How Much is that Shipyard in the Window?

Ready for more work? The latest picture of PCU Maharaja Lela on March 11 2024. Lunas.

SHAH ALAM: How much do you pay for a money losing shipyard? In the case of the Lumut Naval Shipyard Sdn Bhd (Lunas), a MOF-owned company – Ocean Sunshine Bhd (OSB) or Malaysian taxpayers – is paying RM334.73 million in cash for that privilege of owning just 20 per cent stake in it.

Boustead Heavy Industries Corporation Bhd’s (BHIC) announced on April 3 that its indirect wholly owned subsidiary, Perstim Industries Sdn Bhd (PISB), will be disposing 27,000,001 ordinary shares in Lunas to OSB for RM334.73 million.

From the Star:

In a Bursa Malaysia filing today, BHIC said that the proposed disposal is designed to support the government’s decision to ensure the completion of the Littoral Combat Ship (LCS) project.

“On May 29, 2023, BHIC announced that its board had acknowledged receiving a letter from the Minister of Finance Incorporated (MOF Inc) stating its intention to acquire, through OSB (an indirectly owned company), 20.8 per cent of BHIC’s total equity interest in LUNAS, which is held via PISB.

“The terms of the proposed acquisition are still subject to negotiations between the parties,” it said. BHIC said this initiative is also a part of the company’s operational and organisational restructuring, aiming to streamline and realign entities within the company and its relevant subsidiaries.

It also further said “The restructuring ensures that Lunas can complete the construction and delivery of the LCS to the Royal Malaysian Navy within the agreed timeframe, as stipulated in the LCS contract.”

The breakdown of the cost of the LCS project after the sixth supplementary contract. PAC

Which meant that Boustead and LTAT its parent company are no longer responsible for the whole shebang and its now the responsibility of the government and taxpayers, which has no say on the matter = Editor.

It is interesting note that cost of the 20 per cent stake is about RM40 million short of the sum owed by BNS to BHIC which is RM383.94 million. So what is RM40 million among friends then?

The disposal of the stake also meant that OSB – and us taxpayers – are now responsible for liabilities of BNS which is RM848.45 billion. Coupled that with some RM600 million debt owed by BNS to other companies meant that the takeover cost of BNS to Lunas is RM1.7 billion.

The cost of the LCS project is now RM11.2 billion. It must be noted from that RM11.2 billion, Lunas or the former BNS used around RM1 billion to pay its debts and to upgrade the facilities for the LCS project. And not a single ship has been delivered yet.

It is interesting to note that a day after the disposal of the BHIC stake in the shipyard, the Defence Ministry announced the Armed Forces Fund Board 2023 dividend was fixed at five per cent or RM485.08 million in monetary terms. One has to wonder the disposal of the stake had something to do with it.

–Malaysian Defence

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13 Comments

  1. Currently OSB already has 79.23% shares of LUNAS that it bought for RM1 direct from BHIC.

    This RM334.73 million is to buy the 20.77% BHIC shares of LUNAS that is held through BHIC subsidiary Perstim Industries Sdn Bhd (PISB)

    So with this transaction OSB now owns 100% of LUNAS

    So what the government has spent (and taken on as liabilities) for LUNAS so far?
    – RM1 for 79.23% of LUNAS to BHIC
    – RM190 million as working capital injection by OSB to LUNAS
    – RM383.94 million debt of LUNAS to BHIC
    – RM848.45 million liabilities of LUNAS to various suppliers
    – RM334.73 million for 20.77% of LUNAS to PISB

    That is a total of RM 1,757,120,001 !!!

    That is still not including the money to continue the build of the Gowind Frigates itself. Billions wasted and nobody is directly responsible for for this big screw-up.

