Sembawang, Kakinada JV Invest in Facility Offshore India

NEW DELHI (Dow Jones), Nov. 26, 2009

Singapore's Sembawang Shipyard and India's Kakinada Seaports Ltd. will jointly invest $375 million over the next three to five years to build a new offshore service facility for ships, company executives said Thursday.

Sembawang--a wholly owned unit of Sembcorp Marine Ltd.--and Kakinada Seaports will later Thursday sign a pact to form a joint venture named Sembmarine Kakinada Ltd.

"There are no marine and offshore facilities in India," Sembmarine Kakinada director Kris K. Nittala told a news conference. "Indian shipping companies lose business worth $15 million to $20 million each year as they have to rely on repair facilities abroad."

The new company will build the facility--which will cater to offshore drilling companies and merchant vessels trading in Indian waters--on the east coast of India, where Kakinada operates a port.

"We are planning additional investment in the JV, which will start in one to two years," Nittala said. "The total investment in the JV, including the initial $50 million, will be $375 million." Sembcorp Marine, through Sembawang Shipyard, will hold a 19.9% share of the joint venture's initial investment of $50 million, with an option to increase to 40%.

"Raising funds is not a problem," said Ong Poh Kwee, Sembcorp's deputy president. "We can either raise funds from Indian or overseas markets."

He said the fundraising plan will be finalized in the next three months.

Kwee, who is also the managing director of Sembawang Shipyard, said Sembawang will raise its stake in the joint venture to 40% in one to two years.

He said the joint venture company will initially focus on ship repair only and may consider building a dry dock next year. The facility will be expanded to become a one-stop integrated offshore service facility in three to five years, catering to offshore vessels and merchant ships, including repair and building of offshore vessels.

Dry docks--used for the construction, repair and maintenance of ships and boats--are flooded with water, allowing a ship to be floated in, then drained so the vessel can rest on a dry platform.

Kakinada Seaports Mulls Expansion

Separately, Kakinada Seaports chairman and managing director K.V. Rao said the company plans to invest $200 million expanding its cargo and offshore handling facilities.

"We plan to create an additional space of 1,235 meters at our seaport over the next few years," Rao said.

He said the expansion will be completed in two phases. In the first phase, Kakinada will create an additional space of 635 meters, which is likely to be completed by early 2011, he said. "We have already applied for environmental clearance to create additional space of 600 meters in second phase. Once we get the clearance, we will complete this phase in 18 months' time," Rao said.

Rao said the expansion will be funded via a mix of debt and internal accruals.  

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