Good morning, ladies and gentlemen. Welcome to the Conference for Keppel Limited's first half financial results for 2024. We have on the panel this morning, from your left, Mr. Manjot Singh Mann, CEO Connectivity and CEO M1, Mr. Louis Lim, CEO Real Estate, Ms. Christina Tan, CEO Fund Management and Chief Investment Officer, Mr. Loh Chin Hua, CEO, Mr. Kevin Chng, CFO, and Ms. Cindy Lim, CEO Infrastructure. We will begin the session with presentations by CEO Mr. Loh Chin Hua and CFO Mr. Kevin Chng, followed by the question-and-answer session. Mr. Loh, please.
Good morning, everyone. Keppel continued to make encouraging progress towards our Vision 2030 goals in the first six months of 2024. Reflecting our transformation to be a global asset manager and operator, our earnings from the asset management business more than doubled year-on-year to $ 75 million in first half 2024, while funds under management rose 55% to SGD 85 billion since end December 2023.
This was the result of both stronger performance by our private funds and listed entities, as well as the successful acquisition of Aermont Capital in April 2024. Amidst the challenging macro environment, we continue to press forward with our asset monetization plans, announcing about $ 280 million of divestments in first half 2024. This brings us to over $ 5.6 billion in asset monetization announced since October 2020, not including the divestment of platforms such as Keppel Offshore & Marine.
We remain focused on working towards our interim monetization target of $10 billion-$12 billion by the end of 2026. Asset monetization is a key pillar of our Vision 2030 goals, and we will look for opportunities to re-accelerate this when market conditions improve. We have also reaped substantial synergies as one integrated company, mainly from amalgamating and optimizing the company's centralized functions, as well as digitalizing our operations. Since embarking on Project Darwin at the start of 2023, we have achieved an annualized run rate of over $50 million in recurring cost savings, on track towards our target of SGD 60 million-SGD 70 million by end 2026. Our business processes have also been streamlined, and we can explore more automation as we further digitalize.
Machine learning and AI are very much part of the new Keppel, as we look for areas to improve efficiencies, provide insights, and enable our investment processes as well as operations. In second half 2024, we will continue to focus on running a tight ship as we pursue our transformation goals and growth initiatives. In first half 2024, we achieved a net profit of $ 513 million from continuing operations, excluding the effects of the legacy offshore and marine assets. This is 7% higher than $ 481 million recorded in first half 2023 on the same basis. All segments were profitable, with strong improvements in performance by our Infrastructure and Connectivity segments, offsetting a decline in Real Estate contributions.
The losses from the legacy O&M assets relate to the impact from Seatrium shares held in our segregated account, the Asset Co vendor notes, as well as contributions from Keppel's stakes in Floatel and Dyna-Mac, the latter of which was divested in May 2024. Including the effects of the legacy O&M assets, net profit from continuing operations in first half 2024 was $ 304 million, compared to $ 445 million in first half 2023.
To give a clearer picture of our progress as an asset manager and operator, I will, for the rest of this presentation, refer to our financial performance from continuing operations as the new Keppel. This will exclude the effects of these legacy O&M assets that will be sold over time. Continuing operations do not include the $ 3.2 billion profit from discontinued O&M operations when we divested this business in 2023.
For first half 2024, we achieved an annualized return on equity of 9.8%, compared to 8.7% in first half 2023, on the back of our efforts to drive capital-efficient growth. As at the end of June 2024, our adjusted net debt to EBITDA remained at a healthy 3.7x . About 63% of our borrowings were on fixed rates, with an interest cost of 3.79% and a weighted tenor of about three years.
We will continue to be prudent and nimble in capital management, keeping our cost of funds competitive amidst the volatile landscape. As at the end of June 2024, we had total assets of SGD 27.7 billion on our balance sheet, compared to SGD 32.3 billion as at the end of 2021. Over the same period, our FUM has more than doubled to SGD 85 billion and is generating attractive fee income at an annualized fee-to-FUM ratio of 55 basis points.
Our asset-light strategy is bearing fruit. We have shown our increasing ability to do more with less, pursuing growth while also rewarding our shareholders well. 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 the first half 2024. The interim cash dividend, which will be paid to shareholders on August 23rd, is the same as last year's interim dividend of SGD 0.15 per share, reflecting the board and management's confidence in Keppel's growth trajectory. Our recurring income rose 14% year-on-year to $ 388 million in the first half 2024, making up about 76% of our net profit, compared to about 71% in the first half last year.
The improved recurring income was boosted by higher contributions from both asset management, which more than doubled to SGD 75 million a year year-on-year, as well as stronger operating performance in Infrastructure and Connectivity. Our Infrastructure division continues to register strong improvements in its integrated power business, securing higher contracted loads with longer durations while optimizing its operations.
At the end of June this year, about 60% of our contracted generation capacity was locked in for three years or more. The division has also actively expanded its long-term technology solutions and energy services contracts, which grew over 20% in the first six months of this year to $5.2 billion by the end of June 2024. First half 2024 was a busy period for our Asset Management business, as we doubled down on our growth initiatives.
We raised about SGD 435 million in equity and completed $ 2.3 billion worth of acquisitions and divestments across our listed REITs, business trusts, and private funds. We also achieved the first close for our flagship KSURF Fund, bringing the total FUM in our sustainable urban renewal strategy to over $ 1.7 billion. In the first six months of 2024, asset management fees grew to SGD 203 million, up by about 75% year-on-year, mainly due to the improved performance of our private funds and listed vehicles, and with the inclusion of Aermont.
With an increased FUM of SGD 85 billion, we are close to our halfway mark of SGD 100 billion by end 2026, which we are confident of achieving as planned or even earlier. With a combined dry powder of about $ 25 billion, we are in a good position to seize opportunities to acquire attractive assets that may become available when markets go through dislocations.
Between Keppel and Aermont, we are also concurrently pursuing an extended deal flow pipeline of $27 billion. Looking ahead, investors are expected to remain highly selective of investment strategies and asset classes that can provide steady cash flow, long-term returns, and portfolio diversification. This continues to augur well for Keppel's strength in alternative real assets, which are underpinned by resilient macro trends such as the energy transition, climate action, and digitalization.
