CCCC has placed bank guarantees of RM10bil with MRL

The bank guarantees from CCCC was an Advance Payment Bond to MRL and came from the Bank of China and China

PETALING JAYA: China Communications Construction Co (CCCC) has furnished Malaysia Rail Link Sdn Bhd (MRL) with RM10bil of bank guarantees as commitment for it to complete the East Coast Rail Link (ECRL) project.

The bank guarantees from CCCC was an Advance Payment Bond to MRL and came from the Bank of China and China’s Export-Import Bank (Exim Bank).

Sources said the Advance Payment Bond was 15% of the total cost of the project and adequate to cover the upfront payment that CCCC was allowed to draw down on the project.

“When the project is 50% completed, the bond can be called upon in stages,” said a source.

The Chinese contractor of the ECRL was given a RM10bil mobilisation fee, or also known as advance payment to start the project.

Phases one and two of the project cost RM55bil, while an additional RM11bil is for additional work to fortify the structure for a double track in case it is needed in the future.

CCCC was allowed a mobilisation fee of RM10bil based on the total project cost of RM66bil.

The project, conceived by the previous administration, is likely to be scaled down by the new government that is looking at only completing phase one of the job that originally came up to RM46bil.

It is learnt that with some re-engineering and cost-cutting, the project can be completed at just below RM40bil.

The question that has been posed so far by the new government is why was CCCC allowed a high mobilisation fee of 15% when the norm is only 5%? Also, there are reports of CCCC diverting some of the proceeds to companies linked to the troubled 1Malaysia Development Bhd.

To mitigate its case, CCCC is expected to state that it had provided an Advance Payment Bond equivalent to the mobilisation fee.

“If CCCC does not fulfil its obligations, the bank guarantees can be called upon,” said a source.

CCCC has so far drawn down RM19.7bil on the project and work done is about RM9bil. It has billings for another RM10bil that have not been certified yet.