Keppel Corporation and Sembcorp Marine have entered into a non-binding memorandum of understanding (MoU) to open exclusive negotiations to combine Keppel O&M and Sembcorp Marine.
The aim of the discussions is to create a “stronger combined entity and sustainable value” over the long term for Keppel O&M and Sembcorp Marine and their respective stakeholders, in response to “dramatic changes” in the global offshore and marine (O&M) engineering and energy sectors.
Under the MoU between Keppel and Sembcorp Marine, it is envisaged that Keppel and the combined entity will enter into a strategic partnership, pursuant to which Keppel will hold 50% of a 50:50 joint venture that will be established between Keppel and the combined entity.
This would allow Keppel to continue accessing Keppel O&M’s capabilities required for its projects, on terms to be agreed.
The combined entity will be the preferred EPC partner for Keppel’s projects where it has the relevant expertise.
Keppel and Sembcorp Marine will undertake mutual due diligence and discuss the terms of the potential combination, which is expected to take several months.
While the outlook for oil exploration and related activities remains uncertain, the outlook for energy transition is robust, including areas such as offshore wind and hydrogen.
Keppel O&M has secured multiple orders from leading players including two converter stations for TenneT Offshore, two offshore wind farm substations for Orsted, as well as one of the world’s largest offshore wind turbine installation vessels for Dominion Energy.
Sembcorp Marine’s wins include contracts for the Siemens’ Dudgeon Offshore wind farm project (which has been successfully delivered), offshore substation and topsides for the Orsted’s Hornsea 2 offshore wind farm, and the offshore converter platform for RWE Renewables’ Sofia Offshore Wind Farm.
If completed, the potential combination would create a stronger player to capitalise on growing opportunities in the O&M, renewable and clean energy sectors.
By combining the complementary strengths of both businesses, the combined entity would be able to accelerate the companies’ pivot towards O&M renewables opportunities.
It would be better positioned to compete for larger contracts also.
Keppel O&M and Sembcorp Marine have committed to taking a “constructive and consultative Approach” toward the labour considerations of the combined entity during their further discussions.
There will be a focus on “preserving operational strengths, and on continuing to attract and retain local talent, supplemented by international expertise” in these specialised engineering fields.
Both Keppel O&M and Sembcorp Marine have also pledged to work cooperatively with their workplace unions on the future plans for the labour force.