslink, and a S$21.7 million impairment loss on Ixom' s assets mainly in relation to the cessation of operations of a long-term customer. Without the adjustments, Ebitda for FY2021 would have been S$127.5 million.

 

Revenue for H2 was up 11.5 per cent year on year to S$837 million from S$750.4 million, largely due to higher contributions from City Energy and Ixom, said KIT.

 

Total expenses for the period were up 12.6 per cent year on year to S$816.8 million, from S$725.5 million previously.

 

Higher fuel prices drove up the trust' s fuel and electricity costs by 44 per cent, while staff costs were up 23.3 per cent due to a stronger translation between the Singapore dollar and Australian dollar, as well as higher headcounts from the acquisition of ABP. This was partly offset by the absence of staff costs from Ixom' s Latin America and China Life Science businesses which were divested in Q4 2020.

 

The trustee-manager on Wednesday also unveiled its growth strategy going forward, following a strategic review conducted in 2021.

 

Beyond the traditional asset classes such as utilities, the trustee-manager said it will also focus on key asset classes that will benefit from the low-carbon and decarbonisation economy and support the digital economy.

 

" KIT will have a renewed focus on evergreen yield-accretive assets and businesses that will benefit from secular growth trends," Chiang said.

 

It will also look at socio-economic infrastructure that furthers economic growth and enhances social well-being, such as the transportation and social infrastructure sectors.

 

Chiang brings up the example of City Energy. Formerly known as City Gas, the unit has rebranded and transformed into a provider of innovative green energy solutions.

 

" There' s actually a showroom in Plaza Singapore where you can see their Internet of Things (IoT)-enabled gas appliances," Chiang said. " It' s something that the team is actively looking to develop in the near term over the next 1 to 2 years."

 

He added that City Energy is also starting to see green shoots in its electric vehicle charging infrastructure.

 

" We see this really turning the corner within the next 5 years, because this is something that will have to be in line with the adoption of electric vehicles in Singapore as well," Chiang added.

 

With the deconsolidation of Basslink, KIT' s net gearing has fallen to 20.3 per cent as at Dec 31, 2021, down from 32.1 per cent a year ago.

 

While there is no specific limit or target on gearing for business trusts, the trustee-manager said it would take a " prudent approach" to not excessively raise its gearing.

 

As a gauge, it said it expects to keep its gearing level below 50 per cent &ndash in line with the regulatory limit for Singapore-listed real estate investment trusts (S-Reits). This would give KIT a debt headroom of S$1.35 billion.

 

Some 93 per cent of KIT' s total loans are also hedged as at end-2021, and the trustee-manager said it continues to monitor risk exposures and safeguards against evolving market conditions.

 

" Apart from strengthening our existing presence in the developed Asia-Pacific markets, we are also looking at new markets of South Korea and Japan. Our Tier 2 target markets include the UK and Europe, as well as selected markets in the Middle East, such as Abu Dhabi," Chiang said.

 

KIT' s trustee-manager added that it continues to review its pipeline of potential acquisition opportunities, which, if closed, will further strengthen KIT' s long-term income stream.