In addition to growing our existing flagship funds, we have also been fielding good investor interest for three new funds for data centers, education assets, and private equity, which we plan to launch later this year. On the back of robust investor demand for Keppel's data center offerings, we are hopeful of achieving the first close for our third data center fund, with a target size of $2 billion later this year.
Our deep value-added strategies, coupled with the proprietary expertise to develop and operate many of these critical real assets, put Keppel in a strong position to create alphas for our private funds. We can provide further channels of liquidity to our limited partners through our listed Real Estate and infrastructure trusts, which will in turn benefit from the extended pipeline of high-quality assets.
We are pleased to have Aermont on board as our European Real Estate platform, following the completion of our acquisition of an initial 50% stake in April this year. Aermont currently has five flagship funds, including Fund V, a continuation fund in which Keppel has a share of the carry. Aermont continued to perform well, boasting stronger financial performance in first half 2024, compared to our initial projections. On an FUM of over $25 billion, Aermont achieved an annualized fee-to-FUM ratio of about 50 basis points.
Aermont remains focused on deploying Fund V well. With substantial dry powder from their EUR 3.8 billion Fund V, Aermont is well positioned to seize opportunities in the European markets. Meanwhile, together with Aermont, we are in the early stages of working on a separate sleeve in data centers for Europe. We will share more details on this initiative in due course. In our operating platform, infrastructure continues to be an exciting space as we capture growth opportunities amidst the rapidly evolving energy transition landscape.
Our Infrastructure division is enhancing the performance and resilience of the Keppel Merlimau Cogen Power Plant by upgrading its second gas turbine. The first turbine was upgraded successfully a year ago. Together with the new and advanced high-efficiency Keppel Sakra Cogen Plant, which will come on stream in early 2026, Keppel's power generation fleet will be the best in class in Singapore and the region.
Our Keppel-led consortium has also been shortlisted in a closed request for proposal by the Singapore authorities to carry out the Pre-FEED for low or zero-carbon ammonia power generation and bunkering solutions on Jurong Island. Beyond Singapore, we have also announced a collaboration with Japan's Sojitz Corporation to jointly pursue decarbonization and clean energy business opportunities in the Asia-Pacific.
Currently, our long-term technology solutions and energy services contracts produce an EBITDA of more than $40 million per annum. We see a huge addressable market for us to expand our energy, cooling, and decarbonization solutions, both here in Singapore and overseas as well. Our target is to expand this recurring business to one that can generate more than $100 million in EBITDA contributions a year by 2027. In Real Estate, we continue to gain traction in offering asset-light Real Estate-as-a-Service solutions.
Our Real Estate division is currently implementing SUR solutions across a pipeline of six projects with a combined asset value of SGD 3 billion. This includes the announced acquisition of One Paramount in Chennai, where our SUR asset enhancement initiatives will raise its sustainability performance and also improve rentals, drive down operating costs, and provide an uplift to both net operating income and the asset's value. We plan to create a fund to tap the interest of investors in the Indian office market, where developments such as One Paramount would be a potential seed asset. In China, we are also providing larger-scale green and smart city consultancy services to Suzhou Industrial Park and the Sino-Singapore Cooperation Zone in Jinan, Shandong.
In our Connectivity division, reflecting Keppel's commitment to green data centers while also delivering strong returns, our latest data center, Keppel DC Singapore 8, or SGP8 for short, has achieved the BCA Green Mark Platinum Award. The second of three planned buildings in the Keppel Data Centre Campus at Genting Lane, SGP8 is fully leased to clients from across the cloud services, internet enterprise, and telecommunication sectors, and is expected to be ready for service in phases starting from the third quarter of this year. The division is concurrently working with authorities to finalize details of the first floating data center module in Singapore. We expect to take the final investment decision in the second half this year. Meanwhile, M1 continues to make good progress growing its enterprise business.
In the consumer business, having substantially completed the customer migration to its new cloud-native digital platform, M1 is now progressively decommissioning its legacy tech stack, which, when completed, will boost customer acquisition and lower its cost to acquire and serve. To conclude, while 2024 continues to be challenging, we see exciting opportunities ahead as investors' growing preference for defensive, cash flow-generative assets is driving demand for alternative real assets in infrastructure, connectivity, and private credit, areas where Keppel has strong expertise.
Drawing on our deep domain expertise and operating capabilities, we will continue to build on Keppel's unique value proposition to drive stronger returns for our limited partners and greater value for our shareholders. Our CFO, Kevin, will now take over or take you through details of the company's financial performance. Kevin:
Thank you, CEO, and a very good morning to all. I shall now take you through Keppel's financial performance. For first half 2024, Keppel's net profit was SGD 304 million as compared to SGD 3.6 billion in first half 2023. First half 2023 included SGD 3.2 billion of profits from discontinued operations, mainly due to the gain on disposal of Keppel Offshore and Marine of approximately SGD 3.3 billion. Excluding discontinued operations, net profit was SGD 304 million as compared to SGD 445 million in first half 2023.
The lower year-on-year results were largely due to higher net loss from legacy offshore and marine assets amounting to SGD 209 million. This arose from fair value losses on the remaining Seatrium shares in our segregated account as compared to gains in first half 2023, as well as a higher share of loss from an associate. For context, around 60% of our holdings in Seatrium shares were monetized in 2023 at an average price of around SGD 2.60.
In first half 2024, we also recognized higher financing costs and amortization of day-one fair value loss on notes receivables as the Asset Co transaction was completed at the end of February 2023. In the next few slides, I will present the financials excluding the effects of legacy O&M assets so as to provide greater clarity on the financial performance of the new Keppel as a global asset manager and operator. Net profit for the first six months of 2024 improved 7% to SGD 513 million from SGD 481 million in first half 2023. All three segments were profitable, with better performance in Infrastructure and Connectivity segments. Annualized ROE increased to 9.8% in first half 2024 from 8.7% in first half 2023. I will further elaborate on the performance of each segment later.
Adjusted net debt to EBITDA was 3.7x as at end of June 2024 as compared to 3.3x as at end 2023. This was mainly due to an increase in net debt as a result of dividend payments, investments, and additions of fixed assets and investment properties, partly offset by divestments during the period. Free cash flow was SGD 216 million as compared to free cash outflow of SGD 732 million in the same period last year.
