Keppel Corporation Ltd
SGX:BN4
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Keppel Corporation Ltd
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Welcome to the webcast on Keppel Corporation's results and performance in the second half and full year of 2020. Here today are Mr. Manjot Singh Mann, CEO of M1; Mr. Tan Swee Yiow, CEO of Keppel Land; Ms. Christina Tan, CEO of Keppel Capital; Mr. Chan Hon Chew, CFO of Keppel Corp.; Dr. Ong Tiong Guan, CEO of Keppel Infrastructure; Mr. Chris Ong, CEO of Keppel O&M; and Mr. Thomas Pang, CEO of Keppel T&T.
Let me now proceed with the briefing. 2020 was a tremendous year with the COVID-19 pandemic causing immense suffering and severely impacting the global economy. However, 2020 was also a year of transformation and new beginnings for Keppel as we unveil Vision 2030, our long-term strategy to guide the group's growth and transformation as one integrated business, providing solutions for sustainable urbanization.
Last September, we announced further steps in our Vision 2030 road map. As part of our asset-light business model, we identified a group of assets valued at 17.5 over the next 3 years. Since the beginning of October, we have announced divestments of more than $1.2 billion, well on our way to the 3-year target. We will continue our asset monetization program in the year ahead as we recycle capital to fund growth opportunities. We have established a transformation office to drive the group's execution of Vision 2030 with a comprehensive agenda covering 6 work streams: growth initiatives, asset monetization and portfolio optimization, cost and cash management, sustainability, technology and innovation and people and organization.
We also launched a 100-day plan from end September 2020 to early January 2021 to expedite the execution of Vision 2030. Over this period, we announced more than a dozen different initiatives, including asset monetization as well as growth initiatives such as securing new offshore and onshore renewables projects, growing our Urban Development business and launching new funds aligned to Keppel's areas of business.
The pursuit of Vision 2030 is not a one-off sprint, but a multiyear long distance run. Following the conclusion of the 100-day plan, we will pursue second, third and fourth waves of initiatives as we keep up the momentum to realize Vision 2030.
Last September, we also announced the strategic review of Keppel O&M, and early on, our logistics business. Let me provide an update on the 2 reviews. Amidst growing international concerns about climate change, the global energy transition is accelerating with the share of renewables, gas and new energy solutions growing in the energy mix. Demand for solar PV and offshore wind is expected to grow significantly in the years ahead, while natural gas as a transition fuel is projected to overtake oil to become the world's largest energy source.
The COVID-19 pandemic has further accelerated the energy transition by sharply reducing global oil demand, thus triggering a sharp deterioration in the industry in the past year. In line with the changing environment, we have announced today our plans to transform Keppel O&M organically to be more competitive, relevant and aligned to Keppel's Vision 2030 even as we continue to explore inorganic options.
In a nutshell, the organic transformation of Keppel O&M comprises 2 main parts. First, we will transform the company into a nimble, asset-light and people-light opco, which will focus on seizing opportunities in the energy transition such as floating infrastructure and infrastructure-like projects, including renewables, gas solutions, new energy solutions and production assets. We will also collaborate with other Keppel business units to provide other urbanization solutions such as offshore and nearshore infrastructure and floating data center parks, harnessing the synergies of the group.
As part of the transformation, Keppel O&M will exit the offshore rig building business and also progressively exit low value-adding repairs and other activities with low bottom line contribution. It will transit to a developer and integrator role higher up the value chain, focusing on design, engineering and procurement, with fabrication work subcontracted to third parties. Keppel O&M's yard operations will be streamlined, and we will rightsize the organization while investing to build new capabilities. We will also explore how Keppel O&M's offshore rig technology can be repurposed for other users.
Second, we will address the $2.9 billion of legacy completed and uncompleted rigs on our balance sheet by ring-fencing them and putting them under a rig co and a dev co, respectively. Completed rigs in the rig co will be put to work or monetized if there are suitable opportunities. A team will be appointed to support the rig co's chartering and marketing activities. When the oil market improves, utilization and day rates increase and the rigs generate steady cash flow, we will sell the rigs or explore bringing in third-party investors. When the rig co is cash flow generating, it can also be monetized or [indiscernible] and completed rigs while prudently managing cash flow. We will focus on completing rigs that have firm contracts with customers. Completed rigs will either be delivered to customers or transferred to the rig co and put to work also.
Both the rig co and dev co are transient structures. They are projected to need about 5 [indiscernible] plans, we will see a transform and more competitive Keppel O&M, well placed to support the global energy transition. It will be much slimmer than the Keppel O&M of today with a significantly reduced headcount, focusing on higher-value adding work as a developer and integrator. It will also be much more asset-light and a strong contributor to the group's ROE target of 15%.
As part of the strategic review, we are also exploring inorganic options, but there is no assurance that any transaction will materialize. We believe our organic restructuring of Keppel O&M will not only enhance its competitiveness, but also its attractiveness if we were to undertake any inorganic action. We will provide further updates to the market in due course, if there are any material developments.
E-commerce has been growing rapidly in recent years and was given a further boost by the COVID-19 pandemic. Our logistics business has benefited from the increased demand for e-commerce and urban logistics over the past year, with last mile deliveries, gross merchandise value and channel management orders growing significantly. Notwithstanding the growing business, we have decided to sharpen our focus and divest our third-party logistics business in Southeast Asia and Australia as well as our channel management business to a third party who may be able to provide a better ecosystem to scale up the business.
[indiscernible] We have received good interest from the market with many potential buyers signing NDAs. The first bids are expected in February 2021, following which we will shortlist the buyers for deeper engagement. We are keeping options open and may decide to divest our logistics business completely or continue holding a minority stake.
Moving on to the group's financial performance. Against an unprecedentedly challenging backdrop, Keppel sustained a net loss of $506 million for financial year 2020. This was due to impairments of $952 million, mainly in the O&M business, the bulk of which was recorded in 2Q 2020. However, apart from Keppel O&M, all key business units within the group remain profitable. Excluding impairments, financial year 2020's net profit would have been $446 million, underpinned by the resilient performance of Keppel's business units, many of which provide essential services and continue operating during the pandemic.
Our free cash inflow stood at $497 million in 2020 compared to a free cash outflow of $653 million in 2019, due mainly to lower working capital requirements and higher divestment proceeds, underpinned by our asset monetization program. Net gearing was slightly lower at 0.91 as at end 2020 compared to 0.96 as at end September 2020 due to divestment proceeds received during the quarter as well as a higher equity base. If the various asset monetization initiatives, which we have announced such as the divestment of Keppel B Power had been completed by 31st December 2020, our net gearing as at end 2020 would have fallen to 0.81 on a pro forma basis.
