News | MoF to raise up to RM50b to fund MRT3

KUALA LUMPUR (March 15): The Ministry of Finance (MoF) has committed up to RM50 billion in financing for the Mass Rapid Transit 3 (MRT3) Circle Line project, whose initial estimated construction cost is RM31 billion plus land acquisition of RM8 billion. 

MoF will issue government-guaranteed Islamic bonds to raise the required funds for the massive rail transportation project, according to Mass Rapid Transit Corp Sdn Bhd (MRT Corp) chief executive officer (CEO) Datuk Mohd Zarif Hashim.

Zarif noted the extra RM11 billion is to be set aside as contingency given the initial cost is estimated at RM39 billion.

“The utilisation of the RM50 billion allocated by MoF is dependent on how we manage the project in the next eight years,” he told a media briefing. 

“For the next one to two years, we would rather take advantage of the low interest rate environments by issuing sukuk to finance the project as the cash from the government can be deployed for other public infrastructure projects,” he added.

The construction cost of RM31 billion, Zarif said, is similar to the cost of the MRT2 Sungai Buloh-Serdang-Putrajaya (SSP) Line, which is expected to commence operation in the next quarter. 

In comparison, MRT3 Circle Line’s RM31 billion construction cost will be the highest so far, compared to the first MRT1 Sungai Buloh-Kajang (SBK) Line, which costs RM21 billion, and the second MRT2 line, which costs RM30.5 billion (including land acquisition costs), according to MRT Corp’s official numbers.

Putting in hybrid financing model

However, Zarif highlighted that MRT Corp will adopt a hybrid financing model although the MoF has given a RM50 billion funding commitment. 

He noted that contractors are expected to also shoulder the responsibility of funding the project whenever there is shortage of funds from the MoF. 

“As an example, if the first year of the [MRT3] project costs come up to RM3 billion but the government can only offer us RM2 billion in financing, then we are RM1 billion short.

“This means that we would need a contractor to contribute the RM1 billion upfront for the project to proceed as we are competing with other funding priorities of the government,” Zarif explained.

Zarif said the option for the hybrid funding model, including the issuance of sukuk, is to keep MRT Corp’s financing options open, adding that the MoF will finalise the details of the green sukuk issuance, under the Securities Commission Malaysia’s (SC) Sustainable & Responsible Investment (SRI) Sukuk framework.

A spokesperson from MRT Corp pointed out that the proposed hybrid funding model would see a public and private partnership (PPP) with contractors of the project contributing to the upfront construction cost and receiving deferred payments as the project progresses.

Transport Minister Datuk Seri Dr Wee Ka Siong, who was also present at the media briefing, said the tender for the construction works on MRT3 Circle Line project will be opened in May. 

The minister noted that the jobs will be awarded in the fourth quarter of this year.

The MRT3 Circle Line is scheduled to be fully operational by 2030 with the first phase completion expected to conclude in 2028 subject to land acquisition process.

The third MRT line will have a circular alignment running along the perimeter of Kuala Lumpur City, with a length of about 51 kilometres (km) split between 40km of elevated tracks and 11km of underground tunnels, according to MRT Corp. 

The current proposed alignment of the MRT3 Circle Line will have 31 stations with 10 of them serving as interchange stations with the eight existing rail lines in Klang Valley. – The Edge

by: Seah Eu Hen & Shazni Ong

credit photo: PropertyGuru

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