KepCorp hasn't received a cent from scandal-hit Sete Brasil since November

Rig construction has been drastically slowed.

Six semi-submersible rigs intended for Sete Brasil are idling in Keppel’s yards. A report by Jefferies revealed that KepCorp has not received a single cent from its scandal-hit customer since November last year, and the rigbuilder has drastically slowed construction on these projects.

The report said that three of the semis for Sete were 90%, 63% and 36% complete in the second quarter, very minimal progress when compared to 89%, 58% and 32% in the first quarter. 

“This indicates that Keppel has deliberately done minimal work on these projects as they have not been receiving any payments from Sete since Nov 2014. Due to this minimal revenue recognition on Sete projects, O&M revenues in 2Q15 dropped sharply and we expect this to continue till Sete’s debt restructuring is completed and progress payments start flowing again,” Jefferies said. 

According to the report, Keppel has indicated that the total progress payments received to-date from Sete just exceeds their total construction expenditure on these six projects.

“Given Keppel’s conservative approach to managing project/ receivables risk, we believe that Keppel is unlikely to continue further construction work on the Sete projects unless it receives clear indications from Sete on the future progress payments,” the report noted.