In first half 2024, there was lower net cash use in operating activities driven by healthy operational cash flows and lower working capital requirements. Net cash use in investing activities was also lower in the current period as first half 2023 saw a net cash outflow arising from the divestment of KOM. First half 2024 net profit was supported by positive contributions from all income streams.
Underpinned by robust asset management earnings as well as stronger operating performance from Infrastructure and Connectivity, recurring income grew 14% to SGD 388 million from SGD 340 million in the same period last year. Valuation gains of SGD 167 million was higher compared to SGD 22 million in the prior year, supported by higher fair value gains from investment properties in Singapore. Development and EPC earnings were lower year-on-year, mainly due to a decrease in profits from trading projects in Singapore and China.
Due to lower asset monetization, gains from capital recycling decreased by SGD 12 million. Net loss from corporate activities was higher than that of first half 2023, mainly due to lower net interest income and higher share plan expense. Moving on to segmental performance, the infrastructure segment achieved a net profit of SGD 363 million in first half 2024, 25% or SGD 72 million higher than the SGD 291 million in first half 2023.
This was led by strong asset management earnings growth from SGD 4 million in first half 2023 to SGD 44 million in first half 2024, mainly due to fees from better performance achieved by Keppel Infrastructure Trust, which is managed by Keppel, acquisition fees in relation to KIT's acquisition of a German solar portfolio and an Australian transportation business, as well as higher management fees earned during the period.
Our integrated power business continued to deliver robust operating income growth driven by higher contracted spreads. This was partly offset by lower contributions from an associated company in Europe and lower distributions from KIT. The segment also recorded fair value gains from its sponsor stakes in the infrastructure private funds in first half 2024. Amidst challenging market conditions, Real Estate recorded a net profit of SGD 129 million, 31% lower than the SGD 186 million in first half 2023.
Asset management net profit was comparable year-on-year, arising from stable fee revenues, as well as the maiden contribution from Aermont Capital, which was offset by higher overheads. The decline in operating income was a result of higher interest expense and lower contributions from our sponsor stakes, mainly in Keppel REIT, partly due to our reduced unit holding interest following the dividend in specie paid out to Keppel shareholders in November 2023.
Valuation gains were SGD 112 million higher, largely from fair value gains on investment properties in Singapore, partly offset by share of fair value loss from Keppel REIT on its investment properties in first half 2024. Development earnings were SGD 140 million lower year-on-year, mainly due to a decrease in profits from trading projects in Singapore and China.
As compared to first half 2023, which had benefited from en bloc sales of projects in India and Vietnam, there were no divestment gains recognized in first half 2024. Net profit from the connectivity segment of SGD 76 million was more than double SGD 37 million recorded in first half 2023. Asset management net profit was higher year-on-year, mainly due to divestments and acquisition fees in relation to Keppel DC REIT's data center asset in Australia, as well as lower overheads.
The higher operating income was a result of higher project management fees and lower overheads. Earnings from M1 were stable year-on-year. The segment also recorded higher fair value gains from sponsor stakes in private funds, as well as higher gains from disposal of non-core assets and a share of Keppel DC REIT's gain from disposal of its data center asset.
Net loss from corporate activities was SGD 55 million as compared to SGD 33 million in first half 2023. This was mainly due to lower fair value gains on investments, lower net interest income from corporate treasury operations, and higher share plan expenses in first half 2024. This was partly offset by divestment gains from the sale of non-core assets. With that, we have come to the end of the presentation, and I shall hand the time back to CEO for the Q&A session. Thank you.
Thanks, Kevin. So we move on to the Q&A session. We're, of course, open for Q&A, but I'd like to give priority for those of you who make the effort to come down. Yeah? Yes. You're both from the same bank. You don't decide who goes first. Ladies first. Okay.
All right. Thanks very much for the presentation. I have two questions.
Maybe you can just say your name and where you're from.
Thank you. Pei Hwa Ho from DBS. I have two questions. Firstly, this is on the loss for the legacy O&M assets. Is it possible to give us a further breakdown as to how much is for the Seatrium shares, for Dyna-Mac, and then the vendor notes? Second is on infrastructure. Integrated power business is still very strong, just modest slightly from second half last year. How should we think about the business dynamic ahead? Yeah.
Thank you for the question. Maybe the first question I ask CFO to respond to.
Thanks for the question. So just on the breakdown of the SGD 209 million under offshore legacy offshore and marine, about approximately SGD 67 million of that is due to the fair value losses from Seatrium shares. These are relatively volatile. I'll cover that a little bit later on. On the other associates, Floatel and Dyna-Mac was about SGD 34 million. Then the remaining SGD 108 million was a result of the vendor notes interest, vendor notes portion of it that adds up to the SGD 209 million.
Just coming back to the Seatrium shares, I mean, it is relatively volatile. I mean, if you look at the closing price and Seatrium shares has done very well over the course of the last couple of weeks. The variance that we're looking at in terms of the SGD 67 million, if you look at the closing price of yesterday, we would have returned back approximately SGD 21 million in terms of the timing of the closing of the price.
Okay. Thanks, Kevin. Cindy, you want to provide some insights?
Thank you, CEO. Thanks, Chin Hua. I think if you were to compare with second half 2023, as your question alluded to, there's always seasonality when it comes to energy and power performance. In terms of how we look at the integrated power business, suffice to say that based on the breakdown of our long-term contract that we have secured for the power business, we will see 60% of our contracted capacity is signed on a more than three-year tenor.
I think this augurs very well because this will give us predictability of future cash flow. The second very important point is beyond the healthy contracted spread that we have secured, we are also very laser-focused on improving the operating margin by enhancing the efficiency of our generation units, as well as ensuring high reliability, especially in a very volatile market. You don't want to have reliability issues when it comes to outages.
As what CEO presented earlier, we have planned for and will also be embarking on the turbine upgrade that comes early next year. This is at the back of a very successful performance of the first turbine upgrade. Such continuous planning and investment behind upgrade of our generation unit will position us very well entering in the quarters ahead. Thank you.
Thanks, Cindy. I think, Derek, you were next. Yeah.
Morning, Chin Hua. Derek from DBS. I got three questions. The first one is on earnings. I'm looking at your asset management revenues for Real Estate. It has a nice jump, but on the profit side, it appears quite flattish. I'm just curious whether, with the contribution for Aermont, how does it look like from the profit angle? Is there any one-offs that we should be aware of? If not, of course, it appears quite high on the other side.
