Recently I asked questions regarding the RM100 million rail extension linking KLIA to klia2.
Until now no satisfactory answer is given even though PAC itself questioned the justification of spending an additional RM100 million of taxpayers’ money to build the 2km rail when it was supposed to be part of the RM582 million originally allocated by the Malaysia Airports Holdings Berhad (MAHB), a GLC, to build public amenities.
But this issue has taken another turn.
RM100 million to help ERL Sdn. Bhd. in asset expansion
ERL Sdn. Bhd. which operates the train running on the rail was awarded a 30+30 years concession to operate the KLIA Express from KL Sentral to KLIA. Now the company will also run the train on the rail extension to klia2.
I have said that, the RM100 million rail extension is no longer a matter of government overspending but rather a dubious spending by the government to help a private concessionaire expand their asset and increase their private profit.
But there is now even more!
ERL Sdn. Bhd. is the CONTRACTOR for the RM100 million asset expansion paid
Even more interestingly, according to a news report, ERL Sdn. Bhd. is also responsible for building the rail extension to klia2. (Source: Sharen Kaur (31 May 2014). ERLSB tracking new profit path. New Straits Times, p. B1)
Does this means, the government is using tax money to pay ERL Sdn. Bhd., first to build the company’s own operation infrastructure, and then allow the company to make more money out of the said infrastructure.
If this is true, then ERL Sdn. Bhd. has a double dip sweetheart deal!
First it was awarded the RM100 million contract to build the rail, then it was allowed to use the same rail to make more profit.
ERL Sdn. Bhd. will pocket an additional revenue of RM89 million p.a. due to the rail extension
ERL Sdn. Bhd. is jointly owned by YTL Corporation Bhd. (50%), Lembaga Tabung Haji Bhd. (40%) and Trisilco Equity Sdn. Bhd. (10%). (Source: https://www.kliaekspres.com/about-us/corporate/)
Recent business reports has shown that ERL Sdn. Bhd.’s parent company YTL Corporation Bhd’s shares rose after a positive outlook by analysts with ERL Sdn. Bhd. being named as one of the two immediate earning drivers and it is mainly due to the rail extension which will increase its ridership. (Source: http://www.theedgemalaysia.com/business-news/286378-hot-stock-ytl-rises-5-on-outlook-tp-of-rm2.html)
ERL Sdn. Bhd. CEO Noormah Mohd. Noor had earlier forecasted that the new line will increase ridership by 40% (Source: http://www.ytlcommunity.com/commnews/shownews.asp?newsid=61045&category=)
Analysts have indicated that the increased ridership would translate into additional revenue of RM89 million annually and, furthermore, this will go straight into YTL’s bottomline. (Source: CIMB Research 22 April 2014 on YTL Corporation)
On top of that, it must also be noted that under the present arrangement with the government, a charge of RM5 from all airport taxes from KLIA and klia2 will be paid to ERL Sdn. Bhd. (Source: CIMB Research 22 April 2014 on YTL Corporation)
PAC and Auditor General must take serious action
Once again, I call upon both the PAC and the Auditor General to thoroughly investigate and re-assess the rail extension project. The Minister must answer why ERL Sdn. Bhd. was given such preferential treatment, a double dip sweetheart deal: first by being paid RM100 million as contractor to build the rail and then allowed to use the rail to make an additional profit of RM89 million p.a. after that.