Getting Through ‘April Crisis’?
Daewoo Shipbuilding & Marine Engineering (DSME), which has been suffered from rumors that it will fall into a crisis in April, has clinched deals worth up to some 1 trillion won (US$873.74 million) from two European oceangoing vessel operators for the first time this year. The contract for four ships will be valued at 600 billion won (US$524.25 million) but it will exceed 1 trillion won (US$873.74 million) with an option for two more vessels.
As DSME is under pressure to repay its 440 billion won worth debts maturing in April, there has been rumors about its crisis. With the latest deals, all eyes are on whether the company will be able to get out of the crisis.
The shipbuilder announced on March 2 that it inked an agreement with a European vessels operator based in the Marshall Islands to construct two 173,400-cubic meter class liquefied natural gas (LNG) carriers. As the deal includes an option for two more ships, additional orders are also expected. The contract value may double to 830 billion won (US$725.21 million), if the client chooses to have two additional vessels built under the deal.
In addition, DSME signed an agreement with Frontline, a Norwegian shipping firm, to sell two very large crude carriers (VLCCs). The Korean shipbuilder has been constructing the two VLCCs for an Oceanian shipper but the contract was canceled in August last year. Accordingly, the actual value of the deals will surpass 1 trillion won (US$873.74 million).
DSME CEO Chung Sung-rip said, “Currently, the gas carrier market in which the company has the competitiveness, such as LNG carriers and LNG-floating storage regasification unit (LNG-FSRU) vessels, is picking up. With the latest orders, we will make every effort to normalize the management further.”
On February 7, DSME also signed a letter of intent with US firm Excelerate Energy to build up to seven LNG-FSRUs and it is set to sign a formal contract next month. The market price of a FSRU is about US$230 million (263.24 billion won). When the shipbuilder wins all the orders for seven LNG-FSRUs, the deal will reach US$1.6 billion (1.83 trillion won).
With the latest deals, DSME is expected to receive 10 percent of the total value of orders as a down payment in the next few weeks. However, it will be not enough money to wipe out rumors about the crisis in April.