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Rich Capital clarifies partner's concerns over Batam project
RICH Capital said on Friday that it has received a letter from a joint-venture partner of Oxley Batam, its 80 per cent-owned indirect subsidiary, informing it of concerns in relation to the Batam development project in Indonesia.
The project is being developed by Oxley Karya Indo Batam (OKIB), a company incorporated in Indonesia that is equally owned by Oxley Batam and joint-venture partner Karya Indo Batam (KIB).
After a tender process last year, Rich-Link Construction (RLC), an associate of Rich Capital's non-independent non-executive chairman Wang Zhen Wen, was awarded a contract of S$125 million by OKIB to undertake design, construction and maintenance of Phase 1A of the project on Oct 15, 2018. RLC commenced construction on Nov 13, 2018.
On Monday, KIB expressed that it was concerned with a potential conflict of interest in the appointment of RLC as the main contractor. It also alleged delays to the project due to the lack of resources of the main contractor and said that RLC had yet to submit to OKIB a performance bond due under the construction contract for a sum equivalent to 10 per cent of the contract value.
KIB requested that the board of OKIB take action in relation to the management of the project and provide a status update.
On Wednesday, the shareholders of Oxley Batam met with representatives of KIB to resolve their concerns.
In relation to the potential conflict of interest, Rich Capital said it was reiterated to KIB that although the award of the construction contract was an interested-person transaction, all methods and procedures to approve the transaction under the company's IPT Mandate (obtained from shareholders at a meeting last year) were rigorously applied and complied with.
The contract was only awarded to RLC after a thorough tender evaluation process conducted by a reputable independent consultant, it added.
As for the performance bond, OKIB said it understands that the delay was due to the form of the bond required being "incongruent" with what Indonesian financial institutions are able to provide under Indonesian laws and regulations.
The parties have now agreed that a performance bond issued based on Indonesian standard terms will be acceptable, subject to the approval of OKIB's independent project team.
It was also agreed at the meeting by all parties that OKIB would release, in goodwill, part of the first progress claim under the project of S$796,000 to RLC.
RLC shall issue the performance bond and provide it to OKIB within two weeks of receipt of the said sum. Upon receipt of the performance bond, OKIB has agreed to release the balance amounts due under all four progress claims made to date to RLC.
Rich Capital added that the project is progressing on schedule and no costs have been incurred due to the delay of the provision of the performance bond.
To date, about 39 per cent of the 1,193 residential units and 33 per cent of the 100 retail spaces launched in Phase 1A of the project have been sold, it said.
OKIB has also agreed to schedule monthly update meetings to keep all parties informed of the project developments, and to prevent any gaps in communication.