New Bandar Malaysia road alignment delays Ekovest’s construction by 14 months

Construction of Ekovest Bhd’s 32.1km Setiawangsa-Pantai Expressway (SPE) is expected to be postponed by 14 months.

Malaysian Rating Corp Bhd (MARC) said this was due to a change in design of the road alignment at Bandar Malaysia and the need to restart the land acquisition process.

As a result, the project is now expected to complete in November next year, instead of February as initially planned.

MARC said this in a statement to affirm its negative outlook of “AA-IS” for Ekovest’s whollyowned Lebuhraya DUKE Fasa 3 Sdn Bhd’s (DUKE 3) RM3.64 billion sukuk Wakalah.

SPE will connect Middle Ring Road 2 at Wangsa Maju to Kerinchi Link adjoining Federal Highway and is being built under a concession agreement with the government ending Aug 5, 2069.

MARC said the sukuk Wakalah was on a negative outlook last year due to the uncertainty in the sector following the government’s decision to review toll road concessions and tariff framework.

“The negative outlook also incorporated a delay in receipt of the reimbursable interest assistance (RIA) from the government worth RM460 million that could potentially affect DUKE 3’s debt-servicing ability.”

It said although the sector’s regulatory environment appeared more settled and the RIA had been fully received in April, the outlook remained negative as there was a risk of time overrun.

“This is due to the change in alignment at the Bandar Malaysia stretch, a situation that is beyond the scope of DUKE 3’s control.

“Under the latest work plan, progress of construction as at end-September this year stood at 62.8 per cent against the scheduled 64.7 per cent, slightly behind schedule, but deemed manageable,” it added.

As tolling operations are expected to be deferred to January 2021, this could compromise DUKE 3’s debt protection metrics, said MARC.

However, a construction reserve account is in place to mitigate potential cash flow issues arising from tolling delays and cost overruns.

Any cost overrun is likely to be absorbed by Ekovest given the fixed-price contract with the engineering, procurement and construction contractor.