Keppel Corporation Ltd. Business Information, Profile, and History

Company Perspectives:

Keppel is focused on creating and enhancing value for our shareholders by growing its businesses in Offshore and Marine, Property and Infrastructure to deliver sustainable earnings growth. As the Group pursues opportunities which fit its core competencies to achieve profitable growth, it is also building value on its investments to maximise shareholder wealth. Keppel's objective of maximising shareholder value is translated through its strategic actions of: Growing core competencies; Expanding into key markets worldwide; Investing in proprietary technologies; Leveraging strengths through strategic partnerships; Developing a talented global workforce.

History of Keppel Corporation Ltd.

Keppel Corporation Ltd. is one of Singapore's leading and most diversified conglomerates. The publicly listed company, long controlled by the Singapore government, has undergone a thorough restructuring into the mid-2000s, and as a result has refocused on three core areas of operation: Offshore & Marine; Property; and Infrastructure. Offshore & Marine represents the company's largest component, generating some 61 percent of the group's SGD 3.96 billion ($2.4 billion) in 2004 revenues. Offshore & Marine includes subsidiaries Keppel FELS and Keppel Shipyard, and ranks among the world's largest shipbuilders and is the world leader in the construction of jack-up rigs for the offshore oil industry. Keppel Offshore & Marine operates from 16 shipyards located in Singapore, the United States, Norway, The Netherlands, the Philippines, Brazil, Azerbaijan, Kazakhstan, and the United Arab Emirates. Keppel's Property division, represented by Keppel Land Ltd., is a leading property developer primarily active in the Asian region, including in Singapore, China, Thailand, Vietnam, Hong Kong, Indonesia, Malaysia, the Philippines, South Korea, Myanmar, Thailand, and Vietnam, as well as in Australia. The group's total assets portfolio is worth more than SGD 5 billion. The company's Infrastructure division encompasses businesses active in engineering, power generation, and network systems, including the group's Keppel Telecommunications & Transportation Ltd. (Keppel T&T), active in the cellular and microwave communications markets. Before Keppel's restructuring, the largest part of the company's revenues came from its Investments division, which included a 49 percent stake in Singapore Petroleum Company. The divestment of these holdings cut the group's annual revenues by some two-thirds. Keppel is listed on the Singapore Stock Exchange.

Shipbuilding Beginnings in the 1960s

Keppel Corporation derived its name from Singapore's Keppel Bay, the country's primary deepwater harbor. Discovered by Admiral Sir Henry Keppel, the harbour provided a sheltered location for the establishment of the British Empire's colonial outpost in the country. In 1859, the first dock was built in New Harbour. By 1861, the Patent Slip and Dock Company had been established to provide harbor and ship repair services. That company later merged with its chief rival, Tanjong Pagar Dock Company, in 1899, and then changed its name to New Harbour Dock Company. The following year, New Harbour itself was renamed as Keppel Bay.

By 1905, the colonial government had taken the first step toward establishing its control over the harbor. In 1911, government control was solidified with the creation of the Singapore Harbour Board, which took over oversight of the entire Singapore coastline. Following Singapore's independence, the harbor board was placed under the new government's control and became known as the Port of Singapore Authority. Dock operations and services were placed under the Dockyard Department.

In 1968, however, a new company was formed, Singapore Drydock and Engineering Co. (Pte) Ltd., which then took over the Drydock Department. Soon after, the new company changed its name, becoming Keppel Shipyard (Pte) Ltd. The new company was initially operated by the Swan Hunter Group, then a major ship repairer in the region.

Keppel launched the first wave of its expansion early the following decade. In 1971, the company entered shipbuilding, ship repair, and later, rig-building through the acquisition of a 40 percent stake in Far East Levingston Shipbuilding Ltd. That company had been formed just four years earlier, as Far East Shipbuilding Industries (FELS), then went public in 1969, before adopting the FELS name in 1970.

Controlled by the Singapore government, Keppel was placed under local management in 1972. The company continued to seek expansion opportunities, and in order to fund its growth strategy, the company went public in 1975. Nonetheless, the Singapore government maintained its majority ownership of the company.

