Keppel Infrastructure Trust (formerly known as Cityspring Trust)

[AQ.]

KIT's asset seems to have very short contract terms.

Merlimau until 2030 with 10y extension option
Basslink until 2031 with 15y option
DC One until 2036 with 8y option
The 4 water and waste plants until 2024/25/27/34

Does anyone knows what happens when the contract ends for such businesses?
What can KIT do with the asset?
In the event of an extension, will there be any payment involved? If so, who pays who ? Government (as the customer)pays KIT or the other way round since Government is issuing a license to operate?

   For the water and waste plants with no extensions, once the concession periods end, the cashflow streams also end. 

   So far, it seems likely the Ulu Pandan plant (which is close to the Ulu Pandan reclamation plant) will cease and land taken back for redevelopment.

   https://www.businesstimes.com.sg/governm...e-projects

   "The first phase of DTSS, comprising the North and Spur tunnels and the Changi plant, cost S$3.4 billion and was completed in 2008.
   The second phase - which includes deep tunnels extending from the downtown area to the western part of Singapore, the Tuas Water Reclamation Plant (TWRP) and an integrated NEWater factory -     will cost some S$6.5 billion. It will be completed by 2025.

   After that, existing water reclamation plants at Ulu Pandan and Jurong, plus the intermediate pumping stations, will be phased out and the land freed for other uses.
   The entire DTSS, one of Singapore's most ambitious water projects that is expected to serve the country's used-water needs till the next century, will free up about 150           hectares of land that is now occupied by six water reclamation plants and over 130 pumping stations."

[¯|_(ツ)_/¯]

KIT@56
Keppel to acquire Hyflux SingSpring
https://links.sgx.com/FileOpen/20210707_...eID=673927


Stay home and stay safe, everyone.

[Shrivathsa]

Equity Fund Raising proposed at around a price of SGD 0.471. Expected DPU after acquisition is SGD 0.0441, or, am I misunderstanding something in the EFR document, the Trust has sent. Seems like a fairly high yield of 9.36% if the projections hold true. They did do one round of rights issue last year as well. This time it is to acquire a bus service in Australia. Last time was some wind farm or something.

[Shrivathsa]

Interesting article in the edge singapore on perps making a comeback and investors remembering hyflux, https://www.theedgesingapore.com/capital...ins-stable

Gist of it from a KIT perspective is they have

a) $300 million perp 4.75% callable in 2029 (amalgamation of two separate $100 million and $200 million perps)
b) $300 million perp 4.30% callable in 2031 (amalgamation of two separate $100 million and $200 million perps) and now
c) $2800 million perp 4.90% callable in 2034

In all, $800 million of perps.

KIT has shareholder funds of $825 million, and a net debt of $2.8 billion.

Aggregate leverage is 44.7%

The high leverage and use of perps to such an extent, probably explains why it is trading at 8% + yield (I assume investors are balking at the Hyfluxation of the trust). For context, Hyflux had around $900 million in perps and preference shares.

Other notable perp issuers per the article are CLAS, AIMS-APAC REIT, LMIRT and MLT.

In hindsight, should probably have checked the capital structure for perps before buying into the trust.

[weijian]

Interesting article in the edge singapore on perps making a comeback and investors remembering hyflux,  https://www.theedgesingapore.com/capital...ins-stable

Gist of it from a KIT perspective is they have

a) $300 million perp 4.75% callable in 2029  (amalgamation of two separate $100 million and $200 million perps)
b) $300 million perp 4.30% callable in 2031  (amalgamation of two separate $100 million and $200 million perps) and now
c) $2800 million perp 4.90% callable in 2034

In all, $800 million of perps.

KIT has shareholder funds of $825 million, and a net debt of $2.8 billion.

Aggregate leverage is 44.7%

The high leverage and use of perps to such an extent, probably explains why it is trading at 8% + yield  (I assume investors are balking at the Hyfluxation of the trust). For context, Hyflux had around $900 million in perps and preference shares.

Other notable perp issuers per the article are CLAS, AIMS-APAC REIT, LMIRT and MLT.

In hindsight, should probably have checked the capital structure for perps before buying into the trust.

Hi Shrivathsa,

I think the 8+ yield for KIT is probably because it is a trust and hence is able to distribute dividends out of operating or free cash flow (rather than net profit). I couldn't find the distribution policy clearly started in its AR (like some of the other trusts eg. APTT or Netlink Trust) but just a quick comparison of its NP vs distribution income for FY23/22, it is quite clear that the 8+ yield is 2 components - return on capital and return of capital. This also explains why its retained profits/reserves is negative (and hence overall equity) is reducing on a yearly basis.

Perps is just a financing vehicle and has its functions and usefulness. The problem is never with the vehicle but the person who uses it, isn't it? It is just like CDS (credit default swaps) which were invented by JP Morgan as a way to reduce risk, became a leveraged bet against assets going to zero.

If used correctly, perps have the wonderful effect on "escaping" MAS regulatory limits for REITs.  If used wrongly, then you just get Hyflux lor