Keppel says $230m provision for Sete Brasil rig orders 'sufficient'

A Keppel employee looking at jack up rigs (right) under construction at the Keppel FELS shipyard in Singapore in 2013.
A Keppel employee looking at jack up rigs (right) under construction at the Keppel FELS shipyard in Singapore in 2013.PHOTO: BLOOMBERG

SINGAPORE - Keppel Corporation said that the S$230 million in provisions for non-payment for six rigs that were to be built for Sete Brasil remains sufficient.

It did not say that it was going to take legal action against Sete Brazil, a move begun by another Singapore rig builder SembCorp Marine.

Last week, the Brazilian oil rig supplier said it obtained approval from its shareholders to file for bankcruptcy.

Soon after, Sembcorp Marine said that it has begun arbitration proceedings against Sete Brasil's subsidiaries.

Sete Brasil has not paid Sembcorp Marine for orders worth billions since November 2014.

The rig builder has seven drillships worth US$7 billion (S$9.4 billion) for Sete Brasil on its order books. Sembcorp Marine added that in the last financial year, the company had made provisions of S$329 million for the Sete contracts.

Sembcorp Marine will announce its results later on Wednesday (April 27), and is likely to address whether the provisions are sufficient.

Sete Brasil, set up in 2011 to build the world's biggest deep-water drilling fleet for Petrobras, fell into financial distress after it failed to secure long-term financing amid a sweeping corruption probe involving the state-run oil producer.

On Tuesday night, Keppel said that it was informed by Sete Brasil of the move by its shareholders to file for a judicial recovery.

"Keppel has stopped work on the rigs since last year and will not resume construction until payment re-commences," said Keppel.

"Keppel had made a provision of about S$230 million for these contracts in the last financial year. We continue to believe that the provisions are sufficient."

It added that it will continue to monitor and evaulate the situation to "best protect Keppel's interests".