KUALA LUMPUR: The government’s RM1.1 billion investment in Sapura Energy Bhd (SEB) is seen as a crucial relief for vendors struggling with severe cash flow issues due to outstanding payments exceeding RM10 million.
Keyfield International Bhd’s Chief Operating Officer, Mohd Erwan Ahmad, stated that these outstanding debts had caused significant cash flow problems for companies, particularly as SEB’s payment delays occurred in the second half of 2021, during the peak of the COVID-19 pandemic.
“We had financial obligations to fulfill, and the situation was extremely challenging. However, we persevered and are grateful that we did not have to lay off employees.
“As a result, we had to work extra hard to ensure our projects were not delayed due to these late payments,” he told Bernama.
He believes that the government’s intervention in SEB was timely and necessary for the survival of vendors, given the amount involved and the number of affected businesses.
“This injection (of funds) will restore much-needed confidence in the entire supply chain, allowing all suppliers to continue working with SEB and contributing to the development of the local oil and gas industry,” he added.
Meanwhile, Classic Marine Services (M) Sdn Bhd’s Managing Director, Muhammad Khairul Rijal Khalid, acknowledged that many industries were affected by the COVID-19 pandemic, including companies like SEB.
“The delayed payments to vendors, including us, had a significant impact on the industry’s ecosystem,” he said, adding that SEB still had outstanding payments of around RM11 million to Classic Marine for vessel leasing from 2021 to January 2022.
He noted that his company was fortunate that the vessel owners in Singapore, from whom Classic Marine Services leased ships, were understanding and did not impose penalties for delayed payments. Otherwise, the company’s situation would have been even more difficult, he added.
Government’s RM1.1 Billion Investment to Settle Vendor Debts
On March 11, SEB secured a RM1.1 billion investment from Malaysia Development Holding Sdn Bhd (MDH) through the subscription of redeemable convertible loan stocks (RCLS) by MDH.
MDH, a special-purpose entity under the Minister of Finance (Incorporated), stipulated that the proceeds from this subscription would be used solely to settle SEB Group’s outstanding liabilities to Malaysian service providers operating in or supporting the country’s oil and gas sector.
On March 13, Prime Minister Datuk Seri Anwar Ibrahim stated that this RM1.1 billion injection was solely intended to clear SEB’s debts with vendors, involving 2,000 local small and medium enterprises (SMEs) in the oil and gas industry, most of which are Bumiputera companies.
“This funding is part of SEB’s restructuring and aims to support local workers who have gone unpaid for a long time. It is also crucial to preserving the local oil and gas industry ecosystem,” he said.
Growing Confidence in Sapura Energy After Meeting 2023 Commitments
Mohd Erwan stated that when it was first reported in early 2022 that SEB would seek court protection and halt payments to creditors and suppliers for completed work, many lost confidence in the company.
“However, with the new management team, we have gradually regained confidence because Sapura has been fulfilling its promises since 2023.
“We are now more optimistic about SEB’s ability to continue payments and contracts in the future, especially with the capital injection to resolve past debts and issues,” he said.
With renewed confidence in SEB, Keyfield International plans to continue working closely with the company.
Meanwhile, Muhammad Khairul Rijal described the government’s financial injection into SEB as a critical move to sustain the local oil and gas industry, acknowledging SEB’s significant role in supporting business growth since its inception in 2012.
He highlighted that in 2012, around 80% of vessel leasing contracts came from SEB. While this figure has dropped to 60-70% due to new clients, SEB remains a key contributor to the company’s operations.
“The oil and gas industry is high-risk, and the main problem is that not many investors are willing to take that risk. Even banks are hesitant to provide financing due to the sector’s uncertainty,” he noted.
As such, he said the government’s financial injection into SEB was a last hope, as no other party was willing to invest. Without this intervention, the oil and gas sector risked being dominated by foreign companies since local firms lack the capital and competitiveness to survive.
Vendor Operations Affected by Outstanding Payments
Ruhm Marine Sdn Bhd’s General Manager, Captain Rajendra, stated that the company’s high outstanding debts had disrupted operations, with prolonged payment delays affecting cash flow.
“Although we managed to retain our workforce, we had to implement cost-optimization measures. This, in turn, impacted our capital and operational expenditures,” he said.
As a company entirely dependent on the local upstream oil and gas sector, Ruhm Marine believes government intervention is essential to sustaining Malaysia’s oil and gas ecosystem, ensuring the industry’s resilience and continuity.
Rajendra also emphasized that this financial injection could help restore industry confidence, ensure project continuity, and stabilize vendor operations.
“However, concerns about long-term financial health and systemic issues in the sector may still persist.
“It is crucial for SEB to reflect on past challenges and learn from them to strengthen its operations in the future,” he concluded.
— BERNAMA
