SHAH ALAM: Boustead Heavy Industries Corporation Bhd (BHIC), the heavy industry arm of Boustead Holdings Bhd, is selling its entire stake in Boustead Naval Shipyard Sdn Bhd (BNS) – the builder of the LCS – for RM1 – to Ocean Sunshine Bhd (OSB). OSB is an indirect unit of Minister of Finance (Inc).
Although the release said the sale only cost RM1, the actual amount is much higher as OSB will be taking over the liabilities of BNS and it will also be paying BHIC and its subsidiaries some RM400 million of debt. (see below for the full explaination.)
The disposal of the 27 million shares or 20.77 percent held by BHIC’s indirect wholly owned subsidiary Perstim Industries Sdn Bhd, is to facilitate the government’s decision to acquire 100 per cent of BNS shares to ensure the completion of the LCS, BHIC said in a filing with Bursa Malaysia on August 21. Loss making BNS is in involved in the construction, repair, and maintenance of naval ships, mostly for the RMN.
The other shareholders of BNS according to the filing is Boustead Holdings, LTAT and the MOF. It is also likely that Boustead Holdings and LTAT will also dispose their stake in BNS to the OSB.
The disposal of BNS to OSB also means that the company (which is we, the taxpayers) will take over BNS’s liabilities of RM848.45 million recorded under the 2022 financial-year. BNS also recorded after profit loss of RM150 million for the same time-period.
As part of the disposal agreement, BNS will need to pay BHIC some RM400 million owed by the latter to the former and its relevant subsidiaries, following to due diligence and agreement by all parties.
Does this mean the cost of building the five LCS is now RM12.44 billion (RM848.5 million liabilities plus the RM400 million needed to be paid to BHIC and its subsidiaries) instead of the RM11.2 billion, announced last May? Or the increase from RM9.1 billion to RM11.2 billion is the sum above? I believe RM12.44 billion is now the current cost of the project as previous releases by BHIC and Boustead did not mention the liabilities and the money needed to be paid to BHIC by selling BNS to the government. As I said previously, I was told that the project will cost between RM12 billion to RM14 billion though this was for six ships.
BNS announced the additional cost for the LCS after Defence Minister DSU Mohamad Hasan witnessed the signing of the sixth supplementary LCS contract and the decision to nationalise BNS by putting it under MOF-owned company at LIMA 2023.
It is interesting to note that OSB was incorporated in Malaysia on 17 June 2022 under the Companies Act, 2016 as a public limited company. As at the date of this announcement, the issued share capital of OSB is RM1.00 comprising of 1 ordinary share.
OSB is wholly owned by AES Solutions Sdn Bhd, which is indirectly wholly owned by MOF and Pesuruhjaya Tanah Persekutuan. AES Solutions is the operator of Automated Enforcement System (AES) which took over from two private companies. The company was incorporated on September 2, 2013 and has two directors. The two directors are part of the senior management of Prokhas, a company wholly owned by the Ministry of Finance. A check on Prokhas website showed that the company is managed by economists and accountants.
BHIC said in the filing:
The Proposed Disposal serves to facilitate the decision of the Government of Malaysia, through
the Ministry of Finance’s letter to the Company dated 25 May 2023, to acquire 100% of shares in
BNS in order to ensure the completion of the Littoral Combat Ship (“LCS”) project. It is also
formed as part of the Company’s operational and organizational restructuring to streamline and
re-align entities within the Company and its relevant subsidiaries, while ensuring that BNS is able
to complete the construction and delivery of the LCS to the RMN within the stipulated timeframe
pursuant to the LCS contract.
Further to the above, the introduction of a new strategic shareholder into BNS namely OSB, is in
consonance with BNS’ plans to strengthen its business and operations in relation to the
construction, repair and maintenance of naval ships and commercial ship building.
The proposed disposal is expected to be completed by the fourth quarter of 2023.
Updated with the comments on the cost of the LCS.
— Malaysian Defence