PETALING JAYA: The ongoing arbitration between the two contractors currently building the Light Rail Transit 3 (LRT3) will not have any impact on the progress of the project. The two are GEORGE KENT (M) BHD and MALAYSIAN RESOURCES CORP Bhd (MRCB). George Kent told StarBiz that project operations were also running normally.
“The arbitration was to seek clarity on certain clauses in the shareholders agreement in relation to the options for securing financing for the JV Co including the order of priority of such options, ” a George Kent spokesperson said.
The JV company is MRCB George Kent Sdn Bhd.“It is still business is as usual for us with no impact on operations and the progress of project, ” he added.
George Kent had commenced arbitration proceedings against JV partner MRCB after an interpretation of a fine print clause had caused disagreements between them
According to George Kent in its Bursa Malaysia filing on Tuesday, this difference in opinion is due to an interpretation of the provisions in the shareholders agreement pertaining to the priority of the options to secure financing for the JV. George Kent said in its announcement that in the terms of the agreement, working capital requirements of the JV Co shall be obtained in the following priority: firstly, using the retained earnings of the company, secondly, by borrowings and credit facilities from third parties including financial institutions. George Kent said the third priority will be with the issuance of new shares or loans by the parties proportionate to each shareholder’s equity holding in the JV.
The JV Co is equally owned by George Kent and MRCB with a 50:50 shareholding proportion.
MRCB, which has secured funding for its half of the JV Co, declined to comment for this article.
The LRT3 project which had initially been awarded to the JV Co as its project delivery partner (PDP) in September 2015 has gone through several significant phases since it had been awarded when the previous Barisan Nasional-led government was still in power.
It had been in focus when Pakatan Harapan came into power following the general election in May last year.
The new government had said the cost of the 37km Bandar Utama-Klang LRT3 needed to be brought down before the Minister of Finance (MoF) can continue to support it financially. The government said then that it would withhold its support for extra funding unless Prasarana Malaysia Bhd finds a way to slash the total cost of the project.
The interruption was due to the heavy debt situation the country was in, with several other projects such as the KL-Singapore High Speed Rail and the Mass Rapid Transit 3 having been postponed or shelved.