Revised West Coast Expressway deal falls short of protecting taxpayers, says Pua

KUALA LUMPUR, Jan 7 — The revised multi-billion West Coast Expressway (WCE) deal still falls short of protecting taxpayers’ interest and the prime minister’s promises for transparency, DAP publicity secretary Tony Pua said today.

Last week, The Edge business weekly had cited unnamed industry experts in its report that the privatisation deal for the 233km Taiping-Banting highway had revised terms that were more favourable to the government

But Pua (picture) said the deal was given through direct negotiation to Kumpulan Europlus Bhd (KEuro) which, he claims, is a company without the necessary track record and financial capability for the highway project.

He said that KEuro had “generated only RM19.8 million and RM27.7 million in revenues in its financial year 2012 and 2011”, adding that the company’s cash level of RM1.03 million was only 0.2 per cent of the capital required to carry out the project.

He said an “open and competitive tender” would have enabled Putrajaya to get the “best value” in its use of taxpayers’ funds.

Pua further said that Putrajaya had “failed to be transparent in the award because it has steadfastly refused to disclose the terms of the agreement.”

He said that the terms would contain important details such as the “benchmarks set for the cost of the highway, the toll rates to be charged, the details of the proposed profit-sharing formula” and “the rate of return defined for the early termination clause.”

The Petaling Jaya Utara MP again said the disclosure of terms would show whether the people’s interests are well-protected.

Pua said that Pakatan Rakyat (PR) promises to “carry out open, competitive and transparent tenders for all procurement and privatisation projects” and will make public all contracts with concessionaires.

He contrasted Putrajaya with the Penang PR state government, saying an open tender was carried out for the Penang People’s Park and the Subterranean Penang International Convention Exhibition (sPICE) public-private partnership project, with the contracts for the projects made public.

The Edge reported that West Coast Expressway Sdn Bhd (WCESB) had agreed with Putrajaya to hand over control of the highway once the operator recoups its investment from toll collection — even if this occurs before the 60-year expiry of the concession.

“If the highway makes its stated returns in the 50th year, the concession will end and the highway will be given back to the government,” a financial executive familiar with the agreement told the paper.

Apart from the early termination clause, the contract terms have been revised in the government’s favour, the paper reported, pointing to a new revenue-sharing mechanism and the removal of an up to 3 per cent interest subsidy from commercial loans for a period of 22 years.

“The government was of the view that the traffic forecast made by WCESB was too low and this is where the revenue sharing kicks in. If the traffic goes above the forecast, the government gains,” the paper quoted the same executive as saying.

Details of the agreed traffic volume, however, remain confidential.

The project has also been resized after both the government and the highway builder agreed to cut back about 25 per cent of the original plan, with the project now costing RM5.2 billion instead of the initial projection of RM7.07 billion.

Putrajaya is also extending RM1 billion to acquire land needed to build the highway, and a RM2.24 billion soft loan to the company to undertake the project. The loan deal comes with an annual interest rate of 4 per cent commencing in 2013.

WCESB’s parent company, KEuro, reported last year that it recorded a net loss of RM7.52 million for its third quarter ended October 31, 2012 compared with a net profit of RM1 million in the previous corresponding period.

The company told Bursa Malaysia that the loss reported in the current quarter was due to a share of losses in associates of RM2.9 million, a provision for doubtful debt of RM1.83 million and a finance cost of RM2.31 million.

“The preceding quarter’s losses were lower mainly due to the reversal of provision for doubtful debt amounting to RM3.51 million and the reversal of rental charges amounting to RM2.37 million, which were over provided in prior years,” KEuro said in a filing last December.

Revenue, however, increased to RM4.08 million from RM3.84 million a year ago.