Malakoff seeks RM785mil compensation from EPCC contractors of Tg Bin plant

Malakoff Corp Bhd Tanjung Bin Power Plant (coal-fired) in Johor

KUALA LUMPUR: Malakoff Corp Bhd’s subsidiary Tanjung Bin Power Sdn Bhd (TBP) is seeking claims totalling RM785mil from the consortium engaged to construct its 2,100 MW power plant in Johor.

In a filing with Bursa Malaysia, the independent power and water producer said its 90%-owned subsidiary on Wednesday began arbitration proceedings against Sumitomo Corp, Zelan Holdings (M) Sdn Bhd and Sumi-Power Malaysia Sdn Bhd.

“The arbitration is in respect of loss and damage suffered by TBP as a consequence of the respondents’ and/or their agent(s)’ negligence and/or breaches of duties and/or obligations under the EPCC (engineering, design, procurement, construction and commissioning) contract,” the company said.

The arbitration is in relation to boiler tube failures at the plant in 2013. It followed a RM782mil lawsuit filed by TBP against IHI Corp Japan, ISHI Power Sdn Bhd and IHI Power Systems (M) Sdn Bhd in December last year.

IHI had supplied the equipment and parts for the boilers and boiler system, while ISHI and IHI Power provided services to maintain and operate the boilers and mills.

Malakoff said there were at least 22 different boiler tube failure incidents at the plant, which led to the plant’s inability to meet certain required output conditions. It was also reported that the problems, with two of the plant’s three 700mw blocks taken offline, contributed to the delay in Malakoff Corp’s listing.

The three defendants filed to strike out the actions against them.

As for Sumitomo Corp and Zelan, they provided the civil works in building the plant, the first private coal-fired power plant in the country and one of the biggest privately-owned coal-fired plants in South-East Asia.

Zelan is a sister company of Malakoff, with Malakoff’s major shareholder MMC Corp Bhd holding a 39.2% stake in Zelan Holdings’ parent company, Zelan Bhd.

Two nominee directors of MMC on Malakoff’s board, Datuk Seri Che Khalib Mohamad Noh and Datuk Ooi Teik Huat, are also directors of Zelan Bhd.

Malakoff said the arbitration was not expected to have any material impact on its earnings and net assets for the financial year ending Dec 31, 2016.