Published November 28, 2008

$1.2b orders for Keppel Corp being reviewed

The Keppel O&M orders represent 9.6% of its order book

By JAMIE LEE
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SOME $1.2 billion of orders placed with Keppel Offshore & Marine (O&M) are under review.

'... That $1.2 billion figure might spook the market, which is fragile right now.'
- A broker with a local bank

The contracts, signed a few months ago, involve a semi-submersible for Scorpion Offshore, two jack-up rigs for Seadrill and a multi-functional support vessel for Ezra Holdings' Lewek Shipping.

Keppel Corporation said yesterday it has received indications from the customers to review their options and is talking with them for mutually acceptable arrangements.

Construction work has not begun on the projects, but Keppel has received downpayments. A spokeswoman would not say how much has been paid. The review came 'in the light of the tight credit market', she said, declining to elaborate.

Keppel said that if the contracts are cancelled, this is not expected to have a material impact on its net tangible assets or earnings per share this fiscal year.

Keppel O&M has an order book of about $12.5 billion running until 2012. The $1.2 billion orders represent 9.6 per cent of the current order book.

In a separate statement, Ezra said yesterday it is reviewing its $69 million order with Keppel.

The contract was signed in May, with delivery expected in 2010, Ezra said.

Ezra is also re-thinking orders for four multi-functional support vessels that it placed with Pan-United Marine and shipyards in Norway, financial director Tay Chin Kwang told BT.

Ezra's managing director Lionel Lee said in a statement: 'We are taking a prudent approach by revisiting our capital expenditure plans and exploring our options, even though relevant financing for this vessel has been secured.'

Although the market has priced in possible order cancellations in the marine sector, a broker with a local bank said the size of the Keppel orders at risk could hit the markets.

'Order reviews have been anticipated, but that $1.2 billion figure might spook the market,' he said. 'The market is fragile right now.'

An oil-and-gas analyst said a bigger concern is that the contracts under review include those from regular customer Seadrill, an established player in the oil and gas industry.