PLUS Expressways Berhad grapples with tolling issues-

PLUS Malaysia Berhad (PMB), the largest highway concessionaire and the largest toll expressway operator in Southeast Asia, services about 1,000 km of expressways in Malaysia. PMB acquired PLUS Expressways Berhad (which was incorporated in 2002 as a public company) in 2011 and became the largest toll expressway operator in Malaysia. Since 2011, the company has expanded its footprint both in Malaysia and in international markets such as India and Indonesia. However, the company of late has been grappling with toll-related issues on its operational highways. This has had financial implications on the company’s balance sheet. Nonetheless, the Malaysian government is making serious attempts to mitigate the impact of its tolling policy and ensure a sound financial position for highway concessionaires including PMB.

Expanding portfolio basket

PLUS Expressways Berhad is the expressway arm of the UEM Group. The company has control over five highway concessions – the PLUS Expressways (North-South Expressway [NSE], New Klang Valley Expressway [NKVE], Federal Highway Route 2, Seremban Port Dickson Highway), North-South Expressway Central Link, Malaysia-Singapore Second Link, Butterworth Kulin Expressway and the Penang bridge.

The group has made forays into other Southeast Asian nations. PLUS has a 55 per cent stake in PT Lintas Marga Sedaya, the concession holder of the Cipali toll road in Indonesia. It has clinched major projects in India including the Bhiwandi-Kalyan-Shilphata widening project in Maharashtra. As part of its extensive network expansion drive, a 74 per cent equity stake was acquired in Indu Navayuga Infra Project Private Limited (INIPPL). INIPPL was incorporated to undertake the widening, operation and maintenance of the Padalur-Trichy section in Tamil Nadu. The brownfield project is expected to augment its revenue stream as well as increase its market capitalisation.

In 2011, along with its India-based consortium partner IDFC Limited, PLUS Expressways Berhad signed the concession agreement for the Jetpur-Somnath four-laning project in Gujarat. Overall, the Indian operations have added about 190 km to the total network base of the company.

In July 2007, the company’s Indonesian operations commenced through the acquisition of a 55 per cent stake in PT Lintas Marga Sedaya. The latter operates the Cikampek-Palimanan Expressway on Java Island. The project, which was scheduled for completion in 2011, was delayed considerably on account of land acquisition issues, which in turn deferred the disbursement of funds by the lenders. PLUS Expressways Berhad also held a 60 per cent stake in Cimanggis Cibitung Tollways which is involved in the construction and operation of the toll road in Indonesia. In July 2010, the company entered into a conditional sale and purchase agreement with PT Bakrie and Brothers TBK for disposal of its equity interest in Cimanggis Cibitung Tollways for a consideration of about RM 20 million. The proceeds from this equity dilution were diverted towards expansion of the company’s asset base in Indonesia.

Recent domestic issues

PLUS Expressways, along with the other highways acquired by PMB, has not been able to raise its toll rates since 2008 even though its concession agreement with the government allows for an upward revision every three years until December 2038 when the concession agreement ends. The manifesto promise of Barisan Nasional to prevent hikes in toll rates stems from popular discontent at the way such spikes are brought about even after the entity has started making profits. But the company reports that the increase in revenue is very minuscule given the kind of expenses it has to bear. Out of reported revenue of RM 2.61 billion for the year ended December 31, 2014, 50 per cent was spent on repayment of loans, 20 per cent on operation and maintenance, 15 to 20 per cent on upgrading and repairs and a meagre 10 went to the shareholders.

The government has shut down eight toll plazas and reduced toll at several others. At the same time, it has asked PLUS to extend its corporate social responsibility measures in terms of offering rebates during festive seasons.

PLUS plans to submit a proposal and conclude discussions with the government on toll rates by June 2016. The government has also hinted at its willingness to negotiate toll rates by pointing to the opposition party that its manifesto promise of preventing toll rate increases was meant only for the North-South Expressway and not the entire gamut of expressways operated by PMB. As per reports released in March 2016, the government hinted at paying compensation to highway concessionaires if it decides against a toll rate increase. This is expected to cost the government close to RM 1 billion.

Improving traffic flow and efficiency in toll collections

In order to speed up the toll collection procedures, it had introduced PLUSMiles Touch ‘n Go cards, Smart TAG and PLUS Track for paperless transactions. In a recent development, Smart Transit Cards have replaced transit tickets at all the cash lanes on the NSE and the ELITE Highway. The move is aimed at supporting the Malaysian government’s Go Green policy to conserve the environment through the use of recyclable transit cards.

On the domestic front, in 2010, the company acquired a 20 per cent equity stake in Touch ‘n Go Sdn Bhd to incorporate electronic toll collection systems on its expressways. The strategic acquisition will help the company realise the potential gains accruing from the upcoming electronic payment system market. During the same period, PLUS Expressways Berhad acquired Teras Teknologi Sdn Bhd, which is involved in investment holding and the provision of information technology, outsourcing and e-commerce services.

It also acts as a conscientious member of the corporate landscape by engaging in ethical environmental practices and undertaking various green initiatives. One such programme in the pipeline is the regional open space reforestation programme which the company will implement shortly.

The way forward

The company’s consistent track record on the operational front and increasing market capitalisation will allow it to make new forays into Southeast Asian markets. This would augur well in light of its goal to become a formidable global expressway group. Its adherence to environmental standards also makes it a safe bet for governments of developing Southeast Asian nations that have run into a lot of trouble with regard to land acquisition and environmental protection.

PLUS, in spite of domestic difficulties, remains committed to providing safe and efficient expressway services in Malaysia. The company continues to explore widening and upgradation opportunities to increase mainline capacity and traffic volumes along its expressways. Currently, select highway stretches are being widened to four lanes to facilitate smooth traffic flow.