INTRODUCTION

Malaysia Marine and Heavy Engineering Holdings Berhad (“MHB” or “the Company”) wishes to announce that MHB’s wholly-owned and a major subsidiary, Malaysia Marine and Heavy Engineering Sdn Bhd (“MMHE”) had on 14 March 2019 received via its solicitors a Notice of Arbitration dated 13 March 2019 from Kebabangan Petroleum Operating Company Sdn Bhd (“KPOC”) in relation to claims arising from the following contracts:

(1)        CONTRACT NO. KPOC/COC/2009/015: FABRICATION OF KBB TOPSIDES DATED 20.09.2011 BETWEEN KEBABANGAN PETROLEUM OPERATING COMPANY SDN BHD AND SIME DARBY ENGINEERING SDN BHD; and

(2)        NOVATION AGREEMENT (In relation to CONTRACT NO. KPOC/COC/2009/015) DATED 30.03.2012 BETWEEN KEBABANGAN PETROLEUM OPERATING COMPANY SDN BHD, SIME DARBY ENGINEERING SDN BHD AND MALAYSIA MARINE AND HEAVY ENGINEERING SDN BHD.

(collectively referred hereafter as the “Contracts”).

THE DISPUTE

The Kebabangan (KBB) Field is located about 135km NW of Kimanis, Sabah.  The KBB Platform was developed as a hub for development of deepwater oil and gas assets in the North Sabah area.

By virtue of the Contracts,  MMHE was responsible to carry out and complete certain works for KPOC, including to construct, engineer, procure, fabricate, inspect, test & pre-commission, load-out and sea-fastening of the KBB Topsides and associated appurtenances. 

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.

KPOC has included an indicative amount of its alleged loss as part of the Notice of Arbitration, at approximately RM125.1 million, and has claimed that it continues to allegedly suffer losses.

EFFECT OF THE ARBITRATION

The financial impact of the arbitration initiated by KPOC on MHB's Group of Company is dependent on the outcome. The expected loss, if any, 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.

MMHE will vigorously defend the claims made by KPOC and is presently exploring its options to pursue a counterclaim against KPOC. 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.

The Board of Directors of MHB undertakes to continuously update the stakeholders of any material impact to MHB’s Group business and financial results for the financial year ending 2019.

This announcement is dated 18  March 2019.