Following the public offering, Keppel launched its first foreign expansion, creating Keppel Philippines Shipyard in 1975 and launching operations in that country by 1976. Closer to home, Keppel expanded its shipyard operations through the acquisition of rival Singmarine that same year. Then, in 1977, the company inaugurated its first graving dock, Temasek Dock.

Keppel took full control of FELS in 1980. Two years later, the company added its second graving dock, Raffles Dock. By then, however, Keppel had made its first moves toward becoming one of Singapore's major diversified conglomerates. In 1978, the company took its first step by establishing a finance company, Shing Laong Credit. Then in 1983, the company added a property development wing through the acquisition of Straits Steamship Land.

That company had been founded in 1890 as the Straits Steamship Company Ltd., and focused on shipping operations until the early 1970s. In 1973, however, Straits Steamship launched its own diversification drive, adding property development and warehousing businesses, as well as leisure and distribution businesses. Under Keppel, Straits grew strongly, particularly from the mid-1980s as Straits began buying up a number of major Singapore properties. Into the late 1980s, Straits began expanding into the international property market, quickly establishing itself as a major property group in the Asian region. In 1989, in recognition of the growth of Straits's property portfolio, Keppel spun off the property business into Straits Steamship Land Limited.

At the same time, Keppel restructured the former Straits shipping operation into a new company, Steamers Maritime Holdings, which was then given its own listing on the Singapore Stock Exchange in 1989. Steamers then became Keppel's vehicle for diversification into telecommunications networks and related infrastructure operations, launched in 1990. By 1997, Keppel had exited shipping, and had launched the M1 cellular phone network. In that year, Steamers changed its name, becoming Keppel T&T. At the same time, Keppel renamed its property business as Keppel Land.

Diversified Conglomerate in the 1990s

By then, Keppel itself had changed its name, becoming Keppel Corporation in 1986. The company continued to build its shipbuilding and port operations. In 1987, the company merged Singmarine Shipyard with Singapore Slipway, creating a new company, Singmarine Industries. That company was listed on the Singapore exchange the same year.

Keppel turned to the Philippines the following year, acquiring Cebu Shipyard and Engineering Works. That company was then listed on the Manila and Makati stock exchanges in 1989. The following year, Keppel ventured into the United States for the first time, acquiring a stake in a shipyard in Brownsville, Texas. That company became known as AMFELS in 1992 after Keppel acquired full control. By then, the company also had moved into the Persian Gulf market, acquiring the Arab Heavy Industries shipyard in the United Arab Emirates. The company also entered India at this time, buying a shipyard there.

Other shipyards followed during the decade, including the launch of the Caspian Shipyard Company in Azerbaijan in 1997, initially as a joint venture. The company also established operations in Bulgaria, Vietnam, Thailand, and elsewhere during this time.

Keppel in the meantime continued its diversification. In 1988, the company merged its Shing Laong Credit finance unit with publicly listed Sim Lim Finance, creating Keppel Finance. In that year, also, the company bought a stockbroking business, EG Tan Stockbrokers. Two years later, Keppel moved into banking, acquiring Asia Commercial Bank. The company subsequently renamed the bank Keppel Bank, and listed its shares on the Singapore Stock Exchange in 1993. By then, the company also had created a dedicated engineering business, Keppel Integrated Engineering, composed of the various engineering subsidiaries and businesses operated by its other subsidiaries. That company was later renamed Keppel FELS Energy and Infrastructure during the company's restructuring at the end of the 1990s.

Through the 1990s, Keppel emerged as a major player within the world's shipbuilding industry. Keppel developed leadership in two specialties in particular. The first was the design, engineering, and construction of jack-up rigs for the offshore exploration and production industry. The second was the conversion of ships as Floating Production Storage and Offloading and Floating Storage and Offloading vessels.

