Increase in rates a necessity, say Highway concessionaires

Kuala Lumpur: Toll increases are a necessity, according to concessionaires of several tolled highways in the country. They pointed to the complexity of financing and pricing their products, having to meet shareholder expectations for a reasonable rate of return and enduring many early years of losses as the reasons.

Lingkaran Trans Kota Holdings Berhad (Litrak) chief operating officer Richard Lim said several highways even operated at a loss and had their operating expenses subsidised by other more profitable highways.

As reported till date, it was a total of 17 highways set to register a toll hike, including the routes – AKLEH, Besraya, DUKE, Grand Saga, Guthrie Corridor Expressway, Kajang SILK, Karak, LATAR, LEKAS, LKSA, MEX, NPE, SMART Tunnel, Senai-DEsaru Expressway, Butterworth Outer Ring Road (BORR), Sprint Expressway and the LDP Expressway. Now, South Klang Valley Expressway (SKVE) is adding up to the list of 17, making the total count of 18 highways with toll hiked prices.

The rates for which, is mentioned below in the form of table:

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Lim said, Sprint Expressway incurred losses amounting to RM40 million for 14 years and had only started making profit this year.

“A single toll rate could be used over the 36-year period, but that would mean having to start at a higher rate, for example RM2.50 instead of RM1,” he said.

Lim added that none of the investors of the Sprint Expressway had received any returns since the highway started operations. “Being a public-listed group, the shareholders expect a reasonable rate of return on their investments. Otherwise, we might as well leave the cash in the bank to earn interest.”

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Image Courtesy: Paultan.org

“Without a toll rate increase, this may impact the toll concessionaires’ short-term cash flows. As such this could affect their ability to service their debt obligations as well as to maintain certain required debt service coverage ratios in order to maintain the ratings of their debt issuances,” Ekovest Berhad managing director Datuk Lim Keng Cheng, said in a statement yesterday.

Lim also noted that there had been no increase in the toll rate since it opened in 2009, which presented financing risks to the concession.

“The sanctity of contracts must be maintained to ensure that the investing public have confidence to further invest in Malaysia,” said Lim.

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