Good morning, everyone. On behalf of the trustee manager, we wish all a very happy Chinese New Year, and thank you for joining Keppel Infrastructure Trust's second half and full year 2024 financial results webcast. My name is Elaine from the investor relations team. Hosting the session this morning are CEO, Mr. Kevin Neo, CFO, Mr. Raymond Bay, and Director, Portfolio Management, Keppel Infrastructure Trust, Mr. Tan Jun Da. We will begin the session with an update on KIT's financial performance for FY 2024 before we open the session for questions. The meeting transcript is being recorded. Please be reminded to only unmute your mic during the Q&A session. I will now hand the time over to Kevin for the presentation. Kevin, please.
All right. Thanks, Elaine. Good morning, and thank you for joining us today. I will start with slide 4. KIT delivered a strong set of results in FY 2024, with solid growth in FFO of 10.3% growth to SGD 282 million. FY 2024 DI was SGD 203.7 million versus FY 2023 DI of SGD 316.8 million, which included the special distribution from the external capital optimization of SGD 131.2 million. Factoring the capital optimization and other one-offs and timing differences, FY 2024 DI after adjustments is SGD 218.7 million, 4.3% higher year-on-year.
For FY 2024, DPU is SGD 0.039, an increase of 1% year-on-year, excluding the special distribution of SGD 0.0233 paid in FY 2023. KIT's stock performance was supported by new acquisitions, which increased our AUM by 22% to SGD 9 billion. Testament to the trustee manager's value creation capabilities, we saw record FY 2024 EBITDA performance at Ixom, City Energy, and Philippine Coastal. Going to slide 5. We acquired close to SGD 2 billion in enterprise value of new acquisitions, expanding KIT's footprint across its 3 core business segments, which are aligned with the secular growth trend of energy transition, climate change, as well as rapid urbanization. The accretive acquisitions are backed by long-term contracts or availability-based payments, providing stable cash flows, which enhances KIT's cash flow visibility. Moving to slide 6.
Record EBITDA was achieved across Ixom, City Energy, and Philippine Coastal in FY 2024, a result of the trustee manager's value creation capabilities. Our portfolio optimization plans, which include sharpening the existing businesses, growing market share, expansion through bolt-ons and new business segments, have resulted in delivery of sustainable value. On slide 7, it illustrates the acquisitions that we have announced or completed since KIT embarked on its growth strategy to build a global portfolio of best-in-class infrastructure businesses and assets. As a result of portfolio expansion with new acquisitions as well as our value creation activities, KIT's portfolio continued to grow. With the acquisition of its German Solar Portfolio, which saw its first close in 3Q 2024.
The meeting is being recorded and summarized.
The acquisition of Keppel Marina East Desalination Plant in December 2024, KIT's AUM increased by approximately 22% to SGD 9 billion as at 31st December 2024. Slide eight shows KIT's independent portfolio valuation of SGD 9 billion, categorized by business segments and geographies. We continue to invest in essential businesses and assets across our core business segments of energy transition, environmental services, distribution, and storage, which are aligned with strong secular tailwinds. In terms of geography, we remain focused on investment-grade jurisdictions with well-developed regulatory frameworks and strong sovereign credit ratings. With this, I'll hand it down to Raymond, who will go through the business updates and financial performance in greater detail.
Thank you, Kevin. Moving to slide 10. In the next few slides, we have included information on funds from operation, which is net of interest expense and maintenance CapEx, but before growth CapEx. FFO will better reflect the underlying operational performance of KIT's portfolio. Moving to City Energy. City Energy achieved record EBITDA in 2024 as the portfolio management strategies continue to bear fruit. The EBITDA performance was driven by strong contribution from City OG and an increase in installation and contract service income segment. Plant availability was 100% in 2024, and City Energy continued to maintain a sizable base of over 900,000 customers. City Energy's EV charging portfolio continued to expand with new sites secured using approximately 4,800 EV charging lots as at 31st December 2024.
In November 2024, City Energy launched its own brand of smart gas water heater called Life, which has led to high customer onboarding since its introduction. Moving to transition assets. KMC achieved 100% availability for 2024. The extension of KMC Capacity Tolling Agreement led to the resumption of distribution from the second half of 2024. AGPC. In the Middle East, stable gas demand at AGPC continues to be underpinned by the kingdom's economic growth. Moving to the renewable portfolio. During the year, KIT made its first investment in the solar sector with acquisition of the German Solar Portfolio, which is expected to comprise over 60,000 solar systems. We completed four closings to date, representing deployment of approximately 57,000 solar systems. In Germany, Borkum Riffgrund 2 was granted additional grid capacity of 26 MW on top of its existing 450 MW grid capacity.
BKR2 has an operating capacity of 465 megawatts, which can export an additional 5.5 megawatt effective from February 2024. Technical plans are being assessed to increase the output capacity to the maximum allowable 486 megawatts. Moving to slide 11. EMK maintained high availability and full utilization of its incineration business. In January 2025, EMK renewed a steam contract for 10 years with a major customer. This is expected to increase the EBITDA at the site by 26%. EMK's FY 2024 FFO was lower year-on-year due to near-term volatility in landfill prices. We continue to preserve landfill capacity due to softer prices. However, the prices are expected to improve gradually on the prospect of policy adjustments which are favorable for the landfill business.