The second question is on, could you give us some color on the size of your data centers, AUM, both from the private fund side, and do you have any ambitions that you can share in terms of growth in terms of AUM? I know you're doing a lot of stuff there. Then if you can give us a growth target would be helpful. My last question is on Genting Lane data centers. I think it's filling nicely. Just wondering whether is it time that you should be thinking of monetizing that? Thank you.
Thank you, Derek. Can I invite Christina to address?
Hi, Derek. Morning. With regards to our asset management revenue, the contribution from RE, I think from Aermont, I think we have talked about in terms of revenue is about SGD 30 million because we only recorded since April of this year when we closed. It was only for three months. Then for the profitability, we actually also netted off amortization because it's like accounting, I mean, in accounting terms, you have to apply some amortization to the business that you have acquired. So it's not just pure profits. It's actually the net profit less amortization. Yeah.
With regards to data center, I think we have actually run very successfully on the first fund and second fund so that both funds would actually be roughly AUM about SGD 5 billion. So now we're looking to raise a third fund. We set a stated goal of SGD 2 billion in terms of equity in US dollar terms. So that would be probably another SGD 10 billion from here. So I think the data center space is increasingly becoming very attractive as one of the hottest sectors right now. Most of the investors are actually also chasing for it.
So even before we actually finish all our documentation to prepare for the data room, we have a lot of investors actually waitlisting and then asking us, like, "When can we go into your data room?" So there's a good interest, I think, in the funds itself. On the REIT, on divestment, I mean, on the asset in Genting Lane, I think the team is always looking at maximizing it for the private funds, and then at the right time, we will look to exit to the data center REIT.
Maybe just to supplement a bit on what Chris has said, I think if you look at the three sectors that we have, we are getting very good tailwinds on infrastructure as well as connectivity. But the Real Estate side is still facing some headwinds. So in terms of acquisitions for Real Estate, we have not been as quick because we are waiting for the bid-ask spread to narrow. So as a result of that, the cost side is still there because we have overhead costs.
But on the revenue side, quite a number of the deals have been pushed to the right. And so we expect that as deals close in the second half and in next year, we would expect the profitability on the RE, FM, and I to improve. On the data center side, I think what Chris said is quite right. There's a lot of tailwinds there, a lot of interest. There are also quite a number of folks now coming into the space. But I think where Keppel kind of stands out is that we have very strong operating capabilities on the data center side.
We are not just doing powered shells, but we can actually do equipping, and we have a long track record of operating these data centers very well for the customers. And for the customers, these are all mission-critical assets. So they need to make sure that the operator is strong. And then, of course, now increasingly, data centers is also about power, and increasingly, it's about green power. So whether it's cooling, green power, that's where I think infrastructure side can also come in. And so that's the uniqueness about Keppel, how we are able to differentiate ourselves vis-à-vis our peers. Sorry, Siew Khee, you had a question.
Hi. I have quite a fair bit of questions. I'll just go through segment by segment. For infrastructure.
Maybe you do two or three first because I can write down others' speech. Then I'll come back to you again. We answer the questions, and then. Okay.
So I'll just ask three first.
Okay. Yeah.
For infrastructure, why is associate line in infrastructure so weak? Because it's a loss. And also, I guess you might answer on why is the Decarb and solution so weak? Because compared to the past two halves, profits were about SGD 50 million, but this half is significantly lower. And in terms of floating data center, I know that you hope to achieve FID by second half this year, but would you be able to share the capacity and also the CapEx plan? Maybe just finish off on infrastructure. The spread that you're actually closing, half and half, how does it actually compare? First half versus second half last year.
So maybe I ask Cindy to answer the question one and three.
If you are referring to the co-investment and sponsor stake, you're talking about the negative, it should be read in parallel with the valuation column because we do have some co-investment stake and sponsor stake, which are, shall I say, accounted differently under the fund. So it should be read in conjunction with the valuation column as well.
On the second question regarding the associate weaker performance as well as the CAP, I think that is one of our investment, one of our associate in Europe. There's some seasonality in the earnings, in particular when you look at the renewable sector. Half and half is not a good comparison. In terms of contracted spread for the integrated power business, suffice to say it is healthy, but it is also very challenging.
So we remain, like I said earlier, very focused on managing it at a portfolio basis in terms of tenure of the contract as well as the quality of the customer that we are working with. You would have also been aware that there are customers that, for example, GlobalFoundries, we sign long-term, 15-year PPA, big into the contract. There are other value-added services that we bring to the customer beyond just selling power.
Thank you, Cindy. So, Siew Khee, your second question is actually connectivity. So we have been working on this floating data center module for a bit of time now. It's quite innovative, so it takes a bit longer to get all the approvals. But happy to say that we are quite close to getting all the approvals, in which case we will expect to get a final investment decision in the second half. We have not disclosed the power of this module, but we are in very advanced discussions with a hyperscaler who will probably take the entire capacity. Next question. Yes.
Hey. Morning, Chin Hua. Brandon from Citi. Just have a few questions. Basically, first one on China. I think if you look at the business for you, the operating income side has been quite negative for a few periods now. Do you have any new strategy there in China given what we are seeing in the market? It's been slow, it's hard, we know. Yeah. That's my first one. My second one would be more on your pipeline, right? You have sort of doubled it to SGD 27 billion. Any chance of letting us know the conversion rate of this SGD 27 billion? And also the last question would be, do you have any optimal contribution level from asset management? So we saw in this half year that they contributed close to 20% of your recurring income. Yeah. Thanks.
Okay. I will try and address your first and third question, and then maybe ask Chris to talk on the pipeline or give some color on the pipeline conversion. First and foremost, China is quite complex. It's obviously going through some difficult challenges at the moment, both for its economy and also for its on the Real Estate market as well. But if you look at the longer term, medium to longer term, I think it is still a market that we strongly believe in. We think that there's still a lot of opportunities there.
You will recall that last year we announced that we have revised our playbook for China, moving more towards what we believe China needs today compared to what it was before, and more importantly, areas where Keppel can actually make a positive contribution, right? So this would be in areas like energy transition, data centers, etc. And you would have seen that we just recently announced Energy as a Service, which is our kind of breakthrough contract with Perennial in China. So we are starting to embark or starting to execute on this new playbook. But it takes time. So it's not going to just happen overnight, right? But what is also useful for us is that what has been extremely helpful for us is that we have actually started to de-risk our portfolio on China for the last few years.
