Thursday, November 17, 2011


Subject: UEM, EPF waive RM6.5b PLUS compensation
Date: Wednesday, November 16, 2011, 2:59 AM

UPDATED @ 05:55:07 PM 16-11-2011
By Lee Wei Lian
November 16, 2011

The government had frozen contractual toll rate hikes for the NSE until 2015. — File pic
KUALA LUMPUR, Nov 16 — UEM Group Berhad and the Employees Provident Fund (EPF), the new owners of the assets of PLUS Expressways, have waived their right to some RM6.5 billion in compensation in exchange for extensions to the concession periods for the Penang bridge and two other highways.

UEM and EPF also said that toll increases for the North-South Expressway (NSE), the crown jewel of PLUS, will be lowered from 10 per cent every three years to five per cent at the same intervals, while the Penang Bridge will see no increase.

The government owed PLUS billions in compensation due to the decision to freeze unpopular toll hikes that were stipulated in the original concession agreement, until 2015.

The concession agreement for the NSE will end on December 31, 2038 and under the new terms and conditions agreed upon between UEM, EPF and the government, the concession periods for the Penang Bridge, NSE Central Link (Elite) and Butterworth Kulim Expressway (BKE) will be extended to December 31, 2038 from 2021, 2030 and 2026 respectively.

UEM Group managing director Datuk Izzaddin Idris said in a press conference today that the decision to waive the compensation would help the Malaysian government reduce its budget deficit.

He noted at the same time that the agreement would ensure that EPF contributors would benefit from reasonable returns from the mature cash flow generating infrastructure operator.

When asked about the impact of the compensation waiver and lower toll rates on EPF, Rohaya Mohammad Yusof, head of capital markets at EPF said also at the press conference that the national pension fund manager expects dividend payouts of between 5-6 per cent annually.

"That meets our investment objectives," she said.

Rohaya also said that EPF expects a minimum internal rate of return (IRR) on the investment in PLUS to be at least 10 per cent in accordance with EPF's general guidelines.

Izzadin said that the decision to have all the toll concessions revised to expire at the same time was for streamlining purposes.

He also said that extending the concession period for the Penang bridge would help pay for operating and capital expenditure, pointing out that Plus recently spent RM768 million putting an additional lane onto the bridge.

"We need to recover the capital expenditure and we spend RM121 million annually on maintaining the bridge," said Izzadin.

The toll rate increases for the Elite, BKE and the second link to Singapore have also been revised to five per cent every three years starting 2016, from 10 per cent every three years, 25 per cent every five years and 15-25 per cent every five years respectively.

The Penang bridge will not see an increase in toll rates under the new agreement as compared with 10 per cent every five years under the old concession.

A toll increase of five per cent every three years works out to about 1.7 per cent a year.

"This is less than the country's inflation rate," said Izzadin.

Following the signing of the new agreements with the government last week, the revised concession agreements and assets will be placed under Project Lebuhraya Usahasama Berhad (PLUS Berhad), a wholly-owned subsidiary of PLUS Malaysia Sdn Bhd.

PLUS Malaysia is the investment vehicle owned 51 per cent by UEM Group and 49 per cent by EPF.

UEM Group is a wholly owned subsidiary of state asset manager Khazanah Nasional Berhad.

EPF and UEM had last November proposed to privatise PLUS Expressways for RM23 billion but with the condition that the toll concessions be revised.

With the revised concessions now agreed upon with the government, PLUS Malaysia will proceed to complete the acquisition of assets and liabilities of PLUS Expressways by next month, after which the latter will be delisted.

Plus Expressways currently has about RM33 billion in outstanding loans.

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