HSR news flow seen lifting construction

PETALING JAYA: The possibility of favourable developments for the Kl-singapore High Speed Rail (HSR) project as the end-may review deadline nears will bode well for the construction industry.

CGS-CIMB said it does not rule out the possibility that the HSR may be included in the upcoming 12th Malaysia Plan, given the lack of new mega project options.

“We are heartened that the HSR initiative is likely to eventually return to the negotiation table and with the new government restarting bilateral talks with Singapore, mitigating further risks of penalty payments to Singapore.

“However, given the disruptions caused by the Covid-19 pandemic and limitations from the partial lockdown in both countries, we suspect that the end-may deadline could be delayed into the third quarter of 2020 with both Malaysia and Singapore agreeing to come to a final decision on the HSR once the respective Covid-19 lockdowns have been lifted.” It was reported that industry players have been talking about a likely return of the HSR initiative following its deferral since 2018.

CGS-CIMB noted that the deferment of the HSR project since 2018 resulted in Malaysia paying a penalty amounting to almost Rm46mil. “This compares to the abortive cost of almost Rm1bil,” it said.

Citing a local news report, the research house separately noted that the Rm6.2bil sale of four highways under Gamuda may have been aborted.

“Gamuda directly and indirectly owns Lebuhraya Damansara-puchong (LDP), System Penyuraian Traffic KL Barat (Sprint), Lebuhraya Shah Alam (Kesas) and Smart Tunnel.

A source within the Finance Ministry (MOF) said the government’s priority at the moment was to revive the economy, not the highway deals. “Another source said that the transaction was certainly not going through but did not elaborate on the reasons behind its potential failure. Previously, other industry observers had deemed the Rm6.2bn price as being too high while the due diligence in 2019 was not final.”

CGS-CIMB said the highway deal has gone through its third extension of time to February 2020. “Since the change in government, the concession owner has been waiting for a decision or feedback from MOF,” it added.

The research house said the abortion of the highway deal has negative implications for projects under the Penang Transport Masterplan (PTMP), as one of the immediate sources of working capital funding is proceeds raised by the highway concession owner (also PTMP’S project delivery partner or PDP) from the highway deal.

“PMTP’S projects could therefore be further delayed, in our view,” it said.