KUALA LUMPUR, April 26 — Kuala Dimensi Sdn Bhd (KDSB) had agreed to pay its bondholders should there be a shortfall in payments by the government to the turnkey developer for the controversial Port Klang Free Zone (PKFZ) project.
The Sun reported today that KDSB agreed in four letters, including one on September 13, 2004, signed by its director Omar Abdul Latip, to “undertake to cover the shortfall in the event of any shortfall in the amount payable by Port Klang Authority (PKA) in the year 2012 vis-a-vis the bond repayment amount.”
However, with RM733.37 million due at the end of June, PKA has said it must pay the bondholders to avoid breach of contract in the scandal that could cost taxpayers up to RM12.5 billion from an initial RM1.1 billion price tag for the 1,000-acre free economic zone.
According to The Sun, KDSB, which also sold the land for the project at an allegedly inflated price of RM25 per square foot, also indemnified a special purpose vehicle representing the bondholders from liabilities and expenses incurred should KDSB not comply with the various development agreements it had signed with PKA.
The free daily reported that PKA has paid RM2.67 billion to bondholders, with another RM1.6 billion outstanding but former Transport Minister Datuk Seri Ong Tee Keat has said that over RM3 billion has already been paid.
Former PKA chairman Datuk Lee Hwa Beng, who was appointed to the position by Ong, told The Malaysian Insider last week that the board refused to pay KDSB in 2010 as it would have lowered the outstanding sum to below RM1.6 billion, the amount the port authority is suing KDSB for uncompleted works.
But Transport Minister Datuk Seri Kong Cho Ha, who took over from Ong in June 2010, had invoked ministerial powers under the Port Authorities Act in 2010 to order the board to pay the SPV, said Lee, who left PKA in March 2011 after his contract was not renewed.
Ong, who was dropped from Cabinet after being ousted as MCA president in 2010, had also told The Malaysian Insider his directive to suspend payment in 2009 was overruled by the Finance Ministry.
“I don’t want to implicate the prime minister but on July 4, he told me to reverse the decision. I said no way. But the board, under Lee’s stewardship, had to convene a meeting grudgingly to reverse the decision,” he said, referring to Datuk Seri Najib Razak.
PKA chairman Datuk Teh Kim Poh had said last week PKA has to make payments not to KDSB but the SPV.
“KDSB has already been paid early on. As for the issue of non-compliance, that’s why we took them to court. If we have to pay KDSB today, we will not pay. It is a commitment to the SPV. We have to pay, otherwise we would have a bad image,” he had said.
PKA financial manager Adnan Abidin had also said the regulators for Malaysia’s largest port had signed a letter of undertaking in the agreement between KDSB and the SPV representing bondholders.
But Lee told The Malaysian Insider that this was “nonsense” as “from the start KDSB had asked that payment be made to the SPV. So legally, paying the SPV is the same as paying KDSB.”
The DAP has also claimed there are no contract terms requiring PKA to pay if work was not completed as under the bond agreement KDSB was to cover any shortfall in payment due to incomplete work and gave bondholders the power to sue the company in such an event.
But its publicity chief Tony Pua said the government had avoided these actions as they “will obviously mean substantial losses by KDSB, a company owned by Barisan Nasional (BN) Backbenchers Club chairman Datuk Seri Tiong King Sing.”
The project, initially tagged at RM1.1 billion after it was mooted by then Transport Minister Tun Dr Ling Liong Sik in 1997, more than quadrupled to RM4.6 billion by 2007.
A position review by top accounting firm PwC revealed in 2009 that the total cost including interest from debt repayments could reach RM12.5 billion.
Since December 2009, six individuals have been charged in court including ex-MCA president Dr Ling and his successor as transport minister, former MCA deputy chief Chan, who are both accused of lying to the Cabinet.