In appreciation of our shareholders for their confidence and support for Keppel in this difficult environment, the Board of Directors will be proposing a final dividend of $0.07 per share. Together with the interim cash dividend of $0.03 per share, we'll be paying out a total cash dividend of $0.10 per share to shareholders for the whole of 2020.
In Keppel's Vision 2030, we highlighted our focus on improving the quality of our earnings through growing our recurring income while shifting away from lumpy project-based earnings. For 2020, recurring income amounted to $220 million compared to $260 million in 2019. We will present contributions from the group's stakes in the REITs, Keppel Infrastructure Trust and private funds under asset management rather than under the respective business units as was previous -- as was done previously, so as to provide greater clarity on the earnings from Asset Management as well as the core operations of our 3 other segments.
Energy & Environment made a net loss of $1.181 billion for financial year 2020 on the back of losses in the O&M business. Keppel O&M's net loss for financial year 2020 was $1.194 billion. This was mainly due to the significant impairments recorded in second quarter 2020, reduced top line from COVID-19-related disruptions, which severely impacted yard activities in Singapore for much of the year and the higher share of losses from associates.
Keppel's O&M's pivot to renewables and cleaner fossil fuels has borne fruit. Despite the challenging environment, it secured new order wins of about $1 billion in 2020, with offshore renewables and LNG solutions making up 65% of new orders. Keppel O&M's net order book stood at $3.3 billion as at end 2020, over 80% of which comprises renewables and gas solutions.
What has resumed at all our yards, including the Singapore yards, where workforce of about 19,500 has returned to work as at end 2020 with safe management measures in place. We are now catching -- we are now working to catch up on projects which have been delayed due to COVID-19.
Keppel Infrastructure continued to grow as a steady contributor to the group, with its contributions improving from $129 million for financial year 2019 to $144 million for financial year 2020. It continued to deliver strong results, underpinned by improved performance in Energy Infrastructure and environment -- and Environmental Infrastructure businesses.
During the year, Keppel Infrastructure secured $2.1 billion worth of WTE and district cooling contracts across Singapore, India and Thailand. The newly established Keppel Renewable Energy has also announced its first solar farm project in Australia. We will continue to explore opportunities in renewable energy assets in line with Keppel's focus on making sustainability our business.
Urban Development recorded a net profit of $438 million for financial year 2020, lower year-on-year, mainly due to lower contribution from Keppel Land. Keppel Land's contribution was $406 million for financial year 2020, 10% lower than the $452 million for financial year 2019, mainly due to the absence of tax write-backs. During the year, Keppel Land announced asset divestments of about $1.3 billion and acquired a stake in a co-living solutions provider as well as new projects in China and India.
Home sales were lower year-on-year at 3,340 units. The bulk of the reduction was in China due to economic headwinds in the country as well as fewer new projects launched. In Vietnam, home sales were affected by slower approval for the launch of new projects. However, demand for quality homes remains strong.
The first batch of 519 units at Celesta Rise in Ho Chi Minh City was launched in November 2020, and almost all the units were sold within a month. On a positive note, home sales in Singapore improved significantly. Most of the sales were at The Garden Residence, which was 93% sold as at end 2020. These figures do not include the approximately 8,200 units sold on block from the announced divestments of our stakes in 4 residential projects across China and Vietnam.
Our total residential land bank stands at about 54,000 homes, with the majority in China and Vietnam and a growing portfolio in India. In China, the Sino-Singapore Tianjin Eco-City continues to grow steadily with our master developer SSTEC, contributing a profit of $67 million to the group from the sale of 2 residential land plots and the handover of completed homes.
Connectivity recorded a net profit of $13 million for financial year 2020 compared to $136 million in financial year 2019, mainly due to the absence of fair value gain recognized in 2019 from the remeasurement of the previously held interest in M1 at acquisition date.
Digitalization trends accentuated by work-from-home arrangements continue to drive demand for data centers, a growth engine for the group. Our data center business reported a net loss of $12 million for financial year 2020, following the segmentalization of $74 million in contributions from our stakes in Keppel DC REIT and Alpha Data Centre Funds under asset management. This includes the gains from the partial sale of Keppel DC REIT units last year.
During the year, Keppel data centers added 2 new data center development projects in Singapore and China to its portfolio. With the launch of the new Keppel Data Centre Fund II, we will further expand our data center footprint without relying just on our balance sheet, while we continue to grow our fee income from operating and maintaining the data centers.
M1's contribution was $65 million, lower year-on-year due to the impact of the pandemic on roaming and prepaid revenue. However, EBITDA remained relatively resilient at $264 million, a modest decline of 6.9% year-on-year. In 2020, M1 increased its market share to have the second largest postpaid base in Singapore based on both number of customers and revenue.
M1's transformation is also progressing well. It recently unveiled its refreshed brand identity and will shortly launch its new digital connectivity platform, which will significantly improve customers' experience. M1 is also continuing to collaborate with industry leaders to conduct trials of 5G use cases as it rolls out its 5G stand-alone network this year.
For financial year 2020, Asset Management's net profit was $280 million, up 31% from a year ago. This was mainly due to the gains from the reclassification of Keppel Infrastructure Trust as well as improved performance by Keppel Capital, whose net profit grew 6% year-on-year to $85 million.
Asset Management is both a vertical for the group and also a horizontal, which promotes collaboration across businesses, while serving as a platform for capital recycling and tapping third-party investments for growth. Financial year 2020 saw Keppel Capital playing all of these roles in line with Vision 2030. Notably, Keppel Capital's asset management fees grew, underpinned by contributions from new fund initiatives.
Despite the travel and other restrictions imposed by the pandemic, Keppel Capital managed funds raised total equity of about $4.5 billion from institutional investors during the year, reflecting the strong demand from investors for assets with long-term sustainable cash flow. Keppel Capital has also launched and achieved first close for several funds spanning different asset classes. As at end December 2020, Keppel Capital's AUM has grown by 12% to $37 billion compared to $33 billion a year ago.
To conclude, progress in the rollout of the COVID-19 vaccine gives hope that the end of the pandemic may be in sight. However, we are not out of the woods yet. The pandemic continues to spread in many countries, and we have seen the tightening of curves in different cities in response to new waves of infection. We must, therefore, remain vigilant and carefully observe safe management measures. However, COVID-19 has also accelerated many macro trends which were already in motion such as increasing digitalization, e-commerce and the energy transition, which we had identified as part of Vision 2030. This will create new opportunities for businesses, ready and able to seize them. But with the world changing at an increasing pace, we must also speed up on the execution of our vision.
