Calendar An icon of a desk calendar. Cancel An icon of a circle with a diagonal line across. Caret An icon of a block arrow pointing to the right. Email An icon of a paper envelope. Facebook An icon of the Facebook "f" mark. Google An icon of the Google "G" mark. Linked In An icon of the Linked In "in" mark. Logout An icon representing logout. Profile An icon that resembles human head and shoulders. Telephone An icon of a traditional telephone receiver. Tick An icon of a tick mark. Is Public An icon of a human eye and eyelashes. Is Not Public An icon of a human eye and eyelashes with a diagonal line through it. Pause Icon A two-lined pause icon for stopping interactions. Quote Mark A opening quote mark. Quote Mark A closing quote mark. Arrow An icon of an arrow. Folder An icon of a paper folder. Breaking An icon of an exclamation mark on a circular background. Camera An icon of a digital camera. Caret An icon of a caret arrow. Clock An icon of a clock face. Close An icon of the an X shape. Close Icon An icon used to represent where to interact to collapse or dismiss a component Comment An icon of a speech bubble. Comments An icon of a speech bubble, denoting user comments. Ellipsis An icon of 3 horizontal dots. Envelope An icon of a paper envelope. Facebook An icon of a facebook f logo. Camera An icon of a digital camera. Home An icon of a house. Instagram An icon of the Instagram logo. LinkedIn An icon of the LinkedIn logo. Magnifying Glass An icon of a magnifying glass. Search Icon A magnifying glass icon that is used to represent the function of searching. Menu An icon of 3 horizontal lines. Hamburger Menu Icon An icon used to represent a collapsed menu. Next An icon of an arrow pointing to the right. Notice An explanation mark centred inside a circle. Previous An icon of an arrow pointing to the left. Rating An icon of a star. Tag An icon of a tag. Twitter An icon of the Twitter logo. Video Camera An icon of a video camera shape. Speech Bubble Icon A icon displaying a speech bubble WhatsApp An icon of the WhatsApp logo. Information An icon of an information logo. Plus A mathematical 'plus' symbol. Duration An icon indicating Time. Success Tick An icon of a green tick. Success Tick Timeout An icon of a greyed out success tick. Loading Spinner An icon of a loading spinner.

Keppel, Sembcorp Marine complete merger deal to create world’s biggest oil rig builder

© Supplied by Keppel O&MKeppel Shipyard in Singapore
Keppel Shipyard in Singapore

Sembcorp Marine has agreed to merge with Keppel Offshore & Marine in a deal that will create the world’s biggest builder of oil rigs and push the business further into renewables and alternative energy solutions. The pair are forming what could be one of the world’s largest offshore energy players worth $6.3 billion.

Sembcorp Marine and Keppel O&M will be wholly owned by a new holding entity, which will be listed on the Singapore stock exchange, the two companies said in a widely anticipated joint statement Wednesday. A shareholder meeting is expected to be held in the fourth quarter to seek approval for the transaction, which is subject to various regulatory sign offs.

“The signing of a win-win agreement on the proposed combination of Keppel O&M and Sembcorp Marine marks a strategic milestone for the offshore and marine sector,” Keppel Chief Executive Officer Loh Chin Hua said. “It brings together two leading O&M companies in Singapore to create a stronger player that can realise synergies and compete more effectively amidst the energy transition.”

Yards in Singapore were among the worst hit anywhere in the world as the pandemic made it difficult to get skilled manpower from overseas due to strict Covid-19 border restrictions. Last year, Sembcorp Marine reported its biggest loss since at least 1990 after setting aside provisions for labor-related expenses and costs pertaining to existing projects that were delayed due to Covid.

Builders of vessels and rigs globally have been restructuring to stay afloat as orders slumped following weaker crude oil prices in 2014. Thousands of jobs have been culled and shipyards have been shuttered as oil majors such as Shell and ExxonMobil reduced spending on drilling and other offshore equipment.

Wind, Hydrogen

The merger will help the resulting company seek opportunities not just in the oil and gas sector, but also in renewable energies, such as offshore wind and alternative sources including hydrogen, according to the statement.

“Growing commitments by governments and companies around the world seeking to achieve net zero carbon emissions are driving increasing demand for renewable and clean energy solutions,” the companies said. “These include areas such as offshore wind, hydrogen and ammonia, in which both Keppel O&M and Sembcorp Marine have built their respective capabilities and track records in the past few years.”

Under the agreement, Keppel will receive S$500 million ($363 million) from Keppel O&M and a 56% share of the new company on a post-issue basis. Keppel will distribute 46% of the combined entity’s shares in-specie to its shareholders and retain a 10% stake. Keppel O&M has entered into a commitment letter with DBS Group Holdings to raise the funds.

Keppel will later decide what it will do with the 10% stake in the new company, including options such as a distribution or sale, Loh said at a briefing with analysts and media. The company plans to transform itself as a developer, owner and operator of energy related assets rather than being a builder, he said.

Sembcorp Marine will hold a 44% interest in the new company. Its investors will exchange their shares in Sembcorp Marine for stock in the combined entity on a one-for-one basis, and Sembcorp Marine will transfer its listing status on the mainboard of the Singapore exchange to the combined entity.

Order Book

Figures in Wednesday’s presentation show the combined entity will have revenue of S$3.9 billion based on 2021 figures, a net loss of S$1.3 billion and an order book of S$6.4 billion.

The transaction has been some time in the works, with Sembcorp Marine and Keppel signing a non-binding memorandum of understanding in June 2021 to start exclusive talks to combine their oil-rig businesses.

Keppel also agreed with Baluran Ltd. and Kyanite Investment Holdings Pte, an indirect wholly owned subsidiary of Temasek Holdings Pte, to sell Keppel O&M’s rigs that have been built and those already under construction to a new company. Keppel will own 10% of the new entity, while Baluran will hold 74.9% and Kyanite 15.1%.

Keppel O&M used to be Keppel’s biggest contributor to earnings until the decline in rig orders saw the group’s property business take that mantle. Keppel said last year that it will exit the rig-building business and focus more on providing solutions for energy projects.

Sembcorp Marine obtained S$2.1 billion through a sale of new shares in 2020 that saw its biggest shareholder change to Temasek, Singapore’s state investment firm, from Sembcorp Industries Ltd. The rig-builder raised another S$1.5 billion last year.

Recommended for you

More from Energy Voice

Latest Posts