Four platforms are no longer paying! Keppel's 'cancellation' is to shed burdens for restructuring
2022-04-16 09:00
Hundreds of millions of dollars are being written off, and four platforms are being abandoned. Keppel decided to completely clear out "junk" assets before its planned restructuring deal with Sembcorp Marine.
On April 13, Keppel Corporation of Singapore announced that its subsidiary, Keppel FELS, terminated the construction contracts for four self-elevating drilling platforms.
The announcement stated that in October 2013, Keppel FELS received an order from a subsidiary of Clearwater Capital Partners to build two self-elevating drilling platforms for a total of US$440 million. These two platforms were scheduled for completion and delivery in the fourth quarter of 2015 and the first quarter of 2016. In May 2014, Clearwater resold one of them to the Arabian Drilling Company.
Of the aforementioned two platforms, one remains undelivered, with an estimated value of approximately US$200 million.
In addition, in February 2014, Keppel FELS received an order from Fecon International Corp for three high-specification KFELS B-class self-elevating drilling platforms, with a contract value of US$650 million, originally scheduled for delivery in the first half of 2016.
Currently, Keppel FELS has issued termination notices for the construction contracts of the aforementioned four drilling platforms, citing the customer's failure to accept the ordered platforms without reasonable or legitimate grounds, and failure to pay outstanding payments on schedule, despite Keppel FELS being ready for delivery.
Following the termination of the relevant contracts, Keppel FELS will retain all payments received under the contracts to date and will retain ownership of the platforms, including the right to sell them.
Industry insiders say that Keppel Corporation's decision to terminate the four platform construction contracts may be related to its ongoing restructuring with Sembcorp Marine, another major Singaporean offshore and marine engineering company. Keppel Corporation is currently pushing forward with the restructuring of Keppel Offshore & Marine, and is expected to sign a merger agreement with Sembcorp Marine before the end of April. Keppel Corporation stated that the merger of Keppel Offshore & Marine and Sembcorp Marine is in response to the dramatic changes in the global offshore and marine engineering and energy industries in recent years, aiming to create a stronger merged entity that leverages each other's strengths to bring synergistic effects and long-term sustainable value to shareholders. The merger is based on the belief that the merged entity will be able to fully utilize the energy transition, including offshore wind power, and better address the opportunities and challenges faced by the constantly changing and consolidating offshore and marine industry.
In addition, Keppel Corporation has reached a memorandum of understanding with Kyanite Investment Holdings Pte Ltd, a wholly-owned subsidiary of Temasek, to sell Keppel Offshore & Marine's remaining completed and uncompleted drilling platforms and related receivables to an independent asset company. The independent asset company will be majority-owned by external investors, with Keppel Corporation retaining no more than 20% of the shares in this independent asset company.
Keppel Corporation stated that this asset disposal transaction and the proposed merger are conditional upon each other and are proceeding concurrently. Recently, both parties stated that significant progress has been made, including mutual due diligence, transaction structure, and exchange ratio.
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