Gulf Navigation cancels newbuild order

Dubai-based ship owning and maritime services company Gulf Navigation Holding said it is cancelling a contract for a newbuild with SLS Shipbuilding of Korea and has requested for a refund of all installments paid to date along with interest.

Gulf Mishref Shipping, a subsidiary of Gulf Navigation Holding yesterday gave notice to SLS Shipbuilding regarding its cancellation and termination of the new building contract of the 44,000 DWT chemical tanker. The notice has been given as a result of excessive delays in the delivery of the vessel.

Per Wistoft, CEO of Gulf Navigation Holding, had earlier told Emirates Business that it planned to either cancel or renegotiate a contract for two ships with SLS shipyards. He said the two 46,000 DWT chemical carriers were originally due for delivery last year. "We are considering the option, as the shipyard is late in delivering and we can contractually cancel the orders," he said.

In a statement to the Dubai bourse yesterday, it said that "in accordance with the contract, which was duly executed on March 20, 2006, and novated to Gulf Mishref on April 6, 2007, Gulf Mishref has demanded that SLS refund all of the installments paid to date in relation to the vessel, which amounts to $29.4 million (Dh107.9m), corresponding to 50 per cent of the contract price of $58.8m, together with accrued interest of about $6m.

According to it, refund of the installments due to Gulf Mishref has been guaranteed by The Korea Development Bank, and "in the event that SLS do not promptly refund the installments, Gulf Mishref will make a demand under the refund guarantee in due course." The company also added that the refund of the interest bearing installments will have a significant positive effect on the company's result, and strengthen its balance sheet.

Wistoft had also earlier warned that if renegotiations did not work, the company would opt for other ships as it had set aside $50m to $100m for acquiring new ships. Shipbuilding costs have tumbled since 2008 falling from $60m each to $45m.

Meanwhile, quoting a recent study, he said the price of building a new product tanker with a capacity of 47,000-51,000 DWT has on an average increased from $36.05m in 2004 to $51.67m in 2008 and dropped significantly between September 2008 and June 2009, from $52.5m to 42.5m.

And by the end of last year the price of the ship reached $35m or below.

In its annual results it achieved a net profit of Dh26.55m as at December 31, 2009, compared to Dh148.22 in 2008.