  2. So it is RM1.757 billion wasted. That is about USD370 million.

    So many things we could get to upgrade our defence with that kind of money

    We could get
    – 6x Hyundai HDP-3000 OPVs
    or
    – 47x used Blackhawk helicopters to the same spec as what Portuguese Air Force bought recently
    or
    – 7x FA-50 Block 20
    or
    – 120x Gempita IFV25 version (at the same cost as Oman PARS III buy)

  3. … – “Billions wasted and nobody is directly responsible for for this big screw-up”

    Was anyone made responsible for previous cockups? Have we made a determined effort to ensure it doesn’t repeat itself? Even if someone is made responsible it was the very rotten and flawed system we have in place which enabled it.

    … “We could get”

    ”We could get” many things; not just what’s on your preference list. “We could get” or rather “could have gotten” MBTs, network the radars operated by various entities; get a common data link for all our fighters; use it to fund training to enable the RMAF to perform CAS; get loitering munitions and/or UASs to be operated organically by units; use the cash to upgrade the joint EW school; an improved AD capability for 10 Para: etc.

    BTW OPVs really shouldn’t be in the list as the squandered funds we’re referring to was allocated for defence and the MMEA is not a MAF entity and is funded from a different budget but as an erudite you’d know that.

  4. Again.. it’s depressing. We can terminate the crooked bridge project with singapore twice & pay a hefty sum as compensation. But in this matter we cannot terminate. It is grossly absurd & illogical.

  5. Hulubalang “So many things we could get to upgrade our defence with that kind of money”

    Not really. For once you can’t just print money out of thin air to buy imported stuff nor those imported stuff Can pays penchant dividends to make some of the voters happy nor would the gov get ‘cashback’ as those dividend make it way back into the economy and back into the gov coffers.

  6. Yes, just as PSC and NGV Tech were water on the bridge too, so as BNS… water continues to flow under the bridge and will continue to flow thru in future. This is not the end sadly.

  7. I hate quite a number of people politicians ex generals admirals businessmen linked to this fiasco. But am not taking it further because these MFs don’t get caught and jailed but those expressing their disgust do!

  8. @Qamarul
    “But in this matter we cannot terminate.”
    Because in that matter it was politically advantageous to those in power to cancel it but in this case it would be politically suicidal for the decisionmakers.

    @Taib
    “But am not taking it further”
    How to take it any further when both sides would be implicated and culpable to how FUBAR it has became, and the cost involved? The feetdragging delayed decision by subsequent govts itself costed nearly RM 2Bil extra!

  9. ” the MMEA is not a MAF entity and is funded from a different budget but as an erudite you’d know that ”

    The budget to bailout the LUNAS is not taken from defence CAPEX or OPEX budget, but direct from MOF, as why it is now a subsidiary of MOF, not MINDEF.

  10. How to take it any further when both sides would be implicated and culpable to how FUBAR it has became, and the cost involved? The feetdragging delayed decision by subsequent govts itself costed nearly RM 2Bil extra!(joe)
    Well, the wicked politicians still won over the voters mate. They’re still around, still entrenched, still calling the shots over the poor bloody masses like you and me!
    We get caught and jailed. They don’t. It’s justice that’s man-made, not made by Allah! Sorry to say so. So let’s hope we see justice in the Hereafter!

  11. @Taib
    Justice in the Hereafter will not help a single bit in the Herenow, sorry to say (not being pedantic against any religion). Sorry to also say that instead of pushing justice to the Govt for accountability and ‘the buck stops whoever in power’, we push justice to be (hopefully) done by a higher authority.

    As I said before, we can blame the policies from the Govt all we like. But ask yourselves, who are the Govt? The ministers & politicians.
    But who put them there? The rakyat of course! PMX would not be PMX if the people did not vote him into Parliament.
    So the quality of our decisionmakers are reflective of our voters quality, and thus the quality of our voters are reflective on the quality of our rakyat as whole. We have no one else to blame but ourselves, including the mess our economy is in right now.

  12. … – ”but direct from MOF, as why it is now a subsidiary of MOF, not MINDEF.”

    Thanks Grandmaster but I made no mention about LUNAS. Was referring to the fact that the MAF and MMEA are funded from different budgets. Will you next say it’s actually the same source; the government.

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