Good evening, ladies and gentlemen. Welcome to the conference for Keppel Corporation's first half financial results for 2022. We have on the panel this evening from your left are Mr. Manjot Singh Mann, CEO of M1. Ms. Cindy Lim, CEO of Keppel Infrastructure. Mr. Chris Ong, CEO of Keppel Offshore & Marine. Mr. Chan Hon Chew, CFO of Keppel Corporation. Mr. Loh Chin Hua, CEO of Keppel Corporation. Ms. Christina Tan, CEO of Keppel Capital. Mr. Louis Lim, CEO of Keppel Corporation. Ms. Christina Tan, CEO of Keppel Capital. Mr. Louis Lim, CEO of Keppel Land. And Mr. Thomas Pang, CEO of Keppel Telecommunications & Transportation. We will begin the session with presentations by Mr. Loh and Mr. Chan, followed by a question- and- answer session. Mr. Loh, over to you, please.
Thank you. Good evening. Welcome to the webcast on Keppel Corporation's First Half 2022 Results and Performance. The global economic outlook has weakened over the past few months with the conflict in Ukraine, heightened geopolitical tensions, climate change and supply chain disruptions, and the lingering impact of COVID-19, imposing challenges on the operating environment. Inflation, interest rates, and energy prices are expected to stay higher for longer, while prospects for economic growth have dimmed in many key economies. As Keppel navigates the myriad challenges, we are also taking steps to enhance the resilience of Keppel's operations and business. As at the end of June 2022, we have locked in interest rates for 75% of our loans with an average interest cost of 2.56% and weighted tenure of about three years.
This will help ensure that Keppel remains in a strong financial position to weather the headwinds. The essential services that Keppel provides are relatively resilient during economic slowdowns, as they had been during the pandemic. In an environment where inflation is expected to persist for some time, demand for real assets with cash flow, such as infrastructure, data centers, and real estate will continue to grow. These are precisely the areas in which Keppel has strong track records and which we are focusing on as part of our Vision 2030. First half 2022 saw Keppel accelerate the execution of our vision as we continue to simplify and focus our business, monetize our assets, and grow our presence in renewables and decarbonization solutions.
We have completed the divestment of Keppel Logistics and also signed definitive agreements for the proposed combination of Keppel O&M and Sembcorp Marine and resolution of our legacy rigs and associated receivables. When the O&M transactions are completed, the new Keppel will be a very different entity from what we were before. We will be a focused provider of sustainable urbanization solutions with an asset management arm complemented by strong engineering, operations and maintenance capabilities in energy and environment, urban development, and connectivity. As we continue to execute our Vision 2030 strategy, I'm confident that we will not only enhance the group's earnings, but also help the market to better understand and appreciate Keppel's value. Keppel delivered strong results in first half 2022, with the group achieving a net profit of SGD 498 million, 66% higher compared to SGD 300 million in first half 2021.
Annualized return on equity improved to 8.4% for first half 2022, compared to 5.5% for first half 2021. Free cash outflow was SGD 127 million in the first half 2022, compared to the inflow of SGD 499 million in first half 2021, due mainly to lower divestment proceeds. Net gearing remained unchanged at 0.68x as at end June 2022, compared to end December 2021. Since the launch of our SGD 500 million share buyback program in January this year, we have repurchased 57 million shares at an average share price of SGD 6.39, amounting to SGD 364 million in the first half 2022.
In appreciation of the support and confidence of our shareholders, the board of directors has approved an interim cash dividend of SGD 0.15 per share for first half 2022. This interim dividend, which will be paid to shareholders on 19th of August 2022, is higher than last year's interim dividend of SGD 0.12. Reflecting the board and management's confidence in the group's performance and execution of Vision 2030. We have emphasized our commitment to grow recurring income. For first half 2022, recurring income contributed SGD 202 million to the group's earnings, an increase of 43% from SGD 141 million in the first half last year. Since the start of our asset monetization program in October 2020, we have announced about SGD 3.6 billion of asset monetization and received about SGD 2.9 billion of this in cash.
The most recent announcement was the non-binding term sheet on the sale of our interest in the entity which owns the Keppel Marina East Desalination Plant to Keppel Infrastructure Trust. As the developer of KMEDP, Keppel Infrastructure will continue to operate and maintain the plant, which will add to the group's recurring fee income. At the same time, the asset will enhance the strength and resilience of KIT's portfolio, providing greater cash flow visibility. With the good progress that we have achieved and the lineup of assets for monetization, we remain confident of exceeding our SGD 5 billion target by end 2023. Our asset management business is not only a growing contributor to the group, but also an increasingly important and strategic horizontal that pulls the group together. The group's capabilities in developing and operating real assets across these asset classes are well appreciated by investors.
This unique value proposition is something we have and will continue to leverage as we grow our asset management business. We are not just a financial investor like most asset managers. Keppel has a long history and track record of building and operating many of these real assets that investors are increasingly targeting. Assets with predictable cash flow and protection against inflation. In the first half of 2022, our asset management fees rose steadily, growing 14% year-on-year to SGD 126 million, further boosting the group's recurring income. Plans are in progress to launch new flagship funds, such as the Keppel Core Infrastructure Fund and the Keppel Sustainable Urban Renewal Fund, in line with the group's focus on sustainable urbanization solutions. At the end of 2021, Keppel Capital's AUM was SGD 42 billion.
