Don: ‘No toll hike’ offer by PLUS bidder impossible

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KUALA LUMPUR: A senior university economics lecturer has described as “impossible” the offer for a 20-year “no toll hike” by a company bidding to take over PLUS Malaysia Bhd.

Ahmad Rizal Mazlan of Universiti Utara Malaysia’s School of Economics, Finance and Banking said such an offer went “beyond economic and financial reality” because the upkeep of the 772km North-South Expressway (NSE) under PLUS kept increasing due to inflation, cost of materials and maintenance.

“Personally, I view it as impossible not to have any toll hike, particularly for such a long period as 20 years. As it is now, the operating costs involved on those variables are about half a billion ringgit a year and rising, and will keep rising soon,” he told Bernama.

The Ministry of Works has also said that on average, concessionaires were required to spend 45-50% of their earnings for loan repayment, overheads and operation as well as repairs and upgrading.

Ahmad Rizal’s comments came in the wake of the RM36 billion unsolicited bid by Maju Holdings Sdn Bhd to take over the country’s biggest highway toll concessionaire from UEM Group Bhd which owns a 51% stake in PLUS while the remaining 49% is held by the Employees Provident Fund (EPF).

Besides the NSE, which is the backbone of Peninsular Malaysia’s trunk road system, PLUS also runs seven other highways while Maju Holdings only operates the Maju Expressway (MEX) linking Putrajaya, Cyberjaya, Kuala Lumpur International Airport and Kuala Lumpur International Airport 2 with Kuala Lumpur.

Both UEM and EPF have said in no uncertain terms that they have no intention to sell their respective stakes in this David and Goliath deal.

On this score, too, Ahmad Rizal said EPF should not sell a long-term investment like PLUS as this would go against the interest of its 14.5 million members.

“As far as PLUS is concerned, it has done a good job in maintaining and managing highways and with the experience that they have, it is the best entity to (continue) managing it.

“There is no reason for EPF and UEM to dispose of PLUS because of the profits and contributions coming in, coupled with a steady volume and good cash flow. EPF should hold onto this asset as it is very difficult to find a replacement with such an asset profile,” he said.

He said PLUS’s rate of increase of 5% every three years despite higher operating and maintenance costs, was also the lowest among all toll concessionaires because its present owners were government-linked entities and the government’s first priority was always the people.

“PLUS was previously privately owned but is now in the hands of the government and being a strategic asset, it is not viable to give it back to yet another private company,” it said.