Case Study Sunway
Sime Darby
Kumpulan Sime Darby Berhad, Golden Hope Plantations Berhad and Kumpulan Guthrie Berhad merged in November 2007 and became one of the world’s largest oil palm plantation companies as well as a diversified multinational with operations in over 20 countries. Sime Darby’s core businesses are plantation, property, industrial, motors, energy and utilities and healthcare. Their main source of income is from the plantation business. The Energy and Utilities (E&U) division came under intense scrutiny when Sime Darby Bhd disclosed the extent of the losses incurred by its E&U division. The losses incurred by the division were mostly due to cost overruns from the Bakun Hydroelectric Project and both of its Qatar Petroleum (QP) and Maersk Oil Qatar (MOQ) projects. Sime’s subsidiary unit, Sime Engineering, via its 35.7% effective interest in the Malaysia-China Hydro Joint Venture (MCHJV), was awarded the Civil Works 2 Package for the main civil works of the Bakun Hydroelectric Project valued at RM 1.8 billion in September 2002. In 2005, the corporation had to make provision for RM132.1 million for foreseeable contract losses arising from changes in the cost structure of the Bakun project. By May 2010, the cost overruns were estimated to be RM1 billion and were predicted to increase to RM1.8 billion.
In 2006, Sime Engineering Sdn Bhd was awarded the engineering, procurement, construction, installation and commissioning (EPCIC) contract by QP valued at RM 974 million. One of the reasons for the overrun in the QP project was that the Qatar government did not approve one of Sime Darby’s sub-contractors after the project was awarded, which caused delays in fabrication and eventually delays in the installation. Sime Engineering was further awarded an EPCIC contract valued at RM2.2 billion by MOQ in 2007. In 2008, news of cost overruns exceeding RM150 million in Sime Engineering’s MOQ project were met with strong denial from the Board of Directors. Sime Darby’s
Kumpulan Sime Darby Berhad, Golden Hope Plantations Berhad and Kumpulan Guthrie Berhad merged in November 2007 and became one of the world’s largest oil palm plantation companies as well as a diversified multinational with operations in over 20 countries. Sime Darby’s core businesses are plantation, property, industrial, motors, energy and utilities and healthcare. Their main source of income is from the plantation business. The Energy and Utilities (E&U) division came under intense scrutiny when Sime Darby Bhd disclosed the extent of the losses incurred by its E&U division. The losses incurred by the division were mostly due to cost overruns from the Bakun Hydroelectric Project and both of its Qatar Petroleum (QP) and Maersk Oil Qatar (MOQ) projects. Sime’s subsidiary unit, Sime Engineering, via its 35.7% effective interest in the Malaysia-China Hydro Joint Venture (MCHJV), was awarded the Civil Works 2 Package for the main civil works of the Bakun Hydroelectric Project valued at RM 1.8 billion in September 2002. In 2005, the corporation had to make provision for RM132.1 million for foreseeable contract losses arising from changes in the cost structure of the Bakun project. By May 2010, the cost overruns were estimated to be RM1 billion and were predicted to increase to RM1.8 billion.
In 2006, Sime Engineering Sdn Bhd was awarded the engineering, procurement, construction, installation and commissioning (EPCIC) contract by QP valued at RM 974 million. One of the reasons for the overrun in the QP project was that the Qatar government did not approve one of Sime Darby’s sub-contractors after the project was awarded, which caused delays in fabrication and eventually delays in the installation. Sime Engineering was further awarded an EPCIC contract valued at RM2.2 billion by MOQ in 2007. In 2008, news of cost overruns exceeding RM150 million in Sime Engineering’s MOQ project were met with strong denial from the Board of Directors. Sime Darby’s