EMK continues to seek opportunity to grow and has ventured into plastic recycling and asbestos treatment to expand its waste management solutions to capture new EBITDA. Looking ahead, we will continue to drive organic and in-organic growth at EMK. Back in Singapore, our waste and water plants remain stable, fulfilling their contractual obligation in the quarter. The concession for the Singapore Waste-to-Energy Plant was extended upon its expiry in August 2024, with nominal FFO contribution going forward. We continue to explore concession extension for the SingSpring Desalination Plant. On December 27, 2024, we completed the acquisition of Keppel Marina East Desalination Plant. Moving to slide 12. Ixom achieved record EBITDA for its financial year ended September 30, 2024 at AUD 200.3 million. This is due to strong customer demand in its core business segments.
To support continued growth in demand, Ixom has invested in capacity expansion projects. This includes construction of new bitumen facility in Queensland, which will double the existing daily capacity. In New Zealand, Ixom completed addition of a caustic tank, which has increased capacity in the region by 30%. Moving to Ventura. Ventura continues to deliver market-leading performance in punctuality and reliability, outperforming the bus industry in Victoria. As a result of its strong operating performance, it has secured two years extension of its bus contract to 2028 upon achieving of certain key performance targets. We continue to evaluate strategic growth plans such as network expansion within and beyond Victoria, additional electrification revenue by utilizing unused charging capacity at the depots, as well as expansion of its private chartering business. Moving to Philippine Coastal.
Philippine Coastal continued to benefit from its high utilization rate of 94% for FY 2024, achieving record EBITDA of $45.6 million. In October, we announced the sale of Philippine Coastal. This is to align with our longer-term strategy to focus on lower carbon energy transition segments. The divestment is on track for completion in early 2025. Moving to slide 14. We declare distribution per unit of SGD 0.0125 for the period from 5th September 2024 to 31st December 2024. With the book closure date of 10th February, payment distribution will be on 18th February.
Together with the first half 2024 distribution of SGD 0.0195 and the stub distribution of SGD 0.007 from 1st July to 4th September 2024, the total distribution paid for FY 2024 is SGD 0.0390. This represents 1% year-on-year compared to FY 2023 distribution of SGD 0.0386 if we exclude the DI-special distribution in 2023. Moving to slide 15. The next two slides provide a breakdown of our second half 2024 DI. On slide 15, asset DI was significantly higher in second half 2024, driven by positive contribution from acquisition of SGD 26.9 million. The resumption of DI contribution from KMC of SGD 19.7 million, but offset by lower contribution from Singapore of SGD 13.7 million. Moving to slide 16.
Although the asset DI was higher year-on-year, the lower year-on-year DI is due largely to the effects of special distribution in second half 2023. Adjusting for the other one-off and timing differences, second half 2024 DI would be SGD 108.9 million, 14.7% higher year-on-year compared to second half 2023 DI of SGD 94.9 million. The next slide provides a breakdown of the FY 2024 DI. For the full year FY 2024, asset DI of SGD 319.4 million was 4.9% higher year-on-year, mainly due to the positive contribution from new acquisitions of SGD 36.6 million, resumption of KMC DI contribution of SGD 37 million, but offset by lower contribution from Sembcorp and the wind farms of SGD 22.6 million.
In the energy transition segment, City Energy full year 2024 DI was lower year-on-year on lower fuel cost recovery of SGD 7 million. This is net of stronger performance from City OG and higher town gas volume, but offset by higher tax and CapEx expenses of SGD 5.3 million. At the transition assets, if we exclude the resumption of KMC DI of SGD 37 million, the lower contribution from AGPC was mainly due to one-off interest rate swaps gain in FY 2023. At the renewable portfolios, excluding the effect of debt repayment of SGD 26 million, the remaining year-on-year variance of SGD 10.2 million was due to lower wind production, grid outages, and lower electricity price. For the Singapore assets, lower contribution from Sembcorp was partially offset by higher energy efficiency savings at SingSpring. EMK DI was lower due to softer prices for the landfill business.
At Ixom, the impact of higher expenses of SGD 20 million and higher CapEx expenses of SGD 12.6 million was net off by the one-off upfront fee paid in 2023 of SGD 10.4 million. Lower tax paid of SGD 7.6 million, CapEx funded by debt of SGD 17.7 million, with no one-off service income rendered in FY 2023. Philippine Coastal's higher DI contribution was due to higher contract price of SGD 4.4 million and lower CapEx of SGD 3.8 million, net of higher debt repayment of SGD 5.1 million and upfront financing cost of SGD 2.2 million. Moving to slide 18. FY 2024 DI was SGD 203.7 million versus SGD 316.8 million in FY 2023, where there was a special distribution of SGD 131.2 million.
