Marco Polo Marine Ltd. (the Company) referred Monday to the Company’s announcements dated Nov. 17 and Nov. 24 with respect to the termination of the $214.3 million rig construction contract dated Feb. 26, 2014 (as amended and supplemented) entered into between Marco Polo Drilling (I) Pte. Ltd. (MP Drilling) with PPL Shipyard Pte Ltd. (PPL) for the construction of a high-specification jackup (the New Rig) -- PPL Jackup TBN 1 (400' ILC) -- based on PPL’s proprietary Pacific Class 400 design (the Rig Construction Contract).
Unless otherwise defined herein, capitalized terms and expressions used in this announcement shall bear the same meanings ascribed to them in the Company’s announcements dated Feb. 26, 2014, Nov. 17 and Nov. 24 in relation to the Rig Construction Contract. Copies of these announcements can be found at the official website of The Singapore Exchange (www.sgx.com).
On Nov. 17, MP Drilling had issued PPL, the builder of the New Rig, a notice of termination of the Rig Construction Contract following the latter's failure to comply with certain of its material contractual obligations. In arriving at this decision to terminate the Rig Construction Contract, MP Drilling has taken into account various factors including cracks found on all three legs of the New Rig during two rounds of tests, notwithstanding repair works carried out by PPL after the first round of tests.
In view of this termination, MP Drilling had informed PPL that it would not be taking delivery of the New Rig. In addition, it is seeking, among others, a refund from PPL of the initial amount of 10 percent of the contract price (approximately $21.4 million) as well as all other payments made by MP Drilling under the Rig Construction Contract (collectively, Initial Payment) previously made to PPL pursuant to the Rig Construction Contract together with interest.
MP Drilling disagrees with the allegations in the announcements made by Sembcorp Marine on Nov.18 and Nov. 25 that, among others, MP Drilling is in alleged repudiatory breach of the Contract or that MP Drilling’s termination of the Contract is wrongful.
The second announcement by Sembcorp Marine on Nov. 25 states that the New Rig is at “the final phase of construction” and does not deny the existence of defects found on all three legs of the New Rig during two rounds of tests as set out in MP Drilling’s announcements dated Nov. 17 and Nov. 24. MP Drilling regards the nature and number of cracks and other defects (such as porosity) found on all three legs of the New Rig at this stage of construction wholly unacceptable:
MP Drilling maintains therefore that it is entitled to terminate the Contract. The consequence of termination is that MP Drilling is discharged from its obligations under the Rig Construction Contract and is under no further obligation to perform the same. This includes a discharge of its obligation to make any further payment of the contract price or any other sum under the Contract to PPL.
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