KUALA LUMPUR (May 29): Boustead Heavy Industries Corp Bhd (BHIC), the shipbuilding arm of Boustead Holdings Bhd, said it has received a letter from the Minister of Finance Inc (MOF Inc) signalling its intention to acquire BHIC’s entire stake of 20.8% in Boustead Naval Shipyard Sdn Bhd (BNS).

The stake is currently held through BHIC's wholly-owned subsidiary Perstim Industries Sdn Bhd.

"The terms of the proposed acquisition are subject to negotiations between the parties," said BHIC in a filing with Bursa Malaysia on Monday (May 29).

"Any further material developments on the above matter will be announced to Bursa Malaysia Securities accordingly," it added.

This move by MOF Inc raises eyebrows given how it is seen as a “get-out-of-jail-free” card for BNS which is responsible for the controversial RM9 billion littoral combat ship (LCS) project.

BNS was contracted in 2011 to build and deliver six LCS for the Royal Malaysian Navy (RMN), but until today, not one of the six ships had been completed although Putrajaya has already shelled out RM6.1 billion.

One question that arises now is how much MOF Inc will be forking out for the 20.8% stake in BNS.

Prime Minister Datuk Seri Anwar Ibrahim was quoted by the press on May 27 saying that the government had “no choice” but to take over BNS in order to complete the LCS project.

“We have no choice, we have spent RM6 billion, we can’t close, we have to take over to complete the project,” he was quoted saying at the National Book Festival held at the World Trade Centre on May 27.

A day earlier, on May 26, Defence Minister Datuk Seri Mohamad Hasan was reported as saying that MOF had established a special purpose vehicle (SPV) to take over BNS.

Mohamad had said that despite the ministry taking over the LCS project, it will still be overseen by a project monitoring committee jointly chaired by the secretaries general of the Treasury and Defence Ministry.

Boustead Holdings announced that its 68.85%-owned subsidiary, BNS inked a sixth supplemental contract with the government with regard to the construction of littoral combat ships (LCS).

The supplemental contract, which contains several revised terms, requires BNS to build five, instead of six LCS, at higher contract cost of RM11.2 billion.  The original contract cost was RM9.13 billion. 

The contention surrounding the LCS project is that RM6.1 billion has been disbursed by the government for construction of the vessels over the past 10 years or so, but not a single one has been completed by BNS.

According to BNS chief executive officer Captain Azhar Jumaat, the money disbursed has been spent on buying equipment that are required for pre-order.

He refuted that the equipment bought was obsolete, but the equipment is facing "obsolescence".

BHIC is a 65%-owned subsidiary of Boustead Holdings — a company that Lembaga Tabung Angkatan Tentera (LTAT) is in the midst of taking private. LTAT also has an 8.16% direct stake in BHIC.

BHIC shares closed up 4.5 sen or 13.85% at 37 sen on Monday, giving it a market capitalisation of RM90.54 million.