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01 March 2024

Dubai Drydocks World plans Asia shipyard expansion

By Agencies



Dubai Drydocks World, the shipbuilding arm of state investor Dubai World, is eyeing yards in China, India and Vietnam, to expand capacity in the hot business of rig building with oil at records near $100 a barrel.

Chief executive Geoff Taylor told Reuters on Thursday that the company was part of a joint venture which is in advanced talks to buy a small unlisted shipyard in China's Jiangsu province along the Yangtze River delta.

Taylor said the deal was likely to cost Drydock World a total of $55 million. After the acquisition, likely to be completed in the next few weeks, the company plans to inject more cash to turn the yard into a larger shipbuilding and repair facility, he said.

"We have big overall expansion plans -- right now we are looking at more places in China, in India and Vietnam," Dubai-based Taylor said in a telephone interview.

"Any potential acquisitions in Europe and the Americas will be down on our list of priorities," he said.

The firm moved for its first acquisitions abroad last year, paying about $424 million in May for Singapore shipbuilder Pan-United Marine, and $1.6 billion in October to buy the city-state's offshore oil-rig builder Labroy Marine.

With Drydocks yard at home running at virtually full capacity and little land left for further expansion, Taylor said the purchases in Southeast Asia were aimed at securing scarce docking space and beefing up offshore oil-rig building capacity.

Currently it builds Ultra Large Crude Carriers, converts tankers into floating production vessels and builds floating offshore rigs to explore and drill for oil.

Its parent, Dubai World, has long been on a global shopping spree, snapping up huge stakes in ports, airlines, office buildings and casinos, mostly in the developed world.

Drydock World's sister firm Dubai Ports World, which was forced to sell its US assets after agreeing to buy for $6.8 billion in 2006, has rivaled Singapore's state-owned port operator PSA International in several bids for stakes in ports across the world.

Taylor said Drydocks World also expects to see strong competition in Singapore, home to the world's number-one and -two offshore oil-rig builders Keppel Corp and SembCorp Marine. Both the Singapore yards together have about one-third of all offshore rigs under construction worldwide.

Drydocks World is developing another ship and rig-building yard on a 200-hectare site in Batam that was bought in November from Indonesian authorities. The yard is due to start by 2010.

Drydocks World has funded its purchases mostly with bank loans, including a $1.7 billion syndication loan which it launched in November.

"We carry a lot of debt, but the debt is weighed against the (business) potential. We are a very strong group and a lot of banks are quite willing to work with us," Taylor said.

He said Drydocks World saw its revenue and profit grow 25 percent year-on-year in 2007, but declined to give any figures.

Dubai Ports World raised almost $5 billion in November in Middle East's biggest IPO. But Taylor said there were no immediate plans for listing Drydocks World.

"It is always a possibility, but I suspect if that were to happen it would be a couple of years down the road from now." (Reuters)