Thursday, July 09, 2009

"A Voice" met the UEM Chairman

Two commentators asked about a rumour that there was a meeting arranged between myself and UEM Group Chairman Tan Sri Tajuddin Ali.

If I've got my little birds, someone else would have their PIs. If it is a PI and they can afford it, use it as long it has positive intention. But not to victimise staff.

Yes, someone close to "A Voice" did met up Tan Sri Tajuddin yesterday morning in PJ. Someone really close. He could be A Voice or he probably is not.

Tan Sri was wearing a red T Shirt and so was "A Voice". Rocky Bru was there. They had breakfast and spoke on many issues. The conversation was open, frank and friendly.

They touched on a wide range of issues - about the UEM Group, the delisting excercise, new CEO, off course the Qatar deal, and personal stuff. It so happen Tan Sri's wife was from an area "A Voice" grew up in JB.

It is seldom that "A Voice" is willing to meet his subject matter. "A Voice" is not a journalist but merely "A Brick in the Wall" expressing his personal concerns. "A Voice" is not obliged to self restrain and sometimes intensive checking in journalism. It is journalist self restraint that there is now the unreasonable expectation on bloggers to be the "Woodward and Bernstein".

In this case, "A Voice" was willing to meet the man simply because this Tajuddin he has much admiration. Furthermore, his reaction to the expose by "A Voice" has been open. Thats good. He has nothing to hide. Off course, he could do more in engaging the new media but he has his reasons.

"A Voice" trust his integrity to keep his anonymous identity under wrap. "A Voice" doesn't not need the personal fame but merely wants the privacy to blog in peace without being frequently stopped by pretty young things for autographs.

It would have been timely to write about it this morning but I am on kind of a tight schedule today. "A Voice" do cari makan and as normal human, has his commitments. And some blogger claim some politicians keep me on their payroll?

Having met the man, "A Voice" can't simply whack. Probably, that meeting blunted my sharp keybords. On the other hand, I can't requote whatever was said in its entirety. Someone is likely to accuse me of being bought over an omelette, sausages, tomato mushroom and croissant. Man, am I cheap?

Frankly, "A Voice" need to gather his thoughts first. The conversation was going on so smooth that "A Voice" didn't want to disrupt Tan Sri's flow. We were on eye to eye contact. Perhaps "A Voice" must be thinking he is a hotshot like Rocky Bru who could rewrite a whole quote from memory only.

Arrogance may have creep up his head. "A Voice" was having breakfast with a Tan Sri. Pakai selekeh-selekh pun ada Tan Sri nak jumpa.

Do allow me to gather my thoughts and check out some facts. Remember that I have not wrote anything on UEM since June 22nd. I need to sieve through the 125 comments on my June 22nd posting and the postings before.

Omigod ... you people can really bash each other up. Frankly, a lot of the issues raised is too personal in nature and some are out of my scope. But it is indicative of pent up frustation and poor staff morale. And, I raised this issue with Tan Sri.

Dato Izzadin needs to learn up interpersonal skill and public relation fast. None of that apple stuff, ok Zadin? You don't need Cik Zaherah's acknowledgement. We are in adult world.

It is indicative SFA, or WTF it is, didn't really work. Little bird said one can really have a good time at SFA, really really good time.

Apart from sieving the comments, bear in mind that UEM have a legal case in Qatar. Tan Sri said he had nothing to hide and left it to my good judgement. Shoot, now I am responsible to make good judgement. Frankly, I can't divulge all that was said that could affect the gameplan for the case.

My assurance is I didn't take in everything Tan Sri said "hook, line and sinker." Kita pun ada kaki yang high level. Tan Sri was not in thick of the action of the Qatar deal. He joined in 2007.

But one thing I agree with him. He wouldn't have join UEM in 2007 just to soil his good reputation.

The writeup should be up tomorrow, if I do not get called up on last minute somewhere. In the meanwhile, I repost a commentators who divulge management's knowledge of the Qatar problem back in 2006. That was before Tan Sri joined.

There are other gloomy pieces of information and dicument/(s) but I will limit at that. After that gloomy senario, then come my more positive posting of the meeting.

I am sure the few of you guys must be sharpening your knives. Tan Sri felt or probably was briefed that the resentment towards management is not widespread but limited to a few.

