This article first appeared in The Edge Financial Daily on April 16, 2018

KUALA LUMPUR: JAKS Resources Bhd is racing against time to finish building the Pacific Star development in Section 13, Petaling Jaya, this year, in particular a 15-storey office block called Tower A by end-July.

A bank guarantee of RM50 million and about RM30 million in liquidated and ascertained damages (LAD) for the delay in completion are at stake.

According to its chief executive officer Andy Ang Lam Poah, completing and handing over Tower A to Star Media Group Bhd is at the top of the group’s priority list.

“We are working round-the-clock. We are looking at handing over the building by the end of July and subsequently complete the rest of the project within this year,” he told The Edge Financial Daily.

The group is currently entangled in a legal row with Star Media after the media company attempted to make a call on the RM50 million bank guarantee when JAKS failed to deliver Tower A on the stipulated date. It was reported that the delivery of the building has been delayed by 28 months. JAKS responded by obtaining an interim stay to freeze the bank guarantee.

Lam Poah said the group is now awaiting the hearing date of the inter-parte injunction, in which its solicitors are of the view that JAKS did not breach its contract with Star Media.

“Our solicitors have gone through the documents and they say the group has valid and sufficient grounds to support the view that Star’s claim is baseless. The argument is Star had in the course of the Tower A construction instructed various changes to be made on the building that had caused the delays in the whole project. That is reassuring,” he added.

Lam Poah explained that the Pacific Star project comprises five towers that share four levels of basement car park and other common facilities. “If an amendment is made to the design of the basement car park, you need to get the authority’s approval before construction begins and this takes some time, and that would also affect the rest of the towers.”

JAKS chief financial officer Steven Ang Si Eeng said the delays on Tower A were due to design changes made by Star Media and as such, JAKS should not be liable to pay the LAD.

JAKS would be entitled to recoup the cost on those variation orders instead, he added.

In this regard, JAKS has served a notice of arbitration to Star Media to determine the party responsible for the delay and the cost for it, which Lam Poah estimates that it would probably take one to two years to be resolved. Nevertheless, the group had set aside RM20.78 million as contingent liability as at Sept 30, 2017.

In a March 14 report, Affin Hwang Investment Bank Bhd analyst Ng Chi Hoong noted that in the worst-case scenario, where JAKS is liable for the LAD on Tower A, the amount is only likely to be RM30 million based on the sale and purchase agreement signed between JAKS’ 51%-owned unit JAKS Island Circle Sdn Bhd and Star Media in 2011 and assuming that JAKS can complete the building before the end of June.

“At this juncture, we are not seeking to recoup the cost on those variation orders. The intention is to complete Tower A first and then we will sit down and discuss with Star to close the issue,” said Lam Poah.

On Feb 26, JAKS announced that completion of Tower A stood at 95.6%.

“As for the other components of the Pacific Star project which comprises a 13-storey small office home office building and three residential blocks, some 95%-96% have been sold,” said Si Eeng.

On JAKS’ current relationship with Star Media, Lam Poah said: “We still have monthly management meeting.”