Adjusting for one-offs and timing differences, FY 2024 DI was SGD 218.7 million, 4.3% higher year-on-year. Slide 19 provides a snapshot of our balance sheet position. We maintain a strong balance sheet that is well-capitalized to support our growth aspirations. Calculated based on the book value of assets, KIT net gearing level increased to 40.9% from 40.1% as at 30 of September 2024. This is due to additional loan drawdown to acquire KMEDP, as well as funding the fourth close of the German Solar Portfolio. At this level, KIT financial position remains strong, maintaining sufficient debt headroom to support KIT's future growth.
The trustee manager continues to monitor risk exposure and safeguard against evolving market conditions to mitigate against fluctuating interest rates and approximately 72.9% of KIT's total loans are fixed and hedged as at December 31, 2024. We have also hedged approximately 71% of the trust foreign income to mitigate the impact of currency fluctuations. Moving to slide 20. During the year, KIT raised SGD 200 million of perpetual and SGD 200 million of placement. The SGD 400 million total proceeds were utilized to repay the Ventura acquisition term loan. In 4Q 2024, we obtained a new SGD 75 million multicurrency RCF facility to support KIT's growth and improve financial flexibility. Consequently, total undrawn committed facility as at December 31, 2024 total SGD 608 million. Moving to slide 21.
KIT's CapEx plan for 2025, which will help provide our stakeholder with more information on maintenance and growth CapEx across business segments. Maintenance CapEx is the capital expenditure to sustain the operation of our businesses as well as to meet its health, safety, and regulatory obligations. Under the distribution and storage segment, approximately half of the maintenance CapEx relates to Ventura replacement of bus to extend fleet life. The balance of the maintenance CapEx pertains to Ixom, where there is scheduled maintenance. Moving to growth CapEx, this is capital expenditure which will help grow the business and is value accretive to portfolio valuation.
At the energy transition segment, the growth CapEx is substantially driven by the requirement at City Energy for plant life extension as well as its investment in solar and EV. The growth CapEx projected for the environmental service segment pertains to Senoko Waste-to-Energy plant life extension on the extension of its concession, as well as growth plan at EMK. At the distribution and storage segment, the growth CapEx is substantially due to ongoing capacity expansion plans at Ixom, which has been shared earlier in the business update section. With this, I hand the time back to Kevin, who will share more on our sustainability updates.
All right. Thanks, Raymond. We believe sustainability management is imperative to the continued success of KIT and its ability to create value. On slide 23, we share some sustainability performance highlights for FY 2024. Under environmental stewardship, with the acquisition of the German Solar Portfolio, we have expanded our exposure to renewables and increased our total renewable energy capacity to 1.3 GW. Moving to responsible business, we continue to uphold high standards of ethical business conduct and strong corporate governance as a responsible business. We are also pleased to achieve an A rating in the MSCI ESG rating assessment for 2024, which measures an organization's management of financially relevant ESG risks and opportunities. In our commitment to people and community, KIT, together with the Keppel Fund Management and investment platforms, dedicated more than 1,100 hours in volunteering to support community outreach efforts.
We place sustainability at the core of our strategy to create value and achieve growth and maintain a responsible approach to managing our portfolio to deliver long-term value to our stakeholders. Thank you.
All right. Thank you, Kevin and Raymond. We will now open the session for questions and will now proceed to take questions from the audience. Participants may submit your questions in the chat box on the webcast platform, and analysts on the WebEx platform may use raise hand function and unmute your mic on queue. For all participants, please state your company and your name when you submit your question. Can we have the first question, please? Right. Rahul, please go ahead and ask your question.
Hi. Good morning, everyone, and a very Happy New Year. Thank you for taking my questions and really appreciate the incremental disclosures related to CapEx outlook. Maybe just continuing this point about CapEx outlook, could you help us understand these new disclosures better? How should we be comparing the disclosures in slide 21 for 2020 versus 2024? I see in slide 36 we do have, you know, maintenance CapEx and growth CapEx. Are they right for right comparable? Just as an example, right, for energy transition for 2025, the maintenance CapEx forecast is SGD 17 million. Is the right comparable in slide 36 is SGD 6.274 million?
All right. I'll probably take your first question, right. The information that we disclosed on slide 21 on the CapEx is only for FY 2025. The growth CapEx of SGD 25 million, SGD 8 million, and SGD 31 million, right, is something specific to FY 2025. This number may be higher or lower for FY 2026, depending on the growth initiatives and our progress of the various growth initiatives at each project. I don't think you should use that as a guide for that going forward.
Sorry, Kevin, maybe I am not clear. I was asking for FY 2024, like, history versus history.
Oh, history.
Yeah, yeah, not 2026. Yeah.
Oh.
We have a slide 36, right, where we have FY 2024 DI by division. In that, there is a line called maintenance CapEx.
Yes. Hang on, let me just take a look.
Yeah.
Which is slide 36?
Yes, slide 36.
Okay.
FY 2024.
Oh, you mean the SGD 34 million of maintenance CapEx, in FY 2024. Is that what you're asking?
No. Above. Maintenance CapEx SGD 6.274, which are the adjustments, SGD 12,833,044. Basically, we say that.
