KUALA LUMPUR, June 25 — Gamuda Berhad, which is bidding to build a 150km long MRT system costing RM36 billion for the city, is pressing ahead with its plans and expects a decision in the next 2-3 months with work commencing early next year.
Gamuda had yesterday briefed local research houses that feedback so far on its proposal to build the MRT, which The Malaysian Insider understands was unsolicited, was “positive” and pointed out that the MRT was featured as a cornerstone agenda in the 10th Malaysia Plan.
The tender is likely to be done via the Swiss Challenge system, a form of public procurement in usually less-developed countries whereby public authorities receiving an unsolicited bid for a project invites third parties to match or exceed it.
A report by OSK Research said that the Gamuda management, along with its joint venture partner MMC, feel that they have a 80-85 per cent chance of winning the job and work could commence as early as early 2011.
An Amresearch report said that Gamuda has already commenced soil investigation and survey works to prepare the groundwork for the project.
The research house added funding would likely be government backed and part of the funding would be raised via a privately held special purpose vehicle (SPV).
It said that Gamuda’s management revealed that any amount to be raised by the private SPV would likely be backed by the Federal Government under a deferred payment scheme that may take between 10 to 30 years, implying AAA-rating for any papers to be issued.
“Based on the views provided by its financial advisors, Gamuda believes that it would not have problems raising between RM6bil-RM7bil in new debt issues a year,” said Amresearch.
The Gamuda-MMC JV could also opt to raise RM3 billion in bridging loans to kick-start construction works said the local research house and could be required to place an RM1.8 billion performance bond.
“Debts are non-recourse to the Malaysian Government , that is the bridging loans would only have recourse to the Gamuda-MMC JV,” said Amresearch. “Such proposals are offered to ring-fence the Federal Government’s obligations in the event that the project fails.”
The Gamuda management had also apparently estimated that the land acquisition costs would amount to just over RM2 billion and that Gamuda has submitted a legal opinion to the Attorney-General’s office to amend existing legislation to expedite land acquisition.
Gamuda also told analysts that the amount that could be saved from petrol subsidies — estimated at RM60 billion over the last five years — could fund the MRT project and the company’s internal studies showed that the government could save up to RM12 billion a year from the MRT which would be enough to build MRT systems in Penang and Johor Bahru as well.
The company had also acknowledged that MRT systems tend not be commercially viable but have substantial spin off economic benefits and estimated that for every RM100 million that the government would spend on the MRT, RM25 million in annual economic benefits would be generated for the country in the next 50 years, including increased productivity, lower accident rates and lower carbon emissions.
OSK Research however felt that while the project was good, it would face obstacles given the huge RM36 billion investment needed when the federal government is trying to reduce its deficit.
“We believe funding is a prime concern given the Govt’s efforts to cut its deficit. Secondly, the implementations of such large scale jobs are usually faced with many hiccups,” said OSK Research. “The RM12.5bn Electrified Double Track is an example which was awarded in 2003 before being pulled back and re awarded again only in end-2007.”
Kuala Lumpur currently does have several light rail transit lines but they are poorly integrated, have lower capacity than an MRT, and do not hit many commercial centres, lessening their appeal.
The city also lags behind major world cities in terms of rail infrastructure per million of population. It currently only has 15km of rail per million people as compared with 53km in London, 30km in Beijing, 40km in Singapore and 27km in Seoul.
If the proposed 150km KL MRT system and planned LRT extensions takes off, it is projected that the figure for KL will rise to 40km per million people.