Of this, Keppel has put in about SGD 3.5 billion from our balance sheet. We said earlier that as at end June 2020, the group had SGD 17.5 billion of monetizable assets based on carrying value. These assets include our land bank carried at historical costs. Should we monetize these assets at, say, a market value of about SGD 20 billion, and if we were to use SGD 5 billion of the proceeds to reward shareholders through dividends and through the repurchase of shares and also pay down debt, then we would have some SGD 15 billion to reinvest for growth. Using our asset-light model and investing alongside investors in our chosen new growth initiatives, our AUM could potentially grow to over SGD 200 billion, assuming that a similar multiplier applies.
Amidst growing concerns about climate change, Keppel is leveraging our asset-light model to seize opportunities in renewables, clean energy, decarbonization, and environmental solutions as one Keppel. In July, we announced a joint initiative between Keppel Corporation and KIT to invest SGD 234 million in offshore wind assets with a capacity of 258 MW across Europe. This investment will provide Keppel not only with stable recurring income from the operating assets, but also a strong deal flow pipeline in well-established markets with best-in-class operators and co-investors. Including this latest announcement, the group has about 1.8 gigawatts of renewable energy assets in our portfolio. This and other recent initiatives demonstrate how Keppel can quickly scale up in our growth areas and expand our sources of recurring income without relying just on our own balance sheet.
Keppel Infrastructure delivered very strong performance in the first half of this year, with earnings rising 77% year-on-year as we continue to make progress in supporting our communities and customers on their journeys to net zero. In June, Keppel Electric became the first entity in Singapore to be issued an Electricity Importer License by Energy Market Authority, and commence its first renewable energy import under a two-year power purchase agreement of up to 100 MW of renewable hydropower from Laos. We aim to leverage this inaugural cross-border renewable power trade experience and track record to scale renewables importation over the longer term to provide low carbon energy to our customers in support of their net zero plans. Keppel Infrastructure continues to push the envelope for the development of more renewables and decarbonization solutions.
This includes an MOU with the National Environment Agency to jointly study the feasibility and explore the implementation of carbon capture at Singapore's waste-to-energy plants, and a grant from the Energy Market Authority and JTC to pilot Singapore's first membrane-based nearshore floating solar PV system at Jurong Island. The property market in China faces significant headwinds as market sentiments have been affected by debt issues faced by certain Chinese developers, the slowdown in the Chinese economy, and the COVID-19 related lockdowns. Despite the short-term economic challenges, we remain confident about the long-term potential of China, especially in the Tier 1 and Tier 2 cities where we operate, underpinned by continued economic development and growing affluence amongst the Chinese people.
In the past few years, we have been increasingly monetizing Keppel Land's sizable land bank as we transform Keppel Land from a traditional developer into an asset light provider of urban space solutions. To further accelerate our asset light strategy, we are actively exploring opportunities to significantly monetize Keppel Land's land bank in China and Vietnam over the next 1-2 years. This includes the possibility of injecting our land bank into funds managed by Keppel. It would not only allow us to realize the potential value of a land bank, which continues to be held at cost, but also expand our AUM. Investors in this land bank funds would also be able to tap into the proven capabilities of the Keppel Land teams who have been operating in China and Vietnam for the past three decades.
Looking ahead, Keppel Land has continued to accelerate its pivot towards providing real estate as a service and is also exploring a pipeline of sustainable urban renewal and senior living projects across key markets. To be clear, while income generating real estate and real estate services will remain a key focus for the group, the future Keppel will not be just a real estate company after the logistics sale and proposed Keppel O&M spin-off. As part of Vision 2030, Keppel will also focus on flagship offerings in energy transition and decarbonization, environmental engineering solutions and connectivity with a symbiotic asset management business to turbocharge growth and create value for the group. Such flagship offerings will increasingly be integrated horizontally, such as in our data center business.
We will seek to provide our clients with not just data storage services, but also green electrons to support their net zero ambitions, energy efficient district cooling services, as well as an efficient capital funding and recycling model through our private data center funds and Keppel DC REIT. We continue to grow our portfolio of data centers in key markets. We have just announced our sixth data center project in mainland China to cater to the strong demand for data centers driven by the country's continuing digitalization and data localization requirements. In Singapore, we are also actively working with the government and partners to introduce green power and energy efficient infrastructure for both our new and existing data centers.
M1's earnings grew significantly, rising 62% year-over-year in first half 2022, underpinned by strong execution of its transformation plans and continuing growth in the enterprise business, coupled with the increase in roaming and prepaid revenues following the progressive reopening of economies. M1 continues to make good progress in its 5G standalone network rollout. We have achieved more than 80% outdoor coverage as at end June 2022 and are on track to achieve nationwide outdoor coverage by end 2023. M1 is also actively collaborating with other Keppel business units and industry partners to create smarter future ready solutions and more 5G use cases. A case in point is M1's collaboration with Keppel Land to transform i12 Katong into a 5G-enabled shopping mall. The outlook for the O&M sector continues to improve with the increase in oil price.
In the first six months of 2022, Keppel O&M secured $256 million of new orders, bringing its net order book to $4.4 billion as at the end of June. In the latest Petrobras tender, Keppel O&M was selected as the only qualified bidder for the P-80 FPSO project. Keppel O&M is presently in advanced discussions for the P-80 contract, as well as an option for a second FPSO. The two FPSO projects, if awarded, would add over $8 billion to Keppel O&M's order book. Both FPSO projects will have milestone payments with a 10% deposit upfront from the customer when the contracts are executed. Keppel O&M was profitable in first half 2022.
OpCo, which will transfer across to merge with the new combined entity minus the legacy rigs and the out-of-scope businesses, made a net profit of SGD 94 million in the first half 2022. Preparations to complete the proposed O&M transactions are progressing well. Antitrust filings have been launched in different markets, and we are hopeful that approvals will be obtained within our expected timeline. Both Keppel and Sembcorp Marine are also concurrently working on submitting the relevant applications to SGX for the respective shareholder meetings to approve the proposed combination. In the meantime, Keppel O&M is making encouraging progress with its legacy rigs. The near-term shortage of modern rigs has led to an increase in inquiries as well as utilization and day rates for benign environment jackups and floaters.
