Added S$4bn to orderbook, with an option
- KOM secured the P-80 FPSO contract worth US$2.92bn (c.S$4bn), bringing order book to c.S$8.4bn. We estimate P-80 will fetch EBIT margin of c.5%.
- There is also an option for another contract for the P-82 FPSO, which could add another S$4bn to KOM’s orderbook.
- Reiterate Add with an SOP-based TP of S$9.37.
Secured US$2.92bn P-80 FPSO contract; adds S$4bn to orderbook
? KOM secured an international tender from Petrobras for the engineering, procurement, and construction (EPC) of P-80, a Floating Production, Storage, and Offloading Vessel (FPSO). It is expected to be completed in 1H26.
? The P-80 contract is worth US$2.92bn based on progressive milestone payments. It will be cashflow neutral during its execution lifecycle and will add more than S$4bn to KOM’s orderbook. We estimate a 5% EBIT margin for the P-80 contract.
? According to Upstream, both KOM and SMM tendered for the P-80 contract, but KOM ultimately snagged it at US$2.98bn (vs. SMM’s offer of US$3.66bn). After negotiations, KOM agreed to a small price reduction of US$2.92bn.
Second FPSO contract with Petrobras, with an option for one more
? The P-80 is the second major FPSO contract secured from Petrobras, after the P-78 FPSO (worth US$2.3bn) which was awarded in May 21. The P-80 has a larger production capacity of 225,000 barrels of oil per day (bopd) compared to 180,000 bopd for the P-78.
? We understand that KOM is also in negotiations with Petrobras to secure the P-82 FPSO contract, which could be finalised by end-FY22F. We estimate that the P-82 contract, if secured, will add an additional S$4bn to KOM’s orderbook.
Acquiring a 25% stake in a German wind farm for c.S$445m
? KEP is also investing €305m (c.S$445.3m) to acquire a 50.01% stake in a special purpose vehicle (SPV) from Gulf. Post-acquisition, Gulf will own the remaining 49.99% stake in the SPV.
? The SPV holds 50% of Borkum Riffgrund 2 (BKR2), an offshore wind farm in Germany. Orsted owns the remaining 50% of BKR2. KEP’s effective stake in BKR2 is thus 25%.
? BKR2 has c.465MW of offshore wind assets with an average age of 2-4 years (commenced operations in 2019). We understand that BKR2 operates under the German EEG 2014 market premium mechanism, which has a Feed-in-Tariff and guaranteed floor price till 2038, which provides cashflow visibility and de-risks the asset.
Reiterate Add with an SOP-based TP of S$9.37
? Key catalysts: stronger-than-expected asset monetisation and more dividends. Downside risk: prolonged global recession.