Revised West Coast Expressway deal falls short of protecting taxpayers, says Pua

By Ida Lim

Malaysian Insider, January 07, 2013

KUALA LUMPUR, Jan 7 — The revised multi-billion West Coast Expressway (WCE) deal still falls short of protecting taxpayers’ interest and the prime minister’s promises for transparency, DAP publicity secretary Tony Pua said today.

Last week, The Edge business weekly had cited unnamed industry experts in its report that the privatisation deal for the 233km Taiping-Banting highway had revised terms that were more favourable to the government

But Pua (picture) said the deal was given through direct negotiation to Kumpulan Europlus Bhd (KEuro) which, he claims, is a company without the necessary track record and financial capability for the highway project.

He said that KEuro had “generated only RM19.8 million and RM27.7 million in revenues in its financial year 2012 and 2011”, adding that the company’s cash level of RM1.03 million was only 0.2 per cent of the capital required to carry out the project.

He said an “open and competitive tender” would have enabled Putrajaya to get the “best value” in its use of taxpayers’ funds.

Pua further said that Putrajaya had “failed to be transparent in the award because it has steadfastly refused to disclose the terms of the agreement.”

He said that the terms would contain important details such as the “benchmarks set for the cost of the highway, the toll rates to be charged, the details of the proposed profit-sharing formula” and “the rate of return defined for the early termination clause.”

The Petaling Jaya Utara MP again said the disclosure of terms would show whether the people’s interests are well-protected.

Pua said that Pakatan Rakyat (PR) promises to “carry out open, competitive and transparent tenders for all procurement and privatisation projects” and will make public all contracts with concessionaires.

He contrasted Putrajaya with the Penang PR state government, saying an open tender was carried out for the Penang People’s Park and the Subterranean Penang International Convention Exhibition (sPICE) public-private partnership project, with the contracts for the projects made public.

The Edge reported that West Coast Expressway Sdn Bhd (WCESB) had agreed with Putrajaya to hand over control of the highway once the operator recoups its investment from toll collection — even if this occurs before the 60-year expiry of the concession.

“If the highway makes its stated returns in the 50th year, the concession will end and the highway will be given back to the government,” a financial executive familiar with the agreement told the paper.

Apart from the early termination clause, the contract terms have been revised in the government’s favour, the paper reported, pointing to a new revenue-sharing mechanism and the removal of an up to 3 per cent interest subsidy from commercial loans for a period of 22 years.

“The government was of the view that the traffic forecast made by WCESB was too low and this is where the revenue sharing kicks in. If the traffic goes above the forecast, the government gains,” the paper quoted the same executive as saying.

Details of the agreed traffic volume, however, remain confidential.

The project has also been resized after both the government and the highway builder agreed to cut back about 25 per cent of the original plan, with the project now costing RM5.2 billion instead of the initial projection of RM7.07 billion.

Putrajaya is also extending RM1 billion to acquire land needed to build the highway, and a RM2.24 billion soft loan to the company to undertake the project. The loan deal comes with an annual interest rate of 4 per cent commencing in 2013.

WCESB’s parent company, KEuro, reported last year that it recorded a net loss of RM7.52 million for its third quarter ended October 31, 2012 compared with a net profit of RM1 million in the previous corresponding period.

The company told Bursa Malaysia that the loss reported in the current quarter was due to a share of losses in associates of RM2.9 million, a provision for doubtful debt of RM1.83 million and a finance cost of RM2.31 million.

“The preceding quarter’s losses were lower mainly due to the reversal of provision for doubtful debt amounting to RM3.51 million and the reversal of rental charges amounting to RM2.37 million, which were over provided in prior years,” KEuro said in a filing last December.

Revenue, however, increased to RM4.08 million from RM3.84 million a year ago.

No nod for Maju Expressway sale, Putrajaya tells Parliament

By Shannon Teoh

Malaysian Insider, June 14, 2012

KUALA LUMPUR, June 14 — The controversial RM1.7 billion sale of the Maju Expressway (MEX) appears to be scuppered for now after the federal government said it had not approved the sale of the concession held by Maju Holdings.