Uh-
SGD 63.6 million was the maintenance CapEx in FY 2024.
Yes.
Is this the right comparable? Basically, in twenty-
Uh-
2025, our maintenance CapEx will be higher.
Yes. 2025 maintenance CapEx would be higher than 2024. You're comparing the correct metric.
Okay. Thanks.
This is where maybe I can provide a bit more clarity.
Yes, please. Thank you.
You probably see that, you know, one of the three segments, there's a big distribution of it, maintenance CapEx required under distribution storage. I would say it's about half/half from Ixom and Ventura. Ixom, there is a bit of a catch-up CapEx, maintenance CapEx from the COVID days. Because during COVID, a lot of the because of the lockdowns, et cetera, in Melbourne, some of the maintenance work cannot be done. Now we are progressively catching up on the maintenance CapEx. This is not a level that we anticipate to be there or we do not anticipate our maintenance CapEx to be at this level forever. It will come down at some point in time in the next maybe one or two years.
For FY 2020, for Ventura, which accounts for about the other half of the SGD 70 million, a very big chunk is used to replace buses. All right. Maybe just to recap a bit, under the Ventura framework, the company pays for the CapEx upfront with the regulator, reimbursing us for the CapEx as well as the financing cost over a period of time. There are some buses that are due for retirement. We are buying buses to replace them, and the CapEx is ultimately, in a way, like I said, backed by the government.
Right. I completely understand. Thank you. How about the growth CapEx? Like we have around SGD +31 SGD +26 SGD 8 million. We have a high growth CapEx of SGD 65 million. What is the number for 2024?
Just let get you the numbers. Rahul.
Yes, please.
What happens is, if you go to slide 36, you will be able to see there's two lines there, growth CapEx funded by FFO.
Yes.
Yeah.
Basically from SGD 14 million in 2024, we are going up to SGD 65 million in 2025.
No. Maybe, let us get you the right numbers. This is the growth CapEx that's funded by FFO. It does not include growth CapEx that's funded by a debt facility. Let us get you the total figures, so on.
Sure, I understand. Thank you.
We'll get you the numbers for the total growth CapEx for FY 2024. This is where, you know, I think we spoke about it last year. We wanted to give a bit more guidance on what we are incurring, right? Because, you know, in the past, our DPUs, you know, some fluctuation due to growth CapEx that was not debt-funded. We want to give a I mentioned before, like growth CapEx is not a bad thing. I mean, it's actually good.
Yeah.
Because we actually derive higher returns out of that. Increasingly going forward, we want to spend a bit more on growth CapEx as well. We have achieved record performance at Ixom, PGPC and City Energy. All this would not have been possible, right, if we do not put in some growth CapEx over there.
Right. Absolutely clear. Makes sense. Can I just check on this point, right? Like be it maintenance CapEx, be it growth CapEx, like we discussed at Q3, you always have an option to take this CapEx either at the asset level or at the corporate level. Depending upon where you take it might impact the DI. Would not impact, I think, fund from operations, but will impact DI.
Sure.
Going forward, how you're going to balance this out?
Okay, sure. We think that the better metric to measure our performance, especially our ability to generate cash flow, FFO, right? FFO is basically cash flow generated by the business after letting off maintenance CapEx because, you know, a business will always require maintenance CapEx. We will have some form of maintenance CapEx every year. It will not be the same. There'll be some movements, but it's about there. Therefore, we think that FFO is the best metric to reflect our ability to generate cash flows. The difference between FFO and DI is essentially the funding of growth CapEx, et cetera, and the debt repayment, et cetera, and so on.
I cannot give you specific or very prescribed methods as to how we're going to fund it because it depends on the country in question, right? For example, in Korea, in Australia, there is some withholding tax that we have to pay if we bring back cash, right? At KIT level, we are committed to providing a fixed increase to our DPU, which basically means that every single year, I guess every single half a year, we need to pay out a certain amount of money, right? This amount of money can come from the Singapore assets, it can come from assets from various countries. As much as possible, we would like to avoid taking cash from countries with high withholding taxes.
It probably makes a lot more sense for us to actually consume cash over there to fund the growth CapEx in that country, right? That's one consideration that we have. We would generally want to fund growth CapEx with debt facility. It actually improves DI. Sometimes the question that we have is, if I have a lot of cash sitting in one business, why should I be drawing down additional cash, additional debt to fund the growth CapEx? I'll be incurring interest expense for without a good reason. Which is why, you know, we want to encourage our investors to focus more on FFO as opposed to DI. Yeah.
Right.
I hope that gives some.
No, no. Yeah, this is very helpful. Just to confirm, so going forward then, I assume you would be sharing FFO by asset and on a quarterly level so that we also focus on it.
Yeah. I think we have been sharing FFO.
Yeah. We share our FFO on a semi-annual basis.
Semi-annual basis.
Semi-annual. Okay. Semi-annual basis. Okay. Thank you. Thank you. Very helpful. I'll get back in the queue. Thank you.
Thanks, Rahul. Next up we have Yu Kiang from CLSA. Yew Kiang, please go ahead.
