Sslee blog
Hengyuan: Follow up questions on HRC response to my whistle blowing questions
Dear Haniza Abdul Hamid
IR Contact: HRCPD-Corporate-Affairs@hrc.com.my
Thank you very much for email to me HRC’s written response to my questions for HRC 64th AGM and since some of my questions were addressed during AGM and HRC will publish the HRC’s 64th AGM minutes of meeting in HRC’s corporate website hence I will wait tell I read the full AGM minutes/key matters discussed before I send in follow-up questions to clarify on HRC’s responses.
By the way may I know when will HRC publish the 64th AGM minutes of meeting/Key matters discussed in HRC’s corporate website?
At the meantime I would like to direct the following follow up questions on HRC response to my whistle blowing questions to Mr. Surinderdeep Singh Mohindar Singh (Independent Non-Executive Director/The Chair Board Whistleblowing Committee) My follow up questions in RED
Question 1: Overpaid high crude premium that resulted in average USD 136.45 per barrel in Q3 (HRC is welcome to correct my calculation) when average Dated Brent dropped to USD 101 per barrel in Q3 and thus resulting in Q3 PBT of negative RM 894,141,000. Please investigate is the decision to pay high crude oil premium in Q3 shows malpractice, impropriety, misconduct or omission by people involved in the decision making?
Response from HRC:
HRC has a crude term supply agreement in place which ensures its business continuity in operating the refinery. Our decision-making process is guided by a strict code of ethics and compliance with HRC’s policies and procedures, which include a thorough evaluation process to ensure that we obtain the best value for our purchases while maintaining high standards of quality and reliability to our stakeholders. We remain committed to always operate with integrity and with the best interests of our shareholders and stakeholders.
The Whistleblowing Committee has thoroughly investigated your above query, and inform that the internal control processes are subject to review by the Company’s external auditorsi.e.,PwC. There is no malpractice, impropriety, misconduct, and/or omission detected. Crude premiums paid by the Company are in line with prevailing market premiums.
Question 2: From 2021 HRC annual report; The Company held refining margin swaps designated as hedge. The contracts are intended to hedge the volatility of the refining margin (differences between purchase price of crude oil and sales price of petroleum products) for a period between 1 to 33 months (2020: 1 to 12 months). Hedge Gross margin per barrel (USD) 8.00 to 12.30. The Company also uses commodity options, commodity swap contracts and refining margin swap contracts to manage its commodity price risk and inventory holding cost. The Company does not designate these derivatives as hedging instruments.
In Q3 why despite all the above hedging the company suffered other operating losses: RM 73,569,000: Fair value loss on derivatives financial instruments: RM 364,570,000, Inventories written down: RM 70,045,000 and refining loss which contributed to Q3 PBT of Negative RM 894,141,000
My genuine concern, it is impossible to suffer hundreds of millions derivative/hedging (refining margin and inventories) loss and at the same time hundreds of millions in physical inventories and refining margin loss.Please investigate is the decision on refining margin swaps contracts, commodity options and commodity swap contract in Q3 shows malpractice, impropriety, misconduct or omission by people involved in the decision making?
Response from HRC:
We would like to reiterate that our decision-making process is guided by a strict code of ethics and compliance with our company’s policies and procedures, which include a thorough evaluation process to ensure that we obtain the best value for our purchases while maintaining high standards of quality and reliability to our customers. We remain committed to always operate with integrity and with the best interests of our shareholders and stakeholders.
Both the Whistleblowing Committee as well as the Company’s external auditors i.e., PwC have reviewed the existing hedging policy, internal controls and activities. There is no malpractice, impropriety, misconduct, and/or omission detected.
Note: Petron Malaysia managed to turn Q2 derivatives unrealized loss: RM 166,799,000 to Q3 derivatives realized gain: RM 139,957,000 and unrealized gain RM 7,588,000
We are only able to respond on HRC related inquiries.
Follow up questions in red:
I refer to HRC respond to my AGM's question
Question 12: Please explain why paid high crude premium (who make this decision) until Q3 incurred gross (loss) of RM (720,812,000)
Response from HRC:
There is a 2 to 3 month time lag between crude oil purchase to its delivery to our production site. Therefore, Q3 crude feedstock is mainly comprised of purchases in Q2. Crude premium was higher in Q2 due to tightening of the market. Crude premium is market driven and our crude premium paid is consistent with the market.
