www.dbsvickers.com Refer to important disclosures at the end of this report ed:MY / sa: JC

HOLD IPO Price: S$1.13 STI : 2,847.61 (Initiating Coverage) Price Target : 12-Month S$ 1.20 Reason for Report : Initiating Coverage Potential Catalyst: Larger and more visible acquisition pipeline Analyst Suvro Sarkar +65 6398 7973 suvro@dbsvickers.com

Forecasts and Valuation FY N/A (S$ m) 2010F 2011F

Turnover 67 84 EBITDA 15 30 Pre-tax Profit 7 14 Net Profit 7 14 Net Pft (Pre Ex.) 7 14 EPS (S cts) 1.1 2.1 EPS Pre Ex. (S cts) 1.1 2.1 EPS Gth Pre Ex (%) N/A 91 Diluted EPS (S cts) 1.1 2.1 Net DPS (S cts) 3.9 7.8 BV Per Share (S cts) 108.8 103.1 PE (X) 89.4 46.9 PE Pre Ex. (X) 89.4 46.9 P/Cash Flow (X) 43.6 22.1 EV/EBITDA (X) 38.0 19.7 Net Div Yield (%) 3.9 7.8 P/Book Value (X) 0.9 1.0 Net Debt/Equity (X) CASH CASH ROAE (%) 2.1 2.0 Consensus EPS (S cts): - - ICB Industry : Financial ICB Sector: Equity Investment Instruments Principal Business: K-Green Trust is a infrastructure business trust with investments in "green" infrastructure assets Note: Figures for 2010 represent the period from listing date to 31st Dec 2010 (approximately half-year)

Source of all data: Company, Bloomberg

At A Glance Issued Capital (m shrs) 639.1 Mkt. Cap (S$m/US$m) 722.1 / 515.8 Major Shareholders Keppel Integrated Engrg (%) 49.0% Temasek Holdings (%) 10.6% Free Float (%) 40.4%

DBS Group Research . Equity 25 Jun 2010

Singapore Company Focus

K-Green Trust Bloomberg: KGT SP | Reuters: N/A

Green is the colour of Cash• “Green” assets with steady long term cash flow

• Zero debt balance sheet will enable growth

• However, growth pipeline is limited at this point

• Projected DPU yield of 6.9% not far from peers; initiate coverage with HOLD and TP of S$1.20

Stable, long-term cash flows. The initial portfolio of K-Green Trust (“KGT”) consists of two Waste-to-Energy (incineration) plants as well as a water recycling (NEWater) plant in Singapore, with concession terms ranging from 15-25 years. The net cash flow generated will mostly comprise availability payments i.e. the fixed part of total payments, which will be paid as long as the contracted treatment capacity is made available, irrespective of actual volume treated. Counterparty risk is also minimal as off-takers are Singapore Government entities. Management has projected a DPU of 3.91Scts for the 6 months of FY10 and 7.82Scts for FY11, implying an yield of close to 7% at listing price.

Zero debt balance sheet could support inorganic growth. While the potential for organic growth is limited, the Trust does have the balance sheet flexibility to pursue inorganic growth, as it is debt-free at the time of listing. The Sponsor has provided a pipeline of 4 assets as part of Rights of First Refusal (“ROFR”) deed, but these assets will need to be warehoused by the Sponsor until they are operationally stable, and the smaller size of the ROFR portfolio means that even injection of the whole portfolio would only potentially enhance FY11 DPU by less than 5%.

HOLD, for now. Given its debt-free balance sheet and steadier non-cyclical cash flows than some peers, we expect KGT could trade at a slight premium to other infrastructure business trusts. Given the historical trading ranges of peers, we believe KGT could trade between 6-8% target yield, which would imply a share price range of S$0.98 – S$1.30. Our valuation, based on a slight premium to peers (6.5% target yield) is S$1.20. Initiate with HOLD, catalysts could come from a larger and more visible acquisition pipeline.

Company Focus

K-Green Trust

Page 2

SWOT Analysis

Strengths Weakness • Portfolio of operating assets with stable non-cyclical cash flows • Large proportion of availability-based payments, variable output charges passed through • Counterparties are Singapore government entities, hence limited credit risk • Strong support form sponsor group, Keppel Corp in the form of a pipeline of ROFR assets

• Organic growth limited to inflation adjustments, as capacity is unlikely to increase in short term • Tariffs are regulated by concession agreements with Government bodies, and scope for revisions are limited • Equipment downtimes at older plants may cause reduction in tariff payments

Opportunities Threats • Zero debt balance sheet gives the Trust flexibility to grow through debt-funded DPU accretive acquisitions • Growing trend for governments to promote “green” assets will add to acquisition opportunities, over and above projects won by sponsor group • The presence of Temasek Holdings, as a ~60% deemed shareholder in the Trust (through its 21% ownership of Keppel Corp), could make financial transactions easier

