Latest red files bear striking similarities to ECRL project

PUTRAJAYA: The RM9.41bil Multi-Product Pipeline (MPP) and Trans-Sabah Gas Pipeline (TSGP) jobs, the latest of the “red files” to be unveiled by the new Pakatan Harapan government, seem to bear some disturbingly striking similarities to the East Coast Rail Link (ECRL) project.

On Monday, Finance Minister Lim Guan Eng scrutinised the MPP and TSGP projects as the amount drawn down did not commensurate with the level of work done.

“We were shocked to discover that the amounts of RM4.71bil and RM3.54bil for the MPP and TSGP projects had already been drawn down. The total sum of RM8.25bil paid constitutes a staggering 87.7% of the total project value.

“This is despite an average completion rate of only 13%, with another two years of the contract to go,” he said at a press conference yesterday.

In the case of the RM55bil ECRL, some RM13bil has been drawn down. Speculation is rife that some of the money drawn down has been diverted to pay off 1Malaysia Development Bhd’s (1MDB) debt-servicing obligations.

The ECRL has come under heavy criticism for its RM55bil price tag, which translates to close to RM80mil per km. Other railway projects in Malaysia have so far averaged less than RM50mil per km.

Meanwhile, the terms of financing for the MPP, TSGP and ECRL projects are also similar - with China’s Export and Import Bank (Exim Bank) providing 85% of the funds, with the remaining 15% to be raised by the government locally.

According to Lim, the Finance Ministry’s wholly owned subsidiary - Suria Strategic Energy Resources Sdn Bhd (SSER) - was set up with the specific intent of undertaking the MPP and TSGP projects.

“SSER successfully secured funding from Exim Bank amounting to 85% of the project value on March 22, 2017. The balance of the 15% of funds required were to be raised via sukuk issuance. Both the Exim Bank borrowings and the sukuk are secured with federal government guarantees.

“The contracts for SSER were also signed at the same time as the contracts for the ECRL by (former Treasury secretary-general) Tan Sri Mohd Irwan Serigar Abdullah and financed by Exim Bank,” he said.

The MPP, TSGP and ECRL projects were also sealed during previous Prime Minister Datuk Seri Najib Tun Razak’s trip to China in November 2016 and the advance payments were way higher than the normal terms.

The advance payment for the projects, or better known as “mobilisation fees,” is 15% compared to the norm of 5%. The MPP, TSGP and ECRL projects, which commenced in April 2017, were also awarded without a tender.

The ECRL was awarded to China Communications Construction Co, while the MPP and TSGP jobs were given to China Petroleum Pipeline Bureau (CPPB).

Lim said the MPP and TSGP projects were awarded to CPPB on Nov 1, 2016.

“The agreements were signed by Irwan, who was the chairman of SSER. Irwan recently resigned on May 23,” he said, adding that as at end March 2018, the MPP and TSGP projects had achieved only “14.5% and 11.4% progress completion, respectively”.

Lim said the completion rates were, however, yet to be verified or audited.

He also said Pakatan Harapan would be seeking the assistance of the Chinese government to help trace the flow of funds into China to investigate the possibility of money laundering.

CPPB is a subsidiary of the China National Petroleum Corp and the primary builder of pipelines in China. The company is responsible for most of the cross-country pipeline infrastructure in China and has several large-scale projects abroad.

These include the United Arab Emirates Habshan–Fujairah oil pipeline; the India East West Gas Pipeline; and the India China-Russia East Route Natural Gas Pipeline.

In July last year, Petroliam Nasional Bhd’s unit PRPC Refinery and Cracker Sdn Bhd inked a deal with CPPB and CPP Petroleum Engineering (M) Sdn Bhd to develop olefins storage facilities within the Pengerang Integrated Complex.