Keppel wins S$5.3b Hong Kong waste management contract with partner, shares up 1.7%

Keppel wins S$5.3b Hong Kong waste management contract with partner, shares up 1.7%

SINGAPORE: Keppel Infrastructure Holdings, a unit of Singapore-based conglomerate Keppel Corp, has jointly won a S$5.3 billion contract with engineering contractor China Harbour Engineering Company to build and operate Hong Kong’s first integrated waste-management facility (IWMF) for municipal solid waste.

Keppel Corp said in a statement on Friday (Dec 1) that the transactions are “not expected to have significant impact on Keppel Corp’s earnings per share” for the current financial year.

Shares of the local rig-building and property firm closed 1.7 per cent higher at S$7.76 on Friday.

The two companies won the contract through an international tender called by the Hong Kong Environmental Protection Department.

Keppel Infrastructure’s share of the total contract was about S$1.95 billion for its roles in engineering, procurement and construction (EPC), as well as operations and maintenance of the facility. 

It also has an additional S$1.7 billion for escalation provisions and other contingencies.

The EPC phase will involve a reclamation of a 16-hectare area and the design, engineering and construction of breakwaters as well as the integrated waste management facility and its related port facilities on the reclaimed island.

Keppel Infrastructure will undertake the operations and maintenance of the facility for 15 years after the project is completed in 2024, while the environmental technology arm of Keppel Corp - Keppel Seghers - will provide waste-to-energy technology during the EPC phase of the project. 

Keppel Seghers will also build and run other facilities, including the mechanical treatment plant.

The facility will be built on a reclaimed island off the coast of Shek Kwu Chau, located south of Lantau Island.


The IWMF comes as an integral part of Hong Kong’s waste management strategy, with its ability to reduce the total volume of waste treated at the facility by more than 90 per cent. 

Therefore, the move will extend the lifespan of landfills (which is where Hong Kong's non-recycled waste ends up), the statement said.

“The IWMF project reflects the Hong Kong government’s foresight and resolve to effectively and holistically address waste management," said Mr Ong Tiong Guan, chief executive officer of Keppel Infrastructure. 

"Advanced waste incineration technology is able to meet stringent environmental standards and is hence one of the most widely accepted methods of waste management in developed markets,” he added.

The move by Keppel Corp is a "positive", said analysts at Nomura in a note.

“While near-term earnings contribution is limited, medium- to long-term visibility for the infrastructure division continues to improve."

The Nomura note also mentioned that Keppel Corp’s role in the EPC phase remains limited to technology transfer.

“As a result, near-term earnings contribution is likely to remain minimal … Overall, however, we see long-term visibility for the infrastructure segment improving and the group actively looking to bid and win additional projects," Nomura said. 

It also pointed out that in January, Keppel Corp had signed a 25-year water purchase agreement with PUB, Singapore’s national water agency for Singapore’s fourth desalination plant which will be operational in 2020.

Source: CNA/nc