• Change in government regulations regarding ownership and operation of public utility assets could impact the Trust • Change in input waste quality or input water quality, or change in environmental regulations could increase costs of treating the waste/ wastewater

Source: DBS Vickers

Company Focus

K-Green Trust

Page 3

Valuation Singapore peers have traded at between 6-10% dividend yield. Listed comparables to K-Green Trust would include other utility/ infrastructure business trusts like CitySpring and Hyflux Water Trust, who have historically traded in the range of 6-10% forward dividend yield in up to mid cycles. They are currently trading at 7-8% FY11 dividend yield, which is a slight discount to the implied 6.9% FY11 yield projected by KGT management, based on a listing price of S$1.13. KGT can trade at a slight premium to peers but likely range bound. Given its debt-free balance sheet (unlike CitySpring’s heavily levered structure), steady non-cyclical cash flows (unlike Hyflux Water Trusts’s cash flows from industrial parks

in China) and lack of counterparty risks, we expect KGT could trade at a slight premium to the other infrastructure business trusts. However, given the historical trading ranges of peers, we believe KGT could trade between 6-8% target yield, which would imply a share price range of S$0.98 – S$1.30. Our valuation, based on 6.5% FY11 target yield – a slight premium to lower band of average peer valuation of 7-8% – is S$1.20. Initiate coverage with HOLD. Given the limited upside to proposed listing price, which we consider fair, we initiate our coverage on the stock with a HOLD recommendation. Catalysts would come from a larger and more visible acquisition pipeline, as well as debt-financed DPU accretive acquisitions in the medium term.

Peer valuations Company FY End Price

(local $) Mkt Cap

(US$m) DPU estimates (local $) DPU Yield (%) P/BV Govt Bond

Yield (2Y) Avg. Yield

Spread Curr Yr Next Yr Curr Yr Next Yr Curr Yr Next Yr

Australia

DUET Jun 1.67 1272.1 0.20 0.21 12.0% 12.4% 7.1

Envestra Jun 0.495 600.7 0.06 0.06 11.7% 11.3% 1.3

Hastings Div Utilities Dec 1.31 570.0 0.12 0.12 9.2% 9.0% 1.1

Macquarie Airports Dec 2.85 4641.4 0.21 0.21 7.4% 7.5% 1.0

SP Ausnet Mar 0.795 1881.8 0.08 0.08 10.2% 10.3% 4.0

Average 10.1% 10.1% 4.6% 5.5% 5.5%

US

Enbridge Energy Dec 51.39 5967.4 4.03 4.14 7.8% 8.1% 1.6

Enterprise Products Partners Dec 34.36 21965.5 2.33 2.46 6.8% 7.1% 2.2

Buckeye Partners Dec 56.85 2927.8 3.87 4.08 6.8% 7.2% 2.4

Average 7.1% 7.5% 0.7% 6.5% 6.8%

Singapore

MIIF Dec 0.47 439.7 0.03 0.04 6.4% 8.1% 0.6

Hyflux Water Trust Dec 0.65 141.2 0.05 0.05 7.2% 8.3% 0.9

CitySpring Mar 0.595 420.3 0.04 0.04 7.1% 7.1% 1.4

K-Green Trust Dec 1.13 722.2 0.04 0.08 6.8%* 6.9% 1.1 0.5% 6.4% 6.4%

Average (excl .KGT) 6.9% 7.8% 0.5% 6.4% 7.3%

*Annualised yield

Source: Bloomberg, DBS Vickers

Company Focus

K-Green Trust

Page 4

What is K-Green Trust? K-Green Trust (“KGT”) was constituted as a business trust in July 2009, and as of listing date in June 2010, will constitute the assets of two waste management plants as well as a water recycling plant in Singapore. Its sponsor is Keppel Integrated Engineering (“KIE”), the wholly owned environmental engineering arm of Keppel Corp Limited (“KCL”), one of Singapore’s leading conglomerates with interests in oil and gas, utilities and property development.

The key assets. The mandate for KGT is to invest in “green” infrastructure assets, comprising waste management, water and wastewater treatment, renewable energy, energy efficiency and other “green” initiatives in Singapore, Asia, Europe and the Middle East. To start off, KGT’s portfolio consists of the Senoko incineration plant, the Tuas Waste to Energy (“WTE”) plant and the Ulu Pandan NEWater plant, all located in Singapore.

