Oct 19, 2017 - Communications Construction Company. 85% of the project cost will be funded by China. Exim Bank while the
VIVOCOM INTL HOLDINGS BERHAD ("VIVOCOM" OR THE "COMPANY") HEADS OF AGREEMENT WITH MACFEAM SDN BHD FOR EAST COAST RAILWAY LINES (ECRL) PROJECT (“PROPOSED COLLABORATION”)
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INTRODUCTION The Board of Directors (“the Board”) of Vivocom is pleased to announce that on 19 October 2017, Vivocom had vide its subsidiary company, Vivocom Enterprise Sdn Bhd (“VESB”), entered into heads of agreement (“HOA”) with MACfeam Sdn Bhd (“MSB”). (VESB and MSB shall be collectively referred to as the “Parties” and each as a “Party”) The Parties are desirous to associate themselves into and as a consortium, with the purpose of jointly submitting an application for prequalification, tendering for (“Tender”), obtaining the award and performing the contract (“ECRL Contract”) for the “Project East Coast Railway Lines (ECRL)”
in relation to the states of Terengganu and Pahang (hereinafter referred to as the “ECRL Project”) that has been called by The China Communications Construction Company Ltd and China Communications Construction Company (M) Sdn. Bhd
(“EPCC Contractor”). The parties have agreed to execute this Agreement to outline certain principal terms and conditions to establish their respective rights and obligations in relation to the consortium and their collaboration on the ECRL Project and ECRL Contract. Further details of the Project will be announced upon the execution of a formal final agreement between the Parties.
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SALIENT TERMS OF THE HOA The salient terms of the HOA include, amongst others, the following:2.1
Proposed Collaboration 2.1.1
The Parties hereby agree to jointly collaborate in respect of all matters relating to the ECRL Contract, including but not limited to submission of prequalification application, Tender, procurement of award and performance and completion of contract work shall under the ECRL Project (“Consortium”). The Parties expressly declare that they accept towards the EPCC Contractor the joint and several liabilities in respect of all matters relating to the scope of the ECRL Contract.
2.1.2
The shares of the Parties hereto to all rights and liabilities in the Consortium shall be as follows: VESB : 60 % MSB : 40 % 1
The Parties may in good faith mutually agree to vary the above percentage of sharing between the parties should there be any significant variation in the scope of work and responsibility of each party. 2.1.3
The Consortium established by the Parties shall be called VESB-MSB JV (“Joint Venture”)
2.1.4
The Parties shall make available to the Consortium their skill and experience and shall contribute in proportion to their shares to any liabilities including but not limited to cost for bonds or other securities, deposit and working capital. Each Party shall make available their experience, personnel and plant and equipment as may be required by the Consortium
2.1.5
The executive bodies of the Consortium will be: a. The JV Board which will be the supreme authority of the Consortium deciding on any subject of prime importance in the principle of the Parties mutually agreeing upon; b. The Leading Party, which will co-ordinate the preparation of the Tender and act as leader in the Project Management Team in case of award of the Contract; c. The Project Management Team, which will supervise and direct the performance of works to be executed under the directive of JV Board.
2.1.6
VESB shall be appointed as Leading Party of the Consortium.
2.1.7
The JV Board shall comprise: (i) (ii)
3 members nominated by VESB; and 2 members nominated by MSB.
But in any event to be representative of the percentage of sharing between the Parties as set out in the HOA. The JV Board shall have the power, authority and mandate to determine such matters as determined by the Parties. The decision of the JV Board shall be binding between the parties. All decisions of the JV Board shall be determined by collective decision. Each party shall be entitled to appoint, remove or replace any member by notice in writing to the other Party. A Party shall not be entitled to remove or replace any member nominated by the other Party. 2.1.8
The Project Management Team shall comprise of such members representing both parties partaking in the day to day management and supervision of the ECRL Project, who shall carry co-ordinate the prequalification, Tender and carrying out of the terms and conditions of the ECRL Contract. The composition of the Project Management Team shall be reflective of the percentage sharing between the Parties as set out in Clause 2
2.1.9
2.2
The Project Management Team shall not have the power or authority to determine any matter not ascribed in the Definitive Agreement and/or ECRL Contract and shall refer the same to the JV Board for determination. Each party shall be entitled to appoint, remove or replace any representative to the Project Management Team by notice in writing to the other Party. A Party shall not be entitled to remove or replace any representative nominated by the other Party.
Prequalification and Tender 2.2.1
In preparing the pre-qualification documents as well as the preparation of the Tender, the following provisions shall apply: a) In preparing the documents of pre-qualification, the necessary forms shall be completed and all information, quotation and document to be provided by each Party shall be made truly, accurately and adequately in mutual co-operation with the Leading Party. b) In preparing the Tender, the estimate and the necessary calculations will be made by the Parties in mutual co-operation, each Party contributing to the best of its knowledge and experience. c) Each Party hereto shall bear separately and solely all costs and expenses incurred in connection with preparation, submission and negotiation of the Tender up to the date of award of the ECRL Contract according to their shares of this Agreement. Cost for third parties which are of joint interest, Tender Documents and Tender delivery shall be borne by the Parties according to their shares in the agreement. Neither Party shall be liable to the other for costs incurred by the other outside the scope of this Agreement. Each Party shall bear their own cost and expense in preparation of this Agreement and their own liability towards any taxation chargeable or levied in respect of its participation in this joint collaboration.
