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July 11, 2019

IJM contract for Malaysia’s LRT 3 underground works terminated

A MYR1.12bn ($271.5m) contract awarded to IJM Corporation for underground works on the light-rail transit line 3 (LRT 3) in Malaysia has been terminated as the project is being remodelled.

A MYR1.12bn ($271.5m) contract awarded to IJM Corporation for underground works on the light-rail transit line 3 (LRT 3) in Malaysia has been terminated as the project is being remodelled.

In a filing with Bursa Malaysia, the company said that its wholly owned subsidiary IJM Construction (IJMC) received a notice of termination for the underground works from MRCB George Kent earlier this month.

The 37km LRT 3 line will connect Bandar Utama in Petaling Jaya to Johan Setia in Klang.

IJMC won the contract on 13 March last year and preliminary work commenced before the project was suspended three months later.

The company said: “Preliminary works had commenced before the project was suspended in June 2018. IJMC is currently consulting its advisers and will seek appropriate legal redress under the contract.”

It said that other than potential earnings from the project, termination of the project will not have a major impact on the group’s financial position.

In the filing, IJM said: “The termination was due to the project being remodelled from a project delivery partnership model to a fixed price contract model pursuant to the direction of the government.

“The new contractual framework has resulted in MRCB-GK’s employment as the project delivery partner (PDP) under the PDP agreement with Prasarana Malaysia Bhd being terminated.

“Following the termination, and pursuant to the conditions of contract, MRCB-GK as the PDP, has issued the notice to IJMC.”

IJMC received a letter of acceptance last March for the underground package of the LRT 3 for MYR1.12bn, inclusive of 6% Goods and Services Tax.

The project involved the design and construction of an underground tunnel, stations, ancillary buildings and other associated works. It was initially scheduled for completion in 31 months.

The Finance Ministry said in a statement in July last year that the LRT 3 project will resume at a cost of MYR16.63bn ($4.03bn), compared with its original cost of MYR31.65bn ($7.6bn).

The reduction was attributed partly to the cancellation of a 2km tunnel and an underground station.

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