Boustead Subsidiary Hit With Another Claim

KD Tun Razak preparing to leave Kota Kinabalu base for her 2016 maiden voyage from 5th to 12th January. RMN

SHAH ALAM: Boustead subsidiary hit with another claim. Boustead Heavy Industries Corporation (BHIC) Bhd’s subsidiary company – Boustead DCNS Naval Corporation Sdn. Bhd. (BDNC) has received another claim from the Defence Ministry over its ISS contract for the Perdana-Menteri class submarines. The claim is made against the extended ISS contract announced in October, 2015.

The announcement from BHIC.

The Company wishes to announce that on 29 May 2020, Boustead DCNS Naval Corporation Sdn. Bhd. (BDNC) received a letter from the Ministry of Defence (MINDEF) claiming Liquidated Damages amounting to RM11,647,812.00 and EUR6,461,195.09 (RM31.3) for the breach of obligations under the first supplemental contract of the In-Service Support for two (2) units of Prime Minister-Class for the Royal Malaysian Navy Submarines Contract (Extended ISS Contract).

BDNC is a joint venture company between BHIC Defence Technologies Sdn. Bhd. (60%), a wholly owned subsidiary of BHIC and Naval Group (40%).

The Extended ISS Contract was awarded to BDNC by MINDEF through the Additional Letter of Acceptance dated 29 September 2015. The announcement was made on 15 October 2015.

The Board of BHIC is of the opinion that BDNC has adequate bases to defend and appeal against the Claim.

BDNC is currently responding to the demand.

The Claim is not expected to have any material financial impact on BHIC Group for the financial year ending 31 December 2020.

BHIC Group has recognised share of losses of interest in BDNC when applying the equity method up to its interest in the joint venture.

This announcement is dated 5 June 2020.

In 2017, BHIC announced that the Defence Ministry also made similar claim against it. This was for the original ISS contract. From Malaysian Defence post in 2017.

Two RMAF F/A-18D flying over KD Tun Razak in 2017. RMAF.

In a filing to the Bursa Malaysia on July 11, BHIC says Boustead DCNS, received a letter of claim from the ministry on July 10 for compensation amounting to RM53.2mil and 19.3 million euros (RM94.5mil) for an undisclosed breach of contract for the in-service support (ISS) for KD Tunku Abdul Rahman and KD Tun Razak submarines.

RMN submarine seen here with a USN SSN. Picture taken in 2011

In its latest Bursa filing, BHIC said it was still appealing against this old claim and as mentioned in the new announcement it is also appealing against the latest one.

— Malaysian Defence

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12 Comments

  1. So now we have seen 2 claims against boustead regarding the sub refit project. This is most probably due to deadlines being missed rather than technical details unmet.

    But what i am still intrigued is that there is still no claims by the government against boustead for the gowind project. That should tell something about where the delays are coming from…

  2. Legally the contract has not been determined yet. Thats why cant determine the damages. One way is to use the very long delay to terminate the contract, Mindef pay what is due to Boustead and then take out the ship to be completed elsewhere. Once the ships completed the damages can be ascertained. Baru can take action. Alternatively go for arbitration

  3. @…

    You meant to say that the Gowind delays are due to the government and not Boustead itself?

  4. @ASM
    It is probably due to both parties. Bousted made some technical mistakes while government didn’t give money. Things to take note if not mistaken we already pay RM6 billion so at least we should have 4 LCS being near completion. The equipment purchased was also ordered very late in regards to the contract so maybe we are still waiting for those equipment to arrive here.

  5. The complication is Boustead is partly owned by LTAT

    Reply
    They want to fully owned it by buying out shareholders

  6. Probably Type 31 can be replaced Lekiu class as AAW Frigates in the future if gov@mindef/ RMN consider on it.

  7. Congrats to Indonesia. We should choose Iver Huitfeldt from the get go but it was still being built in 2011 and not available for export yet when we signed the contracts for Gowinds yet the 1st gowind were laid down 5 years later in 2016 which meant Iver Huitfeldt was ready for export and can be built without any modifications like we done to our gowind.

    Advantage of Iver Huitfeldt
    – Very long range radar (up to 1000km for ballistic missile detection & tracking, and China have ballistic missiles)
    – Carry multiple times more number of more capable missiles
    – Longer range
    – Have 3x the cooling and power currently needed
    – Large hull for upgradability in future
    – Cost much less to buy ($340 million fully equipped vs $460+ million)

    Disadvantages
    – Larger RCS signature (less stealthy?)
    – Some say it is too large and too heavy for RMN yet we still want to operate larger MRSS
    – Cost more to operate (not really much as its engine is 11k hp while Gowind is 10k hp, and it can cruise at 18 knots on 1 engine)

    I cant seem to find any reason that our Gowind have advantage over Iver Huitfeldt other than being more stealthier hence why we should go for a couple or 3 hulls of Iver Huitfeldt for long range air defence which RMN is seriously lacking.

    Reply
    The Iver was never considered for the SGPV later LCS as it is simply too big for the then requirements. As I reported before the ones that were offered for the project were Dutch, French, South Korean and the British, if I remember correctly. The Dutch and French were shortlisted in the final stretch though as Boustead had partnered with DCNS, the old name of Naval Group, it was just a formality then. The navy then was happy with the Dutch Sigma design, which was later chosen by Indonesia for its frigate project

  8. Multiple source reported the Indonesian Navy Iver Huitfeldt variant to be equipped with Terma C-Flex CMS and Hensoldt TRS-4D AESA Radar.

  9. @Marhalim
    Yes you are correct. Indeed the Iver are twice larger than our Gowinds and would cost higher to operate but that goes hand in hand with increased in capability. Hopefully you could update us on the progress of our Gowind soon.

    @D.W.
    Interesting as TRS-4D has range of up to 250km. The indon should have the option to go for Thales radar wether its the SMART-L + APAR combo (1000km+180km) or NS200 (400km). Maybe they could not afford them for the current asking price?

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