Keppel Sells Singapore Ship Repair Business to ST Engineering
The realignment of the ship repair business in Singapore is continuing with the news that ST Engineering plans to acquire the yard currently operated by Keppel FELS. Keppel had previously announced its plans to refocus its operations away from the offshore sector to execute its strategy to be an integrated business focusing on sustainable urbanization, while ST Engineering will use the site to relocate and modernize its ship repair operations.
ST Engineering’s Marine business has acquired the site and assets of the existing shipyard in Singapore operated by Keppel FELS for S$95m (US$71.6 million). The assets acquired include three floating docks, existing buildings, workshops, and machinery which will be used for the company’s commercial ship repair business.
Discussing the merits of the transaction, ST Engineering said the group’s ship repair business in Singapore has performed well. They said it is profitable and continues to grow. At the same time, Keppel announced in April 2022 that it planned to reposition away from its offshore operations combining the business unit with Sembcorp Marine. The prolonged downturn in the offshore sector had resulted in financial losses leading to Keppel’s decision to focus on its real estate, utility, data center, telecom, finance, and logistics business lines. In October 2022, the companies revised the terms of the megamerger to accelerate Keppel’s plans to exit the ship repair businesses.
ST Engineering said the acquisition will provide them with a location to relocate their existing ship repair operations which currently operate from a leased site that is due to expire in 2024. The GUL yard acquired from Keppel will replace ST Engineering’s Tuas shipyard but be in addition to the company’s Benoi shipyard which is mainly for shipbuilding.
The approximately 141,000 sqm Gul yard, with a gross built-up floor area of 74,593 sqm, has a remaining lease until August 2030 which ST Engineering highlights can also be extended by another 20 years. According to the company the purchase of the existing shipyard “obviates the need to build a greenfield shipyard,” which would require much higher construction and material costs as well as lead time.
“Taking over this brownfield site versus constructing a replacement greenfield site is an effective way to minimize capex. More importantly, building on the existing infrastructure and facility enables us to start operating immediately and effectively with minimal disruption to our operations,” said Mr. Ng Sing Chan, President of ST Engineering’s Marine division.
To maintain its competitiveness in the ship repair segment, ST Engineering said the Gul yard will be progressively upgraded to be a smart shipyard, adopting end-to-end digitalization that will power the ship repair cycle and processes. The new Gul yard will also be used to support the group’s other marine segments, such as module fabrication and offshore renewable projects.
In November 2022, ST Engineering sold its U.S. shipyard operations in an effort to reduce financial losses in the sector and focus on its profitable business in Asia. ST Engineering sold VT Halter Marine and ST Engineering Halter Marine Offshore, which included two active and two dormant shipyards all located in Mississippi. Bollinger, which bills itself as the largest privately-owned and operated shipbuilder in the United States, said the acquisition was designed to consolidate its position serving both the military and commercial markets.