Norsk Hydro cancels Farstad LOI

Norsk Hydro has cancelled the Letter of Intent with Farstad Shipping since the Norwegian oil and energy company could not guarantee that all bidders had received equal information during the tendering process last year. The LOI was for a $160 million long-term charter deal calling for delivery of supply vessel services which included an existing vessel (Far Symphony) for five years, and two new buildings for ten years.

Norsk Hydro?s decision was as a consequence of inquiries into the management of Norsk Hydro in the form of an anonymous e-mail which prompted the company to make an internal investigation of the conditions regarding the award of the contract. The investigation concluded that the company would not sign the contract with Farstad Shipping as it could not guarantee that all bidders had received equal information. According to Norsk Hydro this regards technical information not being handled in line with its procedures prior to tender opening in the beginning of September 2004.

As a result of this decision, Norsk Hydro has decided to conduct a new round of invitations to tender for the procurement of supply vessels and Farstad Shipping will receive compensation from Norsk Hydro to meet expenses accumulated after the signing of the LOI. Norsk Hydro emphasized that Farstad Shipping had no knowledge that such an incorrect distribution of technical information had taken place.

Farstad Shipping now has to decide what action to take in relation to the new building contracts it had placed with the Aker Brattvaag shipyard. The yard has given Farstad an extension until 24 January to decide whether they will uphold the contract or not.