In May, Keppel O&M announced SGD 255 million worth of bareboat charter contracts for four of its legacy jackups, with charter periods of 3-5 years. Keppel O&M is also engaging potential buyers for some of its rig assets. Given the improved market sentiments and traction achieved thus far, we are confident that legacy rigs can be substantially monetized over the next 3-5 years. We continue to work towards completing the proposed O&M transactions by the end of 2022. As announced, when completed, we will distribute substantially all the shares of the combined entity that we will receive as a distribution in specie to Keppel Corporation's shareholders.
The distribution of this 46% stake in the combined entity to our shareholders will be approximately 18.5 shares of the combined entity for each share of Keppel Corporation that our shareholders hold. The final value of this distribution will depend on the actual traded price of the combined entity after the completion of the deal. For illustrative purposes, based on the volume-weighted average price of Sembcorp Marine at the time of the signing of the definitive agreements, the value of shares of the combined entity that each Keppel Corporation shareholder will be entitled to for every share held is approximately SGD 2.26.
Together with the SGD 4.05 billion comprising vendor notes, perpetual securities, and the 10% stake in AssetCo, as well as the SGD 500 million cash that we'll receive in cash, Keppel can realize approximately SGD 9.42 billion in value from the proposed transactions, which is equivalent to SGD 5.32 in value per share of Keppel Corporation. This does not include approximately SGD 300 million in out-of-scope assets, which will continue to be held by Keppel Corporation. To conclude, climate action and the energy transition are expected to gather pace. At the same time, considerations related to energy security will become increasingly critical to governments, driving demand for sustainable energy infrastructure.
With the global push towards net zero, sustainability-related products and services will be a major growth sector, auguring well for Keppel's energy efficiency, carbon abatement, and clean energy solutions. These are thus very exciting times for Keppel as we prepare for a new phase in the company's growth journey. Keppel is in the right space at the right time. We have the ability to create, operate, and maintain not only real assets with stable cash flows, but also assets that are highly sought after amidst the global emphasis on sustainable development. Through our focus on sustainability, being asset light, and harnessing technology. We will deliver solutions that contribute to sustainable urbanization and climate action and create value for all our stakeholders. Our CFO will now take you through the group's financial performance. Chan Hon Chew.
Thank you, Loh Chin Hua, and a very good evening to all. Before I take you through the group's financial performance, I would like to bring to your attention that in accordance with the relevant accounting standards, the results of Keppel Offshore & Marine, excluding certain out-of-scope assets, are presented as discontinued operations with comparative information represented accordingly. The group has also ceased depreciation of the relevant assets that have been classified under disposal group held for sale. This followed the definitive agreements for the proposed combination of Keppel O&M and Sembcorp Marine, as well as the definitive agreement with Baluran Limited and Kyanite Investment Holdings Pte. Ltd. for the sale of Keppel O&M's legacy rigs and associated receivables to a new and separate entity.
For the first half of 2022, the group's net profit, including discontinued operations, was SGD 498 million, representing a 66% or SGD 198 million growth year-on-year. If we exclude the results of discontinued operations, the group's net profit for continuing operations grew 26% to SGD 434 million as compared to SGD 344 million in the same period last year. All segments were profitable, with improved year-on-year performance from energy and environment and asset management. Consequently, annualized ROE improved strongly from 5.5% to 8.4%. In the first half, our urban development and asset management businesses continued to contribute significantly to the group, accounting for 65% of the group's profits.
Corporate and others, which continued to record strong returns from our investments in startups and venture capital funds, contributed SGD 56 million in earnings, representing 11% of the group's profit. Energy and environment contributed a net profit of SGD 45 million, or 9% of the group's bottom line, reversing its net loss in the prior year. Discontinued operations registered a net profit of SGD 64 million, reversing net loss of SGD 44 million in the first half of 2021. I will further elaborate on the performance of each segment later on. Beyond the growth in profitability, the group has maintained a healthy balance sheet. Net gearing was stable at 0.68x as at end of June 2022 as compared to end 2021 despite the slight increase in net debt.
Capital employed has increased due to the earnings growth and movements in other reserves during the half year. Free cash outflow was SGD 127 million as compared to free cash inflow of SGD 499 million in the same period last year. This was largely due to lower divestment proceeds from asset monetizations completed and higher investments made during the current half year, partly offset by improved working capital changes. In addition to the increases in recurring income as highlighted by CEO earlier on, other income streams such as revaluation and fair value gain on investments have performed, as has also performed better year-over-year.
Recurring income improved 43% to SGD 202 million in the first half of 2022, underpinned by stronger share of results from an associated company involved in the integrated power, gas, and renewable energy business under Keppel Infrastructure, lower share of losses from Floatel, as well as higher net profits achieved by M1. Fair value gains on investments were driven by the strong returns from our investments in new technology and startups such as Envision AESC and Vertex Ventures. The group also continued to record revaluation gains from investment properties and data centers in the current half year. Earnings from development for sale were lower year-on-year, mainly due to lower contributions from trading projects in China and the absence of en bloc sales. Moving on to the performance by segment.
