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MMC-Gamuda JV lands PDP role for MRT
20 Dec 2010 - The Edge

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BY Jose Barrock The Cabinet has approved the appointment of the joint venture between MMC Corp Bhd and Gamuda Bhd (MMC-Gamuda JV) as the project development partner (PDP) of the multi-billion-ringgit mass rapid transit (MRT) job, sources say.

At its meeting last Friday, the Cabinet is also believed to have deliberated on the plans for the MRT, with a view to expedite the construction of a line from Sungai Buloh to Kajang via Damansara, called the Blue Line project. The plan is also for the line to go through Permodalan Nasional Bhd's proposed Warisan Merdeka development.

One of the reasons MMC-Gamuda JV was selected is that it had conducted extensive preliminary studies on the project and is equipped to get it up and running quickly, sources say.

"Speed is of the essence ... the government wants the MRT system rolled out fast,and since MMC and Gamuda had done the preliminary studies, they are viewed as having the edge," a source familiar with the matter says.

The Land Public Transport Commission or Suruhanjaya Pengangkutan Awam Darat (SPAD), set up in June by the government, is likely to be given the mandate to oversee the entire construction, together with an independent consultant and the PDP.

However, the appointment of MMC-Gamuda JV as the PDP does not necessarily mean the government will accept its RM36 billion proposal for the MRT.

"The government wants to build the MRT but does not have the required funds. So it has appointed a point person to ensure the project gets done on time and within cost. But which design the government opts for will depend on the consultant," says a source.

MMC-Gamuda JV's proposal involves almost 150km of railway tracks, 40km of which will run underground. It is learnt that there could be almost 100 stations.The entire project is estimated to cost RM36 billion, with about RM14 billion set aside for the underground works.

MMC-Gamuda JV has expertise in tunnelling. It built the RM1.9 billion Stormwater Management and Road Tunnel (SMART) project, and a 3.3km tunnel through Bukit Berapit for the RM12.5 billion double-tracking project. Gamuda was also instrumental in the construction of the Kaohsiung Mass Rapid Transit system in Taiwan.

It is also not clear if other proposals have been submitted to the government. There was talk that a joint venture between IJM Corp Bhd and UEM Group may have joined the fray, seeking to participate in the gargantuan project.

In July, UEM Group CEO Datuk Izzaddin Idris had said the company was keen on bidding. "There is no reason not to bid," he had told a local daily.

PDP jobs

A PDP is generally an experienced contractor appointed to lead a project. This reduces cost as the contractor has competence in commercial procurement strategies and skills in interfacing and coordinating many different contractors. The PDP also has better tender management skills and the requisite balance sheet strength to take on risks of cost overruns and delays.

while the PDP concept has yet to catch on in Malaysia, it is gaining popularity in large-scale projects abroad. For the US$12 billion Crossrail Project to build new railway connections under London, the PDPs are the Bechtel, Halcrow and Systra teams. Bechtel Corp is an engineering, construction and project management company while the Halcrow group deals in planning, design and management. Systra has expertise in urban transport systems.

Bechtel is partnering Hyundai Corp as the PDP for the US$16 billion Korea High Speed rail and is also the PDP for the US$11 billion Channel Tunnel Rail Link in the UK. Other notable PDP-style jobs include the US$6 billion Qatar Bahrain Causeway, where the PDP is Vinci of France.

On the local front, prominent PDP projects include the Express Rail Link where the YTL group was the PDP. MMC-Gamuda JV was the PDP for the Ipoh to Padang Besar doubletracking project.

"[With the appointment of a PDP] the government has taken the delivery risk out of the MRT project, ensuring that there will be accountability for delays and other such issues. The PDP will be the single point of accountability, and assume responsibility for delivery within the agreed time and cost, or face financial penalties. The PDP must have the financial capability to assume such a role," a source familiar with the plan says.

Late last week, Gamuda announced its financials for 1QFY2011 ended Oct 31.The company posted a net profit of RM88.53 million on the back of RM634.20 million in revenue. Gamuda's earnings per share for the threemonth period was 4.35 sen.

As at end-October, Gamuda had cash and bank balances of some RM1.24 billion and short-term investments amounting to some RM497.98 million. The construction giant's shareholders' funds amounted to RM3.79 billion as at end-October.

MMC, meanwhile, is 51.76%-controlled by businessman Tan Sri Syed Mokhtar Al -Bukhary. For its nine months ended September, MMC posted a net profit of RM240.34 million on RM6.61 billion in revenue.The company had shareholders' funds of more than RM10 billion as at end-September.

While MMC-Gamuda JV will be rejoicing, the mood at Syarikat Prasarana Negara Bhd could be sombre. With the appointment of MMC-Gamuda JV as the PDP, Syarikat Prasarana, which is wholly owned by the government, seems to have been sidelined.

According to its website, Syarikat Prasarana was established by the Ministry of Finance to facilitate, undertake and expedite public infrastructure projects approved by the government.

Syarikat Prasarana and its group of companies are also asset owners and operators of several public transport providers, namely the Ampang and Kelana Jaya light rail transit (LRT) lines, KL Monorail system and bus operations in the Kiang Valley and Penang, among others.



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