KUALA LUMPUR — The decision by Malaysia Airports Holdings Bhd (MAHB) to terminate Pestech International Bhd, the contractor for the Kuala Lumpur International Airport (KLIA)’s new aerotrain is expected to pose unfavourable financial effects to the company.
In a Bursa filing, yesterday, Pestech’s board of directors confirmed that its subsidiary Pestech Technology Sdn Bhd (Ptech) had received the termination notice from MAHB.
MAHB had terminated the contract between PTech as the contractor for the design, supply, installation, testing and commissioning (D&B works ) for automated people mover and associated works at KL International Airport (KLIA) including financing, operation and maintenance until February 11, 2034.
“The letter of award for the project at a total contract value of RM742,954,400 was announced by the Pestech on December 27, 2021.
“The Project comprised D&B works of RM396,000,000, financing charges of RM104,200,000 and operation and maintenance services of RM242,754,400 over a period of ten (10) years from year 2025 to 2034,” Pestech stated in its filing.
Pestech added that it is currently consulting its legal advisor and will seek appropriate legal redress under the contract.
According to MAHB, the RM742.95 million agreement awarded to Pestech International Bhd for the construction and provision of a new automated people mover (APM) was cancelled due to Pestech’s failure to meet the stipulated project timeline.
The project was awarded to Pestech in December 2021 following a competitive tender process, MAHB said in its statement.
“Pestech has been found to be in material breach of its obligations under the contract and has failed to remedy the same within the specified time period,” MAHB added.
The decision to terminate the contract stems from various factors, notably PTSB’s inability to fulfil its obligations, resulting in substantial setbacks at crucial project milestones.
Among others, MAHB said the termination is due to PTSB’s non-performance, which compromised significant project milestones and risked delays in delivering the project within the required deadline.
This decision was taken by MAHB’s board of directors, in accordance with MAHB’s principles of governance, and based on rigorous monitoring of the progressive development of the APM project by MAHB’s management and its independent consultants.
On May 10, its subsidiary PTech was fired as a subcontractor for the Gemas-Johor Bahru electrified double-track rail project due to delays.
Main contractor Syarikat Pembinaan Yeoh Tiong Lay Sdn Bhd (SPYTL), the construction arm of the YTL Group, claimed PTech’s “insolvency” were among the issues that have caused the delay of the project since April 2021.
Pestech however had denied that its subsidiary is insolvent in a notice to Bursa Malaysia.
The RM399 million job included turnkey engineering, procurement, construction, and maintenance services.
PTech, which has completed 70% of the project has filed legal action, seeking an injunction, plus other remedies.
Pestech’s senior management has also been in the news for brushes with the law although they have since been cleared.
On Bursa, Pestech’s shares went down to 26.5 sen as of 10.22am after closing at 29 sen yesterday. — August 17, 2023
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