Guan Eng wants Najib to explain new pipeline scandal, believed to be linked to 1MDB.
Kept hidden in the ‘Red Files’, another scandal has been discovered, to the tune of RM9.4 billion.
Finance Minister Lim Guan Eng said Suria Strategic Energy Resources Sdn Bhd (SSER), a wholly-owned subsidiary of MoF, is involved in the scandal that is linked to Multi-Product Pipeline (MPP) and the Trans-Sabah Gas Pipeline (TSGP) projects, approved by the Cabinet on July 27, 2016.
“The RM9.4 billion scandal, where payment was made based on timing milestone and not progressive work is done, resulted in RM8.3 billion being paid or 88% of total project value despite only 13% work completion,” he said in a statement today.
The MPP involved a 600km multi-product petroleum pipeline connecting Melaka and Port Dickson to Jitra, Kedah, costing CNY4.53 billion and RM2.53 billion, or approximately RM5.35 billion.
The TSGP, on the other hand, was to build a 662km gas pipeline from Kimanis Gas Terminal to Sandakan and Tawau, costing CNY3.08 billion and RM2.14 billion, or approximately RM4.06 billion.
Both projects amounting to RM9.41 billion were awarded to China Petroleum Pipeline Bureau (CPPB) on Nov 1, 2016. The agreements were signed by the then Treasurer-General, Tan Sri Irwan Serigar Abdullah, who was also the Chairman of SSER. Tan Sri Irwan resigned on May 23, 2018.
SSER successfully secured funding from China EXIM Bank amounting to 85% of the project value on March 22, 2017. The balance 15% of funds required were to be raised via sukuk issuance.
Both the China EXIM Bank borrowings and the sukuk were secured with Federal Government Guarantees.
During a briefing provided to Treasury officials on May 28, 2018, SSER reported that the three-year projects had commenced in April 2017, said MOF.
As at the end of March 2018 or exactly a year later, the MPP and TSGP projects had achieved only 14.5% and 11.4% progress completion, respectively. However, the completion rates have yet to be verified or audited.
“However, we were shocked to discover that the amounts of RM4.71 billion and RM3.54 billion for the MPP and TSGP projects had already been drawn down and paid to CPPB,” Lim added.
The total sum paid of RM8.25 billion constitutes a staggering 87.7% of the total project value.
This is despite an average completion rate of only 13%, with another two years of the contracts to go.
We have discovered that the payment schedule for the above contracts are based almost entirely on timeline milestones, and not on progressive work completion milestones. Worse, based on the agreements signed, 85% of the project value would be paid by March 1, 2018.
The above does not yet include two other consultancy agreements signed for the same projects above worth approximately RM312 million and RM213 million, and a maintenance agreement worth RM476 million, awarded to companies from China, totalling an additional RM1 billion, Lim said.
The contracts were negotiated by the Prime Minister’s Department, without involving Treasury officials.
The Attorney General’s Chambers have also confirmed that these contracts were signed despite numerous unanswered questions and red flags raised.
Lim said he has strong suspicions that it is all part of the 1MDB scandal.
“I have been informed by Treasury officials that SSER is an offshoot by the same people behind SRC International, a former subsidiary of 1MDB. SRC is the acronym for Strategic Resources Corporation, a name that is similar to SSER,” Lim said.
The contracts for SSER were also signed at the same time as the contracts for the East Coast Rail Link project by Tan Sri Irwan Serigar Abdullah and financed by China EXIM Bank.
It should be noted that the President of SSER is Datuk Mohammed Azhar bin Osman Khairuddin, who is also a member of the company’s Board of Directors.
Datuk Mohammed Azhar is also a Director of Putrajaya Perdana Sdn Bhd, a company linked directly with Low Taek Jho.
“Based on the highly suspicious transactions above, I instructed my officers to file a report with the Malaysian Anti-Corruption Commission last week,” Lim added.
The Prime Minister, Tun Dr Mahathir Mohamad has been briefed on the scandal. In addition, the Ministry of Finance, as the sole shareholder of SSER will take steps to take control of the company pending investigation, said the minister.
Meanwhile, Lim has asked Najib to explain why he allowed 85 percent payment for 13 percent of work done.
“I wish to invite our former prime minister and finance minister to explain what and how the transactions related to SSER were approved by him,” Lim said.