I intend to send out below email on next weekend follow by a confidential email to SC/Bursa.

Pease feel free to comment:

Update: 31/1/2023: Thank all for your valuable comments. I make minor amend to No.5 with "concern/allegation" as suggest by SarifahSelinder. Will send out thin noon.

 

Dear Haniza Abdul Hamid and Board Whistleblowing Committee

IR Contact: HRCPD-Corporate-Affairs@hrc.com.my and Whistleblower@hrc.com.my

 

Since my last email where I wrote please convey my message to all the employees of HRC, if you come across or have information of malpractice, impropriety, misconduct or omission at the very top level that causes loss to HRC please drop me an email.

I am pleased to receive 3 responses and hence I now instead of waiting till the next AGM for BOD to answer my questions, decided to make this report to HRC in-house Board Whistleblowing Committee.  

 

With reference to HRC WHISTLEBLOWING POLICY

I as a member of the public and HRC minority shareholder would like to raise my genuine concerns , which I believe shows malpractice, impropriety, misconduct or omission at the very high level of decision makers which have cause loss to HRC, and detrimental to the  interests of company, employees, minority shareholders and Malaysia tax collection

 

I henceforth make this official report of such malpractice, impropriety, misconduct or omission to HRC in-house Board Whistleblowing Committee to initiate the whistleblowing process:

 

The people involve:

 

Factual description of malpractice, impropriety, misconduct or omission as follow:

 

1: Overpaid high crude premium that resulted in average USD 136.45 per barrel in Q3 (HRC is welcome to correct my calculation) when average Dated Brent dropped to USD 101 per barrel in Q3 and thus resulting in Q3 PBT of negative RM 894,141,000

Please investigate is the decision to pay high crude oil premium in Q3 shows malpractice, impropriety, misconduct or omission by people involved in the decision making?

 

2: From 2021 HRC annual report;

The Company held refining margin swaps designated as hedge.

The contracts are intended to hedge the volatility of the refining margin (differences between purchase price of crude oil and sales price of petroleum products) for a period between 1 to 33 months (2020: 1 to 12 months).  Hedge Gross margin per barrel (USD) 8.00 to 12.30
The Company also uses commodity options, commodity swap contracts and refining margin swap contracts to manage its commodity price risk and inventory holding cost. The Company does not designate these derivatives as hedging instruments.

 

In Q3 why despite all the above hedging the company suffered other operating losses: RM 73,569,000: Fair value loss on derivatives financial instruments: RM 364,570,000, Inventories written down: RM 70,045,000 and refining loss which contributed to Q3 PBT of Negative RM 894,141,000

My genuine concern, it is impossible to suffer hundreds of millions derivative/hedging (refining margin and inventories) loss and at the same time hundreds of millions in physical inventories and refining margin loss.

Please investigate is the decision on refining margin swaps contracts, commodity options and commodity swap contracts in Q3 shows malpractice, impropriety, misconduct or omission by people involved in the decision making?

 

Note: Petron Malaysia managed to turn Q2 derivatives unrealized loss: RM 166,799,000 to Q3 derivatives realized gain: RM 139,957,000 and unrealized gain RM 7,588,000

 

3: I refer to my previous complaint dated 4 Jun 2019 address to:

david-ronald.keat
jocelyn.wang
liangkoksiang
surinder and CC to

william.chen
pauline.ho

How can a 30 tonnes/day H2 plant cost USD 66.4 million? Below is the budgetary quotation for 7,000 Nm3/hr (15.1 MT/Day) H2 plant from Mahler. Please investigate.

1 Kg of H2 is equal to 11.126 Nm3

7,000 NM3/hr H2 plant = 7X24/11.126 = 15.1 MT/Day H2

So for a 30 MT/Day H2 plant you need 2 x 7000 Nm3/hr plant.

2 units of 7,000 NM3/hr are recommended due to the ability to run only one during low load (Greater Turn-down ratio) instead of one single plant and safety of 2 plants instead of one.

Budgetary 2 X EU 7,250,000= USD 2 x 7,250,000 x 1.12 = USD 16,240,000.

This price is budgetary quotation and still can negotiate for discount (2 identical units) and during detail plant configuration discussion (Pressure requirement thus the compressors spec)

Refer attachment: Technical Specification 4289.pdf

Type of Plant: Hydrogen Generation Plant

With Combustion Air Preheating

Capacity: 7.000 Nm3/h (1,013 bar, 273.15 K)

Purity: min. 99,996 vol.-%

Pressure: 15 bar (abs) exit PSA-unit

46 bar(abs) exit H2-booster compressors

(3x 2.500 Nm³/h, brand Mehrer)

Basis of feed: Natural Gas

My genuine concern is this overpriced H2 plant was awarded without competitive quotation from other suppliers.

Please investigate how many quotations from other suppliers HRC evaluated. Did the contract awarded decision show malpractice, impropriety, misconduct or omission by people involved in the decision making?

