Thursday 18 Apr 2024
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This article first appeared in The Edge Malaysia Weekly on March 20, 2023 - March 26, 2023

AN agreement to extend the concession period for the East Coast Expressway 1 (ECE1) was firmed up last November, just days before the 15th general election was held on Nov 18.

Sources say the agreement effectively requires the concessionaire to widen and upgrade the highway and improve its flood mitigation infrastructure, which would cost more than RM2 billion.

It is learnt that in return, the concession that was slated to end in nine years, has been extended by more than 40 years. Based on the supplementary concession agreement, tolling would continue beyond 2072.

The 174km highway that is operated by Anih Bhd is an extension of the Kuala Lumpur-Karak Highway (KLK) and stretches from Karak in Pahang to Kuantan and onwards to Jabor in Terengganu.

There are two toll gates, one in Gombak, Selangor, and the other in Karak, Pahang.

The initial 28-year concession was scheduled to end in 2032. With the new agreement, it will stretch to 2072 and beyond.

When contacted by The Edge, Anih declined to comment.

The company is 51% owned by the estate of the late Tan Sri Dr Nik Hussain Abdul Rahman, while the remaining 49% is owned by Tan Sri Azmil Khalili Khalid, who is married to Nik Hussain’s eldest daughter, Nik Fuziah Nik Hussain.

Azmil and Nik Fuziah, who own 49% of Anih, do not sit on the board of the company, which is not surprising as there is a legal dispute among the shareholders.

The directors of Anih are Nik Hussain’s son Nik Fauzi Nik Hussain, daughter Nik Firdaus, wife Zuraida Abu Bakar, Rozlan Ismail, Siti Marisah Mohamad Nawi and Cheong Wei Ling.

Sources say that Anih’s proposal to widen and upgrade the highway was in the works for some time before it was presented to the cabinet for approval early last year.

“Cabinet approval was obtained for them [Anih] to upgrade [ECE1] — flood [mitigation] and an additional lane — in April 2022. All expenditure is to be borne by the company with no assistance from the government. In return, the government agreed to an extension of the concession period,” says a source.

According to a statement dated Sept 27, 2022, on Anih’s website, the company began had begun flood mitigation works on the highway, with Phase 1 to start on Oct 1 last year. The company said work on Phase 1 was expected to take a year, followed by another year of flood mitigation works before the project is completed.

Anih obtained the ECE1 and KLK toll concessions in 2011 after it acquired the entire business and undertakings of Metramac Corp Sdn Bhd and MTD Prime Sdn Bhd for RM3.25 billion.

Nik Hussain and Azmil set up Anih as a special vehicle for the acquisition. They were major shareholders of MTD Capital Bhd, the ultimate holding company of Metramac Corp and MTD Prime, prior to 2011. MTD Capital, which was listed on Bursa Malaysia in 1994, was delisted and taken private in May the same year.

Anih funded the acquisition through a RM2.5 billion senior sukuk musharakah programme and RM620 million in unrated junior bonds. The shareholders’ combined equity came up to RM525 million.

MARC Ratings Bhd, when contacted, declined to comment on the additional works to be undertaken on the highway, the extension to the concession agreement and the impact on the financials.

A MARC executive says the rating agency is unable to comment on any details regarding specific transactions for potential confidentiality reasons.

“Furthermore, the subject is not something we can comment about now,” he says, adding that it is assessing the situation and will have a response when all the facts are known.

In December 2021, MARC affirmed its AA rating and stable outlook on the RM2.5 billion sukuk programme, citing ECE1’s historically stable traffic and revenue profile, which supports sufficient cash flow generation for Anih to meet its finance service obligations.

“The rating also benefits from the subordinated and equity-like features of Anih’s RM620 million junior bonds that, to some degree, allow the concessionaire to withstand operational underperformance,” the credit rating agency said, adding that the rating was moderated by Anih’s “highly leveraged capital structure”.

The company’s filing with the Companies Commission of Malaysia reflects the stable revenue profile MARC mentioned. It shows that full-year revenue stood at RM486.51 million in its financial year ended March 31, 2021 (FY2021), RM445.77 million in FY2020, RM446.03 million in FY2019, RM464.84 million in FY2018, and RM466.75 million in FY2017.

However, the company has not been paying dividends in the last five years.

Family feud over company control

Nik Hussain, who was a dentist by qualification, passsed away in March 2022. He was a former politician and was appointed deputy minister of works and public amenities under then prime minister Tun Hussein Onn before quitting politics to enter the corporate world.

A few years after the privatisation of MTD Capital in 2011, Nik Hussain got into a legal dispute with his son-in-law Azmil and daughter Nik Fuziah over shares in Anih, and junior bonds tied to the highways. The letters of demand were served in 2018. The dispute continued until the passing of the family patriarch.

At the heart of the matter is Nik Hussain’s contention that Azmil and Nik Fuziah’s shares in Anih and the junior bonds were being held by the pair as his trustees. Azmil and Nik Fuziah counterclaimed and alleged that there was an “underlying partnership” between the pair and Nik Hussain that stretched back to when the latter and Azmil founded MTD Capital.

The dispute between the late Nik Hussain and Azmil and Nik Fuziah is documented in numerous court files.

However, it is understood the case did not conclude after Nik Hussain passed away in March 2022, and the dispute is believed to have moved to the Shariah Court over the inheritance of his estate.

 

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