KEPPEL Infrastructure Trust : A7RU 0% (KIT) has entered a non-binding term sheet to purchase from its sponsor a 50-per-cent stake in Marina East Water (MEW), which owns the Keppel Marina East Desalination Plant (KMEDP), for an enterprise value of about S$355 million.

Post-transaction, KIT and its sponsor, Keppel Infrastructure Holdings, will each hold a 50 per cent joint-controlling stake in MEW, the trust said in a Thursday (Jun 30) bourse filing after trading hours. KIT will receive all of the economic interest from MEW.

KMEDP is Singapore’s fourth desalination plant, and the first and only large-scale, dual-mode plant, which can treat seawater or rainwater drawn from the Marina Reservoir. It can produce 137,000 cubic metres of fresh drinking water per day.

The plant began commercial operations on Jun 29, 2020 and has a 25-year concession, from 2020 to 2045, under a Design, Build, Own and Operate arrangement with the Public Utilities Board (PUB).

Jopy Chiang, chief executive of KIT’s trustee-manager, said that the strategic addition of KMEDP to the portfolio is expected to support the unitholders’ overall distributable income per unit.

He said: “KMEDP is a stellar asset from our sponsor that will add to KIT’s green credentials, reinforcing our commitment to invest in high-quality and energy-efficient assets. Besides being one of the key assets contributing to Singapore’s water resilience, KMEDP has a long-term contract with a strong counterparty, which will improve KIT’s cash flow visibility.”

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KMEDP will continue to be operated and maintained by Marina East Water O&M, a wholly-owned subsidiary of Keppel Infrastructure, until 2045. This will enable MEW to benefit from Keppel Infrastructure’s operating capabilities, while contributing to Keppel Infrastructure’s long-term recurring income from the operating and maintenance fees, the filing said.

Cindy Lim, chief executive of Keppel Infrastructure, said that the proposed deal is part of Keppel : BN4 0%’s asset monetisation strategy and asset-light business model under its “Vision 2030” plan.

“Through unlocking value from KMEDP, the group will be able to redeploy capital towards other growth initiatives, such as renewables and environmental infrastructure, as well as low carbon and decarbonisation solutions in line with Vision 2030,” she said.

The transaction is subject to approvals by shareholders and the PUB, as well as other regulatory approvals. Units of KIT closed flat at S$0.57 on Thursday.