Snapshot of initial portfolio of assets

Name of Plant Year Built Concession Start Date Concession Period Design CapacitySenoko Incineration Plant 1992 Sep-09 15 years 2,400 tonnes/ dayTuas DBOO WTE Plant 2005 Oct-09 25 years 888 tonnes/ dayUlu Pandan NEWater Plant 2005 Mar-07 20 years 148,000 cu m/ day

Source: Company, DBS Vickers Corporate structure of KGT (as of listing) Source: Company, DBS Vickers How does Keppel Corp benefit? Of the three assets, KCL acquired the Senoko and Tuas Waste-to-Energy (“WTE”) plants in 3Q09 and 4Q09 respectively, and along with the Ulu Pandan NEWater plant, injected all three into KGT in order to create a “green” infrastructure fund raising platform as well as benefit from tax incentives under the Singapore Government’s Qualifying Project Debt Security (“QPDS”) incentive scheme.

In future, sponsor KIE will be able to release cash by divesting capital-intensive BOT or DBOO projects to the Trust, and thus recycle capital in order to invest in new projects. Keppel Corp will retain a 49% interest in the Trust, and will distributed the remaining 51% shareholding in KGT to its shareholders via a dividend in species of one KGT unit for every 5 Keppel Corp shares held.

Company Focus

K-Green Trust

Page 5

The Waste Incineration Plants Prior to 1978, substantially all solid waste generated in Singapore was disposed by landfills. In recent years, combustion has become the preferred mechanism for waste management, due to developments in low-emission incinerators and recognition that land disposal of solid waste leads to long-term pollution problems, particularly where hazardous waste is involved. Thus, today approximately 90% of Singapore’s solid waste is incinerated with energy

recovery, while the remaining non-incinerable waste is disposed of at the Pulau Semakau landfill. Incineration is a waste treatment technology involving the combustion of organic materials and/or substances. Incineration of waste materials converts waste into incinerator bottom ash, flue gases, particulates, and heat, which can in turn be used to generate electric power. Flue gases are cleaned of pollutants before being dispersed into the atmosphere.

General processes of a waste incineration plant

Source: Company List of Waste-to-Energy Plants in Singapore

Source: Company

Company Focus

K-Green Trust

Page 6

The Senoko Plant Only incineration plant outside of Tuas. Located in the northern part of Singapore, Senoko Plant is the third waste incineration plant built in Singapore and is one of the four waste incineration plants currently operating in Singapore. Since August 2009, it is also the only waste incineration plant located outside of Tuas, and is positioned to serve the eastern, northern and central areas of Singapore. Commissioned in 1992, it boasts six incinerator-boiler units and two condensing turbine-generators with a power generation capacity of 2 x 28 MW. Senoko Trust acquired Senoko Plant on 31 August 2009 for S$454 million on a willing-buyer, willing-seller basis and it commenced commercial operations under Senoko Trust thereafter. Key details of Senoko Plant

Owner Senoko TrusteePlant Type WTE waste incineration plantLocation Senoko, SingaporeStatus OperatingType of concession Senoko ISATerm of concession 10 years, commencing 1 Sep 2009Contracted capacity 2,100 tonnes per dayOff-taker NEAO&M operator Keppel SeghersEPC contractor for flue gas upgrade Keppel Seghers

Source: Company A view of Senoko Plant

Source: Company The Tuas DBOO Plant First WTE plant built by Keppel. to Located in the western part of Singapore, Tuas DBOO Plant is the fifth waste incineration plant to be built in Singapore and the newest of the four waste incineration plants. It is also the first waste

incineration plant in Singapore built under the public-private-partnership initiative. It was built with Keppel Seghers’ in-house technologies and is the first waste incineration plant in Singapore to showcase WTE (waste-to-energy) technology from a Singapore company. Tuas DBOO Plant commenced commercial operations on the Tuas DBOO PCOD. It boasts two incinerator-boiler units with one condensing turbine-generator offering a power generation capacity of 22 MW. Key details of Tuas DBOO Plant

Owner Tuas DBOO TrusteePlant Type WTE waste incineration plantLocation Tuas, SingaoporeStatus OperatingType of concession Tuas DBOO ISATerm of concession 25 years, commecing 30 Oct 2009Contracted capacity 800 tonnes per dayOff-taker NEAO&M operator Keppel SeghersEPC contractor Keppel Seghers

Source: Company A view of Tuas DBOO Plant

Source: Company Availability based payments dominant. The bulk of revenues under the concession agreements comprises of the “Fixed Capacity Payments”, which are availability based and are payable in full if the available incineration capacity of Senoko Plant and Tuas DBOO Plant is greater than or equal to 2,100 tonnes per day and 800 tonnes per day, respectively. If the available incineration capacity is less than 2,100 tonnes per day, the Fixed Capacity Payments will be reduced accordingly. These payments comprise a fixed capital cost component, and a fixed O&M cost component, both adjustable for inflation. Both are computed based on the available incineration capacity of Senoko Plant and subject to deductions if certain performance standards are not met. The

