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RRJ Capital – a Malaysian-led, Hong Kong-based private equity firm – has made a bid of RM3 billion cash to purchase PLUS Malaysia, which will see the firm acquire a 100% equity interest in the highway concessionaire.
Currently, ownership of the concessionaire is shared between UEM Group – a subsidisry of Khazanah – and the Employees Provident Fund (EPF). The former holds a 51% share in PLUS, with the remaining 49% owned by EPF.
In reports by The Edge and Reuters, the deal will also see RRJ attain both companies’ respective interests in the redeemable convertible unsecured loan stock (RCULS) issued by Project Lebuhraya Usahasama (PLUS), a wholly-owned subsidiary of PLUS Malaysia.
Should the bid be successful, RRJ, via PLUS Malaysia, will be responsible for the operation and maintenance of the 957 km of highways in PLUS’ portfolio. More importantly for motorists, the firm states that it will reduce toll rates by 20% across the board.
Additionally, the proposal will also see the existing concession period be extended for another 20 years after it ends in 2038, during which no subsequent increase in toll rates will be implemented. Other noteworthy details of the deal include terminating the existing compensation commitment by the government to PMB in respect of the postponement of toll hikes.
With this, the government will not have to pay RM2.7 billion to PLUS Malaysia from 2020 to 2025 under the current agreement between both parties. However, the government will continue to be a guarantor for some of PLUS’ debt, which currently sits at around RM30 million.
“RRJ is prepared to move quickly with our financial and technical advisors to begin negotiations and due diligence if our proposed offer is accepted,” RRJ said in a letter dated September 25.
The document also states that RRJ would introduce the latest technologies and systems, which are currently being used in countries like Japan, Europe and the United States. These include electronic toll collection systems such as EZPASS in the US, which would not require any toll booths.
Other planned changes will see the use of big data and artificial intelligence to study life traffic systems in a bid to reduce traffic congestion, differential pricing systems for peak and non-peak hours, special fast lanes for vehicles with more than two or three passengers, and a dual electronic pricing system. The last item will result in higher toll rates for premium cars and lower ones for non-premium cars.
“There have been several proposals on toll highways. Khazanah itself has submitted its own proposal to the government. Ultimately, it is up to the government to consider these proposals and decide what is best for the country and the people,” a Khazanah spokesman told Reuters.
Prime minister Tun Dr Mahathir Mohamad had previously said that Khazanah will sell assets that are “not useful” to the government as a means to raise funds to pay off the country’s debts.
“There would be some control over certain industries, but as to government involvement in business, we have always believed that the government should not be in business. We’re not good at it,” Mahathir was reported as saying when asked on whether Khazanah would continue to sell down its shares in government-linked companies during a dialogue in New York recently.
RRJ’s bid is not the only proposal to acquire PLUS Malaysia, as Maju Holdings also has its hat in the ring with an effective purchase price of RM3.5 billion – RM2 billion in cash and the balance a waiver of RM1.5 billion in compensation due from the government.
Maju’s offer also includes four scenarios, including a 25% reduction in toll rates for a 10-year concession extension, 30% toll reduction for a 15-year extension, 33% toll reduction for a 20-year extension, and a 36% toll reduction for a 30-year extension.
There’s also talk of a government proposal – as reported by NST – to take over 15 highways, including the North South Expressway (NSE), which is managed by PLUS, for a combined RM43 billion through the issuance of debt paper to the concessionaires.