The National Shipping Company of Saudi Arabia
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Notes To The Consolidated Financial Statements For the year ended December 31, 2011 (In Thousands Saudi Riyals)
12. SHIPS UNDER CONSTRUCTION AND OTHERS
The Subsidiary (NCC) NCC signed a contract in 2006 with SLS Shipbuilding Co. Ltd. (“SLS”) of South Korea to build 10 petrochemical carriers and another contract during the year 2007 to build six additional petrochemical carriers with a total cost of SR 3.01 billion (USD 802 million). These carriers were scheduled to be delivered during 2011 through 2012. During 2010, NCC in mutual agreement with SLS decided to cancel seven ships building contracts since SLS was not able to build the carriers and deliver them within the period specified in the agreements. As of December 31, 2010, NCC collected SR 701.6 million which include all installments paid to SLS on all the cancelled contracts totaling to SR 641.3 million (USD 171 million), all other incidental costs amounting to SR 45.2 million, as mutually agreed between the parties, and net recovery amounting to SR 15.1 million which was included in the other income in the year ended December 31, 2010 (see Note 22). SLS completed the construction of four of the nine remaining petrochemical carriers, after the cancellation of the contracts as stated above, and it was added to the Joint
Venture’s fleet in June 2011, August 2011, September 2011 and October 2011 for a total cost of Saudi Riyals 748.7 million. The remaining five carriers under construction are expected to be delivered in 2012 NCC also signed a contract on July 4, 2010 with Daewoo Shipbuilding and Marine Engineering Co. Ltd. of South Korea to build a specialized chemical tanker for total price of approximately SR 245 million (USD 65.3 million) with expected delivery during 2013. NCC also signed contracts with SLS on December 21, 2010 to purchase two chemical carriers for a total price of SR 322.5 million (USD 86 million). These two carriers were received and were added to the Joint Venture’s Fleet on March 16, 2011 and April 15, 2011, respectively. These additions were reflected directly as part of additions to fixed assets.
At December 31, 2011, the balance of ships and other assets under construction represents costs incurred by the Company and NCC (a subsidiary) under signed contracts for constructing new RoRo vessels and chemical tankers, and also includes SR 5.4 million (2010: SR 12.53 million) incurred for the Company’s building and software development costs. The Company On March 6, 2011, the Company signed four RoRo vessel contracts with Hyundai MIPO of South Korea for total cost of SR 1.03 billion (USD 274.2 million). Further, on September 12, 2011, the Company exercised its option to buy additional two RoRo vessels under the above agreement with the same agreed specifications and price for a total cost of SR 0.51 billion (USD 137.1 million). This brought the total number of RoRo vessels under construction to six vessels with a total cost of SR 1.54 billion (USD 411.3 million). The Company paid an amount of SR 308.48 million (USD 82.26 million) during 2011 which represents the first installment on these contracts. The Company expects to receive four of these six vessels in December 2013. The remaining two vessels will be received in 2014.
The movement in ships under construction and others is as follows:
2011
2010
Balance, beginning of the year
1,011,466
1,431,698
Additions
1,025,775
266,300
Transfers to fixed assets
(800,111)
-
Recovery of costs on cancelled ships under construction contracts
-
(686,532)
Balance, end of the year
1,237,130
1,011,466
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