Company Focus

K-Green Trust

Page 7

fixed O&M cost component of the Fixed Capacity Payments covers the fixed O&M fees payable to the Keppel O&M Operator as well as property tax, trustee management fees, licensing fees and insurance costs incurred by Senoko Trust. Variable payments include electricity export component. The other component of revenues is the “Variable Payments”, which are payable for the variable costs in incinerating waste and exporting electricity to the NEMS. The variable O&M cost component covers the variable O&M fees payable to the

Keppel O&M Operator. This mechanism allows the O&M fees payable to Keppel O&M Operator to be passed through to NEA with the effect that the effective income of the sub-trusts to be derived from the fixed capital cost components of the Fixed Capacity Payments. In addition, the sub trusts will receive a variable electricity generation incentive payment, which is computed based on a percentage of revenues from the volume of electricity exported by the plants to the National Electricity Market of Singapore.

Illustration of type of payments in and out of Senoko and Tuas sub-trusts

Source: Company

Illustration of approximate proportion of fixed and variable payments received by Senoko and Tuas sub-trusts

Source: Company

The Water Reuse Plant

Need for alternative sources of water in Singapore. Singapore does not possess significant freshwater rivers or Lakes and until recently, the primary water source has been rainwater collected in reservoirs and catchment areas with the

remainder of the supply being imported from Malaysia. Historically, Singapore relied on imports from Malaysia to supply half of its water consumption. The two water

Company Focus

K-Green Trust

Page 8

agreements that supply water to Singapore are due to expire in 2011 and 2061. NEWater is a key resource. To improve water self-sufficiency, the Singapore government has committed to increase the supply of water from non-conventional sources, such as

desalination and water reuse to be at least 25% of Singapore’s total water demand by 2012. The non-conventional sources currently supply about 15-20% of Singapore’s water consumption. NEWater is reverse osmosis water that is free from viruses and bacteria and contains very low levels of salts and organic matter.

NEWater Plant: General Treatment Process

Source: Company Output should increase with acceptability. The NEWater production uses a multiple barrier approach with microfiltration or ultrafiltration, reverse osmosis, and ultraviolet disinfection to produce high-quality water, which is well within the World Health Organisation drinking water standards. Singapore will continue to expand its NEWater capacity by 340,000 m3/day so that it supplies 40 percent of Singapore’s total water needs by 2020. Currently, 12,000

m3/day of NEWater is added to the rainwater collection reservoirs to naturalise the reclaimed water. This constitutes about 1% of total potable water consumption, a level that should progressively increase to about 2.5% by 2011. With efficiency gains and lower costs of NEWater production, the NEWater price fell from S$1.3/m3 in 2003 to S$1.0/m3 in 2007. The number of NEWater users subsequently increased from 24 in 2003 to 327 in 2009.

List of NEWater plants in Singapore Source: Company

Company Focus

K-Green Trust

Page 9

The Ulu Pandan Plant Fourth NEWater plant. Ulu Pandan Plant is located in the central part of Singapore. In 2005, PUB awarded the contract to Ulu Pandan SPC to design, build, own and operate Ulu Pandan Plant under a public-private-partnership initiative, to meet demand from industrial and commercial sectors in the western and central regions of Singapore. Ulu Pandan Plant is the fourth operational NEWater plant in Singapore and one of the largest wastewater recycling plants operational in East Asia. Modular design, space saving measures and energy saving features lower operating costs. Key details of Ulu Pandan Plant

Owner Ulu Pandan Trustee

Plant Type NEWater Plant

Location Ulu Pandan, Singaopore

Status Operating

Type of concession NEWater Agreement

Term of concession 20 years, commecing 28 Mar 2007

Contracted capacity 148,000 cu m per day of NEWater

Off-taker PUB

O&M operator Keppel Seghers

EPC contractor Keppel Seghers

Source: Company

Availability payment forms a lower proportion of net payout than WTE plants. Under the NEWater Agreement, the Ulu Pandan Trustee will receive both availability payments and payments based on effective output. As the name implies, availability based payments are payable for availing the warranted production capacity of 148,000 m3/day throughout the term of the NEWater Agreement, regardless of whether Ulu Pandan Plant produces any NEWater, ensuring a long-term, predictable cash flow for Ulu Pandan

Plant. If the available production capacity is less than 148,000 m3/day, the Availability Payments will be reduced accordingly. A view of Ulu Pandan NEWater Plant

Source: Company Output payments, on the other hand, are payable based on the net amount of NEWater delivered by Ulu Pandan Plant to PUB at delivery points. The Availability Payments and the Output Payments will cover the O&M fees payable to Keppel Seghers as the O&M operator of Ulu Pandan Plant as well as property tax, trustee management fees, licensing fees and insurance costs incurred by Ulu Pandan Trust. Variable power payment component adds uncertainty. Overall, the effective income of Ulu Pandan Trust is derived primarily from the fixed capital cost recovery payment component of the availability payment and potentially from the variable power payment component of the output payment. However, it is possible that the variable power payment component in the output payments may not sufficiently cover the actual usage charges incurred by the plant, as actual charges incurred vary with the cost of fuel and may be higher or lower than the reference cost (which is based on the monthly average 180cST HSFO for previous 12 months) used in calculating the payment component.

