This article first appeared in The Edge Malaysia Weekly on December 9, 2024 - December 15, 2024

THE general perception is that PLUS Malaysia Bhd is sitting on a lucrative toll concession. But Datuk Amran Hafiz Affifudin, managing director of UEM Group Bhd, tells The Edge that such a perception is different from reality.

“Sometimes people on the outside think that it [PLUS highway concession] is so lucrative. Or maybe they have a different thesis or ability … I don’t know,” says Amran Hafiz.

According to him, the toll collections are barely enough to cover expenses, including payments to bondholders and maintenance costs.

“[The toll collection is] just enough. Rest assured that we are not making extraordinary profit from it,” he says.

A nagging question is how PLUS, which has been operating highways since 1988, has yet to fully redeem the bonds that were issued to fund the construction of the North-South Expressway.

It should be noted that PLUS’ concession was extended by 20 years following the Pakatan Harapan victory in the 2018 general election, which in turn resulted in the abolition of PLUS’ 18% tariff hike as per its concession agreement.

Amran Hafiz explains that the extension was a form of compensation for the removal of future toll hikes.

“You must remember that we need to pay the bondholders. So, the payment goes to the bondholders — it’s a trade-off. It is not like every year, we get billions and billions in our coffers … If the layman’s perception is that we are rolling in cash, we’re not,” he says.

“It’s for financing. The financing is mainly for the construction of the highway. It’s a trade-off. If we had the original agreement, all would be paid by 2038. After that, it would be [toll] free,” he adds.

Amran Hafiz stresses that the cost of maintaining highways is actually quite costly due to weather fluctuations.

“On PLUS, we easily spend RM400 million to RM500 million per year [on maintenance]. I want to be very optimistic about PLUS but our only growth is the traffic growth. But then you have to try to improve our non-toll revenue and that’s for the comfort of road users,” he says.

Amran Hafiz points out that the Malaysian Highway Authority has a very high standard when it comes to the maintenance of expressways. As a result, the cost of maintaining the highways is high.

When asked whether PLUS has given decent dividends to its two shareholders over the years, he acknowledges that the payment is not hefty because of its financials.

A check with the Companies Commission of Malaysia reveals that PLUS suffered three straight years of losses, from FY2021 to FY2023. In FY2023 ended Dec 31, it suffered an after-tax loss of RM148.35 million on the back of RM3.63 billion in revenue. In FY2022, it suffered an after-tax loss of RM247.31 million on RM3.36 billion in revenue (see table).

At end-2023, PLUS had total assets of RM28.44 million, while its total liabilities were pegged at RM38.8 billion. The highway concessionaire had accumulated losses of RM10.41 billion.

In the past when PLUS was the subject of a takeover, its maintenance cost was said to be three times more than some of its counterparts. In an interview with The Edge in 2017, Maju Holdings Sdn Bhd founder Tan Sri Abu Sahid Mohamed said Maju Expressway Sdn Bhd’s maintenance cost was RM18 per sq m, but PLUS’ was three times higher.

The government, when it decided to keep PLUS with Khazanah Nasional Bhd (51% stake) and the Employees Provident Fund (EPF) (49%), sought to explain that there were a number of considerations, such as the terrain of the highway when maintenance costs are looked at.

PLUS has five concessions under its belt. The first is Projek Lebuhraya Utara-Selatan Bhd, whose operations comprise the 772km North-South Expressway, New Klang Valley Expressway, Federal Highway Route 2 and the Seremban-Port Dickson Highway.

The second concession is Expressway Lingkaran Tengah Sdn Bhd, the operator of the North-South Expressway Central Link. The third concession is Linkedua (M) Bhd, which owns the Malaysia-Singapore Second Link Expressway. The fourth is Konsortium Lebuh Raya Butterworth-Kulim Sdn Bhd, which operates the Butterworth-Kulim Expressway, and the fifth is Penang Bridge Sdn Bhd.

From 2017 to 2019, in a protracted courtship, PLUS attracted three proposals from the private sector, all seeking to take control of the highway concessionaire. Maju Holdings bid an enterprise value of RM34.9 billion, including debts.

Private equity fund RJR Capital offered to buy out PLUS for RM3.5 billion and shoulder its liabilities, while Widad Business Group offered two options — a takeover of the 51% stake owned by Khazanah Nasional Bhd for RM1.5 billion cash with the other 49% remaining with EPF, or a full takeover of both Khazanah and EPF’s stakes for RM3 billion.

Amran Hafiz is of the view that the government should leave the Multi-Lane Free Flow (MLFF), a barrier-free system, to the highway concessionaires to operate.

“Logically, it makes a lot more sense for existing concessionaires to do it because we have the system already that we can leverage. It is not like we have to develop something completely from scratch. Our view as concession holders is that we all have the ability to do MLFF,” he says.

He adds that Persatuan Syarikat-Syarikat Konsesi Lebuhraya Malaysia is undertaking discussions with the government as a voice for the concessionaires.

“I think the government has been very open in hearing our point of view. So we shall see what happens. Our stance remains that we are happy to do it, we are in a good position to do it, and we are capable of doing it. So, we hope the government will allow us to,” says Amran Hafiz.

The question of who should operate MLFF has become an issue.

When news broke that the implementation of the MLFF contract might have been granted to a non-concessionaire joint venture, it sparked protests from the highway concessionaires.

In addition, more parties from the private sector have expressed interest in getting the job. Among those that are keen on the job include YTL Power International Bhd (KL:YTLPOWR) and Berjaya Group Bhd.

The MLFF project, slated to replace the current booth-based toll collection system with an overhead gantry system, uses radio-frequency identification or RFID technology along with an automated number plate recognition (ANPR) system. This is envisioned to cut down congestion by turning all entrances and exits on highways into obstruction-free lanes.

Amran Hafiz says that as far as UEM Group is concerned, it has left it to the association to negotiate with the authorities. 

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