As you know, we have actually sold about $3 billion worth of landbank, booking about $1 billion in profit in the last few years. Also more importantly, we have also taken back about CNY 5 billion that used to be there where we parked it there because we were actively buying land. But since we are no longer actively buying land, we brought it back. So I think we have kind of de-risked from China. So we are now executing on this new playbook, and we see good opportunities. So I think that's kind of where I will leave it. Maybe I ask Chris, you want to address?
On the pipeline itself, together with Aermont's, we are actually looking at quite interesting deals. I think Aermont has been spending a lot of time looking at new platforms in Europe, and they have been very successful in executing those strategies, resulting in some of them reaching 10x the last time where we disclosed about it, their performance. So I think in terms of Aermont's acquisition pipeline, we are quite close.
We are looking at those deals where there is more than 50% chance of conversion because they have actually cleared these through the IC itself as well as our pre-deal kind of approval process. With regards to the rest of the group, we are looking at deals in infrastructure. It's more a global play as well, and we are looking at things where we are playing to our strengths. Actually, yesterday, we just signed another deal for infrastructure. It's part of our ecosystem that we're looking at for digital infrastructure.
So I think we are looking at things where actually Keppel has very unique strengths and positioning in terms of creating value for the various platforms that we're looking at. In terms of our data centers and connectivity divisions, I think data centers, we are also starting to look at platforms besides asset acquisitions. I think we have just announced some in Japan. We'll continue to explore more in some of these countries as well.
We're seeing a lot of good collaboration between us and our partners in Japan as well. For, I think, Real Estate, besides the office platforms or office assets, we're looking at things like education sectors. So we've been getting a lot of investors' interest in that area, as well as getting very good traction talking to the international schools and operators, which actually the education assets generate really high yields compared to most sectors.
We're looking at like 7% yield on cost and all that, even in countries like Japan. So I think this is a very interesting sector because we are one of the first early movers in this area. We are also looking at living sectors now going forward, whether it's multifamily, student housing. Because of our close ties with the international operators, a lot more deal flows became available as well. So together of all this, most of these deals would have cleared initial pre-IC.
So your third question, thanks, Chris. Your third question was on the contribution or what's the projected ideal? Is it ideal, is it? Optimal target. Actually, you know how I do it is as high as possible, right? But I think what's more important is to look at how this whole business model of ours works. On the asset management fees, Chris had mentioned that we have a lot of new funds that we are raising. We had some more difficult time raising money, I think, a year ago, but I think along with everyone else. I think now we're starting to see good traction.
So as we raise more funds, and more importantly, as we deploy the funds, then we will see the contributions from asset management fees and profit will grow, right? So as we grow from what it is currently (now it's 85, we hit 100 and ultimately 200), then I will expect the asset management fees to grow. And assuming that we achieve our so-called retain our 55 basis points on FUM, you can work out the numbers. But what's also important is that as we grow this funds under management, it also creates space for our operating division.
Because as we build more Bifrost, we build more hydrogen-ready power plants, it will create opportunities on the operating division, and we are no longer tied to our balance sheet for growth. So which means that as we monetize, we are more able to provide to reward our shareholders going forward. So I think the model is working out well as intended, and I think given where we sit here, Darwin, day one was six months ago or seven months ago. I think we make good progress, but I think this model is definitely something that we'll continue to execute on.
I just want to follow up on - hey, thanks . I just want to follow up on what Christina said on this IC approval and all, right? So can I assume that 50% chance of going through means we should see what, SGD 13 billion-SGD 14 billion of this SGD 27 billion panning out?
I think in terms of the deals, we find it attractive enough to clear the IC, just pre-approvals, but we will still have to do our follow-through with our due diligence and negotiations with our partners. So I think we are quite rigorous in terms of our underwriting and in terms of our negotiations, making sure that it's the right deal and making sure that there's good cash flows for our investor base. So I mean, there's a good chance of conversion, but I guess it has to tick all the boxes as well. Yeah.
So this is also something that I think is important while we do see this as a way for us as we increase the—as we buy more or we do more acquisitions, we create more fees. But at the same time, we have to be mindful that, as what Chris says, we must always be looking after the interests of the investors. So we only do deals that we think checks all the boxes, makes sense, fits the funds strategy, the risk-reward is there.
Because ultimately, we also have to look very closely at making sure that our investment performance continues to be good. Because when you have good investment performance, then there will be more capital that will come. So I think this is kind of short-term versus long-term. We want to do deals. We are very active. I think there's a very strong pipeline. We believe we can convert a significant part of that, but ultimately, we'll have to be dependent on competition for the deals and making sure that the deals are the right deals that we are going to do for the funds and for the REITs that we run.
Hi. Mayank from Morgan Stanley.
Yes.
Just a bit of a question around the EBITDA growth target that you talked about from going from 40 million to more than SGD 100 million per annum on the power side. Can you just give us a bit of a building blocks in terms of how we are getting there, whether it's efficiency, whether it's more than that to it? And I think the second question was more in terms of capital allocation now. You kind of touched earlier a bit on this, but when you look at now going forward, I think you had a cash outflow even for the first half right now. So when do you see that free cash flow positive at the Keppel level kind of coming through? Can we expect that in the second half this year? Thank you.
I think the first question, it's probably not really power sector. It's really some of the new areas that we're in, but I'll ask Cindy to address that.
Yes, indeed. It is not the power business. We call it our Engine 2 , which is the decarbonization and sustainability solutions platform. You have seen in the past few quarters, we have deliberately shared the long-term contract that we have secured in provision of solutions and services related to decarbonization and sustainability. This includes energy as a service, such as providing cooling to space and premise owners, solarization of rooftop, as well as EV charging infrastructure.
On top of that, also providing technological solutions for sophisticated and advanced waste treatment facilities. And of course, this includes essential services for operation and maintenance of waste-to-energy plants, water treatment plants. So this long-term contract has grown pretty interestingly in the past few quarters. And today, as you see, year-to-date, we have grown it by a further 20% to SGD 5.3 billion of secured contracts to be delivered over the next 10-15 years. This will over time translate to EBITDA, and this is where we are very confident that the EBITDA growth by 2027 would be more than 2.5x. So our target is about SGD 100 million from this Engine 2 . I hope this answers your question. Thank you.
