Dato’ Seri Dr Wee Ka Siong
1. The Penang state government continues to defend its decision to fully fund the construction of the Penang Undersea Tunnel but still give the contractor a 30-year toll concession at a toll rate pegged to the Second Penang Bridge.
2. Many critics including the Works Minister have called this the most generous concession agreement in the world.
3. In a normal concession agreement, the concession holder will borrow to fund the construction of the project and then collect tolls to repay its borrowings and make a profit.
4. In the case of the Penang Tunnel, the concession holder will get to make construction profits and then make even more profits from collecting another 30 years of toll charges .
5. Other than his now ridiculed claim that prime seaside land in Gurney Drive cost only RM457 per square foot today, Penang Deputy Chief Minister II P.Ramasamy also said that my claim that the 30-year toll concession for the Penang Tunnel will cost the Penang people another RM3 billion in tolls paid to the Tunnel SPV cannot be verified as it needs financial analysis.
6. However, a simple estimate will show that my estimated figure of RM3 billion is entirely realistic.
7. The first Penang bridge today has a capacity of 155,000 vehicles per day.
8. Assuming that the Penang Tunnel will only see 25% of the first Penang Bridge’s traffic, this would mean only 38,750 vehicles per day.
9. Therefore, 38,750 X RM8.50 X 365 days would mean a toll collection of RM120mil per year – or RM3.6 billion over 30 years.
Let’s be generous to the Penang Govt and round it down to RM3 billion.
10. This is already assuming that the toll rate will never rise or the vehicle traffic will never increase in the next 30 years.
11. With such generous assumptions, P.Ramasamy should know that revenues of RM3 billion over 30 years is easily achievable.
12. On top of that the Penang Govt had also made a generous decision to allow the Tunnel SPV to start work in the year 2023 or 10 years after the contract was signed in 2013 but agreed to pay for this using a set amount of land valued at RM3.6 billion today.
13. Assuming a 5% per year appreciation in land value, this would mean that the RM3.6 billion worth of land today will be worth RM5.8 billion in 2023 – meaning another RM2.2 billion loss to the Penang people. The formula is very simple.
14. This is already assuming a modest 5% per year increase in cost and that there are no further delays to the project. ( Please see the diagram below)
15. Most are aware that this project has been plagued with delays after delays but the Tunnel SPV has never been penalized by the very lenient Penang Govt.
16. Therefore, there is no guarantee that the construction of the tunnel will start in 2023 while any additional delays would only mean additional benefits for the Tunnel SPV as the prime land will further appreciate in cost.
17. On one hand, Pakatan promises in its manifesto to abolish all tolls. However, on the other hand, Pakatan is awarding a 30-year toll concession in the most lop-sided concession agreement ever seen that will lead to billions upon billions of losses to the Penang people.
18. On top of why they awarded a contract that allows the concession holder to start construction only after 10 years, the DAP Penang Govt also has a lot of explaining to do as to why they have awarded such an outrageously generous concession agreement that would put even Tun Mahathir to shame.
19. Can you blame any thinking Penang citizen from suspecting that one or more persons high up in the DAP Penang Govt has a vested interest in this project – either directly or via proxies?