Breakdown of fixed and variable payments received by Ulu Pandan Plant from PUB

Source: Company

Company Focus

K-Green Trust

Page 10

Management Team

The key management team of KGT has been seconded from the talent pool of Keppel Group, as part of the initial support in providing required resources, services and experiences during the start up phase of KGT. The Trustee Manager will

start building an independent team and phase out the secondment arrangements when the assets of KGT grow to around S$1.0 billion.

Key Management Team

Manager (Age) Current Appointment Experience

Mr. Thomas Pang

Thieng Hwi (45)

CEO Previously the general manager overseeing the investment, mergers and

acquisitions and strategic planning of Keppel O&M Ltd. Previously has been

involved in fund raising, business development activities and also served as VP of

Singapore Tourism Board as well as assistant head at Economic Development

Board, Singapore. Holds a Master of Arts degree from University of Cambridge.

Ms. Kang Leng Hui CFO Previously the Finance Manager at Keppel Corp Ltd, responsible for value

management, management reporting and other financial matters. Prior to joining

KCL, she worked at Pricewaterhouse Coopers as an Audit Manager. She holds a

Bachelor of Accountancy Degree from NTU and is a member of CPA, Singapore.

Ms. Foo Chih Chi Senior Investment Manager Previously part of KCL’s strategic development and planning division. From 2008 to

2009, she was seconded to Alpha Investment Partners, where she was a senior

investment manager, specialising in structured real estate investments. She holds a

Bachelor of Business Administration degree from the University of Michigan.

Mr. Koh Hee Song Senior Adviser Currently senior adviser to Keppel Seghers in matters pertaining to solid waste

management, he has held various positions with NEA and the Ministry of

Environment in his long public service career. Last served as the Head of

Engineering Services of NEA until retirement in 2003. Has been awarded Public

Service Medals and Long Service Medal by the Singapore Government.

Source: Company Various management fees and comparisons with other listed business trusts K-Green Trust CitySpring Hyflux Water Trust Base Fee Fixed fee of S$2.0m per annum, adjusted

for inflation every year1% of market capitalisation subject to

minimum of S$3.5m per annum NonePerformance Fee

4.5% per annum of the sum of all cashinflows

20% of total return on units in any quarter above the total return on MSCI Asia Pac (ex-

Japan) Utilities Index, taking into account prior period underperformance

Tiered structure ranging from 5% to 30% of adjusted EBITDA, depending

on the level of EBITDA generatedAcquisition Fee

0.5% of investment value if acquiredfrom Sponsor or related parties, 1% in

other cases None

0.5% of investment value if acquiredfrom Sponsor or related parties, 1% in

other casesDivestment Fee

0.5% of divestment value None 0.5% of divestment value Total fees as a % of net cash generated (est.)

About 9% About 9-10% About 5-6%

Source: Companies, DBS Vickers estimates

Company Focus

K-Green Trust

Page 11

The Growth Pipeline The Sponsor has granted KGT certain rights of first refusal (“ROFR”) pursuant to a ROFR deed, which will come into effect on the date of listing. The ROFR deed applies to any asset, in which the Sponsor or any of its subsidiaries hold more than 50% interest and provides such services as falls within the Trust’s investment mandate. As if listing date, the ROFR portfolio consists of 4 assets, including 3 district cooling systems in Singapore and a WTE plant in Sweden, details of which are highlighted in table below. Some of these assets in the pipeline may not be fully operational at this point, and will not be injected into the

Trust until they attain steady state operations. The Sponsor will support KGT by warehousing these greenfield projects until these projects achieve a more sustainable and steady cash flow stream, after which it will be offered to KGT for divestment purposes. We estimate that the total book value of these 4 assets could only add up to about 15% of the book value of initial portfolio and hence, may not be a significant growth driver.

