MHI-Led Group Exiting Stake in Brazil Shipyard Declaring Loss -Report

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January 5, 2016

Estaleiro Rio Grande Shipyard. Photo: Petrobras News Agency

ReutersRIO DE JANEIRO, Jan 5 (Reuters) – A group of Japanese shipbuilders led by Mitsubishi Heavy Industries Ltd (MHI) plans to exit its 30 percent stake in Brazilian shipbuilder Ecovix and declare the investment as a loss, Valor Economico newspaper reported on Tuesday.

The group led by MHI plans to sell its stake in Ecovix, which it bought in 2013 for about $300 million, to Jackson Empreendimentos for a “symbolic amount,” Valor reported.

Jackson Empreendimentos owns the remaining 70 percent of Ecovix, the controller of Estaleiro Rio Grande (ERG) shipyard in the Brazilian city of Rio Grande. In addition to MHI, the Japanese group includes Mitsubishi Co and the Imabari, Namura and Oshima Shipbuilding companies, the newspaper reported.

MHI’s Brazilian unit did not answer calls requesting comment.

The group was brought into ERG, founded in 2010, to provide technology and management expertise and help the shipyard overcome quality problems, cost overruns and delays.

The sale comes as ERG’s contract to build eight hulls for floating production ships known as FPSOs for Brazil’s state-run oil company Petroleo Brasileiro SA is in jeopardy. Its contract to build drillships for Sete Brasil, another troubled Brazilian shipbuilder, is also in doubt.

Ecovix is part of the same Jackson Empreendimentos group that controls Engevix, a Brazilian construction company caught up in a giant price-fixing, bribery and political kickback scheme at Petrobras, as the oil company is commonly known, Valor reported. Engevix has had two executives jailed for their role in the scandal.

ERG’s problems have led to the layoff of thousands of people and the suspension of most work. The shipyard is undergoing a restructuring aimed at finding a way to reduce 1.7 billion reais ($425 million) owed to clients and suppliers, the newspaper reported.

Just to complete the hulls, ERG needs about 1.5 billion reais in new capital, Valor reported, and MHI’s departure from Ecovix could make it easier to find a partner to revive the company.

Ecovix and Engevix did not respond to calls seeking comment.

China Offshore Oil Engineering Company (COOEC) is a possible partner for ERG, Valor reported. COOEC is part of the same group that includes China National Offshore Oil Corp, which owns a stake in the giant Libra prospect in Brazil’s offshore Santos basin.

($1 = 4.00 Brazilian reais) (Reporting by Jeb Blount; Editing by Will Dunham)

(c) Copyright Thomson Reuters 2016.

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