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PREDICTED LOSSES FOR UEMWORLD (UEMW) FOR 2QFY2006

Preamble


During the month of April 2006, Dato’ Ahmad Pardas Senin (DAPS) had pledged to the business community that “UEM World to turn around” (Star Business Section 18 April 2006). He added that “no provisioning would be made this year” suggesting that the projects in Qatar and India by UEM Builders will cease reporting losses for the year 2006. He went on to add that “If we do not meet the KPIs, someone else would be presenting this corporate briefing next year.’’ Well, that someone else should start warming DAPS seat as the report below describes the imminent losses that UEMWorld and UEM Builders will face.

Tracing the financial reports over the past 3 years, it appears that UEM Builders have been making provision for its operational losses in Qatar and India to a tune of RM400 million. UEMW books reported a provisioning of loss of RM103million last year and DAPS promised that there will be no more. Was he misleading the business community with his ignorance of the issues that his management team have been trying to advise him? The context of this report was based on information from concerned staff from all quarters in the UEM Group.

1 - Salwa Road Project

Salwa Road project was procured through a competitive bidding in 2002 but the project was only awarded in Nov 2003 (Gulf Times). The tender was won on a fair basis and the tender price submitted by other bidders from Europe, Korea and China was close.

Unfortunately, when UEM commenced operations, it coincided with the sudden expansion of construction projects in Qatar who will be hosting the Asian Games 2006. The Middle East region was also booming with the increase in oil prices that pushed other material prices in the region upwards. The boom in China and the “sponge effect” also contributed to the spiraling prices to essential materials such as steel, copper, aluminium, etc.

Basically, UEM was caught at the wrong time and at the wrong place. Not wanting to abandon the project as it was seen to be a “National service” to complete the project at whatever cost, the Board of UEM/UEMW/UEMB did not heed the advice of the management to terminate the contract and stop the potential financial bleeding that was to come. The Boards looked for a scape goat to cover its tracks and the former MD of UEM Builders Dato’ Mohd Nor Idrus was given the privilege under the pretext of early retirement. DAPS again let his cannon loose by informing the world through ITP, an international and market leader publisher in the Middle East on technology, business, consumer and construction matters. He blames the overseas losses in Qatar on “its previous sporadic opportunistic strategy” (ITP Construction 3 May 2006).

In other words, he had faulted Dato’ Wahid Omar his predecessor for the “sporadic strategy” thus further rubbing salt into the wound. But what was eye catching was that DAPS had reported a QR514million loss (equivalent to RM503 million). This is in contradiction to that was reported in the annual audited reports described earlier. Did DAPS knew something about the actual losses and had withheld information from his Board and the business community?

2 - Current State of Affairs

The authorities in Qatar have been blamed for contributing to the increasing losses faced by UEM. It was informed that UEM had told the authorities that they have incurred cost of QR688 million against revenue of QR288 million. This is against a backdrop of 55% physical progress. A deficit of QR400 million has been bandied around but the Qataris are holding firm to state that they will not entertain the claims from UEM as per the provisions of the contract.

Whilst it can be arguable that UEM may have some cause for claims, traditionally, any disputes will have to be channeled through the litigation route via the Courts of Qatar. The process is long, tedious and may cause UEM to spend more money for hiring international Arabic lawyers, translators eventually. Notwithstanding this, the litigation route would spell an end to further forays into Qatar by the UEM Group as the Arabs are known to expel companies that take them to court! DAPS in his press statement (Sun 26 May 2006) confirmed that UEM will take legal action to recover additional costs it incurred. The Qataris are aware of UEM’s intention and is now positioning themselves for a battle. Was it a wise move to tell the whole world your intention especially to your enemy who is now preparing his counter strategy?

3 - The Loss – What next?

So what is the loss that will be suffered by UEM in Qatar eventually? There is a strong possibility that the losses will eventually be in the region of RM500 mil as quoted by DAPS. The costing personnel and auditors are now coming up with projections to this estimate. So how is DAPS going to treat the provisioning of further losses to a tune of about RM500 million when he promised the business community and the financial world that there will be no provisioning in 2006? Was the road show with the media and finance analyst in April 2006 to hood winking everyone to spice up the shares of UEMW and UEM Builders? It was rumored that prior to this event, the image and performance of DAPS was not impressive and there was a need for him to show to his Masters at Putrajaya that he had the magic wand to turn around UEM. So did he do it to save his own skin?

