The infrastructure costs of TRX are estimated at RM3 billion. Its total gross development value is estimated at RM40 billion.
THE parties involved are said to be not overly concerned over the delay in the completion of the infrastructure works at the Tun Razak Exchange (TRX) development, undertaken by WCT Holdings Bhd.
“Currently, WCT’s work on TRX’s infrastructure is progressing ... Infrastructure work for the first phase, which includes the road and tunnel system and parts of its public realm, is expected to be completed by end-2018,” says TRX master developer TRX City Sdn Bhd in response to questions sent by The Edge.
This comes on the back of talk that TRX City has not completely drawn down the credit facility meant to be used to pay for the infrastructure contract that it awarded WCT as part of a land purchase deal both parties entered into in 2015.
“This facility is supposed to be used to pay for the infrastructure and roadways contract that was awarded to WCT. Only about 20% of the facility has been drawn down by TRX City,” says a source, adding that the facility was provided by one of the country’s largest lenders.
The infrastructure contract came together with the land deal that WCT entered into in 2015. The consideration for the land purchase was supposed to be offset against payment for the infrastructure contract. That the infrastructure works are yet to be completed has led to a delay in WCT gaining possession of the land.
To recap, on Oct 19, 2015, WCT’s wholly-owned subsidiary WCT Precious Development Sdn Bhd (WCTPD) entered into a sales and purchase agreement with KLIFD Sdn Bhd for a plot of land within the TRX development worth RM223 million.
Together with the land purchase, WCT was awarded a RM754.83 million contract to construct and complete infrastructure and roadways in TRX. The contract commenced on Oct 21, 2015 and works were to be completed within 687 days, that is Sept 7, 2017, according to its announcement.
The payment for the land was to be offset against what TRX City was supposed to pay WCT for the infrastructure contract, which was to have been made in three tranches on construction reaching certain milestones.
Based on WCT’s quarterly briefing for the quarter ended June 30, there is still an outstanding order book of RM656 million for the TRX infrastructure contract. This means the infrastructure contract was only 13% completed as at June 30. This gels with the claim that only about 20% of the credit facility has been drawn down.
WCT’s management declined to reply to questions sent by The Edge.
Nevertheless, the management appears to be confident that the land will be transferred by the end of this year. On Aug 29 this year, WCT announced that its subsidiary WCT Land Sdn Bhd and WCTPD had entered into a shareholders agreement with CCCG Overseas Real Estate Pte Ltd (CORE) to work together to develop the land “held by” WCTPD.
The agreement stipulates the issuance of 200 million new shares in WCTPD to CORE (Singapore) TRX Investment Pte Ltd (CORE SPV) and China Communications Construction Company (M) Sdn Bhd (CCCCM), representing 80% of WCTPD’s enlarged share base, for RM200 million.
CORE and CCCCM are subsidiaries of China state-owned enterprises China Communication Construction Group and China Communications Construction Co Ltd respectively.
This joint-venture agreement is targeted to be completed by the first quarter of next year.
The infrastructure costs of TRX are estimated at RM3 billion. Its total gross development value is estimated at RM40 billion. So far, TRX has collected RM4 billion through land sales and development rights.
The revenue from its land sales and development rights could be used to fund the infrastructure development.
On the land deal, WCT has paid RM22.3 million, being the 10% deposit of the purchase consideration. The balance is to be paid in three equal tranches of RM66.9 million each.
These payments should be offset against the payment three tranches of RM251.6 million each for the infrastructure project. It is not known if any of these payments have been made by TRX City. The master developer of TRX did not respond to a question pertaining to this.
Despite the delay in the completion of the land deal and infrastructure contract, observers say WCT shareholders should not be worried that the land deal will not go through due to the inter-dependency clause in the agreement. The land deal and infrastructure contract says that if the land deal is terminated not due to a breach by WCT, it should be allocated another plot of land in TRX.
“In the event the SPA (land deal) is terminated due to no fault or breach by WCTPD, the parties shall negotiate for an alternative piece of land within the TRX development. In the event the negotiations for the sales and purchase of an alternative plot fall through, payment of the contract sum (infrastructure contract) will revert from the milestone payments to periodic interim progress payments.
“In the event the infra contract is terminated, WCTPD may elect either to terminate or complete the SPA,” the agreement reads.
WCT had been slow to replenish its engineering and construction order book this year, until the announcement of two LRT3 contracts it secured in August and early this month.
In the RM840 million August contract for the construction of Package GS03, WCT will build guideways, stations, park and ride, ancillary buildings and other associated works of the the section that runs from Suria Damansara to Temasya Glenmarie.
The other contract worth RM640 million for Package GS02 is for the construction of guideways, stations, park and ride, ancillary buildings and other associated works from Merchant Square to Suria Damansara.
WCT has secured RM1.69 billion worth of engineering and construction contracts up to Oct 26. Last year, the group secured RM1.977 billion worth of contracts for the segment. Its outstanding order book is RM6 billion.
● With reference to “Delay in WCT’s TRX infra project not a major concern” (Issue 1186, Oct 30), TRX City Sdn Bhd says the construction of TRX infrastructure by WCT Bhd is progressing according to programme. Both TRX City and WCT are confident of the successful completion of the first phase’s infrastructure next year.
In the first phase, TRX’s internal road network and utility service installation works to related plots within the development shall be completed, along with connectivity from the surrounding road networks, TRX City’s statement reads.
● In “IMS acquisition gives Denko a Dyson boost” (Issue 1186, Oct 30), the line “IMS did not respond to queries from The Edge” should instead have been “Denko Industrial Corp Bhd did not respond to queries from The Edge”. The error is regretted.