KUALA LUMPUR (June 5): Finance Minister Lim Guan Eng revealed today that the previous Barisan Nasional government had made payments amounting to RM8.25 billion for the multi-product pipeline (MPP) and the Trans-Sabah Gas Pipeline (TSGP) projects, despite only 13% of work completed for both projects.
These payments — representing 87.7% of the total project value for both projects of RM9.41 billion — were made despite an average completion rate of only 13%, with another two years of the contracts to go, the minister in a statement today.
Suria Strategic Energy Resources Sdn Bhd (SSER), a wholly-owned Ministry of Finance subsidiary, was set up on May 19, 2016 with the specific intent of undertaking the two projects. Both projects were approved by the Cabinet on July 27, 2016.
The MPP involved a 600km multi-product petroleum pipeline connecting Melaka and Port Dickson to Jitra, Kedah, costing RMB4.53 billion and RM2.53 billion, or approximately RM5.35 billion.
The TSGP, on the other hand, was to build a 662km gas pipeline from Kimanis Gas Terminal to Sandakan and Tawau, costing RMB3.08 billion and RM2.14 billion, or approximately RM4.06 billion.
Both projects amounting to RM9.41 billion were awarded to China Petroleum Pipeline Bureau (CPPB) on Nov 1, 2016.
“The agreements were signed by the then Treasurer secretary-general Tan Sri Irwan Serigar Abdullah, who was also the chairman of SSER.
“SSER successfully secured funding from China EXIM Bank amounting to 85% of the project value on March 22, 2017. The balance of the 15% of funds required, were to be raised via sukuk issuance. Both the China EXIM Bank borrowings and the sukuk are secured with Federal Government Guarantees,” Lim said.
During a briefing provided to Treasury officials on May 28, SSER reported the three-year projects had commenced in April 2017, the minister added.
“As at the end of March 2018 or exactly a year later, the MPP and TSGP projects had achieved only 14.5% and 11.4% progress completion respectively. The above completion rates have yet to be verified or audited.
“However, we were shocked to discover that the amounts of RM4.71 billion and RM3.54 billion for the MPP and TSGP projects had already been drawn down and paid to CPPB.
“We have discovered that the payment schedule for the contracts are based almost entirely on timeline milestones, and not on progressive work completion milestones. Worse, based on the agreements signed, 85% of the project value would be paid by March 1, 2018,” Lim said.
This does not yet include two other consultancy agreements signed for the same projects above, worth approximately RM312 million and RM213 million, and a maintenance agreement worth RM476 million, awarded to companies from China, totalling an additional RM1 billion, the minister added.
“The contracts were negotiated by the Prime Minister’s Department, without involving Treasury officials.
“The Attorney General’s Chambers have also confirmed that these contracts were signed, despite numerous unanswered questions and red flags raised,” Lim said.
Lim said he was informed by Treasury officals that SSER is an offshoot by the same people behind SRC International, a former subsidiary of 1MDB.
“SRC is the acronym for Strategic Resources Corporation, a name that is similar to SSER. The contracts for SSER were also signed at the same time as the contracts for the East Coast Rail Link project by Irwan Serigar, and financed by China EXIM Bank.
“It should be noted that the president of SSER is Datuk Mohammed Azhar Osman Khairuddin, who is also a member of the company’s board of directors. Azhar is also a director of Putrajaya Perdana Sdn Bhd, a company linked directly with Low Taek Jho, better known as Jho Low.
“Based on the highly suspicious transactions above, I have instructed my officers to file a report with the Malaysian Anti-Corruption Commission last week. Prime Minister Tun Dr Mahathir Mohamad has been briefed on the scandal.
"In addition, the Ministry of Finance, as the sole shareholder of SSER, will be taking steps to take control of the company, pending investigation,” Lim said.
H added that the board of directors of SSER and Irwan Serigar in particular, must answer as to why SSER signed such a “lopsided contract that clearly jeopardises the interest of the Malaysian people and government”.
“In addition, we would welcome the former finance and prime minister Datuk Seri Najib Razak, who has been active on Facebook recently, to explain how he could possibly approve the above transactions.
“Finally, if necessary, we would seek the assistance of the Chinese government to help trace the flow of funds in China, in order to investigate the possibility of money laundering,” Lim added.