Defence Ministry seeks RM148mil damages from Boustead subsidiary

Royal Malaysian Navy KD Tun Razak submarine sailing toward the Lumut Naval base jetty accompanied by groups of sail boats on Friday. SAIFUL BAHRI/The Star

KUALA LUMPUR: Boustead Heavy Industries Corp Bhd’s (BHIC) subsidiary Boustead DCNS Naval Corp Sdn Bhd has been hit with liquidated damages claim totalling RM147.7mil from the Defence Ministry with regards to its Scorpene submarines support contract.

Boustead DCNS, which is 60% owned by BHIC and 40% by French naval systems builder DCNS SA, received a letter from the ministry on Monday claiming compensation amounting to RM53.2mil and 19.3 million euros (RM94.5mil) for the breach of obligations under the contract to undertake in-service support (ISS) for two Royal Malaysian Navy (RMN) Scorpene submarines.

In a filing with Bursa Malaysia on Tuesday, BHIC said Boustead DCNS was currently responding to the letter of claim.

Without elaborating on “the breach of obligations”, the 65% owned subsidiary of Boustead Holdings Bhd said the BHIC board opined that BDNC had “adequate basis” to defend and to appeal against the claim.

The claim, it added, was expected to have a material financial and operational impact on the BHIC group for the financial year ending Dec 31, 2017.

BHIC, however, did not elaborate on the potential impact.

The Government had awarded the ISS job to Boustead DCNS on Aug 12, 2010, for total contract sums of 193 million euros (RM946.34mil) and RM532mil.

The Government subsequently renewed the ISS contract - which was to expire in late 2015 - until May this year for 24.98 million euros (RM122.42mil) and RM161.22mil.

Earlier this year, the Boustead group also bagged a RM1.17bil contract from the Defence Ministry to supply four littoral mission ships for the RMN.
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