While the global outlook remains uncertain, I'm cautiously optimistic about the year ahead. Keppel has a clear strategy and the necessary funding to weather the tough environment and pursue growth initiatives. Guided by our Vision 2030, we'll continue to grow our business as a provider of solutions for sustainable urbanization for the benefit of all our stakeholders.
Before I end, I'd like to express my deep appreciation to 2 colleagues on the panel, who will be stepping down next month as part of the group's leadership renewal. Dr. Ong Tiong Guan, CEO of Keppel Infrastructure, will be retiring but will remain on the Board of Keppel Infrastructure. Mr. Tan Swee Yiow will step down as CEO of Keppel Land but will take on a new role as Senior Managing Director of Urban Development at Keppel Corporation. He will remain on the Boards of Keppel Land and Keppel REIT management. Thank you, TG and Swee Yiow for your contributions to the group. I'll look forward to working with Swee Yiow in this new capacity.
Our CFO, Hon Chew, will now take you through the group's financial performance. Thank you.
Thank you, Chin Hua, and a very good evening to all. I shall now take you through the group's financial performance.
In the first half -- in the second half of 2020, the group recorded a net profit of $31 million, which was 21% lower than the corresponding period in 2019. Correspondingly, the earnings per share decreased by 91% to $0.017. Revenue decreased by 20% to $3.4 billion compared to the same period in 2019. Lower revenues from Energy & Environment and Connectivity were partly offset by higher revenues from Urban Development and Asset Management.
Operating profit was 60% lower at $157 million, largely due to weaker performance from the Offshore & Marine business and additional impairments recognized in second half of 2020. Profit before tax at $102 million decreased by a high percentage of 78%, mainly due to share of associated companies' fair value losses on investment properties, lower investment income and higher net interest expense. After tax and noncontrolling interest, net profit was $31 million, translating to earnings per share of $0.017.
In the next slide, we take a closer look at the group's revenues by segment. In the second half of 2020, the group's revenue at $3.4 billion was 20% lower than the same period in the preceding year. Revenues from Energy & Environment decreased by 32% to $1.9 billion, mainly due to significantly lower revenue in the Offshore & Marine business as a result of slower progress from certain ongoing projects due to COVID-19-related disruptions, suspension of revenue recognition on Awilco contracts and deferment of some projects. Lower electricity sales and the completion of Keppel Marina East Desalination Plant project in 2Q 2020 contributed further to the decline in the top line. These were partly offset by higher progressive revenue recognition from the Hong Kong Integrated Waste Management Facility project.
Urban Development's revenue increased by 8% compared to 2019, mainly due to higher contribution from property trading projects, led by a higher number of units handed over for Waterfront Residences in Wuxi, Seasons Residences in Wuxi, Sheshan Riviera in Shanghai and Seasons Residences in Shanghai, which was partly offset by fewer units handed over for Riviera Point in Ho Chi Minh City, Park Avenue Heights in Wuxi, 8 Park Avenue in Shanghai as well as lower contribution from the Reflections and Corals at Keppel Bay in Singapore.
Connectivity saw a 5% drop in revenue, mainly due to lower roaming service revenue as a result of COVID-19 and lower handset and equipment sales in M1 as well as lower contribution from the logistics business following the divestment of certain China logistics assets in November 2019. Revenue from Asset Management increased 3%, largely due to higher asset management fees, partly offset by lower acquisition fees.
Moving on to the group's pretax profit. The group recorded $102 million of pretax profit for the second half of 2020, 78% below the same period in 2019. Energy & Environment's pretax loss was $309 million as compared to $54 million in 2019. The Offshore & Marine business was impacted by slower progress on projects, due principally to a significant downtime as a result of COVID-19 and higher net interest expense, which were partly mitigated by lower overheads, lower share of losses from associated companies and government relief measures for the COVID-19 pandemic.
The weak performance in the Offshore & Marine business was partly offset by higher contributions from the Energy Infrastructure and Environmental Infrastructure businesses as well as absence of share of loss from KrisEnergy as compared to the same period in 2019. Despite higher revenues, Urban Development pretax profit decreased by $11 million to $373 million, mainly arising from share of associated companies' fair value losses from investment properties as compared to fair value gains on investment properties in the same period in 2019 as well as lower contribution from the Sino-Singapore Tianjin Eco-City, mainly due to fewer land plot sales. These were partly offset by higher contributions from property trading projects in China and gains from the disposal of interest in Taicang and Chengdu projects in China.
Connectivity's pretax profit of $16 million was $19 million lower than the same period in 2019 mainly due to lower revenue as a result of COVID-19 travel restrictions and higher digital transformation costs in M1. These were partly offset by gain from the disposal of interest in Business Online Public Company Limited and lower net interest expense.
Asset Management's pretax profit of $34 million was $89 million lower than the same period in 2019, led by lower contributions from Keppel REIT, due mainly to fair value losses on investment properties and Alpha Data Centre Fund, lower investment income as well as absence of dilution gain arising from Keppel DC REIT's private placement exercise in 2019. This was partly offset by dividend income from KIT.
Corporate & Others consist mainly of corporate costs, research and development costs, treasury operations, investment holdings and provision of management and other support services. Pretax loss of $12 million was $11 million lower due to absence of bad debt written off compared to 2019, partly offset by fair value loss on investment and lower investment income.
After tax and noncontrolling interest, the group's net profit was $31 million as compared to net profit of $351 million for the same period in 2019. Profits from Urban Development, Asset Management and Connectivity were partly offset by losses at Energy & Environment.
I shall now take you through the performance for the financial year 2020. The group recorded net loss of $506 million for financial year 2020 as compared to net profit of $707 million in 2019. Consequently, annualized ROE was at negative 4.6% as compared to positive 6.3% recorded in 2019. Free cash inflow of $497 million was an improvement over the free cash outflow of $653 million in 2019. This was mainly due to lower working capital requirements from Energy & Environment and Urban Development and higher proceeds from divestments and of interest in Jiangyin, Taicang and Chengdu projects in China as far as receipt of deferred proceeds from 2019 sale of interest in Dong Nai Waterfront City project.
Net gearing increased from 0.8x at the end of 2019 to 0.91x at the end of 2020. This was mainly due to investments, working capital requirements and payments of final dividend for financial year 2019 and interim dividend for financial year 2020 as well as the impact from lower equity due to the significant impairments recorded in the current year. However, this is an improvement compared against June 2020 net gearing of 1x, largely due to divestment proceeds received during the second half as well as higher equity base arising from higher hedging and foreign currency translation reserves.
