RM6.3bil Penang tunnel job project to begin in two months


Consortium Zenith chairman Tan Sri Azmi Khalid told StarBiz that a land acquisition agreement would be signed on Aug 31 between the company and the Penang state government. A sub-agreement, which provides details on the construction of the first phase, will also be signed on Aug 31.

KUALA LUMPUR: The first phase of Penang’s controversial tunnel project worth RM6.34bil is set to kickstart construction by end-October 2019, amid criticism on the project’s cost and the delay in completing the feasibility study.

Consortium Zenith Construction Sdn Bhd, which is the main contractor for the multi-billion-ringgit project, has clarified that a master agreement was signed on Aug 2 that indicated the Penang state government’s commitment to proceed with the construction of the infrastructure works.

The RM6.34bil project – owned by the Penang state government – will consist of three toll-free roads and a tolled tunnel. The first phase of the project is the 5.7-km Ayer Itam-Lebuhraya Tun Dr Lim Chong Eu bypass. The cost of the first out of three roads, where construction would start in October, is estimated at RM1.07bil.

Consortium Zenith chairman Tan Sri Azmi Khalid told StarBiz that a land acquisition agreement would be signed on Aug 31 between the company and the Penang state government.

A sub-agreement, which provides details on the construction of the first phase, will also be signed on Aug 31.

“The first phase, or what we call Package 2, is targeted to commence on or before Oct 31 this year. The construction period is 36 months from commencement.

“The construction cost of the Ayer Itam-Lebuhraya Tun Dr Lim Chong Eu bypass will be RM851.04mil and the land acquisition will cost another RM220mil. So, that makes RM1.07bil in total.

“One year after the first phase has started, we will begin with the next phase, ” he said.

In this Star file pic taken on Aug 13 2015, Consortium Zenith BUCG official Datuk Zarul Ahmad Zulkifli shows an illustration of the roads and undersea tunnel that the consortium will build in Penang .In this Star file pic taken on Aug 13 2015, Consortium Zenith BUCG official Datuk Zarul Ahmad Zulkifli shows an illustration of the roads and undersea tunnel that the consortium will build in Penang .

Many quarters, including former Prime Minister Datuk Seri Najib Razak, have questioned the continued delay in completing the RM305mil feasibility study for the infrastructure works, which was said to be 83%-completed as of mid-2016.

However, two days ago, Penang chief minister Chow Kon Yeow said the feasibility study was only 90% completed currently.

In response to this, Azmi said there has been a misunderstanding on the progress of the feasibility study.

“The feasibility study for the three major roads was completed on Jan 26,2016 and the approval for the Detailed Environmental Impact Assessment was received on Nov 7,2017.

“As far as the three roads are concerned, the approvals are all settled. This is why we have received a payment of RM208mil from the total of RM305mil in the form of 5.67 acres of reclaimed land.

“What is still pending is the feasibility study for the undersea tunnel, which is only about 10% left. A major reason for the delay is because we were asked by the Penang state government to put the feasibility study on hold for more than a year, as they were negotiating with the-then Barisan Nasional federal government on whether to build a bridge instead of an undersea tunnel, ” he said.

Azmi also pointed out that another reason for the delay in completing the feasibility study was the slower pace in finishing the land reclamation, which will be used to pay Consortium Zenith.

“Going by the agreement, Consortium Zenith will receive 110 acres of reclaimed land progressively and a toll concession for the tunnel as payment for our role in the entire project. This includes payment for the feasibility study.

“Earlier, there was a delay in land reclamation and the land was not ready to pay us for the work, ” stated Azmi.

For context, the Penang state government will pay for the RM6.34bil project via a land swap of 110 acres of reclaimed land in Tanjung Pinang, and a toll concession for the tunnel of not less than 30 years.

The exchanged land has been valued at RM1,300 per square foot based on net developed area.

Of the total RM6.34bil price tag, a total of RM305mil is estimated for the feasibility study and detailed design, RM546mil for land acquisition and RM5.49bil for construction.

For the development of the first phase of the project, Consortium Zenith will receive 29.1 acres of land.

When asked about the financing for the Ayer Itam-Lebuhraya Tun Dr Lim Chong Eu bypass, Azmi said Malayan Banking Bhd (Maybank) would provide global funding for the first phase.

The bank is responsible for the monetisation of the exchanged 29.1-acre land and to finance the land buyer.

“Maybank has managed to conclude the sale of the 29.1-acre exchanged land, pending the signing of the sale and purchase agreement. The land acquisition cost and project financing is at an advanced stage of approval.

“The financing arrangement is expected to be concluded before the commencement of the construction by end-October this year, ” said Azmi.

Consortium Zenith was incorporated on July 5,2012 as a special-purpose vehicle (SPV) to undertake the RM6.34bil infrastructure works in Penang. Zenith Construction controls 84.06% of the SPV, while Main Market-listed Vertice Bhd and Juteras Sdn Bhd own 13.21% and 0.75%, respectively.

For the first phase of the project, namely the construction of the Ayer Itam-Lebuhraya Tun Dr Lim Chong Eu bypass, China Railway Construction Corp has been appointed as the engineering, procurement and construction contractor.

Meanwhile, Buildmarque Construction Sdn Bhd, which is a 50:50 joint venture between Vertice and Vizione Holdings Bhd, is the project manager for the first phase.

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