MAHB seeks to complete PetDag arbitration by year end

SEPANG: Malaysia Airports Holdings Bhd (MAHB) is looking to resolve the arbitration process with Petronas Dagangan Bhd (PetDag)'s subsidiary Kuala Lumpur Aviation Fuelling System Sdn Bhd (KAF) by the end of the year.

The airport operator was looking at extending the concession tenure of 25 years with KAF rather than paying the latter RM456mil as detailed in the arbitration proceedings. 

MAHB's unit Malaysia Airports (Sepang) Sdn Bhd had entered into an airport facilities agreement with KAF in Septemer 2007 to give it 50-year rights to operate and maintain the KLIA aircraft fuelling system.

However, KAF's tenure with MAHB had been halved when in February 2009, MA Sepang and the government signed an operating agreement that gave MA Sepang the rights to maintain the KLIA for only a period of 25 years.

"Admittedly, Petronas Dagangan had invested "significant amounts in capital expenditure" for the original concession period of 50 years, but the decision lies entirely with the government.

"It was the government who restructured our agreement so we have asked all our operating partners and vendors to follow through on this decision. We have been engaging with the government for a resolution with PetDag," MAHB managing director Datuk Mohd Badlisham bin Ghazali told reporters in a press conference after the airport operator's 17th annual general meeting on Wednesday, adding that it was also the government's decision who the fuel partner would be.

Badlisham said MAHB was inclined to arriving at a resolution in terms of the time period with PetDag rather than settle the compensation amount as there were more ways to settle the "back-to-back understanding" as was being done with all other suppliers of the airport.

"PetDag said (the shortened tenure) means a loss of income but that is based on a future amount, an alleged "future loss of income". We don't see any material impact here for now," MAHB chief financial officer Raja Azmi Raja Nazuddin said.

Asked on the next course of action MAHB would take should either party refuse to extend the tenure of the concession with KAF, Badlisham said: "We will then look for other ways to resolve this issue."