Ireka

IREKA Corporation Bhd has rejected a proposed mutual termination of its RM1.07 billion sub-contract for the Pan Borneo Highway Sabah Phase 1B project, following the collapse of the main project agreement due to funding issues.

The group said its wholly-owned subsidiary Shoraka Construction Sdn Bhd (SCSB) had received a notice on July 8, 2025, from Gammerlite Sdn Bhd (GSB) proposing to terminate the letter of award (LOA) for work package WP33, which covers the upgrading of the road from Kampung Lumou Baru to Kampung Toupus.

The proposal followed the termination of the Project Operation Agreement (POA) between GSB and the main contractor, MTD Construction Sdn Bhd, after GSB failed to secure required financing by the June 30 deadline stipulated in the POA.

However, Ireka said it does not agree to the termination “in its current form,” citing that certain scopes of work under the project have already been partially completed.

The group also noted that GSB’s termination notice did not address settlement for work done or other related obligations.

The group has formally expressed its disagreement and is currently engaging legal counsel to assess its rights and remedies.

It reserved all rights under the LOA and applicable laws, including the right to recover costs incurred.

The financial impact to Ireka remains uncertain pending resolution of the dispute.

As of now, approximately RM10 million in revenue and RM1 million in profit have been recognised based on 1% physical progress on the contract.

The company said it is seeking an equitable settlement and managing stakeholder communications to mitigate reputational risk. — TMR

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