Details of ROFR Assets

Name of Plant Location Description Design Capacity Remarks

Biopolis DCS Plant Biopolis@one-north,

Singapore

A district cooling system, wholly-owned

by Keppel DHCS Pte Ltd

25,750 RT

Changi DCS Plant Changi Business Park,

Singapore

A district cooling system, wholly-owned

by Keppel DHCS Pte Ltd

13,000 RT

Woodlands DCS Plant Woodlands Wafer Fab

Park, Singapore

A district cooling system, wholly-owned

by Keppel DHCS Pte Ltd

10,100 RT

Keppel acquired

First DCS (previous

owner of the 3

plants) for S$88m

from JTC Corp in

December’09

Amotfors Energi WTE

Plant

Sweden A combined heat and power WTE plant

which is 22% owned by Keppel Seghers

190 tonnes/ day Keppel Seghers

won a S$75m EPC

contract in April’08

Source: Company How does the ROFR pipeline impact distributions? Assuming fully debt-financed acquisition. We try to create a scenario analysis of the impact on FY11 DPU if the Trustee-Manager were to inject the above assets (or 3rd party assets) into the Trust in FY11. Thus, if we were to assume all the ~S$100m of ROFR assets injected at the beginning of the year at a cash flow yield of 7.5%, it would potentially

increase the DPU payout by about 7%, when fully debt-funded at reasonable rates. Given the nature of assets described above, cash flow yield may not be as high, debt funding may not be cheap, and equity funding may not lead to any significant DPU accretion. Thus, more realistically, DPU accretion from ROFR assets may be limited to below 5%.

Scenario Analysis – Potential FY11 DPU enhancement through acquisitions

Cash flow yield of acquired asset 6.0% 7.0% 8.0% 9.0% 10.0%

50 2% 3% 4% 5% 6%100 4% 6% 8% 10% 12%150 6% 9% 12% 15% 18%

A

cqui

sitio

n

V

alue

200 8% 12% 16% 20% 24%

Source: DBS Vickers estimates

Company Focus

K-Green Trust

Page 12

Key Risks Equipment/ plant downtimes. If the time required for repairs and maintenance is more than expected or such events occur more frequently, it could affect the contracted capacities of the respective plants, and the sub-trusts would not receive full availability payments from the off-takers. As a safeguard, the Keppel Seghers O&M operator will be liable up to 30% of the fixed annual O&M fee in case of payment reductions arising out of plant downtimes, but any damages beyond that will be borne by the sub-trusts. Based on the deduction formulae in the respective agreements, the capacity deduction equivalent to this 30% capped amount will be reached when: i) Senoko Plant available capacity drops below 66.04% ii) Tuas DBOO Plant available capacity drops below

74.46% iii) Ulu Pandan Plant available capacity drops below

70.00% Below these limits, operating profits at the Trust level will be affected, leading to lower cash flows for the year. Based on management projections, every 1% drop in available capacity below the above limits could lower operating profit by 0.30% to 0.80%, depending on the plant. Assets are illiquid. Utility assets are generally regulated by governments, and it may not be easy to invest in or divest such assets, without permission from respective statutory bodies. The lack of control could affect the valuations obtained for such assets as well. No historical financial information. The management has been granted a waiver by the SGX from the requirement to

post historical financial numbers, and thus our assessments are only based upon forecasts and projections by management, rather than our own estimates. Government rules and regulations could change. Changes in regulations in the “green” infrastructure business could impact earnings, if new environmental laws enforce stricter controls or limits on existing assets, which require additional capital expenditure and operating expenses. Senoko upgrade must be on time. According to conditions set out in the Senoko agreement, the Senoko trustee will have to complete the Flue Gas Treatment Upgrade within the stipulated time frame, failing which the Trustee would be in default of the agreement, seriously affecting operations. Energy costs and payments at Ulu Pandan plant are not exactly matched. The variable power payment component under the Ulu Pandan Agreement is adjustable for fuel cost movement according to a formula prescribed by PUB. Only 60.8% of the variable power payment component is adjustable for fuel price indexation and the fuel price indexation is a factor of the monthly average 180cST HSFO for the previous 12 months over the actual fuel price as at the Ulu Pandan commencement date. If the actual cost of fuel is higher than the fixed fuel cost used in the calculation, the variable power payment component will not be sufficient to cover the actual power costs incurred by Ulu Pandan Plant and Ulu Pandan Trust will have to bear the extra costs of fuel incurred.

Company Focus

K-Green Trust

Page 13

Distribution Guidance Trustee Manager likely to pay out 100% of cash flows. KGT will make distributions on a semi-annual basis to unithoilders, within 90 days after the end of each distribution period. The Trustee-manager has provided guidance for DPU up to end-FY11, assuming 100% of forecast residual cash flows are paid out, details of which are posted alongside. The stated policy is to pay at least 90% of cash flows.

