WHILE all the attention and grouse has been focused on the hike in toll rates on 17 intra-urban highways, another toll hike, this time impacting the whole of Peninsular Malaysia, has been scheduled for next year.

PLUS Malaysia Bhd is scheduled to increase the toll rates for four out of its five highway concessions by 5% in 2016. The Government determines if this happens or otherwise.

Subsequently, PLUS will review its rates every three years. Penang Bridge will be the only “spared” highway for the entire duration of the concession as per the concession agreement (CA).

Following the recent toll rate hikes effective Oct 15, PLUS issued a statement reiterating that toll rates on all its highways currently remain unchanged. It further clarified that toll rates on its highways have been unchanged since 2005.

Under the original CA, PLUS’ concession period would be expiring in 2018. But because of several Government-sanctioned deferment in toll rate hikes, the concession period now extends to Dec 31, 2038.

PLUS has five highway concessions under its belt. They are, the PLUS expressways (North-South Expressway (NSE), New Klang Valley Expressway (NKVE), Federal Highway Route 2 (FHR2), Seremban Port-Dickson Highway), North-South Expressway Central Link (NSECL), Malaysia-Singapura Second Link (MSSL), Butterworth-Kulim Expressway (BKE), and the Penang Bridge.

The initial CA was signed in 1988 but was renegotiated in 1999. This allowed PLUS to raise toll rates by 10% every three years as opposed to 26% every three to five years under the original agreement.

In return, the Government agreed to extend the concession period to 42 years, until 2030.

Subsequently, the CA was again renegotiated to extend the concession period for a further eight years, until 2038, to compensate for PLUS shutting down the Senai Toll Plaza and the costs for widening certain stretches of the NSE.

The NSE, the longest highway in the country linking many major cities and towns in western Peninsular Malaysia, makes up for 80% of PLUS’ revenue. According to data from Malaysian Rating Corp Bhd (MARC), PLUS recorded RM2.46bil in toll revenue for the first nine months of the year ending Dec 31, 2014, against full-year revenue projection of RM3.32bil.

Comparatively, PLUS recorded revenue of RM3.25bil for the 2013 financial year against RM3.05bil in 2012. Pre-tax profit was RM34.4mil during the year compared with pre-tax loss of RM4.5mil in the previous year. However, losses widened in 2013 due to high amortisation charges on intangible assets, profit payment on the sukuk among others.

This led to a decrease in its shareholders’ funds which in turn increased its debt-to-equity ratio to 13.1 times in 2013.

For the nine-month period in 2014, the concessionaire saw the NSE and NKVE contributing 64% and 11% respectively to PLUS’ total toll revenue.

This was followed by the NSECL which contributed approximately 10%, while the remaining tolled roads contributed at most 5% of the aggregate toll collection.

PLUS’ cash flow from operations for 2013 stood at RM2.29bil, exceeding MARC’s projections of RM1.91bil. For the first nine months in 2014, it recorded cash flow from operations amounting to RM1.7bil.

MARC projects an upward trend for PLUS’ net cash flow from operations in 2015, 2016 and 2017 to come in at RM2.48bil, RM2.82bil and RM2.95bil respectively.

“PLUS’ minimum base case post-distribution finance service cover ratio stands at 2.40 times in 2015 with the first toll hike scheduled in 2016” it says. Under a stress scenario of a 15% reduction in projected traffic, the cash flow would remain resilient, says MARC.

It adds that overall traffic volume on PLUS-operated highways in 2013 were consistent with its expectations.

Traffic growth

For the first nine months of 2014, the NSE recorded a 2.3% year-on-year growth in traffic to 12.35 billion passenger car unit-kilometres (pcu/km).

PLUS was taken private by UEM Group Bhd and the Employees Provident Fund (EPF) in a 51:49 joint venture for RM23bil that was completed in 2012.

MARC affirms the AAAIS rating on the concessionaire’s RM23.35bil Islamic bond programme with a stable outlook, on the basis of assumed support from the Government.

The rating indicates an extremely strong ability to make payment on the instrument issued under the Islamic asset-based financing contract.

“The support assumption is based on the Government’s golden share and indirect shareholding via UEM, a wholly-owned subsidiary of Khazanah Nasional Bhd, and the EPF in the concession company, as well as the interdependence between default events for the rated sukuk and RM11bil government-guaranteed sukuk that matures after the rated programme,” the rating agency says.

If the Government ceases to be the single largest shareholder in PLUS, this would constitute an event of default.

While traffic volumes have been increasing in general, several new or developing highways and road schemes could impact future traffic performance at PLUS’ toll concessions.

“However, given the extensive length and coverage of PLUS expressways, MARC believes that the localised road schemes will not materially affect the expressways’ overall traffic volumes and toll revenues,” the rating agency says.

Also, the upcoming Light Rail Transit extensions and Mass Rapid Transit projects, once completed, might cause a dip in traffic growth along urban toll roads.

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