Sime in JV to build education hub in Johor

KUALA LUMPUR: Sime Darby Bhd has entered into a joint venture (JV) with Tunas Selatan Pagoh Sdn Bhd (TSP) to undertake the Pagoh Education Hub project worth RM992.6 million under a Private Finance Initiative.

In a filing with Bursa Malaysia yesterday, Sime said its indirect wholly owned unit Sime Darby Johor Development Sdn Bhd (SJD) has formed a 60:40 JV with TSP to undertake the project that will be based on the “build-lease-maintain-transfer” concept. TSP is a unit of little known Sungai Cerah Sdn Bhd.

The construction of the education hub is expected to take place over three years for a total cost of RM992.6 million, including the procurement of teaching equipment, said Sime.
Upon completion, the campus will be leased out to the Ministry of Higher Education, Universiti Teknologi Malaysia, International Islamic University Malaysia and Universiti Tun Hussein Onn Malaysia for 20 years.

In return for undertaking the construction and maintaining the facilities on the proposed campus, the JV will receive availability charges of RM2.62 billion over 20 years upon completion of the project. It will also receive asset management service charges of RM764.5 million over a similar time frame, and RM156.86 million over the first five years for the agreed teaching equipment.

Sime said the project is in line with its existing core business segments.

“The concession agreements [referring to the education hub project] are expected to generate a stable stream of cash flows and contribute positively to the earnings of Sime in the future financial years,” it said in the announcement.

In the same announcement, Sime revealed that it has disposed of five parcels of leasehold land amounting to 506.7 acres in Pagoh, Johor for a cash consideration of RM50.6 million to Pesuruhjaya Tanah Persekutuan.

The disposals were done through its indirect wholly-owned subsidiary Sime Darby Pagoh Development Sdn Bhd. The deals provided the company a gain of RM32.24 million, based on the estimated net book value of the land of RM18.36 million as at Oct 31, 2012.

The land has been valued at an open market value of RM53 million, indicating a price of RM100,000 per acre, said Sime.

Proceeds from the disposal of the land will be used by SJD to develop the education hub in Pagoh, said Sime.

This article first appeared in The Edge Financial Daily, on Nov 8, 2012.

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