Penang Forum’s Lim Mah Hui said SRS Consortium and Gamuda, the developers of the project, stood to make at least RM1.4 billion while the state government would make about RM600 million under the new arrangement in the next 10 years.
He said the figure did not take into account the profit Gamuda Engineering would make as the sole contractor for the reclamation work, which would be awarded without tender.
FMT has reached out to Gamuda and SRS Consortium for comment.
In March, the Penang government said it would allow SRS to reclaim one of the three islands proposed. The company will pay RM3.8 billion to reclaim half of Island A as part of a 30:70 joint venture, with the lion’s share to be held by SRS.
When there is demand, SRS will undertake to reclaim the other half of Island A.
The reclamation will be carried out by Gamuda Engineering, which has been given the right to “slow down” or “increase” reclamation as demand for land drops or increases over time. The state government has given an assurance the land will remain in its hands after completion.
Lim said the new deal is vastly different from what was proposed eight years ago, when the original motive for the three islands was to fund infrastructure projects under the Penang Transport Master Plan (PTMP).
He said that with the Penang government standing to make only about RM600 million over the years, it is highly unlikely any of the PTMP projects, which cost billions, could take off.
“The original idea and intention of the PSR project was to fund the RM46 billion PTMP. The initial estimated cost of the Pan Island Link 1 highway and Bayan Lepas LRT, the first two PTMP projects, was about RM6 billion each.
“These costs have ballooned to about RM8 billion each today. It is impossible to finance even the two initial projects of the PTMP – the LRT and Pan Island Link 1 project – with RM600 million.
“PTMP and PSR have been decoupled. Perhaps the PTMP was simply bait for the people of Penang, which is now switched from the original intention of land reclamation – for land sales per se and not for infrastructure projects as earlier mooted,” he said.
He said that with the first half of Island A to be reclaimed in seven to 10 years, the other two islands would likely be built completely only later, perhaps some 15 years from now.
Since it would take so long to finish half of an island, the idea of selling reclaimed land to finance PTMP projects was highly unlikely.
Lim also said the new deal favoured Gamuda, as the majority shareholder of the joint venture, by giving it the exclusive right to develop and sell the reclaimed land on Island A at its own time frame.
“The turnkey contractor (TC) will directly award the reclamation work to Gamuda Engineering and other work packages – which include infrastructure work, Pan Island Link 2A and Phase 2 reclamation – via competitive bidding.
“Upon completion, Island A will be handed over to Gamuda which will, in turn, call for tenders on land parcel sales.
“This new scheme puts Gamuda in the driver’s seat as it owns 70% of the JV through SRS. Gamuda will be responsible for financing the project and the Penang government will be absolved from all financing responsibilites.”
Lim said that according to Gamuda’s estimates, land sales from the first phase of Island A would be between RM8 billion and RM9 billion over seven years, reclamation costs between RM4 billion and RM4.5 billion and construction costs between RM2 billion and RM2.5 billion.
“Taking the higher estimates, the net revenue is estimated at RM2 billion (RM9 billion from sales minus RM7 billion for reclamation and construction costs). Hence, the net revenue for the Penang government is RM600 million (30% of RM2 billion).
“If the Penang government gets only RM600 million from this new deal, what will Gamuda stand to gain? Plenty. It has complete monopoly over all reclamation work.”