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KUALA LUMPUR, April 8 — The proposal to acquire four highway concessionaires for RM5.48 billion aims to minimise the duration of the concession extension required before returning the concessions back to Putrajaya once it has fully repaid its debts, said the shareholders and board of Amanat Lebuhraya Rakyat Bhd (ALR).
In a statement today, ALR said that the proposal to acquire the highways — namely the Kesas Expressway, the SMART Tunnel, the SPRINT Expressway, and Damansara-Puchong Expressway (LDP) — requires two “critical success factors” to the arrangement, with one of them dictating ALR’s shareholders do not require any equity return and are not entitled to receive any dividends.
“As a consequence, there is no need to prolong the concession period once all of ALR’s debts have been fully repaid.
“Notably, as the existing vendors of the concession companies are commercial entities in nature, such a ‘non-profit’ orientation is not viable under the current ownership structure. Hence, the proposal is for ALR to acquire the concession companies,” ALR said.
ALR’s shareholders and board of directors consists of Tan Sri Azlan Mohd Zainol, Datuk Idrose Mohamed, Datuk Soam Heng Choon, Datuk Dr Nirmala Menon and Datuk Mohamed Sharil Tarmizi.
Without the need to pay dividends to the shareholders, the concession companies’ cash flows can be fully channelled towards supporting any debt financing obligations, they said, adding that it would keep down its cost of capital through reliance on debt funding.
It said that with the dedicated cash flow profile, it expects a strong credit rating, allowing it access into the capital markets to fund the acquisition of the highways, which includes the repayment of existing debt.
“To aid us in the sukuk issuance, we have appointed a consortium of reputable banks. For the avoidance of doubt, ALR is not seeking the government’s financial assistance to guarantee its sukuk,” they said.
ALR said that it anticipates being able to accelerate the full repayment of any debt financing and return the highways to the government in a timely manner, based on its expected traffic projections which takes into account overall GDP, the Covid-19 pandemic, future developments, competing roads and alternative transportation.
“Given our personal conviction and belief on the merits of the proposal, where the country and its rakyat would stand to reap the benefits as elaborated above, we have each voluntarily agreed to serve and assume such roles at ALR, which will act as the private sector intermediary to facilitate the transactions,” it said.
It also asserted that ALR is independent of both the government and existing shareholders of the concession companies, not representatives or nominees of any parties or have any political affiliations.
It also committed itself to ensuring the highest standards of service, with a priority of motorist safety, and to ensure continued compliance with the regulations and requirements of the Malaysian Highway Authority and the respective concession agreements.
Once the debts are fully paid, ALR said it is required by the government to dedicate ALR’s residual surplus, if any, to the continuing maintenance of highways, and/or to the improvement of urban mobility.
“With humility, we hope that our collective track record in the public and private sector would be a testament to our affirmations above and our sincere intentions to facilitate the toll restructuring for the benefit of all stakeholders involved,” it said.
It also said that the government will either have to continue paying heavy toll compensations without any restructuring, in order to bridge the gap between the toll charge and the entitlement of concession companies.
It said it could result in higher toll charges, which lead to higher financial burden on highway users.
“The solution to such a situation is clear: the concession companies’ toll rate entitlement needs to be set at the levels that highway users are currently paying which immediately eliminates any need for Government to pay compensation; and any risk of future toll hikes to the detriment of highway users.
“In any typical toll restructuring, the concession tenure would need to be extended to compensate for the loss in revenue for the concession companies and for the full repayment to the sukuk holders,” it said.
On April 4, ALR made a conditional offer to acquire four Klang Valley highway concessionaires, namely Kesas Sdn Bhd (Kesas Expressway), Syarikat Mengurus Air Banjir dan Terowong Sdn Bhd (SMART Tunnel), Sistem Penyuraian Trafik KL Barat Sdn Bhd (SPRINT Expressway), and Lingkaran Trans Kota Sdn Bhd (Damansara-Puchong Expressway or LDP).
ALR made the offer based on the enterprise values of Kesas (RM1.24 billion) as on the valuation date of December 31, 2021, Litrak Sdn Bhd (RM2.12 billion), SPRINT (RM1.81 billion) and SMART (RM313 million) for a total enterprise value of RM5.48 billion. The offer is valid until April 30, 2022.