Okay. Thanks, Cindy. Mayank, on your second question on capital allocation, we don't really allocate capital in the traditional way, like say someone like a sovereign wealth fund or a pension fund. But certainly, I think we do keep a very close watch on the cash flow, cash inflow, and cash outflow. I think if you look at the first half, I think both Infrastructure and Connectivity was positive, but Real Estate was a bit negative. So there are some challenges there, as I've highlighted. I think we will obviously look for the right opportunities to re-accelerate our monetization. I think that is, as I mentioned in my speech, that is a very key platform that our Vision 2030 is on, is anchored on, and we will need to find the right areas that we can.
So currently, I think on the Real Estate side, I think Louis and his team is looking at some asset monetization opportunities in Singapore and in Vietnam. China is tough, but we're looking at Singapore and Vietnam. So I think we'll definitely be keeping an eye on that. If you don't mind, those people on the—can you wait a second? I would like to address some of the questions online from the very patient retail investors that have called in to post some questions. I'll come back to the audience here. First question is from Nicholas Lim, a retail investor. Nicholas says, "Congratulations on the commendable results for continuing operations profits." He has two questions. First question, what is your direction on the sustainability of Keppel's SGD 0.34 per year dividends?
So he's referring to SGD 0.15 from this year, this year as well as last year, and SGD 0.19 the final dividend. Will it be a level you will absolutely defend? Okay. So first and foremost, Nicholas, we know that dividends are quite important, and as we see most of our earnings are becoming increasingly recurring, it gives us more confidence in terms of declaring dividends. But I cannot predict what the next second half will be. Certainly, we are aware that dividends are important, and you can see from our track record, we have been quite aware that it is really about total shareholders' returns. So it's not just about share price performance, which is important, obviously, but also in terms of what we can distribute in terms of dividends and special dividends.
Second question Nicholas has is, given gearing has been inching up to 0.94x currently, will dividends be cut to par gearing, or is management very comfortable with the gearing of 1.0x, as previously mentioned? So first and foremost, we are now saying, "Hey, look, our business model has changed." You can see again that compared to, say, five years ago, our recurring income is now actually quite a significant part. Last year was 88% for the whole last year. This year, I believe, is in the 70s% for the first half. So we have changed the model. So we are not really looking so much at net gearing, although I know that that's something that some analysts continue to focus on. We believe that a more appropriate measure would be to look at the net debt to EBITDA, which is currently at 3.7x , which is, we believe, quite comfortable.
We believe that we are quite comfortable with the interim dividend. That's why we declared it. We also bear in mind what we see for the rest of the year. Of course, nothing is for sure, but based on what we can see. We are quite comfortable paying that SGD 0.15 interim dividend. Second question is from Etienne Cho of AMAT Singapore. Can you help provide more information with regards to the O&M asset monetization progress? Why not dispose it earlier than later as the capital can be deployed to more productive uses? Completely agree. I think this is something that we are very focused on. How do we monetize this sooner rather than later? I think maybe a few results briefings ago, someone asked me how much profit we can make from this.
I think my reply then and my reply now is our focus is really on monetization. If we make some profit along the way, that's a bonus. Because this is legacy assets. This is not our core business. So our goal is to monetize as soon as we can. But having said that, I think we also can see that it takes time for the market, the offshore market, to improve or recover, I should say. And we are really seeing all the signposts are all in the right direction. CapEx from major oil majors are likely to increase. And we are also seeing that, yes, energy transition will continue, but it will take place together with fossil fuel. So REITs are still required. In these REITs that we have, they represent the most advanced generation REITs that's available in the marketplace. The utilization rates have improved tremendously.
They are all in excess of 90%. A general rule of thumb in the industry is that when you see utilization rates hit 85% and above, charter rates will usually go up. We have seen that happen as well. The industry has also gone through a lot of consolidation. The oil drillers' share price that they have is improving, which means their ability to pay has also gone up. So we are actively fielding inquiries. And the sooner we can get it done, we will. So maybe I come back to the audience. Yes. Please.
I'm Joy from HSBC. Just following up on sort of O&M segment on Asset Co. I think you mentioned in the past there's a bit of a cash sitting at the Asset Co level. Any possibility of sort of extracting some capital towards year-end? You mentioned that you prefer not to look at gearing, but if we look six months forward, will we see sort of monetization picking up and then gearing actually sitting lower versus where we are today?
Then second question on the AUM business, can we get a bit of a breakdown between the fees? So what are sort of event-driven based on acquisition, divestment, as well as promotes? And what are sort of the core recurring base fee? And then lastly, on Real Estate, the development income has been very lumpy for the last few half years. What should we think about this part of the business and your thoughts generally on how Real Estate business should look at going forward? Thanks.
Okay. If you don't mind, I will get my colleague who has been sitting there ready to answer questions. We'll start first. Louis, you want to take the question?
Sure. Thank you for the question. I'm raring to go. No, but I think, as you point out, development is lumpy. I think for that very reason, we have been talking for quite a while now about pivoting away from the lumpy traditional trading and development profits and looking at more recurring income sources. So hence, we still have land bank that we will continue to develop in markets where we see opportunity for development. So for example, in Vietnam, we're still investing with our funds on developing land bank. But noticeably, it will continue to be lumpy, but we'll see a shift towards other sources of income for Real Estate.
Okay. Thank you. On the first question on the cash in the Asset Co, I guess there is quite a bit of cash there. But of course, Asset Co does have some requirements for the use of the cash. But as we sell more assets or as Asset Co sells more assets, I think there will be more cash coming in. So I think we have actually worked with Asset Co to have an early return of, I think it was a dividend, right? They paid back earlier this year.
And our goal is to continue to engage with Asset Co to see how we can accelerate that. Okay. In terms of your other question, which is on what is the likely gearing, I cannot tell you because there's a projection. But I did share that our goal would be to look at accelerating our monetization. So hopefully, some of this will come true in the second half, and that will help on our net debt to EBITDA. Okay. On the fees, sorry. Chris is also waiting to answer the question.