Hey. Hi. Hi, Kevin. Just on the Ventura CapEx, right? You mentioned that it is reimbursable from the government. Can you maybe share more details, like is this index-linked or Will they pay any amount or is it a fixed fee over a certain period?
Okay.
Is there any plans to electrify the buses, you know, make it all EV, you know, which ultimately I would guess that would also incur some further CapEx.
Yeah. Let me explain a bit more about the regulatory framework for Ventura in Australia. What happen is that at the start of every contract, the business will agree with the regulator how much buses to purchase and replace each year. We will agree on the funding plan, how much debt to take on, right? In the, in the revenues or in the fees that we receive from government, the government will actually build the reimbursement into the total revenues or fees that we receive from the government. Let's take a bus, for instance, right? Let's say let's assume a bus costs about $100, right? Let's say we debt fund the CapEx, the $ 100.
What the government in each year would do is that they will actually look to repay us over X number of years. You take $100 divided by X, that will be the amount that they will return to us in that year. On top of that, they will also reimburse us or pay us back the interest expense that we incurred to fund those buses.
It will be over several years before you can fully recoup.
Exactly.
CapEx.
Yes. Generally, I'll say, somewhat over the life of the bus. Yeah.
It should be like 10, 20 years. Would that be?
I would say between 10 to 20 years. Yeah. I mean, I do not want to disclose the exact number, but it's generally between 10 to 20, yeah.
Okay. Okay, thanks. That's all from me now. Thanks.
Thank you, Kiang. We have one question from the floor.
Maybe just one thing on, I'd like to clarify on growth and maintenance CapEx for Ventura. If it's replacing an existing bus, it will fall under maintenance CapEx. All right? If you're buying new buses, then it will fall under growth CapEx.
Thanks, Kevin, for the clarification. I'll move on to a question that came from the floor. This is from Aaron. Could you share if the team has reviewed the portfolio on a holistic basis to identify if there are any underperforming assets in KIT's portfolio that are not generating sufficient yield, and if there are considerations for divesting?
Okay, sure. I would say that KIT is giving our investors a very high cash yield. I think we're quite famous for that. I think we also want to note that we are not just a yield counter. We want to focus on total shareholder returns, which basically means that we're also trying to give our shareholders a what we call a share price appreciation. In order to achieve a share price appreciation, we need growth in the underlying business. That's what we have done with Ixom, PCSPC and City Energy. We are always every year we do a portfolio assessment. Yield is not necessarily the only metric that we look at. We look at the long-term growth.
Sometimes we are happy to for an asset, right, that has, that generates better the cash yield because we take most of the operating cash flow and put it back to growth CapEx to grow the business. Within our portfolio, we want to have a very ideal or optimal portfolio mix where we have some assets that is generating a lot of cash, right? We have some assets that may not generate cash, but it's a good business. There's a lot of growth CapEx which we were happy to fund and achieve increase in EBITDA, increase in cash flows in the tender crop.
Thanks, Kevin. Next question we will take from Ada from OCBC. Please go ahead, Ada.
Hi, Kevin and team. Happy Lunar New Year, and thank you very much for the presentation. I think I have three questions from me. First, I noted that KIT's weighted average cost of debt has actually improved over the past quarter. I was wondering if you see any further financial cost savings going forward and whether you can provide some guidance on your cost of debt for 2025. Secondly, I think there's been quite a lot of noise around the distributable income figures due to one-offs and timing differences. This is something that I've always kind of struggled with, which is to reconcile the fact that your distributable income may be lower year-on-year, but DPU is actually higher. Wondering if management can provide some guidance there.
My third question is a little bit more specific to EMK, and I was hoping that you can provide a little bit more color on what might be causing the volatility in landfill prices and what sort of favorable policy adjustments you are expecting there.
Okay. We probably have to take this in stages.
Yeah, let's start with it.
Let's start with the one that you asked about, interest rate, right?
Yeah. It has improved slightly. This is mainly due to the floating component of our loan portfolio that we did not hedge. What happened was the benchmark rate has come down.
When Federal started cutting rates in Singapore, you also do see SORA rate coming down. That's how, that's where we see the benefits. To answer your question whether we are able to give some guidance for 2025, as you may know now, the market condition, it really depends on what's gonna happen in U.S.
I think, you know, in terms of guidance, we should look at how FOMC is guiding us, guiding the market. That would be the right way to look at it.
Okay.
Yeah. I think the second question was on.
On DI movement.
Okay. You see our assets, like what Kevin has mentioned, how all our assets are generating DI. Now, whether we want to, you know, repatriate the DI back to Singapore for distribution, it's really a business decision. It depends on the business needs. It depends whether there's a growth CapEx requirement or a maintenance requirement, right? There will be timing differences as well. It doesn't mean that if, for example, it can generate SGD 100, I will repatriate SGD 100 back. That's not efficient because there's couple of components there, tax and so on and so forth, right? The timing differences and also the gap between DI and DIPU, I, you call it, the gap will be largely funded by debt. Yeah.
Okay.
