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West Kowloon Cultural District

Parent company hits back at West Kowloon Cultural District Authority for firing contractor on Hong Kong’s M+ Museum over financial woes

Hsin Chong Group says it has not received formal notification of termination and there is no evidence subsidiary is insolvent

PUBLISHED : Sunday, 19 August, 2018, 12:46am
UPDATED : Sunday, 19 August, 2018, 12:19pm

The parent company of a contractor fired by the authority managing Hong Kong’s multibillion-dollar arts hub slammed the decision on Saturday, saying the company was not in financial crisis as claimed.

In a statement released on Saturday evening, Hong Kong-listed Hsin Chong Group, parent of Hsin Chong Construction, described the West Kowloon Cultural District Authority’s decision to terminate its contract for the HK$5.9 billion (US$756 million) M+ museum project as “incorrect”.

The authority announced on Friday Hsin Chong Construction had been axed as the main contractor for the M+ visual culture museum because of insolvency.

It said the contract was terminated because the parent group faced a “severe financial crisis” and the company’s poor management resulted in a “significant delay” on-site.

The group, however, said it had not yet received any formal notification of the termination. It said it did not agree with the reason given as there was no evidence showing its subsidiary was insolvent and the financial condition of the parent firm was irrelevant as far as the main contract was concerned.

Questions over West Kowloon arts hub’s payments to subcontractors

“There is no valid termination to date and the purported termination was incorrect,” the group said.

Authority chief executive Duncan Pescod said on Friday the firing was not a “sudden decision”.

“We have been aware of the financial difficulty facing the parent company and the construction company for a number of months,” he said.

From February 2017 to June 2018, the authority helped Hsin Chong Construction pay about HK$1.5 billion to 17 or 18 subcontractors.

The authority said it would start tendering for a new contractor on Monday with the process to take six to eight weeks, during which the site would be closed. It would try to keep the existing subcontractors of the M+ project, which was about 60 per cent complete. The museum, which occupies more than 645,800 sq ft, is the centrepiece of the arts hub and scheduled for completion in 2020.

Hsin Chong Group, founded in 1939, has been in financial trouble for the past two years. According to its annual report last year, it had HK$13.86 billion in debts but cash resources of HK$784 million. Making a loss of HK$774 million last year, the company failed to repay HK$3 billion in overdue debts.

It is not the first the time the contractor has been linked to controversy. In June, rail giant the MTR Corporation admitted a wall had not been built to standard at To Kwa Wan station along the Sha Tin-Central link. The work was part of a HK$4.57 billion contract awarded to a joint venture between Hsin Chong Group and Samsung C & T in July 2012.

The wall allegedly had reinforcement bars removed and was “shaved thin”. The corporation confirmed one wall deviated from its original design, but there was no safety risk.

Hsin Chong Group is also responsible for a HK$300 million contract to build a 1.6km railway tunnel for a section of the rail link and To Kwa Wan and Sung Wong Toi stations, according to its website. The firm was also involved in two other contracts valued at more than HK$3.6 billion under the express rail link project, one of which involved the West Kowloon terminus.

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The MTR Corporation said it had been attentive to the company’s financial situation and confirmed that all of its projects had been unaffected and would go ahead as planned. It added there were existing mechanisms for all Sha Tin-Central rail link projects to ensure they were able to continue should any party run into financial problems.

The Development Bureau said Hsin Chong Construction was still involved in three public works projects, and the bureau had started procedures to review the company’s financial ability to see if it could fulfil the requirements as contractor.

The bureau will consider taking action such as suspending Hsin Chong from bidding for public works projects or removing it from the list of approved contractors for public works, if necessary.

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It added it had already set up a team across departments to review public works projects involving Hsin Chong. “The related projects are co-developed with another contractor and the progress is normal,” the bureau said.

Those projects involve a regional police headquarters in Kowloon East and an operational base-cum-Ngau Tau Kok divisional police station, which costs about HK$24.8 million; initial and infrastructural works for building a columbarium at Sandy Ridge Cemetery as well as site formation for Tong Hang Road and Tsz Tin Road in Tuen Mun.