The Prime Minister’s Department said in a written reply to a parliamentary question by Petaling Jaya Utara MP Tony Pua yesterday that no permission has been given for the deal due to “several policy matters related to this highway concession that must be studied by the government.”

“The government has never given permission in relation to the proposal for the sale of the KL-Putrajaya Highway to EP Manufacturing Berhad (EPMB),” it said.

Maju Holdings had hoped to walk away with RM668 million in profit.

But the DAP publicity chief told The Malaysian Insider that “while it appears the deal is off, the answer only says it has not but does not say it will not give approval.”

EPMB had in March entered into an acquisition agreement with Maju Holdings to acquire MEX for RM1.15 billion and also assume debts totalling RM550 million, valuing the deal at a total cost of RM1.7 billion.

This would allow Maju Holdings, controlled by Tan Sri Abu Sahid Mohamed, to walk away with a “whopping” return of RM668 million, taking into account that the construction cost of RM1.3 billion was offset by a huge government grant of RM976 million.

MEX is 96.8 per cent owned by Maju Holdings, in which Abu Sahid controls a 91 per cent stake.

The opposition had promised the same month to buy back the MEX concession if it took over federal power after a coming general election and later called the deal a “rape” of taxpayers perpetrated by Tun Dr Mahathir Mohamad while he was still prime minister.

Pua had said the concession agreement was awarded “on a silver platter” to Abu Sahid in 1997 and revised in 2003 just prior to Dr Mahathir’s retirement.

“The rape of Malaysian taxpayers which made a billionaire out of Abu Sahid... is simply outrageous and unacceptable because out of his ‘profit’, RM976.7 million was paid for by Malaysian taxpayers,” he said, referring to the grant which was worth 74 per cent of the RM1.32 billion construction cost.

Pua said it was the former Umno president who made the decision to offer the RM976.7 million grant instead of a loan, allowing Abu Sahid to cash out quickly.

Metramac Highway Toll Abolished

May 16, 2011 00:02 AM

KUALA LUMPUR, May 16 (Bernama) -- The government has abolished toll collection at the toll plazas in the direction of Cheras and Petaling Jaya on the Metramac Highway with immediate effect.

Works Minister Datuk Shaziman Abu Mansor said the toll collection was being abolished seven years before the concession period for the highway was due to end, which is May 31, 2018.

He said the move would benefit some 100,000 users of the highway especially residents of Bandar Permaisuri, Bandar Tun Razak and the surrounding areas.

"With the abolition of this toll, it is estimated that RM180 million in toll collection will have to be foregone while the government also will not need to pay any compensation as per the agreement to close this toll collection early," he said at a ceremony to mark the toll abolition at the Cheras toll plaza of the highway Monday night.

The toll rates at the highway (both directions) were RM0.50 (Class 1 vehicles), RM1 (Class 2 and 3), RM0.30 (Class 4) and RM0.50 (Class 5).

On Jan 28, Prime Minister Datuk Seri Najib Tun Razak had announced that toll collection on the highway would be discontinued before the concession period ended in 2018.

-- BERNAMA

Putrajaya paid RM2b compensation to toll companies

By Yow Hong Chieh

Malaysian Insider

April 26, 2011

 

KUALA LUMPUR, April 26 — The federal government has forked out just over RM2 billion since the 1980s to compensate highway concessionaires for toll hike freezes, Penang Chief Minister Lim Guan Eng has revealed.

“Compensation should be paid following the government’s decision to postpone toll rate hikes for highways [and] expressways in operation, as specified in the concession agreement,” the Works Ministry said in a written reply dated March 21 to Lim.

The ministry also said compensation was also paid to concessionaires after Putrajaya eliminated toll charges at Salak Jaya Toll Plaza and Sungai Besi Highway, and put in place a 50 per cent toll discount for buses on PLUS Expressways Bhd (PEB) highways.

Compensation was also paid for not implementing a “restriction order” on the New North Klang Straits Bypass, the ministry added.

As of December 31, 2010, the total compensation paid out to 27 highway concessionaires stood at RM2.05 billion.

