KUALA LUMPUR: The final stretch of the Kuala Lumpur Outer Ring Road (KLORR) has yet to take off because of project feasibility constraints that may require financial support from the government, said sources.

Ahmad Zaki Resources Bhd (AZRB) has been given the mandate to construct the 40km toll  highway linking the SILK Highway in Kajang to the Gombak toll of the Kuala Lumpur-Karak Highway.

Although the company received the letter of intent (LoI) from the government in 2008, it has yet to commence construction because certain stretches of the highway are not commercially viable, sources said.  

According to sources, AZRB would have no problem building the stretch from Semenyih to Klang Gates as there would be enough traffic to ensure that it would recoup its investment.

“The concern is the stretch from Klang Gates to Gombak where traffic is projected to be low. AZRB would need financial support from the government to build this stretch, otherwise the toll rates would have to be high in order for the company to recoup its investment in the stipulated toll concession period,” said the source.

However, he added that the government is hesitant to provide financial support to highway projects due to criticism, especially in the light of the recent sale of Maju Expressway (MEX) by its current concession owner Maju Holdings Bhd.

Maju Holdings, controlled by Tan Sri Abu Sahid Mohamed, recently proposed to sell MEX to EP Manufacturing Bhd for a consideration of RM1.7 billion. But the sale sparked criticism that Maju Holdings would stand to make a generous profit from the highway built using a government grant, said to be over RM976.71 million.

However, Maju Holdings defended the amount stating that it had inherited debts of RM250 million when it took over the MEX project from its previous owner in 1997, way before the highway was completed in 2007. The company added that the grant received from the government had resulted in lower toll rates at the highway.

On KLORR, The Edge Financial Daily reported last August that AZRB had reached a financial close with Bank Pembangunan Malaysia Bhd for the RM1.5 billion highway. The financial close is the last hurdle before funds can be drawn down to commence work on a project.

However, it is learnt that AZRB has yet to finalise and sign a concession agreement with the government.

KLORR within the greater Kuala Lumpur area is an alternative route to the congested Middle Ring Road 2. The completed sections of KLORR include the Guthrie Corridor Expressway, which links to Elite Expressway from Bukit Jelutong, Shah Alam to Saujana Putra; and the South Klang Valley Expressway from Saujana Putra to Kajang. KLORR also connects Kajang to Hulu Langat via the SILK Highway while the Latar Highway connects Gombak to Kuala Selangor.

AZRB, a Terengganu-based construction outfit, is busy with jobs such as the design and building of Kompleks Kerja Raya 2 in Jalan Salahuddin, Kuala Lumpur; packages 2, 6, 5A and 9C of the East Coast Highway and Universiti Darul Imam package 3 building works.

In March, AZRB was awarded the construction package of the Klang Valley My Rapid Transit Project — Package V6. The Package V6 contract entails the construction and completion of viaduct guideway and other associated works from Plaza Phoenix to Bandar Tun Hussein Onn station for RM764.9 million. The alignment makes full use of elevated structures for a total distance of 5.24km along the Cheras-Kajang Highway. Works are expected to start from end-March 2012 with the targeted completion date in June 2016.


This article appeared in The Edge Financial Daily, May 21, 2012.