KUALA LUMPUR (April 10): Bumi Armada Bhd and its wholly-owned unit Bumi Armada Offshore Holdings Ltd (BAOHL) have partnered up with Shapoorji Pallonji and Company Private Ltd (SPCL) and Shapoorji Pallonji International FZE (SPINT-an indirect wholly owned unit of SPCL) to design and build a floating production, storage and offloading unit (FPSO).
In a filing with Bursa Malaysia this evening, Bumi Armada said the partnership will be on a 50:50 basis. Both parties will jointly invest in Armada Madura EPC Ltd — presently a wholly owned unit of BAOHL — to undertake the design and construction of the FPSO unit.
BAOHL and SPINT’s (JV partners) joint investment in Armada Madura will see each hold a 50% economic interest and be responsible for 50% of the funding obligations with respect to the FPSO project.
In relation to that, the JV partners and Armada Madura have entered into a shareholders’ agreement with respect to the joint venture, which is regarded as a related party transaction, as SPCL is under the Shapoorji Pallonji group of companies owned by Shapoorji Pallonji Mistry, a director of Bumi Armada, and his brother Cyrus Pallonji Mistry.
Prior to that, on the same day, Armada Madura entered into an sales and purchase agreement (FPSO SPA) with PT Armada Gema Nusantara - "to engineer, procure, convert, construct and complete the FPSO for sale and delivery to PT AGN".
The FPSO unit is integral to the fulfilment of a US$1.18 billion (RM4.29 billion) charter contract from Husky-CNOOC Madura Ltd (HCML) that was awarded to a consortium comprising BAOHL and PT Armada Gema Nusantara (PT AGN) on Dec 10 last year.
Under the charter contract, the consortium will provide an FPSO unit for charter and deployment at the Madura BD Field in the Madura Strait, Offshore East Java, Indonesia. It will also undertake the operation and maintenance of the FPSO.
The contract is for a firm charter period of 10 years, with the option of five annual extensions. The FPSO is expected to commence operations at the field in the first quarter of 2017.
Bumi Armada estimates the total financial commitment required by Armada Madura to complete the FPSO will range from US$450 million (RM1.637 billion) to US$500 million (RM1.819 billion), which it shall satisfy via a combination of cash subscription for ordinary or preference shares of Armada Madura, or a provision of shareholder’s loans, including financial guarantees from Bumi Armada and SPCL.
As at the date of this announcement, the equity funding mix has yet to be determined, but Bumi Armada expects Armada Madura to fund between 20% and 45% of its total financial commitment in the form of equity.
Bumi Armada said the JV arrangement will enable the group to mitigate its risk exposure on the charter contract, leverage on SPCL's strong history and experience in fabrication and construction related activities, and enable it to optimise its returns on the charter contract.
"The success of the joint venture arrangement will further strengthen Bumi Armada's relationship with SPCL and encourage mutual exploration of suitable future opportunities in the offshore oil and gas services industry," it added.
"Barring any unforeseen circumstances, the FPSO project is expected to be completed in the first quarter of 2017," it added.
Shares in Bumi Armada closed three sen or 2.94% higher at RM1.05, for a market capitalisation of RM6.16 billion.
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