This article first appeared in The Edge Malaysia Weekly on February 3, 2025 - February 9, 2025

HIGHWAY concessionaires, led by PLUS Expressways Bhd, have come together to develop their own Multi Lane Free Flow (MLFF) systems. They are seeking solutions to minimise profiteering during its implementation.

The concessionaires are also looking to link up with the Road Transport Department (RTD) to enforce penalties on motorists who circumvent the systems by consistently not having enough balances in their accounts to pay for the toll.

“There are no rules that allow concessionaires to go after those who do not pay toll once they have left the highways. The objective of a tie-up with RTD is to ensure that motorists who owe concessionaires have to pay up before renewing their road tax,” says an industry executive.

It is learnt that several large concessionaires have taken the first step to start trial runs on closed highways.

On this score, sources say Projek Lintasan Kota Holdings Sdn Bhd (Prolintas), which is Permodalan Nasional Bhd’s highway concession division, is one of the early movers and has started trial runs using an MLFF system.

Prolintas has six city highways in its stable. Of the six, four highways — Guthrie Corridor Expressway, Ampang Kuala Lumpur Elevated Highway, Kemuning Shah Alam Highway (LKSA), Kajang Dispersal Link Expressway (Silk) — are listed under Prolintas Infra Business Trust Bhd (KL:PLINTAS).

PLUS, which is the biggest owner and operator of highways in the country, is slated to start its own MLFF system by April while another concessionaire that is also likely to undertake trial runs is Amanah Lebuhraya Rakyat (ALR), say industry sources.

“The cost of trial runs are all covered internally. At the end of the trial period, which has not been determined yet, the smaller concessionaires will have the option to piggy-back on any of the systems that are best suited for them,” says a source.

The advantage for PLUS is that its wholly-owned subsidiary, Teras Teknologi Sdn Bhd, currently provides the systems for Electronic Toll Collection for most concessionaires in the country.

Another option that the concessionaires are exploring is for the highway industry as a whole, through the Malaysian Association of Highway Concessionaires Company (MAHCC), to opt for a single system with all the concessionaires taking a stake in the company offering it.

“The initiative through MAHCC is for all concessionaires to take up a stake in the company providing the system and make it a non-profit entity,” says another source.

The logic behind having a non-profit entity run the MLFF system arose from concessionaires’ concerns about excessive profiteering during the implementation process.

Hence, the view is that if all concessionaires, through MAHCC, own a stake in the company running the system, there will be higher transparency on the cost and fewer disputes on the company making excessive profits at the expense of concessionaires.

The MLFF became a sticking point between the government and concessionaires last year following news that a joint venture between Konsortium Jaringan Selangor Sdn Bhd (KJS) and SEP Synergy (M) Sdn Bhd was working on a proposal to roll out the system. KJS, a wholly-owned unit of YTL Power International Bhd (KL:YTLPOWR), will own 60% in the JV while SEP, a bumiputera company ,will hold the rest.

The JV had until Dec 16, 2024 to conclude an agreement with the toll concessionaires on implementing the MLFF. But the deadline passed without any agreement due to resistance from concessionaires.

The KJS-SEP JV came into the picture following a request for proposal by the government in 2021 to implement a MLFF system to ease congestion at toll booths.

The KJS-SEP proposal involved the Malaysian Highway Authority (MHA) setting up a special purpose vehicle (SPV) called the Centralised Tolling Agency (CTA), which would be responsible for collecting tolls on a daily basis. The concessionaires would receive their money one day later.

The role of KJS-SEP is to build the gantries and set up the system for the MLFF to operate, with the collection being channelled to the CTA. In return, it gets a fee of about RM650 million per annum for the cost of setting up and operating the MLFF system.

The JV’s contention is that the cost is lower than the average RM850 million that toll concessionaires incur annually to maintain the toll booths and collection systems. Under the JV’s proposal, the cost savings of RM200 million will go towards the government via the MHA and it can be used to subsidise the annual toll compensation that the government pays concessionaires.

Since 2008, the government has not allowed toll concessionaires to raise toll rates. In return, the government compensates the concessionaires for the loss of revenue. Sometimes, the government extends the toll concession periods in lieu of paying compensation.

The reason concessionaires need compensation is that the highways are financed by debt, which is to be repaid through toll collection. The debt takes into account scheduled toll rate hikes.

If the scheduled toll rate hikes were not allowed, it would impact the cash flows of toll concessionaires and consequently the quality of their debt papers.

The highway concessionaires, in response to the proposal by KJ-SEP JV, claimed that they were not told of the intention of the government to appoint an external party to implement the MLFF by 2024. Their contention was that if the government really wanted to implement the proposal, the process should be managed by the concessionaires themselves and not the MHA or any other party.

The concessionaires’ reasoning is that since they are going to foot the bill, the concessionaires should be allowed to structure the deal and run the process to choose the best proposal in a manner that does not violate the debt covenants.

Apart from the YTL-powered KJS-SEP JV, a consortium led by Berjaya Group was also reported to be keen on running the MLFF system for highway concessionaires at a cost that was supposedly cheaper by 30% compared with the KJS-SEP proposal.

It is worth noting that the Berjaya group was said to be talking to the 32 toll concessionaires individually but so far there had not been any development on the matter. 

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