Cosco Discontinues Octabuoy Hull and Topside Module Project
Singapore-listed Cosco Corporation (Singapore) Limited (the Company) referred Friday to its announcements April 9, 2008; Oct. 2, 2009; May 30, 2011 and July 22, 2014 in relation to the vessel building contract for Octabuoy hull and the topside module (the Octabuoy) secured by the Company’s subsidiary, Cosco (Nantong) Shipyard Co., Ltd. (Cosco Nantong) (being a subsidiary of the Company’s 51 percent owned subsidiary, Cosco Shipyard Group Co., Ltd) with ATP Oil & Gas (UK) Limited (ATP UK).
As announced by the Company July 22, 2014, ATP UK is in company voluntary arrangement (CVA) in the United Kingdom. The Board wishes to provide an update of the matter.
Cosco Nantong has informed the Company that on Dec. 9, 2014, it has received a notice from the CVA managers of ATP UK acknowledging Cosco Nantong’s total debt claim and on Dec. 11, 2014, Cosco Nantong has received an initial part payment of approximately $5 million.
While Cosco Nantong has been making efforts to find a buyer for the Octabuoy and several potential buyers had previously expressed interest, Cosco Nantong has so far not entered into any agreement for the sale. The steep fall in crude oil prices over recent months has had an adverse impact on the global offshore marine industry. This has made it even more difficult to secure a buyer for the Octabuoy as industry players have cut back even further on new orders. This difficulty is compounded by the specialized design of the Octabuoy and the substantive investment in the customized equipment that is required to continue the project.
In light of the above, a decision has now been made by the management of Cosco Nantong to discontinue the project and this is expected to result in a one-off charge of approximately $72 million (SGD 90 million) for the Company for the financial year ended Dec. 31, 2014.
Separately, Cosco issued an earnings guidance with respect to the consolidated financial results of the Company for the financial year that ended Dec. 31, 2014.
The Board is of the view that the Company’s consolidated financial results ended Dec. 31, 2014 will show significantly lower earnings as compared to the consolidated financial results for the financial year ended Dec. 31, 2013. This is mainly due to the steep fall in crude oil prices over recent months which has had an adverse impact on the global offshore marine industry and the one-off charge in respect of the Octabuoy hull and topside module project (which was announced today).
Further details of the Company’s financial performance will be disclosed when the Company announces its unaudited consolidated financial results for the financial year ended Dec. 31, 2014, which are scheduled to be released on Feb. 16, 2015.
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