KUALA LUMPUR (Feb 28): Former deputy defence minister Datuk Seri Ikmal Hisham Abdul Aziz has raised questions about whether the additional RM2 billion increase in the cost of the troubled littoral combat ships (LCS) includes the expenses for taking over Boustead Naval Shipyard Sdn Bhd (BNS) by the government.

Ikmal, the Member of Parliament for Tanah Merah, inquired if the planned takeover of BNS by the Ministry of Finance’s (MOF) special purpose vehicle (SPV) Ocean Sunshine Bhd (OSB) would clear BNS of its debt amounting to RM417 million before the takeover deal is finalised.

"My first question is whether the announced RM2 billion cost increase by the government includes the expense of taking over BNS by OSB, and if it will discharge BNS from its RM417 million debt before the takeover deal is finalised?

"I would also like to ask where will OSB obtain the funds to settle the RM417 million owed by BNS, considering OSB is a shell company under MOF," Ikmal questioned when debating the royal address in Dewan Rakyat on Wednesday.

BNS has been in the spotlight in the last few years due to delays and cost overruns in building the six LCS vessels for the navy.

The project was awarded to the company in December 2011 and RM6 billion has been paid for the RM9.128 billion project, but not a single vessel has been delivered as yet. The first vessel was supposed to be delivered by 2019.

After the government intervened in the project last year, the project was downsized to five vessels instead of six, but at a higher cost of RM11.22 billion.

The five LCS are expected to be delivered in phases, one each in August 2026, April 2027, December 2027, August 2028, and April 2029.

In August 2023, Boustead Heavy Industries Corp announced it is selling a 20.77% stake in BNS to OSB for RM1, as part of the government's plan to ensure delivery of the five naval ships.

But two months later, it was revealed in a Public Accounts Committee report on the LCS project that the government was in talks to take over the entire stake in BNS, which was different from the initial plan of just taking up the 20.77% stake from BHIC.

In the meantime, the stake disposal for RM1 has yet to be completed as the deadline for the fulfilment of conditions precedent in the deal, originally set for Oct 3 last year, was repeatedly postponed. Earlier this month, the deadline was extended for the fifth time to March 31.

For the transaction to take place, four conditions precedent must be fulfilled, one of which involves the execution of a conditional agreement for inter-company trade receivables reorganisation between BHIC and BNS. This agreement aims to settle the repayment of RM383.94 million or any other sum owed by BNS to BHIC.