KUALA LUMPUR (April 8): The shareholders and board of Amanat Lebuhraya Rakyat Bhd (ALR) said its proposal to acquire the four highway concessionaires for RM5.48 billion aims to minimise the duration of the concession extension required, as it has to return the highway concessions to the government once its debts are fully repaid.

In a statement on Friday (April 8), the shareholders said there are two “critical success factors” to the arrangement, the first of which is that ALR’s shareholders do not require any equity return and are not entitled to receive any dividends.

“As a consequence, there is no need to prolong the concession period once all of ALR’s debts have been fully repaid.

“Notably, as the existing vendors of the concession companies are commercial entities in nature, such a 'non-profit' orientation is not viable under the current ownership structure. Hence, the proposal is for ALR to acquire the concession companies,” the statement said.

On April 4, ALR made a conditional offer to aquire four Klang Valley highway concessionaires, namely Kesas Sdn Bhd (Kesas Expressway), Syarikat Mengurus Air Banjir dan Terowong Sdn Bhd (SMART Tunnel), Sistem Penyuraian Trafik KL Barat Sdn Bhd (SPRINT Expressway), and Lingkaran Trans Kota Sdn Bhd (Damansara-Puchong Expressway or LDP).

ALR made the offer based on the enterprise values of Kesas (RM1.24 billion) as on the valuation date of Dec 31, 2021, Litrak Sdn Bhd (RM2.12 billion), SPRINT (RM1.81 billion) and SMART (RM313 million) for a total enterprise value of RM5.48 billion. The offer is valid until April 30, 2022.

ALR’s shareholders and directors comprise Tan Sri Azlan Mohd Zainol, Datuk Idrose Mohamed, Datuk Soam Heng Choon, Datuk Dr Nirmala Menon and Datuk Mohamed Sharil Tarmizi.

In the statement, the ALR shareholders also said that ALR minimises its cost of capital through reliance on debt funding. Without the need to pay dividends to shareholders, the concession companies’ cash flows can be fully channelled towards supporting any debt financing obligations, they said.

Given this dedicated cash flow profile, ALR expects a strong credit rating which would allow it to tap the capital markets to fund the said acquisition, which includes repayment of existing debts.

“To aid us in the sukuk issuance, we have appointed a consortium of reputable banks. For the avoidance of doubt, ALR is not seeking the government’s financial assistance to guarantee its sukuk,” it said.

Based on the expected traffic projections — taking into consideration the overall GDP, the pandemic, future developments, competing roads and alternative transportation — ALR anticipates that it would be able to accelerate the full repayment of any debt financing and return the highways to the government in a timely manner.

The entity also clarified the involvement of its shareholders and directors.

“Given our personal conviction and belief on the merits of the proposal, where the country and its rakyat would stand to reap the benefits as elaborated above, we have each voluntarily agreed to serve and assume such roles at ALR, which will act as the private sector intermediary to facilitate the transactions,” it said.

The board and shareholders of ALR affirmed that they are independent of both the government and existing shareholders of the concession companies, not representatives or nominees of any parties or have any political affiliations and that ALR would commit to upholding existing high standards of service, with priority on motorist safety.

It said that ALR will also ensure continued compliance with the regulations and requirements of the Malaysian Highway Authority and the respective concession agreements.

Once its mandate to return the concessions to the government is achieved, ALR said it is required by the government to dedicate ALR’s residual surplus, if any, to the continuing maintenance of highways, and/or to the improvement of urban mobility.

It also reiterated that its shareholders and directors are not entitled to receive any dividends or distributions from ALR.

“With humility, we hope that our collective track record in the public and private sector would be a testament to our affirmations above and our sincere intentions to facilitate the toll restructuring for the benefit of all stakeholders involved,” the statement said.

Meanwhile, ALR said that without any restructuring, the government either has to continue paying a burgeoning toll compensation to make up for the gap between the toll charge and the entitlement of the concession companies, or toll rates are increased resulting in a higher financial burden on highway users.

“The solution to such a situation is clear: the concession companies’ toll rate entitlement needs to be set at the levels that highway users are currently paying which immediately eliminates any need for Government to pay compensation; and any risk of future toll hikes to the detriment of highway users.

“In any typical toll restructuring, the concession tenure would need to be extended to compensate for the loss in revenue for the concession companies and for the full repayment to the sukukholders,” it said.