This article first appeared in The Edge Malaysia Weekly on December 23, 2024 - December 29, 2024

THE West Ipoh Span Expressway (WISE), which stretches 60.88km between Gopeng and Kuala Kangsar in Perak, is expected to ease congestion at the Menora Tunnel on the North-South Expressway when it is completed in 2028.

However, insiders at the Public Private Partnership Unit (UKAS), which is under the Prime Minister’s Department, reveal that the project’s concessionaire East Coast Road Sdn Bhd will have to prove its financial capabilities come February 2025, or risk having the concession agreement (CA) withdrawn.

“The concessionaire will have to show that it has the financial capabilities to undertake the project by February. This is one of the conditions precedent (CPs) to the CA that was awarded in September,” says one of the insiders.

According to the insiders who spoke to The Edge on the condition of anonymity due to the sensitivity of the topic, East Coast Road is not allowed to novate the agreement to other parties or form a joint venture to achieve financial close.

“The concessionaire also cannot change its shareholders. This requirement is so that parties awarded with concessions do not flip it to the highest bidder and make a profit out of thin air,” says one of the insiders.

Although the CA was awarded in September, negotiations for the project have been ongoing since 2021, they say. It was given the green light by the cabinet in December 2023. The concession period for WISE is 55 years and the toll rate is set at 23 sen per kilometre.

On Dec 19, Minister of Works Datuk Seri Alexander Nanta Linggi, in response to a question by Senator Datuk Shamsuddin Abd Ghaffar in the Dewan Negara, said the concessionaire would have to meet all the CPs within 12 months of the signing of the CA. He also said the construction cost of the expressway is RM4.513 billion. However, it is not clear whether this includes the land acquisition as well as pre-development costs.

A search with the Companies Commission of Malaysia (SSM) shows that East Coast Road is owned by the children of Zainal Abidin Awang Kechik. The company is 52.85% owned by Any Arope Zainal Abidin and 10.7% by Ahmad Sahill Zainal Abidin. Zurich Headquarter Sdn Bhd, a company majority owned by Any Arope, holds 22.78% of East Coast Road.

Meanwhile, Zurich Capital Sdn Bhd — in which Zurich Zainal Abidin is the largest shareholder with a 40% stake — holds the remaining 13.67% of East Coast Road. The other 60% of Zurich Capital is owned by Ahmad Sahill and Zulykha Zainal Abidin.

Nothing much can be said about Zainal Abidin, except that he is a well-connected person. It is not known if he or his children are corporate figures, although Any Arope and Zurich are co-founders of Zurich Union.

According to its website, Zurich Union is “exclusively curated to synthesise a dynamic and diversified conglomerate outfit that houses all Zurich-monikered companies operating at the forefront of the infrastructure industry”.

In October, Any Arope, who is group managing director and group CEO of East Coast Road, estimated that WISE would cost RM6.2 billion to develop.

As a rule of thumb, banks will fund 80% of a project and the concessionaire the other 20%. This means East Coast Road will have to put in RM1.24 billion, which will be used for land acquisition and pre-development costs, such as land surveying, road engineering and other consultancy services.

According to the UKAS insiders, the land acquisition cost is about RM680 million. The alignment of the expressway will go through land owned by the Perak government as well as Sime Darby Bhd (KL:SIME). “About 200ha of land belonging to the state government will have to be acquired by East Coast Road for WISE. This is estimated to cost around RM200 million,” says one of them.

East Coast Road is said to be arranging a term loan of RM1 billion with a financial institution. However, whether the term loan has been triggered and drawn is not clear.

According to SSM data, East Coast Road’s total issued and paid-up capital is RM8.8 million. As at Oct 30, 2023, the company had non-current assets worth RM1.46 million and current assets valued at RM5.5 million. The company did not have any non-current liabilities, while its current liabilities stood at RM434,218.

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