KUALA LUMPUR – Amanat Lebuhraya Rakyat Bhd (ALR) has received positive responses from financial institutions for its plan to acquire four major highways in the Klang Valley given the sound business of the concessionaires, a source said.
The source close to the proposal, which will see a trustee taking ownership of the highways and keeping toll rates unchanged till the end of their concessions, said ALR has not only convinced the financial institutions on the viability of the proposal, but is now feeling rather bullish that any bonds or sukuk to be issued would good ratings and be well received.
ALR has offered to entirely acquire the Shah Alam Expressway (Kesas), Western Kuala Lumpur Traffic Dispersal System (Sprint Highway), Damansara-Puchong Expressway (LDP), and Stormwater Management and Road Tunnel (Smart), for an aggregate enterprise value of RM5.48 billion.
“The financial institutions involved have deemed that the business model is sound.
“They see it as a solid investment because (the highways) are mature products with steady income streams,” the source said.
Last week, ALR issued a statement saying the acquisition plan is an integral part of the toll restructuring proposal for the four highways, as announced by both the Prime Minister Datuk Seri Ismail Sabri Yaakob and the Works Minister Datuk Seri Fadillah Yusof recently.
ALR said the acquisition was important because users of the four highways were paying toll charges that were lower than what the concession companies were entitled to charge based on their respective concession agreements.
For this, the government was subsidising the toll charges amounting to billions of taxpayer funds annually.
Concessionaires are also entitled to periodic upward toll revisions, which governments are likely to have little appetite to approve.
ALR’s board members included its chairman and prominent banking figure Tan Sri Azlan Mohd Zainol, Bank Negara Malaysia independent director Datuk Nirmala Menon, former PLUS Expressways Berhad managing director Datuk Idrose Mohamed, Real Estate and Housing Developers’ Association (Rehda) president Datuk Soam Heng Choon, and former Malaysian Communications and Multimedia Commission chief Datuk Mohamed Sharil Tarmizi.
ALR said the takeover would remove any need for the government to pay compensation and the risk of future toll hikes that would affect highway users.
The prime minister earlier said the restructuring of the four companies is expected to reduce compensation costs from January 1, 2022, until the end of the concession period, and enable the government to save at least RM4.3 billion in toll subsidies.
Prior to ALR’s statement, Fadillah told The Vibes that the government will not be spending a single sen for the restructuring of concessions for the four major highways either through direct funding or government guarantee.
He said this is the commitment given by the government to ensure no public funds are used for the takeover of the highways by ALR, which is essentially a private entity.
Fadillah also said the entire funding for the restructuring will be fully borne by ALR by way of Islamic bonds or sukuk.
However, Pakatan Harapan (PH) had raised concerns over the takeover plan, urging the government to provide a full explanation to Parliament on the details of ALR.
The coalition’s presidential council was seeking clarity pertaining to the company’s financial obligations and expenditure transparency.
Plans are good, but there’s risk
Despite this, some economists said ALR’s plans were a step in the right direction but warned of certain risks involved.
Universiti Tun Abdul Razak economist Dr Barjoyai Bardai agreed that the government’s and ALR’s plans “made economic sense” as they would reduce the burden on taxpayer funds and road users.
“This can be a good experiment on the role of not-for-profit companies in the development of Malaysian economic development,” Barjoyai said.
“What we need is a good monitoring mechanism of the arrangement to make sure that the company only has the interest in serving and helping the mass public.”
Another economist, who declined to be named, echoed Barjoyai’s take on the matter but said the apparent lack of guarantees for ALR was a cause for concern although it was generally a step in the right direction.
“This will be dependent on the traffic volume, which could sustain the operational costs throughout the concession agreement.
“But traffic volume can be subjected to volatility and it may miss the projections.
“Without guarantees, it means the traffic volume has to be robust enough to cover the operational cost and be able to record profit.
“This is a function of how the ALR would earn based on their Internal Rate of Return (IRR),” the economist said.
He said, however, that the upshot is that toll rates will remain constant throughout the concession agreement, and this may limit the rise in the cost of living among Malaysians especially those who are the regular users of these highways.
“It’s good if it can be (properly) executed.” – The Vibes, April 13, 2022
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