AsiaShipyards

Shipyard order sparks political debate in Malaysia

TH Heavy Engineering Berhad (THHE) has been awarded a RM740m ($181.3m) government contract to build three offshore patrol vessels (OPV) for the Malaysian Maritime Enforcement Agency (APMM), despite the shipyard having little experience in shipbuilding.

THHE specialises in the construction of offshore platforms, but won the shipbuilding contract on the condition that it cooperates with other local companies with the necessary facilities, capacity and experience for shipbuilding, according to reports.

The order has sparked political debate in Malaysia, particularly from the government’s opposition.

“If [THHE] has already faced issues with finishing tasks, such as delays and a suspension by Petronas Carigali from participation in its acquisition contracts, it is certain that THHE will face issues in providing the necessary OPV ships now,” said Rafizi Ramli, secretary-general of opposition party PKR, quoted by press in Malaysia.

The delays could hinder the country’s efforts to maintain maritime security, the politician said.

“Considering the danger present off Malaysia’s shores, especially in East Sabah (after the repeated kidnapping cases), the move to grant the OPV contract to a completely inexperienced company is asking for trouble because there is a high chance that the OPV ships will not be completed on time,” Rafizi continued.

“This will inhibit efforts to improve national coastal safety controls, which will in turn cause the threat of pirates and kidnappers to continue.”

Rafizi claims prime minister Najib Razak awarded the contract to help rescue THHE’s finances and to validate Tabung Haji’s investment in the yard, despite accumulating losses of around RM554m ($135.8m). Tabung Haji invests in sharia-compliant vehicles to raise money for Malaysian pilgrims to Mecca and partly owns the shipyard.

Earlier this month, three parties filed claims for a total of RM38m ($9.52m) against the yard, leading some analysts to wonder if it can continue to operate as a going concern. The claims are in relation to the supply of equipment and work done for the Layang FPSO project.

AmInvestment Bank Research said in a report that THHE’s current cash flows are unable to service its debt.

“We believe that the company … will have difficulty in securing external financing for its working capital and ongoing projects unless it is able to recapitalise its balance sheet via an equity raising exercise,” the bank said this month.

Holly Birkett

Holly is Splash's Online Editor and correspondent for the UK and Mediterranean. She has been a maritime journalist since 2010, and has written for and edited several trade publications. She is currently studying for membership of the Institute of Chartered Shipbrokers. In 2013, Holly won the Seahorse Club's Social Media Journalist of the Year award. She is currently based in London.
Back to top button