This article first appeared in The Edge Malaysia Weekly on October 2, 2023 - October 8, 2023

THERE could be surprises in the award of the RM742.95 million Kuala Lumpur International Airport (KLIA) aerotrain contract by Malaysia Airports Holdings Bhd (MAHB), sources familiar with the matter tell The Edge.

In a nutshell, while market talk has it that three out of the four companies that failed to secure the contract at end-2021 had placed their bids last Monday, there is a possibility of the project reverting to the original winners — Pestech International Bhd and France’s Alstom. IJM Corp Bhd is now in the picture, as it is in the midst of taking control of Pestech.

MMC Corp Bhd in a consortium with CRRC-MRT and Mobilus Sdn Bhd; Malaysian Resources Corp Bhd (MRCB) in a joint venture (JV) with South Korean rolling stock outfit Woojin Industrial Systems Co Ltd; and SMH Rail Sdn Bhd in a standalone proposal, are understood to have put in bids to MAHB to complete the aerotrain project. Another shortlisted candidate — Hartasuma Sdn Bhd in partnership with Austrian company Doppelmayr Seilbahnen GmbH — is said to have opted out.

It is worth noting that MMC initially partnered Japan’s Mitsubishi Heavy Industries, and MRCB was tied to Leitner-Poma of the US. While MMC’s reason for ditching Mitsubishi Heavy Industries is not known, MRCB and Leitner-Poma had parted ways as MAHB was not keen on their pulley system.

One source says US-based consultancy firm Jacobs Engineering Group, which was appointed by MAHB, has stopped the evaluations of the three companies that had submitted their plans for the aerotrain, which is a precursor to the project reverting to the Pestech-Alstom JV.

In an email response to The Edge on whether Pestech and Alstom with IJM in tow are still in the running, and if it is true that Jacobs Engineering Group has stopped evaluations of the three bids, MAHB says: “As previously announced, on Aug 24, 2023, MAHB had issued out a tender by invitation to four companies that had participated in the previous aerotrain replacement tender.

“The current tender process is progressing as scheduled. Hence, we are unable to provide specific details or comments on any tender-related matters. MAHB remains committed to ensuring the safe and timely delivery of the new aerotrains, and is focused on efforts to expedite continuity of the project,” it adds.

While details on the project are scarce, it is learnt that Alstom has already undertaken a major part of its obligations — in that it has already built one of three trains — and a change of partners for Alstom for the project could pose an issue, as the French company is firmly contracted to Pestech. Thus, any change such as Alstom partnering another party may result in legal wrangling and further delays.

It is also understood that outstanding payments owed to Alstom by Pestech had more or less been settled recently.

The KLIA aerotrain project was 37% completed as at late August this year, with the deadline for completion in March 2025 fast approaching.

To recap, construction giant IJM at end-July this year had proposed to take a 44.83% stake in Pestech via a share issuance at 15.5 sen per share, or for a total of RM124 million, which at that time was a 47.46% discount to the stock’s trading price of 29.5 sen and only 30% of Pestech’s net assets per share of 53.21 sen as at end-March this year.

This corporate exercise — the entry of IJM as the driver — was proposed as Pestech being cash-strapped was underperforming in its contracts, including the aerotrain project at KLIA.

Some sources say Pestech’s delay in the aerotrain project could be in the region of 265 days, which is strange as the aerotrain contract was awarded in late 2021.

Nevertheless while IJM, Pestech and Alstom were not involved in the recent bids, the cost escalations and delays in the aerotrain project, should a new party be appointed, could nudge the job back to them.

Other than the project reverting back to Pestech and Alstom, other sources say MMC-CRCC is the front runner among the three bidders. CRCC is understood to be an original equipment manufacturer for Alstom’s rail arm, Bombardier Transportation, and MMC has the clout and resources required to undertake the job.

Other than the tight deadline and increasing costs, it is also noteworthy that MAHB may see a change at the helm as Datuk Seri Iskandar Mizal Mahmood could leave the airport operator and his successor is unknown at press time (see also story below). Iskandar Mizal took over the helm of MAHB in October 2021.

MAHB, which is 33.21% controlled by sovereign wealth fund Khazanah Nasional Bhd, operates all 39 airports and landing strips in the country with the exception of Senai Airport in Johor Bahru, which is controlled by tycoon Tan Sri Syed Mokhtar Albukhary’s MMC — one of the bidders for the aerotrain project.

For the six months ended June 2023, MAHB chalked up a net profit of RM160.72 million on revenue of RM2.27 billion. For the corresponding period a year ago, it suffered a net loss of RM162.91 million on revenue of RM1.26 billion.

As at end-June this year, MAHB had cash and cash equivalents of RM1.34 billion, and on the other side of the balance sheet, the airport operator had long-term debt commitments of RM4.08 billion and current liabilities of RM768.53 million.

MAHB shares ended last Friday at RM7.13, translating into a market capitalisation of RM11.9 billion.

Pestech’s stock, meanwhile, has gained 85% since hitting its 52-week low of 15.5 sen in late June this year, closing at 29.5 sen last Friday and giving the company a market capitalisation of RM290.4 million. 

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