Port of Tanjung Pelepas (PTP), which is 70% owned by Syed Mokhtar’s MMC Corp Bhd, is opposed to CIMB’s proposal to sell APH, and has made its objections known to the bank-appointed receivers of the failed petroleum venture, PricewaterhouseCoopers (PwC).
The contents of PTP’s letter to PwC remain unclear, but industry executives say Syed Mokhtar could be exercising his rights over the waterway that surrounds APH, which is just 700 metres from PTP.
CIMB advertised on July 4 that it was looking to sell the conditional rights to develop the petroleum storage, blending and distribution terminal located in Tanjung Bin, Johor, and had given PwC the mandate to seek proposals for APH.
It is understood that about 10 proposals have been received.
PTP, executives familiar with the matter say, sent the letter objecting to the sale about a week after the advertisement came out in the newspaper. However, it is uncertain if PwC is deterred by PTP’s objection. PwC declined to comment when contacted.
CIMB’s interest stems from APH having a RM1.4 billion bridging loan, of which RM840 million has been drawn down for the project cost.
APH was also supposed to be part of the second phase of development at PTP, as proposed to the National Economic Action Council back in 2001, according to executives familiar with PTP.
“The land is actually owned by the government, so how can CIMB sell the project? Of course PTP has a claim, it is in its waterway as per the port concession agreement.
The objective of APH back then was to supply fuel to vessels docking at PTP to ensure competitive bunker rates,” an executive familiar with the matter said.
The government however is keeping mum.
A check with the Companies Commission of Malaysia reveals that APH is wholly owned by AQ Properties Sdn Bhd, which in turn is 90% owned by KIC Oil & Gas Sdn Bhd and 10% by politically connected Trek Perintis Sdn Bhd. KIC Oil & Gas is controlled equally by Abdul Rashid Mohd Isa and Faizan Hassan.
This plan for PwC to sell the conditional rights came about after CIMB withdrew its backing for an earlier restructuring plan by PwC, which entailed a debt-to-equity swap.
The plan was to transfer the conditional rights to develop and operate the petroleum
storage, blending and distribution terminal to a special purpose vehicle (SPV), and later draw investors into the SPV and complete the project, which would give the project some value and enable all creditors to recover at least a portion of their money.
Swiss group Mercuria Energy Group Ltd and Petrofac Ltd were said to be among the groups interested in APH.
The petroleum hub project has been wrought with problems. APH was given the mandate to build an oil terminal dubbed Bunker Island off Johor in 2005. PTP then contested it, saying that it had an interest in the project, but its protests fell on deaf ears.
Initially, the government had sought to have KIC hold a 40% stake, with 20% equity interest each for Trek Perintis and Syed Mokhtar.
However, the businessman is said to have opposed the structure. With the deadlock, the project was delayed for more than two years, with cost overruns exceeding RM400 million.
According to industry players, the delays were largely attributed to the need for redesigning, after the soil on the island, which was largely silt, was found to be inappropriate.
Later, it was rumoured that APH had to incur additional costs to stabilise the island using a method that incorporated the use of a perforated vertical drain (PVD), which stalled the entire project.
It is understood that consultants had signed off on the project, saying that it was feasible.
Now, APH requires an additional RM2.6 billion to refinance CIMB’s bridging loan and to restart the unsuccessful project. Other than CIMB, Muhibbah Engineering (M) Bhd is owed RM400 million and other creditors about RM100 million.
A RM2.6 billion injection means the price for the 100-acre island would work out to about RM600 per sq ft.
Seaport Terminal (Johore) Sdn Bhd, a vehicle of Syed Mokhtar’s has already set up another bunkering facility in Tanjung Bin, partnering Vitol, which will compete with APH if and when it is ready.
In another development, Muhibbah Engineering announced that it is being sued by ZAQ Construction Sdn Bhd, the managing contractor for APH.
ZAQ also filed suits against CIMB, APH and Lim San Peen, the receiver and manager appointed by CIMB, seeking damages for the restructuring scheme that was proposed in January 2012 but called off after CIMB withdrew its support. ZAQ is seeking, among others, damages against all the defendants for their involvement and indicated support.
This article appeared in The Edge Financial Daily on September 4, 2012