Prasarana may raise up to RM10bil to finance LRT extension. Or described another way, Prasarana may take on another RM10 billion in debt, in addition to the RM9 billion that it currently carries (notes which are coming due soon).
The sweet irony is this: Prasarana, which has been the vehicle (pardon the pun) for government bailouts in the urban transport sector, is going to have to be helped out by the government in the next few years.
Otherwise, will another bailout be necessary, this time of Prasarana?
Prasarana may raise up to RM10bil to finance LRT extension (The Star)
Wednesday March 2, 2011
By B.K. SIDHU
It is to finance extension of Kelana Jaya and Ampang LRT lines
KUALA LUMPUR: Syarikat Prasarana Negara Bhd plans to raise between RM5bil and RM10bil over the next five years via a bond sale to fund the light rail transit (LRT) extension.
About RM7bil is needed for the extension of the two LRT lines (Ampang Line and Kelana Jaya Line). A further RM3bil is required for infrastructure and other things like buses that provide feeder services for the integration of the urban transport system in the Klang Valley.
The first package for the LRT extension was announced in November, while the tender for the second package is under way. The tender closes in mid-April.
“We will be going to the market again after raising RM2bil in 2009. At this juncture we are still working out how much we need to raise over the next five years. It could be anything between RM5bil and RM10bil,” Prasarana group managing director Shahril Mokhtar said in an interview with StarBiz. “We are looking to raise bonds just like we did the last time.”
He said Prasarana decided to opt for bonds for future funding requirements owing to the good response to the earlier RM2bil bonds. However, Shahril could not say exactly when the bonds will be issued.
Prasarana is a wholly-owned unit of Minister of Finance Inc. It is the asset owner and operator of several public transport providers, namely the Ampang and Kelana Jaya lines, KL Monorail system, bus operations in the Klang Valley and Penang, as well as cable car services in Langkawi.
Shahril said Prasarana expected to receive 470 new buses by the third quarter this year to add to its pool of 1,200 buses that provide feeder service to LRT stations in the Klang Valley.
[TRANSIT: 1200 buses providing feeder services? Not all of the buses are feeder services. Please be accurate in reporting information.]
Of the 470, about 70 are shorter buses measuring eight metres in length, which are suitable for narrower roads and could be used in residential areas. A standard bus is 12m in length.
“If the shorter buses work out well in residential areas, we will order more,” he said, adding that each bus cost between RM400,000 and RM500,000.
Asked if the Government was subsidising Prasarana’s operations, Shahril said: “We are being subsidised because we receive fuel subsidy but there are quotas and limits too. For everything else we raise our own financing and that is why we need to sell bonds to raise financing.”
Turning to the two LRT extensions, he said they covered 17km each for the Kelana Jaya Line and Ampang Line.
Work on the first stretch of the rail extension will begin next month, where the Kelana Jaya Line will link the Kelana Jaya station to Glomac Business Centre through to Lembah Subang.
The 17km stretch of the Kelana Jaya Line starts from the Kelana Jaya station and connects to Subang, USJ and ends in Putra Heights. The Kelana Jaya and the Ampang line extensions will be completed in 30 and 27 months respectively. There will be 13 new stations.
In November, Prasarana appointed Trans Resources Corporation Sdn Bhd and Bina Puri Holdings Bhd-Tim Sekata JV as main contractors for the first package of the Kelana Jaya Line and Ampang Line respectively. Several others had been appointed as sub-contractors.
As of January this year, the Kelana Jaya Line’s average daily ridership during peak hours jumped by 40% year-on-year to 47,714 commuters.
Here’s a little bit of background information: Prasarana was set up in 1998 as a government infrastructure and asset owner. The company took over the assets of the LRT lines and certain bus operators beginning in 2003. They also took over the assets of the KL monorail in 2007.
These transfers of assets to Prasarana were all bailouts supported by the government. Now it appears that the government will be helping Prasarana out, with RM2.5 billion to help pay off some of Prasarana’s notes which are coming due in November of this year.
Prasarana has also been mentioned in recent reports by the Auditor General for various issues including non-performing subsidiaries, the purchase of new buses & abandonment of old buses, and the question of how Prasarana will repay its bonds beginning in 2011.
The Auditor General also noted that Prasarana would not be able to raise enough revenue through fares, unless fares were raised to RM9 for a full Kelana Jaya line journey.
Even the years of extra revenue from “starting fares” (which will no longer be available by the end of this year) will not help that much.
Prasarana is not in the best financial situation at the moment, but it appears that things will not get terribly worse. They will still have to service their existing RM9.64bn debt as well as future debt raised, but the government is going to provide some funding for immediate debt servicing.
Perhaps most importantly, Prasarana will probably not be responsible for debts related to the MRT – which are expected to be placed in the hands the government’s new Special Purpose Vehicle (let’s call it “Prasarana MRT-Sahaja”) with cost overruns supposedly taken care of by Project Delivery Partner MMC-Gamuda.
Another important factor is that the government is clearly showing its interest in investing in urban mass transit & urban public transport. There have been some benefits from pump-priming and government stimulus, although more needs to be felt.
But the crucial steps of reforming the public transport industry have not yet taken place. And unfortunately we do not know the details of the Prasarana Go Forward Plan that Shahril has introduced – which would be helpful to gauge where things are going for Prasarana and the industry in general.
Also important is that it does seem that Prasarana is in a better management situation than they have been in the past. TRANSIT is confident that Shahril Mokhtar can do a good job leading the organization provided that he sticks to his knowledge & leads his board, not the other way around.