Transport Ministery Datuk Seri Kong Cho Ha yesterday directed the Port Klang Authority’s (PKA) board to release payment due to bondholders of the Port Klang Free Zone (PKFZ) project, setting aside the port authority’s earlier decision to hold back payment.
“We will pay according to what’s been decided much earlier, according to the schedule that’s been set,” said Kong, who is also MCA secretary-general, when approached by reporters after the MCA presidential council meeting here.
Kong was asked to comment on The Edge Financial Daily’s report yesterday that PKA’s board had decided to withhold the final payment of RM222.58 million to Free Zone Capital Bhd (FZCB), one of the four special-purpose vehicles (SPVs) established by PKFZ turnkey contractor Kuala Dimensi Sdn Bhd (KDSB), for the project.
It was learnt the PKA board had decided not to pay FZCB in view of the port authority’s RM1.4 billion legal suit against KDSB, for alleged wrongful and excessive claims on work done for the PKFZ, among other claims.
With the decision, PKA had effectively shifted the decision making on the bond obligations to the transport minister. Section 3(4) of the Port Authorities Act 1963 empowers the minister to override a decision by the port authority, as long as such orders were not inconsistent with the Act.
Asked if he would order PKA to change its decision, an irate-looking Kong said, “I will talk to them” before walking away.
In an almost immediate response at a separate event in Port Klang yesterday, PKA chairman Datuk Lee Hwa Beng said the port authority would do as directed by the minister.
“He is our boss. If he directs us to pay, we will pay,” Lee said when met at the official opening of Container Connection (M) Sdn Bhd in Port Klang.
The PKFZ bonds were issued with the implicit backing of the federal government in the form of letters of support, the efficacy of which has been the subject of different interpretations and placed under serious doubt.
However, Kong’s statements echoed earlier reassurance by the government, including Prime Minister Datuk Seri Najib Razak, who pledged that the government would honour the debt obligations on bonds issued by KDSB to finance the PKFZ project.
Recently, The Edge Financial Daily also reported on the default late last year of a RM240 million bond by Malaysian International Tuna Port Sdn Bhd (MITP), which also had the backing of a government letter of support. It is now the subject of a legal proceeding between the bond trustee and MITP.
PKA scheduled repayments to bondholders totalling RM723 million and had already disbursed RM350 million to two SPVs — Transshipment Megahub Bhd (TMB) and Valid Ventures Bhd (VVB) — in June.
PKA is due to make a total payment of RM372 million by July 31, with RM222.58 million payable to FZCB and another RM150 million to Special Port Vehicle Bhd (SPVB). The port authority is due to make payments to the other three SPVs until 2017.
PKA had taken a 20-year soft loan of RM4.6 billion from the Ministry of Finance to repay bondholders, with the first repayment to the ministry due in November.
Asked about what PKA would be faced with in the event it won its legal suit against KDSB but unable to recover any money, Lee sidestepped the question, saying: “PKA reports to the transport minister. So if (he) directs us to pay, we will pay.
“We are going to have a board meeting on July 29. If the transport minister say pay, we will pay.”
This article appeared in The Edge Financial Daily, July 28, 2010.
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