Hey, hi, Joy. On the fees-wise, actually, because acquisition fees is all this, it's actually part of the way we have structured both whether it's at the REITs or for the funds. So we don't see it as just event-driven. We think it's more a recurring basis because we have it every year in terms of our acquisition fees. It's from both the REITs as well as the private funds. It's part of the feature of the fund structure. But it's roughly about 10%, I would say. And then in terms of performance fees, it's also a feature that we have in our REITs and trusts as well as in our private funds. So that to us is all actually recurring basis. That's about 12%.
Okay. Thank you, Chris. So do you have a question?
Yes, Mr. Loh, I do. So if I'm acquiring, I have three questions. Right. So the first one is on capital recycling. It's, of course, slowed down in the first half. You've kind of forewarned us about it. How do we think about the second half? Should we see an acceleration? And can you talk about some of your plans apart from, say, spin-off of DC7 or even the Asset Co? Second question is on, actually, second and third questions on infrastructure.
So there was a half-on-half decline in earnings from operation for infrastructure from about SGD 350 million to about SGD 307 million. Can you just share some color of what happened down there? Right. And then the third question is that on Slide 9, you talk about that infrastructure EBITDA growth target. Why EBITDA? Why not profit? Should we be thinking about some, say, higher cost ramp-up that will kind of mute the sort of earnings trajectory? Thank you.
So I think for us, we are always looking, of course, you can express it in different ways. But I think the way why we express this in EBITDA form is that it's a recurring business, right? So this order book that Cindy's division has generated or has grown from scratch now is SGD 5.2 billion. It is not one-off in the traditional sense, right? So if it's one-off like an EPC, then you will say, "What's the profit margin?"
So we're really looking more at a recurring business that will generate EBITDA because these are contracts. Many of these are contracts that are multi-year, right? And some of them quite long-dated. And this is exactly the type of business that we are pursuing. Okay. So maybe on the second question on infrastructure performance, Cindy, I think you've covered some of that, but maybe you can see whether any additional color you want to provide.
There are seasonalities if you were to compare half-on-half, especially on power and renewable. That includes not just our Singapore business performance, but also our associated company in Europe. So I think you will appreciate that there are seasonalities in energy business performance half-on-half. But let's look at it on a full-year basis. Talk about it maybe when we show the full-year results. Just to supplement a bit on the EBITDA representation or the target growth, we use EBITDA because this is really quasi-cash.
So think about it this way. This long-term contracts for provision of solutions and services will be built on a monthly basis with cash payment from clients. So this is an important point to note. We have this visibility for the next 10-15 years to be delivered. Second item is that such long-term contracts for solutions and services have in it baked-in indexation. We also will be insulated from inflationary cost pressure as we deliver such services and solutions over the subsequent years. These are very two important points to note. Thank you.
Thank you. Now, your first question was on capital recycling. I guess we call that monetization. As I mentioned, we are looking for opportunities to re-accelerate. I think there's always a fine line that we take. I mean, it's like my earlier answer to the question on Rigco . We do want to monetize as soon as we can. The market is coming towards us. It's a question of, do we do it now? Do we do it six months later?
Then we can see what's the difference in terms of what we call a wholesale analysis, right? But fundamentally, we are driven to monetize because I think this is a very key part of our growth strategy. Our funds under management is really the one that is providing the ammunition for us to grow. But then within our own balance sheet, the assets that we've identified for monetization, our goal will be to monetize them as soon as we can, provided the pricing is correct, right? So I think you mentioned about DC7. I think Chris has already addressed that already, Genting Lane. No, you shake your head. Well, and what?
I know you're going to monetize it. I'm just wondering what other assets?
Oh, what?
Yes, so you want that could help with the monetization. Talk about inside and out.
What other assets? Oh, besides DC7, is it? Oh, I think I mentioned Singapore assets, Vietnam assets. We're looking at those in the Real Estate space as well. Anyway, most good, huh? Good. Okay. Okay. Siew Khee, you have another question?
I have a few questions.
I know. So three, and then after that, I'll come back to you again.
Sorry. Three. So I need to actually pick the right one. Okay.
No, no, no. You can have more, but you start with three first. I'll give you a chance. Don't worry.
Okay. Thanks. Just sorry to just go back to infrastructure. Just wanted to check. You mentioned that half-on-half is not a good gauge to look at because there are seasonalities. But if we just look at the CAP alone, first half last year was extraordinarily strong. And you actually noted that SGD 53 million was extraordinary. So just wanted to check what was so extraordinary last year and whether that can actually continue this year. This is not part of the question.
This is just a follow-up earlier on. So I'm still on my first question. You mentioned earlier at the beginning of the briefing on Singapore also have seasonality. Did I catch that wrong? Singapore shouldn't have seasonality, right? Okay. Then just on connectivity, is data center network segment profitable? And how much is the profit? And back to Real Estate, there's a valuation gain in the first half this year. Which assets are these? And also in second half last year, also a strong gain, but we didn't get to ask you. So what were the properties this half and last half that had revaluation gain?
Okay. So you have three questions on infra, connectivity, and Real Estate. Maybe Cindy, you want to do the first one?
So specifically, first half 2023, the majority of the impact is due to the contribution from an associated company in Europe. So the associated company in Europe is a Switzerland-based integrated energy business player. So our associated company trades in gas and electricity. As you can, if you recall, in the last 2 years, Europe has experienced a very volatile energy market thanks to not just the hot war in Ukraine, Russia, but also weather.
So I think that extraordinary contribution from our associated company is now muted in first half 2024. Sorry. Sorry. Second half 2023 versus first half 2024. Half-on-half, right, your question? Singapore muted, but you can't say that there's no seasonality because weather is also one constraint. Gas price performance is also another. That's at the market level. But in terms of our contracted portfolio, we are diligently insulating ourselves from seasonality by making sure our contracted portfolio is resilient enough.
Okay. Thanks, Cindy. Kevin, you want to answer this on profitability?
Yeah. Just on profitability for data centers for first half, it is a slight positive. Yes.
Louis, you want to?
Sure. So for this half, we don't really disclose it at the asset level, the adjustments. But I think, as you would expect in a market like China, we have made some downward adjustments, but these have been more than offset by fair value gains in markets like Singapore and some other markets outside in this region that we've been playing in. Similarly, last half, most of the fair value gains were from the commercial office and retail assets that were closer to completion. So what I can point out quite clearly is, as you know, Keppel South Central in Singapore is close to completion. So we've adjusted the valuation method for that asset, and that's contributed to the gain in this half.