Details of DPU guidance

Period Guidance (Scts)

From listing date to 31 Dec 2010 3.91

For the first half of 2011 3.13

For the first half of 2011 4.69

Source: Company

Forecast Distribution Summary FY N/A (S$ m) 2010F 2011F

Net Profit 7.1 13.6 Add: non cash tax 0.0 0.0 Add Depreciation & Amortisation 0.2 0.3 Less: Recurring Capex 0.0 0.0 Add lease receivables 18.5 36.5 Net Cash Earnings for Distribution 25.8 50.4 Cash Distributions Paid (25.0) (50.0) Div Payout Ratio (%) 97% 99%

Source: Company, DBS Vickers

Note: Figures for 2010 represent the period from listing date to 31st Dec 2010 (approximately half-year) Revenue breakdown by assets – Company Projections FY N/A 2010F 2011F

Revenues (S$ m) Senoko Plant 17 34 Tuas Plant 11 21 Ulu Pandan Plant 7 13 Construction 32 16 Total 67 84 O&M Income 25 50 Senoko 13 25 Tuas 7 14 Ulu Pandan 6 10 Finance Income 9 18 Senoko 5 9 Tuas 4 7 Ulu Pandan 1 2 Construction revenue 32 16 Total reported revenue 67 84 Tariff revenue 53 105 O&M income 25 50 Finance Income 9 18 Financial Receivables 19 36

Source: Company, DBS Vickers

Note: Figures for 2010 represent the period from listing date to 31st Dec 2010 (approximately half-year)

Company Focus

K-Green Trust

Page 14

Financials – Income Statement No historical financial statements. For the Senoko plant, accounting treatment before and after acqusition by KGT (in Aug 2009) is very different and hence, financials would be misleading. For the Tuas plant, it commenced operations only in end-October 2009 and thus, was operational for only two months in FY09. Thus, despite the availability of financial records for Ulu Pandan Plant, the Trustee Manager has chosen not to disclose historical financials since they would not be comparable with future projections.

Topline includes construction revenue and is hence, misleading. The Senoko trustee will have to complete the flue gas upgrading works at Senoko plant, through Keppel Seghers as EPC contractor , in FY10-11, and this would distort topline by about S$32m in FY10 and S$16m in FY11, owing to the associated accounting treatment for concession assets. The constrcution revenue will be matched by a similar construction expense, and hence, would not affect operating profits, which are likely to remain largely stable on a sequential basis.

FY N/A (S$ m) 2010F 2011F

Turnover 67 84 Cost of Goods Sold (56) (64) Gross Profit 11 20 Other Opg (Exp)/Inc (3) (6) Operating Profit 7 14 Other Non Opg (Exp)/Inc 0 0 Associates & JV Inc 0 0 Net Interest (Exp)/Inc 0 0 Exceptional Gain/(Loss) 0 0 Pre-tax Profit 7 14 Tax 0 (1) Minority Interest 0 0 Preference Dividend 0 0 Net Profit 7 14 Net profit before Except. 7 14 EBITDA 15 29.6 Sales Gth (%) N/A 25.7 EBITDA Gth (%) N/A 97.7 Operating Profit Gth (%) N/A 91.7 Net Profit Gth (%) N/A 90.8 Effective Tax Rate (%) 4.3 4.8

Source: Company projections

Note: Figures for 2010 represent the period from listing date to 31st Dec 2010 (approximately half-year)

Sales Trend Operating Cost Trend Profitability Trend

20.0%

22.0%

24.0%

26.0%

28.0%

30.0%

0102030405060708090

100

2010A 2011F

S$ m

Total Revenue Revenue Growth (%) (YoY)

0102030405060708090

100

2010A 2011F

Cost of Goods Sold (-) Other Operating Expenses (-)

86%87%88%89%90%91%92%93%94%95%96%

02468

101214161820

2010A 2011F

Net Profit (After-extraordinaries) Net Profit Growth (%) (YoY)

Company Focus

K-Green Trust

Page 15

Financials – Balance Sheet Zero debt at the Trust and Group level. After the restructuring exercise involving the three sub-trusts, there will be no external borrowings at the asset level, as existing project debts between the sub-trusts and Keppel Group will be replaced by equity injections from the Sponsor by way of shreholder loans. Thus, the Trust will be free to leverage its

debt-free balance sheet in raising debt to fund future acquisitions. Fixed assets take the form of financial assets. Given the accounting norms for concession assets, the plants will be classified on the balance sheet as financial receivables and not as property, plant and equipment.

