[RAM] RAM Ratings affirms rating of EKVESB's guaranteed sukuk

EKVESB holds a 50-year concession from the Government of Malaysia for the East Klang Valley Expressway (EKVE or the Expressway), a 36.16 km closed-toll system which starts from Sungai Long in Kajang and ends at Ukay Perdana in Ampang (the Project). The Expressway’s construction progress remains delayed, standing at 88.23% as of 25 June 2024 (scheduled: 94.29%).

From the originally scheduled completion date of 9 September 2019, the project has faced prolonged and repeated delays. Initially set back due to land acquisition issues, the Project was then delayed by pandemic lockdowns with the current construction progress now stalled by the lack of funding. As of 25 June 2024, construction was 88.23% completed. Past extensions of time were granted, with the most recent extension formalised by a fifth Supplemental Concession Agreement, revising the completion date to 31 Dec 2025 – a further delay of another year. 

Despite the setbacks, management expects Section 1 of the EKVE, running from the Sungai Long toll stop to the Ampang toll stop, ¬to commence sectional tolling at the beginning of next year, estimating the rest of the Expressway to be fully completed by December 2025.  

The Expressway completes the Kuala Lumpur Outer Ring Road network, improving connectivity for north-south traffic flows in the eastern part of the Klang Valley. Its prospects are exposed to competition posed by alternatives and the possibility of further construction hold-ups. Cash flow mismatches from project completion delays suggest that refinancing and/or an additional financial injection will be pivotal to ensuring continued servicing of the Sukuk, particularly with principal repayment scheduled to start in 2026. The long-dated highway concession tenure affords room for refinancing though any refinancing prospects will hinge on traffic performance and toll collections upon the Expressway’s opening. As with most concession-related projects, EKVE exposes the Company to regulatory and single-project risks.


Analytical contact
Davinder Kaur Gill
(603) 3385 2525
davinder@ram.com.my

Media contact 
Sakinah Arifin 
(603) 3385 2500 
sakinah@ram.com.my