Keppel Infrastructure Trust (KIT) and City Infrastructure Trust (CIT), two of the 13 business trusts listed on the Singapore Stock Exchange, have submitted a merger proposal to their minority unitholders that has the potential to shake up Singapore’s infrastructure trust market.
If approved at KIT’s and CIT’s respective extraordinary general meetings next Tuesday, the transaction would create the country’s largest infrastructure-focused business trust with total assets of $2.5 billion.
Under the proposed arrangements, each KIT unitholder will receive 2.106 new CIT units in exchange for every KIT unit held. The two trusts also announced they would issue 1.3 billion new units as part of the deal.
Tong Yew Heng, chief executive officer of CitySpring Infrastructure Management (CSIM), CIT’s trustee, described the deal as “transformational”. The transaction includes the acquisition by KIT of a 51 percent stake in the Keppel Merlimau Cogen (KMC), a power plant owner to be absorbed by the new entity.
“With greater scale and critical mass, the combined trust will be able to better access the capital markets to pursue meaningful growth opportunities in the future. Such future growth opportunities could include assets incubated by [Keppel Infrastructure] in addition to other infrastructure assets that meet our investment criteria,” Tong said.
The new entity will be named Keppel Infrastructure Trust after its largest unitholder, Keppel Corporation (which holds 22.9 percent of the units). Temasek, Singapore’s SGD$223 billion (€138 billion; $172 billion) sovereign wealth fund and second-largest shareholder in the Keppel group, will become the second-largest unitholder in the trust with approximately 19.97 percent of the units.
The combined trust will manage a portfolio mainly comprised of energy generation and distribution assets. In addition to KMC, these will include KIT’s Senoko and Keppel Seghers Tuas waste-to-energy plants as well as the trust’s Ulu Pandan wastewater treatment (NEWater) plant.
The assets the entity will inherit from CIT comprise City Gas, the sole producer of town gas in Singapore, SingSpring, the country’s first large-scale seawater desalination plant, and Basslink, a high-voltage cable crossing the Bass Strait.