Energy and Environment's net profit for the first half was SGD 109 million, a sharp reversal from the net loss of SGD 179 million in 2021, which had included an impairment of SGD 318 million related to the group's exposures to KrisEnergy, partially offset by share of Floatel's net restructuring gain of SGD 215 million. Our infrastructure business achieved a 77% increase in net profit to SGD 106 million. All key sub-segments of Keppel Infrastructure recorded higher year-on-year net profits, backed by strong execution of ongoing projects, operations and projects, and a higher share of results from an associated company, as mentioned earlier. Discontinued operations recorded a net profit of SGD 64 million, reversing a net loss of SGD 44 million in 2021, underpinned by Keppel O&M's improved performance.
In addition to revenue recognition from new projects, Keppel O&M also recorded higher investment income, improved results from associated companies, as well as gains from divestment of Keppel Smit Towage and Maju Maritime. As mentioned earlier, the group has also ceased depreciation for the relevant assets that have been classified under disposal group held for sale. Urban development's net profit was lower year on year at SGD 168 million, due to lower contributions from China trading projects and fair value gains from investment properties. There was also an absence of gain from en bloc sales in the first half of 2022, as compared to a SGD 53 million gain recognized from the sale of our interest in Dong Nai project in Vietnam last year.
Contribution from the Sino-Singapore Tianjin Eco-City was lower as there were no land sales in the current period compared to the sale of a commercial and residential plot achieved in the first half of 2021. Connectivity's net profit was lower year-on-year at SGD 10 million, mainly due to the absence of a gain from the disposal of interest in Keppel Logistics (Foshan) in 2021. This was partly offset by gains from divestment of Keppel Logistics Private Limited and Indo-Trans Keppel Logistics Vietnam Co Ltd. M1's mobile and enterprise revenue grew as it continues to expand the enterprise business and 5G offerings. Net profit from M1 was 62% higher at SGD 34 million on the back of better operating results underpinned by higher revenue and lower depreciation and amortization expenses, which were partly offset by network service fee expenses.
Performance of the data center business was lower as compared to the first half of 2021. This was mainly due to the absence of fair value gain from Keppel DC Frankfurt 1 that was divested in September last year. Earnings from our data center business shown on this slide do not include about SGD 20 million earnings from Keppel DC REIT and data center private funds, which are reported under the asset management segment. Asset management has achieved an increase of 32% in net profit to SGD 155 million in the first half of the year. The strong performance was underpinned by higher fee income arising from successful acquisitions by the REITs and trust during the period, as well as higher fair value gains on investment properties and data centers recorded by the REITs and the private funds.
These were partly offset by the absence of mark-to-market gains from investments recognized in 2021. The lower net profit from the private funds was mainly due to the absence of contribution from a fund that was liquidated in 2021. Contribution from corporate and others remained stable at SGD 56 million, despite the absence of distribution income from iGlobe Platinum Fund, recognized in the first half of 2021. As shared earlier, our investments in new technology and startups continued to yield good returns that supported the SGD 94 million of fair value gains recorded in the first half of 2022, mainly from investments such as Envision AESC and Vertex Ventures. The positive variance was partly offset by higher interest expense attributable to this segment and the absence of gain from the disposal of non-core asset recognized last year.
To round up, the group has delivered strong financial performance for the first half of 2022, as evidenced by the sharp ROE improvements, healthy net gearing and higher recurring income. With that, we have come to the end of the presentation. I shall hand the time back to Loh Chin Hua for Q&A. Thank you.
Thank you, Chan Hon Chew. We reached the Q&A session. Please submit your questions on the net and we will endeavor to answer them. Okay. The first question is from Tan Xuan of Goldman Sachs in Singapore. "On slide 8, for the potential SGD 200 billion AUM, what is the timeline that Cap, Keppel Corporation is hoping to achieve that?" There is no timeline that we are giving. I think we're just showing that, based on our asset light model and our monetization plans, we can potentially grow Keppel Capital to SGD 200 billion AUM. The time taken will of course depend on market conditions, but I think this is an achievable and quite a realistic potential AUM for Keppel Capital.
Can you also talk about the asset classes and geographies of the additional potential AUM? Maybe I ask Christina.
Okay. Thanks, Tan Xuan. With regards to the asset classes and geographies, we will actually focus on what Keppel is strong at. In areas of like, what we'll call energy and environment, providing clean energy, clean water. We will also focus on areas in connectivity, which is our data centers, our subsea cables, area, and of course, not forgetting urban development and solutions. You know, in terms of geography and asset classes is probably where, you know, Keppel has shown its capabilities and strength. I think our investors actually like Keppel Group because of our capabilities as a developer, operator and manager.
We are very confident that we will be able to continue to grow our AUM with the support of all our sister BUs, you know, realizing the potential for us. Thank you.
Thank you, Christina. Next question submitted by Terrence Chua of Phillip Securities, Singapore. Terrence has two questions. First question: could you provide us more insight into the China projects? I think he's referring to the real estate projects. How much have the average selling prices and sales fallen for the China projects? Maybe I ask, Louis Lim.
Yep
To address this.
Thank you for the question, Terrence. I think as CEO mentioned in his speech, we are clearly facing headwinds in China, with the deleveraging policies as well as the COVID situation. The impact on sales has been significant for the largest developers across the market. We have seen a 50% drop in units sold. For Keppel Land in China, we have also seen about 2/3 drop from 1,550 units that we sold in the first half of last year to 480 units for the first half of this year. In terms of the selling prices though, because we are in some of the key markets like Shanghai and Wuxi, actually the secondary market pricing is quite strong.
Again, the government sets limits on pricing, so we actually haven't seen a significant drop in prices for those particular cities and micro markets that we are in. We maintain a very positive view on the medium to long-term prospect for the Chinese market. I think in the meantime, we will continue to see headwinds. That said, over the last month, in June, if you look at the high-frequency data, it's actually improved significantly with an increase in sales in June for about 61% versus the previous month. For Keppel Land China as well, we saw very good recovery in our project in Wuxi, Seasons Residences. June saw Keppel Land having the highest number of units sold in China.
