PETALING JAYA: With the Deep Producer 1 languishing in Dubai pending a court auction for US$6.2 million in wharfage and related charges, questions are being asked as to the viability of its acquisition.
In March 2011, Ramunia Holdings Berhad (now TH Heavy Engineering Berhad or THHE), entered into a preliminary agreement to secure marketing rights to the vessel to allow it to bid for FPSO projects.
Ramunia went on to acquire the vessel for US$82.5 million, a 36.5% discount on its market value, substantially financed by bank borrowings.
The discount aside, Ramunia’s other justification for the acquisition was less clear. At the time, the company’s own disclosure sheet merely referred to “the prospects of time charter arrangement for any FPSO projects being secured”, but without specific details.
Given that the charter arrangement with JX Nippon Oil & Gas Exploration (Malaysia) Ltd (JXN) only materialized in 2014, it remains unclear why the Deep Producer 1 was acquired three years earlier.
This is especially so because Ramunia, in which Lembaga Tabung Haji held a 29.68% stake, had reported a massive financial loss of RM383 million in 2009, with its status as a going concern being questioned by its own auditors. With the company struggling to put it to any use, the vessel was left anchored in Dubai for three years.
The JXN contract, which involved the conversion of the vessel to an FPSO unit and an eight-year charter arrangement with a potential 10-year extension, came as a lifeline to THHE.
Projecting a revenue of US$829 million over the charter period, the company embarked on the FPSO conversion process with the handover deadline set for June 30, 2016.
Estimated to cost a massive US$230 million, the company failed in its bid to finance the conversion process via bank borrowings. With the conversion less than half complete at the handover deadline, the company found itself staring into the abyss.
By end-2016, it had amassed RM602 million in debts to contractors and was subject to an US$18 million liquidated damages claim by JXN.
To this day, many questions remain unanswered. Who did the project’s cost analysis? Who assessed the feasibility of its timeline? Who advised on financing? Who determined that the project was commercially viable? Who approved the venture? To date, no one has been called to account. – FMT