Keppel Infrastructure Trust: Delivering Resilient Growth

Date: November 11, 2020



Over his three decade-long career in the energy, power and infrastructure sectors, Matthew Pollard has become well-acquainted with the lessons that failure and near-failure can teach.

After co-founding an entrepreneurial start-up in Hong Kong focused on mid-sized China power projects in the 1990s, the Bachelor of Arts graduate from New York’s Columbia University found himself, at one point, with only HK$10 in his bank account. That venture went on to arrange the investment of US$200 million into seven co-generation projects in China.

The subsequent stages in Pollard’s career journey were equally instructive – he held the position of Vice President and Head of Greater China M&A at Enron International between 1998 and 2000. A year after his departure from the Texas-based energy and commodities company, it filed for Chapter 11 bankruptcy protection.

Fast-forward to 2008, Pollard joined Arcapita Bank to lead its Asian infrastructure investments team. Some years later, the Bahrain-based bank also filed for Chapter 11 bankruptcy protection.

Drawing on his experiences, Pollard, who holds a Master of Business Administration from the University of Chicago, went on to set up Capital Partners Group in 2014, an independent financial services firm focused on the power, utility and infrastructure sectors.

He was also the Chairman of Honiton Energy Group, a leading developer and operator of wind power generation facilities in China, which was sold to SunEdison in 2015.

“I’ve experienced a multitude of changes throughout my career, and a couple of those could be characterised as failures or near-failures,” recalled Pollard, now the CEO of the trustee-manager of SGX-listed Keppel Infrastructure Trust (KIT).

“But there were many precious lessons along the way – one probably learns more from failures than successes. And I would almost always prefer to hire someone who has gone out, tried, failed, and eventually succeeded, rather than someone who has had a relatively easy career path.”

Pollard first joined Keppel in November 2017, when he was appointed Managing Director of Infrastructure at Keppel Capital. In July 2018, he took the helm of the trustee-manager of KIT.

Almost immediately, he was presented with a challenging task – to source for deals to grow KIT’s portfolio. “I asked myself: What did we need to do or change in order to secure a deal, and an accretive one, that would grow KIT into its next phase?”

It all boils down to mindset, he noted, referring to New York Times business bestseller “Who Moved My Cheese?”, a motivational self-help book written by American physician Dr Spencer Johnson.

“If the cheese is in front of you, all is good. The problem occurs when someone moves your cheese,” he said. “By that point, in mid-2018, KIT had looked at some opportunities, but they weren’t panning out.”

“To change that, the team had to re-orientate their perspective, as well as their objectives and goals, beyond looking at core or traditional infrastructure projects in developed economies.”

Creative Approach

Secondly, the team should be open to different possibilities, particularly the less-than-obvious ones. “It’s about being entrepreneurial and creative in the way you approach the opportunity set,” Pollard noted.

One such case in point was KIT’s purchase of Australian chemicals group Ixom for A$777 million in November 2018. “When the Ixom opportunity opened up, at first glance, it didn’t seem a good fit because it was a pure chemicals company, and KIT had no business owning a chemicals supplier,” he said.

“But if you think about the water business, several processing and treatment stages are involved before you can deliver clean water,” he added.

“Ixom was the sole manufacturer and supplier of chlorine in Australia, and you can’t have a water business without chlorine supply. We knew this because we operate several water businesses at KIT and across the Keppel group. So by buying its operations, KIT had effectively bought into the water business across Australia.”

In comparison, investing directly into the water sector would have been more competitive and less viable. “We would have had a hard time because our competitors for those types of assets have a lower cost of capital.”

Since making its trading debut on SGX in 2010 as K-Green Trust, KIT has evolved to become the largest diversified business trust listed in Singapore, growing from an initial portfolio of three assets to eight strategic businesses and assets valued at approximately S$5 billion. Its portfolio is segmented into the three core sectors of Distribution & Network, Energy and Waste & Water.

Businesses and assets in the Distribution & Network segment provide essential products and services in the areas of gas production, distribution of critical and essential chemicals, as well as telecoms and electricity transmission. These assets are well-positioned to deliver resilient cash flows with potential for growth that is supported by favourable market dynamics and demand over the long term.

The Energy and Waste & Water segments comprise assets that are integral to the provision of power, waste treatment and water purification. The contract terms for these assets are backed by recurring fixed capacity or availability payments, providing KIT with stable cash flows.

The trustee-manager for KIT is Keppel Infrastructure Fund Management, a wholly owned subsidiary of Keppel Capital, a premier asset manager in Asia. Keppel Capital is wholly owned by SGX-listed Keppel Corporation, which provides solutions for sustainable urbanisation. The trust’s Sponsor is Keppel Infrastructure, which invests in, owns and operates competitive energy and infrastructure solutions and services.

