The Board of Directors (Board) of Cosco Corporation (Singapore) Limited (the Company) referred Thursday to its announcement July 22, 2010 in relation to the turnkey EPC (Engineering, Procurement and Construction) contract (the Contract) worth more than $500 million secured by the Company’s subsidiary, Cosco (Dalian) Shipyard Co., Ltd. (Cosco Dalian) (a subsidiary of the Company’s 51 percent owned subsidiary, Cosco Shipyard Group Co., Ltd) with Dalian Deepwater Development Ltd (the Shipowner) to build an advanced and versatile dynamic positioning 3 (DP3) deepwater drillship (the Vessel).
The Board wishes to announce that the Shipowner served a notice Aug. 5 to Cosco Dalian to terminate the Contract based on alleged grounds of delay in the delivery of the Dalian Developer (UDW drillship), the construction of which is substantially completed. On Sept. 5, the Shipowner submitted a request for arbitration in London in which the Shipowner claimed for a refund of the first instalment paid on the Contract amounting to $110 million and other advances paid by the Shipowner together with interest thereon, damages and interest thereon, indemnity for future losses, further or other relief and costs. On Oct. 7, the Shipowner rejected Cosco Dalian’s without prejudice proposal to settle the matter.
Cosco Dalian has informed the Company that it has appointed legal advisers in London in relation to the arbitration and is responding to the request for arbitration accordingly. Concurrently, subsequent to the receipt of the above notice of termination by Cosco Dalian, several potential buyers had expressed interest in the Vessel.
Given the present stage of the arbitration proceedings, it is difficult to quantify the eventual financial impact of the arbitration at this point in time.
The Company will make announcements of any significant development in this matter at the appropriate junctures.
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