Govt to fork out RM5bil to PLUS and another RM2.5bil to compensate for its deferred toll rate hikes
KUALA LUMPUR: The Government will have to fork out just under RM5bil in compensation to PLUS Expressways Bhd following its decision not to raise toll rates over the next five years, according to UEM Group Bhd’s group managing director/chief executive officer Datuk Izzaddin Idris.
He said thi s was in addition to some RM2.5bil which the Government owed PLUS in compensation thus far for having deferred toll rate hikes.
“Theoretically, there is an existing mechanism in place for compensation in the concession but that is currently subject to discussion,” Izzaddin said at a joint press conference with Employees Provident Fund deputy chief executive officer of investment Shahril Ridza Ridzuan yesterday on the proposed takeover offer of PLUS.
While presenting Budget 2011 last week, Prime Minister Datuk Seri Najib Tun Razak had announced the decision not to raise toll rates for PLUS-owned concessions for the next five years.
PLUS owns four concessions – North-South Expressway, Expressway Lingkaran Tengah Sdn Bhd (Elite), Linkedua (M) Bhd and Konsortium Lebuhraya Butterworth-Kulim Sdn Bhd (KLBK).
The plan is to rationalise all the terms of these four concessions into a master concession agreement which is currently ongoing. On whether the restructuring of concession agreements (CA) could eventually lead to a reduction in toll rates, Izzaddin declined to comment as “toll increases (or not) is a prerogative of the Government.”
“At the end of the day, it’s a balance between what users pay and the expected returns by long-term funds like us and, thirdly, what the Government wants to do. We expect a very fluid discussion in the CA negotiations. So, apart from the Government’s intention to hold toll increases, everything else is subject to discussion,” Shahril said, adding that the offer, which is subject to the successful restructuring of the CA, could take between eight and 12 months.
Last Friday, EPF and UEM made a joint offer to acquire the entire assets and liabilities of PLUS for RM23bil which works out to RM4.60 a piece through a co-investment vehicle to be owned 51% and 49% respectively.
The move will allow EPF, which already owns 12.03% of PLUS, to raise its stake in the highway operator to 49%. “It’s a mature cashflow-generating asset which would provide stable returns for EPF contributors,” said Shahril.
Izzaddin and Shahril also defended their offer price as “fair”, although the toll operator’s share price shed 12 sen to finish at RM4.34 yesterday after a two-day trading halt.
“What we are proposing to do is absorb the concession risk that’s characteristic of a business like PLUS. PLUS’ share price only crossed the RM4 mark on July 1 and, before, it was trading below that. The share price always trades to a discount of DCF (discounted cash flow) valuation which has certain assumptions,” said Izzaddin.
“We are effectively taking away or absorbing those assumptions. So, we think it’s fair given the range and cash flow projections.”
“If you look at the trading pattern of PLUS in the past year, apart from the increases in the last two weeks, essentially, you won’t find many shareholders who will say they are not getting a premium over their entry price,” said Shahril.
Izzaddin pointed out that the offer price of RM4.60 represented a premium over PLUS’ initial public offering (IPO) price of RM2.295 and RM2.50 per share for retail and institutional investors respectively in 2002.
He also said that the offer was above the all-time high reached by PLUS since its listing of RM4.46 reached on Oct 13, the last day of trading prior to suspension.
UEM and its parent, Khazanah Nasional Bhd, collectively hold 55.25% of PLUS, of which 15.02% has been pledged against exchangeable trust certificates issued by Khazanah.
“For UEM, the deal enables us to further our business in PLUS locally and regionally and to create more value,” said Izzaddin.
“There are many ways to structure the deal but we felt this (the asset and liability route) is the most efficient
The uniqueness of this deal is that it’s coming from existing shareholders of PLUS and, therefore, it precludes us from voting at the EGM.
So, this deal rests entirely in the hands of PLUS’ minority shareholders who have the complete say,” he added.
Of the total consideration of RM23bil, RM11bil will be paid out in cash through a proposed special dividend and selective capital reduction (SCR) to PLUS minority shareholders who collectively own 47.8% while RM12bil will be the amount owing to PLUS.
Khazanah, UEM and EPF will waive their entitlement under the proposed special dividend and SCR.
Upon completion of the exercise, PLUS will be held by EPF, Khazanah and UEM and will be delisted.
Shahril admitted that the flurry of market talk in recent months on takeover bids for PLUS had led the fund to “review its outlook of PLUS and consider if there was an opportunity to increase EPF’s stake to a more meaningful manner.”
“In the last few weeks, an opportunity presented itself and we got around to discussing it with our peers and things crystalised fairly rapidly from thereon,” he said.
To a question on why EPF had chosen to go with UEM instead and not another party, Shahril said EPF had not been approached by anyone else apart from UEM.
Besides, he added: “EPF has to take a conservative view on the partners it wants to have in terms of long-term partnership for this asset.
