The Port Klang Authority (PKA) board of directors will meet tomorrow morning to decide whether to fulfill its apparent obligations to bondholders who helped finance Port Klang Free Zone (PKFZ) turnkey contractor Kuala Dimensi Sdn Bhd (KDSB).

Previously, the board had reportedly expressed reservations on the payment of RM222.58 million to KDSB’s special purpose vehicle Free Zone Capital Bhd, because of an ongoing suit.

azlanPKA is suing KDSB for allegedly overclaiming RM1.4 billion and is considering withholding payment because it is worried that it may not be able to recover funds from the latter.

According to a PKA source, the precaution was necessary because if the suit goes in PKA’s favour, the board will be held liable in the event monies could not be recovered from KDSB.

However, Transport Minister Kong Cho Ha appears to be adamant that the PKA must honour its obligations to pay FZCB and Special Port Vehicle Berhad (SPVB) by July 31 as scheduled previously. 

While confirming this to reporters yesterday, Kong did not explain the government’s motivation in doing so.

Kong was also ambivalent when asked whether he would invoke Section 3(4) of the Port Authorities Act 1963 to override the board’s decision, in the event the board decides to withhold payment.

“I will speak to them,” was Kong’s curt reply.

In the latest development, the Transport Ministry has ordered PKA to make its payment to the special purpose vehicles as set out in the payment schedule.

Does PKA really have to pay?

Meanwhile, English daily The Sun reports that KDSB had in 2006 given written guarantees to three special purpose vehicles that it will cover any shortfall by PKA to the bondholders.  

azlanThis has effectively put in question Kong’s insistence on using public funds to repay the bondholders. 

Interestingly, these letters were never mentioned in the audit report by PriceWaterhouseCoopers, who were commissioned by former transport minister Ong Tee Keat as part of an exhaustive probe into the PKFZ scandal.

In total, KDSB formed four special purpose vehicles to raise RM4.6 billion to fund the project.

Last month, PKA disbursed RM350 to two special purpose vehicles - Transshipment Megahub Bhd (TMB) and Valid Ventures Bhd (VVB).

Another RM150 million is scheduled to be paid to Special Port Vehicle Bhd.

Related story: Tee Keat: PKA must not pay bondholders

Chart: The business and political connections