HSR agreement relevant to local players

Construction

Maintain overweight: A legally binding bilateral agreement for the much anticipated KL-Singapore high-speed rail (HSR) was signed on Tuesday at the Prime Minister’s office in Putrajaya. The bilateral agreement marks another big milestone for this mammoth rail project (earlier estimates at RM30 billion to RM40 billion, recently reported at RM60 billion to RM65 billion).

It was highlighted that the length of the entire 350km HSR alignment remains unchanged, of which 15km will lie in Singapore and 335km in Malaysia (96% of total alignment). Other new details include that the HSR lines in Singapore and Malaysia are to be linked by a bridge over the Straits of Johor 25m above the water level. This new breakdown should provide a rough hint of how the development cost will be apportioned.

The project time frame set forth under the bilateral agreement continues to put 2026 as the targeted completion date, assuming that the project commences (the building phase) in 2018. It is reported that the bilateral agreement also formalised the financing and procurement aspects of the project to a certain extent.

Appointment of a joint development partner (JDP) in early 2017 to assist in the overall implementation of the HSR project is on track. We understand that the JDP will provide advice on operational, technical and procurement matters relating to the HSR’s system and operations.

We still believe that the JDP is likely to be a reputable international HSR expert. It appears that the JDP will also assist with the structure and monitoring of the civil works tender, which could begin in late 2017.

The joint tender for the HSR system will commence in the fourth quarter of calendar year 2017 (4Q2017) and a decision on whom to award the rail system to will be made by the end of 2018. On this note, it remains to be seen if the 4Q2017 timeline will also cover the civil works tender. Apart from a joint tender for cross-border HSR operations, Malaysia will also put up its own tender for a domestic operator to run the domestic service within its borders. — CIMB Research, Dec 13

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