Keppel to build vessel in US worth $600m; more bondholders accede to Floatel lock-up

The vessel is being built by Keppel Offshore & Marine's shipyard in the US, Keppel AmFELS.
The vessel is being built by Keppel Offshore & Marine's shipyard in the US, Keppel AmFELS.PHOTO: KEPPEL CORPORATION LTD

SINGAPORE (THE BUSINESS TIMES) - Keppel Corporation on Thursday (Dec 17) said it is building a wind turbine installation vessel (WTIV) for US energy company Dominion Energy scheduled for delivery in 2023.

This comes after the conglomerate in October announced that it had bagged a contract worth about $600 million for the engineering, procurement and construction of a vessel for the offshore renewable energy industry.

The vessel is being built by Keppel Offshore & Marine's shipyard in the US, Keppel AmFELS. It will be available for charter hire to offshore wind developers, in support of several US wind projects, Keppel Corp said.

In addition, the vessel is expected to be fully utilised on US East Coast projects exceeding five gigawatts of US offshore wind construction through to 2027.

Its hull will have a length of 472 feet, a width of 184 feet and a depth of 38 feet, making it one of the biggest offshore wind installation vessels in the world, Keppel Corp added. The WTIV will also have accommodations for up to 119 people.

Robert Blue, Dominion Energy's president and chief executive, touted the project as a "monumental step" for the offshore and wind industry in the US.

He added that the vessel will provide "significant American jobs, and a reliable, home-grown installation solution with the capacity to handle the next generation of large-scale, highly-efficient turbine technologies".

Work on the vessel, which will be named Charybdis, has commenced with a keel-laying ceremony.

According to Keppel Corp, the contract is on progressive payment terms and is not expected to have any material impact on its net tangible assets and earnings per share for the current financial year.

Separately, Keppel Corp on Wednesday night announced that additional bondholders have acceded to the lock-up agreement related to the proposed restructuring of Floatel.

Earlier this month, FELS Offshore - a wholly-owned unit of Keppel Corp - entered into a lock-up agreement for the proposed restructuring.

Floatel is 49.92 per cent-owned by FELS Offshore. The agreement includes an ad hoc group (AHG) of holders of US$400 million worth of Floatel's 9 per cent senior secured first-lien (1L) bonds, as well as other consenting 1L bondholders.

The lock-up agreement will commit Floatel, Keppel, the AHG and any acceding 1L bondholders or holders of the US$75 million worth of Floatel's 12.75 per cent second-lien (2L) bonds to attempt a financial and corporate restructuring of Floatel. The restructuring is expected to involve a new entity acquiring certain subsidiaries of Floatel that own and operate vessels.

As at Dec 16, Keppel Corp noted that bondholders holding over 67 per cent of the 1L bonds, and bondholders holding close to 18 per cent of the 2L bonds are now party to the lock-up agreement. This is up from over 56 per cent and close to 13 per cent respectively. Furthermore, shareholders of Floatel representing a significant majority of the equity have also executed the agreement, Keppel Corp said.

The parties to the lock-up agreement have agreed that if the 2L bondholders pass a resolution in support of the restructuring, they will be issued with 10-year warrants, which will convert into 12 per cent of the equity in the new company, with a strike price based on an equity value of US$424 million.

In addition, the parties have also agreed to issue existing Floatel shareholders, other than FELS Offshore, with 10-year shareholder warrants, which convert into 5 per cent of the equity in the new company, with a strike price based on an equity value of US$625 million. These warrants will only be issued to those who vote in favour of the proposed restructuring.

On Dec 16, Floatel also filed voluntary winding-up petitions before the Bermuda courts in respect of Floatel and its subsidiaries - Floatel Reliance, Floatel Superior, Floatel Triumph and Floatel Victory.

As at 9.41am on Thursday, Keppel Corp shares were trading at $5.32, down $0.04 or 0.8 per cent.