Refocused for the New Century

The Asian banking crisis forced Keppel to rein in its highly diversified businesses. The company launched a major restructuring program in 1998. As part of that restructuring, the company agreed to merge Keppel Bank with rival Tatlee Bank in 1998, marking a first step in the company's exit from the financial industry. Other rationalizations followed. In 1999, the company merged Keppel Shipyard with rival Hitachi Zosen, creating Keppel Hitachi Zosen. In 2002, however, Keppel took full control of that business, and established a new subsidiary, Keppel Offshore & Marine. This new company integrated several of Keppel's businesses, including Keppel FELS, Keppel Shipyard, and Keppel Singmarine, as well as all of the group's international shipyards.

Keppel's international profile expanded again that same year, when the company reached an agreement to acquire Rotterdam, The Netherlands-based Verolme Botlek. That shipyard was then renamed Keppel Verolme. Then in 2003, Keppel entered Kazakhstan, setting up an offshore engineering and construction facility there.

Keppel's restructuring continued into the mid-2000s. The company refocused its operations around a three-prong core of Offshore & Marine, Property, and Infrastructure. Into the beginning of 2004, Keppel also operated a fourth division, Investments, which included its 49 percent in Singapore Petroleum Company and a 36 percent stake in k1 Ventures. The Investment division in fact represented the largest part of Keppel's revenues, at some two-thirds of company sales. In 2004, however, Keppel spun off its investment operations. While this reduced the group's sales to slightly less than SGD 4 billion ($2.4 billion) for the year, it represented a major step forward in Keppel's strategy to reinvent itself as a focused Singapore corporate powerhouse for the new century.

Principal Subsidiaries: Alpha Investment Partners Ltd.; Arab Heavy Industries PJSC (UAE); Caspian Shipyard Company Ltd. (Azerbaijan); Dragon Land Ltd. (China); Keppel AmFELS Inc. (U.S.A.); Keppel Bay Pte Ltd.; Keppel Corporation Limited; Keppel Electric Pte Ltd.; Keppel Energy Pte Ltd.; Keppel Engineering Pte Ltd.; Keppel FELS Brasil S.A. (Brazil); Keppel FELS Limited; Keppel FMO Pte Ltd.; Keppel Integrated Engineering Ltd.; Keppel Kazakhstan LLP; Keppel Land International Limited; Keppel Land Limited; Keppel Offshore & Marine Ltd.; Keppel Philippines Marine Inc.; Keppel Philippines Properties Inc.; Keppel Shipyard Limited; Keppel Singmarine Pte Ltd.; Keppel Telecommunications & Transportation Ltd.; Keppel Thai Properties Public Co. Ltd. (Thailand); Keppel Verolme B.V. (The Netherlands); MobileOne Ltd.; Network Engineering; Offshore & Marine A/S (Norway); Offshore Technology Development Pte Ltd.; Seghers Keppel Technology Group N.V. (Belgium); Singapore Petroleum Company Ltd.

Chronology

• Key Dates:
• 1859: The first dock is built in Singapore's New Harbour (later Keppel Bay).
• 1913: Singapore Harbour Board, which becomes Port of Singapore Authority after the country's independence, is created.
• 1968: Singapore Drydock and Engineering Co. is established to take over Drydock Department of Port of Singapore Authority; the company adopts the name Keppel Shipyard.
• 1971: Shipbuilding group FELS is acquired.
• 1975: Keppel goes public on the Singapore Stock Exchange.
• 1983: The company acquires Straits Steamship Ltd., which provides an entry into property development, later forming the basis for Keppel Land and infrastructure subsidiary Keppel T&T.
• 1986: The company changes its name to Keppel Corporation.
• 1990: Keppel enters the United States with the acquisition of a shipyard in Brownsville, Texas; the company acquires Asia Commercial Bank, which becomes Keppel Bank.
• 1998: Keppel Bank merges with Tat Lee Bank amid a restructuring of operations.
• 1999: The company merges Keppel Shipyard with Hitachi Zosen, which becomes Keppel Hitachi Zosen.
• 2002: The company acquires full control of Keppel Hitachi Zosen, which is integrated into the newly established Keppel Offshore & Marine, as well as Keppel FELS and KFEI.
• 2003: Keppel enters Kazakhstan with the creation of an offshore engineering and construction subsidiary.
• 2004: Keppel spins off the Investments division to refocus around a core of Offshore & Marine, Property, and Infrastructure.