SembMarine leaps into future with massive new shipyard in Tuas

$750m first phase to be ready by 2013 and remainder over 12 years; no cash-call to fund expansion
Vincent Wee Business Times 5 Nov 09;

(SINGAPORE) Sembcorp Marine yesterday took a bold step into the future by unveiling plans to build a massive integrated yard facility in Tuas View Extension. This will be Singapore's first new-built yard in a generation. Its first phase is expected to cost about $750 million and be completed by 2013.
Development of the 73.3-hectare first phase will begin next month and is expected to take four years. The remainder of the 206-hectare total site will be developed in two more phases over a period of 12 years.

'This is the right time to build in order to anticipate (demand) especially after the most recent crisis as we have seen neighbouring countries build up their shipyard facilities,' said SembMarine president and CEO Wong Weng Sun. 'We're trying to envisage the next cycle . . . and this is the best time to build and crucial to success in the future.'

In response to concerns that the new capacity will come onstream after the rigbuilding cycle has peaked, Mr Wong said that the first phase will focus on ship repairs and conversions, two sectors that should remain strong. Dock capacity has not kept pace with the increase in the global fleet which has added an average of 1,000 ships per year over the past four years.

Sembawang Shipyard managing director Ong Poh Kwee revealed that SembMarine turned away over 400 ships last year alone as it did not have the capacity to take them in.

Ship repairs contribute around $150 million to $160 million in turnover at the moment with SembMarine making the most of its current facilities to build rigs, do conversions as well as take in what repair jobs it has capacity to handle. The new yard will create 200 vessel slots per year, Mr Wong said.

SembMarine's regular customers and preferred partners have more than 1,000 vessels between them, most of which call in Singapore for their repair and maintenance needs. As much as 86 per cent of the repair business comes from these regular customers, Mr Ong said. With as much as half of the world's ships expected to be plying Asian routes in future, quicker turnaround times will be an increasingly important factor.

A 30-plus-30 years' lease has been signed with JTC for the first phase and SembMarine's current operations in Pulau Samulun will be relocated to the new yard and the land returned to JTC when it is ready for commercial operations. SembMarine will maintain operations at its other units PPL Shipyard and Sembawang Shipyard for now.

The development costs will be funded through a combination of debt and internal funds. SembMarine said that it has secured $700 million in committed banking facilities comprising $300 million term loans and $400 million revolving credit facilities with various banks.

SembMarine said that the expansion is a long-term project and is not expected to have any material impact on the net tangible assets and earnings per share for the year ending Dec 31, 2009. Barring unforeseen circumstances, it expects positive contributions to earnings when phase one becomes operational.

CFO Tan Cheng Tat assured investors that there would be no cash calls to fund the expansion. He added that the group also had the capacity to gear up to as much as 1.75 times, giving it the ability to take advantage of opportunities to expand overseas as well despite the huge capital expenditure planned over the next few years.

When fully completed, the new yard will increase total dock capacity by 62 per cent to 3.08 million dwt (deadweight ton) from 1.90 million dwt currently and will feature optimised docking and berthing facilities, with an improved dock and quay ratio, to ensure effective utilisation and faster turnaround in repairs and upgrading of ships, rigs and floaters.

The first phase will more than triple land area from the current 20 hectares, nearly quadruple drydock capacity to 1.55 million dwt from the current 400,000 dwt and boost quay length by almost three and half times from 1,071 metres to 3,408 metres. This will give SembMarine four very large crude carrier-size drydocks compared to two now.

Integrated facilities and newer technology will make the yard more efficient and productive which will in turn boost capacity and profitability, Mr Wong said. He expected productivity at the new yard to increase by at least 15 to 20 per cent.

The new facility marks a key milestone in the transformation of Singapore's offshore and marine sector, the Economic Development Board (EDB) and JTC Corp said in a joint release.

'The first integrated yard facility represents how Singapore stays at the forefront of the marine and offshore sector through constant innovation and modernisation,' said EDB chairman Leo Yip.

'Given the yard's new requirements, it was a challenging project for JTC,' said CEO Manohar Khiatani. 'We worked very closely with SembMarine to create a unique custom-made waterfront profile for the integrated new yard facility.'

SembMarine to build high-tech yard
$750m hub in Tuas is designed to boost competitive edge
Alvin Foo, Straits Times 5 Nov 09;

SEMBCORP Marine has unveiled plans to build Singapore's first integrated yard facility, in a move designed to boost its competitive edge and ready itself for the upturn. Located at Tuas View Extension, the state-of-the-art yard will occupy 206ha and be built on reclaimed land in three phases over 16 years.

Work on the first phase - costing $750 million - will start next month and is expected to be completed in four years. The remaining two phases will be developed over a 12-year period. The yard will serve as a one-stop hub for ship repair and conversion, shipbuilding, rig building and offshore engineering and construction.

Speaking at a briefing yesterday, SembMarine chief executive Wong Weng Sun said: 'It's the best time to build - and it's crucial, not only in the business sense, but also for the future.'

He added that the yard will leave SembMarine well positioned to respond to forecast growth in dock capacity demand and to a rise in offshore oil and gas activities, which will be spurred by projected increases in Asian seaborne and oil trades.

JTC Corp chairman Cedric Foo said: 'It's not only a key project for Sembcorp Marine, but also a major milestone for Singapore.'

Economic Development Board chairman Leo Yip said: 'The state-of-the-art facility will sharpen our competitive edge, and it demonstrates how Singapore continues to stay at the forefront of the global marine and offshore industry through constant innovation and modernisation.'

The yard will be designed to serve a wide range of vessels, including very large crude carriers, new generations of mega-container ships, LNG carriers and passenger vessels. When fully completed, the new yard will boost SembMarine's total dock capacity by 62 per cent and enhance productivity by up to 20 per cent.

The 73.3ha Phase 1 will focus on ship repair and conversion, with SembMarine relocating its Pulau Samulun operations to the new yard when the initial phase is ready. SembMarine said it had secured $700 million worth of committed banking facilities for the yard.

Yesterday's announcement came as SembMarine reported that net profits went up 3 per cent to $144.6 million in the three months ended Sept 30. Revenue rose 32.9 per cent to $1.52 billion.

Earnings per share was 7.02 cents, up from 6.84 cents a year ago, while net asset value per share was 77.43 cents, up from 64.11 cents as of Dec 31 last year.

The company has a net order book worth $6.7 billion, including $1.12 billion in new orders secured during the first half of this year. It said the fundamentals for the offshore oil and gas sector remained intact, with oil prices stabilising in the US$70-US$80 a barrel range. It expects its ship repair business to remain reasonably good for the rest of this year.

Before news of the planned integrated yard broke, SembMarine shares closed two cents higher yesterday at $3.44.

SembCorp Marine building 206-hectare yard facility in Tuas
Desmond Wong, Channel NewsAsia 4 Nov 09;

SINGAPORE: SembCorp Marine is building a new 206-hectare yard facility in Tuas in three phases over the next 16 years.

SembCorp Marine said on Wednesday the first phase will have ship repair and conversion facilities, and will have three-and-a-half times the capacity of the current yard at Pulau Samulun.

The rig-builder expects the new yard to boost productivity by as much as 20 per cent from a reduced product cycle.

The construction of the first phase of the project will cost S$750 million and it will begin next month.


- CNA/so