November 25, 2009
Sembawang Shipyard in India JV
Singapore's Sembawang Shipyard, a wholly-owned subsidiary of Sembcorp Marine, and India's Kakinada Seaports are to form a joint venture (JV) company.
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The JV, Sembmarine Kakinada, will establish and operate a marine and offshore facility catering to offshore drilling units and merchant vessels trading or operating in Indian waters.
SKL is located on the East Coast of India between Vishakhapatnam and Chennai Port. The East Coast of India is one of the world's key oil and gas exploration areas.
Sembcorp Marine says its investment in this facility is a strategic fit and is in line with its Indian hub strategy to cater to the growing needs of customers operating in India. Well supported by the Indian government and the oil and gas industry, SKL will boost the business of Sembcorp Marine and further promote the Kakinada Port area.
Sembcorp Marine through Sembawang Shipyard will hold 19.9% share of the JV's initial investment of US$50 million, with an option to increase to 40%.
The joint venture partner, Kakinada Seaports is the first private port to operate on the East Coast of India and it is currently one of India's busiest ports. Kakinada Seaports serves more than 3,500 ship-calls annually and plays an important role in the efficient turnaround of vessels requiring replenishment, bunkering and ancillary services.
Sembmarine Kakinada will commence operations immediately by using the available pier at the Kakinada port. It will initially provide riser/equipment repairs, afloat repairs and modules fabrication. Within three to five years, however, plans are for SKL to become a one-stop integrated offshore service facility catering to offshore vessels and merchant ships including the repairs and servicing of offshore vessels and ships, newbuilding of offshore vessels and ships, riser/equipment repairs and modules fabrication.
Major offshore companies operating off the East Coast of India are expected to use the facilities of the newly established SKL to support their growing offshore oil and gas activities in India's East Coast. Transocean Offshore International Ventures Limited, India, a subsidiary of Transocean Inc., is to sign a "Favored Customer Contract" to use its facilities to support its ongoing offshore drilling units. Similar contracts are being signed with Aban Offshore Limited, Asia's largest private drilling company to repair/upgrade its drilling units and with MARCAS, an association of ship owners and ship managers that includes V-Ships, the world's largest ship-management company, to repair its fleet of vessels trading to India.
Barring unforeseen circumstances, Sembcorp Marine expects positive contributions to its earnings from the Joint-Venture facility in the future. However, the above investment is not expected to have a material impact on Sembcorp Marine's earnings and net tangible assets per share for the current financial year ending 31 December 2009. The investment will be funded from Sembcorp Marine's own internal resources.