Dear Sir,
This is my response to the article titled:
Penang undersea tunnel: a response – Dato’ Zarul Ahmad Mohd Zulkifli
Do not accuse me of not privy to the full facts of the transaction. I based on the following transactions between Bursa Malaysia and Astral Supreme to draw my conclusion.
The following is the announcement:
Astral Supreme Bhd announced that its wholly-owned subsidiary, Astral Supreme Construction Sdn. Bhd. (974198-D) (ASC) has on August 15, 2013 entered into a Joint Venture Agreement (JVA) with Zenith PMC Sdn. Bhd. (1007127-K) (ZP) to jointly manage, perform and carried out the Feasibility Studies and Detailed Design Stage of the project known as Projek Pembinaan Jalan-jalan Utama dan Terowong di Pulau Pinang, involving the proposed construction of various roads in Penang and an undersea tunnel between Penang island and Seberang Perai (the Project). The objects of the Joint Venture are: the joint management and performance of the FSDD and/or the Works within the Project Timeline and in accordance with the requirements and terms of the Principal Project Agreement and the FSDD Contract; the appointment of architects, engineers, surveyors, consultants and/or other advisers (Consultants) in relation to the Works; the funding and financing of the Works, including but not limited to payment of Consultants; and the doing of such acts, matters and things as may be consistent with, necessary for or incidental to the attainment of any of the objects above to be undertaken by the Parties and their consultants, where applicable, in accordance with the terms and conditions set out in the JVA. The estimated project cost of MYR2 million will be funded through internally generated funds.
In response Bursa Malaysia requested Astral Supreme for additional information for public release.
In this connection, kindly furnish Bursa Malaysia Securities Berhad ("Bursa Securities") with the following additional information for public release:-
The specific roles and responsibilities of Astral Supreme Construction Sdn Bhd ("ASC") under the JVA;Whether ASC has the capacity and capabilities in undertaking the Feasibility Studies and Detailed Design Stage ("FSDD") of the Project; The equity interests to be held by ASC and Zenith PMC Sdn Bhd ("ZP") in the joint venture;The name of the directors and major shareholders of Zenith Construction Sdn Bhd ("ZC") together with their respective shareholdings;The equity interests held by ZC in the Consortium;Further clarification on how the revenue to be received by ZP is derived from whereby the joint venture is entered into to jointly manage, perform and carry out the FSDD;The terms of cost sharing between the ASC and ZP under the JVA; The estimated total cost of the FSDD Project; andThe basis and assumption used in arriving at the Guaranteed Profit of RM15 million for ASC.
Please furnish Bursa Securities with your reply within one (1) market day from the date hereof.
The following is the reply by Astral supreme to Bursa Malaysia:
Further to the announcement (Ref. No. CS-130815-209CB) made on 15 August 2013 pertaining to the Proposed Joint Venture Agreement ("JVA") entered between Zenith PMC Sdn. Bhd. and its wholly-owned subsidiary, Astral Supreme Construction Sdn. Bhd., the Board of Directors of Astral wishes to furnish additional information of the above matter as follows:-
1. The primary roles of ASC are to conduct engineering design, cost-benefit analysis as well as economic assessment of the project, based on traffic studies.
The responsibilities of ASC include the following:(a) appoint such Consultants to perform the various stages of the Works as may be determined and directed by the JV Committee;
(b) allocate the work orders to all the Consultants for their orderly execution of the Works, after such work orders have been approved by the JV Committee;
(c) make payment to each of the Consultants pursuant to the stages of the Works that have been completed and in accordance with the terms and conditions set out in the respective letters of engagement of the Consultants;
(d) provide to ZP, the Project Works Records (as defined herein) as soon as practicable after any of them are received, prepared or issued by ASC. For the avoidance of doubt, ownership and all proprietary rights to the Project Works Records will remain with ZP;
(e) prepare and provide financial reports on the Joint Venture on a quarterly basis to ZP, with the first quarterly report being in respect of the quarter commencing on 1 September 2013 and ending on 30 November 2013 (“Quarterly Financial Reports”). The Quarterly Financial Report shall be subject to the approval of the JV Committee;
(f) ensure that it maintains accurate and complete accounting and other financial records of all operations and activities relating to the Joint Venture and the Works and make all financial reports in accordance with generally accepted and applicable accounting principles and practices; and
(g) ensure completion of the Works to the satisfaction of ZP and Consortium within the Project Timeline.
