The EdgeDaily

19 Jan 2009: Cover Story: Bankers set precedent in Assam Jawa-Templer Park job
By Siow Chen Ming

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The Assam Jawa-Templer Park (AJTP) highway concession project adds a new dimension to
how bankers reduce their risks in financing such projects.
The bankers — Bank Pembangunan and Islamic Development Bank — had imposed a
condition that AJTP's concessionaire, KL-Kuala Selangor Expressway Bhd (KLKSE), tender
out the job to get the lowest possible bid, rather than nominating a related-party contractor.
Through a tender exercise, KLKSE had in June last year awarded the AJTP project to a third
party contractor, Mudajaya Corp Bhd, for a contract price of RM958 million. Sources say
Mudajaya's bid had beaten other contractors, including IJM Corp Bhd, and was about RM50
million below the original cost estimate.

Thus, the outcome is that Bina Puri Holdings Bhd, despite holding a 50% equity interest in
KLKSE, will not be involved in the construction of AJTP. In the company's announcement on
June 5, 2008, on KLKSE's awarding the AJTP job to Mudajaya, Bina Puri had stated that "no
directors, substantial shareholders and/or persons connected with them have any interests,
direct or indirect, in the above transaction."
Such an arrangement helps to protect bankers' interests as they could prevent cases where
related-party contractors cream off margins in the construction of the highway before toll
revenue kicks in.

It is not difficult to fathom why bankers have become more cautious. Credit crunch aside, the
memory of how the SILK highway concession project turned sour with actual traffic flow 70%
below forecast is still fresh in their minds. The result was bankers were forced to take a steep
haircut after contractors got lucrative margins on the construction.

In KLKSE's case however, the fact that Bina Puri is not going to reap any construction profits
from the AJTP project means that it is taking a higher risk by putting in its equity in the nonlisted
KLKSE. In essence, Bina Puri will only recover its investment in KLKSE when the AJTP
highway begins tolling, and that is provided the traffic flow meets the original forecast.

Interestingly, Senator Tan Sri Tee Hock Seng, group managing director and substantial
shareholder of Bina Puri, is putting his own money into KLKSE as well, despite his company
not getting the AJTP job. Sources say Tee has advanced some RM20 million to Bina Puri to

pay for equity in KLKSE, which has an initial-paid up capital of RM60 million.
KLKSE had in 1997 signed a concession agreement with the government for the design and
construction and finally, to operate the 33km highway linking Assam Jawa to Templer Park
for a period of 30 years, later revised to 40 years. Due to the Asian financial crisis, the project
was put on the back burner and had remained so for the last 10 years, as Bina Puri couldn't
secure financing for the project.

The highway project was only revived last year after which KLKSE awarded the AJTP job to
Mudajaya last June. Construction work had commenced in October last year.

Subsequently, after the paid-up capital in KLKSE is firmed up, Bina Puri last week
announced that KLKSE had achieved its financial close and has finalised all the loan
documentation with Bank Pembangunan for the Istisna' facility of RM740 million and Islamic
Development Bank for the Istisnaa wa Ijaara' facility of RM300 million. The facilities will be
utilised to finance the construction of the toll highway from Assam Jawa to Kundang for
Package 1, and from Kundang to Templer Park for Package 2.

The KLKSE's model of tendering the AJTP job rather than giving it to a related party is the
right way to go. While the concession agreement signed with the government gave KLKSE
the right to "design and construct" the highway, which in other words means allowing it to
nominate its own contractors, the bankers have stepped in to push for an open tender to
safeguard their interests.

For further enquiries, please contact :
Cik. Surati Sujor
Corp Communications Dept
BINA PURI HOLDINGS BHD
Tel : 03-6136 3333 (3005)
Fax : 03-6136 9999
E-mail : surati@binapuri.com.my