Thank you, Louis.
Okay.
Terrence Chua has a second question, which is related to the first, which is, do you foresee any impairments in 2022? For this, maybe I ask, Chan Hon Chew, CFO to answer.
Thank you. Thanks for the question. As part of the process in preparation of the results announcement, we have reviewed all the projects under development and the conclusion is there's no need for any impairments. For the land bank, as we have always said, it's actually is the cost that's really a very low risk of any impairments.
Yeah. Thank you. I think maybe just to kind of add to that is that our land bank historically has been bought, they are on average, more than, I think, seven years old. So they are bought at a much, lower price than what it is, the market consider to be the market value today. So, the risk of impairment from the land bank is, fairly limited. Yeah. Next question. This is, submitted by Mayuko Tani of, Nikkei in Singapore. She has a couple of questions on data centers. Maybe I will start with the first question and ask Thomas to, address it. Thank you for the presentation. Please give us an update on new and green data center development plans within Singapore as well as globally. Thomas.
Thank you very much, Mayuko-san, for the question. Keppel is indeed interested to participate in the government's call for application for data center innovation projects in Singapore. We are looking to bring several innovative solutions to the proposal, including a floating data center module as well as a larger project that could aggregate demands from various players. We are at the stage of discussing with potential partners to bring in renewable energy as well as green molecules into Singapore in order to satisfy this energy security, as well as energy efficiency that we want to bring to our data center projects in Singapore.
Going forward, the similar concept could be exported to other countries that have similar requirement as well as constraint in land availability in their location. This similar concepts could be exported to the regional countries as well. Thank you very much.
Thanks, Thomas. I think you answered the three questions really. Anything else you want to add? Anything on the floating data center project you want to elaborate? I think, I guess this is referring to the floating data center module that we had earlier briefed the market on.
Yeah. We have made quite a lot of progress on that floating data center module. At a stage that, when we are able to make an announcement, we'll make the announcement when approval are obtained.
Okay. She has a third question, which is, what other technologies are you interested in? Would you like to address that?
One of the technology that we use in data center is in helping to reduce the energy required in cooling, which takes up a lot of electricity in every data center project. We have invested in a technology company in the U.S. called Nautilus. We participated in the equity of that company. They have launched our first floating data center module in California, and it uses seawater for cooling of the data center and has brought the power utilization efficiency, the PUE, down significantly, and it is receiving a lot of attention from the market. One of the technology we would use in the Singapore project will likely be seawater cooling to help with energy efficiency as well.
Okay. Thank you, Thomas. Next question. Next question is from Terrence Chua of Phillip Securities Singapore. Terrence has two questions. "Hi, management. Thanks for the presentation. Can you provide more insights into the proposed O&M transactions? How far along have you moved, since the announcement?" Terrence, I will try to address this. When we first announced the signing of the definitive agreement, we have spoken about how this is a win-win-win proposal in terms of it's good for Keppel Offshore & Marine, and of course, we believe it's also good for Sembcorp Marine.
More importantly, I think it strengthens us to create a new global champion focused not just on the traditional O&M business but increasingly on the energy transition. I think this is, you know, the recent months with oil price increase and the improving sentiments on the O&M sector. I think this all bodes well for a combined entity. In terms of how far along have we moved, I think we have made good progress. As reported in my opening remarks, we are making good progress in terms of the applications for the antitrust. We believe we are on track for the completion of the transaction sometime in the Q4.
Of course, we are also preparing, both sides are also preparing to submit the necessary applications to SGX to requisition the EGMs that are required for their respective shareholders on both sides to vote on the proposed transaction. That is all the work that we've been doing is progressing well. The two teams are also working closely on pre-planning for integration. There's also a bit of work there and I believe there's been also good progress on that front. Thank you. Next question is from Ho Pei Hwa of DBS in Singapore. Congrats on the good results.
On the property market in China, could management elaborate a bit more on near- to medium-term outlook and strategy to navigate through the uncertainties? How should we think about Keppel's ongoing projects and new launches ahead, as well as capital recycling activities in China? I believe Louis has already provided a bit of details on this China property market, but maybe I'll ask him to see whether you want to elaborate further based on the questions that Ho Pei Hwa has raised.
Sure. Thank you, Ho Pei Hwa. I think as I mentioned, the more recent data gives us some cautious optimism in terms of how the market will go forward. We do think that in the near to medium term, it will be bumpy. There will be stop-start activities as a result of, you know, potential COVID lockdowns. I think we need to be nimble. You know, the opportunity for us in this period of time is again that the Chinese developers may find some challenges with debt financing, and that's where we may be able to come in to partner with them, and selectively invest in some key micro markets.
Again, as I mentioned, the average selling price for some of the cities that we're in have held up well, but that's not the same across the board as you would expect. I think where we choose to play is going to be quite important. In terms of capital recycling, I think we as you're aware have an asset monetization plan for some of our assets in China. Given the current sentiment in the market, we will obviously think about timing when we get the best value from any monetization efforts. Thank you.
Thank you, Louis. I think on this point on asset recycling, I think we've mentioned before that we have quite a large pool of assets to monetize. Of course, we have certain plans, we have different waves. When there is some resistance encountered because of market conditions, we have the option of moving forward some of the assets that are scheduled for recycling in later years, moving them to the left. This would hopefully keep we believe will keep our program on track. Next question. Okay. Submitted again by Terrence Chua of Phillip Securities in Singapore. His question: Could you provide us with an update on the Bifrost Cable System? Thomas, please.