Do you want to have more questions?
Okay. So just on Floatel, the losses are quite wide. What is the plan for Floatel, and what's the book value that we have in the company? Actually, I can't remember. Maybe just refresh our memory on Floatel's book value that we recognize and what's the plan and whether it was actually making losses second half last year.
Okay. That's all? Okay. You want to cover the?
Yeah. Okay. Just on Floatel, maybe I'll just answer the question in two parts. The losses that we see for first half this year is primarily due to two, I guess, unbudgeted events where they recently refinanced a one stack in order to consolidate everything into one stack and had to incur additional upfront interest. That's point number one. Point number two is one of their vessels has actually gone through an unexpected sort of repair to get it ready for charter.
Floatel itself is actually doing very well as far as the four vessels goes, and they're quite well chartered for quite long periods, actually. If you look at their current order book now, that is fixed, it's almost close to slightly north of SGD 400 million as far as order book goes for the next couple of years. I'm sorry. The other question that concerns—so just on losses for Floatel for last year, yes. Floatel's depreciation is still high. So we continue to see P&L being negative, but we expect them to turn around very soon with most of the charters coming live from second half of this year onwards. Okay.
Thank you. There's a question from
the— Hi. I'm Felicia from The Edge. I have one question on the Bifrost Cable System. Do you have a completion rate and any expected ROI on that?
Expected what? Sorry?
ROI.
ROI. Oh. Okay. We are—I think it's more than almost 80% complete. So we are quite at very advanced stages. We're still going—we still have a few landing stations to complete. Currently, we are expected to be ready for service first half of next year. ROI, we don't really disclose this, but it's been a good investment, I think, for Keppel and for the fund, yeah, for the investors in the fund.
The inquiry for the 5 fiber pairs or for the fiber pairs that we have has been good. As we get closer to ready for service, we've seen that the rates have actually gone up significantly. This is one investment that should perform significantly above underwriting. Maybe I move on. There are two questions that have been there from online for a while. Maybe I address that first. First question is from Miyoko Tani of Nikkei. Thank you for the presentation. On your plans in China, specifically in the Real Estate sector, what is your stance and plans amid the prolonged market environment? Are there any specific types of properties that you think have better potential and you are keen to pursue? I think I kind of addressed this earlier on.
We believe that what China needs today is quite different from when we first entered the market 30 years ago. So we have kind of put up a new playbook for China, focusing on what China needs today and also where Keppel can contribute effectively. You will have heard from my remarks that we're no longer just kind of looking at Real Estate deals per se, but we're actually providing services, including helping looking at sustainability, looking at master planning in Suzhou and Jinan.
So thes e are all part of our Real Estate as a service. Of course, there are other areas outside Real Estate that we are keen on, as I mentioned, energy transition, data centers, connectivity. So all these are areas that I think will be important. There will still be a market for Real Estate in China, but increasingly, it is really more China for China. So we are starting to see as the market bottoms out, there's demand, investor demand. But increasingly, these investor demands are more local, meaning coming from the local investors in China rather than from overseas.
And as an asset manager, this would be the area that we will be tapping on. So the next question is from Paul Chew of Phillip Securities. How much of the SGD 203 million asset management fee will transaction related? I think Chris has already addressed that. Any updates on the performance of Rigco? I think I will also address that. I think the thing about the vendor notes that we have or the credit notes that we have on Rigco, there are some accounting treatment there that sometimes we get interest on the credit notes, but there's some accounting amortization, etc., first-day loss. So sometimes it can be quite difficult, not so clear to see.
But maybe one way to look at it is that it's about $4 billion. So it's sitting on our books. We have associated with that, if you work out on our interest cost, it's about SGD 170 million a year, right? But if you look at the charter income that we get from the jackup rigs, only the jackup rigs that we have chartered out, we are getting about SGD 70 million a year. So, of course, the other rigs are not chartered out. So that's why there's still a—so I think maybe that's one way to kind of look at it. Of course, our goal is not just to charter; our goal is to monetize. If chartering is a way to lead to monetization, then that's the way that we'll pursue it. So maybe that's one way of looking at that. Okay. Yes. Ren.
Yeah. Just two more questions, right? I realized that just a few days ago, you bought this One Paramount asset in the hope of warehousing. Correct me if I'm wrong, but we have not seen Keppel doing that for a while now because a lot of your assets have been bought by your funds and third-party capital. So has there been a change in the strategy? So that's my first one. And second one, I think, Christina, you mentioned that the third data center fund, the FUM, is SGD 10 billion. Is that the number that you said? Because you said another SGD 10 billion, right?
Yeah. I think we're talking more about the GAV because in terms of the equity raised, and then you will do a leverage on a leverage basis. So actually, the GAV is much higher.
Okay. So my second question would be, can you sort of give us a sense of what's the FUM from the private credit fund as well as the other fund that you're targeting to launch, which is the education fund? So if you were to add up together, you're actually already above that SGD 100 billion by 2026, right?
Yeah. Yeah. Don't keep increasing my target.
But I think you're not wrong. I think at the end, the SGD 100 billion target is just an interim milestone, right? I think our goal is really SGD 200 billion. It's not SGD 100 billion. So if Christina and the FM and I can achieve SGD 100 billion earlier or more than SGD 100 billion by 2026, who is going to argue with her, right? So you had a question on, Warehousing. Warehousing. Okay.
So generally, as a rule, we do not like to warehouse, generally, because I think if we have funds that are raised that can invest in that particular asset, then that's the best way to do it. But sometimes there are opportunities that come up that look interesting to us, and we may find that it's easier to launch a fund with some seed assets. And then this is something that where Paramount fits in. Paramount fits in in other ways as well. I think we're going to apply our solutions that we think we can improve the performance. It's already quite well. I mean, it's finished. When was it completed?
Two years ago. And it's already up to about 80% leased out, and we believe we can lease the most of it out before we put it as a seed asset for an India office fund.
So it's quite well leased, and it's also recurring income. So in a way, even when it sits on our books, it should pay for itself because the yield is quite good. And so it doesn't cost a burden as far as servicing the debt is concerned. And we'll look to put it into a fund. I mean, that's the goal. Okay? Okay. Any further questions? If not, thank you very much. Ladies and gentlemen, we have come to the end of our conference. Thank you for joining us today.