Question 1: The Whistleblowing Committee has thoroughly investigated your above query, and inform that the internal control processes are subject to review by the Company’s external auditors ie.,PwC. There is no malpractice, impropriety, misconduct, and/or omission detected. Crude premiums paid by the Company are in line with prevailing market premiums. Quote, “There is a 2 to 3 month time lag between crude oil purchase to its delivery to our production site. Therefore, Q3 crude feedstock is mainly comprised of purchases in Q2” unquote
Did Whistleblowing Committee receive top management reasons to justify their decision on high price crude feedstock mainly comprised of purchases in Q2 but did not sufficiently hedged thro’ commodity options, commodity swap contracts to sell forward 2 to 3 motnhs (back to back) the refining finished products?
Is that not constituted as malpractice, impropriety, misconduct, and/or omission of top management to sufficiently hedge the high price crude purchase 2 to 3 months back with commodity options, commodity swap contracts forward sell 2 -3 months of the equivalent amount of refining finished products?
Question 3: I refer to my previous complaint dated 4 Jun 2019 address to:
david-ronald.keat@hrc.com.my
jocelyn.wang@hrc.com.my
liangkoksiang@gmail.c
surinder@hrc.com.my and CC to
jocelyn.wang@hrc.com.my
liangkoksiang@gmail.c
surinder@hrc.com.my and CC to
How can a 30 tonnes/day H2 plant cost USD 66.4 million? Below is the budgetary quotation for 7,000 Nm3/hr (15.1 MT/Day) H2 plant from Mahler. Please investigate.
1 Kg of H2 is equal to 11.126 Nm3
7,000 NM3/hr H2 plant = 7X24/11.126 = 15.1 MT/Day H2
So for a 30 MT/Day H2 plant you need 2 x 7000 Nm3/hr plant.
2 units of 7,000 NM3/hr are recommended due to the ability to run only one during low load (Greater Turn-down ratio) instead of one single plant and safety of 2 plants instead of one.
Budgetary 2 X EU 7,250,000= USD 2 x 7,250,000 x 1.12 = USD 16,240,000.
This price is budgetary quotation and still can negotiate for discount (2 identical units) and during detail plant configuration discussion (Pressure requirement thus the compressors spec)
Refer attachment: Technical Specification 4289.pdf
Type of Plant: Hydrogen Generation Plant
With Combustion Air Preheating
Capacity: 7.000 Nm3/h (1,013 bar, 273.15 K)
Purity: min. 99,996 vol.-%
Pressure: 15 bar (abs) exit PSA-unit
46 bar(abs) exit H2-booster compressors
(3x 2.500 Nm³/h, brand Mehrer)
Basis of feed: Natural Gas
My genuine concern is this overpriced H2 plant was awarded without competitive quotation from other suppliers. Please investigate how many quotations from other suppliers HRC evaluated. Did the contract awarded decision show malpractice, impropriety, misconduct or omission by people involved in the decision making?
Response from HRC:
This question has been addressed by the former CEO, Mr David Keat, whereby there were two letters dated 17 June 2019 and 3 July 2019 that were sent to Shareholder,Mr Lee Soon Sheng.
Question 2: In total there are how many suppliers bidding for the H2 plant?
And did the Whistleblowing Committee receive the compilation of all the quotations submitted from different suppliers, the summary comparisons on each supplier's scope of supply, technology advantage/disadvantage, price comparison and etc and the reason/justification by top management in awarding the H2 plant contract to this particular supplier?
Question 4: I received anonymity sender with two invoices as per attachment and I quote his message, “One such instance is the Invoices issued by Hengyuan International Sdn Bhd (HISB) to HRC (Invoices INV-20080 & INV-20081 dated 26/6/2020) with regards to SBM & PLEM projects occurred in Q2 2020. INV-20080 was issued to the amount of RM 1,000,000.00. It was justified with 1104 total manhours. Meanwhile INV-20081 was issued to the amount of over RM 1.6 million which charged from claimed 1800 manhours. The invoices were issued with just 1 page justification with no breakdowns of the costs and NO REPORTS were submitted or reviewed. The invoices were reviewed and commented by the Technical Team to be too excessive but with no impact.”
Please verified the authentic of the two invoices and if the invoices are genuine then this is a clear case of malpractice, impropriety, misconduct or omission by people involved as common payment standard should required payment invoice must has client PO number with reference to service or products supplier S&P signed contract with mutually agreed prices, supply scope, performance specification, penalty for non performance, payment terms/conditions and etc.
