Works minister: Toll hikes to become conditional

KUALA LUMPUR (Nov 27): The new enhanced highway concession agreements will see toll rate hikes become conditional instead of the current automatic rate increase mechanism.

In response to queries from The Edge Financial Daily, Works Minister Datuk Fadillah Yusof said that as a result of the enhancements, there could be “no toll rate increase and the prevailing toll rate shall remain.”

“In the new concession agreements, we have a clause on toll review mechanism whereby not later than six months prior to the review date, verification of the toll revenue will be done by comparing the actual cumulative toll revenue to the projected cumulative toll revenue for the relevant operating period,” Fadillah said in an emailed reply.

“If it is verified that the actual cumulative toll revenue is more than the projected cumulative toll revenue, then toll rate will not increase and the prevailing toll rate shall remain,” he explained.

On Nov 23, while winding up the Supply Bill 2016 for the ministry at the Parliament, Fadillah reportedly said that the government has enhanced the terms in its agreement with highway concessionaires on the toll rate, and one of the terms is the abolishment of automatic toll rate increase, which was present in previous agreements.

On top of that, he also mentioned that there are eight highways entitled to higher toll rates in 2016, and the government had already allocated RM593.32 million to compensate the highway concessionaires in the event they are not allowed to increase their rates.

Of the eight highways, four belong to PLUS Malaysia Bhd, which is a member of Khazanah Nasional Bhd-owned UEM Group. The four are North-South Expressway (NSE), Second Link Expressway, North–South Expressway Central Link (Elite) Highway, and Butterworth-Kulim Expressway (BKE).

The other four highways are Seremban-Port Dickson Highway, Shah Alam Expressway (Kesas) Highway, Damansara–Puchong Expressway (LDP) and the North Klang Straits Bypass Expressway.

Notably, a revision of highway concession agreement would affect the returns of concessionaires, which would not go down well with financiers including bondholders.

Nevertheless, in the email reply yesterday, Fadillah said the clause in the enhanced agreement has been agreed upon by the concession companies.

“Any change in the terms of the concession agreement has to be mutually agreed upon by the government and the concession company,” he said.

PLUS was one of the concessionaires that accepted a revision to the concession agreement back in 2011.

Under the revised agreement, PLUS agreed to freeze its highways’ toll rate until 2015, waive outstanding government compensation up to 2015 (totalling RM6.5 billion), and cut toll rate increment to 5% every three years (from 2016 onwards).

The old agreement allowed PLUS to increase toll rate by 10% to 25% every three to five years for its highways.

The Employees Provident Fund owns more than 20% of PLUS’ bonds.

Moreover, the revision also capped the concession period of NSE and Second Link to Dec 31, 2038, while extending the concession period of Elite and BKE to end-2038.

The last toll rate adjustment for NSE was done in 2005, while the previous rate hike for Elite, Second Link, and BKE was in 2008.

Note that tolls at highways operated by 11 concessionaires were raised in October by between 20 sen and RM3.

They are the Kuala Lumpur-Karak Highway (KLK), Maju Expressway (MEX), Kajang Dispersal Link Expressway (Silk), Duta-Ulu Kelang Expressway (Duke), Smart Tunnel, KL-Kuala Selangor Expressway (Latar), Sungai Besi Expressway (Besraya), New Pantai Expressway (NPE), Kajang-Seremban Expressway (Lekas), Damansara-Puchong Expressway (LDP), and Western KL Traffic Dispersal System (Sprint).

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This article first appeared in The Edge Financial Daily, on Nov 27, 2015. Subscribe to The Edge Financial Daily here.