The North-South Highway received the most compensation (RM735.2 million), followed by the Damansara-Puchong Highway (RM631.1 million) and the Penang Bridge (RM181.2 million).

Lim (picture) cautioned today that this total did not take into account bank guarantees, subsidies and tax incentives or the total toll collected from highway users.

“BN (Barisan Nasional) should reexamine highway concession agreements for the welfare of the public,” he said in a statement.

Prime Minister Datuk Seri Najib Razak announced in last October’s Budget 2011 speech that PEB would not be allowed to raise toll rates for the next five years.

Critics warned that the move could cost the government RM5 billion in compensation - in addition to the RM2.5 billion already owed to PEB as of June 30, 2010 - and push up federal debt.

Total federal government debt soared from RM362.4 billion in 2009 to RM408.2 billion last year, or 53.7 per cent of GDP, the highest in five years.

Najib, however, announced a similar five-year toll freeze on the Karak and East Coast Phase One highways in January.

He also said toll charges for the East-West link highway at the Salak and Taman Connaught interchange in Kuala Lumpur would be eliminated by May.

Pakatan Rakyat (PR) has flayed Najib’s “populist” measures, pointing out that any benefit highway users gain from the freezes will be wiped out by compensation paid to concessionaires using public funds.

The opposition has promised to reforms the country’s tolled highway system within 100 days of seizing Putrajaya. PR has promised to abolish the toll system by instructing Khazanah Nasional Bhd, the Employees Provident Fund (EPF) and other government bodies to take over highway assets from the concessionaires.

Toll abolished on one stretch, no rates hike on two highways

STAR, January 29, 2011

PUTRAJAYA: Toll for the Salak to Taman Connaught stretch of the East-West Link Expressway is set to be abolished by May, Datuk Seri Najib Tun Razak announced.

The Prime Minister also announced that the toll rates for the Kuala Lumpur-Karak Expressway and East Coast Expressway Phase One would not be increased for the next five years.

He said the decisions were made following a review of transportation costs, including restructuring the toll charges and to ease the people’s burden.

He also added that no compensation would be paid to the concessionaires of the three highways.
“In line with the 1Malaysia spirit, People First, Performance Now, I have asked toll concessionaires to carry out a review of the respective toll charges to help the Government prosper the country and lessen the burden of the people.

“Taking up the Government’s call, two corporate figures who are also major shareholders of a toll concessionaire, came forward with a toll restructuring proposal through the acquisition of assets, which will benefit the people,” he told a press conference at his office here yesterday.

Also present was Works Minister Datuk Shaziman Abu Mansor.

Najib said the Kuala Lumpur-Karak and East Coast Phase One expressways were owned by the two corporate figures, adding that he had also asked for the concession period not to be extended.
“The suggestion to acquire the concessionaire’s assets brought about the termination of the East-West Link
Expressway concession ahead of its original 2018 expiry date.

“This means that expressway users will not have to pay toll anymore and its implementation date will begin once the documentation process is completed, expected in May 2011,” he said.

“I am also calling on other toll concessionaires to emulate these initiatives for the benefit of the people,” he said.

The concession of the East-West Link Expressway is held by Metramac Corporation Sdn Bhd.

On whether the initiatives would also be extended to other highways, including the major North-South Expressway, he said the matter was under consideration.

“Let’s do it one by one. I have got more good announcements,” he said.

Later, Najib flew to Kota Kinabalu and met Sabah Barisan Nasional leaders for an hour after arriving in the state capital for a two-day visit.

He then launched the 7ha Perdana Park at Tanjung Aru, developed and managed by state water concessionaire Timatch Sdn Bhd.

Najib also witnessed the signing of a master collaboration agreement between Singapore-based Parkway Health and state-affiliated firm Jesselton Wellness Sdn Bhd to set up the Kota Kinabalu Gleneagles Medical Centre costing some RM200mil.

The prime minister then flew to Tawau where he spent the night before his scheduled visit to Sabah’s pristine Maliau Basin today.

