Penang may issue own bonds to kick-start 3-islands project

Penang CM Chow Kon Yeow (second from left) with Gamuda Group Berhad managing director Lin Yun Ling (second from right) and SRS Consortium project director Szeto Wai Loong (right) at the signing today. With them are state secretary Abdul Razak Jaafar (left).

GEORGE TOWN: Penang today said it would consider issuing its own bonds to kickstart its three reclaimed islands project, which would in turn be sold to fund the state’s RM46 billion transport master plan, or PTMP.

Chief Minister Chow Kon Yeow said this after being advised by financiers that federal government approval was not needed to issue its own bonds.

“According to a few financial institutions, we don’t need a federal guarantee. A state government guarantee would suffice. That is good enough,” he said.

Chow was responding to a question about how the state would carry out the PTMP in view of the political realignment at the federal level.

This was because Putrajaya, under former prime minister Dr Mahathir Mohamad, had said it was willing to guarantee a RM10 billion bond to kickstart reclamation work.

The former PM had asked the state to set up a special purpose vehicle company so that the bonds could be issued with a sovereign guarantee.

“The advice (by the former PM) has not been withdrawn. Of course, it is a different PM now. Again, we will study the financial plan, if there is a need for the state to issue bonds.”

Chow said in the meantime, PTMP’s project delivery partners, SRS Consortium (SRS), will propose a plan on how to finance the project.

He said this would entail getting SRS to obtain RM1.3 billion in “bridging financing” and the Penang government would get another RM1 billion for the same purpose.

“SRS is to submit the plan to the state within a month so that the state can look at the cash flow, the costs and so on, and to consider various options of financing the project.”

Chow said priority would be to reclaim island A to the southeast of Penang island so as to cater to the booming manufacturing industry at Bayan Lepas.

Earlier, Chow signed a master agreement with SRS to officially go ahead with the three artificial islands’ project, along with two highways and a light rail transit (LRT) project on the island.

Chow inked the deal with the SRS, which comprises Gamuda Berhad (with a 60% share), Ideal Properties (20%) and Loh Poh Yen Holdings (20%).

The consortium won the project in an open tender and was formally awarded the project on Aug 12, 2015.

As part of the agreement, SRS would see work proceeding on the Bayan Lepas LRT, Pan Island Link (PIL) Highway 1, PIL Highway 2A and the Penang South Reclamation.

The 19-station, 30km LRT project is expected to cost RM8.5 billion, while the PIL 1 Highway will cost RM7.5 billion.

PIL 1 will run for 19.5km from Gurney Drive to a point near the second bridge and take seven years to complete if there are no complications.

PIL 2A, on the other hand, will connect Jalan Permatang Damar Laut to the first of the three artificial islands. There was no breakdown of the cost of this project component.

The PSR, or three-islands project, will reclaim 1,821ha of land and will later be sold to the highest bidder.

In a speech before inking the agreement, Chow said the PTMP was of paramount importance to improve the worsening traffic situation in Penang.

Chow said the goal of the project was to achieve a 40:60 ratio in terms of public transport use to private vehicle use. The current public transport use is at 8%, he said.

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