Monday, 19 June 2017

PCSB to terminate RM3bil contract given to MHS Aviation

Petronas Carigali Sdn Bhd is terminating a June 2011 contract involving the charter of five Eurocopter EC225 helicopters from Boustead Holdings Bhd’s subsidiary MHS Aviation Bhd.

The 10-year contract, with an option to extend for another five years, was previously estimated to be worth about RM3bil.

In a filing with Bursa Malaysia, Boustead said its 51%-owned subsidiary MHS, the country’s largest civil helicopter operator, had received a letter dated June 9 from Petronas Carigali giving a 90 days’ notice of its intention to terminate “without cause” the contract for the provision of rotary wing aircraft, equipment and services for heavy type aircraft - EC225.

MHS received the notice of termination while discussions between the parties regarding arbitration proceedings were ongoing, Boustead said.

Petronas Carigali, which is Petronas’ exploration and production arm, had suspended the use of the five helicopters following two forced landings in the North Sea in May and October 2012 involving the helicopters which, according to Boustead, “were unconnected” to MHS and Petronas Carigali.

In the May and October 2012 incidents, EC255 Super Puma flights ferrying oil workers in the North Sea were forced to ditch due to a gearbox failure. Several charter operators of the EC225 model suspended flights with the model following the second incident.

(In 2007, Malaysia had its own incident involving the Super Puma when a helicopter chartered by Petronas Carigali and operated by MHS ditched in bad weather off Bintulu.)

On Sept 1 last year, MHS issued a notice of arbitration against Petronas Carigali, claiming, among others, damages of RM42.76mil.

“For its part, MHS has put on record that it did not agree that this termination notice has been validly issued. MHS views this as a breach of the contract and will treat any attempt to terminate the said contract on the basis of such notice as a repudiatory breach of the contract,” Boustead said.

Boustead completed the acquisition of a 51% stake in MHS, which provides helicopter services to oil and gas companies, for RM100mil in June 2011.

On the rationale for the proposed acquisition, Boustead noted that Petronas Carigali had awarded the EC225 contract to MHS for a period of 10 years with an option to extend for another five years starting from April 1, 2011, to March 31, 2021.

“The board believes that this contract which amounts to approximately RM3.1bil will further ensure the continued revenue from air charter business and utilisation of the aircraft for the benefit of Boustead Holdings Bhd group,” it said at the time.