This article first appeared in The Edge Financial Daily on July 13, 2018
PORT KLANG: The Port Klang Authority (PKA), the regulator of Northport and Westports, is in talks with the finance ministry (MoF) to restructure the repayment of the RM3.8 billion soft loan it took from the federal government, said Transport Minister Anthony Loke.
PKA took up the loan from the MoF back in 2013 — payable over 19 years beginning 2018 — to develop the controversial multibillion-dollar Port Klang Free Zone (PKFZ).
“We will try to restucture the loan. Hopefully, the amount to be paid annually can be reduced so that at least there will be no cash flow deficit in PKA’s books,” Loke told reporters after attending a meeting with PKA yesterday.
PKA is expected to rake in a revenue of RM266 million for the current financial year ending Dec 31, 2018 (FY18). At the same time, it will have to bear administrative costs of RM80 million, maintenance costs of RM6 million, and the RM222 million annual loan repayment.
“This will result in a cash flow deficit of about RM42 million, [and] every year, PKA will need to utilise its cash reserve [to satisfy its obligations],” said Loke.
PKA general manager K Subramaniam said the regulator currently has cash reserves of some RM380 million. He also shared that the lease terms for Westports, Northport and PKFZ are revised every three years.
This would see the loan being restructured for a second time. In 2017, the MoF restructured the loan repayment to be payable over 29 years from 19 years.
Under the deal, the statutory body is scheduled to make an annual payment of principal plus interest of RM222 million. The obligation for the first two quarters of 2018 has been paid.
The repayment is at an interest rate of 4% per year — plus 2% for any outstanding payment from the scheduled timeline.
PKA, together with the government-linked company (GLC) under its purview, PKFZ Sdn Bhd, generates revenue mainly from the leasing of port facilities in Westports and Northport, as well as PKFZ.
For FY17, PKFZ recorded a revenue of RM78.46 million against operating expenses of RM18.76 million.
According to Loke, PKA’s main priority in the long term is to improve the profitability of PKFZ, which contributes about RM80 million in revenue per year to the regulator.
“There are still commercial buildings [at PKFZ] that are not yet tenanted. We are looking at ways and means to increase the utilisation rate [of PKFZ],” Loke said, adding that the soon-to-be appointed board of directors will be tasked to do so.
At present, the industrial portion of PKFZ is 85% utilised, he noted.
The free trade zone also houses a 100,000 sq ft exhibition centre, and a commercial building previously slated to be set up as a hotel. Both are currently not utilised.
“There is no operator for the hotel building. Whether we want to still turn it into a hotel, the new [PKFZ] board will be asked to submit a proposal,” said Loke.
Loke is also proposing for a non-political accountant to be appointed as the chairman of PKFZ.
“This (PKFZ) is a GLC. The Pakatan Harapan coalition has promised in its election manifesto that there will be no politically linked elected representatives on the board of GLCs. This is also applicable to PKFZ,” he said.
However, the same does not apply for PKA as it is a regulatory body, said Loke. “The distinction needs to be clear. PKA is a statutory body... You can expect politicians on the board [of PKA],” he added.
PKFZ attracted controversy and public scrutiny after it was revealed that its original projected cost of RM1.96 billion had escalated to about RM3.52 billion, excluding interest costs, as at end-2008.
The total project cost was later said to have grown to RM7.45 billion, including the additional interest cost from the MoF soft loan and interest cost from deferred payments to PKFZ’s turnkey developer Kuala Dimensi Sdn Bhd.