KUALA LUMPUR (Nov 23): Malakoff Corp Bhd has launched arbitration proceedings against Japan's Sumitomo Corp, Zelan Holdings (M) Sdn Bhd and Sumi-Power Malaysia Sdn Bhd seeking RM785 million for breach of contract.

Malakoff took the step through its subsidiary Tanjung Bin Power Sdn Bhd (TBP), which owns the Tanjung Bin Power plant in Johor.

In a filing with Bursa Malaysia today, Malakoff said the Sumitomo Zelan Consortium was engaged to provide TBP with engineering, design, procurement, construction, commissioning (EPCC) and related services in respect of the plant and its related facilities.

"The arbitration is in respect of loss and damage suffered by TBP as a consequence of the respondents' and/or their agent(s)' negligence and/or breaches of duties and/or obligations under the EPCC contract. At present, the loss and damage suffered by TBP is estimated to be approximately RM785 million," it added.

Malakoff said the arbitration is not expected to have any material impact on the earnings and net assets of the group for the financial year ending Dec 31, 2016.

In July 2003, a consortium of Sumitomo, Zelan and Sumi-Power Malaysia had beat three other giants — Japan's Mitsubishi, German's Siemens and France's Alstom — to win a RM6 billion contract to build the 2,100-megawatt (MW) coal-fired plant to supply electricity to state utility company Tenaga Nasional Bhd.

The Tanjung Bin power station comprises three plants of 700 MW each.

Malakoff noted that MMC Corp Bhd, being a major shareholder of Malakoff, holds a 39.2% stake in Zelan Bhd, which is, in turn, the holding company of Zelan Holdings.

It also pointed out that the nominee directors of MMC Corp on the board of Malakoff namely Datuk Seri Che Khalib Mohamad Noh and Datuk Ooi Teik Huat are also directors of Zelan Bhd.

Shares in Malakoff closed up one sen or 0.71% at RM1.42 today, with 5.36 million shares changing hands, giving it a market capitalisation of RM7.1 billion.