KUALA LUMPUR: PLUS Expressways Bhd is set to build a fourth lane on certain stretches of the North-South Expressway (NSE) and the New Klang Valley Expressway (NKVE) at an estimated cost of RM1.143 billion.

In an announcement to Bursa Malaysia Securities yesterday, PLUS said its wholly owned subsidiary, Projek Lebuhraya Utara-Selatan Bhd (Projek), had received a notification that the Ministry of Works was in agreement for it to construct a fourth lane along parts of the two highways.

These stretches are from Shah Alam to Rawang, Shah Alam to Jalan Duta and a section from the northern part of Nilai to Seremban.

“The details of the proposed funding and other arrangement for the fourth lane widening works are currently under review and discussion with the government,” PLUS said.

The funding will also be subject to the approval of the government, bondholders and lenders and the board of directors of Projek and PLUS.

An analyst at a bank-backed research house said she did not expect the RM1.1 billion cost to have much of a negative impact on PLUS’ earnings or balance sheet, given that the government would likely compensate the company accordingly.

“I don’t see much negative impact from the lane expansion on the company. Back in 2005, when PLUS did a similar expansion, it was well compensated,” she said.

PLUS had previously carried out third lane expansion works on the NSE at an estimated cost of RM1.042 billion.

Then, the government also owed PLUS a total of RM331.68 million in compensation payable due to the closure of the Senai toll plaza.

PLUS raised funds to prepay the government outstanding government support loans totalling RM962 million, part of which was used to compensate PLUS for the amount owing and for the highway widening project.

As part of the deal, the government allowed PLUS to take over the Seremban-Port Dickson Highway valued at RM50.27 million and gave an extension of the NSE concession by eight years and seven months to Dec 31, 2038,  worth about RM361.89 million.

“Now, it is up to PLUS to sit down and negotiate with the government,” said the analyst.

The next toll rate revision for PLUS involving a 10% hike is scheduled for 2011, but the latest widening project will not have a direct impact on the matter.

The analyst said as far as toll hikes were concerned, it was either the public or the government paying for it. She added that the latest round of expansion works by the highway operator was likely an effort to improve traffic flow.

PLUS yesterday rose two sen to RM3.39, with 2.43 million shares changing hands.

This article appeared in The Edge Financial Daily, July 7, 2010.