Thanks, Terrence. The manufacturing of the cable and the electronic components of the system started in December 2021. The marine survey for the cable routes had also been completed in April this year. We are currently applying for permits from the various regulatory authority for the cable lay approval. We expect the cable lay to start in early 2023, and aiming for RFS in 2024. I would also like to add that the cable is attracting a lot of interest, and we have already three cables committed to customers.
Thank you, Thomas. Next question. Okay, this next question submitted by Rahul Bhatia of HSBC Research in Singapore. Rahul has two questions. First question: More than 70% of the SGD 500 million planned buyback is already completed. Does the management intend to carry on beyond the SGD 500 million, given the increased authorization of 5% buyback given at the AGM? Rahul, I think the 5% increase, of course, is very helpful, as we kind of embark on this share buyback. But the original intention and the intention of this share buyback is a couple of folds. One is, we think, you know, we think that, as we look at some of our M&A transactions, particularly, involving founder's platform, we think that sometimes, it might actually be.
We may achieve better alignment with the founders, where we pay partly in cash, partly in shares. The share buyback is partly to fund that. And also, of course, to fund our share plans at Keppel. Even when the shares are used and we will then relook at it, but at this point in time, we still have a balance. I think we will complete this share buybacks first. Second question is, what should we expect in terms of dividend for second half 2022? I think when the board met to discuss the interim dividend, I think this, of course, reflects how we as a group have performed in the first half.
We have also looked at what we think we will do in the second half. Of course, this is subject to us achieving our forecast. This is increasingly, of course, also a bit challenging given the external environment. The final dividend, of course, will be decided at the end of the year or the beginning of early next year. The interim dividend reflects the confidence of the management and the board that we will, you know, have in our performance. Okay. Next question, also submitted by Rahul. Could you share if there are new property project launches expected in second half 2022, especially in Vietnam and China? Can I ask Louis to address this?
Yes. Thank you for the question, Rahul. There will be new property project launches. In China, we are looking at launching some units for phase five of our Seasons Residences project in Wuxi. In Vietnam, we're looking at three launches for Celesta Avenue, Celesta Gold, as well as Empire City. I think we've talked about some approvals that we need to get in the past and trying to push on them. I'm pleased to announce that we have got the construction permit for Celesta Gold. And we also have the project approval for Celesta Avenue secured. Beyond Vietnam and China, we are also looking at Albania and India for more units to be launched, as well as Wisteria in Indonesia. Thank you.
Next question. Okay, this submitted by Paul Chew of Phillip Securities in Singapore. Paul has two questions. The first question is on the electricity market, but before I ask my colleague Cindy to address it, he has a second question which is related to the earlier question. That is. Will Keppel be canceling the shares bought back? As I was explaining to Rahul, the shares buyback program is to fund in-house management share plan as well as potential M&A transaction. The current plan is not to cancel the shares buyback at this present time. Cindy, can you address the first. Oh, let me read the first question from Paul Chew. Can you discuss electricity spark spread in Singapore? What is driving the improvement in, if any, especially with the usually high reserve margin?
Thank you, CEO. Thank you, Paul, for the question. The electricity spread is driven by multiple factors such as the availability of gas supply, plant outages of generators, including the economic activities that's picking up in Singapore. Last but not least, there's also a function of the weather which impacts the efficiency of generation. Suffice to say for Keppel Electric, we actually run an integrated energy business where we also control upstream steady fuel supply. We run our own four units of generator, and we have a very reliable and proven electricity retail downstream. I think this is hopefully supplemented in the longer term. We have also supplies of renewable electricity. Thank you.
Thank you, Cindy. Next question is submitted by Ezien Hoo of OCBC Bank in Singapore. "Thank you for the presentation. Keppel is in the midst of making a number of new investments and expansion into new businesses. What are the metrics that Keppel use to track, monitor the success of these expansions?" It's a very good question, Ezien. I think this is something that is top of mind for us. I wouldn't say that we are expanding into a lot of new businesses. I think these are a lot of them are quite close adjacencies. Whatever it is, whether it's into an existing area or into a new adjacency, we will be very disciplined in how we approach these investments.
We have a very demanding internal underwriting process. All the CEOs and myself, we are part of a group that looks at all the key investment and divestment decisions across the group, supported by a very strong working team, which will obviously look very closely at the return projections and of course, also at the risks that we are gonna take on. Ultimately, we are driven by what we call risk-adjusted returns. Of course, after the transaction has been done, that's not the end of it. We will still keep track of how the various investments are performing.
I'm sure there are also lessons that we can draw from this, that will, then add to our experience and track record and, allow us to be a better investor, going forward. Second question, that you posed is, "Does Keppel Land view CapitaLand as a competitor in Vietnam and China?" I think first and foremost, Vietnam and China are very, large markets, so there are many, players in that market, not just, Singapore companies. Each one will play to their strengths. You know, we believe for Keppel Land, we have certain strengths in this market when we compete. As I said, we're not only competing with Singapore companies, but also local companies and other international developers.
This is our 30th year operating in Vietnam, and we're also quite close to that mark in China. We believe that we have done our dues. We have very strong teams on the ground who are very good at executing. We believe that puts us in good stead. Next question. Okay, next question is submitted by Mervin Song of JP Morgan. "Some of your alternative asset manager peers have noted that their capital partners are more cautious in deploying capital given the uncertain macroeconomic backdrop and the risk of cap rate expansion. Is Keppel Capital experiencing similar concerns, and should we expect slower AUM growth ahead?" Maybe I ask Christina.
