43. SIGNIFICANT EVENTS (CONT'D.) (a) Material litigation (cont'd.) (ii) Malaysia Marine and Heavy Engineering Sdn Bhd (“MMHE”) and Kebabangan Petroleum Operating Company Sdn Bhd (“KPOC”) MMHE, a subsidiary of the Group, had on 13 March 2019 received a notice of arbitration from KPOC in relation to claims arising from the Kebabangan (“KBB”) field project. KPOC claims that MMHE is in breach of the contract in respect of the appointed supplier of the valves per the contract. The actual valves procured were claimed to be defective and thus KPOC has suffered substantial loss and damage. By way of Final Award dated 23 July 2021 that was made available to MMHE on 3 August 2021 (“Final Award”), Arbitral Tribunal has ordered that MMHE shall pay KPOC the following:- (a) The sum of RM17,241,178 as damages for the expenses incurred by KPOC for assessment, procurement and replacement of valves in the period of 2016 to 2019, together with interest at the rate of 5% per annum from 11 October 2019 to the date of payment; (b) The sum of RM9,820,770 as damages suffered by KPOC in having to procure 1,365 valves and install 1,454 valves in the future, together with interest at the rate of 5% per annum from 11 October 2019 till the date of payment; and (c) The sum of RM1,029,167 for its legal fees and expenses. In the Final Award, the Arbitral Tribunal also dismissed all of KPOC’s claim for loss of revenue in the sum of RM28,030,906. On 30 September 2021, MMHE filed an application to set aside the Final Award pursuant to Section 37 of the Arbitration Act 2005, whereby MMHE seeks for the Final Award to be set aside on grounds, amongst others, that there was a breach of the rules of natural justice in connection with the making of the Final Award. KPOC, in this regard, has filed an application to seek leave from the High Court to register and enforce the Final Award as a Judgment of the High Court. The Hearing of both applications were heard on 11 February 2022. During that hearing application, the Judge ordered for both Originating Summons to be heard simultaneously in a single session and a new hearing date is fixed on 15 April 2022. MMHE is of the view that it has a fair chance to set aside the Final Award and therefore has not made any provision in respect of this claim. 43. SIGNIFICANT EVENTS (CONT'D.) (b) Impact of the COVID-19 pandemic The COVID-19 pandemic has not materially affected the financial performance, financial position, cash flows and liquidity of Gas Assets & Solutions and Offshore Business segments in the year to date. However, the financial performance of the Petroleum & Product Shipping segment for the year to date was affected by the lower tanker freight rates due to the impact of the pandemic on global oil demand. Additionally, the Marine & Heavy Engineering segment was also impacted by the COVID-19 pandemic. The Heavy Engineering sub-segment’s loss widened due to additional cost provisions made for on-going projects due to the extended project completion date despite recording higher revenue than prior year. As a result of the extended project completion date, certain Heavy Engineering projects may potentially be exposed to risks of significant Liquidated Damages (“LDs”). However, as the extended project completion date was mainly caused by COVID-19, the Group expects to be able to defend against any application of the LDs. Furthermore, the client has agreed in principle to extend certain project milestones which the Group is now striving to meet. As such, the Group did not recognise any impact of the potential LDs in the current financial year. At the same time, the Group is also pursuing COVID-19 cost recovery and other claims from the client on the same projects. The Group will continue to monitor the situation and will account for any potential LDs and cost recovery claims accordingly. The Marine sub-segment continues to record losses from lower revenue in the current year as a result of the border restrictions. In terms of cash flow and liquidity, the Group has not experienced any major delinquencies in its receivables account relating to the COVID-19 pandemic. As at 31 December 2021, the Group recorded net current asset position of RM413,230,000 and cash, deposit and bank balances of RM7,952,347,000. As a result, the Group does not anticipate any financial difficulties to meet its debt obligations in the foreseeable future as well as its ability to operate as a going concern as of the date of this report. NOTES TO THE FINANCIAL STATEMENTS 31 December 2021 NOTES TO THE FINANCIAL STATEMENTS 31 December 2021 MISC Berhad 446 Integrated Annual Report 2021 MISC Berhad Integrated Annual Report 2021 447 FINANCIAL STATEMENTS FINANCIAL STATEMENTS
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