As a PDP, LBU stands to get between 5% and 6% of the total cost of the project
MUCH has been written on the Pan Borneo Highway, the multi-billion-road network connecting Sarawak and Sabah that is finally being rolled out after it was first mooted over five decades ago. The company mandated to deliver the project is little-known Sarawak-based company Lebuhraya Borneo Utara Sdn Bhd (LBU).
Early this week, the company signed a memorandum of understanding (MoU) with the Federal Government and the Sarawak state government for construction of the Sarawak portion of the highway. The first phase is expected to begin in September.
LBU has been appointed as the project delivery partner (PDP) and will be responsible for supervising and managing construction works of the 1,090 km-long toll-free stretch of the Sarawak side.
This means LBU is now the sole point of accountability to complete the said stretch at a reasonable cost and period.
The overall project has been tagged with a ceiling budget of RM27bil.
According to industry players, it is generally known that a main contractor could make a profit margin of about 10%, leaving the balance for the sub-contractors to execute the job. “But the cost of completing the job goes way above what has been budgeted and more often that not there are delays. This is why a PDP comes in. The role of a PDP is to ensure that the job is completed on time and within budget. In return they get about 5% or 6% of the project cost,” says the player.
If this is really the case, LBU could stand to earn more than RM1.3bil from the Pan Borneo Highway provided it is done within cost and on schedule.
“Apart from that, sometimes the PDP can also participate in some sections of the job that are more difficult and costly,” says an industry player.
The PDP job of the Pan Borneo Highway is enough to throw the spotlight on the company and the people behind it, more so given that the highway will replace Bakun Dam as the biggest and most expensive infrastructure ever built in Sarawak.
It is not known if there was a competitive tender process for the PDP job.
StarBizWeek was unable to get in touch with the company as there was no contactable number.
According to the Companies Commission of Malaysia (CCM), LBU was set up is 2011 with a paid-up capital of RM1mil,
Its income statement as at Dec 311, 2013, filed with the CCM, showed that it has no revenue generating activity yet.
Industry sources say LBU was initially set up to undertake the construction of the whole Sarawak stretch, but the government felt that it had better access to cheaper financing and the framework was changed to make it the PDP.
A PDP concept allows the Ministry of Finance to provide the necessary funding through Infra Fund – a similar concept used for the Mass Rapid Transit (MRT) project.
Appointed firms, like LBU, will then receive a fee based on meeting an greed key performance index or KPI.
For the MRT project, the job of the PDP went to a joint venture between MMC Corp Bhd and Gamuda Bhd , two established players in the construction industry and project management space.
As for LBU, very little is known of its track record in terms of project management. “Can it undertake a project this size,” asks a fund manager.
A company search on LBU shows that its directors are mostly from Peninsular Malaysia. Two personalities from Sarawak on its board are Tan Sri Abang Ahmad Urai Hakim Abang Mohideen and Mohd Zaidee Abang Hipni.
Ahmad Urai and Mohd Zaidee are shareholders of LBU by virtue of their interest in Maltimur Resources Sdn Bhd, which owns a 55% stake in the former.
Ahmad Urai, who is LBU chairman and once an active politician, has a 30% stake in Maltimur, while Mohd Zaidee owns 40%. Through his interest in Maltimur Resources, Mohd Zaidee effectively controls about 22% of LBU. The other shareholder of Maltimur is one Safuani Andul Hamid, who is also a director at LBU.
LBU’s other shareholder is Jalinan Rejang Sdn Bhd, which hold the remaining 45% stake. Based on its CCM company profile, it has four shareholders, some of whom are directors at LBU.
Mohd Zaidee, meanwhile, is said to be a close associate of well-known Sarawak businessman, Tan Sri Bustari Yusuf (pic).
The 46-year old chartered accountant was once the group executive director of OBYU Holdings Sdn Bhd, which is Bustari’s flagship company.
OBYU is an investment holding company, which has its finger in a several industries including property, construction, plantations and telecommunications.
Before being appointed director of LBU on December 2 last year, Mohd Zaidee was the chief financial officer of Petra Energy Bhd . Bustari is a major shareholder of Petra Energy with a 27.47% indirect interest through Shorefield Resources Sdn Bhd. He bought into the oil and gas outfit in 2009, first taking up a 30% stake.
Petra Energy also counts Datuk Mohamed Nizam Abdul Razak, who is the brother of Prime Minister Datuk Seri Najib Abdul Razak, as a substantial shareholder with a 9.09% stake as at April 17, 2015.
Elsewhere, Bustari has been as an independent non-executive director of PPB Oil Palms Bhd since February 2007.
He is also now a name to watch in the healthcare sector, through his 36% shareholding in Metrocare Services Sdn Bhd.
Metrocare Services owns 60% of One Medicare Sdn Bhd, the company with the concession to operate and manage hospital support services (HSS) in Sarawak for a 10-year period. The remaining 40% stake in One Medicare is held by integrated facilities management firm, Faber Group Bhd .
The 64-year-old Bustari, who hails from Sibu but has made Sarawak his base, is said to be influential in Putrajaya.
Industry sources say he is the “go-to man” for many companies seeking to do business in Sarawak because of his extensive links in the state.
Incidentally, Bustari is also the brother of current Works Minister Datuk Seri Fadillah Yusof.
With the signing of MoU, work on the first phase - a stretch spanning 773 km – is expected to start in September, according to a report by Bernama quoting Fadillah.
The Federal Government, according to Fadillah, was still working to finalise the cost and design of the highway,
Works on the Sarawak stretch is expected to be completed by 2023 and bring spill over effects of at least four times to the economy, if a Government study of Peninsular Malaysia’s North South Expressway is a yardstick.
The mammoth project was first announced in 1963, but did not take off until it was fast-tracked under a public-private-partnership model in Budget 2015.