KUALA LUMPUR (Jan 23): The government has extended the concession period with Express Rail Link Sdn Bhd by another 30 years to 2059, after seven years of negotiations since 2017, according to Transport Minister Anthony Loke Siew Fook.
“This is the only extension [of the concession]. When the previous government talked about it in 2017, it was just the beginning of the negotiations. It has taken seven years to conclude,” Loke told reporters here on Tuesday after witnessing the signing of a supplementary concession agreement with ERL.
Loke also said signing the concession agreement early gives certainty to the private-sector operator to further invest in the infrastructure.
“If there is no confirmation whether the concession is continued or not, it is certain that they will not invest. No company will invest if they do not know whether the concession continues (after 2029).
“We provide this confirmation much earlier. Now, it is only 2024. The concession only ends in five years. But we have given the commitment to signing the supplementary concession agreement, so that they can plan to invest in their assets,” he said.
The agreement, apart from extending the concession period, also comes with a profit-sharing mechanism, whereby according to ERL chief executive officer Noormah Mohd Noor, the government will be entitled to 30% of the company’s earnings once the shareholders' internal rate of return (IRR) crosses the 10% threshold.
“There is a mechanism in the concession agreement, whereby if the shareholders' IRR goes above 10%, then there will be a sharing of the profit between the government and ERL, which is 70:30,” she said.
The supplementary agreement entered into by both parties on Tuesday allows ERL to implement a “market-driven” fare structure, transitioning from a fixed fare structure that requires government approval for every increase.
Under the new agreement, the government will stop paying ERL fees or charges from the collection of passenger service charges (PSCs) starting from 2029.
Asked about the compensation owing to ERL that has yet to be settled, Loke said he is not able to share on the matter, because the latest figure is only known to the Ministry of Finance.
The compensation arose when the government did not allow fare hikes for ERL services, whose fares were kept at RM35 for many years, before being increased to RM55 a trip in late 2015.
“As you know, running rail services is very expensive. There are obsolescence issues with upgrading and all that. It's very expensive to upgrade certain systems,” said Noormah on Tuesday.
Currently, on top of fare charges, ERL also gets a cut from the PSC from outbound international (RM5) and domestic passengers (RM1).
PSCs collected from passengers at Kuala Lumpur International Airport (KLIA) Terminal 1 and Terminal 2 are shared between Malaysia Airports Holdings Bhd and the government. ERL gets a share of the portion that the government receives.