2. ASC has the capacity and cababilities in undertaking the Feasibility Studies and Detailed Design Stage ("FSDD") of the Project as ASC project team comprise of consultants and professionals in relevant fields.
3. No equity interest is involved in the ASC and Zenith PMC Sdn Bhd ("ZP") joint venture as this is a non incorporated JV arrangement between ASC and ZP.
4. Directors of Zenith Construction Sdn Bhd ("ZC")Mohammad Jeffrie bin Abdul HalimLee Chee HoeLim Moi Yoke
Major Shareholders of ZCMohammad Jeffrie Bin Abdul Halim (67.10%)Lee Chee Hoe (9.21%)555 Capital Sdn Bhd (23.68%)
5. There is no direct equity interest held by ZC in the Consortium Zenith BUGG Sdn. Bhd. ("Consortium"). According to ZC, Lee Chee Hoe and Wong Kwai Wah are holding equity interest on behalf of ZC in Consortium.
6. Essentialy, the revenue is derived from the Consortium which will be remitted to a JV's bank account which is to be jointly operated by ASC and ZP.
7. The JV’s project cost essentially comprises payment to consultants such as engineers, architects, surveyors and other relevant professionals and for general coordination and administration of the JV.The initial “cost” is anticipated to be about RM2 million. However, the costs shall then be reimbursed by ZC on all payments made by ASC to the Consultants on a quarterly basis, within seven (7) Business Days after the finalization of each Quarterly Financial Report, subject to ASC’s submission of valid invoices, receipts and supporting documentation in respect of payments made by ASC to the Consultants.
8. The estimated total cost of the FSDD Project is RM215 million.
9. The RM15 million Guaranteed Profit for ASC is derived from 25% of RM60 milliion revenue.
This announcement is dated 20 August 2013.
The following spell out the reason why I accuse the project a corruption by proxy:
1) See how the initial project cost of RM2 million suddenly ballooned to RM215 million when Bursa Malaysia ask about the basis and assumption used in arriving at the Guaranteed Profit of RM15 million for ASC.
2) Bursa Malysia ask whether ASC has the capacity and capabilities in undertaking the Feasibility Studies and Detailed Design Stage ("FSDD") of the Project. This is the RM6.3 billion worth of reply: ASC has the capacity and cababilities in undertaking the Feasibility Studies and Detailed Design Stage ("FSDD") of the Project as ASC project team comprise of consultants and professionals in relevant fields. For a RM6.3billion project, can you accept this type of answer?
3) Bursa Malaysia ask about the specific roles and responsibilities of Astral Supreme Construction Sdn Bhd ("ASC") under the JVA. This is the fantastic reply: The primary roles of ASC are to conduct engineering design, cost-benefit analysis as well as economic assessment of the project, based on traffic studies. Where is the feasibility study? Who is going to do the feasibility study? The consultants or Zenith PMC? Or may be there is no feasibility study at all.
4) Do you sincerely believe that the JV going to do any feasibility study? Feasibility study is not just about cost-benefit analysis , economic assessment of the project, and traffic studies,it should focus on safety aspect and environmental impact. Is there any ground investigation? Any geophysical investigations, probe drilling, and core drilling? Any effort to locate fault and fracture zones? Any investigation on the existent, strike, and dip of fault and fracture zones? For a RM6.3 billion mega project, can you accept the type of feasibility study as proposed by ASC?
5) Without preliminary engineering study, there is insufficient info to complete a level of tunnel design that can be used to conclude the selection of a tunnel boring machine (TBM) and arrive at a credible estimate of the TBM advance rate. One of the largest cost factors associated with tunnel construction is determining what kinds of geological conditions exist between the portals or shafts of a tunnel. Modern geotechnical engineers utilize a variety of imaging technologies and boring samples to determine rock type and groundwater penetration. These technologies can provide an acceptable level of confidence in the type of rock that needs to be bored through. The major geological and geotechnical factors that pose a high level of uncertainty to the current design and estimates of schedule and cost are totally ignored by Lim Guan Eng administration throughout the tendering process.
5) Without preliminary engineering study, there is insufficient info to complete a level of tunnel design that can be used to conclude the selection of a tunnel boring machine (TBM) and arrive at a credible estimate of the TBM advance rate. One of the largest cost factors associated with tunnel construction is determining what kinds of geological conditions exist between the portals or shafts of a tunnel. Modern geotechnical engineers utilize a variety of imaging technologies and boring samples to determine rock type and groundwater penetration. These technologies can provide an acceptable level of confidence in the type of rock that needs to be bored through. The major geological and geotechnical factors that pose a high level of uncertainty to the current design and estimates of schedule and cost are totally ignored by Lim Guan Eng administration throughout the tendering process.
