Contracts IJM, Sunway, MMC, Putrajaya may gain from Warisan Merdeka

by **Cals** Fri 16 May 2014, 17:36

Contracts IJM, Sunway, MMC, Putrajaya may gain from Warisan Merdeka

Business & Markets 2014

Written by Kamarul Azhar of theedgemalaysia.com

Friday, 16 May 2014 15:45

THE construction of the proposed 118-storey Warisan Merdeka tower by Permodalan Nasional Bhd (PNB) is gathering momentum with the pre-qualification tender notice put up by its developer PNB Merdeka Ventures Sdn Bhd (PMV).

According to the notice, which was in several major news dailies last Wednesday, the main contractor role will most likely go to a foreign construction company. This is due to the stringent requirements drawn up for the lead contractor.

Among others, PMV requires the lead contractor to have experience as a main contractor with direct responsibility for the construction of mixed-use projects exceeding 60 storeys and/or 250m in height.

The lead contractor must also have a total annual value of main contractor works of not less than RM5 billion per annum in the last five years. Furthermore, it must have completed main contractor works in a single contract of not less than RM1.5 billion in value in the past five years.

However, the foreign company must form a 60:40 joint venture with a local contractor to bid for the project.

The registration of intent must be made no later than 3pm on May 16 while the pre-qualification document must be submitted before June 6.

Several names of local construction companies have been bandied around as potential bidders for the role of JV partner. They include IJM Corp Bhd, Sunway Bhd, Putrajaya Perdana Bhd and MMC Corp Bhd.

PMV requires the local JV partner to have experience as a main contractor for the construction of mixed-use projects exceeding 15 storeys, with a minimum of 10 years of experience and establishment, as well as strong financial background.

“Among the local construction companies, I think IJM has the expertise and financial capacity to undertake the project. Second-tier companies such as Eversendai [Corp Bhd] could provide other services to the main contractor,” says a construction sector analyst with a local investment bank.

IJM’s construction arm, IJM Construction Sdn Bhd, recently won a contract for the main building works of a commercial development in Damansara Utama, consisting of a shopping mall, an office, commercial pods as well as a 21-storey hotel block worth RM396 million.

The recent contract win has lifted IJM’s construction order book by 20% to RM2.4 billion, according to Maybank Investment Research’s estimates. Besides IJM, Sunway could also be a contender for the role, analysts say.

“Sunway has undertaken works for the construction of high-rise buildings and has the financial muscle to undertake its part of the project,” says another construction sector analyst with a local research firm.

Sunway is one of the largest construction companies in Malaysia with an outstanding order book of close to RM4 billion. As at end-2013, the group’s construction order book replenishment totalled about RM2.2 billion, including RM1.5 billion in external jobs, according to AmResearch.

In August last year, its unit, Sunway Construction Sdn Bhd, was awarded a contract worth RM282.9 million by Pulau Indah Ventures Sdn Bhd, the Khazanah Nasional Bhd and Temasek Holdings Pte Ltd JV, to build the Urban Wellness project in Medini, Iskandar Malaysia.

One of the requirements stated in the pre-qualification notice is for the local company to have a minimum 30% bumiputera equity. According to an executive with PMV, the local contractor can form a consortium with another bumiputera-owned local company to meet the equity requirement.

“Our preference is for the JV to consist of one foreign company as the lead contractor, and one local partner. However, if the local partner does not meet the 30% bumiputera equity requirement, a consortium can be formed with a bumiputera company.

“However, we would like to see the bumiputera company having a role in the JV so that it can gain experience in developing such a complex project. We don’t want the bumiputera company to just be a sleeping partner,” the executive says when contacted by The Edge.

Other local companies that have participated in the construction of skyscrapers include Tan Sri Syed Mokhtar Albukhary’s MMC. Its unit, MMC Engineering Services Sdn Bhd, was previously involved in the construction of Tower 1 of the Petronas Twin Towers.

Besides MMC, privately owned Putrajaya Perdana Bhd is another company that may bid for the local partner role. Putrajaya Perdana was delisted in 2010 after its holding company, UBG Bhd, was privatised by PetroSaudi International Ltd.

Putrajaya Perdana has resurfaced in the corporate scene in Malaysia with its unit, Putra Perdana Construction Sdn Bhd, securing the contract to supply raw water to Petronas’ Refinery and Petrochemical Integrated Development project in Pengerang, Johor.

Prior to its privatisation, Putrajaya Perdana also had a commendable track record, having been involved in the development of iconic projects such as the Pavilion shopping complex in Bukit Bintang, the Felda Tower and various government buildings in Putrajaya.

The Warisan Merdeka project will be built on a 19-acre parcel that houses the historic Stadium Merdeka and Stadium Negara. The project was first announced by Prime Minister Datuk Seri Najib Razak in 2010 when he was tabling the 2011 Budget Bill in Parliament.

According to the PMV executive, many international contractors have approached the company for details on the project. However, none has registered yet to participate in the pre-qualification process.

While he declined to name the interested contractors, industry sources say they include Samsung C&T Corp, Hazama Corp, Daewoo Engineering & Construction, China State Construction Engineering Corp (CSCEC), Leighton Holdings and Saudi Binladin Group.

Some of these international contractors had been appointed as main contractors for some of Malaysia’s tallest buildings. Samsung C&T and Hazama were the main contractors for the Petronas Twin Towers, while Daewoo E&C constructed Menara TM in Bangsar and KLCC’s Tower 3.

While Malaysia had looked to South Korean and Japanese contractors previously for the construction of skyscrapers, Chinese companies have in recent years stamped their mark here with the construction of various infrastructure projects.

In January, CSCEC was awarded the contract to build Mah Sing Group Bhd’s high-rise residences in Medini, Iskandar Malaysia.

China Harbour Engineering Co Ltd, meanwhile, was the lead contractor for the second Penang bridge project.

This article first appeared in The Edge Malaysia Weekly, on May 12 - 18, 2014.