KUALA LUMPUR (Feb 1): The government's termination of the integrated immigration system that was in the process of development by Prestariang SKIN Sdn Bhd has resulted in irreparable damage to Prestariang Bhd group of companies that in turn resulted in destruction of shareholder value and created financially stress.
Prestariang Bhd is now known as AwanBiru Technology Bhd (AwanTec). SKIN is the Bahasa Malaysia's abbreviation of the Sistem Kawalan Imigresen Nasional (SKIN) project that was awarded in 2018 just before the 14th general election (GE14).
The company's counsel Datuk Lim Chee Wee in a continuation of his opening statement over the suit filed in 2019 said that the expropriation by the government resulted in the company undergoing tremendous reputational loss and this continued till today.
“This is also threatening the ongoing viability and competitiveness of Prestariang,” he said.
The senior lawyer also showed High Court Judicial Commissioner Datuk Seri Latifah Mohd Tahar the calculation and formula used by his client to arrive at the company seeking damages of between RM732.86 million and RM922 million following the termination.
“The RM732.86 million is a conservative approach in the calculation, while the RM922 million is the capital asset pricing model. The calculations are based on the weighted average cost of capital (WACC),” he said.
The submissions on the opening statement took place last Friday (Jan 29), via videoconferencing, with copies of it being made available to theedgemarkets.com.
Lim said his client Prestariang SKIN had put in substantial effort to avoid termination and to reduce the cost of the project further, but the then Malaysian government was insistent on terminating the concession agreement (CA).
“The impact or consequences suffered by Prestariang SKIN, its parent company and employees were a plunge in its share price, loss to shareholders and loss of jobs,” he said.
In the last session in the opening statement, Lim disclosed that prior to November 2018, the number of employees of AwanTec was 319 and, after the expropriation, only 154 employees were retained as at April 2019, and as at June 2020, the number had fallen further to 85.
CA stipulates project was for 15 years since August 2017
The CA for the SKIN project was for a duration of 15 years, beginning in August 2017, under the previous Barisan Nasional (BN) government to design and maintain a new immigration and border control system.
On Dec 10, 2019, the then Pakatan Harapan (PH) government announced that the Cabinet had decided to scrap the project in favour of a new system that would save government funds.
The concession involved a three-year build-and-deployment phase, and a 12-year maintenance and technical operation phase. Payment by the government to Prestariang SKIN was to commence upon full commissioning of the system with an average annual payment of RM294.7 million.
Lim said his client had conducted numerous occasions to come up with the equity internal rate of return (EIRR) that was eventually fixed by both parties, and this formula was used to calculate the damages.
He further pointed that the contractual consequences of termination are stipulated under Clause 28.3.1(b)(iii), where the government is obliged to pay for the present value availability charges (ACs) for the remaining concession period discounted at the WACC of the company.
He emphasised that there was no breach of contract on his client's part as prior to its termination, his client had completed 22.37% of the project.
“As there is no breach of contract, the penalty argument does not arise. The sum that we are claiming for is not extravagant nor unconscionable,” he said, adding that the CA does not provide for a specified sum but rather gives a contractual formula that was cited earlier.
Lim, who appears with Joyce Lim Hwee Yin and Esther Hong Hui Jun, will continue with his statement on Feb 26, and subsequently senior federal counsel Ahmad Hanir Hambali is expected to give his reply for the government.