MAHB terminates Pestech’s RM743mil aerotrain contract due to delays

16 August 2023

Airport operator MAHB says Pestech’s subsidiary was found to be in material breach of its obligations under the aerotrain contract.

MAHB terminates Pestech’s RM743mil aerotrain contract due to delays

Malaysia Airports Holdings Bhd (MAHB) is terminating the RM742.95 million contract awarded to Pestech International Bhd (Pestech) for the construction and supply of a new automated people mover (APM or aerotrain project) at Kuala Lumpur International Airport (KLIA).

In a filing with Bursa Malaysia, the airport operator said its wholly-owned subsidiary Malaysia Airports (Sepang) Sdn Bhd (MA Sepang) issued a notice of termination today to Pestech Technology Sdn Bhd (PTSB) in respect to the contract for the design, supply, installation, testing and commissioning for the APM at KLIA.

MAHB said the termination is due to, among others, PTSB’s “non-performance, compromising significant project milestones and risking delays to deliver the project within the required deadline”.

“PTSB has been found to be in material breach of its obligations under the contract and had failed to remedy the same within the specified time period,” the filing added.

PTSB, a wholly-owned subsidiary of Pestech International, had been appointed by MA Sepang as the design and build contractor for the KLIA Aerotrain replacement programme on Dec 14, 2021 through an open tender process.

Public uproar

MAHB is now tasked with identifying swiftly a suitable party to take on the project as the suspension of the aerotrain service early this year has caused huge inconvenience to travellers and tourists, and has sparked public uproar.

There had been much public criticism due to the recurring breakdowns in the 25-year-old aerotrain service that has been suspended indefinitely since March. The last disruption occurred in March due to mechanical and electronic failures, which resulted in 114 passengers remaining stranded mid-route.

According to a report in The Edge today, sources said the airport operator’s decision came after the progress of the project was more than 250 days behind the schedule as stated in the contract.

The filing said following the notice of termination, preceded by a notice of default to PTSB, MA Sepang will be enabled to recommence and complete the works through the engagement of other parties, to ensure the project is completed on schedule.

“MAHB remains committed to assign the necessary resources in order to minimise any potential delays to the APM project.

“With immediate effect, MA Sepang will expedite consultations and discussions with all existing stakeholders who are presently involved in the APM project for continuity and to mitigate any delays.”

These include working closely with relevant parties involved in the replacement project of the train’s tracks and system, as well as identifying an experienced and credible third-party contractor to ensure consistent progress of all project components, it added.

MAHB managing director Iskandar Mizal Mahmood said the project is of significant importance to ensure the comfort and convenience of passengers travelling through KLIA.

“Our focus moving forward is on the timely delivery of the aerotrain while observing stringent quality control and safety standards of the project, with no compromise to our operations and governance processes,” he said in a statement.

The termination comes on the heels of IJM Corp Bhd’s recent announcement of its plan to acquire a 44.83% stake in Pestech through a restricted offer of 800 million shares at 15.5 sen each, totalling RM124 million, making them the largest single shareholder.

The transaction price represents a considerable discount compared to Pestech’s market price.

Its shares ended 2.5 sen or 7.94% lower at 29 sen today, valuing the group at RM282.95 million. It had fallen as much as 3.5 sen or 11.11% earlier in the afternoon.

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