Just to maybe add on to that is, you know, at a KIT level, we are committed, like I said, to providing a certain amount of distribution to our unit holders. As much as possible, we want to draw cash or dividends from assets from countries where there is no withholding tax on dividends.
Mm-hmm. Mm.
Our very ideal candidate is actually all the Singapore assets. We'd like to fund our distribution, all the cash flow from Singapore assets. Korea, there's some withholding tax over there. Australia as well. There's depending on how much franking credits we have. That's more of the tax optimization question.
I think your question aims more to, like, you know, what are causing the fluctuations, right? The movements in DI, right? There are a few things that will cause DI. DI is basically the amount of income that we can ultimately distribute to unit holders. It's a very confusing number, right? For a few reasons why. First, DI is also after one-off cost, right? For example, in 2024, there are certain one-off fee expense of about SGD 13 million, right? This cost that we do not expect to recur. When it comes to setting our DPU, right, we are committed to growing our DPU by 1%-2% annual.
We have done so at least 1% in the last couple of years. This is something that we probably will continue doing going forward. We take a very long-term view to debt position. We take a look when assessing the long-term growth of DPU. We look at over a long period of time, how much can our cash flow increase by. The fact that we increase our DPU means that we are actually very comfortable and confident of our ability to generate cash flow. I would say that maybe the better way to look at it is to look at FFO, right? Because FFO is the cash from operation, cash from asset after maintenance CapEx. Our FFO is probably at SGD 280+, which is higher than, you know, our distributions.
I would say one of the key difference between FFO and DI is really growth CapEx. Growth CapEx to me is sometimes, you know, discretionary. If we need cash, we can turn it off. If we do not need the cash, we turn it on. As, like I said, you know, growth CapEx is good, and we want to spend them to increase our growth on business going forward.
Did I cover all the questions? I may have missed out some of your queries here.
Yeah, I think that's very helpful. I think it also sends a more positive sign to the market as well to have a metric that is a bit more accurately representing the underlying businesses and also something a little bit more stable, because I think the noise that has been caused by, especially all the CapEx and one-offs, has been quite distracting as well. It really caused a lot of questions in terms of whether or not.
Yeah.
it is sustainable.
All right. like last year, like I said, there's a one-off, transaction cost, fee payment.
That transaction, we acquired a few business in that year. We do a bit more refinancing in that year. There will be certain transaction costs, up-front costs, financing costs that will help to reduce DI, but we do not expect them to, you know, recur every single year. Financing up-front costs probably happens only when we refinance, yeah, which is gonna be like every 5-7 years, yeah.
For the bench.
Yes. Okay. Thanks a lot. That was more helpful. Yeah, I think I had that one last question about a bit more color around EMK as well.
Oh, okay.
Yes.
Yeah. On the landfill, right?
What happened was that, for 2024, I would say from a macro perspective, it's not too great, in Korea.
The macro is a bit weaker. They have issues with the construction industry, right? For example, like our landfill, right, and like all other landfills in Korea, they accept quite a heavy what we call industrial and construction waste. With the construction industry showing some lower performance in Korea last year, less construction waste was produced, less industrial waste produced. That actually led to a decrease in the ASP for landfill. This is not something specific to EMK. It's something that is applied across all players in-
the whole space. However, having said that, we think we actually have a very positive long-term view or even midterm view of Korea. The current macroeconomic issues at Korea will go away. I think we are starting to see some signs of improvement to the sector. What do I mean by that? For example, again, this is something that we are monitoring very closely. There will be two policy changes in Korea come end of the year and early next year. This pertains to the closure of public landfills in the Seoul metropolitan area.
It also pertains to no direct waste from households to the landfills and so on. This basically means this will have a few impacts. It basically means that the ASP for incineration in incinerators that's located near the Seoul metropolitan area, it could probably see a higher ASP increasing. Then regional landfills that's outside of the Seoul metropolitan area could also see ASP increases because, you know, the country is urbanizing, the country is growing, right?
Waste is produced, and not all waste can be recycled. Korea has a very high level of recycling rate. Over 90%, almost, I think above 95%. The waste must go somewhere, right? Which is why we actually have a positive view of the business in the next, over the mid and long term.
Okay, thanks a lot, Kevin. This is very helpful. I'll come back to the queue. Thanks a lot.
Thanks, Ada. I'll move on to another question from the floor, from Aditya Salim of Chartwell Capital. Can you share some color on Ventura's strong DI in the fourth quarter of 2024, and how should we think about the DI run rate for Ventura in 2025?
Sorry, I missed that.
I'll repeat the question. Aditya's asking for some color on Ventura's DI performance in 4Q 2024, and how should we think about the DI run rate for Ventura in 2025?
I'll say Ventura is a very stable business. The number of assets that we have will is projected to grow at somewhat multiple of the population growth rate in Australia. The DI that you see, I think SGD 50 million plus, I think that's about 6 months worth of contribution. For 2025, you could probably see a higher number because 1, it contributes on a full year basis to KIT.
Thank you, Kevin. The next question comes from Goola from The Edge. How should we think about value given that NAV declined year-on-year? How can asset growth yield better value in terms of NAV, or should we just focus on DPU growth?
