Kuala Lumpur North-East Expressway

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In August 2004, the Malaysian federal government (GOM) granted to Konsortium Lebuhraya Utara Timur Sdn Bhd. (Kesturi) a 34 year contract to design, construct, operate, and maintain the 18.4-kilometre Duta-Ulu Kelang Expressway (DUKE). The project, which was previously known as Kuala Lumpur North-East Expressway (KLNEE), was to be developed on BOT basis. The project was designed as a dual-four lane expressway from Duta Interchange to Kuching Interchange, and the remaining stretches were dual-three carriageways. The road was to connect the North Klang Valley Expressway on the Western part of Kuala Lumpur to the Kuala Lumpur – Karak Highway on the Eastern side and onwards to Middle Ring Road 2 (“MRR2”) at Jalan Ulu Kelang. The expressway was also aimed at dispersing city traffic to suburban areas via its connections to major roads. Duke was expected to have a traffic volume of between 40,000 and 60,000 vehicles per day at the beginning of its operation. Kesturi, formed in 2002, was a wholly owned subsidiary of Nuzen Corporation bhd., which was owned by Wira Kristal Sdn Bhd (70%) and Malaysian Resources Corporation Bhd (30%). The project cost for Kesturi was US$ 218.95 million (RM 832 million). Such cost did not include the land acquisition to be assumed by GOM and estimated at US$ 87.89 million (RM 334 million), raising the total cost of the expressway to US$ 306.84 million (RM 1.166 billion). The project was designed to minimize land acquisition by including, viaduct or bridge structure. Of the total land required by the project, only 20% would be acquired from private owners. The 34 year contract included 3 year construction period and 31 year operational period. In the latter one, Kesturi was given the right to manage the toll operations and collect toll revenues. Tolling on the expressway was on an “open basis” concept and the three toll plazas were located at Kg Batu Ayer Panas and Sentul Panas. Kesturi reached financial closure in October 2005 by issuing a US$ 205.26 million (RM 780 million) bond through Redeemable secured serial Sukuk Istisna in Malaysian market. The bond had a tenor of 13 years. The remaining project cost was to be funded through equity contributions. The risks during construction period were assigned as follows. GOM assumed the land acquisition cost and risk. Ekovest Construction Sdn Bhd’s was appointed as the construction contractor and assumed construction risk by agreeing on a fixed sum and fixed day turnkey contract with Kesturi. Delays were passed to the contractor through the back-to-back liquidated ascertained damages arrangement in the turnkey contract. The project financiers appointed Independent Consulting Engineer (ICE) and Perunding ZKR Sdn Bhd., to supervise the expressway construction and ensure that construction works were executed in compliance with the turnkey contract, budget and timeline. For the phase 2 of the project or Duta-Ulu Kelang Extension Expressway reached financial closure in December 2013 by issuing senior sukuk and junior bonds to fund a bond buyback and finance the project, which links the eastern and western parts of Kuala Lumpur. The estimated cost of the project is US$381 million. In December 2013, Konsortium Lebuhraya Utara-Timur (Kesturi), the project company issued US$730 million of senior sukuk and US$57 million of junior bonds. The proceeds from the senior bond issue would redeem an outstanding US$260 million Islamic MTN issue and part-finance the construction and financing costs of US$381 million for the extension of the Duta-Ulu Kelang Expressway. Kesturi is wholly owned subsidiary of Nuzen Corporation Sdn Bhd, which is a joint venture company between Wira Kristal Sdn Bhd and Malaysian Resources Corporation Berhad. CIMB was the sole lead manager, and the sukuk issue was offered in 15 tranches at tenors ranging from six to 20 years, with annual gaps, priced to yield 4%-5.25%. Ekovest Construction was the EPC contractor for the project. (In 2014, Ekovest buys 30% stake of the project from RMBC)