Government-linked companies (GLCs) will look at Islamic instruments when they need to raise funds for projects. The move is in sync with the Malaysian government’s call to make the country one of the global Islamic financial hubs.
For PLUS Expressways Berhad (PEB), apart from helping achieve the government’s agenda, the Islamic instruments can attract all kinds of investors as they cater for the Islamic and non-Islamic markets.
“Our preference for Islamic bonds is not just because we are GLC, but because we want to cater for a wider market. Furthermore, we want to support the government’s agenda. Our Islamic papers will help towards achieving the goal,” chief financial officer of PEB Annuar Marzuki Abdul Aziz (pic) said in an interview with Islamic Finance news.
He said this after confirming that PEB subsidiary Projek Lebuhraya Utara-Selatan (PLUS) will issue RM700 million (US$218 million) in nominal value Islamic Medium-Term Notes (MTNs), or Sukuk III, by end-May to refinance a tranche of its Senior Sukuk worth RM550 million (US$171.3 million) due on the 30th May.
Annuar said as the present value of the Sukuk III is approximately RM310 million (US$96.5 million), PLUS will utilize its internal generated funds to repay the remaining debts. Senior Sukuk is part of PLUS’s Islamic MTN program that was established in October 2006 to refinance its Senior Sukuk.
With the growing interest in Sukuk issuance, Annuar said PLUS will continue to look at Islamic instruments as an option in refinancing its completed projects. The company usually takes up borrowings for projects under construction and will look at Islamic bonds when the projects are completed.
PEB is currently working on two toll road projects in Indonesia, the 25.4km Package 4, Cimanggis-Cibitung Toll Road and the 116km Cikampek-Paliman toll road project. Last September, PEB and its joint-venture (JV) partners, Bakrie & Brothers and Capitalinc Investment, won the tender bid to construct the toll road on a build, operate and transfer (BOT) basis. The toll road will form part of the proposed Jakarta Outer Ring Road 2 and is located on the outskirts of the Jakarta metropolitan area.
The concession shall be for a period of 35 years from the date of the proposed execution of the concession agreement. PEB is the majority shareholder of the JV with 60% equity interest while Capitalinc Investment and Bakrie & Brothers own 25% and 15% of the JV company respectively.
Annuar said the project is still in the early stages and the JV company has not inked the concession agreement as it is still finalizing its formation. The project cost of the toll road is estimated at RM1.2 billion (US$373 million) and the company is considering loans and equity to finance the project.
PEB has also acquired a 55% equity interest in Lintas Margas Sedaya (LMS), the holder of the largest concession for Trans-Java Expressway. LMS has been awarded the longest tranche of the toll highway with a distance of 116km from Cikampek to Palimanan, which will form part of the Trans Java Expressway when completed.
The Trans Java Expressway links the island of Java from Merak in the east to Banyuwangi in the west. LMS is the concessionaire appointed to undertake the design, construction, management, financing, operation, maintenance as well as toll collection for the toll highway.
Annuar said the project is in the land acquisition phase, adding that 70% of the cost will be settled via syndicated loans from Indonesian banks, for which an agreement was signed in July last year. The remaining 30% will be equity funded based on the portion of each JV partner. The project, targeted for completion in 2011, is expected to contribute positively to group revenue.
On the local front, PLUS is in the midst of upgrading the North-South Expressway, which would cost the company RM1 billion (US$311 million).
Analysts expect PLUS to continue recording growth over the next few years with the completion of a third lane on the North South Expressway as well as the acquisition of ELITE and Linkedua. ELITE is the concessionaire of the North-South Expressway Central Link for a concession period ending the 31st May 2030 and Linkedua is the concessionaire of the Malaysia-Singapore Second Crossing for a concession period ending the 31st December 2038.
Annuar said the group’s sound performance has attracted foreign investors from the US, Australia, Singapore and several European countries. He said the total shareholding of the foreign investors has increased to approximately 10% now from 6% last year. “Many of them are long-term investors,” he noted. PEB has five billion outstanding ordinary shares.
As at the 30th March 2007, PEB’s substantial shareholders were UEM Group (40.19%), Khazanah Nasional (23.87%), Employees Provident Fund Board (9.68%) and Kumpulan Wang Persaraan (4.26%).
PEB shares have been part of the Dow Jones Islamic Index since April last year.
By Dalila Abu Bakar