"UEM and Khazanah have been managing PLUS all this while and is instrumental to bring it to where it is today.”
By ANITA GABRIEL
anita@thestar.com.my
He said thi s was in addition to some RM2.5bil which the Government owed PLUS in compensation thus far for having deferred toll rate hikes.
“Theoretically, there is an existing mechanism in place for compensation in the concession but that is currently subject to discussion,” Izzaddin said at a joint press conference with Employees Provident Fund deputy chief executive officer of investment Shahril Ridza Ridzuan yesterday on the proposed takeover offer of PLUS.
While presenting Budget 2011 last week, Prime Minister Datuk Seri Najib Tun Razak had announced the decision not to raise toll rates for PLUS-owned concessions for the next five years.
PLUS owns four concessions – North-South Expressway, Expressway Lingkaran Tengah Sdn Bhd (Elite), Linkedua (M) Bhd and Konsortium Lebuhraya Butterworth-Kulim Sdn Bhd (KLBK).
The plan is to rationalise all the terms of these four concessions into a master concession agreement which is currently ongoing. On whether the restructuring of concession agreements (CA) could eventually lead to a reduction in toll rates, Izzaddin declined to comment as “toll increases (or not) is a prerogative of the Government.”
“At the end of the day, it’s a balance between what users pay and the expected returns by long-term funds like us and, thirdly, what the Government wants to do. We expect a very fluid discussion in the CA negotiations. So, apart from the Government’s intention to hold toll increases, everything else is subject to discussion,” Shahril said, adding that the offer, which is subject to the successful restructuring of the CA, could take between eight and 12 months.
Last Friday, EPF and UEM made a joint offer to acquire the entire assets and liabilities of PLUS for RM23bil which works out to RM4.60 a piece through a co-investment vehicle to be owned 51% and 49% respectively.
The move will allow EPF, which already owns 12.03% of PLUS, to raise its stake in the highway operator to 49%. “It’s a mature cashflow-generating asset which would provide stable returns for EPF contributors,” said Shahril.
Izzaddin and Shahril also defended their offer price as “fair”, although the toll operator’s share price shed 12 sen to finish at RM4.34 yesterday after a two-day trading halt.
“What we are proposing to do is absorb the concession risk that’s characteristic of a business like PLUS. PLUS’ share price only crossed the RM4 mark on July 1 and, before, it was trading below that. The share price always trades to a discount of DCF (discounted cash flow) valuation which has certain assumptions,” said Izzaddin.
“We are effectively taking away or absorbing those assumptions. So, we think it’s fair given the range and cash flow projections.”
“If you look at the trading pattern of PLUS in the past year, apart from the increases in the last two weeks, essentially, you won’t find many shareholders who will say they are not getting a premium over their entry price,” said Shahril.
Izzaddin pointed out that the offer price of RM4.60 represented a premium over PLUS’ initial public offering (IPO) price of RM2.295 and RM2.50 per share for retail and institutional investors respectively in 2002.
He also said that the offer was above the all-time high reached by PLUS since its listing of RM4.46 reached on Oct 13, the last day of trading prior to suspension.
UEM and its parent, Khazanah Nasional Bhd, collectively hold 55.25% of PLUS, of which 15.02% has been pledged against exchangeable trust certificates issued by Khazanah.
“For UEM, the deal enables us to further our business in PLUS locally and regionally and to create more value,” said Izzaddin.
“There are many ways to structure the deal but we felt this (the asset and liability route) is the most efficient
The uniqueness of this deal is that it’s coming from existing shareholders of PLUS and, therefore, it precludes us from voting at the EGM.
So, this deal rests entirely in the hands of PLUS’ minority shareholders who have the complete say,” he added.
Of the total consideration of RM23bil, RM11bil will be paid out in cash through a proposed special dividend and selective capital reduction (SCR) to PLUS minority shareholders who collectively own 47.8% while RM12bil will be the amount owing to PLUS.
Khazanah, UEM and EPF will waive their entitlement under the proposed special dividend and SCR.
Upon completion of the exercise, PLUS will be held by EPF, Khazanah and UEM and will be delisted.
Shahril admitted that the flurry of market talk in recent months on takeover bids for PLUS had led the fund to “review its outlook of PLUS and consider if there was an opportunity to increase EPF’s stake to a more meaningful manner.”
“In the last few weeks, an opportunity presented itself and we got around to discussing it with our peers and things crystalised fairly rapidly from thereon,” he said.
To a question on why EPF had chosen to go with UEM instead and not another party, Shahril said EPF had not been approached by anyone else apart from UEM.
Besides, he added: “EPF has to take a conservative view on the partners it wants to have in terms of long-term partnership for this asset.
"UEM and Khazanah have been managing PLUS all this while and is instrumental to bring it to where it is today.”
By ANITA GABRIEL
anita@thestar.com.my
Comments
Post a Comment