This article first appeared in The Edge Financial Daily on May 17, 2017
SHAH ALAM: IWH CREC Sdn Bhd, which has been accused of failing to meet payment obligations for the purchase of a 60% stake in the Bandar Malaysia project, could have a second chance to participate in the massive development in the city centre of Kuala Lumpur.
IWH CREC could submit its bid for Bandar Malaysia as the Malaysian government is soliciting new bids considering the 194ha of prime land has appreciated in value, according to Minister in the Prime Minister’s Department Datuk Seri Abdul Rahman Dahlan.
Abdul Rahman stressed that there was never a flip-flop on the government’s decision.
“There were certain conditions not fulfilled by the previous consortium, so the government terminated the deal legally, and called for another tender, which is beneficial to the country as the value [of the land] has now appreciated a lot,” he told the media at the sideline of Gamuda Bhd’s Tunnelling Training Academy graduation ceremony yesterday.
Abdul Rahman noted that Najib has made it clear that the new bidders could include the members of the previous consortium, namely IWH CREC. “They can still participate, as long as the numbers are okay,” he said.
Abdul Rahman also refuted rumour that the US$400 million (RM1.72 billion) contract that has been awarded to CREC to construct the oil terminal in southern Johor is a form of compensation by the government.
“They have been bidding for it for a long time; it didn’t happen overnight,” he explained.
IWH CREC would have paid RM7.41 billion for the 60% equity stake in Bandar Malaysia if TRX City Sdn Bhd, a former unit of 1Malaysia Development Bhd (1MDB), did not terminate the share sale agreement on May 3. The land, where the old air force is located, was valued at RM12.35 billion under the agreement.
IWH CREC is a 60:40 joint venture (JV) between Iskandar Waterfront Holdings Sdn Bhd (IWH) and state-owned China Railway Engineering Corp (M) Sdn Bhd (CREC). Businessman Tan Sri Lim Kang Hoo holds a 63% stake in IWH, while Kumpulan Prasarana Rakyat Johor Sdn Bhd owns the remaining 37%. In short, the consortium consists of the Chinese government, Sultan of Johor and Lim.
Back on Dec 31, 2015 at the signing ceremony of the share sale agreement, 1MDB CEO Arul Kanda Kandasamy told the press that the RM12.35 billion market valuation for the Bandar Malaysia land had exceeded 1MDB expectations.
“We have always stated that our target value for Bandar Malaysia is RM11 billion to RM12 billion. We have now achieved RM12.35 billion, exceeding our expectations in terms of the target value for the rationalisation plan,” Arul Kanda was quoted by the media as saying then.
The stake sale then helped cash-strapped 1MDB raise fresh fund to pare down its whopping over RM40 billion debts.
TRX City gave a notice of termination to IWH CREC on May 3 to abort the stake sale deal immediately citing the reason that the JV had failed to pay despite several extensions.
IWH CREC, however, said the JV had sufficient financial resources and capabilities to ensure the smooth and successful execution and implementation of the development of Bandar Malaysia.
It said TRX City’s unilateral declaration that the share sale agreement had lapsed is unacceptable. IWH CREC reserves all its rights in this matter.
Nonetheless, the tide seems to have changed after Najib’s official visit to China over the weekend. He met China’s President Xi Jinping and Premier Li Keqiang on the sidelines of the inaugural One Belt One Road Forum in Beijing.