2.2.2
It is hereby understood and agreed that the Parties hereto are expressly forbidden to submit tenders for the ECRL Project either singly or in conjunction, directly or indirectly, with any other persons, firms or companies other than in accordance with the provisions of this Agreement. The Parties hereto also will ensure that the principle of exclusivity as stated herein will be extended by them to their subsidiaries, affiliated companies, firms or persons over which they may from time to time exercise control.
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2.2.3
2.3
If the Tender is successful, the Parties shall enter into the Definitive Agreements to regulate the Parties’ relationship, rights and responsibilities in respect the ECRL Project in proportion with the shares contained in the agreement
Term and Termination 2.3.1
This Agreement shall become effective on the date of signing and shall not be terminated by any of the Parties until: a) In the event the Parties to this Agreement fail to be short-listed for tendering during pre-qualification process; or b) In the event the Parties after being short-listed for tendering do not agree on a joint tender; c) In the event the Parties shall have been short-listed for tendering, shall have worked out and agreed upon comprehensive Definitive Agreements based on the stipulations of this Agreement. Such comprehensive Definitive Agreements shall be concluded prior to the submission of the Tender unless otherwise agreed upon by the Parties, and executed upon the successful Tender; or d) In the event that there is no confirmation of results from the EPCC Contractor, 1 (one) year after the date of signing of this Agreement, unless otherwise mutually agreed in writing.
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SOURCES OF FUNDS The cost and outlay by VESB on the JV have not been fixed and shall be determined once the terms and conditions of a final agreement is mutually agreed upon by the Parties. Once determined, VESB will finance the cost and outlay by way of internally generated funds and/or bank borrowings, as and when required.
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FINANCIAL EFFECTS Project cost and financial benefits derived from the Proposed Collaboration cannot be ascertained at this point of time. Barring unforeseen circumstances, the Proposed Collaboration is expected to contribute positively to the future earnings of Vivocom. Further details of the financial effects arising from the Proposed Collaboration will be announced upon the execution of final agreement by the Parties.
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5.
APPROVALS The ratio of amount of investment in the proposed consortium is not ascertained at this juncture. The company will make further announcement once the quantum is confirmed and will seek shareholders approval if necessary.
6.
DIRECTORS’ STATEMENT The Directors of Vivocom are of the opinion that the terms of the HOA are fair and reasonable and that the Collaboration is in the best interest of the Company.
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INTERESTS OF DIRECTORS, SUBSTANTIAL SHAREHOLDERS AND/OR PERSONS CONNECTED None of the directors and/ or substantial shareholders and/ or persons connected to the directors and/ or substantial shareholders of Vivocom have any interest, whether direct or indirect, in the Proposed Development.
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ABOUT EAST COAST RAILWAY LINES (ECRL) “The East Coast Economic Region (ECER), measuring more 51% of the total area of Peninsular Malaysia. ECER covers the states of Kelantan, Terengganu and Pahang, as well as the district of Mersing in Johor. ECRL is an electrified railway line connecting the east and west cost of Peninsular. ECRL has 22 stations along the 688km line from Pengkalan Kubor in Kelantan to Port Klang in Selangor, covering the ECER. The ECRL project cost is estimated at RM55 billion. The rail link will be built by China Communications Construction Company. 85% of the project cost will be funded by China Exim Bank while the remaining 15% to be funded through sukuk or Islamic bonds from Malaysia investment banks. The project is targeted to complete by year 2024. The 668km line would promote the development of industrial areas and the growing trend of Transit Oriented Development (TOD) that would nurture compact residential districts and commercial centres along the rail stations, hence benefiting the major towns designated as main stations for the project. The ECRL would link the key economic industrial areas with the ECER such as the Malaysia-China Kuantan Industrial Park (MCKIP) and Gambang Halal Park in Pahang, Kertih Biopolymer Park (Terengganu) and Tok Bali Integrated Fisheries Park (Kelantan). The government has forecasted the gross domestic product (GDP) for the three east coast states to grow by 1.5% at the current rate with the implementation of this project. The viability of the ECRL is undisputed as it is estimated that 5.4 million passengers and 53 million tonnes of cargo will use the service annually by year 2030 as the primary transport between the east coast and west coast.
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The revenue from the operation of the ECRL is projected to be obtained through a transportation ratio of 30% passengers and 70% freight. The government had mapped out the interest of Malaysians in the project, including coming to an agreement with China that at least 30% of Malaysian contractors to be involved in this high-impact project. Currently, Malaysia Rail Link (MRL) is actively embarking on a roadshow to tap Malaysian subcontractors that possess CIDB Grade G3G7 and a minimum CIDB Score Rating of 2 Star to participate in a pre-qualification (Pre-Q) exercise.” Sources: The Star, New Straits Times, The Sun Daily
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ABOUT MACFEAM SDN BHD MACfeam Sdn Bhd was established in 1997, wholly owned by Pegasus Diversified Berhad. MACfeam Sdn Bhd provides services to Engineering, Construction Fields, Manufacturing, Fabrication and Supply especially in the Oil and Gas Industries, both on On-Shore, Off-Shore and Power Generation Development. MACfeam Sdn Bhd has broad experiences in bending, welding, heat treatment, nondestructive testing of various types of steels used in the markets. Over the last decade MACfeam Sdn Bhd has been accredited by PETRONAS for major onshore fabrication and construction works. In addition, MACfeam Sdn Bhd has also received various accreditations from a number of reputable bodies such as American Petroleum Institute (API), Moody International Certification Ltd, The American Society of Mechanical Engineers (ASME), The National Board and also Construction Industry Development Board (CIDB).
This announcement is dated 19 October 2017
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