The company says that it will ‘explore viable solutions’, including talks with the end-customer, Empire Offshore Wind
[SINGAPORE] Seatrium on Friday (Oct 10) announced that it had received a termination notice for a US$475 million contract inked with a Maersk Offshore Wind affiliate in 2022.
The contract was for the construction of a wind turbine installation vessel at the US offshore wind farm, Empire Wind 1. It is about 98.9 per cent complete.
The company said that it will “explore viable solutions”, including talks with the end-customer, Empire Offshore Wind, a joint venture between Equinor and BP. It did not elaborate on the “allegations” received in the notice of termination.
Shares of Seatrium plunged by as much as 7.8 per cent to S$2.25 in the first 40 minutes of trading on Friday. They inched back up to S$2.28 at close – 6.6 per cent or S$0.16 lower than Thursday’s closing price of S$2.44.
The marine engineering company said it is evaluating its legal and commercial options, including the possibility of legal proceedings for “wrongful termination”. It declined comment on the amount paid out so far on the contract, following a query from The Business Times.
The vessel was set to be based on Sembcorp Marine’s in-house design in collaboration with Maersk Supply Service. Empire Wind 1 was originally part of a two-phase offshore wind project with Empire Wind 2. Seatrium said earlier that the project was expected to power more than a million New York homes and play a key role in advancing the US’ clean-energy transition.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
Seatrium had also won the contracts for the engineering, procurement, construction, offshore hook-up and commissioning of two offshore substations for the Empire Wind 1 and Empire Wind 2 farms.
However, its Empire Wind 2 contract, valued at more than S$250 million, was cancelled in 2024 by Empire Offshore Wind “as a result of the significant macroeconomic conditions”.
Still, Empire Offshore Wind had said that the Empire Wind 1 project contract remained “unaffected”.
“We believe the development is likely to have a negative near-term impact on the share price,” said Citi analyst Luis Hilado. “The emergence of any remedies and/or damage control with future disclosure from Seatrium and/or Equinor would be key to watch out for.”
Hilado added in a later update that Seatrium management indicated that the terminated contract was a “pre-merger deal”.
Therefore, it was under a structure of 20 per cent downpayment and 80 per cent final-payment-upon-delivery. This, he said, likely has negative implications because Seatrium has realised actual costs for the build but has only actually collected 20 per cent of the revenue.
However, because it was a “low gross margin contract”, compared to post-merger contracts with double digit margins, the accrued profit is likely “small”. This is given that net profit margins would be even lower than the gross project margins.
“We still await potential solutions via their direct discussion with Equinor,” said Hilado. “In the meantime, we would note that Seatrium has a track record of triggering its share buybacks when the shares are under duress.”
Seatrium’s net profit for the first half of 2025 grew more than three times to S$144.4 million, up from S$36 million during the same period last year.
