We refer to your letter (Ref No: BM/CS1/20110218/zk/PLC.ZELAN (845)) dated 18 February 2011 in relation to the announcement which we made on 16 February 2011 and our response to the additional information requested are as follows:

1.    Brief details of the project that incurred foreseeable losses

The project is the design, engineering, procurement, commissioning and construction of a 2 x 300-400MW coal fired power plant located at Rembang, Central Java Province, Indonesia. The project owner is PT PLN Persero, Kantor Pusat, Indonesia.

2.    What was the total amount of revenue reversed and the total foreseeable losses incurred for this project?

The total amount of revenue reversed from the project during the third quarter is RM80.15 million.

The total foreseeable losses for this project is approximately USD24.2 million (RM74 million).

3.    Explain the basis and accounting policy in respect of the revenue reversal

The revenue recognition for construction contract is based on the percentage of completion method.

The stage of completion is measured by the reference to the proportion that contract costs incurred for contract work performed to date bear to the estimated total costs for the contract.

Although the works at site is progressing, due to the additional estimated total costs recognized during the quarter, the percentage of completion for the project as at 31 December 2010 at 91.8% is lower than the percentage of completion of 96.5% at 30 September 2010. This resulted in the reversal of revenue recognized from this contract.

4.    What is the current stage of completion of the project and has all foreseeable losses relating to the project taken up in the financial statements?

The project has achieved an overall physical completion of 94%. The balance of works at site mainly relates to the testing and commissioning of the plant.

The foreseeable losses taken up in the financial statements have taken into consideration all currently available information.

In view of the delays suffered by the Group in respect of the project, the Group has applied for an extension of time. However, in December 2010, the owner of the project issued a notice, indicating their intention to take over the outstanding works.

Pursuant thereto, the Group engaged into negotiations with the owner towards entering into a supplementary agreement setting out the remaining outstanding works and the cost to be incurred to complete the works, as assessed by an independent consultant, as well as a revised timeline for completion of the outstanding works. In the meantime, the Group is continuing work on site.

As a consequence of the notice from the owner, there is the possibility that liquidated ascertained damages (“LAD”) of a maximum of approximately RM125 million may be imposed and the performance bond issued by the Group to the owner of the project of RM132 million may be drawndown. It may also result in delays in the collection of the outstanding progress billings previously certified by the owner of the project of approximately RM181 million, potentially pending ascertainment of costs to completion by the independent consultants.

However, the Directors are optimistic that, based on the negotiations held with the owner to date, they will be successful in their negotiations with the owner of the project and a supplementary agreement will be signed.

Thank you.

This announcement is dated 18 February 2011.