SINGAPORE: Sembcorp Industries said on Wednesday (Apr 22) that its subsidiary Sembcorp Cogen has terminated a gasoil supply and storage agreement with troubled oil trader Hin Leong Trading “to protect its interests”.
Sembcorp Cogen had inked the deal with Hin Leong in 2009 to purchase gasoil reserves required under its electricity generation licence from the Energy Market Authority (EMA). Hin Leong also provides storage and management services for the gasoil reserves on behalf of Sembcorp Cogen.
The carrying book value of the gasoil reserves stored with Hin Leong was S$94 million as of Dec 31, 2019, Sembcorp Industries said in a bourse filing after trading hours.
EMA requires Sembcorp Cogen to have enough gasoil reserves for at least 60 days of operations. At least 30 days of the operational reserves must be located at Sembcorp Cogen’s generating premises or on a site approved by the EMA, the filing added.
One of Asia’s largest independent oil trader, Hin Leong, which means “prosperity” in Chinese, is now struggling to repay debts of US$3.85 billion (S$5.49 billion) amid an oil price crash.
The firm filed for bankruptcy protection last week amid revelations that its billionaire founder Lim Oon Kuin had directed the company to hide nearly US$800 million in losses from speculating oil futures over the years.
The Singapore police confirmed on Tuesday that investigations are ongoing, while the Accounting and Corporate Regulatory Authority said it is monitoring the case and “will assess if further action is warranted”.
The Enterprise Singapore, the Maritime and Port Authority of Singapore and the Monetary Authority of Singapore also said they are “closely monitoring” developments relating to the debt-laden oil trader and the broader oil trading and bunkering sectors.
READ: Hin Leong’s financial woes have ‘no serious impact’ on Singapore’s oil trading, bunkering sectors: Agencies
Given these recent news reports and Hin Leong’s filing for a debt moratorium, Sembcorp Industries said in the bourse filing that “Sembcorp Cogen has taken steps to protect its interests over the gasoil reserves” and terminated the agreement.
It added that it has notified EMA of the situation.
Several media reports on Thursday morning said Hin Leong is now mulling a judicial management, where an independent manager is appointed to oversee the company’s affairs.
According to Reuters and Bloomberg, citing anonymous sources, the company plans to hand over management to PwC, the accounting firm it had enlisted as one of its financial advisers when it filed for a moratorium.