KUALA LUMPUR (Nov 24): Zelan Bhd said it would be seeking indemnity from partner Sumitomo Corp against Malakoff Corp Bhd's multi-million claim in relation to works done for the Tanjung Bin Power Plant project.

It would also be seeking legal advice to defend and safeguard its subsidiary Zelan Holdings (M) Sdn Bhd's interests in the arbitration proceedings initiated by Malakoff to recover the said sum.

Its response, filed with Bursa Malaysia today, came following Malakoff's announcement yesterday that it is seeking RM785 million via arbitration from Japan's Sumitomo Corp, Zelan Holdings and Sumi-Power Malaysia Sdn Bhd for breach of contract in relation to the project.

Malakoff initiated the proceedings via its subsidiary Tanjung Bin Power Sdn Bhd (TBP), which owns the Tanjung Bin Power plant in Johor.

Zelan said Malakoff is seeking RM782.02 million from the three companies.

The sum, it said, was being sought for what Malakoff said were losses arising from: 1) available capacity payments and daily utilisation payments amounting to RM404.25 million under the Power Purchase Agreement between Malakoff and Tenaga Nasional Bhd; 2) a claim of RM84.71 million for losses incurred due to the inability of the facility's boilers to safely reach 700MW; and 3) costs of repairs and rectifications amounting to RM293.06 million.

Malakoff is also seeking an indemnity from the three companies against losses incurred and any future losses that it would incur, including claims or causes of action brought against it by any third party due to the breaches, default, negligence, errors and or omissions on the part of the three companies.

Today, Zelan said its scope of work under the project, as outlined in the Sumitomo-Zelan Consortium Agreement dated April 1, 2003, is only limited to civil works.

Sumitomo Corp's scope, it said, was "all necessary work for the execution and completion of the project excluding the complete civil work".

“With respect to one another, each consortium party shall be solely responsible and fully liable for its own scope, including quality, cost overrun, delay in performance and warranty matter.

“If claim is made by the owner of the project or third parties against a consortium party who is not responsible, the consortium party responsible shall indemnify the other consortium party against whom the claim was made,” Zelan explained.

This was the basis it provided for seeking an indemnity from Sumitomo Corp.

Meanwhile, it also disclosed that two of its directors, namely Datuk Seri Che Khalib Mohamad Noh and Datuk Ooi Teik Huat, are also directors of Malakoff.

Zelan's major shareholder, MMC Corp Bhd, which owns 39.25% of Zelan's shares, is also the major shareholder of Malakoff with 17.95% of its shares, it added.

At 3.21pm today, Zelan shares slid half sen or 3.23% to 15 sen, giving it a market capitalisation of RM135.18 million.