Note: Without a client PO, it can only mean no competitive quotations/tendering calling, price, supply scope, performance specification, penalty for non-performance, payment terms/conditions and etc negotiation, contract official signing and purchase order issued to supplier.
Response from HRC:
We would like to reiterate that our decision-making process is guided by a strict code of ethics and compliance with our company’s policies and procedures, which include a thorough evaluation process to ensure that we obtain the best value for our purchases while maintaining high standards of quality and reliability to our customers. We remain committed to always operate with integrity and with the best interests of our shareholders and stakeholders.
All RPTs are subject to stringent review.Review by our external auditors show that RPTs as disclosed on page 144 in the FY 2020 Annual Report, are all within limits and authority as approved by shareholders at the 61stAGM.
Question 3: Did the Whistleblowing Committee received the top management confirmation (Invoices INV-20080 & INV-20081 dated 26/6/2020) are genuine and the allegation the invoices were issued with just 1 page justification with no breakdowns of the costs and NO REPORTS were submitted or reviewed. The invoices were reviewed and commented by the Technical Team to be too excessive but with no impact is also genuine?
If genuine then on what reason/ground Whistleblowing Committee concurred/agreed with the management response and not as a malpractice, impropriety, misconduct, and/or omission of top management as alleged ?
Quote, “We would like to reiterate that our decision-making process is guided by a strict code of ethics and compliance with our company’s policies and procedures, which include a thorough evaluation process to ensure that we obtain the best value for our purchases while maintaining high standards of quality and reliability to our customers. We remain committed to always operate with integrity and with the best interests of our shareholders and stakeholders.
All RPTs are subject to stringent review.Review by our external auditors show that RPTs as disclosed on page 144 in the FY 2020Annual Report, are all within limits and authority as approved by shareholders at the 61stAGM
Question 5: The anonymity sender also expressed his concern/allegation and I quote, “For a more recent example, the newly completed E4M projects are currently in operation even without the issuance of CCC from local authorities. It was declared to be completed and ready to be commissioned even before BOMBA certificate was issued to HRC. If people are to look deeper into E4M project, a lot more questionable practices occurred including the takeover of the project from the original EPC contractor to HQC which happened without proper due diligence. Also recently is the payment request by HISB to HRC which involves multimillion ringgit as payment for the so-called experts dispatched from Hengyuan Headquarters to “assist” in the project commissioning. In reality the “experts” are just young engineers sent without clear objectives and far away from assisting the commissioning of the project. Refer to HYSH press release http://es.hyshjt.com/show-14-103-1.html. The best part was that for each person, HYSH/HISB charged HRC more than 200 USD per hour for the whole duration they are at site” unquote
Again please verify the authenticity of above concern/allegation and if proved genuine then this is something bigger than malpractice, impropriety, misconduct or omission by the people involved but allowing a systematic failure to go on unchecked.
Response from HRC:
It is part of the project management process to ensure all permits and licences are obtained accordingly prior to achieving the full operational status.HRC is currently in the final process of ensuring all permits and licences, including the Certificate of Completion and Compliance (CCC).
Question 4: Did the management submitted to Whistleblowing Committee the time line or certificate of installation completion date, plant start commissioning and successful commissioning completion date, BOMBA certificate date, Certificate of Completion and Compliance (CCC).date and the commercial plant operational date for verification that the management did ensure all permits and licences are obtained accordingly prior to achieving the full operational status so as to prove beyond any doubts that the allegation is fault?
Did Whistleblowing Committee investigate the allegation in reality the “experts” just young engineers sent without clear objectives and the HYSH/HISB charged HRC more than 200 USD per hour?
Did management submit to Whistleblowing Committee the actual invoice and USD per hour charged?
Quote, “Also recently is the payment request by HISB to HRC which involves multi million ringgit as payment for the so-called experts dispatched from Hengyuan Headquarters to “assist” in the project commissioning. In reality the “experts” are just young engineers sent without clear objectives and far away from assisting the commissioning of the project. Refer to HYSH press release http://es.hyshjt.com/show-14-103-1.html. The best part was that for each person, HYSH/HISB charged HRC more than 200 USD per hour for the whole duration they are at site” unquote
Question 6: I received an email from an ex-employee and a whistleblower: I quote her email, “Hi, I am one of the victims of the HRC whistleblower. I am an ex-staff of HRC, I left October 2022 after they payout my contract employment. I did 2 whistle-blows with SOLID evidence yet, the whistleblowing committee says there is nothing wrong.
