Signing ceremony between Ekovest Bhd and Employees Provident Fund

Ekovest Berhad (Ekovest), a Bursa Malaysia Main Market listed company involved in construction, property development and infrastructure concession businesses, recently announced that its wholly-owned subsidiary, Nuzen Corporation Sdn Bhd (Nuzen), has entered into a conditional share sale agreement (SSA) with the Employees Provident Fund (EPF) for the disposal of 40% of the issued and paid-up share capital of Konsortium Lebuhraya Utara-Timur (KL) (“Kesturi”), for a total cash consideration of RM1.13bil (Proposed Disposal).

Nuzen is the holding company of Kesturi, which is the concession holder of the Duta-Ulu Kelang Expressway (Duke), a 34-kilometre highway comprising two phases with a concession period of 54 years. Duke Phase 1 is already in operation while Phase 2 is expecting to complete construction and commence toll collection by the first half of 2017. Upon completion of the construction for Duke Phase 2, the traffic volume for Duke is expected to double.

Upon completion of the SSA, EPF will pay RM921mil in cash to Ekovest. A further RM209mil in cash will be paid by EPF to Ekovest following the issuance of the certificate of practical completion for Duke Phase 2, of which, RM149mil will be deposited in an interest bearing designated account by Ekovest.

For the proceeds from the Proposed Disposal, Ekovest intends to allocate RM400mil for repayment of borrowings, up to RM245mil to be distributed to shareholders of Ekovest, RM485mil for general corporate, working capital and others.

Speaking after the signing ceremony, Ekovest Berhad executive chairman Tan Sri Datuk Lim Kang Hoo said, “The Proposed Disposal is in line with the Company’s strategy to monetise its matured infrastructure assets to free up its financial resources for the expansion of its infrastructure division and other core businesses, such as construction and property development.

It represents an opportunity for the Company to partially monetise its investment in Kesturi at an attractive price, while allowing Ekovest to continue participating in Kesturi and operate the highway via its remaining 60% equity stake. It is estimated to result in a balance sheet gain on disposal of RM764mil which will further strengthen Ekovest’s shareholders funds.

“Furthermore, the Proposed Disposal represents an opportunity for Ekovest and EPF to establish a long-term relationship with each other through their joint investment in a mature yield-generating infrastructure project. We look forward to the prospect of leveraging on the establishment of this relationship as a platform to pursue collaborations on other potential investments in the future,” he added.

Employees Provident Fund deputy chief executive officer (investment) Datuk Mohamad Nasir Ab Latif said, “Similar to all of EPF’s other infrastructure ventures, we focus on several key criteria which include a strong regulatory framework, an operational track record, and other ongoing macroeconomic factors. Following our due diligence exercise, we are convinced that this investment meets EPF’s requirements. The case for investment is strengthened by Kesturi’s long term contractual relationship with the government, as well as its favorable demographics of highway users.

“With infrastructure assets providing steady yields, we foresee that the EPF will continue to explore opportunities in the infrastructure space in its commitment to generate real rate of returns for its members. The EPF focuses on investments that offer stable cash flows, are inflation-linked in nature, and that which best align with our risk-reward criteria.”

Subject to all relevant approvals being obtained, the Proposed Disposal is expected to be completed by the first half of 2017.

CIMB Investment Bank Berhad is the Principal Advisor for Ekovest, with AmInvestment Bank Berhad as the Co Advisor. The Joint Advisors for EPF is RHB Investment Bank Berhad and Maybank Investment Bank Berhad. Astramina Advisory Sdn Bhd is the Financial Advisor for Ekovest and the Transaction Arranger for EPF.

Present at the SSA signing ceremony were Board members of Ekovest, representatives from the EPF management, and the various teams of advisors and business partners.
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