Syed Mokhtar gets Penang Port

By Jahabar Sadiq
Editor, Malaysian Insider

December 24, 2010

KUALA LUMPUR, Dec 24 — Tycoon Tan Sri Syed Mokhtar Al-Bukhary has won the race to take over the Ministry of Finance’s (MoF) Penang Port Sdn Bhd (PPSB), adding the northern port operator to his maritime logistics operations.

The Malaysian Insider understands that the Cabinet approved the sale at its meeting this week despite competitive bids from other top businessmen and also the Penang government, which owns the port land.
“The Cabinet has decided in favour of Syed Mokhtar,” a source told The Malaysian Insider, saying the tycoon’s company will buy into the port operator and the ferry service between Penang and Butterworth.
It is not known what price the government had agreed on but sources said it will be finalised soon.

Syed Mokhtar also owns PTP and Johor Port.

The influential businessman already owns Port of Tanjung Pelepas and Johor Port via MMC Corp Bhd, whose joint venture with Gamuda Bhd were also named Project Delivery Partner (PDP) for the RM36 billion Mass Rapid Transit (MRT) project in Kuala Lumpur.

Sources said Syed Mokhtar was the preferred contender as he already owned ports and airports although another Putrajaya-friendly tycoon Datuk Siew Ka Wei was keen to purchase PPSB through Ancom Logistics Bhd, whose chairman Datuk Abdul Latif Abdullah used to be PPSB chairman.

PPSB is a wholly-owned subsidiary of MoF Inc while the regulator, Penang Port Commission (PPC), also reports to Putrajaya through the Transport Ministry. Prime Minister Datuk Seri Najib Razak recently named MCA president Datuk Seri Dr Chua Soi Lek to head the PPC.

Penang Chief Minister Lim Guan Eng wrote to Najib in early December to put in a bid to run the port, which has declined since the MoF took over in 1994. The port lost its free port status in 1974.

It is learnt that cargo volumes have failed to match Port Klang and Tanjung Pelepas, growing only 5.8 per cent a year between 1995 and 2009, against Klang which grew 14.2 per cent annually.

Syed Mokhtar’s Tanjung Pelepas port began in 1999 but now handles more than six million TEUs (twenty-foot equivalent units) a year, six times more than the one million TEUs in Penang.

Penang has complained that federal ownership of the port operator has worsened its financial position, with net debt rising from RM148 million in 2004 to RM832 million in 2009 — a 462 per cent increase in five years.

Apart from the debt, any company taking over PPSB will also have to find nearly RM400 million to dredge the port channel and attract larger vessels there.

PPSB is already carrying out dredging in the North Channel to ensure it goes from 11.5m to between 13.5m and 14.5m in the coming year.

Lim’s administration had sought to take over PPSB.

PPSB has been planning to privatise and float its shares on Bursa Malaysia since 1996, but it was not able to do so because of the loss-making ferry service. A plan to hive off the ferry operation to Syarikat Prasarana Negara Bhd last year also fell through at the last minute. The ferry service has been a major hindrance to state-owned PPSB’s listing plans in the past due to the losses incurred, running into some RM13 million to RM15 million a year.

PPSB made RM77.74 million in after-tax profit in 2009, up from RM22.70 million the previous year despite revenues falling to RM268.54 million in 2009 against RM277.04 million in 2008.
State government sources said Lim could bring in enough businessmen and experts to run PPSB, which needed funds to deepen the port’s channel and also modernise its wharfs and berths.

“Lim has a few ideas to turn around the port and make it perform better,” a source said, pointing out that Penang owns the port’s land and waters and would have a say over who eventually owns PPSB.

Lim’s DAP colleagues had told Parliament on November 24 that Putrajaya should come clean on whether Syed Mokhtar had bought into the management of PPSB, which is led by Penang Umno leaders such as PPSB chairman Datuk Seri Dr Hilmi Yahya and its managing director, Datuk Ahmad Ibnuhajar.
A unit of Syed Mokhtar’s diverse infrastructure and logistics conglomerate was awarded a 4G network provider licence recently while another subsidiary is interested in acquiring the North-South Expressway (NSE).