Seatrium, Maersk resolve contract dispute, with giant line to pay $465 million upon vessel delivery
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Maersk Offshore Wind’s affiliate Phoenix II will pay the balance of the contract price – valued at US$360 million (S$465 million) – upon delivery of the vessel.
PHOTO: MAERSK SUPPLY SERVICE
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SINGAPORE - Offshore, marine and energy specialist Seatrium said on Dec 22 it has reached a settlement with Denmark’s Maersk to deliver an offshore wind vessel that was intended to work on a project off the coast of New York.
Maersk Offshore Wind’s affiliate Phoenix II will pay the balance of the contract price – valued at US$360 million (S$465 million) – upon delivery of the vessel. As at Dec 22, the project is around 99.8 per cent completed, Seatrium added in its statement.
Shares of Singapore-listed Seatrium jumped on the news, with the counter closing up 2.9 per cent, or six cents, at $2.13 on Dec 22.
The deal comes after Seatrium started its own arbitration proceedings against the buyer
Both parties agreed for the Maersk affiliate to pay part of the contract price – US$250 million – using an interest-bearing credit arrangement. This was extended to the buyer by the company’s wholly owned subsidiary, Seatrium (SG).
The credit arrangement is for up to 10 years and repayable through cash generated by the vessel.
Seatrium said its subsidiary will have a mortgage over the vessel, as well as first priority rights over the vessel and the Maersk affiliate’s bank accounts.
Seatrium had in October received a termination notice for its contract with the Maersk affiliate for the construction of the wind turbine installation vessel at a US offshore wind farm. This project was scheduled to be completed in the early part of 2025.
Both parties will withdraw and discontinue all legal proceedings following Dec 22’s announcement, with the contract in full force and effect.
Seatrium does not expect the latest development to affect its net tangible assets and earnings per share for the current financial year ending Dec 31. It will make further announcements as and when there are material developments.
More pros than cons, says Citi
Citi analyst Luis Hilado noted that although he and other analysts had not expected Seatrium to lose money through the arbitration, the market still views the resolution “positively” due to the removal of the legal overhang.
“We believe this will supersede concerns of being exposed to the operational performance of the vessel,” said Mr Hilado in a note on Dec 22. “Combined with the revival of its order win momentum, the stage is set for a better 2026 financial year.”
Any potential negative perception of Seatrium will also be addressed thanks to the resolution, he added, setting a target price of $2.65. Mr Hilado also said that although the new payment terms technically discounted the contract’s value, the interest charged will likely balance out any hit to 2025 earnings.
Not only that, the deal structure is likely to increase finance income from 2026, but he added that he was waiting to see if Seatrium had the right to sell the vessel to a third party. THE BUSINESS TIMES
