GLC could lose millions, says DAP of cancelled IWH-CREC investment

boo-cheng-hauPETALING JAYA: DAP’s Skudai assemblyman Dr Boo Cheng Hau says the cancellation of the ICSB consortium’s investment in Bandar Malaysia may negatively impact Johor government-linked company Kumpulan Prasarana Rakyat Johor (KPRJ).

In a speech at the opening session of the state assembly in Johor Bahru today, Dr Boo said Iskandar Waterfront Holdings (IWH) owned 60% equity of ICSB whereas China Railway Engineering Corporation (CREC) owned the remaining 40%.

Through its 40% equity in IWH, he said, KPRJ would have had a 14.4% interest in the Bandar Malaysia project if the deal had materialised.

Pointing out that KPRJ was expected to shoulder RM1.7 billion in Bandar Malaysia’s investment of the total RM7.41 billion undertaken by ICSB, he said the Johor state government’s investment arm was estimated to have taken on RM178 million of ICSB’s RM740 million deposit.

“If it is ICSB’s failure to fulfil the contractual obligations as announced by TRX City Sdn Bhd, KPRJ’s share of the deposited RM178 million could be forfeited, and its losses in future returns from long-term investment is estimated at RM28.8 billion if the deal actually materialises,” he said.

“This will have an impact on KPRJ’s financial status and reputation.”

On May 3, TRX City said the share sale agreement (SSA) with IWH and CREC regarding the sale of 60% of the issued and paid-up capital of Bandar Malaysia had lapsed.

It said this was due to the failure of the purchasing parties to fulfil payment obligations.

In a statement, TRX City said despite repeated extensions being granted, IWH-CREC failed to meet the payment obligations outlined in the conditions precedent under the SSA, which was signed on Dec 31, 2015.

“As a result, the SSA between the parties stands null and void with immediate effect,” it said.

Following that, it said given a significant appreciation in the value of the Bandar Malaysia land, TRX City’s sole shareholder, the finance ministry, would now be retaining 100% ownership of the site to ensure the Malaysian people benefited from its development in its entirety.

Today, Dr Boo said according to the 2015 Auditor-General’s Report, KPRJ needed to review its management of 18 subsidiaries’ performance.

“KPRJ’s 18 subsidiaries have investment funds of RM432 million and RM144 million in nine joint ventures.

“Nonetheless, only six out of the 18 subsidiaries are active, and 12 are dormant. Only one out of the 18 subsidiaries is making profit, and the remaining 17 are in a total accumulated loss by 2014.

“The Johor state government should consider winding up the dormant KPRJ subsidiaries to prevent further losses.”

Dr Boo added that the Johor government should not be reluctant to negotiate with the federal government in defending the interests of the state.