This article first appeared in The Edge Malaysia Weekly on January 23, 2023 - January 29, 2023
THE joint venture between MMC Corp Bhd and Gamuda Bhd, the JV between YTL Construction Sdn Bhd and SIPP Rail Sdn Bhd, as well as Malaysian Resources Corp Bhd (MRCB) are said to be the companies that have participated in the pre-qualification round to bid for the systems turnkey contract (STC) of the Mass Rapid Transit Circle Line (MRT3).
Another company that is said to have participated in the pre-qualification for the STC is Dhaya Maju LTAT Sdn Bhd, a JV between privately held Dhaya Maju Infrastructure (Asia) Sdn Bhd and Lembaga Tabung Angkatan Tentera.
Sources from rail and construction companies tell The Edge that the consortia and MRCB are likely to be the only ones that have pre-qualified for the STC package because of the lack of interest from other construction players due to the stringent requirements under the package.
“Those who can fulfil the pre-qualification requirements can still submit, but the industry is quite small. Everybody knows everybody and talks. So far, those consortia are the ones slated to participate,” says one of the sources.
The pre-qualification deadline has been extended several times by MRT Corp. As per the original notice of pre-qualification, the deadline was Dec 16, 2022. This was extended to Jan 16 this year and then to Feb 15.
The STC package includes works to implement signalling and train control as well as provide the electric train and depot equipment, power supply and distribution system, communication system and automated fare collection.
There had been rumours that other construction groups such as Sunway Construction Group Bhd and WCT Holdings Bhd also wanted to participate in the tender and were preparing for the pre-qualification exercise. However, it appears that they are not participating in the exercise for unknown reasons.
Meanwhile, IJM Corp Bhd is said to have shied away from participating in the STC due to the private funding requirement of MRT3.
The Employees Provident Fund (EPF) is the largest shareholder of IJM with a 17.39% stake, followed by Amanah Saham Bumiputra with 17.23%. Kumpulan Wang Persaraan (Diperbadankan) holds an 8.29% stake in the construction group, while Urusharta Jamaah Sdn Bhd has 6.1%.
According to the sources whom The Edge spoke to, MMC-Gamuda JV is partnering with Hyundai Rotem as its electric train original equipment manufacturer (OEM) because to pre-qualify for the STC package, a consortium must have an OEM partner or an electric train provider.
YTL-SIPP JV is partnering with China Railway Construction Co Ltd (CRCC) as its electric train OEM partner to pre-qualify for the job.
It is not known who MRCB is partnering with. If MRCB does not partner with any electric train provider or OEM, it could be disqualified from bidding for the STC tender. It is also not clear who Dhaya Maju LTAT is partnering with for the electric train provider or OEM.
MRT Corp requires the pre-qualification participants to have railway system works experience, with one of the JV or consortium partners to be an electric train OEM or provider. The participants must also have delivered at least 70 electric train cars over a cumulative 10 years, with a grade of Automation Level 4.
According to the pre-qualification notice issued on Sept 23, 2022, if the JV or consortium partner is an electric train provider, a back-to-back guarantee letter from the OEM is required.
From the pre-qualification document sighted by The Edge, an electric train provider is defined as a company that is not the OEM of metro electric trains, but has the successful experience and track record in managing electric train contract and/or train assembly.
If the definition stops there, then MRCB should qualify for the STC tender. However, MRT Corp further states that an electric train provider shall also establish an electric train assembly plant or facilities in Malaysia for the purpose of the implementation of this project.
It is not known whether MRCB has such facilities in Malaysia, which therefore could qualify the company as an electric train provider.
An MRCB spokesperson declined to confirm whether the group has participated in the pre-qualification round for the STC.
However, disqualifying MRCB would further reduce the pool of potential bidders for the STC, which will make the tenders less competitive, says one of the sources The Edge spoke to. MRCB, after all, has STC experience, being the turnkey contractor for the LRT Shah Alam Line.
“The requirements for the MRT3 STC package are very stringent. How many companies in Malaysia have the experience in undertaking metro rail projects as a turnkey contractor? And the requirements to have part of the consortium [be] an electric train provider or OEM is also limiting the pool,” says one of the sources.
This is on top of the requirement for the private funding of MRT3.
While MRCB was the turnkey contractor for the LRT Shah Alam Line, YTL-SIPP JV is the main subcontractor for the Gemas-Johor Bahru Electrified Double-Tracking Project. Its partner CRCC is one of the turnkey contractors for the project, together with two other China construction companies.
MMC-Gamuda JV has been at the forefront of the development of rail-based public transport infrastructure in the country through the MRT Kajang Line and MRT Putrajaya Line. Its OEM partner Hyundai Rotem was the supplier for the MRT Putrajaya Line’s rolling stock.
While MMC-Gamuda JV has a wealth of experience in rail projects, its finances may be stretched by the private financing requirement, especially if it also secures the civil works construction package. The JV is favoured to land the tunnelling portion of the project.
To recap, MRT3 has a “hybrid financing” model, where the contract winners have to fund at least 10% of the contract value in the first two years of the construction. Industry observers put the price tag on the MRT3 STC at between RM7 billion and RM10 billion.
This means that the STC contractor will have to bear at least RM700 million in the first two years to implement the system.
“Even if MMC-Gamuda wins the STC contract, if they too were the winner for the civil work packages, they would have to provide quite a lot of funds to finance the project. This could stretch their balance sheets,” says a source The Edge spoke to.
Nevertheless, the final say on how MRT3 will be funded is still up in the air, as the new government under the leadership of Datuk Seri Anwar Ibrahim will be tabling the new Budget 2023 in late February.
The budget will shed light on whether the MRT3 project will still go on as is, or if the government will review the project. One of the areas up for review could be MRT3’s funding model, as the private funding model will only make it more expensive for the government down the road.
MRT3 is slated to cost RM50.2 billion, including land acquisition costs. The 50.8km alignment will run along the perimeter of the city of Kuala Lumpur.
The Circle Line will be connected to existing MRT, LRT, KTM and Monorail lines through 10 interchange stations. Once completed, the transit network will further encourage public transport usage in Kuala Lumpur, according to MRT Corp.
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