PETALING JAYA (May 26): Boustead Holding Bhd announced that its 68.85%-owed subsidiary, Boustead Naval Shipyard Sdn Bhd (BNS) has inked a sixth supplemental contract with the government with regard to the construction of littoral combat ships (LCS).
In a filing to Bursa Malaysia, Boustead Holdings said the sixth supplemental agreement contains the following salient terms and conditions:
(i) the resumption of all design and construction activities shall commence upon signing the sixth supplemental contract;
(ii) the reduction of LCS vessels from six units in original plan to five units;
(iii) the duration of the contract shall be extended with the first vessel to be delivered, fully tested and trialled in August 2026 and the fifth vessel in April 2029;
To recap, the contract was awarded to BNS in 2013. The first of the six vessels had been slated for delivery in April 2019, with BNS supposed to deliver a vessel in an interval of six months. The last vessel should have been completed by October 2021.
(iv) the total contract price is revised to RM11.2 billion following, amongst others, the approved change of specifications and extension of time.
The original contract cost amounted to RM9.13 billion, of which the government had already disbursed RM6.1 billiion for the project.
(v) the terms of payment is varied from milestone activity to progress of works reflecting the various elements in the contract based on weightage to the design, equipment, construction and trials & commissioning.
Besides Boustead Holdings, Lembaga Tabung Angkatan Tentera holds a 10.38% stake and Boustead Heavy Industries Corp Bhd owns a 20.77% stake in BNS. The Ministry of Finance holds one golden share in BNS.
BNS bungled a RM9.13 billion contract to build the six LCS vessels — the first ship was only 44% completed at the end of August last year, while the others were between 0% and 35% completed.
Boustead Holdings chairman Datuk Nazim Rahman said the agreement resulted from a thorough review of multiple options and all aspects of the project by various ministries and agencies under the government as well as BNS, with the sole aim of reviving the LCS project in line with The Armada Transformation 15 to 5 plan by the Royal Malaysian Navy (RMN).
“Under this new agreement, various preventive measures have been put in place to ensure that the ships will be delivered on time and within the allocated budget.
"This includes the formation of a project monitoring committee, co-chaired by the secretary general of Treasury and secretary general of the Ministry of Defence, to strengthen the execution and supervision of the project delivery, hence ensuring the failures of the past do not happen again," Nazim said in a statement.
Citing his confidence in BNS' ability to complete the project, he added, “In the past few years since the project was put on hold, the governance within BNS has been improved significantly.
"The new management that has been put in place, not just at BNS, but also at Boustead Heavy Industries Corporation Bhd, Boustead Holdings as well as LTAT, has allowed the company and its shareholders to take an objective assessment of the project and the best way forward to complete the delivery of the ships."
The supplemental contract was signed by Defence Ministry secretary general Datuk Seri Muez Abd Aziz and BNS chairman Datuk Nazim Rahman, witnessed by Defence Minister Datuk Seri Mohamad Hasan.