Johor oil terminal in rescue talks with investor, says contractor

By Shannon Teoh
The Malaysian Insider
Jun 17, 2011

KUALA LUMPUR, June 17 — Asia Petroleum Hub (APH) is in talks with an investor to fully finance its troubled multibillion-dollar oil terminal in Johor, one of its main contractors said today.

Muhibbah Engineering Bhd said in a filing to Bursa Malaysia that APH “has identified an investor and was in negotiations with the investor to fully finance the completion of the APH hub project, including making due payments to contractors.”

Singapore Business Times (BT) had reported on Wednesday that financier CIMB Bank had placed APH under receivership over a RM1.4 billion three-year bridge loan granted in 2006.

APH drew down RM840 million for project costs but executives told BT that costs had escalated and APH was looking for investors for a further RM2 billion in new financing.

Muhibbah is one of the contractors for the petroleum hub and bunkering facility at the reclaimed island of Tanjung Bin with receivables for work and related costs amounting to RM 370.8 million at the end of last year.

Its share price sank by 20 per cent to RM1.52 yesterday following the report, its steepest drop in more than three years.

However, the shares recovered this morning and were last traded at RM1.60 with over 9 million shares done before trading was halted for one hour from 10.39am.

“As this is a oil and gas project with a secured business and the said investor due to finalise its financing transaction with APH, there are reasonable grounds to hold that the receivables are recoverable in due course,” Muhibbah said in its filing.

BT had reported that the move to put APH under receivership could spell the end for the development which was once billed as one of the world’s largest fully integrated terminals with a storage capacity of 924,000 cubic metres.

CIMB Research had said the worst case scenario for Muhibbah was that it would have to write down RM300 million owed by APH which could push it into losses for the 2011 financial year.

APH had awarded Muhibbah the contracts for marine piling and jetty works worth RM820 million.

The research house added however that APH is likely to negotiate for more time to resolve the matter and rope in a new investor.

The BT report also said that a tussle has emerged over the ownership of APH, involving its majority shareholder, private terminal operator KIC Oil and Gas, Malaysian tycoon Tan Sri Syed Mokhtar Albukhary, and an apparently Umno-linked company called Trek Perintis.

The report added that more than three years ago, the Cabinet decided that Seaport Terminal, a private company controlled by Syed Mokhtar should be allowed to take up a 35 per cent stake in the project but the tussle between Seaport and KIC has not as yet been resolved.

  1. #1 by dagen on Saturday, 18 June 2011 - 9:41 am

    Doesnt umno realise that this is the reason (and this is not the first of such similar predicatement affecting most of umno’s mega projects) why the people, although supportive of the (wot?) RM40b mrt project, expressed strong caution that the project be better planned before execution.

    Here in this oil terminal project we are only talking about (presumably) construction costs. Apart from its construction, the mrt project also involves something far more sticky – acquisition of privately owned land. The process can be tedious and very time consuming. While the process peters itself out financing costs would continue to run. We all know how bank interest balloons. Look at the PKFZ project for some serious lessons.

    Back to the oil terminal project. We need to know how the problem was allowed to build up to such an extent. I am sure umno has a hand in it.

  2. #2 by yhsiew on Saturday, 18 June 2011 - 9:52 am

    ///and an apparently Umno-linked company called Trek Perintis///

    Would there be a “classic” government bailout for APH in the end? Just wait and see.

  3. #3 by bruno on Saturday, 18 June 2011 - 10:44 am

    Any mega project should be tender openly and not be reserved for any GLC or political crony,because mega projects specially reserved for these people usually will incur heavy cost overuns.Corruption and kickbacks are usually the cause of these projects failing.Then the state will have to bail them out as usual.The only time these politicians will ever learn is being given the stick.The people’s power stick.

  4. #4 by undertaker888 on Saturday, 18 June 2011 - 12:04 pm

    Those umno with big egos and small brains should not do big businesses or big things. When are they going to learn? Another 50 years?

  5. #5 by Godfather on Saturday, 18 June 2011 - 12:19 pm

    Satu lagi projek Barisan Nasional. They give it to a crony who doesn’t know anything about tankfarms. All this crony knows is how to obtain political protection, so they give some free shares to UMNO, and also some free shares to royalty. To compensate for these free shares, they have to pad up the construction contracts, so for a RM 2 billion project, they now have cost overruns of over RM 1 billion. Now they go to the market to seek investors – and they still think that the market is stupid.

    Sigh…another bailout on the cards.

  6. #6 by limkamput on Saturday, 18 June 2011 - 12:28 pm

    Aiyaya, no cost overrun yet, no massive variation order yet, no default yet, and no bailout yet, how can the project ever be completed. I challenge BN to give me one useful project that was completed in time based on cost that was originally estimated and allocated.

  7. #7 by waterfrontcoolie on Saturday, 18 June 2011 - 1:13 pm

    For all intent and purpose, whether a project would acrually make money is not the main concern of those Malaysian players. Their only strength is their connection to the power that be. Hence, putting your hand on the construction works is first priority, the margin is guaranteed. At th end of the day, like PKFZ, if the project go bust, well the bankers have to bear the risks. this has been the modus operandi of most if not all those projects. Otherwise, you can’t find the rationale of working with Mugabe, the man who literally destroyed Zimbabwe totally within the years he rules the country. that is the type of hero we are whorshipping all these years, and we have plenty in our country as examples. Just like the LRT in Kl, the Gomen can always bear the final costs even if CIMB is caught with this project. By now, we are must be the expert in Re-INSURANCE RECOVERY business.

  8. #8 by hallo on Saturday, 18 June 2011 - 1:18 pm

    They are like the world worst corruption in the world

    They said Bersih will hurt economic, what they are talking about?…why they mention corruption politicians hurt economic

    The Bersih aim to bring fairer, more justice for ALL MALAYSIANs, the corrupted politicians don’t listen instead they want to stop it.

    They have no morality about corruption

    It is not surprise, each year they may proudly tell their cronies how much he/she have made that year..hundred thousand disqualified…million is low…billion yeah standard…

  9. #9 by dagen on Saturday, 18 June 2011 - 2:22 pm

    Yeah. Another project given to cronies with no relevant knowledge or experience, I suppose. Like that company set up to provide expert advise to jibby jib on submarines. Its ok. See walaupun tak tahu tapi serupa boleh buat juga. So you see. Do we need brains and talents? Razak Baginda is not an engineer. Neither is he a military man. But you see, he learns on the job man. And he learns very quickly. The crux of the matter is, dont worry people, by the fourth or maybe fifth oil terminal project these fellas would have learned and improved. After that, further oil terminal projects will be ok. That is why several billions of taxpayers’ money spent on these fellas as tuition fees, is worth it, I tell you.

    Ni ok. Tada masalah. Tapi yen2 tak ok. 1.8m spent. Tu needlessly spent. Membazirkan wang rakyat.

  10. #10 by Cinapek on Saturday, 18 June 2011 - 11:13 pm

    A very simple question. How in the world could a project run so much higher over its budgeted cost (stupid question really, since EVERY major Malaysian mega bucks project must overrun their budget massively. It is standard operating procedure) haphazardly or they were not done for the right reasons.

    The next question is if the project is still viable as the promoters claim, why would CIMB place APH under receivership? By doing so, CIMB is as good as cutting the legs off APH as a going concern. Even if they can find an investor, they will not have any leverage to bargain for a good deal.

    I hope we are not seeing another PKFZ bailout since CIMB is the playground of No. 1’s little brother.

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