The group earned a total revenue of $6.6 billion in 2020, a decrease of 13% year-on-year. Lower revenues from Energy & Environment, Asset Management and Urban Development were partly offset by higher revenues from Connectivity. Impacted by impairments of $799 million, operating profit was much lower at $8 million as compared to $877 million in 2019. Share of losses from associate companies and higher net interest expense drove the group into pretax loss position of $255 million as compared to pretax profit of $954 million in the prior year.
Excluding impairments, pretax profit of the group was $775 million, which was $302 million or 28% lower than in 2019. After tax and noncontrolling interest, net loss was $506 million, translating to a loss per share of $0.278.
In the next slide, we take a closer look at the group's revenues by segment. Group revenue declined 13% year-on-year to $6.6 billion. Revenue from Energy & Environment decreased by 21% to $3.9 billion, mainly attributable to lower revenue in the Offshore & Marine business due to slower progress from certain ongoing projects as a result of COVID-19, suspension of revenue recognition on the Awilco contracts, fewer new contracts secured in 2020 and deferment of some projects, which were partly offset by revenue from new projects. The lower electricity sales and slower full year progressive revenue recognition from Hong Kong Integrated Waste Management Facility project as well as the completion of the Keppel Marina East Desalination Plant project in 2Q 2020 further contributed to the decline at the top line.
Urban Development saw a 5% decline in revenue as a result of lower revenue generated from property investment, fewer units handed over at Waterfront Residences in Wuxi, Riviera Point in Ho Chi Minh City, Serenity Villas in Chengdu and Corals at Keppel Bay in Singapore as well as absence of units handed over at Park Avenue Heights in Wuxi and The Springdale in Shanghai compared against last year. These were partly offset by the higher contribution from the property trading projects led by higher number of units handed over 14 [ Sino Eco-City ] residential projects and Seasons Residences in Wuxi, Sheshan Riviera in Shanghai and Seasons Residences in Shanghai.
Revenue from Connectivity increased by $92 million to $1.2 billion, largely due to full year contribution from M1, which was consolidated from March 2019, partly offset by lower contribution from the logistics business following the divestment of certain logistics assets in November 2019.
Asset Management saw a 7% decline in revenue mainly due to lower acquisition and divestment fees, partly offset by higher management fees.
Moving on to the group's pretax profit. The group recorded a pretax loss of $255 million for 2020 as compared to $954 million pretax profit in 2019. Excluding impairments, pretax profit of the group was $775 million, which was $302 million or 28% lower than 2019. Energy & Environment's pretax loss was $1.25 billion as compared to pretax loss of $121 million in 2019. Excluding impairments, pretax loss of $269 million was largely due to weaker performance from the Offshore & Marine business, which had been impacted by slower progress on projects due principally to significant downtime as a result of COVID-19, higher share of losses from associated companies, higher net interest expense and fair value loss on investment. These were partly mitigated by lower overheads, government relief measures for the COVID-19 pandemic as well as higher contributions from the Energy Infrastructure and Environmental Infrastructure businesses, the absence of share of loss from KrisEnergy and fair value loss on KrisEnergy warrants as compared to 2019.
Pretax profit from Urban Development increased by $44 million to $720 million, driven by higher fair value gains from investment properties, higher contribution from property trading projects in China as well as highest contribution from the Sino-Singapore Tianjin Eco-City. These were partly offset by lower contribution from associated companies.
Connectivity's pretax profit of $29 million was $167 million lower than 2019, mainly due to the absence of fair value gain from the remanagement of previously held interest in M1 at acquisition date recognized in 2019, as well as lower contribution from M1. These were partly offset by gain from the disposal of interest in Business Online Public Company Limited and lower losses from the logistics business.
Asset Management registered an increase of 27% in pretax profit of $304 million, mainly due to mark-to-market gain recognized from the reclassification of the group's interest in capital infrastructure trust from an associated company to an investment following the loss of significant influence over KIT, gain from the sale of units in Keppel DC REIT, gain from divestment of interest in Gimi as well as dividend income from KIT and higher contribution from Keppel DC REIT. These were partly offset by mark-to-market losses from investments, lower investment income, lower contributions from Keppel REIT and Alpha Data Centre Fund as well as absence of dilution gain arising from Keppel DC REIT's private placement.
Corporate & Other's pretax loss of $57 million was $21 million higher, mainly due to the fair value loss on investments as compared to fair value gain on investments in 2019 and lower investment income. These were partly offset by absence of bad debt written off in 2019.
After tax and noncontrolling interest, the group's net loss was $506 million as compared to net profit of $707 million in 2019. Losses at Energy & Environment were partly offset by profits from Urban Development, Asset Management and Connectivity. Excluding the impairments of $952 million, the group was profitable for the financial year 2020 at $446 million, 46% or $382 million lower than the net profit of $828 million in 2019. For like comparison, the net profit of $822 million in 2019 had also excluded impairments. Accordingly, annualized ROE, excluding impairment, was 3.9%.
The group net loss of $506 million for 2020 translated to a loss per share of $0.278. ROE was at negative 4.6%. Our proposed final dividend to our shareholders for 2020 will be $0.07 per share. Including the interim dividend paid, the total distribution for 2020 will be $0.10 per share.
Net cash from operating activities was $202 million as compared to net cash used in operating activities of $825 million in 2019, mainly due to lower working capital requirements for Energy & Environment and Urban Development. Net cash from investing activities was $295 million, comprising divestment proceeds and dividend income from associated companies totaling $687 million as well as net receipts of advances from associated companies of $59 million, partly offset by investment and operational capital expenditure of $451 million.
Net cash generated from investing activities in 2019 was $172 million, largely due to divestment proceeds from disposal of interest in Jiangyin, Taicang and Chengdu projects in China and receipt of deferred proceeds from 2019 sale of interest in Dong Nai Waterfront City project as well as dividend income from associated companies and net receipts of advances from associated companies. As a result, there was an overall free cash inflow of $497 million for 2020 as compared to free cash outflow of $650 million in 2019.
With that, we have come to the end of the presentation, and I shall hand over the time back to our CEO, Chin Hua, for Q&A. Thank you.
Thank you, Hon Chew. So we will proceed to the next segment, which is Q&A. Please submit your questions through the web, and we'll endeavor to address any questions that you may pose to us. Thank you.
Okay. First question, I think, is from Terence Chua of Phillip Securities Research in Singapore. What is the rationale of restructuring the business into 2 additional units, rig co and dev co? Why can't the divestment of existing rigs be done without the additional restructuring?
