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Cancelled rig spat: SembMarine's PPL now terminates contract

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Marine logistics player Marco Polo Marine and rigbuilder Sembcorp Marine traded shots at each other overnight in an ongoing contractual dispute over a US$214.3 million rigbuilding contract.

MARINE logistics player Marco Polo Marine and rigbuilder Sembcorp Marine traded shots at each other overnight in an ongoing contractual dispute over a US$214.3 million rigbuilding contract. The contract, which Marco Polo first terminated in November, was in turn terminated by Sembcorp's PPL Shipyard on Tuesday after it said Marco Polo failed to pay a progress payment plus interest.

Marco Polo said its unit Marco Polo Drilling received, on Tuesday, a written notice from PPL to terminate the contract as well as a demand for a progress payment of US$21.43 million as well as accrued interest of US$77,399.80 for the month of November. Marco Polo had in November first cancelled the rigbuilding contract due to cracks found on all three legs of the rig among other things, and sought a refund of a US$21.43 million initial deposit.

Sembcorp added that Marco Polo Drilling's obligation to pay PPL the progress payment was guaranteed by Marco Polo Marine under a parent company performance guarantee. This progress payment had been due upon executing the contract on Feb 26, 2014, and Marco Polo Drilling was initially allowed to pay it by Feb 11, 2015, Sembcorp said.

"However on Marco Polo Drilling's requests, the payment of the second disbursement was deferred twice, first to no later June 30, 2015 and subsequently to no later November 30, 2015. Marco Polo Drilling also agreed to pay interest on the second disbursement up to the date of payment," Sembcorp said.

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Marco Polo said on Wednesday that PPL has commenced legal action against the company under the guarantee.

"The board would like to reiterate its position that neither the company nor Marco Polo Drilling is under any obligation to make the payments claimed by PPL whether under the rig construction contract or the guarantee and that there is no basis for the notice of termination of the rig construction contract to be issued by PPL. The board further notes that under the terms of the guarantee, PPL has no basis to commence legal action against the company in the Singapore courts," Marco Polo said.

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