The 2 whistle-blows were:
1) Clear case of Procurement Manager "pre screening" potential suppliers and denied fair competition to other capable suppliers;
2) Clear case of Procurement Manager instructed me to "proceed" telling the supplier to go ahead without PO issued. He clearly knows the last signatory has not signed (in SAP) yet. No mandate was given to him from the last signatory too. When I brought up this non-compliance to the tender secretary and risk manager, I was interrogated like an offender”
As said, I have all "solid" evidence, at first I planned to proceed to SC myself, but since I found out about your articles, I wonder how we could align on this. FYI, the procurement manager is a Chinese PRC, that explained the immunity. During the "investigation" he even told one of my Team Leader that "he is untouchable". Other than that, I also raised 6 offences he did, including sexual harassment to HR, but HR paid out the remaining of my contract in return of me to drop the 6 offences.” unquote
Please verify the authentic of above claim and if proven genuine then beside a clear case of malpractice, impropriety, misconduct or omission by the people involved, I have my serious/greatest concern Chair of Board Whistleblowing Committee Liang Kok Siang (Independent Non-Executive Director) impartiality and lack of commitment in protecting the whistleblower and in finding the root causes of the non-compliance and recommending immediate remedies and prevention measures. Will the Chair of Board Whistleblowing Committee Liang Kok Siang kindly forward me a copy of the committee finding on the above case?
Please give me an indicating timeline when The Board Whistleblowing Committee will deliberate and decide on the party to conduct the investigation (whether internal or external investigator) and when will I be notified on the outcome of the completion of the whistleblowing process.
Response from HRC:
Internal investigation by the Board Whistleblowing Committee has been completed with conclusion that there had been no misconduct, malpractice and/or impropriety as stated above.In 2022, we have reported that there were no instances of bribery, corruption, or misconduct found pursuant to reported whistleblowing case(s) after investigation by the Board Whistleblowing Committee. Please refer to page 20 of our 2022 Sustainability Report [HRC-SR2022.pdf (listedcompany.com)
Question 5: Dear Mr. Surinderdeep Singh Mohindar Singh as newly appointed to the Chair Board Whistleblowing Committee have you reopened and reviewed the above case?
Have you personally emailed those resigned under duress and coercion and the victims to hear what they have personally experienced and their grievances?
Note: The case of Procurement Manager abuse of power and not following the Standard Operation Procedure can be easily traceable and verifiable by following the documentation workflow date.
As of the case of sexual harassment the evident can be collaborate between the victim and co-workers witness and the predator behaviour can be collaborate with his observable daily conducts and even from office gossip.
Last and not least, my many thanks to Independent Non-Executive Director Mr. Surinderdeep Singh Mohindar Singh, we meet during HRC AGM many years back and you come across immediately to me as man of “Integrity, Righteousness, Just and Fair Minded” please uphold justices for the company, employees and minority shareholders and hold top management and Executive Directors accountable, responsible and answerable.
Thank you
Have a good day
Best Regards
Lee Soon Sheng
PS: The best Independent Non-Executive Directors are reflective and thoughtful in their approach, ask the tough questions and offer considered advice based on sound judgment.
Successful Independent Non-Executive Directors must maintain integrity and have strong principles. They insist that the right thing is done for the company.
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Discussions
Be the first to like this. Showing 11 of 11 comments
qqq3,
My letter is address to:
Independent Non-Executive Director Mr. Surinderdeep Singh Mohindar Singh newly appointed to the Chair Board Whistleblowing Committee for follow up questions on HRC response to my whistle blowing questions. As my concerns were not addressed sufficiently.
Tell me what wrong with that?
2023-06-12 17:45
Tell me what wrong with that?
not interested.......................bursa 1000 companies................................not enough can buy Wall Street and HK.
2023-06-12 17:51
is there excessive refinery capacity in the world? appears to be so.
at first, people think Ukraine war means refined products go up..........ukraine war and sanctions against Russia also got enough refinery capacity, how?
everyone who got the money must have increased refinery capacity, in the last 10 years, led by China, Middle, USA, Europe. ...and Hengyuan represents the smallest, oldest and least efficient. ...even Malaysia got the huge huge Johor complex.
2023-06-12 17:58
qqq3,
I ask you are simple question on my HRC concerns and you talk refinery capicity for what?
2023-06-12 19:06
China SOE and a 人大代表, if it is in China, you already in big trouble.
Don't play play visit China.....lol
2023-06-12 23:02
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Will email out next week.
You are welcome to give your comment.
2023-06-11 17:31