Monday 25 Sep 2023
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KUALA LUMPUR (Sept 7): Boustead Naval Shipyard Sdn Bhd (BNS) has assured that there will be no major delays in the construction of littoral combat ships (LCS) despite its termination of two main contractors of the project.

Contraves Advanced Devices Sdn Bhd (CAD) and Contraves Electrodynamics Sdn Bhd (CED) — previously appointed by BNS to purchase equipment from original equipment manufacturers (OEMs) to build the vessels — recently had their letters of awards (LOAs) voided in view of allegations of misconduct, illegality and fraudulent dealings in relation to the LOAs issued to the contractors.

The latest developments come in the wake of findings by the Public Accounts Committee (PAC), the Governance, Procurement and Finance Investigation Committee, the ongoing investigation by the Malaysian Anti-Corruption Commission (MACC), and the released forensic audit report by Alliance IFA (M) Sdn Bhd on the scandal-ridden LCS project.

“We do not foresee [that] the termination of CAD and CED will further delay the project. BNS is committed to deliver the vessels in accordance with the new schedule, which is to be negotiated with the government,” BNS CEO Azhar Jumaat said on Tuesday (Sept 6) in response to queries by The Edge.

"The termination will allow BNS to negotiate directly with the relevant OEMs and this can be done within the proposed delivery period for the vessels," Azhar added.

BNS’ major shareholders are Boustead Holdings Bhd, which owns a 68.85% stake; followed by Boustead Heavy Industries Corporation Bhd (BHIC), 27.77%; and armed forces fund, Lembaga Tabung Angkatan Tentera (LTAT), 10.38%.

At the Dewan Negara sitting last month, Defence Minister Datuk Seri Hishamuddin Hussein said the government would report on the timeline and progress of the LCS construction project in stages and that his ministry had been given six months to mobilise efforts to revive the project. He also said that the first LCS ship would be delivered to the Royal Malaysian Navy within two years.

Hishamuddin's statement was in response to a report by PAC that not a single ship had been completed, despite the government having spent RM6 billion on the LCS project, which the government had awarded to BNS through direct negotiations.

BNS only terminating intermediaries, no nomination of new contractors

Azhar, who was appointed BNS CEO in May, said the OEMs in the current contract of the LCS project will remain involved in the project, as BNS is only terminating the intermediaries.

"The contract termination only refers to taking out intermediaries. We are not replacing OEMs appointed through CAD and CED.

"That means BNS is only terminating CAD and CED as intermediaries. Thus, there is no issue on [the] nomination of new contractors. There is no additional cost to the government [to complete the vessels] due to the termination of CAD and CED,” Azhar said.

Company checks showed that BNS had current liabilities (debts due within six months) of RM2.05 billion as at end-2021, and long-term liabilities of RM167.3 million. Its current assets stood at RM1.22 billion, while non-current assets were at RM298.5 million.

For FY21, BNS incurred a net loss of RM52.71 million, against a revenue of RM302.15 million.

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