Keppel Infrastructure Trust plans to issue 7y SGD senior bonds at 3.10% yield

Keppel Infrastructure Trust (KIT) plans to issue bonds at an initial price guidance (IPG) of 3.10%, for accredited and institutional investors only. Both the issuer and these bonds are unrated. Proceeds from this issuance will be used for KIT’s financing requirements, asset enhancement works, and/or general working capital purposes.

(Note: The official issuer name is Keppel Infrastructure Fund Management Pte. Ltd., the Trustee-Manager of KIT.)

These bonds come with typical financial covenants already established in its Multicurrency Debt Issuance Programme. One of these covenants states that KIT must maintain an adjusted EBITDA to net interest expense ratio of at least 3.5x.

About Keppel Infrastructure Trust

(Unless otherwise stated: Data is as of FY25 [31 December 2025]; dollar values [$] are in SGD terms; and percentage changes are year-on-year [y/y].)

KIT primarily operates across 4 business segments: Energy Transition, Environmental Services, Distribution & Storage, and Digital Infrastructure (newly acquired). By assets under management (AUM), Energy Transition is KIT’s core segment (57% of AUM). Examples include City Energy, Singapore’s sole producer and retailer of piped town gas, a 51% ownership in Keppel Merlimau Cogen Plant (a 1,300MW gas-fired power plant), a minority interest in Aramco Gas Pipelines Company, as well as renewable assets such as KIT’s European wind farms and German solar portfolio.

Distribution & Storage is KIT’s second-largest segment (31% of AUM) and provides exposure to essential distribution, chemicals and transport infrastructure. The segment is anchored by Ixom, an Australian chemicals and water treatment company with operations across 10 countries. Other assets include Ventura, the largest bus operator in Victoria (Australia) whose revenues are mainly supported by long-term, fixed-fee, cost-indexed government contracts.

Financial highlights (FY25)

KIT’s revenues rose +3% y/y to $2,277m in FY25, driven by a +10% growth in its ‘Distribution & Storage’ segment ($1,453m), on the back of stronger contributions from Ixom and Ventura. Meanwhile, the ‘Energy Transition’ segment also delivered +2% revenue growth ($612m) with City Energy contributing well. These helped to offset weakness in ‘Environmental Services’ (-26% to $213m), with management citing lower income from the Senoko Waste-to-Energy Plant after concession renewal.

Reported group EBITDA was roughly flat (+0.2%) at $493m in FY25. This reflected a combination of small top-line growth (+3% mentioned above), as well as slight increases in group expenses. Key line items like raw materials (+3%), gas transportation / freight / storage costs (+4%) grew roughly in line with revenues. Staff costs rose +24% to $377m, though this was offset by lower operation & maintenance costs (-26% to $170m).

Despite the flat EBITDA, funds from operations (FFO) came in at a solid $326m in YF25, +17% y/y from FY24’s $278m. Some positives include acquisition-related costs and lower tax paid but overall indicate that the cash-generating ability of KIT remains healthy.

(Note: FFO is more representative of cash performance, while EBITDA is more representative of overall operating performance.)

Financial outlook

Management has clearly articulated its playbook for the coming quarters: it will continue to actively recycle capital while strengthening existing cashflows, so it can keep distributions stable. KIT’s FY26 outlook remains constructive – we provide some examples below stated by management, but this is a non-exhaustive list.

• [Energy Transition] City Energy grew its gas water heating market share to 20% in 2025, and management sees prospect for further growth there.
• [Environmental Services] The Singapore plants should continue to benefit from steady concession-style cashflows.
• [Distribution & Storage] Ixom is expected to deliver continued revenue / EBITDA growth after the Hilditch acquisition completed in October 2025, as Hilditch’s portfolio and customer base are described as ‘highly complementary’ to Ixom.
• [Digital Infrastructure] Global Marine Group is already one of the world’s largest subsea cable solutions providers globally, and management expects it to capitalise on positive demand and supply dynamics within the industry.

We also reiterate that KIT’s business model lends itself to earnings stability over time, especially as much of its portfolio involves critical infrastructure which is less cyclical in nature. Furthermore, KIT’s assets benefit from cost pass-through mechanisms or CPI-linked (inflation) escalations embedded in its long-term contracts, particularly if broader inflation begins to trend upward because of the ongoing Middle East conflict. Finally, some of its businesses (e.g. City Energy) also occupy dominant market shares in their respective markets, supporting the stability of its revenues over time.

Credit outlook

Liquidity remained ample, as KIT ended FY25 with $719m in cash and bank deposits (FY24: $457m). The increase in cash levels was largely supported by strong and consistent operating cash inflows of $318m in FY25 (FY24: $316m). It also had additional headroom in the form of $139m in undrawn revolving facilities. We see little near-term liquidity risks, considering current borrowings stand just a little higher at $1,076m, and also considering KIT sits in a current assets position currently (i.e. current assets > current liabilities).

KIT maintained a healthy net gearing ratio of 38.7% in end-2025 (end-2024: 40.4%). This was primarily driven by lower net debt levels (-2%) from $2,532m in end-2024 to $2,475m in end-2025; its higher cash position helped to offset the slight +7% increase in gross borrowings. Its total assets grew just +2% to $6,403m.

(Note 1: KIT is a business trust, and hence not subject to the usual 50% gearing limit imposed on S-REITs by the MAS.)

(Note 2: KIT has issued a sizeable amount ($800m) of perpetuals. While perpetuals are typically not included in the calculation of gearing ratio, even for S-REITs, we note that an ‘adjusted’ gearing ratio including perpetuals would be much higher at 51%.)

Interest coverage remined strong too, reported at 7.6x in end-2025 (end-2024: 7.0x). Its weighted average cost of debt remained steady at 4.4x (end-2024: 4.5x), primarily in SGD and AUD terms. 72% of its debt is fixed or hedged, giving it some protection even if the RBA hikes rates in 2026.

KIT continues to have little trouble refinancing its borrowings. KIT reported a weighted average maturity of 3.14 years as of FY25, including $1,023m due in FY26 itself. However, KIT announced it had already successfully refinanced $663m (i.e. leaving ~$360m due in FY26) of Ixom-related loans out to FY29; following this, near-term maturities become much more manageable with just $360m due in FY26 and $346m in FY27. Particularly with this new bond issuance today, we think KIT retains decent funding flexibility to refinance its existing borrowings.

Bond comparison

This new issue has an IPG of 3.10%. Even accounting for the final price guidance (FPG) coming in lower than the 3.10% IPG, it is likely to still offer a slight yield pickup over Sembcorp Industries’s 2031 and 2032 bonds yielding 2.3% - 2.5%.

We also note that the FPG is likely to come in lower than KIT perpetual yields. This is understandable given the subordination risks relating to perpetuals, as well as potential non-call risk. However, we note that KIT’s three perpetuals come with step-ups which may help to dis-incentivise a non-call, while its first two perpetuals (4.750% and 4.300%) also have reset rates based on the now-discontinued SOR rate.

We find this new issue fairly priced. KIT maintains a decent financial outlook and credit profile, and these bonds are best-suited for fairly conservative investors who are not seeking significant yield pickup within the SGD bond market.

Table 1: Bond comparison

Declaration: For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) and the analyst who produced this report hold NIL positions in the abovementioned securities. This research report was prepared with the assistance of artificial intelligence (AI) tools. iFAST Financial Pte Ltd does not rely exclusively on AI for content generation; the content of this report – including all investment theses, ratings, price targets and conclusions – has been independently reviewed and verified by the research analyst(s) to ensure accuracy and professional integrity.