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MoF reveals suspicious transactions involving Trans-Sabah Gas Pipeline and Multi-Product Pipeline

PETALING JAYA: The Ministry of Finance (MoF) revealed today that two multi-billion projects, the Multi-Product Pipeline (MPP) and Trans-Sabah Gas Pipeline (TSGP) were done on lopsided terms which led to about 88% of the projects total value of RM9.4 billion paid out, even though only 13% of work on the three-year projects have been executed.

The MPP involves a 600km multi-product petroleum pipeline connecting Melaka and Port Dickson to Jitra, Kedah costing CNY4.53 billion and RM2.53 billion, or approximately RM5.35 billion.The TSGP, on the other hand, was to build a 662km gas pipeline from Kimanis Gas Terminal to Sandakan and Tawau, costing CNY3.08 billion and RM2.14 billion, or approximately RM4.06 billion.

Both projects were awarded to China Petroleum Pipeline Bureau (CPPB) on November 1, 2016 and work started in April 2017.

“We have discovered that the payment schedule for the above contracts are based almost entirely on timeline milestones, and not on progressive work completion milestones. Worse, based on the agreements signed, 85% of the project value would be paid by March 1, 2018,” Finance Minister Lim Guan Eng said in a statement earlier.

He said RM4.71 billion and RM3.54 billion for the MPP and TSGP projects respectively have been drawn down and
paid to CPPB. The total sum paid of RM8.25 billion constitutes a staggering 87.7% of the total project value. This is despite an average completion rate of only 13%, with another 2 years of the contracts to go.

The above does not yet include two other consultancy agreements signed for the same projects above worth approximately RM312 million and RM213 million, and a maintenance agreement worth RM476 million, awarded to companies from China,
totalling an additional RM1.0 billion.

Suria Strategic Energy Resources Sdn Bhd, a unit under the MoF set up to undertake the two projects, secured funding from China EXIM Bank amounting to 85% of the project value on March 22, 2017. The balance of the 15% of funds required were
to be raised via sukuk issuance. Both the China EXIM Bank borrowings and the sukuk are secured with Federal Government Guarantees.

MPP and TSGP contracts were negotiated by the Prime Minister’s Department, without involving Treasury officials. The Attorney General’s Chambers confirmed that these contracts were signed despite numerous unanswered questions and red flags raised.

“Based on the highly suspicious transactions above, I instructed my officers to file a report with the Malaysian Anti-Corruption Commission last week. The Prime Minister, Tun Dr Mahathir Mohamad has been briefed on the scandal,” Lim said, adding that the Ministry will seek the assistance of China's government to help trace the flow of funds in there, in order to investigate the possibility of money laundering.


Fomca lauds move to abolish toll, stabilise retail fuel price

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KUALA LUMPUR (June 5): The Federation of Malaysian Consumers Associations (Fomca) has lauded the government’s move to abolish highway toll and stabilise retail fuel price as part of an enlarged effort to reduce the cost of living, according to its chief executive officer Datuk Paul Selvaraj. “Where possible, the retail fuel price should be stabilised,” Selvaraj told reporters after meeting with the five-man Council of Eminent Persons (CEP) at Menara Ilham, here, today. “Toll abolition is beneficial and we fully support that,” he added. Shortly after being appointed as Malaysia’sRead More


Abolishing tolls will test PPPs for stakeholders: MARC

PETALING JAYA: Malaysian Rating Corp Bhd (MARC) said while the government’s move to abolish toll charges would minimise impact on public finances, it will be a test of public-private partnerships (PPP) for project owners, debt holders and the public sector, and may impact other segments of infrastructure financing.

The rating agency which rates 10 toll concessionaires with an aggregate outstanding amount of RM33.1 billion, have attached the “developing” designation, which conveys the uncertainty surrounding the credit trajectory of the affected issuers arising from the proposed abolition of road tolls, to all issue ratings in the toll universe.

MARC believes that the approach the government will take to abolish tolls would be to minimise the impact on public finances and forestall any untoward effect on capital markets.

“Available options include an early termination of the affected concessions and the renegotiation of concessions possibly involving the conversion of the ‘user pays’ toll roads to long tenure shadow toll roads in which no actual tolls are collected from the public,” it said.

The importance of toll revenue as a funding source for infrastructure construction and maintenance has risen over the years.

In more recent times, however, concession tenures were extended to compensate concessionaires for toll revenue losses which arose from the abolition of tolls at selected toll collection points and the deferment of scheduled toll increases.

“Notwithstanding these measures, the government’s annual cash compensation commitments pursuant to deferred toll hikes have remained sizeable in aggregate.

