Darco Water: Material impairment possible as Con Dao Project deposit wasn’t repaid after deal termination

Water in a fountainWater in a fountain

Darco Water Technologies faces a potential material impact on 2021 earnings as it hasn’t received a refund of the US$600,000 refundable deposit it advanced for the now-terminated letter of intent to acquire Con Dao Green Energy in Vietnam, the company said in a filing to SGX Monday.

In 2018, Darco Water’s subsidiary Darco Water Systems issued a letter of intent to acquire Con Dao Green Energy, the build-own-operate developer of the Con Dao Solar Power Park in Vietnam; the letter of intent was terminated in August 2021.

Under the terms of the LOI, Darco Water has sought a full refund of the advance sum within 14 days of the termination, which was due by 26 August, the company said.

“As of the date of this announcement, Con Dao Green Energy has not repaid the Advance Sum, and the management of the company is currently in discussions with the counterparty and its major promoter shareholder, Dr. Dinh Minh Dao, in order to arrive at a resolution,” Darco said Monday.

“In the event that the company is unable to arrive at a satisfactory resolution with the counterparty and Con Dao Green Energy is not willing and/or is unable to repay the advance sum, further impairment may then be required,” the company added.

The maximum amount of further impairment which may be required for the 2021 financial statements is US$600,000, or around S$812,000, Darco said.

“The further impairment, if made, will have a material impact on the financial performance of the company,” Darco said, adding the amount would be around 45 percent of the company’s profit before tax for 2020.