That's a good question, Terence. I think this is something that the both of KOM and management has been -- actually been very working very intensely since we announced the strategic review a few months ago. And I think in the strategic review, the goal of creating these 3 different divisions is really to clearly identify what are the legacy assets, ring-fence them, make it very clear what is the path today like for these legacy assets. We can't solve all this immediately, but I think there is a very good plan to resolve these legacy assets. And then in the meantime, we also do not want to burden the operating company, which itself has a very important task to transform, to make itself more relevant in terms of the changed external environment today, especially with the accelerated energy transition.
This is a question from Cheryl Lee. What are the examples of floating infrastructure and infrastructure-light projects Keppel O&M is interested in both restructuring? Does this include FPSO and FSRU, EBITDAs? How does pursuit of these projects fit in with Keppel's vision of being asset-light and people-light? Maybe I will ask Chris Ong, CEO of KOM, to address this.
Thank you, CEO. Thank you, Cheryl, for the question. The answer is yes. FPSO and FSRU are still within the portfolio of our products that we will go after. This pursuit actually brings us to reinforce our capabilities of being an integrator and also engineering, procurement and project management company. On top of that, we have examples like even our FLNG projects in the gas arena like Gimi, where we utilizes the different strength within the group to develop projects. So in that way, we are actually fitting this more appropriately into Keppel vision of being asset-light and people-light.
Thank you. There's another -- there's a question from Mayuko Tani of Nikkei in Singapore. You have announced to restructure KOM organically, but you also said you are considering inorganic options. What does this mean? Are you still actively looking for buyers for KOM? If you find a buyer, is selling KOM an option or will you sell partly?
Well, Mayuko-san, I think the first, as I said, in my response to the first question, the energy transition is upon us. It is very -- it's been accelerated, and the headwinds being faced in the offshore marine industry is intense. So it is very important that when KOM has now come up with a good organic plan, we should work on it immediately. The challenges for us to transform KOM is very critical.
But at the same time, as I mentioned in my remarks, we're continuing to explore inorganic options. But there's no certainty that this exploration will actually lead to a transaction. But we believe that the organic plan that we have to transform KOM will make KOM more competitive. And should we consider an inorganic option in the future, that would actually not harm us. In fact, it may strengthen the position.
So in terms of the options on -- we are not at liberty now to explain -- to share what are the different possibilities. I guess I've said before, all options are being considered. Thank you.
There's a question from Anita Gabriel of Business Times. The group's move to exit the rig business indicates its lack of confidence on the outlook of the oil and gas sector making a meaningful recovery in the medium to long term. Is this correct?
Maybe I ask, Chris, if you could address that.
Thank you, Anita, for the question. The exit of the rig newbuilding business is actually our view that we have enough -- to put enough attention into offloading and putting our present assets to meaningful charter or even a sale eventually. So in the medium term, this reorganization actually allows the organization to focus on that instead of looking for a newbuild rig business, which we think that will take a longer time to recover.
I think, if I can add to that, Chris, it's also our view that with the energy transition, there will be a bigger push in the energy mix from cleaner fuel like gas as well as renewables. So I think this is also reflective of the group's Vision 2030, where we are focusing to providing more sustainable solutions for our customers.
You have a second question, Anita, which is, can you elaborate what were the other possible options that were considered under the O&M review? I think I've addressed that. That's what I call under the inorganic option.
Next question is from Horng Han, CLSA in Singapore. Thank you for the presentation. I would appreciate if you can answer the following questions. Can you elaborate what does it mean to be a developer and integrator of offshore energy and infrastructure assets while outsourcing fabrication work? Does it mean Keppel will still bid for offshore wind projects together with other yards where construction is outsourced.
Chris?
Thank you, CEO. Well, being a developer and integrator of offshore energy and infrastructure asset, it's actually not new to Keppel. We have a strong track record of doing so. When we are saying that we would be outsourcing fabrication work, it means that we will do so by subcontracting the work of fabrication, which is usually labor and space intensive to our network or partners. We will still be integrating the offshore assets and to final delivery.
On the question on whether we will still bid for offshore wind project, it is precisely so. With the restructuring, the OpCo can really focus and enhance and strengthen our track record in the offshore renewable projects. So the answer is yes.
Next question? Okay. Also from Horng Han. His question, logistics is currently enjoying a structural uplift in demand due to COVID. Can you share why is Keppel divesting and not investing more capital to grow this business?
I will start first, and then maybe I'll invite my colleague Thomas to add to this. You are right, Horng Han. I think Keppel Logistics have actually been one of the beneficiaries of COVID-19. We've seen very strong growth in urban logistics and in our channel marketing this year.
But I guess this decision to divest is related to our more disciplined approach at how we allocate capital in the group under Vision 2030. We believe we have a very good business, but it is currently subscale. We believe that whilst it is possible for us to invest more capital, that perhaps another player with the better ecosystem may be able to grow this faster than us. Now as I said in my remarks, it does not mean that we will divest completely. It will depend. We could divest completely or we could even retain a minority stake.
Thomas, do you want to add anything to that?
Thank you, CEO. Thanks, Horng Han. I think Mr. Loh has essentially covered most of what I wanted to say. What we could benefit from this new business partner with a better ecosystem could mean a better network or presence in Southeast Asia. That could contribute a lot more to this Logistics business in the future. So not just additional capital, the local networks in these Southeast Asian countries will greatly help to grow this business at a faster pace. Thank you.
Thanks, Thomas. Maybe I'll direct the next question back to you again, Thomas. It's from Terence Chua of Phillip Securities. What is the purpose of holding a minority stake in the Logistics business?
Thank you, Terence. We believe that divesting the Logistics business at this current stage may not necessarily bring us the maximum value, so we do not mind keeping a minority stake to partner with the new investors that could potentially grow this to a much larger entity. And we could ultimately benefit from that growth instead of divesting 100% at this point in time. But we are not -- we have -- do not yet have offer on the table now, so it's a little bit too early to conclude whether or not we'll sell 100% or we'll hold minority stakes in the end. Thank you.
Thanks, Thomas. The next question is also from Terence Chua of Phillip Securities Research in Singapore. Can you share more details of what the second wave of initiatives are?
I think we will continue with our plans to execute Vision 2030. So the second wave would include additional asset monetization as we recycle capital. At the same time, we'll be looking to seek growth opportunities, grow new engines and execute our plans following the strategic review of our O&M and Logistics businesses and other restructuring initiatives. This -- all this would be driven by our transformation office, who has the responsibility of executing Vision 2030 across the 6 different work streams that I had mentioned in my opening remarks. Thank you.
Okay. This is a question from Tsu Wei of Macquarie Singapore. He has 2 questions. First question, can you walk us through the options that open up for Keppel as a result of the organic restructuring of KOM?
