Daewoo Shipbuilding & Marine Engineering (DSME), South Korea’s second-largest shipbuilder, has gotten its hopes up to finally receive the delayed payment of near $1 billion from Sonangol EP for two drill ship orders from the Angolan state oil firm.
According to industry sources on Sunday, Rosário Isaac, executive administrator and director of Sonangol, and other key board members last week visited the Korean shipbuilder’s Geoje shipyard. It marks the first visit by the firm’s top board members after a management reshuffle alongside a power transition that brought an end to the 38-year ruling of José Eduardo dos Santos last year.
DSME and Sonangol entered negotiations over when to deliver the two drill ships worth $1.24 billion in return for the payment of remaining dues.
A DSME official said the shipbuilder is more likely to recover the unpaid receivables from Sonangol with ship delivery in the first half of next year with situational changes such as the inauguration of the new administration, replacement of Sonangol’s leadership team and high oil prices.
DSME won the order to build the two drillers for the Angolan state firm for $1.24 billion in 2013. Upon signing the deal, the Korean shipbuilder received 20 percent or $250 million of the total contract value in advanced payment. Under the so-called heavy tail contract terms where a shipbuilder makes larger payment in the final phase of the building process, DSME should receive the remaining $990 million upon delivery.
But the delivery has been delayed as Sonangol struggled under low oil prices and weak demand, while its government had to seek a rescue fund from the International Monetary Fund.
Sonangol’s payment will be a big relief to the shipbuilder but it remains to be seen how much of the remaining dues will be recovered as the drill ship price already fell 30 to 40 percent from the time the contract was made.
By Kang Gye-man and Minu Kim