LCS contractor to get RM190mil working capital from govt

 

The littoral combat ship project’s cost has ballooned to RM11.22 billion while the delivery of six vessels was reduced to five.

PETALING JAYA: After acquiring a controlling stake in littoral combat ship (LCS) contractor Lumut Naval Shipyard Sdn Bhd (LNS) (formerly known as Boustead Naval Shipyard Sdn Bhd), the government will now fork out an additional RM190.15 million to fund its working capital, via a share issuance exercise.

This may well portend the first of more fund injections to keep the troubled RM11.22 billion LCS project afloat to finally start delivering five combat ships to the Malaysian navy.

The exercise will see Ocean Sunshine Bhd (OSB), a wholly-owned subsidiary of Minister of Finance Inc (MOF Inc), taking up 190.15 million new shares for a consideration of RM190.15 million, or RM1 per share.

OSB currently owns 79.23% of LNS while MOF Inc holds a single special share. Boustead Heavy Industries Corp Bhd (BHIC) owns the remaining 20.77% via wholly owned Perstim Industries Sdn Bhd (PISB).

OSB is also in the midst of acquiring PISB’s 20.77% stake in LNS for RM1. The deal was signed last August and the deadline to fulfil conditions precedent was extended for a fourth time recently.

In a filing with Bursa Malaysia today, BHIC said LNS will issue 240 million new shares to its existing shareholders, representing 185% of the shipbuilders’ share base, at RM1 apiece.

With OSB taking up 190.15 million shares, the remaining 49.85 million shares will be issued to PISB at no cost.

“No consideration will be payable by PISB as the 49.85 million new issue shares will be transferred to OSB from PISB on issuance,” said BHIC.

It added that the proposed exercise was “initiated by OSB”.

“The proposed issue is undertaken by LNS with the intention to capitalise the shareholders’ advance by OSB for the purpose of the working capital of LNS,” it explained.

BHIC clarified that the proposed issue will not have any effect on LNS’s issued share capital as it does not involve any issue or allotment of new shares in the company.

Plagued by controversy

The LCS project is said to be the largest defence procurement in Malaysia’s history at a total cost of RM9 billion. It came under intense scrutiny in 2022 after the Public Accounts Committee (PAC) revealed that not one of the six ships had been completed although Putrajaya had already paid out RM6.08 billion.

Due to delays and cost overruns, the project cost has ballooned to RM11.22 billion while the delivery of six vessels was reduced to five.

Based on the initial plan, the first ship was supposed to be delivered in 2019. Under a revised plan, the vessels were scheduled to be delivered in August 2026, April 2027, December 2027, August 2028, and April 2029.

The Malaysian Anti-Corruption Commission (MACC), which investigated the controversial project, had previously recommended that several individuals be charged.

Just this week, PAC chairman Mas Ermieyati Samsudin said the delays in the construction of the littoral combat ships are “shocking and worrying”.

“PAC wants the contractor, as well as the LCS project team, to take steps to resolve the problem,” she said after the PAC was given a progress report on the long-delayed project. - FMT