Thursday 28 Mar 2024
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This article first appeared in The Edge Financial Daily on June 27, 2019

KUALA LUMPUR: The government has to pay RM18 billion compensation to abolish tolls along the four intra-Klang Valley highways owned by Gamuda Bhd if the Minister of Finance Inc (MoF Inc) does not take over the concessionaires, said Finance Minister Lim Guan Eng.

The minister, in a statement yesterday, reiterated that the government cannot afford such a large compensation given its current fiscal condition.

Furthermore, Guan Eng explained that by taking over the four concessionaires, the government will have the right to allow toll-free travel during the off-peak period, and up to a 30% discount outside of the peak period beginning next year.

“This compares with having to pay RM18 billion in compensation for the highways to not collect any toll charges. Due to legacy issues from the previous government leading to financial constraints, the federal government cannot afford to fork out RM18 billion,” he said.

The four highway concessionaires that the MoF Inc has made an offer to acquire are Kesas Holdings Bhd, Sistem Penyuraian Trafik KL Barat Holdings Sdn Bhd (Sprint), Lingkaran Trans Kota Holdings Bhd (Litrak), and Projek SMART Holdings Sdn Bhd. Under the proposal, MoF offers to pay RM6.2 billion (before deducting the debts) or RM4.5 billion cash after deducting the borrowings, which it will also assume.

After the acquisitions, the government will own Kesas Highway, Lebuhraya Damansara Puchong, SMART Tunnel, Sprint, Kerinchi and Penchala highways.

The ministry had previously revealed that the four concessionaires would be compensated between RM5.25 billion and RM6.5 billion if the government were to just freeze toll rates at current levels until the end of the concession periods.

In yesterday’s statement, Guan Eng highlighted that the reduced toll charges will save users of the four highways an estimated RM180 million per year.

“Secondly, the concession periods will not be lengthened but will expire in accordance with the existing concession agreements.

“Thirdly, upon expiry, the congestion charges will be further reduced significantly to cover only the operating and maintenance costs, without any profit element,” Guan Eng said.

The minister previously revealed that the proposed toll-free period is between 11pm and 5am, while the peak period will cover six hours daily, leaving 12 hours eligible for the proposed discount rate.

The takeover of the four highway concessionaires will be funded through issue of bonds and is subject to cabinet approval. The offer will be valid until July 12.

“Let me reiterate that the conditional offer is made after due diligence by professional banking consultants in line with fulfilling the commitment by the Pakatan Harapan government in its electoral manifesto, to take over highway concessions and gradually reduce toll rates, to ease the burden on the people,” Guan Eng said.

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