DSME Reaches Operations MoU with Iranian Yard

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By MarEx 2016-05-18 10:28:34

DSME has announced an agreement for technology transfer and operations management with ISOICO (Iran Shipbuilding and Offshore Industries Complex), a move expected to help Daewoo win new business from Iranian firms. 

Iran has stated plans to invest in tankers and LNG carriers over the next several years as it ramps up oil and gas production, and DSME’s experience will help it develop its domestic shipbuilding capabilities. ISOICO operates a shipyard facility in Bandar Abbas, and under the agreement DSME will work closely with its counterparts to modernize the yard's operations. The state-owned firm would like to expand its tonnage output; at present it can produce four 80,000 dwt ships per year. 

Struggling South Korean shipbuilders are reported to be working hard to gain Iranian orders. DSME has been linked to a deal to build five modern jack-up rigs worth over $1 billion for the National Iranian Oil Company. 

In South Korea, the shipbuilder faces an unfolding accounting fraud scandal in addition to its existing financial troubles. The firm allegedly kept double books in order to conceal losses from its external accountant; it posted positive results in 2013 and 2014, then a nearly $5 billion loss in 2015. Its accountants, Deloitte Anjin, have called for it to recalculate its 2013 and 2014 results; the revised numbers show large losses in both prior years. The allegations against DSME are under investigation by government regulators. Two former CEOs are prohibited from leaving the country while prosecutors investigate, and they may face charges. 

Like the other members of South Korea's Big Three, DSME has been hard-hit by the downturn in shipbuilding and has been shedding non-core assets and laying off staff. DSME's largest creditors, the Korea Development Bank and the Export-Import Bank of Korea (KDB and KEXIM) have offered $3.4 billion in aid, contingent on restructuring. So far, "plans are going smoothly as planned across areas such as cash injection, recapitalisation, and others," said Financial Services Commission commissioner Kim Yong Beom.