Minister: klia2 cost to exceed RM4b

KUALA LUMPUR: Malaysia Airports Holdings Bhd (MAHB) has been hit by cost overruns for the construction of its new low-cost carrier terminal in Sepang (klia2), said Deputy Transport Minister Datuk Abdul Aziz Kaprawi, bringing the total cost to more than RM4 billion.

“It will be higher [than the budgeted RM4 billion], but the amount will not jeopardise MAHB’s financial performance,” he told The Edge Financial Daily.

Abdul Aziz said he had been briefed by MAHB officials on the matter, and that the additional development cost of klia2 will be incurred by the airport operator and not public funds.

Abdul Aziz declined to disclose the additional cost incurred, but said that it would not make a “big” dent in MAHB’s bottom line, in view of the fact that it is a public-listed company and is answerable to its shareholders.

He attributed the additional cost to a change in job scope and “other unforeseen matters”.

He added that MAHB is currently preparing the necessary report, which will be submitted to his ministry.

When contacted, MAHB chief financial officer Faizal Mansor declined to comment on the cost escalation.

The cost of the new terminal has increased significantly from its initial estimate of RM1.7 billion when the project commenced in 2009. MAHB blamed the jump in klia2 construction cost to RM4 billion on the enlarged scope of work involved such as the installation of a fully automatic baggage handling system from a semi-automatic one.

The new terminal was first designed to cater for 30 million passengers a year, measuring about 150,000 sq m, but this was revised during its construction phase to 257,000 sq m, a 71% increase, with an increased capacity to cater for up to 45 million passengers a year.

Meanwhile, on whether the May 2 opening is a “soft launch”, Abdul Aziz said: “Whether it is going to be a soft launch or a grand opening, it (klia2) is going to be operational on May 2 as planned”.

Maybank IB Research aviation analyst Mohshin Aziz said cost overruns would crimp MAHB’s profits. Based on a financial analysis, he noted that MAHB could face another 10% or RM400 million in cost overruns at klia2.

MAHB’s net profit for the financial year ended Dec 31, 2013 dropped 1.4% to RM388.93 million from RM394.46 million in the previous year, due to higher total costs.


This article first appeared in The Edge Financial Daily, on March 31, 2014.