Termination of Yinson’s Vietnam JV not expected to impact its earnings forecast

  • Corporate News
  • Friday, 20 Sep 2019

PETALING JAYA: The termination of Yinson Holdings Bhd’s 49%-owned joint venture PTSC Ca Rong Do in Vietnam is not expected to impact Yinson’s valuation and earnings forecast.

According to sources, the termination did not come as a surprise as the suspension under the alleged force majeure had little sign of hope to revive the project.

“The cost incurred for the project is minimal and should be recoverable from the client, Talisman Vietnam 07/03 BV (TLV).

“Analyst consensus did not include the Ca Rong Do project in their projections, ” a source said.

To date, no floating production, storage and offloading (FPSO) vessel has been secured or converted for the Ca Rong Do project.

Hence, the project cost is relatively minimal. The charter contract worth US$1bil over a 15-year period for the supply of a floating production, storage and offloading (FPSO) facility at the Ca Rong Do Field Development located in Block 07/03 in the Eastern Sea Offshore Vietnam (CRD Field) has been terminated due to a prolonged force majeure event.

It is believed that the force majeure event stemmed from the overlapping claims in South China Sea, between Vietnam and China.

In a Bursa Malaysia filing on Tuesday, Yinson said the effective date of the termination will be determined upon discussions between TLV and PetroVietnam Technical Services Corp (PTSC).

Yinson owns 49% of PTSC Ca Rong through its indirect wholly-owned subsidiary Yinson Clover Ltd, while the remaining 51% stake is held by Vietnam’s state-owned PTSC.

“PTSC CRD will assert its rights under all relevant contracts and in laws, for any advances, claims, liabilities, losses and/or damages against or suffered by it in any way concerning the matter, ” the filing read.

UOB KayHian, in a highlight note yesterday, said it was in March 2018 when TLV’s parent company Repsol invoked force majeure on the FPSO Ca Rong Do.

In a January 2019 company note, the research house had highlighted that a termination compensation may be a potential event by the second half of this year as it is not beneficial for both Yinson and Repsol to keep this project in a suspension mode.

“We maintain our view that the amount is minor and negligible to our valuations and forecast, assuming that it covers the initial project costs, given that Yinson did not purchase an FPSO nor incur any major running costs for the project.

“We understand that the process of the minor cost recovery (from Repsol) is already ongoing prior to the announcement, ” said UOB KayHian.

As of June 30,2019, Yinson’s orderbook amounts to an estimated US$4.94bil over firm and option period.

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