Highway veteran Azmil back to make inroads

“I WOULD not have negotiated for this.”

Those are the exact words of Tan Sri Azmil Khalili Khalid, who is back in charge of running the Kuala Lumpur-Karak Highway and East Coast Expressway Phase 1 (ECE1) after a seven-year hiatus.

In an interview with StarBiz 7, the 64-year-old says the supplemental concession agreement (SCA) in November 2022 required the concessionaire ANIH Bhd to spend RM2.3bil to widen the lanes at Kuala Lumpur-Karak and undertake flood mitigation works at ECE1.

While this was acceptable, there was another element which the ex-banker feels was unfair to the concessionaire.

ANIH was required to accept the waiver of the RM1.4bil owed by the government to ANIH. The amount was supposed to be the compensation for not raising toll charges previously.

“It could have been addressed in a better way. I inherited this problem but I know I can manage it and I will,” says Azmil.

ANIH is now known as AFA Prime Bhd, after Azmil took over the control from his in-laws.

The SCA was signed just two days before the 15th General Election whereby the concession period was extended by 37 years until 2069.

Without the extension, the concession for the 60km Kuala Lumpur-Karak and the 174.5km ECE1 would expire by 2032.

Azmil notes that the SCA was signed without the sukuk holders’ approval.

“That’s a breach. The sukuk holders must approve the RM1.4bil waiver. The moment you are in breach, the sukuk holders can call for default or demand their money back.

“Luckily, I managed to pacify them because my relationship with them goes a long way back. I brought them in originally,” he adds.

Azmil, who is also chairman of Main Market-listed UEM Edgenta Bhd, left MTD group – the previous owner of ANIH – in August 2017 following a family feud and a legal dispute. His wife, who was also part of the management team, left some time earlier due to health reasons.

By the time he left MTD, the company was headed by his father-in-law, the late Tan Sri Dr Nik Hussain Abdul Rahman.

Nik Hussain previously served as deputy minister of Works, and also of Telecommunications and Posts, from 1976 to 1984.

The legal dispute was resolved earlier this year after Azmil signed a settlement agreement with his in-laws that allowed him to take control of five companies that included ANIH.

As a result, Azmil raised his stake from 49% to 100% in ANIH, now AFA Prime.

With Azmil in charge, AFA Prime’s growth will focus on domestic as well as international infrastructure development.

He has identified three countries for overseas expansion –Saudi Arabia, Indonesia and the Philippines.

Talks are ongoing for expansion into Saudi Arabia.

Azmil also envisages an initial public offering for AFA Prime, although he has not committed to a timeline.

Within Malaysia, the upgrading of the Kuala Lumpur-Karak highway and ECE1 over the next 48 months is set to lift traffic volume for the concessionaire, providing a new growth opportunity.

“In the third stage of the development of the Kuala Lumpur-Karak highway, the number of lanes will be increased from six to eight.

“Under the second stage, the lanes were increased to six,” Azmil says.

He says the traffic volume projected for Kuala Lumpur-Karak and ECE1 under the earlier concession until 2032 has been achieved. This has ensured that the concessionaire can service its loans duly.

Nonetheless, Azmil clarifies that the tollways have not paid a dividend to the shareholders to date.

“This is because we are always upgrading. While we have paid back the bank loan as per the original forecast, we refinanced it with sukuk over a longer period.

“We are now in the second sukuk. The first was terminated because we refinanced it with the existing one.

“The second sukuk expires in 2030, which is two years before the concession was originally supposed to end.

“Since the concession is extended, we are going for a third sukuk,” he says.

The new sukuk will pay off the existing debt of RM1.7bil under the current sukuk and junior bond, and will also raise cash for the RM2.3bil upgrading works.

In total, the new sukuk will raise about RM4bil with a maturity period of 20 to 25 years.

As a veteran in the highway business, Azmil believes in making profit over the long run.

“If you build a highway to make money from construction, it is a recipe for disaster.

“If you want to be a concession holder, don’t look at making money from construction because you will pump up your overall costs and toll rates will become ridiculously high.

“In the end, people will not use your highway as projected.”

In the case of Kuala Lumpur-Karak and ECE1, Azmil says an increase in toll rates may not be necessary if the traffic volume post-upgrading is significantly above AFA Prime’s forecast.

“The last thing I want is a toll hike. If traffic is 10% to 15% above the forecast, we can do without toll hikes.”

While traffic volume on AFA Prime will naturally increase moving forward, it is looking for new ways to attract users.

One way is to have charging stations for electric vehicles (EV).

As EV sales continue to increase, the availability of charging stations will give the public more confidence to travel to the East Coast using the highways under AFA Prime.

The move is also part of the company’s sustainability drive, with Azmil being a strong proponent of environmental, social and governance standards.

The upgrade of the tollways under AFA Prime will also incorporate “sustainable bridges” which will use less concrete and more sustainable materials, without compromising quality or incurring additional costs.

As the company spreads its wings to foreign markets, Azmil says the construction business will have a bigger role to play.

During his time at MTD, Azmil points out the company had presence or contracts in 16 countries at its peak.

He is confident that he will be able to replicate the success in foreign expansion.

Asked whether he is also interested in securing concessions for new highways in Malaysia, Azmil says it is not part of the plan.

However, he is on the lookout to acquire existing toll roads in the country, including the troubled ones.

“I feel I can do justice to them (troubled tollways). It’s part of building AFA Prime’s revenue base.

“Of course, we must be careful because if the cost structure of the highway is not right, earnings will be affected,” he adds.