More questions over toll deals

STAR, 6 January 2009

KUALA LUMPUR: Confusion reigned at the library in the Works Ministry on the second day after toll agreements in the country were declassified.

Politicians and reporters, who had turned up as early as 7.30am to get access to the documents although the library opened at 9am, were dismayed to find that much of the contents were either too technical, incomplete or that they just had no time to digest the information.

With public viewing in the morning restricted to only five people at one time for a maximum of two hours and one document each, reporters had to rely on information supplied by politicians, who were given priority to read the agreements.

As at lunchtime, only one reporter had managed to read an agreement relating to the New Pantai Express­way but complained that she could not fully understand the content or compensation formula.

In the evening, however, 15 people were allowed in at one time after Works Minister Datuk Mohd Zin Mohamed gave the directive to the library to expand the facility.

Busy reading: Visitors to the library going through the toll agreements at the Works Ministry in Kuala Lumpur Monday.

There was also grumbling after some of the reporters, who had turned up early for their turns to look at the documents, got bumped down in the queue after politicians made an earlier booking with the library,

Among the “incomplete” documents were the deals for the SMART Tunnel, which only came with the first 118 pages without any appendix or schedules, and the Shapadu toll agreement, which was only 16 pages long. None of the agreements also carried with any subsequent exemption or additional clauses.

Petaling Jaya Utara MP Tony Pua, who led a DAP delegation, said the Damansara-Puchong Highway was making excessive profits and called for the Government to stop compensating the operator.

The highway operator had initially set its toll rate at RM2.10 but reduced it to RM1.60 in the last adjustment in 2007.

“Under the agreement, the toll charge will rise to RM3.10 in 2016. In its financial prospectus, the highway operator has stated that the construction cost was RM1.327bil and that the 30-year projected profit was RM18.865bil.

“Between 1997 and 2006, it was supposed to have made a profit of RM1.22bil, nearly the construction cost. So, their collection to date has more than paid for the highway and what they are collecting for the next 20 years, is excess profits,” he said, adding that to allow Kesas to raise toll charges by more than 10% every two years until 2022 was also excessive.

Pua called on the Government to nationalise the highways to lighten the financial burden of the people and keep toll charges minimum.

Serdang MP Teo Nie Ching said the agreement with Penang Bridge almost guaranteed profit for its highway operator, adding that this was unfair because the bridge had been opened since 1985 whereas the agreement only started from 1993.

Future agreements will be made public, says ministry

STAR, 6 January 2009

KUALA LUMPUR: All future toll concession agreements signed between the Government and highway operators will be made public.

Works Minister Datuk Mohd Zin Mohamed said this as the Govern­ment decided to declassify 22 out of the 23 toll concession agreements beginning last Friday.

However, as at 4pm on the second day of public viewing yesterday, only 17 toll agreements were available at the Works Ministry’s library.

The agreements were for the Damansara-Puchong Highway (LDP), Guthrie, Sprint, Besraya, Ampang-Kuala Lumpur Elevated Highway, SMART Tunnel, NNKSB, Metramac, Kesas, Grand Saga, Lebuhraya Pintas Selat Klang Baru, NPE, MTD, Penang Bridge, SILK, BORR and Shapadu.

Only Maju Expressway, which operates the Kuala Lumpur-Putrajaya highway, has not given its consent for its toll agreement to be declassified.

Zin said PLUS, the New Klang Valley Expressway and other toll agreements would be made available to the public from noon yesterday.

“If it’s not (ready) in time for today, the public can view it tomorrow,” he assured.

Asked if any future toll agreement would be made public, Zin said the Government had taken the first step in declassifying the documents.

“That is the way in future,” he said.

Asked about suggestions that the expressways should be nationalised, Zin said the Government “was not looking at the option at the moment”.

On certain highway operators already making profits due to high traffic volume, Zin said it was time such companies looked into “giving something back in return.”

“That’s why we are seeking an understanding on this concession agreement so that the ones who have really shown good returns on their investments reflect their corporate responsibility and give discounts and rebates like what PLUS has done.

“This is the moment for any concessionaire that feels it can give back to the stakeholders, to look into it,” he pointed out.