Move to reduce toll rate hike burden on public

PETALING JAYA: The Government will meet toll road concessionaires on Monday to discuss how to smoothen toll rate increases so they do not burden the public.

“The Government intends to invite proposals from the concessionaires on how best to restructure their agreements so that toll hikes won’t be as severe as scheduled,” said an industry source.

Discussions will also entail firming up the amount of compensation highway operators will receive from the Government, following the decision to scrap toll hikes for this year.

Minister in the Prime Minister’s Department, Datuk Seri Abdul Wahid Omar, who heads the Economic Planning Unit, will represent the Government in these discussions.

The meeting comes after Deputy Prime Minister Tan Sri Muhyiddin Yassin announced last week to halt toll rate hikes on major highways for 2014 and instead pay RM400mil in compensation to expressway owners in the Klang Valley that were supposed to raise their toll rates. The Government had deliberated on whether to stop subsidising toll concessionaires in order to reduce the fiscal deficit.

Industry experts reckon the reason why the Government is calling for restructuring proposals from the concessionaires is to reduce future compensation payouts. “Faced with its fiscal constraint, the Government might not be able to prolong the costly practice of compensating highway concessionaires,” said an analyst.

Muhyiddin was also quoted as saying that the Government was “considering the renegotiation of toll concession agreements after a thorough review of existing concessions”.

CIMB Research said in a recent note that the RM400mil compensation due for 2014 would be the highest in seven years, and bring the Government’s cumulative compensation to RM1.5bil since 2008. The brokerage estimates that the average hike in toll rates this year could have been 43% for the 14 major urban/intra-urban highways.

The proposal to reduce or restructure the country’s highway tolls, however, requires agreement from both sides – the Government and the concessionaires involved – as they are bound by the obligations agreed to in the original concession agreements.

“It has to be done carefully, without disturbing market sentiment and investor confidence,” said an industry observer.

Industry observers said the process to restructure the toll agreements will not be easy, as some concessionaires had debt obligations.

Last year, the Government, via the Performance Management and Delivery Unit or Pemandu, set up a special laboratory to study the implications of toll rate hikes. In recent months, there has been increasing criticism from various quarters on subsidy cuts and the price rise for fuel, sugar, electricity and assessment rates.

Toll rates were due for an increase in 2011 as stated in the concession agreements, but the Government had then staved off such increases by compensating the companies. The last major hike took place in 2007.

CIMB Research expects Gamuda Bhd and IJM Corp Bhd, which are owners of major urban highways due for toll rate increases, to get the lion’s share of the compensation.

Currently, there are at least seven listed companies that own major highway concessions in the Klang Valley, with Gamuda having the most toll roads.

It operates three major expressways, all of them in the heart of the Klang Valley’s growth corridor. They are the Kesas Highway, the Damansara-Puchong Highway as well as the Western Kuala Lumpur Traffic Dispersal System or Sprint.

IJM Corp is the owner of the New Pantai Expressway, Besraya Highway and the Kajang-Seremban Highway.

The other listed players are Malaysian Resources Corp Bhd, Ekovest Bhd, Taliworks Corp Bhd and Silk Holdings Bhd, which is the concession owner of the Kajang Silk Highway.