PETALING JAYA: Negotiations between the government and Malaysian Resources Corp Bhd (MRCB) on the termination of Johor Bahru Eastern Dispersal Link’s (EDL) concession is still ongoing, although it has stopped collecting the RM6.80 per trip toll since the start of the year.
Malaysian Highway Authority (LLM) Director-General Datuk Ismail Md Salleh told SunBiz in an email response recently that the Ministry of Finance is still in discussions with the highway concessionaire on terms of the mutual termination agreement.
When contacted, MRCB declined to respond to queries, saying the parties are still in negotiation.
A key issue involving the negotiation will be the large amount of debt the concession holders has on its books due to the EDL, which constitutes about 26% of the group’s total debt of RM3.9 billion as at Sept 30, 2017, a drag on its financials.
Previously, the Second Finance Minister Datuk Seri Johari Abdul Ghani reportedly said the government will pay a cash compensation of an estimated RM70 million annually to MRCB for the loss of revenue resulting from the toll abolishment.
Asked how the compensation would impact MRCB’s financials, Affin Hwang Capital Research analyst Loong Chee Wei told SunBiz that the compensation is expected to improve the earnings and cash flow of the group, adding that the estimated RM70 million cash compensation per annum to MRCB should be sufficient to offset the group’s losses incurred due to interest expense, amortisation as well as operating costs.
Nevertheless, Loong said there is still uncertainty on whether the government will take over the debts of the EDL concession.
“If not, the compensation is just sufficient to defray the total costs of operating the expressway but does not generate a good return on investment,” he added.
The 8.1km EDL was built at a cost of RM1.2 billion.
According to news reports, MRCB has injected RM58 million into the EDL for the past two years, due to the cash flow mismatch between its toll collection and debt obligations. On June 2017, MRCB pumped in another RM67 million to repay its concession unit’s term loans.
The government will reportedly settle an amount of RM2.2 billion to PLUSMalaysia Bhd for the abolishment of tolls in three other locations, namely Batu Tiga, Sg Rasau in Selangor and Bukit Kayu Hitam in Kedah, as announced under Budget 2018.