KUALA LUMPUR: Sarawak construction firms will be big winners from the next round of contracts set to be given out for the RM16bil Pan Borneo Highway development in the state.
Eight major works packages worth up to RM10bil had been finalised and would be awarded by this month, a source told StarBiz. The recipients of the contracts are predominantly Sarawak-based companies, some of whom have partnered with Peninsular Malaysia contractors during the bidding process, he said.
Among the Sarawak firms that had participated in the tenders are Cahya Mata Sarawak Bhd
, Hock Seng Lee Bhd (HSL), Zecon Bhd, Shin Yang Shipping Corp Bhd and Naim Cendera Sdn Bhd.
Some 16 companies were said to be vying for works packages under the Pan Borneo project. Some of the prominent bidders are joint-venture companies whose partners comprise of one Peninsular Malaysia-based firm and an East Malaysia player.
The Sarawak stretch of the Pan Borneo Highway measures 1,089km and is expected to be completed by 2022. Inclusive of the Sabah portion, the total cost for the project is estimated to be RM29bil.
The project involved the construction and upgrading of 779km of single carriageway roads to dual carriageway. Additionally, it would also involve the construction and upgrading of 115 bridges as well as three rest and service areas.
Three packages, for the Serian-Pantu, Bintagor-Sungai Kua and Telok Melano-Sematan stretches, had been awarded.
The bids for the upcoming packages had been submitted before the May 30 deadline imposed by Lebuhraya Borneo Utara Sdn Bhd, which is a project delivery partner for the toll-free highway project.
After a muted second quarter of the year with zero contracts relating to the Pan Borneo development given out, analysts said it was timely to conclude the tendering process in order to expedite construction works.
The contracts were being awarded after the conclusion of the Sarawak state elections in May, noted one construction sector analyst. Furthermore, the source of funding for the entire venture had also been finalised, he added.
Works Minister Datuk Seri Fadillah Yusof was recently quoted as saying that more than 60% of the construction costs would be borne by the issuance of new sukuk by Danainfra Nasional Bhd, while a further RM5bil would come from the state’s development expenditure. Having raised funds for the Klang Valley Mass Rapid Transit (KVMRT), DanaInfra is a government-linked entity which issues bonds to finance major infrastructure projects. The issuance of the Pan Borneo Highway bonds would mark the first time that the firm was raising funds outside of the KVMRT project.
Some RM13bil worth of Federal Government-guaranteed bonds would be issued for the venture with the first batch amounting to RM10bil. The issuances are timed for August or September, Reuters reported yesterday.
Previous tenders given out have amounted to over RM1bil each. In March, a joint-venture between Zecon Bhd and Kimlun Corp Bhd won a RM1.46bil contract for the construction of the Serian-Pantu stretch.
In the same month, a joint venture between HSL and bumiputra contractor Dhaya Maju Infrastructure Asia secured a RM1.7bil contract for the Bintangor-Sungai Kua stretch.
In a note yesterday, Kenanga Research highlighted the Pan Borneo Highway as a major earnings catalyst for public-listed construction companies that are in the running for the works packages.
“The job flows in the second quarter had been fairly slow with only RM5.9bil in contracts dished out compared with RM30.8bil in the first quarter of the year. We remain excited for the construction sector with the prospect of more job flows in the coming months,” it said, adding that small-to-mid cap companies could respond actively to newsflows relating to major projects such as the Pan Borneo, the share prices of larger players may be more subdued due to built-in expectations.
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