Transport Minister Anthony Loke Siew Fook (centre) witnessing the signing of the supplementary agreement between Express Rail Link Sdn Bhd (ERL) and the government, represented by ERL director Muhammad Hariz Mohd Nadzmi (second from left) and Ministry of Transport (MOT) chief secretary Datuk Santhiran Muniayan (second from right) on Tuesday. Looking on were ERL CEO Noormah Mohd Noor (left) and MOT land division secretary Wan Mohd Asraf Wan Salleh. (Photo by Shahrill Basri/TheEdge)

KUALA LUMPUR (Jan 23): The government has extended the concession period with Express Rail Link Sdn Bhd by another 30 years to 2059, after seven years of negotiations since 2017, according to Transport Minister Anthony Loke Siew Fook.

“This is the only extension [of the concession]. When the previous government talked about it in 2017, it was just the beginning of the negotiations. It has taken seven years to conclude,” Loke told reporters here on Tuesday after witnessing the signing of a supplementary concession agreement with ERL.

Loke also said signing the concession agreement early gives certainty to the private-sector operator to further invest in the infrastructure.

“If there is no confirmation whether the concession is continued or not, it is certain that they will not invest. No company will invest if they do not know whether the concession continues [after 2029].

“We provide this confirmation much earlier. Now, it is only 2024. The concession only ends in five years. But we have given the commitment to signing the supplementary concession agreement, so that they can plan to invest in their assets,” he said.

Loke said KLIA Transit and KLIA Ekspres carried a total of 8.9 million passengers before Covid-19 in 2019. In 2023, the number of passengers was 6.58 million, which was 74% of the 2019 passenger figure.

The agreement, apart from extending the concession period, also comes with a profit-sharing mechanism, whereby, according to ERL chief executive officer Noormah Mohd Noor, the government will be entitled to 30% of the company’s earnings once the shareholders' internal rate of return (IRR) crosses the 10% threshold.

“There is a mechanism in the concession agreement, whereby if the shareholders' IRR goes above 10%, then there will be a sharing of the profit between the government and ERL, which is 70:30,” she said.

Under new 'market-driven' fare structure, govt to stop paying ERL fees from PSC collection starting 2029

The supplementary agreement entered into by both parties on Tuesday allows ERL to implement a “market-driven” fare structure, transitioning from a fixed fare structure that requires government approval for every increase.

Under the new agreement, the government will stop paying ERL fees or charges from the collection of passenger service charges (PSCs) starting from 2029.

Asked about the compensation owing to ERL that has yet to be settled, Loke said he is not able to share on the matter, because the latest figure is only known to the Ministry of Finance.

The compensation arose when the government did not allow fare hikes for ERL services, whose fares were kept at RM35 for many years after since it started operations in 2002, before being increased to RM55 a trip in late 2015.

Based on ERL’s original fare schedule, fares for the express service should have been increased to RM41 in 2004, RM56 in 2009 and RM74 in 2014. By 2024, the fare for a single trip would be a hefty RM126.

“As you know, running rail services is very expensive. There are obsolescence issues with upgrading and all that. It's very expensive to upgrade certain systems,” said Noormah on Tuesday.

Currently, on top of fare charges, ERL also gets a cut from the PSC from outbound international (RM5) and domestic passengers (RM1).

PSCs collected from passengers at Kuala Lumpur International Airport (KLIA) Terminal 1 and Terminal 2 are shared between Malaysia Airports Holdings Bhd and the government. ERL gets a share of the portion that the government receives.

Supplementary deal a win-win for ERL and users, says Loke

Loke said the supplementary concession agreement is seen as a win-win situation between ERL and users, where the best service can be provided by ERL without burdening the operation in terms of costs.

“The government remains committed to improving alternative services to KLIA that will create healthy competition in terms of competitive fare options,” he said.

Loke hopes the supplementary concession agreement will pave ways for ERL to be self-sustained.

The loss-making rail service incurred a net loss of RM156.34 million for the financial year ended June 30, 2022 (FY2022), narrowing from RM209.95 million in FY2021, according to a filing with the Companies Commission of Malaysia.

Revenue more than doubled to RM43.35 million in FY2022, from RM18.17 million in FY2021.

In terms of the number of passengers, Loke said KLIA Transit and KLIA Ekspres carried a total of 8.9 million passengers before Covid-19 in 2019.

“In 2023, the number of passengers was 6.58 million, which was 74% of the 2019 passenger figure. There is still a lot of room for passenger growth. With the completion of the signing of the second concession agreement between ERL and the Malaysian government, I would like to challenge the operators to redouble their efforts to attract more users, and promote rail services in a more powerful and effective way,” the minister said.

“With the post-Covid recovery of the tourism sector, ERL should aim for a high number of passengers this year, if possible, with at least an additional one million passengers compared to 2019. By 2026, Malaysia will celebrate the Visit Malaysia Year on a grand scale. The country will receive a large number of tourists. The tourism sector will grow rapidly,” Loke added.

ERL is 45%-owned by YTL Corp Bhd, followed by Lembaga Tabung Haji’s 36% stake, SIPP Rail Sdn Bhd’s 10% shareholding, and the remaining 9% interest owned by Trisilco Equity Sdn Bhd.