Ireka faces RM1.07b contract termination over Pan Borneo Highway project

• The termination proposal was triggered by the lapse of a project operation agreement between main contractor MTD Construction Sdn Bhd and Sabah-based Gammerlite, which was terminated on June 30 due to Gammerlite’s failure to secure the necessary funding.

KUALA LUMPUR (July 29): Ireka Corporation Bhd (KL:IREKA) has received a notice of mutual termination concerning its RM1.07 billion subcontract with Gammerlite Sdn Bhd for the Pan Borneo Highway project, following upstream funding constraints and the exit of the main contractor.

The contract, initially awarded in October 2024 to Ireka’s wholly owned subsidiary Shoraka Construction Sdn Bhd, pertained to Phase 1B of Sabah’s Pan Borneo Highway, specifically covering the stretch between Kampung Lomou Baru and Kampung Toupus under Work Package 33.

The termination proposal was triggered by the lapse of a project operation agreement between main contractor MTD Construction Sdn Bhd and Sabah-based Gammerlite, which was terminated on June 30 due to Gammerlite’s failure to secure the necessary funding.

On July 8, Ireka received a mutual termination notice from Gammerlite. However, the group objected to the proposal, citing partial completion of works and the absence of settlement terms. Ireka has formally communicated its disagreement and is awaiting a response, while reserving its legal rights under the contract and applicable laws.

The group is currently seeking legal advice and evaluating all available avenues to recover costs and ensure fair compensation for completed work and incurred obligations.

To date, approximately RM10 million in revenue and RM1 million in profit have been recognised, reflecting physical progress of about 1%. The financial impact remains uncertain, pending resolution of the dispute, potential legal costs, and reassessment of project-related assets and liabilities.

“The company is pursuing an equitable settlement for work performed and costs incurred, and anticipates legal and administrative expenses in connection with the dispute resolution process,” Ireka said.

Further announcements will be made in accordance with Bursa Malaysia Securities Bhd’s listing requirements upon any material developments, Ireka added.

The company officially entered Practice Note 17 (PN17) status on March 1, 2022, after Bursa rejected its application for an extension of the relief period that was provided during the Covid-19 pandemic due to its shareholders' equity falling below 50% of its share capital.

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