The Port Klang Free Zone (PKFZ) controversy continues its path down a dizzying spiral as three mystery letters surfaced out of a mountain of documents choking the multi-billion ringgit project.

The Sun today ran a report claiming that PKFZ turnkey contractor Kuala Dimensi Sdn Bhd (KDSB) had issued three letters of undertaking allegedly offering to cover any shortfall in repayments by the Port Klang Authority (PKA) towards bonds issued to raise funds for the project .

azlan The daily quoted a few lines out of one of the letters which said: ‘We hereby confirm that we undertake to cover the shortfall in the event of any shortfall in the amount payable by Port Klang Authority in the year..vis-a-vis the bond repayment amount after taking into account balances in the escrow account’.

It also claimed two KDSB directors – Idris Mat Jani and Omar Abdul Latip – signed the letters on separate dates between September 2004 and September 2006, as guarantees of repayment for three out of the four special purpose vehicles (SPV) set up by KDSB to issue the bonds.

If true, it could be argued that PKA can choose not to fork out the money as the letters allegedly issued by KDSB would have absolved the port authority of the responsibility over any outstanding repayments.

KDSB chief executive officer Faizal Abdullah, however, would neither confirm nor deny the existence of the letters, saying that there had been too many letters changing hands to keep track of specifics.

‘We can take legal action’

But he stressed that even if such letters were issued, they had no relevance on the position that the PKA must abide by the original contract and make the repayments in full.

"If they (PKA) were not able to operate the free zone or if it was not completed in the stipulated time, then it’s a different story," he said when contacted.

"But the Port Klang Free Zone is there, it’s not something under construction. It has been operating for the past four, five years."

NONE Former transport minister Ong Tee Keat ( right ) also had no knowledge of the letters, saying he did not come across such documents during his stint at the ministry when he launched an in-depth probe into the beleaguered PKFZ fiasco.

"I’m quite sure even in the  PricewaterhouseCooper report it was not mentioned. At that point of time (as minister), we didn’t know of such letters but this has really aroused my interest," he said when contacted, adding that he intends to follow up on this new development.

Faizal, clearly annoyed by the new allegations, repeated that the agreement was for PKA to pay for services or products delivered by KDSB.

"How can they say they have no obligation to pay? How can PKA do that? Focussing on one or two letters is out of context...you must take it (agreement) in totality.

"They can choose not to pay but we can take legal action. They must bear the consequences," he said.

PKA’s board of directors is expected to decide tomorrow morning whether or not it will make the payment of RM222.58 million to one of the SPVs, Free Zone Capital Bhd (FZCB).

Liable for monies

Bernama, meanwhile, reports that in a statement this evening the Transport Ministry said the government has decided for PKA to make payment to the special purpose vehicles as set out in the payment schedule.

The ministry said the government had taken all relevant factors including the government's commitment to bondholders and PKA's obligations under the agreements signed.

NONE PKA had also given an undertaking to make payment to the special purpose vehicles, said the ministry.

It was learnt that the PKA had reservations over making the payment in view of its on-going RM1.4 billion suit against KDSB.

A source from the port authority said they are considering withholding the payment as the board would be held liable for monies that cannot be recovered from KDSB in the event that the PKA wins the suit.

Nearly RM3 billion is also owed to three other SPVs – Transshipment Megahub Bhd, Valid Ventures Bhd and Special Port Vehicle Bhd.

A sum of RM1.3 billion is scheduled to be paid to Valid Ventures next year, while a RM1.4 billion payout is due to Transshipment Megahub in 2012 and RM150 million is owed to Special Port Vehicle Bhd.