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Friday, May 18, 2018

Toll dilemma


BUSINESS NEWS
Friday, 18 May 2018
by ganeshwaran kana

PETALING JAYA: With the Government expected to make announcements on changes to toll charges on expressways, attention will be focused on the impact this may have on concessionaires and the national finances.

While it remains unclear whether the new administration plans to remove toll charges entirely, ending tolls in stages or to pursue a toll rate restructuring will have some impact on concessionaires, bond holders and the government’s own purse strings.

Pakatan Harapan promised to abolish toll collection in its 14th general election manifesto. However, a complete abolition will likely see the federal government undertake significant burden on its fiscal spending.

Speaking to the media yesterday, Tan Sri Zeti Akhtar Aziz, who is part of the five-member Team of Eminent Persons, said that Tun Daim Zainuddin would likely announce the decision on toll charges as early as next week.

In a 2010 study by the Performance Management and Delivery Unit (Pemandu), it was revealed that the overall cost to acquire all highways in the country was about RM383.3bil. However, as noted by CIMB Research, Pakatan Harapan had earlier estimated that the takeover of all highways via the expropriation clause would only cost the government about RM50bil.

The latest cost to take over all the highways is unknown. While the removal of toll charges will likely benefit road users and relieve pressure from the rising cost of living, critics believe the move could strain the federal coffers if the toll charge removal is not substituted with other sustainable revenue streams.

According to the Bond Price Agency Malaysia’s figures as at April 23, there was a total of RM55.3bil of outstanding bonds from various toll concessionaires within Malaysia.

This means the government would have to pay over RM55bil just to take over the debts of the toll concessionaires in the event of a complete acquisition of toll operators in the country - aside from the cost to acquire the assets.

In a separate report, Maybank Investment Bank Research pointed out that the government would have to pay about RM79bil in compensation, at the most minimal, to acquire all outstanding debt and shareholders’ equity. This is assuming a general 70:30 debt-to-equity ratio.



According to a Bernama report yesterday, Employees Provident Fund (EPF) chief executive officer Datuk Shahril Ridza Ridzuan said a right holistic solution was needed to tackle the issue of toll highways.

“We have to be mindful that a lot of money was invested through the capital markets and there is a need for some balance in this situation,” he said.

Former Deputy Works Minister Datuk Rosnah Abdul Rashid Shirlin said at the Dewan Rakyat earlier this year that there were 31 tolled expressways in Malaysia as at end of 2017.

“The annual operations and maintenance cost for each highway in 2016 was between RM6.82mil and RM1.5bil,” said Rosnah, adding that the toll collection in 2016 was between RM27mil and RM2.867bil.

However Pakatan Harapan, in its 2018 alternative budget, had pointed out that buying back toll concessionaires would be more cost-effective, in comparison to paying periodic compensation to toll concessionaires.

Toll charge removal is not uncommon in Malaysia. This year, the previous Barisan Nasional government abolished toll collection at four expressways, namely, Batu Tiga, Shah Alam and Sungai Rasau in Selangor, Bukit Kayu Hitam in Kedah and the Eastern Dispersal Link in Johor.

The country’s toll concessionaires will likely be watching the developments related to toll charges closely.

Currently, there are nine listed toll concessionaires in Malaysia, namely, IJM Corp Bhd

image: https://cdn.thestar.com.my/Themes/img/chart.png, WCE Holdings Bhd

image: https://cdn.thestar.com.my/Themes/img/chart.png
, Taliworks Corp Bhd

image: https://cdn.thestar.com.my/Themes/img/chart.png
, Ahmad Zaki Resources Bhd

image: https://cdn.thestar.com.my/Themes/img/chart.png
, Gamuda Bhd

image: https://cdn.thestar.com.my/Themes/img/chart.png
, Bina Puri Holdings Bhd

image: https://cdn.thestar.com.my/Themes/img/chart.png
, Ekovest Bhd

image: https://cdn.thestar.com.my/Themes/img/chart.png
, Lingkaran Trans Kota Holdings Bhd

image: https://cdn.thestar.com.my/Themes/img/chart.png
 (Litrak) and Malaysian Resources Corp

image: https://cdn.thestar.com.my/Themes/img/chart.png
 Bhd.

Apart from these public-listed companies, the country’s sovereign wealth fund Khazanah Nasional and the Employees Provident Fund (EPF) are also involved in the toll concession business. Khazanah and the EPF are the shareholders of Projek Lebuhraya Usahasama Bhd (PLUS), the owner of five major highways, including the North-South Expressway.

Non-listed Projek Lintasan Kota Holdings Sdn Bhd (Prolintas), which is 100%-owned by Permodalan Nasional Bhd, is also an expressway operator in Malaysia.

Most of the major tolled highways in the country are owned by PLUS and Prolintas.

RHB Research Institute said the impact from the abolition of tolls in Malaysia would be largely neutral on the toll concessionaire stocks, provided that fair compensation is given. “The abolition of toll charges could result in a one-off cash injection, following the disposal of toll concession assets which comes at the expense of earnings from the collection of tolls. The proceeds, which could be used to pare down debts, may just give rise to special dividends to shareholders,” said the research firm.

Meanwhile, PublicInvest Research said that the acquisition of concessionaries with the aim of abolishing toll collections would be protracted. “With issues of compensation certain to be a sticking point, it may cloud sentiment on listed players like Gamuda, IJM Corp, Taliworks and Litrak, which own more than one concession, alongside Ekovest and Bina Puri which only have one each,” it said.

Read more at https://www.thestar.com.my/business/business-news/2018/05/18/toll-dilemma/#FXpFEdmRlO8jzDzj.99

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