“For a significant number of project bonds and sukuk in MARC’s toll road universe, the timely implementation of scheduled toll hikes and/or payment of cash compensation for toll hike deferments is referenced as an important recurring rating consideration,” MARC said in its note.

Large-scale greenfield toll road concession projects with demand risk have been mainly financed with bonds and sukuk. A defining characteristic of domestic toll concessionaires it said, is the high proportion of project bonds or sukuk in their capital structure, the rating agency added.


Abolishing tolls a test of PPPs for stakeholders: MARC

PETALING JAYA: Malaysian Rating Corp Bhd (MARC) said while the government’s move to abolish toll charges would minimise impact on public finances, it will be a test of public-private partnerships (PPP) for project owners, debt holders and the public sector, and may impact other segments of infrastructure financing.

The rating agency which rates 10 toll concessionaires with an aggregate outstanding amount of RM33.1 billion, have attached the “developing” designation, which conveys the uncertainty surrounding the credit trajectory of the affected issuers arising from the proposed abolition of road tolls, to all issue ratings in the toll universe.

MARC believes that the approach the government will take to abolish tolls would be to minimise the impact on public finances and forestall any untoward effect on capital markets.

“Available options include an early termination of the affected concessions and the renegotiation of concessions possibly involving the conversion of the ‘user pays’ toll roads to long tenure shadow toll roads in which no actual tolls are collected from the public,” it said.

The importance of toll revenue as a funding source for infrastructure construction and maintenance has risen over the years.

In more recent times, however, concession tenures were extended to compensate concessionaires for toll revenue losses which arose from the abolition of tolls at selected toll collection points and the deferment of scheduled toll increases.

“Notwithstanding these measures, the government’s annual cash compensation commitments pursuant to deferred toll hikes have remained sizeable in aggregate.

“For a significant number of project bonds and sukuk in MARC’s toll road universe, the timely implementation of scheduled toll hikes and/or payment of cash compensation for toll hike deferments is referenced as an important recurring rating consideration,” MARC said in its note.

Large-scale greenfield toll road concession projects with demand risk have been mainly financed with bonds and sukuk. A defining characteristic of domestic toll concessionaires it said, is the high proportion of project bonds or sukuk in their capital structure, the rating agency added.


RAM reaffirms Midciti Sukuk's AAA/Stable rating

KUALA LUMPUR, May 30 — RAM Rating Services Bhd has reaffirmed the AAA/Stable rating of Midciti Sukuk Bhd’s Sukuk Murabahah Programme of up to RM3.0 billion in nominal value (2014/2044). The rating agency said the rating of Midciti Sukuk, as a…


Bintulu Port’s 1Q18 dragged by Samalaju

KUCHING: New sukuk expenses, increased total amortisation expenses from Samalaju Industrial port and poorer performance from Bintulu Port dragged Bintulu Port Holdings BHd (Bintulu Port) in its first quarter of financial year 2018 (1Q18). To note, 1Q18 net profit of RM31.2 million was deemed broadly within expectations, coming in at 20 per cent of Kenanga […]


Latest Shariah-compliant stocks list stands at 693

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KUALA LUMPUR (May 25): The latest list of Shariah-compliant stocks as published by the Securities Commission in the latest May review list yesterday, which takes effect today, comprises 693 counters, comprising 77% of total stocks listed on Bursa Malaysia. Of this total number, 17 stocks were newly-added to the Shariah compliant list. According to Hong Leong Investment Bank (HLIB) Research in a note today, the return of Digi.com Bhd on the list was not surprising as its debt position was already Shariah compliant with the RM5 billion sukuk that wasRead More


Dollar sukuk issuance climbs 47.6 pct in 1Q18

KUALA LUMPUR: Dollar sukuk issuance boosted the global sukuk market in the first quarter 2018 (Q118), climbing 47.6 per cent year-on-year (y-o-y) to US$10.4 billion (US$1=RM3.98) and accounted for 34.5 per cent of the global sukuk issuance as at end-March 2018 (end-March 2017: US$7 billion). RAM Ratings Services Bhd in a statement yesterday said the […]


Dollar sukuk issuance clims 47.6pc in Q118

KUALA LUMPUR, May 23 ― Dollar sukuk issuance boosted the global sukuk market in the first quarter 2018 (Q118), climbing 47.6 per cent year-on-year (y-o-y) to US$10.4 billion (RM41.4 billion) and accounted for 34.5 per cent of the global sukuk…


Two new categories for RAM League Awards 2018

KUALA LUMPUR: RAM Rating Services Bhd introduced two new categories for the RAM League Awards 2018 held on May 4 – the RAM Green Bond Award and Sustainable Company Award. In a statement, the rating agency said the Green Bond Award recognised bonds or sukuk which financed projects with the highest RAM environmental-benefit rating, contributing […]