Sembcorp Marine Completes $3.3B Acquisition of Keppel O&M

Keppel Corporation reported that the mergamerger of its shipyard and offshore marine engineering business was completed with Sembcorp Marine on February 28, 2023, acquiring the company and marking Keppel's exit from the shipbuilding and marine operations. The deal, which was valued at more than $3.3 billion, creates a combined company focused on the offshore and marine sectors under the management of Sembcorp Marine while Keppel plans to focus on its real estate, utility, data center, telecom, finance, and logistics business lines going forward.

The companies point out that the merger is being completed as the industry outlook for oil & gas, offshore renewables, and other green solutions continue to improve amid the ongoing energy transition. The combined company will have an orderbook valued at more than US$13 billion with an increasing focus on offshore wind and renewable energy as well as the transition to alternative fuels in the maritime industry. Prior to the combination, Sembcorp Marine reported that 37 percent of the group’s net order book as of the end of 2022, or more than US$1.85 billion, was for renewable wind energy and other cleaner and green solutions.

Among the reference projects cited by Sembmarine is the design of the world’s first green ammonia-fueled tanker, the development of a first-of-its-kind ammonia bunkering vessel, integration of a hydrogen fuel cell system onto a Ropax vessel, as well as projects underway including a Wind Turbine Installation Vessel (WTIV) for Maersk Supply Service and platforms for the Sofia offshore wind farm. Activity in the core businesses won during the second half of 2022 also included contracts for an FPSO for Brazil’s Petrobras, work for New Fortress Energy on two floating LNG liquefaction facilities, and engineering work for a gas topsides project in Australia.

With improving order visibility, Sembmarine predicted that the enlarged group will be in a stronger position to convert its orders pipeline into further firm contracts. They plan to focus on these business areas while also undertaking a comprehensive review of the business and developing the integration steps.

“While integration of this scale will present challenges,” Sembmarine told investors during its year-end financial report, “the enlarged group is expected to benefit from greater synergies from the broader geographical footprint, larger operational scale, and enhanced capabilities of Singapore’s two leading O&M companies.”

As evidence of the growing momentum, the company reported a significant improvement in its financial performance, turning EBITDA positive in the second half of 2022, and cutting full-year net loss by 78 percent year-on-year to a loss of just over US$200 million for the 12 months ended December 31, 2022. They noted that 21 projects were underway with 12 having been delivered during the second half of 2022. Revenues for the year reached nearly US$1.5 billion.

There had been talk for years in Singapore of a possible combination of the two operations which was accelerated by the downturn in the offshore energy sectors. The companies first publicly acknowledged the merger discussions in the spring of 2021, finally agreeing on terms in April 2022. The deal was later revised in October 2022 into a direct acquisition of Keppel O&M by Sembcorp Marine with a lower valuation of Keppel’s assets and an agreement to lower Keppel’s retained portion of the combined company.