This article first appeared in The Edge Malaysia Weekly on April 15, 2024 - April 21, 2024

INTEGRATED Marine Works Sdn Bhd (IMW) — a privately held company that was granted a 15-year extension of its concession to provide dredging and reclamation works to all federal ports owned by the government in May 2022 — is understood to have fallen into financial distress, resulting in receivers and managers AdamPrimus & Co PLT being appointed on March 1.

The Edge understands that AdamPrimus & Co was appointed to IMW by Malayan Banking Bhd (Maybank), which is looking to get back monies owed to it.

Sources from the port industry say the government has suspended IMW’s concession.

Others say, however, that IMW, which is wholly owned by private company Inai Kiara Sdn Bhd, is applying for judicial management, which will result in a judicial manager being appointed to oversee the ailing company’s business. The judicial manager will prepare a proposal for creditors with the aim of reviving the company’s financial health, in contrast to a winding up.

“Since IMW has gone into receivership, the concession should be automatically terminated, but Inai Kiara and IMW are fighting it with the judicial management proposal,” a source familiar with the matter says.

A number of issues are causing the negative sentiment surrounding IMW and Inai Kiara, including IMW not paying the annual concession fee of RM1 million to the government for the past two or three years, and some changes in shareholding that are alleged to have taken place without the government’s green light, which contravenes the terms of the concession agreement.

While the payment of the concession fee and changes in shareholding are unlikely to be valid reasons for the termination of the concession, the appointment of receivers and managers is a valid ground for termination, a port official says.

Little is known about Inai Kiara’s financials as its last filed financial accounts were for FY2013.

Companies Commission of Malaysia (CCM) filings for 2013 show that Datuk Guljar Mohamad Noor Mohamed controlled 85% of Inai Kiara while Hisham Mohamed Hashim held the remaining 15%. Guljar, who was the force behind Inai Kiara, is understood to have died.

According to filings with CCM, for its financial year ended Dec 31, 2021, IMW chalked up an after-tax profit of RM265,751 from RM41.78 million in revenue. IMW had total assets of RM191.9 million and total liabilities pegged at RM138.99 million, out of which more than 93% or RM129.84 million were current liabilities.

IMW had retained earnings of RM47.91 million as at end-2021. The company, according to the CCM filing, had charges of RM582.8 million with Maybank in March 2017.

In its annual report for FY2021, IMW said that it “has projected contingent liabilities of RM128.79 million (2020: RM128.09 million) and RM713.71 million (2020: RM666.91 million), [which] arose from the corporate guarantee provided to financial institutions for the banking facilities granted to its holding company Inai Kiara and its related company Inai Rimba Sdn Bhd respectively.

“The corporate guarantee [is] for the bulk Maybank loan borrowed by Inai Kiara to finance [the] Inai Saga and Inai Rimba vessels.”

In the five-year period ended Dec 31, 2021, IMW’s best showing was in FY2018 when it posted an after-tax profit of RM6.68 million from RM368.65 million in revenue.

It is also understood that there are interested parties looking at buying over or wresting control of IMW, but it is not known how a due diligence will pan out.

“There were questions asked even when IMW’s contract was extended in 2022. The company’s financials were weak even back then,” the source familiar with the matter says.

To put things in perspective, federal ports include Port Klang, which is made up of Northport and Westports in Selangor; Port of Tanjung Pelepas and Johor Port in Johor; Penang Port; Teluk Ewa Port in Langkawi; Tanjung Bruas Port in Melaka; Kemaman Port in Terengganu; Kuantan Port in Pahang; Bintulu Port in Sarawak; and Labuan Port.

Bintulu Port, which is currently a federal port, is slated to be handed over to the Sarawak government in June.

Another source says that dredging works at Port Klang’s terminals can cost about RM30 million a year, but could not provide details about the dredging requirements of other ports.

This means that the concessionaire would earn RM30 million a year for the dredging works at Port Klang alone, as it is the only appointed service provider.

IMW was first awarded the federal port dredging concession in 2004, to provide maintenance dredging for all federal ports. The tenure of the concession agreement was from December 2004 to December 2019.

At the time, IMW was a joint venture between Inai Kiara and Tan Sri Syed Mokhtar Albukhary’s Seaport Terminal (Johore) Sdn Bhd.

The two have gone their separate ways.

A check on Inai Kiara’s website indicates that it has at least 21 vessels involved in dredging and related works, nine barges and a handful of small vessels such as tugboats, as well as a number of excavators and related equipment such as pipes. The market value of these vessels and assets is anyone’s guess.

Interestingly, Minister of Transport Anthony Loke Siew Fook in March 2022, when he was an opposition member of parliament, questioned the award of the concession to IMW. Loke said at the time that Inai Kiara was bankrupt after being sued by the government for evading taxes to be paid to the Inland Revenue Board (IRB).

In IMW’s annual report for FY2021, it mentioned defending IRB actions for 2014, 2017 and 2018 and stated that IMW had filed a counterclaim and was awaiting a settlement proposal from IRB. IMW said the total liabilities estimated from this case amounted to RM43.76 million. In another action by IRB for 2012, 2013, 2015 and 2015, it is stated to have estimated liabilities of RM14.4 million. Other litigation faced by IMW is small.

In written responses to Loke’s questions in March 2022, the Ministry of Transport said Inai Kiara’s strengths were its status as a 100% local company and completing 247 dredging works with a total contract value of almost RM2.28 billion in its earlier concession.

The written reply also said IMW had sufficient assets and technical know-how to undertake dredging works, in contrast to other local players that were using foreign-owned machinery.

Port sources say the IMW concession agreement was signed at the end of May, just a few weeks after Loke’s questions in parliament.

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