6) What is constitute a feasibility study on tunneling?
According to tunneling expert, the feasibility study should cover the following activities:
A comprehensive ground investigation program has to be carried out. Such a program should include additional geophysical investigations, probe drilling, and core drilling.
It is also important to locate major fault and fracture zones and to investigate the depths to competent bedrock adjacent to the tunnel portals. It should be recognized that if the tunnel is make of two uni-direction tunnel tubes, the width of the two tubes is close to 50m and the investigation need to cover a large area.
In order to further investigate the existent, strike, and dip of fault and fracture zones it is also necessary to carry out geophysical investigations (resistivity and refraction seismic investigations) on a certain distance and parallel to the planned tunnel alignment one line on each side of the tunnel. Adjacent to the tunnel portals it is also necessary to make similar studies on transverse lines. In order to calibrate the geophysical investigations it is necessary to drill some core holes along the tunnel alignment. Core holes should also be drilled in order to investigate the conditions of anticipated fault and fracture zones.
It is also necessary to locate the level of competent rock adjacent to the tunnel portals. Besides the geophysical investigations a comprehensive drilling program is necessary. The drillings should consist of percussion drilling and core drilling. As core drilling is expensive, a combination of percussion drilling and geophysical logging should be considered as a complement. In critical areas one investigation hole per 10m2 is foreseen.
Contrary to previous drilling the new investigation holes should reach below the planned tunnel floor.
In order to penetrate more fractures(fracture zones are normally dripping close to vertical) and also to investigate the conditions anticipated fault and fracture zones inclined core holes approximate 70 degrees, should be used. Near the tunnel portals it is also recommended to drill near the horizontal (30-40 degree) core holes along the tunnel alignment. In the core holes it will be necessary to perform water loss measurements(Lugeon tests) on a routine bases in order to evaluate the hydro-geological conditions of the bedrock.
Cores from the tunnel level should be subject to uni-axial compressive strength test and cover existing rock types. Rock stress measurements in any of the core holes should also be considered. Excavation of an investigation trench down to the tunnel level should be considered in connection to one of the tunnel portals as a complement to the investigations and drillings outlined above.
A comprehensive ground investigation program has to be carried out. Such a program should include additional geophysical investigations, probe drilling, and core drilling.
It is also important to locate major fault and fracture zones and to investigate the depths to competent bedrock adjacent to the tunnel portals. It should be recognized that if the tunnel is make of two uni-direction tunnel tubes, the width of the two tubes is close to 50m and the investigation need to cover a large area.
In order to further investigate the existent, strike, and dip of fault and fracture zones it is also necessary to carry out geophysical investigations (resistivity and refraction seismic investigations) on a certain distance and parallel to the planned tunnel alignment one line on each side of the tunnel. Adjacent to the tunnel portals it is also necessary to make similar studies on transverse lines. In order to calibrate the geophysical investigations it is necessary to drill some core holes along the tunnel alignment. Core holes should also be drilled in order to investigate the conditions of anticipated fault and fracture zones.
It is also necessary to locate the level of competent rock adjacent to the tunnel portals. Besides the geophysical investigations a comprehensive drilling program is necessary. The drillings should consist of percussion drilling and core drilling. As core drilling is expensive, a combination of percussion drilling and geophysical logging should be considered as a complement. In critical areas one investigation hole per 10m2 is foreseen.
Contrary to previous drilling the new investigation holes should reach below the planned tunnel floor.
In order to penetrate more fractures(fracture zones are normally dripping close to vertical) and also to investigate the conditions anticipated fault and fracture zones inclined core holes approximate 70 degrees, should be used. Near the tunnel portals it is also recommended to drill near the horizontal (30-40 degree) core holes along the tunnel alignment. In the core holes it will be necessary to perform water loss measurements(Lugeon tests) on a routine bases in order to evaluate the hydro-geological conditions of the bedrock.
Cores from the tunnel level should be subject to uni-axial compressive strength test and cover existing rock types. Rock stress measurements in any of the core holes should also be considered. Excavation of an investigation trench down to the tunnel level should be considered in connection to one of the tunnel portals as a complement to the investigations and drillings outlined above.
Lim Guan Eng should come clean on this issue and spell out in detail the feasibility study that need to carry out.
Regards,
Ong Eu Soon
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