I think the organic restructuring, as we have outlined, is a good plan, and it is something that we believe will transform KOM into a more nimble, more competitive unit. More importantly, it will be more relevant particularly in the environment that we are seeing in terms of the accelerated energy transition, and it will fit more closely with our Vision 2030. I think as we do this, as I've said, we will execute this organic plan immediately. But along the way, if there is an inorganic option that would strengthen KOM and provide better value proposition to Keppel stakeholders, we certainly would consider that.
Okay. Second question, how will valuations for KOM RigCo in the inorganic scenario work given its negative equity value? Historical examples, like [ EMA subsea ], it could be sold for its debt value at most. Hon Chew, do you want to try to address that?
I think at this point, probably it's premature to speculate on how we go about the inorganic option. So at this point, I think we can't really comment, yes.
Thank you. Okay. Next question, this is from Chen Lin of Thomson Reuters in Singapore. When you say Keppel O&M will have a significantly reduced headcount, what is the head count now? And how many jobs do you expect to cut?
Can I ask Chris?
Thank you, Chen Lin, for the question. The present head count stands at 10,500. It is premature for us to determine a final number that what will be the workforce be at, bearing in mind that we still have an order book of $3.3 billion to execute. But part of the transformation is also to retrain and also to create more skilled and high-value jobs for our people. So there will be a mix with HR talent mapping exercise, too.
Next question. This is a series of 3 questions from Siew Khee of CIMB Singapore. First question, will there be any future cost impact from the O&M restructuring?
I think if you are talking about the rightsizing, I think we have shared before that we have shaved off about $90 million in run rate in terms of overhead costs starting from January this year. If you are referring to potential cost impairments, we are -- it's still too early at this point in time to judge.
Second question, can you please simplify updates on the development of the Petrobras rigs with Magni? Maybe I ask Chris Ong, can you answer that?
Thank you, CEO. At the present moment, Petrobras has announced that at the request of Sete, they would basically negotiate the settlement after the inability for Sete to meet the settlement requirement at the due date. So it is actually an open extension of the date, and we would wait for the outcome of that renegotiation.
Okay. Next question from Siew Khee is, can you elaborate on your investment plan in the solar farm in Australia?
Now this is undertaken by Keppel Renewable Energy, which is also headed by Chris Ong. So can I ask Chris to elaborate?
Well, this is the Harlin Solar project that is in Queensland of Australia. It's minimum 500 megawatt of solar development. The construction plan is scheduled to start -- financial close is scheduled to be at next year, 2022, and construction will start and last for almost a year. Now the way that we are set up is to utilize the different strength of the group itself. And Keppel Renewable Energy is working closely with Keppel Infrastructure Fund to take a look at how we can actually monetize this on this project itself.
Thank you. Next question is from -- well, there are 3 questions from Donald Chua, Bank of America Singapore. First question, what is the value of the Logistics business to be sold? How much gains are you expecting?
Donald, this is commercially sensitive, so we can't answer that question.
Second question, where would the capital from the $3 billion to $5 billion of divestments be redeployed into? Would the bulk be going into Energy & Environment?
I think we have announced before that we have a couple of areas of growth that we have identified under Vision 2030. Connectivity is one. We also see large-scale smart Urban Development as another. And then, of course, Environment is also very important; and then, of course, Energy, particularly new energy and renewable energy; and of course, Asset Management as well.
Third question from Donald, which markets will you invest the second DC fund of USD 500 million? Will this be pipeline for KDC? Maybe I ask Thomas to answer the first question. And then maybe, Christina, you can answer the second question.
Thank you. Thank you, Donald. The exciting markets are North Asia, China, Singapore, of course, and some of the European cities, major cities in Europe. We are seeing strong pipelines from those countries and cities that I mentioned. Christina?
Okay. Thanks, Thomas. Yes, most of the investments that we have done for the first fund,will actually be a potential for pipelines for KDC REIT. So the second fund will actually also provide another group of pipeline for KDC REIT. So I think connectivity and digital infrastructure is what investors are most excited nowadays, so we are quite fortunate that we have the expertise in-house to actually carry out and execute this strategy. Thanks.
Thank you, Chris. Next 2 questions come from Gerald Wong of Crédit Suisse in Singapore. Gerald's first question, what is the estimated capital requirements for the O&M OpCo to ensure that it is asset light and self-sustaining?
As an OpCo, we would expect that the capital requirements would be fairly limited. And as Chris has explained, it is going to be a very asset-light business. With the ring-fencing of the rigs that are built and rigs to be built, OpCo will actually be quite light in terms of its balance sheet. More importantly, OpCo has quite a sizable net order book of over $3 billion, most of which are in gas and renewables. So we believe that there is -- we're not making a projection, but there's a good opportunity for OpCo, a good prospect for OpCo to be profitable in the near future.
Next question, would you consider FLNG conversion work given that some of them may require large capital requirements? Maybe, Chris, do you want to deal with that?
From the development basis, it is actually FLNG work, with a good offtake and a good end customer behind it, is actually cash flow neutral for us, just like the FLNG that we are converting right now. Of course, given the ability to develop some of the upstream projects with our partners, we actually utilizes the strength of the group like Keppel Capital to participate in some of the equity so that it can be monetized over time.
Yes. Thank you, Chris. Next question also is from Gerald. And his question, would you potentially be giving up on synergies with the Connectivity business with the sale of the Logistics business?
Well, I guess there is a bit of that. I mean we do see, as we said earlier, that the Logistics business is -- has picked up. The potential is certainly there. But I think what is important for Keppel, as we follow our Vision 2030, is that we do want to own businesses that are scalable. And if we are not able to scale it ourselves, then maybe it can be better owned by someone else or we could also, as I said, there's a possibility that we could take a minority stake if we feel that, that offer is a good partner and the offer is a good one.
Okay. Next question? Okay. This is from Chang Kwok Wei of Citi Research. With the aim of becoming more nimble and asset, labor light in mind, could you please elaborate on what are the group's plans for its network of yards? Which particular asset will be considered for mothballing or disposal, for example?
Chris, can you take care of that? Thank you.
Thank you, Kwok Wei. As we move towards asset-light model, we will streamline our yet operation, of course, keeping the most capable and most income-generating yards to be even -- emerge even stronger. Some of the yards would be divested or some of the yards would be actually repurposed in the longer run. We do not have plans to update at this particular moment, but it is in process, and we will update as they progress.
Thank you, Chris. Next question? This question is from Mayuko Tani of Nikkei Singapore. Is this your first full year loss? If not, when was the last time you recorded a full year loss?
Maybe I'll ask Hon Chew.
Yes, thanks. Thanks, Chin Hua. Well, the last time we had a full year loss goes back to many years in 1998, around the time of the Asian financial crisis.