FY N/A (S$ m) 2010F 2011F

Net Fixed Assets 0.9 1 Invts in Assocs & JVs 0 0 Other LT Assets 553 532 Cash & ST Invts 70 55 Inventory 14 14 Debtors 18 18 Other Current Assets 55 55 Total Assets 710 674 ST Debt

0 0 Other Current Liab 15 15 LT Debt 0 0 Other LT Liabilities 0 0 Shareholder’s Equity 696 659 Minority Interests 0 0 Total Cap. & Liab. 710 674 Leverage Analysis (x) Net Interest Cover nm nm EBITDA Gross Interest Cover nm nm Total Debt to EBITDA 0.0 0.0 Total Debt to Total Assets 0.0 0.0 Total Debt to Capital N/A N/A Net Debt to Equity CASH CASH Net Debt to Equity ex MI nm nm Capex to Debt nm nm Liquidity Analysis (x) Cash Ratio 4.7 3.7 Current Ratio 10.6 9.5 Quick Ratio 5.9 4.9

Source: DBS Vickers estimates

Company Focus

K-Green Trust

Page 16

Financials – Cash Flow Operating cash flow will support distributions. Healthy and predicatble operating cash flows from the initial portfolio of 3 assets should support the projected DPU payouts over FY10-11.

Capex of around S$50m in FY10-11. This will be required to perform the flue gas upgrade at Senoko plant, and will be funded from internal cash, arising from the initial proceeds and existing cash assets.

FY N/A (S$ m) 2010F 2011F

Pre-Tax Profit 7 14 Dep. & Amort. 0 0 Tax Paid 0 0 Assoc. & JV Inc/(loss) 0 0 Chg in Wkg.Cap. 0 0 Other Operating CF 19 36 Net Operating CF 26 51 Capital Exp.(net) (32) (16) Other Invts.(net) (663) 0 Invts in Assoc. & JV 0 0 Div from Assoc & JV 0 0 Other Investing CF 0 0 Net Investing CF (695) (16) Div Paid (25) (50) Chg in Gross Debt 0 0 Capital Issues 713 0 Other Financing CF 0 0 Net Financing CF 688 (50) Net Cashflow 19 (15) Opg CFPS (S cts) 4.1 7.9 Free CFPS (S cts) (0.9) 5.5

Source: Company projections

Note: Figures for 2010 represent the period from listing date to 31st Dec 2010 (approximately half-year)

Cash Flow Trend Free Cash Flow Per Share Free Cash Flow As At Year End

-765

-565

-365

-165

35

235

435

635

2010A 2011F

CF from Op CF from Invt CF from Fin

(0.01)

0.01

0.03

0.05

0.07

0.09

2010A 2011FFree Cash Flow Per ShareFree Operating Cash Flow Per Share

0

5

10

15

20

25

30

35

2007 2008 2009 2010A 2011F

Company Focus

K-Green Trust

Page 17

DBSV recommendations are based an Absolute Total Return* Rating system, defined as follows:

STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame)

BUY (>15% total return over the next 12 months for small caps, >10% for large caps)

HOLD (-10 to +15% total return over the next 12 months for small caps, -10 to +10% for large caps)

FULLY VALUED (negative total return i.e. > -10% over the next 12 months)

SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)

Share price appreciation + dividends DBS Vickers Research is available on the following electronic platforms: DBS Vickers (www.dbsvresearch.com); Thomson (www.thomson.com/financial); Factset (www.factset.com); Reuters (www.rbr.reuters.com); Capital IQ (www.capitaliq.com) and Bloomberg (DBSR GO). For access, please contact your DBSV salesperson. GENERAL DISCLOSURE/DISCLAIMER This document is published by DBS Vickers Research (Singapore) Pte Ltd ("DBSVR"), a direct wholly-owned subsidiary of DBS Vickers Securities (Singapore) Pte Ltd ("DBSVS") and an indirect wholly-owned subsidiary of DBS Vickers Securities Holdings Pte Ltd ("DBSVH"). [This report is intended for clients of DBSV Group only and no part of this document may be (i) copied, photocopied or duplicated in any form by any means or (ii) redistributed without the prior written consent of DBSVR.] The research is based on information obtained from sources believed to be reliable, but we do not make any representation or warranty as to its accuracy, completeness or correctness. Opinions expressed are subject to change without notice. This document is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate legal or financial advice. DBSVR accepts no liability whatsoever for any direct or consequential loss arising from any use of this document or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. DBSVH is a wholly-owned subsidiary of DBS Bank Ltd. DBS Bank Ltd along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. DBSVR, DBSVS, DBS Bank Ltd and their associates, their directors, and/or employees may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies. The assumptions for commodities in this report are for the purpose of forecasting earnings of the companies mentioned herein. They are not to be construed as recommendations to trade in the physical commodities or in futures contracts relating to the commodities mentioned in this report. DBSVUSA does not have its own investment banking or research department, nor has it participated in any investment banking transaction as a manager or co-manager in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively.

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Company Focus

K-Green Trust

Page 18

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