$302m Marco Polo rig deal 'still valid'

SembMarine (above) said the "purported termination on Nov 17, 2015, is wrongful and without any justification whatsoever" .
SembMarine (above) said the "purported termination on Nov 17, 2015, is wrongful and without any justification whatsoever" . PHOTO: BLOOMBERG

Marco Polo Drilling, in trying to halt deal, is breaching contract, says SembMarine

Sembcorp Marine (SembMarine) has hit back in a contractual dispute with customer Marco Polo Drilling (MPD), insisting a US$214.3 million (S$302 million) rig deal is still valid.

The client, a unit of Singapore-listed Marco Polo Marine, last week sought to unilaterally terminate the contract - and demanded the refund of payments made so far.

But in a statement yesterday, SembMarine said Marco Polo Drilling is in "repudiatory breach" of contract.

The client claimed the SembMarine unit PPL Shipyard (PPLS) allegedly failed to comply with certain material contractual obligations. But SembMarine said PPLS' position is that the contract is still in force.

On Tuesday, Marco Polo Marine said it has, through its legal counsel, initiated the contractual dispute resolution process against PPLS. This is to seek a refund of the initial payment of 10 per cent of the contract price, about US$21.4 million, and all other payments it had previously made to PPLS, plus interest.

Yesterday, SembMarine said the "purported termination on Nov 17, 2015, is wrongful and without any justification whatsoever" .

It said the rig, due to be delivered on Nov 30, was substantially ready to be completed when MPD terminated the order.

"Based on the construction schedule, more than 98 per cent 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," SembMarine said.

It added that any defect discovered will be made good and pass satisfactory tests by the classification society, before delivery.

SembMarine said the contract also allows PPLS an additional 210 days after Nov 30 to deliver the rig. Therefore, PPLS has "more than enough time" to rectify any defect and deliver the rig.

"PPLS is of the view that the purported termination by MPD is to avoid its obligation to pay the second disbursement of 10 per cent of the contract price (US$21.43 million), that has already accrued and due to PPLS immediately on the execution of the contract," SembMarine said.

It added that this payment was deferred twice at the request of MPD and is payable by Nov 30.

SembMarine said PPLS will be seeking payment of the second disbursement if MPD fails to pay up by Nov 30 and that all of the rights of PPLS are reserved.

As the disputes are technical in nature, SembMarine said "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".

SembMarine's shares fell 0.9 per cent to $2.15, while Marco Polo Marine rose 1 per cent to 19 cents.

A version of this article appeared in the print edition of The Straits Times on November 26, 2015, with the headline '$302m Marco Polo rig deal 'still valid''. Print Edition | Subscribe