Thank you. Okay. Next question is from Anita Gabriel of Business Times. Can you elaborate what happens to the shipyards? Are they converted to non-rig offshore infrastructure building or are they sold or repurposed? And will this mean potential write-downs down the road?
I think you have answered the questions in the sense that if we find that we do not need the footprint as we have today, there's a possibility that we can repurpose this. We can also, of course, sell the yards that are surplus. But a lot of the activities that we are going into which is non-oil rigs will also require some -- may also require some production space. I think it's too early to say whether there's any potential for write-downs related to this.
Next question? This is a question from Jeffrey Tan of The Edge Singapore. Can you please share examples of how Keppel's O&M's offshore rig technology can be repurposed for other uses? Maybe I can ask Chris to address this first.
Jeffrey, our rig technology consists of our jacking system, for example. That has been repurposed for wind turbine installation vessels, which we already have some track records. So we'll continue to strengthen on that part to reuse our strong IP in that area.
I will take the question 2.
Maybe I read this question first.
Yes.
Second question from Jeffrey is, could you please also elaborate on how the OpCo of Keppel O&M will collaborate with other Keppel business units to provide other urbanization solutions.
Chris?
Well, at the present moment, we are already utilizing our engineering and project management capabilities to develop joint infrastructure projects like floating DC and also some of the nearshore infrastructure potential. At the same time, we utilizes all the capabilities throughout the group, inclusive of KC, in terms of funding.
Thank you. I think next question is also for you. This is from Mayank of Morgan Stanley in Singapore. In the new areas of offshore energy, how does Keppel see strength?
Chris?
Thank you, Mayank. As mentioned earlier on, Keppel Offshore & Marine strength in terms of development of projects, engineering, procurement, project management and our track record has seen us -- give us the ability to actually reuse, repurpose some of our IPs and also give us a pivot to new energy solutions in the energy transition.
Like for example, we have our own franchise of floating LNG vessels, bunkering vessels and also our own solution in wind turbine installation. So the capabilities are adjacent, and we are confident that we are able to make use of this strength in offshore energy space.
Thank you, Chris. Next question is from a retail investor, [ Mr. Tiu ] from Singapore. He has 2 questions. I will direct both questions to Christina.
First question, Keppel Corporation seems to be betting big on data centers. Keppel DC REIT is also the only REIT on SGX focusing entirely on data centers. However, there are also other listed entities on SGX going to DCs. What competitive advantage does Keppel have over these other entities?
Christina, of course, is also the Chairman of Keppel DC REIT, so please.
Yes. Thank you, [ Mr. Tiu ], for the question. I think we are not just betting big on data centers, but I think the truth is that it's very well demanded. Especially with COVID, actually, digital infrastructure is hugely demanded by all businesses. And even with all your streamings and all that, that's happening, everything is all going through the Internet. So there's -- with 5G and all this coming up, I think there's a huge demand on data centers. So I think we are really actually focused in the right sector.
I think what Keppel has as an advantage compared to others is that we have an ecosystem where Keppel Land can build a core and shell. And then we have Keppel Infrastructure that can build the power and cooling, the infrastructure that's needed by these data centers.
Like we said in the past, data centers, that's like 5 megawatts. But nowadays, you're looking at data centers of like 100 megawatts, which is like a mini power plant. So it's actually Keppel's advantage that we have an in-house team in the infrastructure space who are able to build and deliver this infrastructure for the data centers.
And now of course, the most important is our operating capabilities. Keppel actually has been ranked #2 in the world in terms of operational management capabilities against 93 other operators in the world for one of our top cloud players. So it's actually quite a huge advantage that we have because we are able to operate and maintain these data centers.
And with that, I think all the cloud players, all the top 5 cloud players in the world are actually working very closely with us in terms of the demand for data centers where they need the next data center. So most of them would spend a lot of time with us to discuss and actually work through a plan in terms of their requirements for data centers.
Thank you, Chris. Maybe if I can also add, Keppel has very strong engineering capabilities. And we have been able to use our Engineering NUS to look at how to make data centers more energy efficient.
At the same time, of course, we have Keppel Renewable Energy. I think nowadays, whilst there's a huge demand for data centers, there's also some concern that data centers emit a lot of carbon. So Keppel DC has been a pioneer looking at how to reduce energy through its high-rise data centers, tropical data centers, floating data centers. So -- and of course, as I said, being able to bring green electrons through Keppel Renewable Energy would be a huge advantage.
Chris, I'll let you answer the next question, which is, did Keppel Corporation ever considered listing a logistics-focused REIT as an addition to your current family of REITs and to divest your Logistics business to this REIT and the reason why so?
I think no -- for right now, I think it's probably -- for us, it's not the time to actually list a logistics-focused REIT. But we will -- it's always possible in the future that we might consider that, I think, as we -- if we do build up in terms of scalability, in terms of the Logistics business. I think as for now, I think the decision has been taken by the Board to divest the Logistics business. So we are not planning to set up a REIT just to take into account all the Logistics businesses that we have right now.
Okay. Thank you. Next question is from Terence Chua of Phillip Securities. It's property related, so I'll direct it to Swee Yiow. Can management provide an update on the sales progress of 19 Nassim? Second question, what about expectations for The Reef at King’s Dock?
Swee Yiow?
Thanks, Chin Hua. We had sold 2 units in 19 Nassim so far. Because of COVID-19, we have been now going by appointment only.
And for the second question, we have launched a preview for The Reef on 16th of Jan. And based on the response so far, we are reasonably optimistic that I think the response will be good, the demand will be good. And we'll be launching the project soon.
But more importantly, I think The Reef have many positive part of it. I think it's in a very prime location. And this is probably one of the most convenient waterfronts, next to -- walking distance to the MRT stations. And with many good design and the first of its kind on the floating deck, we hope that the response -- we are reasonably confident that the response will be good. Thank you.
Thanks, Swee Yiow. There's some follow-up questions from Horng Han of CLSA. I have the follow-up questions. Based on the revised O&M asset-light strategy, what would be the proportion of contract value attributable to Keppel if we use example of contract wins with Ørsted and TenneT, which was worth $160 million and $560 million, respectively?
The second question, will Keppel be shifting its focus to the upstream operator business in offshore wind farms, such as bidding for offshore wind projects in other parts of the world, example, U.S.?
Chris, can I ask you to take this, please?
Thank you, CEO. Each project will have its different scope that was undertaken. If the question was around the contracts that was in the yard at this better moment, Ørsted is a contract that we undertake mainly construction and integration. So if you use that as an example, given like-for-like, our ambition is to be able to do engineering, procurement, project management and to be able to manage the whole value chain by itself. So from that logic itself, we would see that we are looking for more value-add type of projects where it will contribute to the bottom line meaningfully given that there's a different scope between each of the projects.
