KUB: RM1.23 bil rail JV terminated

KUALA LUMPUR (Dec 15): KUB Malaysia Bhd said the mutual termination of the RM1.23 billion rail project in Johor with Malaysia Steel Works Bhd (Masteel) was because the government had failed to give a definitive timeline for the project.

It said it has, together with Masteel, followed the direction of the Economic Council (EC) since a presentation of the train project on Aug 8, 2011, to finalise certain issues with the transport ministry and coordinate with three transport ministers.

The parties had, early this year, finalised the proposal for the re-tabling of the project to the EC.

However, in a meeting with the Economic Planning Unit (EPU) on

April 15 to discuss the re-tabling, KUB and Masteel were informed that they had to undertake additional “social routes” for the commuter train service.

“After due consideration, we concluded that the additional routes will render the project economically unviable.

“In view of the long gestation time and the impasse with EPU, we decided to terminate the [joint-venture or JV] agreement on the basis that all eff orts made by us to date with the Malaysian government have not yielded a definitive timeline for the satisfactory conclusion of the said project,” KUB said in a filing with Bursa Malaysia yesterday.

Both companies announced the abrupt termination of the JV on Dec 1, with no reason given, saying only that the resources intended for the project would be re-allocated to focus on their existing core businesses.

KUB and Masteel inked an agreement in January 2011 to establish Metropolitan Commuter Network Sdn Bhd, with KUB having a 40% stake and Masteel 60%.

The JV company was to build and operate the 100km intercity rail transit system in Iskandar Malaysia.

In March 2015, the transport ministry reportedly said it was reviewing updates on the proposed project.

KUB, which is 22.55%-owned by the Ministry of Finance Inc, had said then that the company would engage in further discussions with the ministry to speed up the review process.

In November that same year, Masteel said via a fi ling with Bursa that it had presented to the senior management at Railway Assets Corp, which is under the transport ministry, the town planning scheme for a piece of land in Kempas, Johor, to build a proposed commuter train depot and other assets as required by the transport ministry.

KUB closed unchanged at 40 sen yesterday, valuing it at RM222.6 million while Masteel rose two sen or2.82% to close at 73 sen for a market capitalisation of RM177.6 million.

This article first appeared in The Edge Financial Daily, on Dec 15, 2016. Subscribe to The Edge Financial Daily here.