PPL Shipyard Challenges MPD's Termination of Jackup Construction Contract

Sembcorp Marine Ltd. referred Wednesday to the announcements made by Marco Polo Marine Ltd. on Nov. 24 and Nov. 17, and the announcement made by Sembcorp Marine on Nov. 18.

PPL Shipyard Pte Ltd.’s (PPLS) position is that the contract is still subsisting and Marco Polo Drilling (I) Pte Ltd. (MPD) is in repudiatory breach. PPLS did not accept MPD’s repudiatory breach. PPLS has elected to affirm the contract and PPLS’ lawyers have notified MPD’s lawyers of this election Nov. 23.

The contractual delivery date is Nov. 30. When MPD purported to terminate the contract on Nov. 17, the Rig -- PPL Jackup TBN 1 (400' ILC) -- was substantially ready to be completed for delivery. Based on the construction schedule, more than 98 percent of the Rig had been completed. The final phase of construction included a pre-load test and a jacking trial followed by non-destructive testing. Any defect discovered will be made good and retested to the satisfaction of the Classification Society and MPD before delivery. Notwithstanding the Nov. 30 delivery date, the contract provided that PPLS has an additional 210 days after Nov. 30 to deliver the Rig. PPLS therefore has more than enough time to make good any defect and deliver the Rig to MPD in accordance with the contract. In view thereof, MPD’s purported termination on Nov. 17 is wrongful and without any justification whatsoever. PPLS is of the view that the purported termination by MPD is to avoid its obligation to pay the second disbursement of 10 percent of the contract price ($21.43 million), that has already accrued and due to PPLS immediately on the execution of the contract. This payment was deferred twice at the request of MPD, and is payable by Nov. 30.

As for dispute resolution, as the contract is still subsisting, and the disputes are technical in nature, PPLS will be inviting MPD to refer the disputes to the Classification Society, whose decision shall be final and binding on the parties as provided for under the contract.

PPLS will also be seeking payment of the second disbursement if MPD fails to make payment by Nov. 30. All of the rights of PPLS are reserved.

Sembcorp Marine will make further announcements where necessary.

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