SembMarine to sell its Cosco Shipyard Group stake

Singapore’s rig builder Sembcorp Marine is set to sell its 30 percent equity interest in China’s Cosco Shipyard Group.

SembMarine as the company is also known, will sell its stake in Cosco Shipyard Group for $220.68 million to China Ocean Shipping (COSCO).

Cosco Shipyard Group is a ship repair, conversion and shipbuilding group which owns six shipyards in China. SembMarine first announced its acquisition of the 30 percent stake in Cosco Shipyard Group in 2004.

Explaining the rationale behind the decision to divest the Cosco Shipyard Group stake, SembMarine said the Chinese company was no longer a strategic investment, nor a core asset for SembMarine.

Apart from this, SembMarine will gain of approximately S$48.32 million over the carrying value of the investment in Cosco Shipyard Group of S$180.10 million. SembMarine said it would use the net proceeds from the proposed sale for working capital.

Subject to receiving all the relevant approvals, the sale is expected to be completed by the end of the year.

Worth noting, while selling its direct 30 percent stake, Sembcorp Marine remains involved in Cosco Shipyard indirectly. Namely, the Singaporean company has a 4.98 percent shareholding in Cosco Corporation (Singapore) Ltd, which in turn has a 51% equity interest in Cosco Shipyard Group.

Offshore market woes

As for the Cosco Shipyard Group, the Chinese company last week agreed to delay the delivery of a semi-submersible tender assist rig at a request of a client.

In a statement on Friday, Cosco Guandong said it has, with the rig owner, agreed to delay the delivery of the rig until November 30, 2017. To remind, the Edrill-3 rig, ordered in 2013 by Energy Drilling, was scheduled for delivery in just a few weeks, on November 30, 2016.

“In view of the rescheduling and the uncertainty as to when the owner will take delivery of the rig, it is not possible to ascertain the financial impact of the agreement for rescheduling at this point in time,” Cosco said.

In a separate statement on Friday, Cosco Group its the offshore marine business has been adversely affected by current situation of low crude oil prices which has already persisted for a significant period of time.

“For more than two years, the global offshore market has been slowing down significantly. There are still no signs of sustainable improvement,” Cosco Group said.

In line with the difficult situation in the offshore markets, in the past two years Cosco experienced delivery date extensions and order cancellations for several of its projects.

“Some customers have delayed accepting delivery of projects upon completion and it is possible that more customers will seek to delay delivery of projects or seek deferment of payment schedules,” Cosco Group said on Friday, adding that this could adversely affect its financials.

Offshore Energy Today Staff