KUALA LUMPUR, Dec 29 — Vertice Bhd and Consortium Zenith Construction Sdn Bhd have mutually terminated the contract for the construction works for Package 2 of the Penang Mega Infrastructure project worth RM815.0 million undertaken by Buildmarque Construction Sdn Bhd.
Buildmarque Construction is a 50:50 JV company formed between Vertice Construction, a wholly-owned unit of Vertice Bhd, and Vizione Construction Sdn Bhd, a wholly-owned subsidiary of Vizione Holdings Bhd, for the construction of a by-pass from Bandar Baru Ayer Itam connecting to Lebuhraya Tun Dr Lim Chong Eu.
In a filing with Bursa Malaysia today, Vertice said Buildmarque Construction, Vertice Construction and Consortium Zenith Construction has entered into a deed of rescission and termination to mutually agree to terminate the contract awarded on August 30, 2018, and the supplemental letter of award dated January 31, 2019.
According to the company, Buildmarque Construction was unable to procure project financing worth up to RM295.0 million to fund the total estimated project costs for the contract works, overheads (such as salaries, office expenses as well as legal and professional fees) and interest costs in order to pay the sub-contractors and suppliers in a timely manner.
It added that Buildmarque Construction did not require financing to commence with the early works as its shareholders, namely Vertice Construction and Vizione Construction, were able to finance the early works from their respective working capital and internally-generated funds.
Vertice said under the contract, the construction period was supposed to be 36 months from the commencement date or from the date of issuance of the notice to proceed, with the construction of major road 2 is expected to commence in September 2019 and be completed in August 2022.
“The construction of major road 2 did not commence in September 2019 as expected.
“Instead, Consortium Zenith and Buildmarque Construction mutually agreed to commence only the early works for the project in November 2019 which amounted to RM25.0 million,” it said.
As the contract is worth RM815.0 million, the company said the mutual termination would have a material impact on the future earnings of the group.
“As a result of the mutual termination, Buildmarque Construction will not be able to recognise further earnings, if any, from the contract works of Package 2 project.
“Correspondingly, Vertice will not be able to recognise its future share of earnings, if any in Buildmarque Construction,” it said.
Nevertheless, Vertice said in the absence of the project financing, Vertice/Buildmarque Construction is unable to comply with the above-mentioned payment terms to continue to undertake contract works of Package 2 Project.
“Buildmarque Construction had requested for Consortium Zenith to vary the payment terms, for instance, for payments to be made to Buildmarque Construction after each progress claim.
“However, the request was denied by Consortium Zenith,” it said.
Vertice said premised on the above, in particular Buildmarque Construction’s inability to procure the project financing, the board is of the view that it is no longer feasible for Vertice/ Buildmarque Construction to continue to undertake the contract works of Package 2 project. — Bernama