At the moment, we are not planning to be in the upstream and operator business because it requires different skill set right now. But definitely, on the development and the integration part of that business, we are definitely interested and looking out with our partners and our current clients.
Thank you, Chris. Next question, 2 questions from Rahul Bhatia of HSBC. First question, what is the long-term vision for OpCo? Will it continue to hold all the yards that you currently own? I think we've answered that in the remarks, so I'll leave that.
Second question, how is the environment in Vietnam for property sales? Maybe I ask Swee Yiow to answer that question.
Thank you. Vietnam property market generally is still very healthy. But with the COVID-19, there's a lot of focus and tensions handling this. And -- but so as a result, the approval for sales launches generally slowed down across all projects.
But as shared by Chin Hua earlier on, yes, when we launched Celesta Rise in November last year, we managed to sell the 519 units within 1 month. So it just show that the market is still quite strong if we have a good product to market. Thank you.
Yes, thank you. Next question is from [ Nicholas ] of -- he's a private investor in Singapore. He has 2 questions. First question, can you share with us the status of Golar's current FLNG conversion projects with Keppel, namely the Gandria and Gimi? Are they on track for completion on time? And are there risk of impairments from these projects?
Maybe, Chris?
We still have effective contract and following-up with Golar on the Gandria project, and we await for the updates on the notice to proceed. We will provide updates if there are significant new development.
For Golar Gimi, it has been extended by 11 months, and the vessel redelivery from Singapore is planned early 2023. The [ MENA ] is according to plan, and activities has been restored. So we are working towards the new REIT delivery plan.
Okay. Thank you. There's a second question, and this question is, can you share -- or could you share if there are still ongoing investigations, lawsuits against Keppel O&M by the Brazilian authorities due to Operation Car Wash? Or is the case officially closed?
Well, first of all, Keppel O&M has successfully complied with the obligations under the Deferred Prosecution Agreement that was entered into with the U.S. Department of Justice on the 22nd of December 2017. And the DPA has accordingly been concluded. There are still some matters to be resolved with the Public Prosecutor's Office, but this is more dealing with the administrative charges which is still ongoing. Thank you.
Okay. Next question is from Tat Wei of Nikko Asset Management in Singapore. Thank you for the presentation. With regards -- she has 3 -- 2 questions. With regards to asset monetization, can you share with us the potential amount of remaining noncore assets that may be monetized?
I don't think we provide that, but maybe I'll ask Hon Chew.
Thanks, Chin Hua. I think when we shared our asset monetization plan, we did share that of the $17.5 billion, about $3.9 billion are actually part of the noncore assets, yes.
There's a second question. Is there a leverage ratio target that you can share that is to be achieved over the medium term?
Thanks, Chin Hua. I think as I've said before, we don't have any leverage target. But that said, we have always said that we want to maintain our net gearing at 1 or -- and below. So that remains relevant today. And as we have said earlier, we managed to bring down our gearing from 1x as of June to 0.91x as of end of the year.
And if you look at the divestments that we have done so far and as Chin Hua has shared in his address, on a pro forma basis, our gearing would have been brought down to 0.81 if we take into account all the divestments that we have announced. Thank you.
Okay. Next question is from [ Mr. or Ms. Yong ], who is a retail investor. Does KC, I suppose as Keppel Corp., sees itself competing with other Singapore-based companies for global projects especially in the renewable energy space? Would this cause a bidding war amongst Singapore-based company, thus result in lower margins?
Well, I think the truth of the matter is that there is quite a bit of capital going into the renewable energy space. We think that there's still a lot of opportunities there. But like most things, we have to be quite careful in making sure that we do our sums and only go in when the risk-adjusted returns make sense. Okay?
Next question? Next question is from [ Mr. Tiu ] or [ Ms. Tiu ], a retail investor in Singapore. What is Keppel Corporation's plan for M1 in the larger scheme of things and general direction of Vision 2030? Any concrete examples of how M1 has been contributing meaningfully in that regard?
Well, M1 is part of our Connectivity segment. It is undergoing transformation at this point. And I believe that Connectivity is going to be a very major growth for the group. But maybe I will ask Manjot to share with us some of the things -- exciting things that we're doing at M1.
Thank you, Chin Hua. Well, apart from the transformation plan that we put in place and executing right now for M1, I think to your second point of any concrete examples of how M1 has been contributing, I think with 5G, there are a number of use cases that M1 is working on with different Keppel BUs.
The big advantage that M1 has over other telcos in the region and Singapore is that we -- with Keppel's diversified business model, it gives us a great opportunity to try out and create use cases with 5G that we can then use for other industries within Singapore and outside of Singapore. So that use cases are already in action with other business units of Keppel. Thank you.
Thanks, Man. We have another question from Cheryl Lee of UBS. She has 2 questions. I think I'll take the second question first, and then I'll ask our CFO to take the first question.
The second question that Cheryl had is as RigCo and DevCo are transient structures, can Keppel share its target deadline by which this might be dissolved?
Well, I think DevCo is -- probably has a shorter runway, we expect, because projects under DevCo, those that have contracts will get built. Those without contracts, if we built it, it will go into RigCo. So after that is done, then DevCo will be surplus to requirement.
RigCo, on the other hand, will depend on how quickly the oil market recovers. The going is still going to be quite tough in the next year or so. But if you look at some of the industry reports, the expectations is that we have a lot of rigs, older rigs being put to pasture, scrapped. Eventually, the newer rigs, the premium rigs will get work and go to work. So when that happens, we would either then sell the rigs under RigCo or, potentially, if we charter them out, we will create cash flow. Then we can then work with investors. So the timing for that will depend on how quickly the offshore rig market recovers.
Now Cheryl has a first question, which is Offshore & Marine PATMI's losses widened from $959 million to $1.2 billion for the full year. What was the drag on the business in the second half? Any one-off impairments in the second half? Can I ask Hon Chew to address this? Thank you.
Yes. Thanks, Chin Hua. Yes, as I mentioned in my address, revenues were down for the second half as well. And the share of losses from associates also contributed to the widening of the losses. But there were some impairments in the second half. And if you refer to Slide 27 of my presentation, there's a list of other impairments. In particular, the items on fixed assets and intangibles, $24 million and $23 million, these are the 2 impairments that were made in the second half.
Thank you, Hon Chew. Okay. I think I understand from my colleagues there are no further questions, so that leads me to thank everyone for attending and for your questions. They were all very good questions and gave my colleagues a chance to address them. Thank you very much. Have a pleasant evening ahead.