Sime Darby is reported to have incurred an estimated cost over-run of RM1.7 billion on a Bakun Dam contract worth RM1.8 billion.
It is understood the government has agreed to reimburse Sime around RM0.7 billion, leaving the firm to absorb the remaining RM1 billion, The Star reported.
But who actually owns Sime Engineering, which reportedly was awarded the RM1.8 billion contract? The firm is a 100 per cent subsidiary of Sime Darby Bhd, according to the group’s 2009 Annual Report. Sime Darby Bhd in turn is owned by Amanah Saham Bumiputera Scheme (39 per cent), EPF (14 per cent) and PNB (13 per cent).
That means the government will have to absorb RM0.7 billion and the Sime Darby GLC the remainder. And who benefits? Energy-intensive private firms will enjoy cheap electricity tariffs generated by the dam – if (and that is a big IF) the jinxed dam is functional. Socialising costs/losses and privatising profits.
As the Bakun Dam bleeds red ink, the displaced and marginalised Penan, who lost their ancestral burial grounds to the dam, could well have the last laugh – though one suspects there could be a few more ‘last laughs’ in store.
The government has to give us a breakdown of the total cost incurred on the Bakun Dam, indicating how much of it is incurred by the private sector, by GLCs and by the government itself. The resettlement and other associated costs of the dam should also be included.
Update: Sime Darby has now announced it will be conducting an investigation.
Sime Darby addressing challenges in its energy and utilities Division
KUALA LUMPUR, 6 May 2010 – With reference to recent media reports about Sime Darby’s Energy & Utilities Division, including projects in Qatar and Bakun, the Group would like to confirm that a Taskforce is investigating all aspects of this Division’s business operations in an effort to address the tough and challenging situation it is currently facing. The Taskforce has yet to complete its investigations, and once completed, the Group will make all relevant disclosures during its 3rd Quarterly Results announcement on 27 May 2010.
The Sime Darby Management is aware of the difficulties and challenges besetting its Energy & Utilities Division, especially with regards to operational efficiency and project management, and has instituted a new management team at the Division.
The Group is currently addressing the situation by implementing appropriate measures.