KIT’s strategic goal is to deliver sustainable returns to its unitholders, through a combination of recurring distributions and capital growth over the long term, Pollard said.

It aims to add businesses and assets that have defensive cash flows, possess high barriers to entry, and provide essential products and services. “That’s what we think about when we talk about infrastructure – it’s not necessarily the traditional definition of brick-and-mortar structures, such as toll roads and airports,” he noted.

“In particular, Ixom has performed better than traditional infrastructure assets during COVID-19, which proves our thesis.”

Looking ahead, Pollard is focused on identifying key businesses and acquiring them at reasonable prices. Relevant investment criteria include assets that generate defensive cash flows and revenues that are inflation- and/or gross domestic product-linked, with potential for growth.

“We’re trying to grow aggressively, and that means larger transactions,” he said.

“This is the difficult part – not wasting time executing opportunities with low probability of success, trying to pick the right ones. The key is channelling our limited time and resources to the areas where they can make the most impact.”

On the Radar

Other strategies for KIT include undertaking co-investment and incubation opportunities with Keppel Capital and/or the Sponsor, as well as partnering experienced operators on greenfield investments with limited construction exposure.

For now, KIT is focused on Australia as well as the European Union, and is adopting an opportunistic approach with regard to Southeast Asia. “Frontier countries are also on our radar – we have an open view on Bangladesh and Myanmar, and are keeping an eye on Thailand, the Philippines, and to a certain extent, Indonesia.”

As at 30 September 2020, KIT’s gearing level stood at 33.7%, providing the trust with comfortable debt headroom to pursue growth. At the same time, to mitigate fluctuations in interest rates, close to 81% of KIT’s total loans have been hedged.

In line with KIT’s strengthened focus on sustainability, KIT and Keppel Energy Pte Ltd secured a seven-year S$700 million sustainability-linked loan for its jointly owned Keppel Merlimau Cogen plant earlier in June. This is one of the largest sustainability-linked loans in Singapore.

Meanwhile, COVID-19 continues to create headwinds and uncertainty for the global economy. “KIT’s well-diversified and highly defensive portfolio of businesses and assets, providing essential products and services, is well-positioned to weather this unprecedented period of turbulence, and continue delivering long-term sustainable distributions and returns to unitholders,” he noted.

At the same time, Pollard is prioritising efforts to groom and empower employees. “KIT is not just about buying more assets or businesses – it’s also about building the right culture and teams.”

One important aspect of this is having open and free debates within the organisation. “I want to make sure my staff are empowered to speak up and carry out their responsibilities. There’s no such thing as a dumb question, and having opposing viewpoints is important to arrive at the right decisions,” he added.

The 52-year-old is also a big believer in hard work, and draws daily inspiration from building, growing and transforming KIT’s business. “Working hard does pay off, and what you call luck really is the byproduct of hard work,” he said.

In fact, his biggest source of inspiration – “at the risk of sounding super-cliched” – is his Irish wife, who is in her 50s. “She pulled herself up by her bootstraps – starting with nothing at 18, working her way up from au pair to News Editor of the Asian Wall Street Journal, and making a success of it through her own efforts.”

Pollard makes it a point to teach these very same values to his sons, aged 20 and 22, and daughter, 14. “I also tell them to surround themselves with good people, as the friends you make and keep will be important influences in your life.”

“And make sure you hire people smarter than you, because you can’t do it alone!”

Keppel Infrastructure Trust

Keppel Infrastructure Trust (KIT) is a diversified business trust listed on SGX with over S$5 billion in assets under management. KIT’s portfolio of strategic infrastructure businesses and assets provides essential products and services to a wide array of customers including government agencies, multinational corporations, commercial and industrial enterprises as well as retail consumers. Its assets are segmented into the three core sectors of Distribution & Network, Energy and Waste & Water. Businesses and assets in the Distribution & Network segment provide essential products and services in the areas of gas production, telecoms and electricity transmission, as well as manufacturing and distribution of critical and essential chemicals. The Energy and Waste & Water segments comprise assets that are integral to the provision of power, waste treatment and water purification.

The Trustee-Manager for KIT is Keppel Infrastructure Fund Management, a wholly owned subsidiary of Keppel Capital Holdings Pte Ltd. KIT is sponsored by Keppel Infrastructure Holdings Pte Ltd, which invests in, owns and operates competitive energy and infrastructure solutions and services.

The company website is:

Click here for the company’s StockFacts page.

For the three months ended 30 September 2020 business update, click here.


First published on SGX website on 30 October 2020

About kopi-C: the Company brew

Text: Jennifer LH Tan
Photo: Company file

kopi-C is a regular column on the SGX Research website that features C-level executives of leading companies listed on Singapore Exchange. These interviews are profiles of senior management aimed at helping investors better understand the individuals who run these corporations.

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