KUALA LUMPUR (Aug 16): Malaysia Airports Holdings Bhd (MAHB) intends to terminate the RM742.95 million contract given to Pestech International Bhd to build and supply a new automated people mover (APM) or aerotrain project in the Kuala Lumpur International Airport, as the latter has failed to meet the timeline, according to sources.
Sources told The Edge the airport operator’s decision came after the progress of the project was more than 250 days behind the schedule as stated in the contract.
When contacted, MAHB and Pestech did not respond to The Edge's queries.
This means the airport operator will need to look for a party or consortium to undertake the project soon, as the disruption of the aerotrain service has caused public outcry.
Pestech’s wholly owned Pestech Technology Sdn Bhd secured the job from Malaysia Airports (Sepang) Sdn Bhd in December 2021. The job scope included design, supply, installation, testing and commissioning of the APM and associated works.
Pestech said the contract was under Option 2, which included financing as well as operation and maintenance of the facility from March 14, 2025 to Feb 11, 2034.
It is understood that Pestech then was willing to have a deferred payment scheme that was spread over 15 years. With this, MAHB would not incur front-loaded large capital expenditure for the aerotrain service.
The possible termination comes shortly after IJM Corp Bhd announced its plan to take up a 44.83% stake in Pestech via a restricted offer of 800 million shares at 15.5 sen apiece, or RM124 million in total. IJM will be the single largest shareholder of Pestech following the deal.
The transaction price is at a steep discount to Pestech's market price. Pestech shares were unchanged at 31.5 sen at the time of writing on Wednesday (Aug 16), valuing the company at RM312.5 million.
Aerotrain was Pestech’s biggest win since listing
The possible termination comes amid backlash over frequent breakdowns of the 25-year-old aerotrain service, which has been suspended until further notice.
The latest disruption and suspension of service by MAHB was in March this year, following mechanical and electronic failures, resulting in 114 passengers being stranded midway on the tracks.
The intention for the award to Pestech in 2021 was not only to replace the trains but the entire track system, so that passengers would be able to experience a renewed modern aerotrain service when they pass through the airport.
According to MAHB's management, the replacement was integral to maintain the airport's reputation as one of the world’s best airports.
Notably, the aerotrain contract was the biggest win for troubled engineering outfit Pestech since its listing.
According to a filing in December 2021, Pestech said the project was expected to contribute positively towards its revenue and earnings for the financial years ended June 30, 2022 (FY2022) to FY2034.
The termination would be another blow to the company, already mired in issues in the past, including investigations by the Malaysian Anti-Corruption Commission, which are understood to have been resolved.