Issue Samurai bond to take over PLUS

Through a 0.65% coupon rate, interest for a RM30b loan will be just RM195m


UEM Group Bhd and the Employees Provident Fund (EPF) took over the assets and liabilities of PLUS Expressways Bhd in 2011 in a RM23 billion deal.

The costs were at least 30% higher as the then prime minister had preempted the delisting of Plus Bhd in his budget speech, which led to a hike in PLUS’ share price.

Immediately after that, an entity that only had about RM6.1 billion in liabilities was burdened with a RM30 billion sukuk loan facilitated by CIMB Group Holdings Bhd. And in a worst case scenario of corporate malfeasance ever witnessed in Malaysia Inc, the loan was ostensibly utilised to pay for the purchase of PLUS by the current shareholders, further burdening an entity that was relatively debt-free considering the revenue.

In 2018, PLUS toll revenue was expected to be more than RM3 billion, a slight decrease due to the abolishment of the Batu Tiga-Sungai Rasau and Bukit Kayu Hitam toll plazas.

Annual interest payments are close to RM1.5 billion a year, not taking into account sukuk repayments. Excess revenue is paid out in the form of dividends to shareholders and from 2012-2017, RM2.85 billion was paid in such dividends to UEM and EPF.

PLUS also reportedly has the highest maintenance costs and almost RM1 billion is set aside for this, which should not be the case.

At the end of the day, it is the public that bears this burden almost exclusively on their shoulders.

The government must seriously consider buying out PLUS through a Samurai bond exercise — the most recent which enjoyed a coupon rate of just 0.65% — and hold this national asset in trust for future generations in the form of a infrastructure trust, as this would be a government-to-government negotiation.

Therefore, interest for a RM30 billion loan will be just RM195 million versus the RM1.5 billion currently paid. With 70% of the RM3 billion revenue used for repayment, the highway can be fully paid up in 15 years or so, four years prior to end of the current concession period slated for 2038.

The option to completely abolish toll is not possible in view of the annual maintenance and upgrading costs. So, the public can expect to pay toll even after the end of the concession period but it should be structured not to profit the select few but to cover only costs.

And plug the leakages and maintenance cost too, and any extra income can be used to buy out other tolled roads or build new highways toll-free. It is time for decisive action.

Basil John Fernandez

Shah Alam