KUALA LUMPUR: Malaysia Marine and Heavy Engineering Holdings Bhd (MHB) has been slapped with a RM125.1 million claim by Kebabangan Petroleum Operating Co Sdn Bhd (KPOC) for an alleged breach of contract to supply valves.

In a filing with Bursa Malaysia yesterday, MHB said its wholly-owned unit Malaysia Marine and Heavy Engineering Sdn Bhd (MMHE) received a notice of arbitration dated March 13, involving two contracts namely, the fabrication of the Kebabangan field (KBB) topsides dated Sept 20, 2011 between KPOC and Sime Darby Engineering Sdn Bhd; and a novation agreement dated March 30, 2012 signed among KPOC, Sime Darby Engineering and MMHE.

Located about 135km north-west of Kimanis, Sabah, the KBB platform was developed as a hub for the development of deepwater oil and gas assets in the north of Sabah.

Under the contracts, MMHE was responsible to carry out and complete certain works for KPOC, including to construct, engineer, procure, fabricate, inspect, test and pre-commission, load-out and sea-fastening of the KBB topsides and associated appurtenances, said MHB.

The works were completed in June 2014.

“KPOC, in its notice of arbitration, claims that MMHE was and is in breach of the express and/or implied terms of the contracts in respect of the supply of certain valves,” said MHB.

Noting that the financial impact of the arbitration initiated by KPOC on the group is dependent on the outcome, MHB said, adding that the expected loss arising from this claim is anticipated to be at approximately RM125.1 million, or more.

However, no operational impact is expected to arise from the claim, MHB added.

“MMHE will vigorously defend the claims made by KPOC and is presently exploring its options to pursue a counterclaim against KPOC,” said MHB, adding that apart from the arbitration proceeding, MMHE reserves its right to pursue any other legal actions as may be permitted under the Malaysian laws, including, if appropriate, to seek indemnity from the ultimate supplier of the said valves.

MHB said it will update the stakeholders of any material impact on the group’s business and financial results for the financial year ending Dec 31, 2019.