It is always said that “desperate man will do desperate things”. If the additional provision of losses is inevitable in the coming financial reporting, it would not be surprising that some form of fudge actions will be put in place to cover up the entire affair to save embarrassment and of course his position as MD. What are his options? For one, he may look to his faithful friend at UEM Builders to fudge the figures to hide the losses. Second, if this is not possible as the cash flow will eventually rear its ugly head, DAPS may try to pass on the losses into UEM Bhd books since it is not a public listed entity. Is this morally correct as whoever is carrying the can, it involves tax-payers money! This is a more likely scenario but this option will need the blessings from Khazanah. Tough call ahead by Datuk Azman Mokhtar who selected DAPS as the man to turn around UEM but instead will discover that he will be “turned around” by DAPS.

The third option would involve a Government to Government settlement that is indirectly a bail-out for UEM. For this to happen, it is almost certain the Government of Qatar will ask for favors in the international agenda e.g. trade agreements, geo-political issues such as OIC chairmanship support, etc. All these at the expense of the Government of Malaysia. At least, some compensation can be received to minimize the bleeding suffered by UEM. Having said this, the loose cannon speech by DAPS stating that legal pursuit will be activated has not helped this option to be materialized.

Summary

Whatever it may be, DAPS will need to reprimanded for the way he has handled the business community by misleading everyone from day one. The Masters at Putrajaya must be alerted so that something can be put right before it is too late.

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PREDICTED LOSSES FOR UEMWORLD (UEMW) FOR 4QFY2006

Latest news from Qatar is that the losses by UEM continue to mount and things are not getting prettier by the day. Despite declaring a provisional loss of about RM 200 million in 2005 and Mr Ahmad Pardas Senin (MD of UEMWorld) committing to no further provisions of losses will be made in 2006, the attempts to hide the truth is becoming more and more difficult by the day. 2006 is coming to an end and what has been achieved in terms of progress is just over 60% progress. The main line expressway was rushed to be completed in time for the Doha Asian Games. The "so called completed expressway" was a actually a cover up as the final pavement layers were not carried in accordance to specifications and design in most areas. This is now obvious as reported in the Gulf Times(refer to news article in Appendix 1). And if one were to travel along Salwa Road, one would observe the pavement layer in several areas to be cracking after opening to traffic less than 2 months ago. At this point in time the damage is still being investigated but the cost of repairs would probably be in the region of QR 200 million at the expense of UEM.

The attempt to cover up the cost overrun incurred by UEM is becoming more and more obvious. Staff involved in the project has been told that all documents regarding budgetary cost plans and claims related to the project is off limits and there is a clamp down on circulation of these documents. Even the contracts claims staff have no access to these documents, suggesting that the cost overrun has now ballooned to more than QR 800 million in losses. It was also reported that UEM has not been paid for 4 consecutive bills totaling QR80 million as the Client Ashgal is now going to impose Penalties. Our source in Ashgal has informed us that UEM has been issued an Extension of Time of about 40 days from the original completion period of April 2006 and UEM is now incurring Penalty cost at a tune of QR 315,000 per day starting from June 2006 to the anticipated completion date. Even if UEM is terminated in February 2007, the penalty will aggregate to a sum of QR 94,500,000 for 10 months. Please note that there is no ceiling in the Contract and the exchange rate for QR and RM is almost 1:1!

So what is the cost overrun anticipated by UEM which the company is so tight-lipped about? 2 scenarios exist:

Scenario 1: If UEM is terminated by Ashgal, the direct impact is encashment of performance bonds (QR 44mil), the loss of working capital borrowed (QR400mil), the loss of 4 months of unpaid claims & retention sum (QR 120mil), the loss of plant & equipment (QR 50mil), rectification cost of defects (QR 200mil), penalties (QR 94.5mil) & Ashgal’s back charges to complete the remaining work (QR 400 mil). All this comes to a staggering total of QR 1310 mil.

Scenario 2: If UEM continues with the project and are unsuccessful with the claims, the cost overrun is anticipated to be construction cost (QR 500 mil), Penalties (QR 113 mil for 12 months), defect rectification (QR 200 mil) totaling QR 813 mil.

Notwithstanding the high probable imposition of Penalties, Ashgal is now mooting to terminate the contract due to the insipid performance displayed by UEM over the last 1 year. With many experienced staff being removed and or leaving the project and frequent changes to the top hierarchy chain of command, major confusion exist at the site level of who is really in charge of the project and the staff are generally demotivated and lost in the woods.

Should UEM be terminated or even strive to finish the project, the consequential losses to UEM will be definitely exceed QR 800 million and will be the final blow adding more woes of the GLC in making a comeback trail.

