Singapore’s Keppel Offshore & Marine (O&M) will exit the rig-building business after completing existing rigs under construction, and focus on infrastructure projects, including renewable energy, said Keppel Corporation on Thursday (28 Jan).
In a statement, the company said that the transformation is part of its strategic review with the goal to create a “slimmer” and “more competitive” Keppel O&M that is well-placed to support the energy transition.
Keppel, which is largely owned by Temasek, will restructure its O&M business into three parts – Rig Co, Development Co (Dev Co), and Operating Co (Op Co) – separating construction and ownership of legacy drilling rig assets from its core operations.
The company added that Keppel O&M will not undertake any new project requiring large upfront capex or without milestone payments.
The business will progressively exit low value-adding repairs and other activities with low bottom-line contribution, and focus on higher value-adding work.
“The share of renewables and new energy solutions in the global energy mix has been growing rapidly, driven by environmental concerns as well as technological advancements and the declining cost of renewables,” said Loh Chin Hua, CEO of Keppel Corporation and Chairman of Keppel O&M.
Mr Loh hinted that Keppel is also exploring inorganic options for the O&M business, though there is “no assurance that any transaction will materialise”.
Keppel also noted that the restructuring will have a “significantly reduced headcount”.
“When we succeed in executing these plans, we will see a transformed and more competitive Keppel O&M, well-placed to support the global energy transition,” said Mr Loh.
The restructuring will commence with immediate effect and is expected to be executed over the next two to three years.
Reflecting its new focus, Keppel O&M will carry out a rebranding exercise, and refine its vision and purpose.
Meanwhile, Keppel Corp reported a net loss of S$506 million last year, compared to a net profit of S$707 million in the previous year.
The latest results were including impairments of S$952 million mainly due to the offshore and marine business, said the firm.
For the second half of last year, the Group reported a net profit of S$31 million, a turnaround from the net loss of S$537 million in the first half of 2020.
Keppel O&M’s involvement in Brazil’s massive corruption scandal
It was reported earlier that Keppel O&M has paid US$55 million in bribes, between 2001 to 2014, to secure contracts with Brazillian state-owned oil giant Petrobras.
In July 2016, Zwi Skornicki – Keppel’s former third-party commercial representative in Brazil – told a court that five leading executives, including chief executive officer Chow Yew Yuen, had authorised him to bribe public officials in exchange for Petrobras contracts.
Keppel had “strongly” denied the allegations then, stressing that none of the executives and CEO Chow ever authorized any bribes.
Two months later, the company admitted that “certain transactions” associated with Mr Skornicki “may be suspicious”, and notified the authorities in the relevant jurisdictions.
Subsequently, in December 2017, Keppel agreed to pay fines amounting to US$422.2 million as part of a global resolution with the authorities in the United States (US), Brazil, and Singapore.
Citing admissions and court documents, the US Department of Justice (DOJ) revealed on 22 December 2018 that between 2001 and 2014, Keppel O&M “conspired to violate the Foreign Corrupt Practices Act (FCPA) by paying approximately US$55 million in bribes to officials at the Brazilian state-owned oil company Petrobras and to the then governing political party in Brazil, in order to win 13 contracts with Petrobras and another Brazilian entity.”
US court documents also revealed that between 2001 and 2011, Keppel O&M executives created and executed agreements on behalf of the company with consulting firms controlled by a consultant.
The document did not mention the name of the consultant, but it is believed to be Mr Skornicki.
Keppel stated last December that it has successfully complied with its obligations under the US Deferred Prosecution Agreement (DPA) entered into with the US Department of Justice in December 2017, and the DPA has accordingly concluded.
As part of the fines payable under the global resolution, about US$52.8 million (S$70.5 million) was payable to the Corrupt Practices Investigation Bureau (CPIB) in Singapore within three years from the date of a conditional warning.
The discussions with the specified Brazilian authorities remain ongoing, and CPIB has agreed to extend this three-year period for a further 12 months until 22 December 2021, it added.
On Wednesday (27 Jan), CPIB noted that it cannot comment or provide updates on Keppel O&M’s bribery probe because it needs to “protect the integrity” of these confidential investigations, as reported by CNA.