Users get better toll deal with revision of concession deal

The acquisition of the assets and liabilities of PLUS Expressways Bhd (PEB)
by UEM Group Bhd and the Employees Provident Fund (EPF) will pave the way
for a better toll deal for users and a saving of RM6.5 billion for the
government.

UEM Group and EPF today announced they agreed to revise the terms of the
toll concession agreement with the government, under which there will be no
toll increases on four expressways until 2015 and government will not make
any compensation payment.

UEM Group’s managing director/chief executive officer, Izzaddin Idris, said
the four expressways were North-South Expressway (NSE), NSE Central Link
(ELITE), Malaysia-Singapore Second Crossing (Linkedua) and the
Butterworth-Kulim Expressway (BKE).

He said starting 2016, the toll rate increases on the four expressways will
be fixed at five percent every three years, while that for Penang Bridge
will remain as per current charges until the end of the concession period.

Currently, the toll increases are: NSE (10 percent every three years); NSE
Central Link (10 percent every three years); Linkedua (25 percent every
five years); BKE (15-25 percent every five years); and Penang Bridge (10
percent every five years).

In a media briefing and press conference on the proposed acquisition in
Kuala Lumpur today, Izzaddin said PEB will also waive RM2.9 billion in
current outstanding compensation balance and the toll freeze until 2015,
which will otherwise cost the government RM3.6 billion.

The toll freeze was announced by Prime Minister Najib Abdul Razak last year.

There will be no extension for concession period for NSE and Linkedua which
will end in December 2038, he said.

However, the concession period for ELITE, BKE and Penang Bridge will be
extended to December 2038.

The current expiry dates are – ELITE (May 31, 2030); BKE (June 27, 2026);
and Penang Bridge (Dec 31, 2021).

“We entered into negotiations with the aim to realise four goals – to
minimise the toll rate increases and achieve a reasonable toll structure,
mitigate the government’s burden on toll compensation, ensure lenders’
interests are protected and avoid any impact to the debt capital markets,
all the while ensuring a fair deal for equity stakeholders,” he said.

Deal expected to be completed by Dec 31

He said UEM and EPF expected to complete the acquisition and minority
shareholders of PEB to receive their payments by Dec 31 this year.

Once completed, UEM will own 51 percent of the special-purpose vehicle for
the acquisition, PLUS Malaysia, while EPF 49 percent.

At the moment, UEM holds 38.5 percent stake in PEB and EPF 12.4 percent.

He confirmed that PEB, the largest the toll operator in the country, will
raise funds to refinance existing borrowings of RM11 billion and also
“streamlining everything”, adding that details will be announced later.

On a report that PEB would raise around RM33 billion, he said it was no
secret as the calculation of the figure was based on the borrowings of PEB
of RM11 billion and the outstanding consideration for the acquisition of
the assets and liabilities of PEB of RM22.25 billion.

EPF’s head of capital market department, Rohaya Mohammad Yusof, said the
fund expected the dividend payout from the investment at 5-6 percent
annually throughout the concession tenure.

She said as a general principle, EPF expected a minimum internal rate of
return of 10 percent for its investment, and this was what it expected when
entering into the negotiation for acquisition of assets and liabilities of
PEB.

“We believe the negotiations with the government have resulted in a fair
outcome for all parties.

“The investment is expected to generate a stable and sustainable yield,
which fits well into EPF’s strategic asset allocation,” she said.

– Bernama

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