At the same time, the concession period for several expressways will be extended.
This is in broad strokes the conclusion of the negotiations between the government and UEM and the EPF.
The hike in the toll rate for the North South Expressway (NSE), NSE Central Link (ELITE), Malaysia-Singapore Second Crossing (Linkedua),and Butterworth-Kulim Expressway (BKE) will be reduced and fixed at 5%. The first increase will take place in 2016 and revisions will be done every three years. Rates for the Penang Bridge will remain until expiry of the concession agreement.
The expiry date of all five concessions will be standardised at Dec 31, 2038, together with the NSE and Linkedua, without further extensions. The duration of the concession for ELITE was originally till 2030, BKE (2026) and the Penang Bridge till 2021.
To reduce the financial burden on the government, UEM and EPF have agreed to waive the outstanding balance of compensation to PLUS of RM2.9 billion as at Dec 31 last year, besides another RM3.6 billion in compensation for the five-year toll rate hike freeze between 2011 and 2015.
Prime Minister Datuk Seri Najib Razak announced the freeze on toll rates for four expressways -- NSE, ELITE, Linkedua, and BKE, last year.
Under the current toll structure, rates at the NSE, ELITE and Penang Bridge are revised upwards by 10% every three years, while the BKE toll hike is 15% to 25% every five years and Linkedua’s rates are revised upwards by 25% within a similar time frame.
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| EPF capital market department head Rohaya Mohammad Yusof (left) and UEM Group Bhd group managing director and CEO Datuk Izzaddin Idris shake hands at the conclusion of negotiations on the government proposed acquisition of the assets and liabilities of PLUS Expressways Bhd. |
Datuk Izzadin Idris, UEM group managing director and CEO, told a news conference at the end of negotiations with the government that the decisions represent a “milestone” and a win-win deal for all interested parties.
Izzadin said the reduction in the toll hike will benefit the man in the street and at the same time ensure that PLUS has sufficient cash flow to finance its capital needs. The money is crucial for the maintenance of its infrastructure which amounts some RM800 million annually.
“We have to maintain about 4,000 slopes along the NSE. We are preserving the NSE, a key national asset that forms the backbone of Peninsular Malaysia’s road infrastructure.
“Collection from the modest increase in toll rates [post-2016] and the limited extension will allow us to maintain the current standard of roads and services,” Izzadin said, adding that the decision to waive the compensation for PLUS will strengthen the government’s balance sheet.
Rohaya Mohammad Yusof, who heads the EPF’s capital market department, said the pension fund hopes to achieve an internal rate of return of at least 10% from its investment in PLUS. This translates into a dividend yield of 5% to 6% from its investment in the highway operator.
In October 2010, UEM and EPF made a joint offer to acquire the business and undertakings of PLUS, including its entire assets and liabilities for RM23 billion or RM4.60 a share. The yet-to-be completed exercise is being undertaken via PLUS Malaysia Sdn Bhd in which UEM holds 51% and the EPF 49% equity interest.
UEM, a wholly-owned subsidiary of state-owned investment arm Khazanah Nasional Bhd, currently owns 38.5% of PLUS. The EPF has a 12.4% stake in the highway operator.
In December 2010, PLUS grabbed headlines again when it received a rival offer of RM5.20 a share from Jelas Ulung Sdn Bhd. The directors of Jelas Ulung -- Ibrahim Mohd Zain and Ghazali Mat Ariff -- had reportedly obtained financing from BOCI Asia Ltd, a unit of Bank of China Ltd to fund its proposed takeover.
In January 2011, PLUS decided to accept the offer from UEM and the EPF after the acquirers paid a RM50 million cash deposit. Jelas Ulung’s offer was rejected as the offerer’s proposal failed to comply with the conditions announced by PLUS.
PLUS shareholders approved the UEM/EPF offer at an adjourned EGM a month later.
Under the exercise, the businesses of PLUS’ concession companies -- Projek Lebuhraya Utara-Selatan Bhd, ELITE, Linkedua and Konsortium Lebuhraya Butterworth-Kulim will be transferred by way of novation to Projek Lebuhraya Usahasama Bhd, a special purpose company wholly owned by PLUS Malaysia.
PLUS Malaysia will also acquire Penang Bridge Sdn Bhd under the proposed takeover.
Having finalised the revised concession agreements with the government, PLUS will proceed with the distribution of its cash to shareholders via a proposed special dividend and selective capital reduction. Apart from the acquisition price of RM4.60 a share, the company will pay an additional dividend of 2.13 sen a share to shareholders, translating into a total payout of RM106.6 million.
PLUS will be subsequently be delisted. Izzadin said there are “no plans at this stage” to relist the company in the future.
With the exit of PLUS from the equities market, he said investors can still participate in the company’s growth story by subscribing to new bonds issued by the firm. He did not elaborate, only indicating that the company is looking at selling up to RM33 billion worth of bonds to finance its capital needs.
Bloomberg, quoting sources, reported that PLUS is planning to issue RM30 billion worth of Islamic bonds to finance its expansion plans under the company’s new shareholders. It was reported that the debt instruments may be issued either at the end of this year or early next year.
Written by Chong Jin Hun, theedgemalaysia.com
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