The government is looking to commence negotiations with certain highway concessionaires on the expropriation value of their concessions, according to a report by The Edge today.

The report, which cites unnamed sources, claimed that this would entail the government taking over the highways for public use. It may or may not include compensation for the existing owners.

“Globally, the expropriation of assets by governments often has a negative impact on capital markets,” the report noted.

It quoted an unnamed analyst commenting that the government is looking to break the highway concession agreements without having to fork out large compensations.

However, the report said details are scarce, and it is unclear how the government plans to conduct the expropriation and what impact it might have to shareholders and bondholders of the highway concessions.

Those affected could include government-linked companies, the report said, such as Plus Malaysia Bhd that is owned by Khazanah Nasional Bhd via its wholly-owned unit UEM Group Bhd, and the Employees Provident Fund.

In addition, since highway construction is largely financed through debt, institutional investors may be affected as well.

The report quoted RAM Ratings saying that 23 tolled road operators had issued debt papers totalling RM52.83 billion in bonds and sukuk as of May last year, excluding loan stocks.

“The bonds are largely held by local institutional investors and government-linked pension funds.

“It remains to be seen how the government plans to take over existing concessions as the construction of most highways is largely financed by debt, and the coupon and repayment schedule for these bonds are usually structured to match the cash flow from toll collection,” it said.

Abolishing tolled highways in stages is one of Pakatan Harapan’s election promises during the 14th general election.

On Feb 23, the government announced that it is entering negotiations with Gamuda Bhd to acquire four highway concessions, and introduce a congestion charge during peak hours in lieu of a toll. 

Gamuda said this would be done in accordance with market valuation norms and practices. 

Finance Minister Lim Guan Eng had said that a government proposal to take over more toll concessions will be ready in two to three months, and these will be more complex than the negotiations with Gamuda. 

However, Prime Minister Dr Mahathir Mohamad had cautioned it is ultimately the rakyat that pays even if the government succeeds on delivering on its promise to abolish tolls.

“We need to buy the tolled roads. When you buy, you need to raise money and service the loans that we raise.

"So we try to reduce the money (costs) we have to pay for acquiring highways, that will go stage by stage and step by step, (we decided) on not a fully toll-free road, but partially and free at certain times," he said on Feb 25.