I would say that NAV is not the correct metric to measure KIT. Our total assets, our statutory asset value is not the correct metric to value KIT. Let me give you an example point. I think, you know, the REITs, they are allowed to revalue their assets every single year. We are not allowed to revalue our assets. For instance, we bought Ixom in 2019. EBITDA has increased from SGD 130 million then to slightly over SGD 200 million as of last year. That's an SGD 80 million or SGD 70 million increase over the last four to five years, and we still carry Ixom at the historical acquisition cost. Our total assets does not reflect the market value of our assets. Likewise, City Energy.
City Energy, if you track our record, City Energy has grown a lot in the last two or three years after we have repositioned it for growth. EBITDA increasing from SGD 47.4 million in 2021 to SGD 84.5 million for last year. That's like a 38% increase. Again, we are still carrying at the original book value. There is certain fixed line assets and concession assets in Singapore that will fall off. Those will depreciate over time. That's true. I think our strategy is to focus a lot more on evergreen assets, and we have been growing our evergreen assets such that an increase in valuation, right, of our evergreen assets will actually outweigh the effect of any decline in the value of our fixed line assets.
I would encourage our investor shareholders to look at our independent portfolio valuation as a better proxy, right, for the market value of our assets.
Just to add on, you can look at our AUM number. That's on slide four. It's SGD 9 billion AUM.
Thanks, Kevin and Raymond. I'll move on to the next question from the floor. This question is on Ixom from Aaron and Terence Chua. Will KIT consider a more proactive approach in seeking potential buyers for Ixom to realize capital gains, which could then be reallocated towards loan repayment and potentially new investment opportunities?
Yeah. I think we got this question a lot. We are at this stage committed to growing Ixom. It's a great business. We are confident that we can grow it strongly in the years to come. If as and when someone comes to us with a price that we cannot say no to, we will consider selling. This is the approach that we take to our other assets as well. Ultimately, we believe that we want to do what is right first, grow the business, build a strong business, over time, people will recognize the value that we created, and then they will offer us If they offer us a price that we cannot say no to, then we sell.
Thanks, Kevin. We have a question from the floor. Shekhar, please go ahead and ask your question.
Thank you, Elaine. Thank you, everyone, for letting me speak. Just two quick questions. First one on portfolio reassessment. I think some of it has already been asked earlier, but I'll just check again. Based on your current portfolio base, is there any asset that is absolutely right for you to consider divesting? Second question is, you know, you had four pillars in your business segments. There is a empty pillar called digital. Given the recent news flow from Keppel Corp on the optic fiber, any possibility of you considering offtake of the optic fiber from Keppel Corp anytime soon?
Okay, sure. I think you have three questions over there. I'll probably take the first question first. I think the first question is, are there any assets that is prime for monetization? I think that's probably not something that I will provide a direct answer to, right. Like I said, you know, whilst we have, going forward, we are going to take a more active approach at monetizing, grow our business and then resetting our capital. That's something that we will do going forward. We have said that last year. Like I said, we are also a very long-term investor, right. The decision that we always make is that should we hold or should we sell?
If we feel that someone is offering us a value that's higher than the intrinsic value of the business, then we will do a sell decision, right? There is probably no sacred cows in our portfolio. If someone comes to us with a price that we cannot say no for any assets, we will probably consider that, right? I'll say, you know, we have some good businesses there, and sometimes we do get inbound notice, or inbound inquiries about our assets. Okay, we had two more questions, right?
Wong Yew Kiang had a question on, given the new flow for on digital assets with subsea cable at sponsor level, is there any consideration to offtake any of these?
Yeah. Digital infra is a sector that we are very keen on. We see a lot of growth over there. Our sponsor, Keppel, right, on the Keppel Data Centres side, they are building the subsea cable. It's still under construction. Probably come online, I don't believe in a couple of years' time. I think that's an interesting asset. I think at the right time, you know, we probably wanna have conversations with them.
Thanks, Kevin.
Okay. Thank you.
Thanks, Yew Kiang. I have one more question from Aditya Salim. Can you share if there is any progress on the concession extension at SingSpring?
The SingSpring concession will expire end of the year. The land lease can run for another eight more years from the end of 2025 . We have been having discussions with PUB over possible extension. We are still in discussions, and at the right time, we'll make the necessary disclosure.
Thanks, Kevin. If there are further questions from the analysts, please raise your use the raise hand function so that I can see you and call you, queue you to ask. We have one question from Peggy Mak, from Whitefield Capital Management. Peggy is asking, "Can I clarify the workout of FFO? Is FFO after interest expense and maintenance CapEx?" I think that since we are disclosing FFO for the first time in quite detail, for us to do that, yeah, definitely, clarify this.
Yes. FFO is after interest expense and after maintenance CapEx. That's the question, right?
Yeah.
I have one more question from Terence Chua at UOB. Can I check what is the trajectory of your weighted interest rates in 2025?
