IN 2011, the UEM GROUP and EPF took over the assets and liabilities of PLUS Expressways in a RM23 billion deal.
It was at least 30% higher, as the then-prime minister had pre-empted the delisting of Plus Bhd in his budget speech, which led to a hike in PLUS share price.
Concurrently, an entity that only had about RM6.1 billion in liabilities was burdened with a RM30 billion sukuk loan facilitated by CIMB bank.
And in a worst case scenario of corporate malfeasance ever witnessed in Malaysia Inc, the loan was ostensibly utilised to pay for the purchase of PLUS by the current shareholders – further burdening an entity that was relatively debt-free considering the revenue.
The biggest irony, the purchase is entirely been paid for by toll payers.
It was reported by PLUS that 46% of revenue collected is utilised to pay the interest on the loan. Excess revenue is paid out in the form of dividends to shareholders and from 2012-2017, RM2.85 billion was paid in such dividends to UEM Group and EPF.
PLUS also reportedly has the highest maintenance costs and almost RM1 billion is set aside for this, which should not be the case.
It has also been reported that less than 2% of the outstanding loan has been repaid. At the end of the day, it is the public that bears this burden almost exclusively on their shoulders.
A viable solution to ease toll and debt burdens will be to create a EPF-PLUS REIT (infrastructure trust) that in essence will take over PLUS and the liabilities of PLUS that can amount to around RM30 billion.
Instead of paying interest to banks, the said REIT can lock in annual dividend payment to EPF, pegged between 5.5 and 6% annually.
This can range from RM1.65 billion to RM1.8 billion in dividend payouts, every year, which ultimately will benefit millions of EPF members, who are also toll payers.
With a reported revenue of over RM4 billion, even after allocating RM1.2 billion for maintenance, that might easily still be another RM1 billion in excess – which can be utilised to give cash back toll discounts, which can be equivalent to 25% of current toll charges.
With toll collection slated until 2038 (15 years), this can amount to RM42 billion in toll collected out of RM60 billion reverting back to toll payers.
More importantly, any increase in toll rates will also not be necessary.
With such a huge outstanding loan, there might be a sinister objective to use this excuse to seek an extension after 2038. Therefore, it might be essential to redeem the REIT every year, with any excess revenue.
Alternatively, instead of giving toll discounts, by 2038, RM15 billion or more can be redeemed, in lieu of toll discount. This can result in a reduction in toll collection (in lieu of dividend payments) again, given in the form of discounts, annually. An extension of five years means another RM5 billion can be redeemed, which will amount to RM20 billion in 20 years.
With dividend pegged at 6% on the outstanding of RM10 billion REIT and maintenance costs, this will amount to RM2 billion, which means in 20 years toll charges can be effectively reduced by 50% permanently.
Both options offer a viable solution to reduce toll and debt burdens. A task force can be set up to study both options and let toll payers decide which option to choose.
However, the toll still needs to impose payment for operations and maintenance. It would be prudent to conduct a forensic audit of operational costs, from maintenance to staff headcounts and other unrelated expenditures.
A similar scenario might map out with the West Coast Expressway (WCE).
Built at a cost of RM5 billion, with RM800 million in govt funding for land acquisitions, apparently the WCE has been given a 60 year concession to collect toll.
The government of the day needs to be decisive and collaborate with key stakeholders to ease the burden on the public and ensure they are not taken for a ride every other day. – November 3, 2023
John Fernandez is a Scoop reader from Shah Alam