PETALING JAYA: Having failed to reach a settlement following several rounds of negotiations, Prestariang Bhd has decided to take the federal government to court to sue for compensation over the termination of its contract.
The group’s subsidiary, Prestariang SKIN Sdn Bhd (PSKIN), has named the government as defendant in a RM732.86mil legal claim in relation to the cancellation of the RM3.5bil national immigration control system (SKIN) project.
This follows the government’s unilateral termination of the project by way of expropriation in January this year.
The sum it is seeking, Prestariang said, was calculated based on the contractual formula provided in the 15-year concession agreement (CA) it had entered into with the government back in August 2017.
In a statement, the group said the parties involved had engaged in a few rounds of negotiations, but were “unable to reach an amicable settlement on the quantum”.
“As a last resort, the board of Prestariang is now fiducially obligated and compelled to litigate for its contractual payment,” it said.
PSKIN, in August 2017, had secured the 15-year concession to design, deliver, continuously maintain and provide scheduled upgrades for a new and improved immigration and border control system for the Immigration Department.
The new system was to replace the existing Malaysian Immigration System (MyIMMS).
It was agreed that PSKIN would receive about RM3.5bil over the 15-year period, subject to the entire capital expenditure being privately funded by PSkin.
However, the group, via a letter from the Home Ministry in December last year, was informed of the Cabinet’s decision to terminate the project, with the termination taking effect the following month.
The news sent the share price of Prestariang, which has a 70% stake in the project through PSkin, plunging close to six-year lows.
Prestariang, in the statement yesterday, said its subsidiary had undertaken extensive technical studies and works on the project since 2014, and had incurred a substantial amount of expenses.
“PSKIN had also entered into numerous third-party contracts for the purpose of executing the SKIN project,” it said.
Before it was awarded the contract, PSKIN had to undergo three years of technical, commercial and legal evaluation by the Home Ministry and other government agencies.Prestariang said PSKIN, in the legal claim filed yesterday, noted that the CA clearly spelt out the government’s obligations in the event that the project was unilaterally terminated by way of expropriation.
It reiterated that its subsidiary has never defaulted on the CA, and that it “strongly believes that the CA was fair and reasonable”.
The SKIN project is among several big-budget agreements entered into by the government under Barisan Nasional, which then came under review after Pakatan Harapan took over last year.
In defending the cancellation of the project, Home Minister Tan Sri Muhyiddin Yassin said at the time that the ministry had found weaknesses in the terms of the CA and implementation of the project.
Among the weaknesses, he said, were that the contract terms were more favourable to the company than the government, the exorbitant cost of the project and the limited scope of the project which did not meet the requirements of the Immigration Department.
While Prestariang later confirmed that it did not plan to contest the government’s unilateral move, and would instead seek compensation, there were reports that Kumpulan Wang Persaraan Diperbadankan (KWAP) was seeking to revive the project by offering to lower the cost.
StarBiz reported last month, quoting sources, that KWAP had proposed to cut the cost of the project by 17% to RM2.89bil if the government agreed to revive it.
KWAP currently holds a 5.84% stake in Prestariang, according to Bloomberg data.
Prestariang yesterday saw its largest decline in a single day this year, after tumbling seven sen or 11.7% to close at 53 sen.