Trajectory. Is that like an interesting I will not be able to give a guidance on this as you can see on the presentation slide, we are 70% hedged. The movement will remain on the 30% unhedged portion, and that's our margin is fixed, right, with the bank. The movement is really the benchmark rate. I would say that the entire market takes cue what happens in the U.S. Yeah.
I think Terence had a follow-up question. Are you expecting any interest savings?
I think if, you know, FOMC were to cut rate, and Singapore were to follow suit by devaluing the currency, I would expect to see some savings on interest rate.
Thanks, Raymond. I have a question from Suvro of DBS. Suvro, please go ahead.
Hi, thanks. Just wanted to follow up on this conversation around the what to focus on. Is it distributable income or is it FFO? At the end of the day, I guess given that we are a business trust, distributions that continue to be important metric for investors. In terms of KIT, doesn't KIT's ability to sustain distributions or growth distributions? As an investor, what should they be looking at? Is it DI? Because DI may not then give the best picture or is it FFO? When does FFO get impacted by your timing of growth CapEx? It's, again, it may not provide the right picture. What should, how should investors then judge?
Okay.
the ability to sustain.
So-
-distributions?
Yes, you know, I know, the REITs and business trust in Singapore, we tend to focus a lot on cash yield. We do want to provide our unitholders with strong, stable and increasing cash yield. At the same time, we do not just want to be a cash or a yield component stock, right? We want to provide total shareholder returns to our unitholders. Our objective is always to grow our DPU in a very sustained manner, right? That's somewhat benchmark to inflation and then hopefully that the growth in our portfolio will catalyst or catalyze increase in our share price. As to what metric, I would say that the better metric to determine the sustainability of our distribution is actually FFO.
There is a lot of noises in our DI, right? Some are one-off, some are growth CapEx. It's hard, right, from an outside perspective to assess from DI whether our DPUs, distributions are sustainable. Which is why, you know, I think we wanted to focus a bit more on FFO. FFO is the cash flow from operations from our underlying assets after maintenance CapEx. Long this number is higher, right, than the distributions that we are making, I think we are in good position. Our cash flows are very strong, recurring, sustainable, therefore, the DPUs that we make are also quite sustainable.
Okay. Even if DI is lower than the distributions you're making, it's not a point of concern in terms of.
It's not a source of concern for us.
Okay. Going forward into next year, if you look at your portfolio, where do you think you're expecting incremental growth and is there any areas where you think there is risk to the cash flows?
Sorry?
If you look at it. If you look at your portfolio, are there any particular assets that you think will be your main focus areas? Are there any areas where you think there is risk to the cash flows?
I'll say our divide our portfolio into two, right? We have a good blend of actively managed assets where we own a controlling stake or 100%. We have a portfolio or sub-portfolio where we own minority interest and so on. Our efforts are always focused on those assets that we control and have a lot of sort of expertise in, right? That would be Ixom, Ventura, City Energy, EMK, and so on. These assets all happen to be in asset classes or sectors where the broader Keppel Group has a lot of operating expertise in, right? Which is why we want to leverage on the group operating expertise, knowledge within a group to grow this.
Where do we see incremental growth in Keppel's portfolio? I'll say we do see increase in growth in our portfolio across time. Even from the, I'll say the passively managed, passive assets, I think there are some growth over there as well. For instance, right, let's say using the German Solar Portfolio as an example. The number of systems we have in that portfolio is fixed, right? Because of the way the debt amortization is structured, it's not a bullet loan, it's an amortizing loan.
As over time, as we amortize the debt or pay down our debt, the FCFE coming out from this portfolio will actually increase over time, even when the number of systems remains the same. I think Ventura, I think we have spoke a lot about the growth that we have achieved at Ixom, City Energy, and PGPC. Maybe I can say a bit more about, let's say, Ventura, right? I think this is a question that I forgot to answer earlier on, right? We do not just see Ventura as a transportation play, but we also see as an energy transition play, right? The world going forward, the direction is very clear. They will switch to electric buses, and that's definitely a journey that we want to be part of, right?
That's just the first point I make. There's also good growth in Ventura as well, because if you look at Australia, Melbourne is one of the biggest city over there, if not the biggest. They are also probably one of those that have the highest level of population growth through natural birth or as well as immigration. We do see more buses being required over time in Melbourne, and that's certainly something a trend that we want to tap upon.
Thank you.
Thanks, Suvro. I think we'll take one last question on the wire. Terence from Mizuho, can we get what your acquisition pipeline is for this year?
Okay. Good question, right. We see a lot of infrastructure opportunities that are out there, and we are always on the lookout and chasing a number of deals. I'll say that we are very, very disciplined. We want to buy correct assets at the right price and so on. If we can find one that meets our requirement and where we can get a meeting of minds in terms of price, we'll definitely transact. Yeah. Like I said, you know, we do expect to do a couple of deals, this year. Right. I probably cannot commit or comment on the number of deals, the size that we can do, we do see opportunities coming up.
Thanks, Kevin. We've come to the end of our results webcast this morning. A happy Lunar New Year again to everyone who participated, and thank you for joining us this morning. Have a nice day. You can disconnect. Thank you.