Gulf Nav may put Dh229m provisions for Chinese dispute

Gulf Navigation Holding (GNH) may have take Dh229 million provisions from a case involving Chinese firms for building two VLCCs after arbitrators awarded decision against the UAE firm.

The company clarified in a statement to Dubai Financial Market that in the First Part it may have to take $29.1 million (Dh106.8 million) provisions that it has paid as advance to the Chinese firms plus the legal costs totalling Dh111.5 million.

For the Second Part, it may have to take another $29.1 million (Dh106.8 million) provisions plus the interest rate amounting to Dh117.67 million in total.

So the company’s combined losses due to provision because of impact of the arbitrator’s verdict could Dh229.17 million, it said, adding that its auditor PricewaterhouseCoopers is studying the numbers and the firm is waiting to receive the auditor's final recommendation.

On March 18, a GNH statement said to DFM said that arbitrators in London which considered the dispute between the UAE firm and Zhoushan Jinhaiwan Shipbuilding Co. Ltd, Hull/Grand China Logistics Holding (Group) Co. Ltd and HNA Group Co. Ltd., decided against it and obliged it to pay the second part of the building contract with interest.

Gulf Navigation MD Kawe, however, said the although the company is making provisions for Part B, but technically this amount would be much less, if at all, since the yard has to mitigate the losses in building the ships and GNH is supposed to pay for losses incurred to yard, as a difference between the construction cost and sales price, less the amount that is already paid.

“We are surprised the tribunal ignored this fact and gave an award for full second installment, which in our opinion, is not correct,” Kadwe said in statement.

Clarifying its positions further, GNH said it will appeal arbitrator’s decision after consulting with legal advisors in details.

“We received initial analysis from our lawyers, which does indicate appeal would be possible. Once we receive final recommendation from lawyers and select lawyers who will represent us for appeal, we will submit application for appeal within permitted 28 days, i.e. before 10th April, 2014,” Kadwe added.

The company announced that it may take provisions in its 2013 financial year.

This is the second arbitration loss for Gulf Navigation in as many months. On February 2, 2014, a UK tribunal decided against Gulf Navigation in another dispute involving Nordic American Tankers for delivery of vessel Gulf Scandiac.

After a lengthy and expensive arbitration process under UK jurisdiction, the tribunal has directed Gulf Navigation to pay $10.2 million (Dh37.4 million) and interest.

“Gulf Navigation is now seeking advice from an international law firm based in the UAE to find if Gulf Navigation can appeal further on this in the court,” the company said in a statement last month.

Gulf Navigation Holding (GNH) and its group of companies own and operate crude and chemical tankers. Its fleet comprises of eight chemical tankers, as well as four crew boats used in its agency business. It is the only maritime and shipping company listed on the Dubai Financial Market.

The company will hold its annual general meeting on April 28, 2014, it said in DFM filing, adding that one of its board members Ms. Sahia Ahmed resigned from the company for “special reasons”.

GNH shares closed at Dh0.415 on Wednesday, March 19.