This article first appeared in The Edge Financial Daily on June 25, 2019

KUALA LUMPUR: Scomi Group Bhd said yesterday its unit Scomi Transit Projects Sdn Bhd (STP), last Friday, inked a RM122 million agreement with Prasarana Malaysia Bhd (PMB) to design, manufacture, complete and deliver seven four-car vehicles for the KL Monorail.

In a statement on Bursa Malaysia, Scomi Group said the completion agreement is conditional upon PMB issuing an acceptance certificate after the expiry of a monitoring period following the completion of remedial works to put five four-car monorail trains into revenue service.

“The works [for the seven four-car vehicles] are to be completed within 18 months from the issuance of a notice to proceed by PMB. STP shall provide PMB with a design guarantee bond and an endemic defects bond, in the form of on-demand bank guarantees each for 2.5% of the completion agreement sum to cover five years commencing from the system acceptance certificate’s issuance [as defined in the contracts].

“PMB shall have the right to step in and perform the works under the completion agreement in the event of [a] default by STP. PMB may retain 2.5% of any payment due to STP under the completion agreement. STP shall provide PMB with a parent-company guarantee issued by Scomi Group Bhd to guarantee the due performance by STP of its obligations under the completion agreement and indemnify PMB from any losses that it may suffer up to a maximum liability of 5% of the completion agreement sum,” Scomi Group said.

The group said STP will procure and supply components, services and materials required under the completion agreement. Scomi Group said the costs of components, services and materials will be paid directly to the vendors by PMB.

“The completion agreement will not have any material impact on the company’s (Scomi Group) earnings per share and net assets per share. There is no effect on the company’s gearing as no bank borrowings are expected to be arranged for the completion agreement,” Scomi Group said.

The trading of Scomi Group shares was suspended from 9.30pm to 12.30pm yesterday in conjunction with the announcement of the agreement. After trading resumed, the stock closed two sen or 33.33% higher at eight sen apiece, with a market value of RM76.82 million.