(Yicai Global) Jan. 17 -- Chinese industrial machinery and heavy equipment maker Taiyuan Heavy Industries will write off about CNY480 million (USD70 million) in fiscal last year after it failed to transform to high-end manufacturing, as the revenues earned by the offshore petroleum and gas mining platform in which the northern Shanxi province-based company invested proved insufficient to cover its USD200 million development cost.

It will thus also directly result in a net loss for the manufacturer for the year, the Chinese heavy machinery supplier headquartered in the landlocked North China city of Taiyuan said in a statement yesterday, adding it will thus obtain USD126 million in lease income.

The news pushed Taiyuan Heavy Industries shares [SHA:600169] to open lower than their nadir yesterday, and they closed 3.48 percent underwater at CNY2.22 (USD0.32) this afternoon.

Taiyuan Heavy's wholly-owned unit recently inked a lease contract with Mexican well drilling and gas field operation firm Perforaciones Maritimas Mexicanas for it to use the first offshore oil and gas drilling rig developed by the subsidiary, per the statement.

The lease payments earned via performance of the contract will not  suffice to cover the platform's development cost, as Taiyuan Heavy's early-stage investment in the equipment was CNY1.3 billion (USD190 million).

The Mexican lessee has now paid the money due and will also have the right to directly buy the platform after the lease contract's extension expires, the statement said, adding this drilling rig will take part in two large-scale projects owned by Mexico's state petroleum giant Petróleos Mexicanos, which trades as Pemex.

PMM is an affiliated offshore drilling well company under Mexico's major oil and gas contractor Protexa, and it mainly undertakes offshore drilling projects, operating in oil fields in the Gulf of Mexico and in waters around Malaysia and Indonesia.

Taiyuan Heavy invested and constructed this platform through its unit in the coastal city of Tianjin from 2013 in an effort to transform to high-end manufacturing.

Editor: Ben Armour