Keppel Corp

OCBC on 9 Jul 2012

According to Upstream, a shortage of vessels equipped to work in the renewable offshore sector has spurred new building programmes, and green energy ventures in the US are turning to the offshore industry to acquire expertise needed to execute marine projects. This has resulted in opportunities for yards such as Keppel Corporation (KEP) which has a significant presence in the US Gulf coast. KEP is well-positioned to tap the offshore wind sector - it has its own offshore wind turbine vessel design and the group has been expanding its capabilities in this area. Still the sector is a relatively new frontier for most countries and time would be needed for more orders to come. However, we appreciate KEP’s steady efforts to build up its capabilities to service the offshore wind industry which also has synergies with the offshore oil and gas sector. Maintain BUY with fair value estimate of S$13.38 on KEP.

Wind sector holds promise for offshore yards
According to Upstream, a shortage of vessels equipped to work in the renewable offshore sector has spurred new building programmes, and green energy ventures in the US are turning to the offshore industry to acquire expertise needed to execute marine projects . This has resulted in opportunities for yards such as Keppel Corporation (KEP) which has a significant presence in the US Gulf coast.

KEP is well-positioned to tap the sector
KEP first entered the offshore wind energy sector in 2010 when its Netherlands subsidiary Keppel Verolme won a contract to build an electrical transformer and maintenance platform for a German offshore wind farm. Since then it has constructed a wind turbine installation vessel of its own design that has practical advantages over existing vessels in the market. The unit secured its first contract last year.

Expanding suite of solutions for offshore wind farms
In Jan this year, KEP also announced that one of its subsidiaries will acquire a 49.9% stake in OWEC Tower (AS) for about S$61m. The latter is the only company with a track record of having its jacket foundation design installed for offshore wind farms. This move enables KEP to tap on OWEC’s expertise to develop its business in the design and construction of offshore wind turbine foundations as well as installation and support vessels.

Still a relatively new frontier
Though development of offshore wind farms seems to be gaining traction in parts of Europe like Germany, and the US also has plans to develop its own farms, some Chinese offshore wind projects have been delayed due to red tape. The sector is still a relatively new frontier for most countries and time would be needed for more orders to come. However, we appreciate KEP’s steady efforts to build up its capabilities to service the offshore wind industry which also has synergies with the offshore oil and gas sector. Maintain BUY with fair value estimate of S$13.38 on KEP.