INTRODUCTION

Reference is made to the Malaysia Marine and Heavy Engineering Holdings Berhad (“MHB”) or “the Company’s”) announcements dated 14 March 2019 and 6 August 2021 as well as the material litigation updates in the Note B8 of the Quarterly Results duly announced on 26 April 2019, 02 August 2019, 24 October 2019, 12 February 2020, 29 April 2020, 23 July 2020, 27 October 2020, 09 February 2021, 28 April 2021 and 30 July 2021.

THE DISPUTE

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

MHB’s wholly-owned and major subsidiary, Malaysia Marine and Heavy Engineering Sdn Bhd (“MMHE”) was to carry out and complete certain works for Kebabangan Petroleum Operating Company Sdn Bhd (“KPOC”), including to construct, engineer, procure, fabricate, inspect, test & pre-commission, load-out and sea-fastening of the KBB Topsides and associated appurtenances (“Contract”). 

The works were completed in June 2014.

KPOC, in its Notice of Arbitration dated 13 March 2019, claims that MMHE was and is in breach of the express and/or implied terms of the Contract 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. KPOC subsequently, as part of its Closing Submissions dated 9 March 2021, identified its claim amount as RM58.9 million.

THE FINAL AWARD AND SETTING ASIDE APPLICATION

The Tribunal has issued the Final Award dated 23 July 2021 in the arbitration proceedings initiated against MMHE by KPOC (“the Final Award”).

In the Final Award, the Arbitral Tribunal has ordered that MMHE shall pay KPOC the following:-

a) The sum of RM17,241,178.02 as damages for the costs expenses incurred by KPOC for assessment, procurement and replacement of valves in the period of 2016 to 2019, together with interest at the rate of 5% per annum from 11 October 2019 to the day of payment;

b) The sum of RM9,820,770.00 as damages suffered by KPOC in having to procure 1365 valves and install 1454 valves in the future, together with interest at the rate of 5% per annum from 11 October 2019 till the date of payment; and

c) The sum of RM1,029,167.25 for its legal fees and expenses.

MHB Board of Directors wishes to announce that on 30 September 2021, MMHE had filed an application to set aside the Final Award pursuant to Section 37 of the Arbitration Act 2005, whereby MMHE seeks for the Final Award to be set aside on grounds, amongst others, that there was a breach of the rules of natural justice in connection with the making of the Final Award.

THE FINANCIAL AND OPERATIONAL IMPACT TO THE GROUP 

MHB Board of Directors is of the view that the application to set aside the Final Award is in the best interests of MMHE and the Group and it will not have any material impact on the financial position and operations of MMHE.

Further announcements will be made in respect of any material development thereof.

This announcement is dated 30 September 2021.