KUCHING: The Public Works Department (JKR) cannot liquidate the performance bond of RM24.75 million put up by Zecon Bhd related to the Petra Jaya Hospital project here.
The Kuala Lumpur High Court on Thursday (March 14) granted in Zecon’s favour the interim injunction restraining JKR from making a claim on the bank guarantee for the performance bond pending the disposal of the dispute on the project between the two parties.
To recap, the federal government has earlier challenged the court injunction obtained by Zecon to restrain JKR from making a claim or receiving the proceeds from the bank guarantee on Aug 10, 2018.
The court adjourned the hearing on the government’s challenge on Dec 4 to enable both parties to discuss a possible settlement to their disputes.
Following that, Zecon has written to the Attorney General to request JKR to accede to the court’s decision to explore settlement to their disputes and set a date to meet up and discuss.
Zecon filed an ex-parte application to the court and obtained the injunction two days after JKR terminated the RM495 million contract for the hospital project awarded to Zecon on April 26, 2013.
Zecon was appointed as the turnkey contractor for the proposed 300-bed hospital with a project duration of 42 months.
However, the company was terminated as the turnkey contractor due to “unacceptable” works delay on the project.
It was reported that Zecon should have completed and delivered the project on Nov 29, 2016 but, according to the Health Ministry, the company had merely completed 34.54 percent of the project as of June 2018.
Zecon has claimed that it was wrongly dismissed, and that as a result of the termination, a substantial amount of the company’s money was stuck in the project in terms of equipment supplied and delivered on site and work done but not paid although certified.
The certified amount by Zecon’s consultants and due for payment by JKR is about RM55 million, according to the company.
Zecon has initiated arbitration action against JKR, claiming payment for works done, equipment supplied and delivered to site, costs and expenses as well as losses to the tune of RM155 million.
In early November, Zecon told Bursa Malaysia that it had defaulted in the payment of some RM104 million to syndicated lenders on financial facilities for the hospital project.
The lenders have taken Zecon to court and the case is pending.
The company had also defaulted payment of RM20 million, being the balance of the principal amount under the revolving credit facility due on Dec 28, 2017 in relation to the progressive build-up funds into the Sinking Fund account.
To address its financial woes, Zecon has said that it is formulating and implementing a proposed repayment scheme, which include private placement and issuance of irredeemable convertible preference shares. A consultant on this has been appointed.
As an alternative, the group is looking at monetising its certain property assets within first half-2019.
