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Posted by : Admin Direktori Blog | Jumaat, 15 Oktober 2010 | Published in

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Philosophy Politics Economics


EPF To Acquire PLUS: Robbing Peter To Pay Paul?

Posted: 14 Oct 2010 10:54 PM PDT

EPF's proposed Plus takeover like 'robbing Peter to pay Paul', says Pua
By Clara Chooi October 14, 2010

KUALA LUMPUR, Oct 14 — DAP MP Tony Pua has silenced calls for celebration over the Employees Provident Fund's (EPF) possible acquisition of Plus Expressways Bhd, claiming it would be akin to "robbing Peter to pay Paul".

The Petaling Jaya Utara MP told a press conference in Parliament that in the first place, the terms of the toll concession itself was unfair and should be reviewed, before any sale was made.

"Everybody is supporting EPF because EPF pays returns to workers. I'm of the view that this will be a case of robbing Peter to pay Paul.

"You are sucking from the people with an unfair toll concession contract, to pay workers. It will be EPF using an unfair contract to pay the people. This is not the way for EPF to generate returns for the people," he said.

Pua added that if that were the case, then the government should create more highways, create more unfair contracts and allow EPF to manage them so the body could give good returns to the people.

He explained that the toll-road concession contract was unfair for it stipulates that every three years, Plus was allowed to increase its toll rates by 10 per cent.

Failing which, he added, the government would have to compensate them.

"Government compensation to Plus last year was RM850 million. This is a contract that will last until 2038... it is an unfair contract.

"This is a highway that burdens Malaysians, businesses and consumers who use the roads regularly to travel between cities in the peninsular," he said.

Pua said that Plus makes an annua profit of between RM1.2 billion to RM1.5 billion due to increasing traffic and was a cash cow.

"It has RM2.1 billion of incoming cash every year. They have some of the most lucrative terms for a highway concession," he said.

A recent report in The Star English daily said that although there are five parties at present bidding for UEM Group Bhd, sources believe that EPF was still a shoo-in to take over Plus.

Two other parties so far – MMC Corp Bhd and Asas Serba Sdn Bhd – besides EPF, have gone public with their respective bids.

Pua said today that since a takeover was impending, Khazanah Nasional Bhd, which owns 100 per cent of UEM, should create an open bidding platform for the sale of Plus.

UEM owns 38.5 per cent of Plus. Khazanah also has a direct stake of 16.7 per cent, which means the government investment arm controls 55.2 per cent of Plus.

At present EPF owns 12.27 per cent of Plus.

"They should put in a target. For example, toll rates must be frozen, toll concession period should be maybe 10 years.

"Do an open bidding to see which party will pay the highest. That way, the government will gain because Khazanah will get the highest price for its assets rather than a direct award," Pua said.

He also suggested for toll rates to be restructured to ensure they were more acceptable to the people.

"Plus today suspended their shares pending an announcement. We do not know what it is but it could be related to this acquisition.

"if it is, we will be very disappointed because they have not resolved the fact that Plus will continue to be making hefty profits at the expense of commuters. Disproportionate to the cost of construction of the highway," he said.

When asked if he was against the idea of allowing EPF to acquire Plus, Pua said, "I am against EPF taking over immediately, under the current terms of the concession. Actually, I am against anybody taking over under the current concession terms. You must first restructure the contract terms."

He reminded that the opposition had proposed how the government could take over the Plus concession so that they could eventually freeze toll rates and be toll-free after seven or eight years.

"This is because the toll money collected would be enough to pay for the acquisition," he said.

MCA, Pua pointed out, had also supported such a proposal.

"They had a study team and came up with a proposal slightly different from ours but essentially, it is the government taking over and being able to substantially reduce rates.

"None of these proposals have been carried out. So now toll rates remain high or government compensation remains high," he said.

Can GLCs Raise RM454 billion Under ETP? II

Posted: 13 Oct 2010 10:48 PM PDT

Pemandu needs to do much better to convince Malaysians that GLCs will be able to stump up RM454 billion for ETP projects

I have on Monday questioned the Prime Minister and Pemandu on how the Malaysian GLCs will be able to raise RM454 billion for ETP projects when the listed GLC companies (excluding banks) have only got a market capitalisation of RM266 billion and shareholder funds of RM140 billion, as well as RM38.6 billion in debt. This is based on 17 largest listed GLCs on Bursa Malaysia including the G-20 companies monitored by the Putrajaya Committee on GLC High Performance (PCG) as well as listed Petronas subsidiaries.

Pemandu had issued a statement yesterday had claimed that my conclusion was flawed because I did not include non-listed GLCs. "Not all GLCs are listed and hence, the non-listed GLCs are not factored into the current market capitalisation. Key GLCs that are privately held today will be taken public over the next 10 years."

I agree that non-listed GLCs were not included in my calculation because their financial information is not publicly available but the reason why the data from the 17 companies were sufficient is because they already are the largest Malaysian GLCs in this country, hence their being monitored directly by PCG.

However, the only largest unlisted GLCs of note are the Petronas group and the Felda plantation group. Petronas for example, has announced that they will invest approximately RM2 billion per annum over the next three years in domestic exploration, while Felda generated net profits of approximately RM1 billion per annum. The combined net profit for the 17 listed companies is only RM14.1 billion.

Hence even with the inclusion of non-listed GLCs, the Malaysian GLCs will be hard-pressed to invest RM50 billion per annum to meet the RM454 billion target over the next 8-9 years.

Under such circumstances, Pemandu will need to do much more to convince Malaysians that the figures projected are indeed viable, and the best way to so will be to provide a detailed outline of investments by individual GLCs on the 131 projects.

It is certainly not enough for Pemandu to just claim that "the market capitalisation of listed government-linked companies (GLCs) to grow in tandem with Bursa Malaysia's growth rate" which is expected to be at a compound annual growth rate (CAGR) of 15%, where the Government "expect the market capitalisation of Bursa Malaysia to grow from RM1 trillion in 2010 to RM3.9 trillion by 2020".

Firstly, Bursa Malaysia can grow very quickly with new sizeble listings such as Petronas, which may in itself nearly double Bursa's market capitalisation but it will not at the same time double the value of existing GLCs. Hence it is a fallacy for Pemandu to expect GLCs to grow at the same rate as Bursa's market capitalisation.

Secondly, the targets are once again set at a level well beyond the norm over the past decades with no explanations provided on the basis of such assumptions. Between 1991 to 2000, the market capitalisation doubled from US$56.7 billion to US$113.1 billion. It then increased further to US$286.2 billion or 153% by 2009. These numbers have yet to take into consideration the fact that the increase in overall market capitalisation is partly due to a 200% increase in the number of companies listed from 321 in 1991 to 959 in 2009. However, Pemandu is now expecting Bursa's market capitalisation to incresase by nearly 290% by the year 2020, well beyond our historical performance.

Pemandu needs to be credited for having spent substantial effort in identifying projects to be undertaken by the country's investors over the next 8-9 years. The effort is substantial and many of these projects have been discussed in depth. However, now that the projects have been identified, it is now important to tie them to the ground and ensure that these projects are digestable by our local companies, especially our GLCs. Otherwise, the risk of other unintended outcomes such as a self-induced debt crisis for the country as a result of a reckless increase in private debt securities, expected from RM270 billion in 2010 to RM880 billion in 2020.

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