Sure.
To address this.
Okay. Thanks, Mervin. Actually on the contrary, when we talk to investors actually, we realize that a lot of CIOs are actually reallocating the portfolio. They are actually downsizing the bond portfolio and actually increasing the allocation to alternative asset classes. I think we are able to confidently say our AUM growth will be strong because Keppel is actually in the right place at the right time. We are doing the right asset classes. We are looking into things like data centers, infrastructure, and real estate. I think what investors are looking for are assets that have long-term cash flows. I think the sectors that we are looking at actually fit right into this area.
We are experiencing, like for infrastructure, for example, there's actually. It's part of the essential service. Actually, investors like it for its core nature that is able to generate very stable long-term cash flows for them and actually inflation hedge as well, and you know, CPI index as well. I think probably the sectors that we're in could be different from our competitors, but because of the strength of the Keppel group.
We are actually more confident in terms of the environment right now that we will be able to experience a higher growth in AUM. Thank you.
Thanks, Christina. Next question is submitted by Low Horng Han of CLSA in Singapore. Good evening. Low Horng Han has two questions. First question from Low Horng Han: Given the change in investment climate in places such as China, would Keppel be reviewing its SGD 5 billion disposal target? I think Low Horng Han, we had addressed this earlier. It's true that China is facing some short-term headwinds, but as I have shared, we do have quite a large pool of assets from which we can monetize. We have, you know, programs in place for different streams of assets, different waves of assets that are being monetized.
We will then relook at this and see whether there are assets in the fleet in the later years that we can move to the left in different markets. We remain confident that we will not only meet, but we will exceed our SGD 5 billion target for 2023. Second question from Low Horng Han is on O&M, and I'll ask Chris Ong to address this. On PAT, will part of the work be outsourced to third parties, example, construction of the hull? If so, what will be the net contract value per FPSO?
Thanks Low Horng Han for the question. PAT, there will be outsourced components, like what you mentioned, construction of hulls. Regardless, KOM is fully responsible for the EPC contract. In such a way that we will be project managing, and there's no difference when we subcontract the components within our yards. The full contract value will flow through the revenue of KOM.
I think when we look at margins, we also look at the overall project, right?
Yeah, that's right. The philosophy of outsourcing is based on the best and most economical model, and the margin is considered with the full contract price in play.
Thank you, Chris. Okay, next question. Next question is from Paul Chew of Phillip Securities. Maybe I ask Chris to address this first question as well. Can you provide any updates on AssetCo's progress in monetizing the legacy rigs?
So far we have good progress in terms of monetizing whether it is through finding bareboat charters and eventually making the rig operational or discussing with potential client in asset sale. The B classes, as what the CEO has mentioned, in the first half we have found bareboat charters for four of the rigs, and we are also in discussion with potential buyers for some of the rigs.
Thank you. Second question, maybe I ask Chan Hon Chew to address. Second question from Paul is, also, can you remind us of the amount of equity injected by Kyanite and Baluran into AssetCo?
Yeah. Yeah, thanks, Loh Chin Hua. I think when we announced the definitive agreement, we did say that the net tangible asset funded by the core equity amounts to about SGD 624 million. Of which, as we have also said, we'll be putting in about SGD 120 million of Perps and SGD half a million of core equities. The rest will be funded by Baluran and Kyanite.
Thank you. Next question. Our next question submitted by Terrence Chua of Phillip Securities. Thanks for the explanation, Loh Chin Hua, appreciate it. I have a follow-up question on the Keppel O&M and SMM transaction. Can I find out if there are any contingencies that Keppel has made if the deal does not go through? Well, I think this is highly speculative, Terrence, and I would not want to address it. I think, as I have mentioned, all the preparation work is on track. Of course, at the end of the day, we still need to clear the antitrust as well as to clear shareholders on both sides. What I would say is that I think, as you have seen from our report for the first half, Keppel O&M has performed well.
We are now making profit for Keppel O&M. The OpCo that will travel across minus the legacy rigs as well as the out-of-scope businesses in fact have performed even better than Keppel O&M as a whole. Order book is good, and we have a prospect of adding quite a significant chunk to the order book, assuming that the 2 FPSO projects get signed up. I think Keppel O&M is in pretty good shape. Of course, on the legacy rigs, we have also reported that things are, you know, the conditions, the market conditions have improved. The potential for us to monetize substantially most of these rigs in the next 3-5 years is very good. Thank you. Okay, this is from.
Next question is from Foo Zhiwei of Macquarie, Singapore. Okay, "Hi, management. Congrats on a good set of results." Foo Zhiwei has two questions. "First one, I note that you have a single client in energy and environment contributing SGD 1.1 billion in revenue. Can you elaborate?" Maybe can I ask Cindy to address that?
Thank you, Foo Zhiwei. In energy environment, we recorded pretty strong revenue of first half coming from the power business, as well as the progressive recognition of revenue from our Hong Kong integrated waste management project. Specific to the single client that has contributed SGD 1.1 billion in revenue, it is actually our customer, Energy Market Company, EMC. Thank you.
Thanks, Cindy. Foo Zhiwei has a second question. The dividend of SGD 0.15 represents a payout slightly above your historical range of 40%-50%. Can we expect similar dividend payout ratio in second half 2022? Maybe Chan Hon Chew, w ould you like to address that?
Yeah, thanks. Thanks, Loh Chin Hua. I think earlier on, Loh Chin Hua also talked about the dividend for the full year. I just want to add that when looking at dividend, we also look at, you know, the progress of our asset monetization that gives us more confidence in the dividend when we look at it, you know, for the full year. Looking at, you know, the 40%-50%, or slightly higher, in terms of the payout ratio is something that, you know, is still achievable.
