TH Heavy Engineering on track to exit PN17

KUALA LUMPUR: TH Heavy Engineering Bhd (THHE) is on track to emerge from its Practice Note 17 (PN17) status, after it received shareholders approval to transfer its floating, production, storage and offloading (FPSO) job awarded by JX Nippon Oil & Gas Exploration (Malaysia) Ltd, to Yinson Holdings Bhd today.

The novation of the contract is part of the group's scheme arrangement with its creditors to regularise its financial condition. THHE has about three months to submit its regularisation plan to the authorities.

"The shareholders have given us 100% support. So our next phase is to complete the regularisation process, which involves the issuance of new shares subject to the Bursa approval," THHE CEO Suhaimi Badrul Jamil told reporters after its EGM.

"The novation of the contract is critical component of our scheme arrangement. So we hope to be on track to regain back our footing and get out of PN17 as soon as possible," he added.

THHE was unable to deliver the project to JX Nippon scheduled on June 30, 2016 and complete the conversion works of FPSO Layang Vessel, because it could not raise the necessary funding.

The group recently announced that it will receive RM374 million cash as proceeds of the novation agreement, of which RM352.8 million has been earmarked as payment for scheme creditors.

Suhaimi also noted that the group is looking to dispose its underutilised assets to pay off its debts, which is expected to raise some RM12 million.

"We have some cranes at our yard and other equipment that we purchased and identified that is under utilised. We are trying to dispose all of those items," he added.

Upon completion of the scheme arrangement, Suhaimi said the group is hoping to pare down its borrowings to around RM65 million, from over RM900 million currently.

"It is a big step but we would like to assure that the board will do whatever that is required to preserve value for shareholders," he said.

Asked on the progress of its joint venture with Destini Bhd to supply three units of offshore patrol vessels (OPV) for the Malaysian Maritime Enforcement Agency (MMEA), Suhaimi said the parties are on track to deliver the project.

"We started the physical work at our yard in December last year. This is sort of our pioneer project in shipbuilding and part of our plans to re-focus and also to diversify our earnings," he added.

The construction of the three units of OPV is estimated to take three and a half years to complete.

THHE's share price closed unchanged at nine sen, with some 767,000 shares changing hands.