AFTER a delay of more than a decade, the RM8.9 billion electrified double-tracking railway line project linking Gemas to Johor Baru has been revived. The project is expected to provide a fresh source of construction jobs for local players.

It is learnt that SIPP Railway Sdn Bhd (SIPP), a private vehicle controlled by Sultan of Johor Sultan Ibrahim Sultan Iskandar, has been set up. It is expected to get a slice of the pie.

A consortium of three China-based companies — China Railway Construction Corp Ltd (CRCC), China Railway Engineering Corp (CREC) and China Communications Construction Corp (CCCC) — received the letter of award from Transport Minister Datuk Seri Liow Tiong Lai last October.

CRCC, the largest engineering contractor in China, holds a 40% stake, while CREC and CCCC each have 30% in the consortium.

A groundbreaking ceremony for the project, scheduled for last December, had to be postponed because of certain issues with the state authorities.

The consortium is expected to start the groundwork next month, but some issues need to be ironed out, according to Sun Ming, general manager of CRCC’s Malaysian unit.

“SIPP will be our first contractor for this project. We and SIPP will also appoint local subcontractors for the railway construction,” he says, adding that SIPP’s job scope has yet to be finalised.

Sun says SIPP is a good partner to have on board as the project involves land acquisition.

The double-tracking project covers 191.14km and includes nine new passenger stations, two rolling stock depots and three open stations next to the existing line. At a speed of 160kph, it will cut travelling time from Johor to Kuala Lumpur almost by half, from 6 to 3½ hours.

The project, expected to take four years to complete, was first mooted under the administration of Tun Dr Mahathir Mohamad. When Tun Abdullah Ahmad Badawi took over as prime minister, it was among the many mega projects shelved on the grounds that the nation’s coffers were depleting.

The project was revived in 2007. A joint venture set up by MMC Corp Bhd and Gamuda Bhd secured the RM12.5 billion electrified double-tracking project for the Ipoh-to-Padang Besar stretch.

Despite the hiccups that caused a delay in the groundbreaking ceremony, Sun expects the project to be completed on time. He says there should not be any major geological problems given that a major part of the double-tracking line is on flat land. “There isn’t any hilly terrain and with our experience, it should not be that complicated.”

As a government-funded project, payments will be settled progressively, he adds.

Despite the weak ringgit, he says the project cost should be within the management’s control as most raw materials will be sourced locally.

CRCC, which has its headquarters in Beijing, is listed in Shanghai and Hong Kong, with a market capitalisation of RMB169.8 billion and HK$1,91.4 billion respectively, based on its closing prices last Friday.

The company is well known for its many railway construction projects in its home country as well as abroad, including Nigeria, Turkey, Tanzania and Zambia.

Unlike its peers CCCC and CREC, CRCC is seen as a latecomer to our shores as it only set up its Malaysia office at end-2012. Last year, CRCC sealed construction contracts worth RMB1.2 trillion, but Malaysia only accounted for less than 1%.

It is understood that its unit, CRCC Zhu Zhou Locomotive Co Ltd, has submitted a bid for the rolling stock for the third light rail transit project.

Although it is not known at this juncture, analysts expect that at least a 30% stake will be going to local companies. This will come up to about RM2.7 billion — a substantial sum for local players.

“It is true that the government would like to see at least 30% awarded to local construction players,” says Sun.

He says the CRCC and its partners may also award contracts to local players separately, instead of under the consortium.

Analysts generally see the double-tracking project as a catalyst for the construction sector. The players likely to be the beneficiaries will be those with a track record in rail jobs such as MMC Corp, Gamuda Bhd and IJM Corp Bhd, as well as subcontractors like WZ Satu Bhd and Fajarbaru Builder Group Bhd.

It is learnt that Gamuda and MMC will tender for the southern double- tracking project separately this time. Gamuda is aiming for RM1 billion worth of work from the project. Other big players that have shown interest include IJM, which was involved in the Seremban–Gemas double-tracking project with Indian partner Ircon International Ltd in 2008.

Affin Hwang Investment Bank analyst Loong Chee Wei expects the local players to form consortiums to bid for jobs.

He believes the Chinese consortium will not be overdependent on a particular contractor to hedge their risks but will instead split it into a few packages to benefit more players.

The project has been accounted for in forecasts of many analysts this year.

AllianceDBS Research analyst Chong Tjen San expects local players that have established relationships with the three Chinese companies to have a slight edge.

“The contract, if it is really happens next month, will be a boost for the sector. It has been a long time... they thought it would be awarded last year,” he tells The Edge over the phone.

A quick check with Bursa Malaysia reveals that local players that have tied up with CCCC, CRCC and CREC include George Kent (M) Bhd, Econpile Holdings Bhd and Vivocom International Holdings Bhd.

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