by winston » Tue Jul 01, 2008 2:01 pm
Not vested. From CIMB:-
MPU submits petition for bankruptcy
Keppel Corp announced that its Netherlands subsidiary, Keppel Verolme BV has received a notice from MPU Offshore Lift ASA (MPU) that it has decided to submit a petition for bankruptcy in Norway. Therefore Keppel Verolme has stopped work on the MPU Heavy Lifter project immediately.
To recap, the contract was awarded to Keppel Verolem in Dec -06 at Euro 140m for the construction of a floating heavy lifter for the purpose of decommissioning of offshore structures. Keppel Verolme has received payments from MPU for all costs it has incurred to date on the project. The project was originally scheduled for delivery in 1Q09.
Comments Insufficient financing from MPU. Industry sources said that the vessel is highly complex and has resulted in cost overruns compared to the original budget. According to rigzone, MPU is still trying to secure for financing to complete the project. The estimated cost increase to finalise the project is approximately Euro100m. Keppel unlikely to takeover heavy lift vessel. While the next cause of action has yet to be decided, the ownership of the vessel remains with MPU and we believe it is unlikely for Keppel to complete the project and sell in the open market.
More sell down expected. Following last week’s negative newsflow pertaining to variation order dispute with Fred Olsen Energy over the cost of semi-submersible upgrade, we believe Keppel’s share price could be further dampened by the bankruptcy petition of MPU.
Impact estimated to be about S$12-18m for Keppel Offshore & Marine. We believe Verolme’s earnings could be dampened due to the work freeze and inability to take on new jobs from other yards in such a short notice. We estimate loss of earnings could be about S$12-18m in total from FY08 to FY09.
Valuation and recommendation
Earnings estimates trimmed by 0.4-1% for FY08-FY09 for Keppel O&M as a result of the cancellation of the current contract. However our target price remains at S$13.70, still based on sum-of-the-parts valuation. Maintain Outperform.
It's all about "how much you made when you were right" & "how little you lost when you were wrong"