Saturday 17 May 2014

Mystery in highway toll-rates

I felt puzzled after reading news articles related to tolled-expressway in Malaysia.

In this article which was published a day before the opening of Besraya Expressway Extension,
“Besraya’s concession has been extended for eight more years to end on May 14, 2040 due to the new 12.34km route,” he said, adding that the toll rate would be decided by the Government.
In another article which was published just few days before the opening of second Penang Bridge.
Jambatan Kedua Sdn Bhd managing director Datuk Dr Ismail Mohamed Taib said the firm had initially asked to match the rate with that of the first bridge link at RM7 but the Malaysian Highway Authority proposed a higher amount.

“The rate will still be below RM10 but it will be able above RM7. For example, it could be RM8.50,” he told the press at a media briefing session today at the Batu Kawan toll booth leading to the newly completed bridge.

He added that the final decision on the toll rate will be announced by the Prime Minister Datuk Seri Najib Razak when he officiates the bridge’s opening this Saturday.
1) Why were toll rates fixed last minutes, and not during the signing of concession agreements?

It would be interesting to find out how the toll rates were decided by the government, and at the very last moment just before the toll collection started.

In these cases, how the concessionaires obtain financing if there was uncertainty in the toll rates and cash flow? The difference in proposed toll rates of RM8.50 and RM7.00 is considerably significant (17.6%). Also, without the toll-rates known to a concessionaire, how the concessionaire proceeds with its capital budgeting before committing to a highway project? And we are talking about highway projects that cost a few hundred millions each if not in billions.

2) Why Malaysian Highway Authority proposed a higher amount?

Malaysian Highway Authority is a statutory body/regulator. Why it proposed higher toll rates for second Penang Bridge? Was it for the best interest of the public? It is easier to comprehend if it came from the concessionaire.


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