IJM gets termination notice for LRT3 contract

The termination is due to the project being remodelled from a PDP model to a fixed price contract model, according to firm

by SHAZNI ONG / pic by TMR FILE

IJM Corp Bhd’s wholly owned subsidiary, IJM Construction Sdn Bhd (IJMC), has received a notice of termination from MRCB George Kent Sdn Bhd (MRCBGK) as contractor for works on the Light Rail Transit Line 3 (LRT3) project.

In an exchange filing yesterday, IJM stated it received the notice from MRCBGK for the underground package works of the LRT3 from Bandar Utama to Johan Setia.

IJM added that the termination is due to the project being remodelled from a project delivery partnership (PDP) model to a fixed price contract model, in pursuant with the direction from the government.

“The new contractual framework has resulted in MRCBGK’s employment as the PDP under the PDP agreement with Prasarana Malaysia Bhd being terminated.

“Following the termination, and pursuant to the conditions of the contract, MRCBGK as the PDP has issued the notice to IJMC,” the company said.

IJM stated that it is currently consulting its advisors and will seek appropriate legal redress under the contract.

“Apart from the potential earnings from the project, the termination of the project will not have any significant effect on the financial position of the group,” IJM said.

On March 13 last year, IJM was awarded the RM1.12 billion underground package job, the group’s first construction contract win for 2018.

The project involved the design, construction and completion of the underground tunnel, stations, ancillary buildings and other associated works, with a completion period of 31 months.

The contract boosted IJM’s outstanding orderbook to an all-time high of RM9.7 billion.

Preliminary works had commenced before the project was suspended in June 2018 by the Pakatan Harapan government, which decided to review major projects as part of efforts to rein in government expenses and the value of large projects.

The LRT3 was expected to proceed after its cost was brought down from RM31.65 billion to RM16.63 billion on reduced capacity, and is set to serve two million residents from Bandar Utama to Klang by 2020.

George Kent and Malaysian Resources Corp Bhd (MRCB) were appointed the project delivery partners for the 37km line in 2015 and have since agreed to undertake the project on a fixed price contract regime.

It was reported earlier that construction works are set to continue in the second half of this year at a reduced cost of RM16.63 billion, a 47% drop from the original cost of RM31.65 billion. The completion date is expected on Feb 28, 2024.

The decrease came after the government made the reduction of stations to 20 terminals, as well as the parking facilities from 6,000 to 2,300 bays, besides revising the selection of trains from 42 sets of six-car trains to 22 sets of three-car trains.

The implementation concept of the project was also remodelled from a project delivery partner regime to a fixed price contract regime, which shields the government from any cost fluctuations.

Prasarana Malaysia Bhd remains as the project operator, with joint venture MRCBGK as the main contractor.

Shares of IJM closed three sen or 1.25% higher at RM2.43 yesterday, giving it a market value of RM8.84 billion.

The continuation of the LRT3 project comes amid the revival of other deferred infrastructure projects.

These include the East Coast Rail Link and the Rapid Transit System which connects Johor Baru and Singapore.