 

4:  I received anonymity sender with two invoices as per attachment and I quote his message, “One such instance is the Invoices issued by Hengyuan International Sdn Bhd (HISB) to HRC (Invoices INV-20080 & INV-20081 dated 26/6/2020) with regards to SBM & PLEM projects occurred in Q2 2020. INV-20080 was issued to the amount of RM 1,000,000.00. It was justified with 1104 total manhours. Meanwhile INV-20081 was issued to the amount of over RM 1.6 million which charged from claimed 1800 manhours. The invoices were issued with just 1 page justification with no breakdowns of the costs and NO REPORTS were submitted or reviewed. The invoices were reviewed and commented by the Technical Team to be too excessive but with no impact.” unquote

 

Please verified the authentic of the two invoices and if the invoices are genuine then this is a clear case of malpractice, impropriety, misconduct or omission by people involved as common payment standard should required payment invoice must has client PO number with reference to service or products supplier S&P signed contract with mutually agreed prices, supply scope, performance specification, penalty for non performance, payment terms/conditions and etc.

Note: Without a client PO, it can only mean no competitive quotations/tendering calling, price, supply scope, performance specification, penalty for non performance, payment terms/conditions and etc negotiation, contract official signing and purchase order issued to supplier.

 

5: The anonymity sender also expressed his concern/allegation and I quote, “For a more recent example, the newly completed E4M projects are currently in operation even without the issuance of CCC from local authorities. It was declared to be completed and ready to be commissioned even before BOMBA certificate was issued to HRC. If people are to look deeper into E4M project, a lot more questionable practices occurred including the takeover of the project from the original EPC contractor to HQC which happened without proper due diligence. Also recently is the payment request by HISB to HRC which involves multimillion ringgit as payment for the so-called experts dispatched from Hengyuan Headquarters to “assist” in the project commissioning. In reality the “experts” are just young engineers sent without clear objectives and far away from assisting the commissioning of the project. Refer to HYSH press release http://es.hyshjt.com/show-14-103-1.html. The best part was that for each person, HYSH/HISB charged HRC more than 200 USD per hour for the whole duration they are at site” unquote

 

Again please verify the authenticity of above concern/allegation and if proved genuine then this is something bigger than malpractice, impropriety, misconduct or omission by the people involved but allowing a systematic failure to go on unchecked.

 

6: I received an email from an ex-employee and a whistleblower: I quote her email, “Hi, I am one of the victims of the HRC whistleblower. I am an ex-staff of HRC, I left October 2022 after they payout my contract employment.

I did 2 whistle-blows with SOLID evidence yet, the whistleblowing committee says there is nothing wrong.

The 2 whistle-blows were:

1) Clear case of Procurement Manager "pre screening" potential suppliers and denied fair competition to other capable suppliers;

2) Clear case of Procurement Manager instructed me to "proceed" telling the supplier to go ahead without PO issued. He clearly knows the last signatory has not signed (in SAP) yet. No mandate was given to him from the last signatory too. When I brought up this non-compliance to the tender secretary and risk manager, I was interrogated like an offender”

As said, I have all "solid" evidence, at first I planned to proceed to SC myself, but since I found out about your articles, I wonder how we could align on this.

FYI, the procurement manager is a Chinese PRC, that explained the immunity.

During the "investigation" he even told one of my Team Leader that "he is untouchable".

Other than that, I also raised 6 offences he did, including sexual harassment to HR, but HR paid out the remaining of my contract in return of me to drop the 6 offences.” unquote

 

Please verify the authentic of above claim and if proven genuine then beside a clear case of malpractice, impropriety, misconduct or omission by the people involved, I have my serious/greatest concern Chair of Board Whistleblowing Committee Liang Kok Siang (Independent Non-Executive Director) impartiality and lack of commitment in protecting the whistleblower and in finding the root causes of the non-compliance and recommending immediate remedies and prevention measures.

Will the Chair of Board Whistleblowing Committee Liang Kok Siang kindly forward me a copy of the committee finding on the above case?

 

Please give me an indicating timeline when The Board Whistleblowing Committee will deliberate and decide on the party to conduct the investigation (whether internal or external investigator) and when will I be notified on the outcome of the completion of the whistleblowing process.

 

Thank you

 

Best Regards,

Lee Soon Sheng

 

PS: I quote the below HRC WHISTLEBLOWING POLICY

The Board Whistleblowing Committee will deliberate and decide on the party to conduct the investigation (whether internal or external investigator)

The whistleblower will be notified on the outcome of his/her disclosure within 7 days from the completion of the whistleblowing process.

 

Any disclosure made herein should contain the following information: -
(i) factual description of the improper conduct;
(ii) the people involved (and whether they are employees of HRC or third parties);
(iii) the relevant dates of occurrence;
(iv) particulars of witnesses, if any; and
(v) documentary evidence, if any

 

A whistleblower will be accorded (to the extent reasonably practicable) with:
(i) protection of confidentiality of identity; and
(ii) internally will be protected against any adverse and detrimental actions for disclosing any improper conduct committed or about to be committed provided that the disclosure is made in good faith based on reasonable grounds.
Such protection is accorded even if the investigation later reveals that the whistleblower is mistaken as to the facts and the rules and procedures involved.
Any disclosure which is found to be frivolous or vexatious will not be entertained