KGT – AmFraser

Delivering a predictable stream of cash flows

K‐Green Trust (KGT) is structured as a business trust with three assets, specifically waste‐to‐energy incineration plants Senoko plant and Tuas DBOO plant as well as Ulu Pandan plant, which is a NEWater plant. These assets are operated under concession agreements with the NEA and PUB, of which KGT will build and operate the plant for a concession period between 15 and 25 years and subsequently transfer the plant to the governing agencies at the end of the concession period. Such concession arrangements are accounted for as service concession receivables.

A predictable stream of cash flows: As 80% of KGT’s revenue is derived from fixed capacity payments from the NEA and PUB under long‐term concession agreements, it offers a sustainable stream of cash flows that will continue to support its dividend yield. KGT offers a dividend yield of 7.2%, one of the highest among S‐REITs and business trusts currently. However, there will be no further distributions from the assets upon the expiry of the concession period. Upon the concession expiry of the Senoko plant in 2024, which contributes approx. 50% of the trust’s overall revenue, KGT will witness a significant step‐down in its overall distributions to Unitholders.

Scope to carry out yield‐accretive acquisitions: Due to its net cash position with zero debt, KGT has the financial clout to take on yield‐accretive acquisitions without raising equity finance.

Should KGT engage in acquisitions, this should help to mitigate the loss of income from the expiry of its existing concession agreements.

Declining NAV: The nature of KGT’s service concession agreements means that KGT is subject to declining service concession receivables as it approaches the expirations of its respective concession agreements. This will translate into declining book value over the coming years.