13 comments:

kuldeep said...

Please ask Tan Sri to talk to people on the ground i.e staff,suppliers,clients,subcons.

That may not be the job of a non executive Chairman but for the sake of the nation one have to cross boundaries sometime.

And the new CEO?Well,if you are merely looking at reports,talking to senior mgmt and feted at group welcoming parties..you won't get too much feedback.Go to the ground and feel the pulse.

Life4youisGood said...

That's a mark of a responsible blogger..listening to both sides!

As for the two reports, 2Q2006 & 4Q2006, it does exist! It was send to the MoF with copy to Khazanah. But, whether the gets into the intended hands, only Gods knows..

In the meantime, we will give Tan Sri the benefit of the doubt and wait for your write-up and summary.

Cheers

Anonymous said...

"Little bird said one can really have a good time at SFA, really really good time."

U got that right!!! That's Ridza's greatest legacy..tebuk menebuk..yeehaa!!

Opps..sorry..sorry..Focus!..Focus!..must maintain focus.

SFA Diehard Fan

tooth-tooth said...

i dont think TA should worry, just carry on his job properly.... but politic is politic. maybe that why.

Anonymous said...

So..with this report out way back in 2006..no action until now..can still say Ridza & Pardas the best pair?? Best pair of titties maybe can la.

So, cyber-troopers2 Ridza, Venu..lu orang suma mana menyorok??

Muat ka hiding dalam itu susu besar? kah kah kah..zana...

Anonymous said...

New MD 'teacher's pet' ka?

OMG..One disaster after another..

Macam P.Ramlee says: Kecik-kecik tak nak mampus, dah besar menyusahkan orang...Tan Sri P.Ramlee yang kata, bukan aku..

Anonymous said...
This comment has been removed by a blog administrator.
Anonymous said...

Voicey,

I've once squated at his London flatlet when he was a PhD student at QMC. Thanks T.S

Tony M.

Anonymous said...

very interesting...but why?

In any competitive bids the margins will always be very slim..and further , a contractor have to accept the conditions of contract imposed..

And its not a rare occurence for cost to escalate beyond those allowed for in the bids due to various reasons..

The difference between a genuine contractor and a "part time" contractor is that genuine contractors will progress the works regardless of cost overruns..in fact ..will try to expedite completion and work on design,execution methods and other means to mitigate losses.

Time is money..the longer you drag,the more cost you will incur.

Of course..at the same time the real contractor will ensure proper documentation of notices and letters in preparation for potential claims.

UEMB instead went thru a scapegoating process which disrupted the project team/continuity,a PR exercise that virtually announced their strategy to the Qatari,instituted controls that basically squeezed their own site people and displayed a total lack of leadership.

So the losses just kept on escalating.But the bosses have already insulated themselves from the blame game by parading the usual suspects.

Its interesting only to see whether the new MD will see thru the smoke and mirrors.

Anonymous said...

Very nice story on UEM... but where is the announcement to the stock exchange... eie : letter of offer, letter of intent? How are we to believe that all these are true if there is not anything in black and white to Bursa Malaysia?. Some people may misconstruct the UEM interview in Business Times are market manipulation. Who is offering UEM, the contract, why didnt the reporters ask the UEM boss that simple question?. I suggest UEM immediately make a public announcement to the stock exchange, if not AVOICE, we trust you to take it up.

Anonymous said...

Tan Sri,
Please review in detail the Certificate of Completion and Extension of Time document that was issued by the Qatari authorities
My review confirmed that these are in relation to the second package of works which was awarded to UEM after the re-negotiation exercise, which was the essence of the "un-signed" supplementary agreement.
UEM is not out-of-the-woods yet as there is a separate and more rigorous exercise required to prove that UEM was not the cause of delay to the Salwa Road Package under Phase 1.
To be confident that the claims of RM 1bil is going to be successful is premature at this stage. With a Saddam Hussein in charge, it is not surprising to hear that all is well and UEM is going to be successful. Take College of Technology's case as example.
You have a master of deception and magician in your midst

Anonymous said...

The new UEM chief executive is from TNB, a tainted fella who asked for double his salary when the economy was down and the company was not doing well.

What kind of CEO does that make?

This fella will need very good make-over, kena taubat nasuha before the industry can start to accept him.

-- Bumiputri --

Anonymous said...

Voicey,

After your meeting with the Chairman, except for one more article, you have become so quite about UEM - where are the further write ups you promised us?

My Say