This article first appeared in The Edge Financial Daily on July 10, 2019

KUALA LUMPUR: IJM Corp Bhd said yesterday it will seek “appropriate legal redress” after being terminated as the works package contractor (WPC) for the underground package of the light rail transit Line 3 (LRT3) project.

The group said its wholly-owned unit, IJM Construction Sdn Bhd (IJMC), received the notice of termination from the project’s turnkey contractor, MRCB George Kent Sdn Bhd (MRCBGK), on Monday.

“IJMC is currently consulting with its advisers and will seek appropriate legal redress under the contract,” it added in a filing with Bursa Malaysia, without giving further details on the matter.

Noting that it had announced the letter of acceptance for the project worth RM1.12 billion on March 13, 2018, IJM Corp said preliminary works had commenced before the project was suspended in June 2018.

The group, however, said that apart from the potential earnings from the project, the termination will not have any significant effect on its financial position.

IJM Corp noted that the termination was due to the project being remodelled from a project delivery partnership (PDP) model to a fixed price contract model pursuant to the direction of the government.

“The new contractual framework has resulted in MRCBGK’s employment as the project delivery partner under the PDP agreement with Prasarana Malaysia Bhd (the employer of the project) being terminated,” it added.

The government had announced in July 2018 its decision to do away with the PDP model and revert to the turnkey model. It approved the continuation of the project with the final cost being reduced by 47% to RM16.63 billion from RM31.65 billion. Part of the reduction is contributed by the cancellation of a 2km tunnel and an underground station.

The completion date for the 37km-LRT3, which connects Bandar Utama in Petaling Jaya to Johan Setia in Klang, was meanwhile extended from 2020 to 2024.

The fixed price contract between Prasarana and MRCBGK was signed on Jan 25, followed by a novation agreement involving the two parties and nine WPCs on Feb 23.

The novation agreement allows the WPCs to migrate from the PDP regime to the fixed price contract regime with MRCBGK as the turnkey contractor and Prasarana as employer for the project.

The nine WPCs are Mudajaya Corp Sdn Bhd, WCT Construction Sdn Bhd, Gabungan Strategik Sdn Bhd, APEX Communications Sdn Bhd, Rahimkon Sdn Bhd, Sunway Construction Sdn Bhd, Pembinaan Jaya Zira Sdn Bhd, SN Akmida Sdn Bhd and Trans Resources Corporation Sdn Bhd.

On Jan 18, MRCBGK’s LRT3 project director Patrick Hwang Chee Leong told The Edge Financial Daily that it will not be seeking any compensation from either Prasarana or the government following the remodelling of the PDP contract into a fixed price contract.

Shares in IJM Corp closed three sen or 1.25% higher at RM2.43 yesterday, with a market capitalisation of RM8.82 billion. Year to date, the stock has climbed some 51%.