Yeah. Thank you. Next question please. Okay, next question is from Lim Siew Khee of CGS-CIMB in Singapore. "Hi there." Lim Siew Khee is happy with the SGD 0.15 DPS, though the asset monetization pace has been impacted by the current environment. Do you think the pace of monetization will pick up in second half of 2023? I've addressed this earlier, Lim Siew Khee. I think we remain very confident that we will exceed our target of SGD 5 billion by the end of next year. So, you know, for the various reasons I have earlier said. Second question from Lim Siew Khee, "What is the SGD 61 million under others in energy and environment mainly due to?" So maybe, Chan Hon Chew?
Yeah. Thanks, Loh Chin Hua . They're mainly attributable to interest costs, as well as share of Floatel's results. Given that Floatel is out of scope, that's why it's not under the discontinued operation, but is shown under others. Those are the main components.
Thank you. Next question. Next question is from Mervin Song of JPM in Singapore. Prior to the privatization of M1, Q417 to Q418, quarterly profit after tax was SGD 25 million-SGD 36 million. Q2 2022 net profit now stands at SGD 34 million. Adjusted for difference in capital structure, how far away is M1 achieving pre-COVID profitability? Second question, with resumption of travel, how does Q2 2022 roaming revenues compare to 2019 levels? That means pre-COVID. Can I ask Manjot to address this?
Yeah. Thanks, Mervin, for the question. Let me answer your second question first. At this point in time, for Q2 of 2022, we are at about half of our pre-COVID roaming revenues. That's primarily because China is yet to open up, which contributes quite significantly to the roaming revenues in Singapore. As roaming opens up, and with our increase of consumer base, along with our increasing enterprise revenue, I think we'll be on course to achieving our pre-COVID profitability as roaming improves more in 2023. Actually all our key business indicators are traveling in the right direction. Therefore profitability is a matter of time. Thank you very much.
Thank you, Manjot. I think also part of the transformation that we're undertaking in M1, the share of the profit from the different segments may be different from before we privatized M1.
That's correct. Yeah.
I mean, you have more, enterprise, et cetera, et cetera.
5G, of course.
Yeah
Will also contribute.
Thank you. Next question please. Okay, next question is from Jame Osman of Citi, Singapore. "Hi, thanks for the presentation. Could you share what the contribution of renewables related business earnings was to the energy and environment segment in first half 2022? And also what do you expect the contribution could grow to in the coming years with the recent investments made in this space? The amount, I believe is still quite small in the first half, because this is still a nascent segment that we're going into. There are two types of investments that we have made, in broad terms, in this space.
For those investments, like what Keppel Renewable Energy is doing in Australia, where we are building greenfield, it will take, you know, a few years before they become cash flow generating and become profitable. That will take a bit longer to build. At the same time, of course, you will note that we have also recently done transactions like Cleantech, the platform in C&I space for rooftops. That one is an existing operation, so we would expect to have to see some contributions. Of course, more recently, our investment together with KIT into some wind assets in the European Nordics. I think those are operating assets, so you will start to see some income coming through.
I just wanted to be sure to say that, the investments are there. We believe that this is a very big growth segment and align with what we're trying to do for Vision 2030. This is something that we'll continue to build on. Not just using our balance sheet, but working alongside the investors under Keppel Capital. Okay. Next question from Lim Siew Khee . Okay, she has two questions. One is on the loss, the other one is on the gain. Okay? The first question is, what is the SGD 8 million loss in logistics related to in connectivity? Her second question, how come the profit from M1 jumped 62% year-on-year, though revenue only up by 6% year-on-year? Maybe Chan Hon Chew.
Thank you, Lim Siew Khee, for the question. On your first question on logistics, the SGD 8 million loss is basically the operational loss of the logistics business, including the loss from Keppel Logistics before the sale. That is partly offset by the gains from the sale of Keppel Logistics and also Indo-Trans Keppel Logistics Vietnam. As to the second question, the profit of M1 jumped 62% year-on-year, though revenue only grew by 6%. It's partly due to revenue growth and improvement in the M1 operations. Also, the other reason is this is the first half year after the monetization of the network assets by M1 to Keppel DC REIT. As a result, because now M1 is more asset light, as a result, the depreciation is no longer with M1.
Their depreciation has reduced. At the same time, interest expense is also reduced. In that space, we pay a network service fee, which is lower than the savings, you know, in depreciation and interest expense. As a result, M1's profit has gone up by 62%.
Thank you. Next question. Next question is from Terrence Chua of Phillip Securities Singapore. Can you give us more details on some of the offshore and marine projects that were completed in the first half 2022? Chris?
Thanks, Terrence. For the first half of 2022, O&M delivered 6 projects which comprises of conversion projects, repair projects, and also new build projects. We have delivered one new build dredger, one wind turbine installation vessel leg structure, one wind turbine installation vessel upgrade, a FSRU conversion, one dredger jumboization, and one LNG carrier upgrade.
Thank you, Chris. Next question. This is from, submitted by, Danny Teoh. I think he must be a retail investor, I suppose. Space in Singapore.
Is there any further updates on or developments on Keppel's previous bid for SPH? There's no update. I mean, you know, you know what has happened. So as far as we're concerned, you know, we're disappointed we didn't win, but you know, life goes on. I think we have quite a lot of things on our plate, and we are focused on that. Will there be any fees payable to Keppel since the deal did not materialize? There is an arbitration process that is ongoing. I can't say much more than that. Thank you. Okay, I believe we come to the end of the Q&A session. Thank you all for joining us. Have a great evening again. Thank you very much.