ST Marine, the shipbuilding unit of Singapore's ST Engineering, reports that it has received a notice of termination dated March 17, 2011 from French shipowner Louis Dreyfus Armateurs (LDA) in respect of the shipbuilding contract for a Roll-on/Roll-off Passenger ferry. The Ropax was contracted in July 2007 for a contract price (inclusive of variable options) of approximately S$179 million. ST Marine says that in the notice, LDA has alleged that there is a delay in the delivery of the Ropax vessel. It further alleges that even if the vessel is tendered for delivery there will be a deficiency in the deadweight capacity of the vessel.
"The Notice further states," says ST Marine, "that in the event LDA is not entitled to terminate the contract in accordance with the Notice, LDA is fully prepared to continue to fulfill its obligations under the contract but however that it will become entitled in due course to terminate the contract by reason of deficiency in the deadweight capacity."
ST Marine has referred the matter to its legal advisers.
In the event that the notice is valid, ST Marineis required to refund the milestone payments made to ST Marine amounting approximately to S$129m plus interest. LDA has also reserved its right to pursue claims in damages. If liable for damages, ST Marine’s position is that under the terms of the contract its total liability for damages is capped at 10 percent of the contract price.
March 20, 2011