This article first appeared in The Edge Financial Daily, on March 10, 2016.

KUALA LUMPUR: Prasarana Malaysia Bhd, the owner of the KL monorail system, said it had planned to terminate a RM494 million contract with Scomi Engineering Bhd to expand the monorail fleet after the latter failed to deliver the trains within the stipulated time frame.

Scomi also failed to submit any plan to resolve the delay.

In a statement yesterday, Prasarana said it had issued a notice to remedy to Scomi’s wholly-owned subsidiary Scomi Transit Projects Sdn Bhd for its failure to comply with Stage Gate Schedule 2 of the second supplemental contract to deliver 10 sets of new four-car monorail trains, including seven sets for revenue service by Dec 31 last year.

Prasarana said Scomi not only failed to comply with the schedule on the delivery of the trains, it also failed to submit any mitigation plan to remedy the delay as requested by Prasarana on Jan 4.

Under the notice to remedy, Scomi has 60 days from March 8 to comply with the notice, failing which Prasarana would be at liberty to terminate its contract with the public transportation service provider.

This comprises the principal contract dated June 3, 2011, the supplemental agreement dated April 16, 2014, and the second supplemental contract dated April 15, 2015.

Under the principal contract signed between Prasarana and Scomi in 2011, Scomi was contracted to deliver 12 sets of new four-car monorail trains, construct a new depot, install a new signalling system and upgrade the Kuala Lumpur monorail stations, including the electrical and mechanical systems, for a total contract value of RM494 million.

Prasarana said to date, only six sets of new four-car monorail trains had been delivered, of which five sets are currently in revenue service.

“Works related to the upgrading of the monorail stations and other related systems are still in progress pending the full delivery of the remaining four-car monorail trains,” it added.

On March 1, Scomi obtained an ex parte injunction to restrain Prasarana from terminating the project. Scomi said the legal action and injunction were necessary after Prasarana threatened to terminate the contract.

The ex parte injunction was initially valid until March 4, but was extended until April 1 when the matter will be heard on an inter partes basis (between the parties).

Scomi indicated that the effect of the pending litigation on the ongoing business performance of the group is dependent on the outcome.