WHILE Gamuda is still considering and deliberating the offer from Amanat Lebuhraya Rakyat Bhd (ALR) – and we will duly announce our decision on their offer immediately after our board has made a decision on it – we would like to make the following comment(s).
The toll industry has been in a quagmire for quite some time to find a suitable solution to alleviate the Government of Malaysia (GoM) from their burden of paying toll subsidy annually which the Works Minister Datuk Seri Fadillah Yusof had mentioned previously on April 30 last year to be RM2.25 bil for 2021 alone (for the entire industry).
And yet, with the GoM being responsible to always ensure sanctity of contracts as well as not wanting to burden the motoring rakyat with any toll rate hikes either (which is the obvious solution to reduce or eliminate the toll compensation subsidy), solving this quagmire has been very difficult indeed.
Up until Monday (April 4) with the ALR’s proposed solution and offer – this quagmire seems to have been resolved. With their proposed structure, both the rakyat and the GoM wins since:
(i) ALR’s concession toll rate would be maintained at the present rate until the end of concession, ie no more toll hikes which significantly benefiting the motoring rakyat and yet,
(ii) The GoM no longer needs to pay any toll compensation subsidy either since ALR’s new concession rate is equal to the present toll rate, thus saving GoM RM4.3 bil (net of tax waiver) as reported by the Works Minister himself on Monday (April 4).
(iii) This valuable savings can then be further spent on other crucial, more urgent development expenditure and basic infrastructure for the well-being of Keluarga Malaysia (Malaysian Family) as the GoM deems fit.
Regarding point (i) above, the savings to the motoring rakyat of the highways are:
For example, KESAS (Shah Alam Expressway) user only pays RM2 instead of RM3 at each of the toll plazas or a saving of RM1 or 50%. Similarly, SPRINT Expressway (Pantai) user only pays RM2.50 instead of RM4.50 or a saving of RM2 or 80%.
In this manner, the motoring rakyat also saves RM5 bil directly (which is the same gross compensation savings saved by GoM to keep the tolls subsidised at artificially low rates).
The other observation we would like to make with respect to ALR’s proposal is the comparison with the last offer we received in 2019 from the GoM itself as much has been said about the apparent similarity between the two.
As far as we can see, the key differences are:
- Lower value of buyout: ALR’s total enterprise value is lower than the 2019 offer by RM720 mil as follows:
- Off GoM balance-sheet: ALR’s proposal has no recourse to the GoM at all, ie there is neither a GoM guarantee nor any implied financial undertaking by the GoM to the providers of funds to ALR. This clearly is very different from the 2019 offer where the GoM undertook to do the acquisition directly and have the funding on its own balance sheet.
Hence, under the ALR proposal, GoM’s upside of RM4.3 bil net compensation savings is truly at no cost to the Government. This is an important improvement, especially in today’s context since the GoM must be focused on optimising all resources to help the rakyat and our economy recover from the COVID-19 pandemic crisis.
- Reduction of concession periods: ALR is obligated to redeem its funding (sukuk) as soon as it can – and once it does – it must return all the four highway concessions back to the GoM. In that sense, any extension given to the concessions under ALR is NOT mutually exclusive from its actual traffic performance as was intimated by the Works Minister on Monday (April 4) in his announcement of ALR’s proposal.
Higher actual traffic achieved will reduce actual extension required because ALR’s sukuk will be redeemed much earlier. In other words, the higher the traffic: the shorter the concessions.
We applaud the Government for this pro-rakyat innovation where the concession can be shortened and most probably will be. Based on the Jacobs’ traffic projection of a modest 1.7% traffic compound annual growth rate (CAGR) growth, all the concessions are expected to be returned to GoM by the end-May 2032.
We did not notice this feature in the previous 2019 offer.
- No spending by GoM: Because ALR is buying the highways and not the GoM as per the 2019 offer, the GoM today does not spend a single sen on the acquisition nor does it have to worry about the operations and maintenance (O&M) expenditure of the highways.
- Privatisation agenda intact: With the ALR structure, effectively the GoM today maintains its current privatisation agenda, unlike the nationalisation of these highways under the previous 2019 offer. Via ALR, the present GoM “gets the cake and eats it too” because while its privatisation policy is still maintained, it does save RM4.3 bil in net compensation savings without spending a single sen and additionally with no recourse to GoM either.
We sincerely thank the ALR board for the offer and applaud the personal commitments of each and every one of their board members in their sincerity to help both the GoM and her rakyat to achieve this innovative and unique win-win-win solution.
Hence, like the Works Minister, we pray for the success of ALR in meeting all of its condition precedents to complete the deal, and we believe the other concessionaires should also answer the minister’s clarion call to do similar restructurings to ease the GoM’s burden on compensation payments while not burdening the motorists of Keluarga Malaysia. — April 6, 2022
Mohammed Rashdan Mohd Yusof is Gamuda Bhd’s deputy group managing director.
The views expressed are solely of the author and do not necessarily reflect those of Focus Malaysia.
