KUALA LUMPUR (April 5): Whilst Gamuda is still considering and deliberating the offer from Amanat Lebuhraya Rakyat Berhad (ALR), and we will duly announce our decision on their offer immediately after our Board has made a decision on it, we would like to make the following comment(s): 

The toll industry has been in a quagmire for quite some time to find a suitable solution to alleviate the Government of  Malaysia (GoM) from their burden of paying toll subsidy annually, which the YB Minister of Kementerian Kerja Raya  (KKR), Datuk Seri Fadillah Yusof had mentioned previously on 30 April 2021 to be RM2.25 billion for 2021 alone (for  the entire industry). And yet, with the GoM being responsible to always ensure sanctity of contracts as well as the  GoM not wanting to burden the motoring rakyat with any toll rate hikes either (which is the obvious solution to reduce  or eliminate the toll compensation subsidy), thus solving this quagmire has been very difficult indeed. Up until  yesterday that is. 

As of yesterday, with ALR’s proposed solution and offer — this quagmire seems to have been resolved. With their proposed structure, both the rakyat and the GoM wins since: 

(i) ALR’s concession toll rate would be maintained at the present rate until the end of concession, i.e., no  more toll hikes — significantly benefiting the motoring rakyat, and yet 

(ii) The GoM no longer needs to pay any toll compensation subsidy either, since ALR’s new concession rate is  equal to the present toll rate — thus saving GoM RM4.3 billion (net of tax waiver) as reported by YB Minister Dato’ Sri Fadillah himself yesterday. 

(iii) This valuable savings can then be further spent on other crucial, more urgent development expenditure  and basic infrastructure for the wellbeing of Keluarga Malaysia, as the GoM deems fit — further benefiting  the wider rakyat and Keluarga Malaysia, as a whole. 

Regarding point (i) above, the savings to the motoring rakyat of the highways are:

For example; KESAS user only pays RM2 instead of RM3 at each of Toll Plazas. Saving of RM1 or 50% savings. Similarly = SPRINT (Pantai) user only pays RM2.50 instead of RM4.50; a saving of RM2 or 80% savings. 

Hence, in this manner — the motoring rakyat also saves RM5 billion directly (which is the same gross compensation savings saved by GoM to keep the tolls subsidized at artificially low rates).  

The other observation we would like to make with respect to ALR’s proposal, is the comparison with the last offer we received in 2019 from the GoM itself, as much has been said about the apparent similarity between the two. 

As far as we can see, the key differences are: 

1. Lower value of buyout: ALR’s total enterprise value is lower than the 2019 offer by RM720 million as follows: 

The primary reason for this difference above is because ALR’s offer is dated two years after the previous offer, and  therefore, the cashflows from those two years would not be included in ALR’s discounted cash flow valuation of the  highways which results in a lower enterprise value number. Both offers use the same discounted cash flow valuation  methodology, which is the market norm and industry standard to value highway concessions. 

2. Off GoM balance-sheet: ALR’s proposal has no recourse to the GoM at all, i.e. there is neither a GoM  guarantee nor any implied financial undertaking by the GoM, to the providers of funds to ALR. This clearly is  very different from the 2019 offer, where the GoM undertook to do the acquisition directly, and have the  funding on its own balance sheet. 

Hence, under the ALR proposal — GoM’s upside of RM4.3 billion net compensation savings is truly at no cost  to the Government. This is an important improvement, especially today since the GoM must be focused on optimising all resources in helping the rakyat and our economy recover from the Covid-19 pandemic crisis. 

3. Reduction of concession periods: ALR is obligated to redeem its funding (Sukuk) as soon as it can, and once it  does, it must return all the four highway concessions back to the GoM. In that sense, any extension given to  the concessions under ALR is NOT mutually exclusive from its actual traffic performance, as was intimated by YB Minister KKR, Datuk Seri Fadillah Yusof yesterday in his announcement of ALR’s proposal. Higher actual traffic achieved will reduce actual extension required because ALR’s Sukuk will be redeemed much earlier. In other words, the higher the traffic: the shorter the concessions. 

We applaud the Government for this pro-rakyat innovation where the concession can be shortened and most probably will be. Based on JACOBS traffic projection of a modest 1.7% traffic CAGR growth, all the concessions  are expected to be returned to GoM by the end of May 2032. 

We did not notice this feature in the previous 2019 offer. 

4. No spending by GoM: Because ALR is buying the highways and not the GoM as per the 2019 offer, the GoM today does not spend a single sen on the acquisition nor does it have to worry about the operations and  maintenance (O&M) expenditure of the highways. 

5. Privatisation agenda intact: With the ALR structure, effectively the GoM today maintains its current  privatisation agenda, unlike the nationalisation of these highways under the previous 2019 offer. Via ALR, the  present GoM “gets the cake and eats it too” because whilst its privatisation policy is still maintained, it does  save RM4.3 billion in net compensation savings without spending a single sen and additionally with no  recourse to GoM either.

We sincerely thank the ALR Board for the offer and applaud the personal commitments of each and every one of their  Board members in their sincerity to help both the GoM and her rakyat, to achieve this innovative and unique win-win win solution. 

Hence, like YB Minister Datuk Seri Fadillah Yusof, we pray for the success of ALR in meeting all of its condition precedents to complete the deal, and we believe the other concessionaires should also answer the Minister’s clarion call to do similar restructurings to ease the GoM’s burden on compensation payments whilst not burdening the motorists of Keluarga Malaysia.