Tolled Roads and National Embarassments!

Tolled Road Solutions

1.       Asas Serba has come up with a RM50b dividend bond proposal to fund its takeover of all the expressways in Malaysia, and also promises a 20% reduction of tolls as part of the proposal. Is is feasible? Sure. But that is not the question.

2.       Why are expressways lucrative? Most international funding agencies cite the PPP / PFI arrangement of tolled roads as workable. BUt the real question was how it was structured that was positively lopsided so as to create a disadvantaged party in the Government.

3.       Malaysia's structure allowed for the concessionaire to cite a construction cost, which already included a substantial margin. In return for the financing risks undertaken by the concessionaire, the toll concession will be for an agreed period, say 20 years, with builtin adjustment formulas to compensate the concessionaire for the maintenanc, upgrading, operations and also for inflationary pressures over the period.

4.       This is not dissimilar to the first-generation IPP structures, and certainly provides the concessionaire with an advantage for it to diversify into other areas such as YTL's forays into global markets knwoing that there is a stable, recurring cash cow back home that could protect it from risks inherent in foreign deals. Anyways, YTL's foray into regulated markets meant that it was still cautious enough, and the sweetheart deals it could conclude with dodgy clauses about appointing key personnel from the other party to juicy posts meant that it could live well off the initial deal.

5.       Quite why UEM, Renong, and now Khazanah has been unable to take advantage of PLUS is another

5. issue. The latter may well need PLUS to cover for the other dodgy deals that it has inherited.

6.       Where's the sweetheart deal in toll roads that Asas Serba is so interested in? The secret probably lies in the capital structure. Why bonds? This will be a fully leveraged deal - but the finer details is where Asas Serba is hoping to clinch it. And beware the valuation for all the expressways and the concession period that it is asking for. In all probability, the public would do well to consider if it intends to forsake the multiple generations beholden to tolls for a 20% reduction Asas Serba is throwing about.

7.       For whatever the deal’s worth, the question is who’s paying? Government saves on compensation payments, and lest we forget, it’s not the Government’s – it’s the rakyats. Now who will pay for the sweetheart deal for Asas Serba? For sure, the existing private shareholders for the toll concessionaires will receive a premium to facilitate their decision to sell for the profitable routes, and the less profitable ones will still walk away with their money’s worth.

8.       The solution isn’t replacement like-with-like. The solution is for expropriation, and the rakyat owns it. If Asas Serba, without track record and just a few sheets of A4 people can expect to raise RM50b, why not sovereign government of Malaysia?, Let it be that once toll concessions end, we can expect that there will no longer be continual payment in perpetuity, whereas now exits are deferred by concession extensions.

Musa Hassan - the embarassing IGP, Syam - the more embarassing Minister in charge

9.       The issue here is justice. If you can dispense justice, and there is integrity and professionalism in how you dispense your responsibilities, there are no embarassing questions you need to fend off. And if the IGP of Malaysia 'merajuk' - bloody hell, what hope do we have? We may as well have Rafidah Aziz there. And if the Minister echoes and supports this embrassing turn of events - ei... malu la!

10.   I have serious reservations abt Syam and his pronouncements. More often than note, he just hits the wrong nerves. He’s just so out of touch – and if this is the best UMNO can offer… bloody hell!