Gamuda Bhd has confirmed it is currently
in talks with the Government to sell its 4 highway concessions to a private
highway trust.
The value? Probably an enterprise value
of RM5.2 billion, paid through bond issuance, according to Kenanga Research. Investors
have an annual return of 4-5% supported by cash flows from the tolls. No
guarantee or support from the Government is required. Toll hikes are waived
with extension of concession periods. This means road users will continue to
pay the same amount but for a longer period.
The Government will not have a stake and
as such there is no outlay required.
Gamuda Bhd however on 10th of
May, denied that its proposal to have four tolled highways acquired by a
highway trust involved an enterprise value of RM5.2 billion. “The speculated
enterprise value of RM5.2 billion for a highway trust proposal is incorrect,”
Gamuda said
In the previous model of 2019, the
Government acquired the concessions for RM6.2 billion. Also, it required a
congestion charge which would reduce toll rates by 30% during non-peak hours
and free travel during off peak hours.
From the Government’s point of view,
they could save on RM5.3 billion of toll compensations (from the toll hike
freeze) for the remaining concession period for the tolls through this
initiative. This also benefitting Gamuda by raising private funding initiative
(PFI) equity to jump-start its MRT 3 project, or partly fund its 10-year Penang
South Islands (PSI) plans. Road users in addition would get to enjoy zero toll
hikes too.
Sounds like a win-win idea? If this
proposal be accepted, it opens doors for other existing toll concessionaires to
sell matured highway and channel proceeds to new ventures.
In the U.S., the Highway Trust Fund
(HTF) was established in 1956 to provide a more dependable source of funding
from the federal government for the construction of the interstate highway
system. The HTF is comprised of two constituent accounts:
·
The
Highway Account, which is largely devoted to construction and maintenance of
highways and bridges; and
·
The
Mass Transit Account, which is used to make capital expenditures on buses,
railways, subways, ferries, and other modes of public mass transit.
The Congressional Budget Office
estimates that Highway Trust Fund tax revenue will total $43 billion in fiscal
year 2020 (figure 1). Revenue from the federal excise tax on gasoline ($25.8
billion) and diesel fuel ($10.5 billion) accounts for 84 percent of the total.
The remaining trust fund tax revenue comes from a sales tax on tractors and
heavy trucks, an excise tax on tires for heavy vehicles, and an annual use tax
on those vehicles. In addition to dedicated tax revenue, the trust fund
receives a small amount of interest on trust fund reserves.
The current tax rates are 18.4 cents per
gallon for gasoline and ethanol-blended fuels and 24.4 cents per gallon for
diesel (0.1 cent of each tax is dedicated to the Leaking Underground Storage
Tank Trust Fund). The tax rates on motor fuels have not changed since 1993 and
thus have failed to keep pace with inflation. If tax rates had been indexed for
inflation since 1993, the current tax on gasoline would be about 33 cents per
gallon and the tax on diesel fuel would be about 44 cents per gallon. Although
the current taxes on motor fuels (except for a residual tax of 4.3 cents per
gallon) are set to expire at the end of September 2022, Congress has routinely
extended the taxes in the past.
Why can’t we have a similar system to
fund highways and rail projects?
Reference:
1.
Cheah
Chor Sooi, Gamuda’s highway trust proposal may just be a viable idea, 10 May
2021, Focus Malaysia
2.
Emir
Zainul, Gamuda confirms plan to sell four highway concessions to govt, 11 May
2021, The Edge
3.
Gamuda
clarifies proposal on tolled highway trust, 10 May 2021, SunBiz
4.
The
Highway Trust Fund Explained https://www.pgpf.org/
5.
What
is the Highway Trust Fund, and how is it financed? Tax Policy Center
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