CEO on Naza-CSR’s bid to be PDP and provide up to 90% financing for rail job
PRASARANA Negara Bhd, which will oversee the development of the upcoming RM9bil third light rail transit line (LRT 3), welcomes any “funding” initiatives by potential project delivery partners (PDP) but conditions for the funds being made available have to be in line with the objectives of the project.
Its relatively new group managing director Azmi Abdul Aziz admits that funding proposals of LRT 3 by PDP bidders could be an added advantage but the conditions for the financial aid must not be restrictive or against the Government’s objectives, such as restricting or compromising on the level of local participation in the project.
“In this specific scenario, the bidder must also show the source of funding. If it is sourced outside the country, then it must be made clear if it involved any bilateral benefits or other issues.
“Financial capability of the PDP bidders is one of the main criteria that will be examined alongside technical expertise when evaluating the proposals.
“To my best knowledge, the Government does not restrict local bidders from teaming up with foreign entities. The joint venture agreement should be done accordingly at their level before submitting the proposals,” he tells StarBizWeek yesterday.
Azmi was asked to responsd to a recent StarBiz report that stated the Naza Group with its China-based partner, CSR Zhuzhou Electric Locomotive Co Ltd have included financing package of up to 90% of the LRT 3 development cost in their proposal.
It is understood that in exchange of the financial aid, Naza and its partner may need a stake in the operating company or a concession agreement to run the new line that will generally connect Bandar Utama and Klang with major stops in Tropicana, Subang and Shah Alam.
Besides Naza Group, it has been reported that five other companies have been shortlisted for the PDP job of LRT3.
The five include a joint venture between Gamuda Bhd and MMC Corp Bhd , a tie-up between Malaysian Resources Corp and George Kent (M) Bhd , UEM Group Bhd, Sunway Bhd and a collaborative effort involving WCT Bhd and Alloy-MTD Group which is the merged entity of the now privatised MTD Capital Bhd and Alloy Consolidated Sdn Bhd.
However, Azmi declines to confirm on the shortlisted list of companies because the closing date to collect the offer document was still open until next week.
“Subsequently, potential bidders are supposed to submit their proposals in early June as we plan to officially announce the winner in July,” he says.
Azmi points out as the PDP is still relatively a new concept of managing large scale Government initiated infrastructure project first implemented in the on-going mass rapid transit (MRT) line 1 construction, there will be room for improvement.
“The LRT 3 PDP fee structure and other mechanism will not be much different from the MRT line 1. By using the PDP concept, we have to bear a little bit of extra expenditure in the initial budget.
“But the execution risk is reduced significantly because the PDP ensures that it is done on time and with additional cost.
“Ultimately we are reducing the risks of any delay, that could mean additional cost, with public benefit in mind,” he says.
Under the MRT agreement, the PDP will receive a fee of 6% of the total aggregate work package contract value.
Should the eventual total cost of the project be less than or equal to the target cost, then the PDP shall be entitled to the full fee.
But if the project cost is more than the target cost, then the PDP fee shall be reduced in accordance with an agreed formula.
Azmi updates that currently the LRT 3 has obtained conditional approval from the Prime Minister via Land Public Transport Commission (SPAD) and the three-month public display on the prosposed alignment will begin in May and land acquisition process will be done concurrently.
“We anticipate land acquisition cost could go to as high as RM1bil on top of the estimated RM9bil construction cost and the new Selangor Mentri Besar has been very supportive of this development.
“Ground-breaking of this new line is slated to be in between late third or early fourth quarter of this year to meet its completion deadline somewhere in 2020,” he says.
It was reported that the LRT 3 line that will link Bandar Utama to Klang would have about 25 stations plus an underground station with overall length of around 36km.
Azmi admits there is a short underground portion in LRT 3 as compared to the one in MRT Line 1 that is supposed to be in Shah Alam but it may be avoided if they could opt for an elevated viaduct which is much cheaper.
The LRT 3, even after the revised Budget 2015, remains a priority development that has been spared a spending cut alongside the MRT line 2 project, the High Speed Rail project, the Pan-Borneo Highway and the Refinery and Petrochemicals Integrated Development project in Pengerang at a total development expenditure of RM48.5bil.
On his appointment to helm Prasarana early this year, Azmi, who was previously attached to SPAD, admits it was a unexpected but a positive surprise.
Azmi was previously the chief development officer position of in SPAD for three and a half years.
For him, this new position will be an interesting undertaking in the task of modernising the country’s public transport system replacing Datuk Seri Shahril Mokhtar who is now Mass Rapid Transit Corp Sdn Bhd’s chief executive officer.
Azmi, a mechanical engineer by training, describes that his current position completes his career cycle in the rail industry from his initial involvement in Putra Line (now known as Kelana Jaya line) under the Renong Group, to his day of building trains during his attachment with Scomi Engineering before joining the regulatory arena under SPAD.