This article first appeared in The Edge Malaysia Weekly on May 15, 2023 - May 21, 2023

THE government is said to be looking at extending the concession period for all highways in Peninsular Malaysia to avoid toll hikes.

Sources say that the government is extending the concession period to as long as 30 years, subject to cabinet approval.

“The plan to extend the concession agreements for highway operators is being reviewed. However, it will still need cabinet approval,” a source tells The Edge.

The Ministry of Works had not responded at press time.

Another source says some highway operators have already been notified of the potential extension of their concession periods.

“I was told that the government is looking to raise it up to 30 years for all concessionaires. It is likely to be announced in the second half of the year,” says the source.

Meanwhile, a third source who is close to a concessionaire points out that while he had heard about the extension, some highway operators had not received any notice from the government.

“It is likely that the government is looking for ways not to increase toll charges on all the highways, without having to pay cash compensation to the highway operators,” he says.

Another source says, however, that the longer concession periods could come with a toll reduction. “It is likely that the highway owners would need to reduce their toll rates in exchange for a longer concession period.”

Besides cabinet approval, the concessionaires will need to get their creditors, namely bondholders, to consent to the longer concession period without a toll hike.

Bondholders might not be in favour of stretching the concession period. In such circumstances, the creditors are likely to demand an early redemption.

It is learnt that PLUS Malaysia Bhd (PLUS) signed a supplementary concession agreement with the government last December to extend its toll concessions by another 10 years to 2068. The reason was to maintain the toll rate at current levels.

In 2020, the government had extended the concession period for PLUS by 20 years to 2058, which led to an 18% reduction in toll rates.

It is worth noting that PLUS’s initial concession was for 30 years from 1998 to 2018, but it was later extended for 12 years until 2030.

PLUS, the country’s largest highway concessionaire, holds five concessions — Projek Lebuhraya Utara-Selatan Bhd, Expressway Lingkaran Tengah Sdn Bhd, Linkedua (M) Bhd, Konsortium Lebuhraya Butterworth-Kulim Sdn Bhd and Penang Bridge Sdn Bhd.

Khazanah Nasional Bhd and the Employees Provident Fund own 51% and 49% stakes respectively in PLUS.

Another highway concessionaire that has been given an extension for its toll concession is Anih Bhd, for the Kuala Lumpur-Karak Highway (KL-Karak) and Phase 1 of the East Coast Expressway (ECE1) by 37 years to 2069, according to MARC Ratings Bhd.

Anih inked the supplementary agreement for the extension with the government last November. Its initial 28-year concession for KL-Karak and ECE1 was previously slated to expire in 2032.

Anih 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.

Anih obtained the ECE1 and KL-Karak 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.

Last year, Deputy Prime Minister Datuk Seri Fadillah Yusof, who was then Works Minister, said the government might extend the concession period for three of four Klang Valley highways involved in a restructuring through Amanat Lebuhraya Rakyat Bhd (ALR) in exchange for no increase in toll charges.

Fadillah said an extension of the concession period was not the exclusive right of the concessionaires, and that the renewed concession period will depend on the traffic flow of each highway.

“The extension is not automatic. For three highways (Kesas Expressway, Sprint Expressway and Damansara-Puchong Expressway or LDP), the concession will be extended for five to 10 years, while [the concession for] the SMART tunnel may be shortened, depending on the traffic data that will be reviewed from time to time,” he told a press conference in April last year.

ALR is a special-purpose vehicle (SPV) set up to acquire four Klang Valley highway concessionaires — Lingkaran Trans Kota Sdn Bhd (Litrak), Sistem Penyuraian Trafik KL Barat Sdn Bhd (Sprint), Kesas Sdn Bhd (Kesas) and Syarikat Mengurus Air Banjir dan Terowong Sdn Bhd (SMART) — last October.

Litrak operates the LDP, Sprint operates the Sprint Expressway, Kesas operates the Kesas Expressway, and Smart operates the SMART Tunnel.

The government did not need to directly take on debt to acquire the toll concessions, as ALR, the not-for-profit SPV, was taking over the highway concessions using securitised cash flow from the concessions.

Fadillah said that under this model, the government would incur no costs, as it would not be required to bear any maintenance or operating costs for the restructuring.

“Users of these highways will no longer have to worry about a possible increase in tolls, nor will the government have to use the people’s tax revenues to pay compensation to the concessionaires,” he added.

A market observer points out that the extension of the highway concessions would benefit the mature highways, but not so much the new ones.

It remains to be seen whether the government’s move to extend all concession periods will lead to a reduction in toll rates. 

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