Monday, April 21, 2014
Is There A Need To Privatise PLUS?
This happened when PLUS was delisted from Bursa Malaysia and fully taken over by the government via two agencies - the Employees Provident Fund (EPF) and Khazanah-owned UEM Group Bhd.
While efforts are now underway to prise PLUS away from government ownership, politicians and economists are in agreement that it should stay in government hands, given that this is a critical national infrastructure spanning the length of Peninsular Malaysia.
The recent unsolicited offer from Idaman Saga Sdn Bhd, which was rumoured to have roped in another government-linked entity, to take over the ownership of the nation's most lucrative highway concession has once again seen calls for nationalisation from both sides of the political divide.
What seems to be forgotten is that the 772km NSE that forms the backbone of the country's road network, together with all the highways under the purview of PLUS Malaysia Bhd, had already been nationalised since 2010 following calls from the people.
The unsolicited offer, which lacks an offer price from Idaman Saga, a private vehicle of Tan Sri Halim Saad, among other things, includes a sweetener: it will not increase toll charges until the end of the concession period in 2038. This will also save the government some RM64 billion in compensation as a result no toll increases between 2016 and 2038.
Such an offer has certainly struck a chord with the motoring public.
Despite the lack of financial details i.e. the offer price and funding of the purchase, analysts felt that the offer lacked viability for it to be considered a serious bid.
The current owners - UEM Group Bhd and the EPF - certainly have no plans to part with their prized asset.
Analysts say that PLUS Malaysia Bhd is an attractive takeover target with its huge cash generating business and steady growth potential.
"PLUS is already a national asset as it is owned by government-linked companies, 51 per cent by UEM Group and 49 per cent by EPF. It is pointless to risk privatisation. In terms of being competitive, UEM has managed PLUS well.
PLUS gives a good return to EPF contributors, so it's not necessary to privatise it," said David Ang Chin Tat, the Selangor Chairman of Gerakan.
"The government tries to look after the best interests of the people so that big assets are sometimes nationalised to protect the public. The public, also means the people who work for PLUS, not only the highway users.
"EPF represents 14 million Malaysians (who are contributors). Why should EPF pull out from the joint venture? I don't see it as being necessary," Ang said.
Zakie Shariff, a Director of FA Securities, said for a highway that has reached maturity like PLUS, it made more sense to let the status quo remain because it was once privatised before being nationalised via EPF and UEM.
"To have a third party now to buy back from EPF and UEM, I don't see the rationale. If anyone really wants to reduce the financial burden of the rakyat, look at the intracity ones, don't just look at PLUS.
"With the high cost of living right now, the offer of no toll hikes and huge saving is tempting to the public and the government," he said.
Stressing that one needs to think long-term on this matter, he said, "EPF plus UEM are two government agencies and this partnership, which saw the nationalisation of PLUS in 2010, has thus far managed PLUS well."
"Why should this arrangement that is currently benefiting the rakyat be changed?" asked an economics professor, who spoke on condition of anonymity, on the Idaman Saga offer.
"No doubt, the public is not happy with the expected toll hike among all the highway concessions and not just PLUS," she said.
"For PLUS, even though it is owned by government agencies, it manages public amenities and operates like a business entity," she stressed.
But many analysts are also of the opinion that given the maturity of the toll concessions and the profits that had been enjoyed by the profitable toll concessionaires, there is a pressing need for the government to revisit the agreements to reduce the frequency of toll hikes and the quantum of price increases