KUALA LUMPUR, Feb 10 — The proposed new operating agreement (OA 2023) between the government and Malaysia Airports Holdings Bhd (MAHB) is seen as positive for the airport operator’s development as it offers remuneration for capital expenditure (capex) spent and part-fund its capex via the Airport Development Fund (ADF).
CGS-CIMB Securities said the most important provision of OA 2023 is that MAHB might be able to explicitly recover any capex for airport development, on top of the usual operating expenditure costs, by way of a “suitable investment recovery mechanism.”
It noted that a regulatory asset base (RAB) model might be included in the recovery mechanism, based on a to-be-determined weighted average cost of capital (WACC) rate of return against MAHB’s asset base.
“We are overall positive on the OA 2023 because MAHB would be able to derive a rate of return on its capex spending, which was previously not possible under the OA 2009.
“This may involve an increase in its aeronautical tariffs to pay for the capex over a period of time,” the research house said in a note.
Under the current OA 2009, there is no avenue for MAHB to recover its capex spending via higher aeronautical tariffs – this resulted in a significant decline in return on equity when the RM4 billion Kuala Lumpur International Airport 2, now known as KLIA Terminal 2, was commissioned in 2014.
Once the OA 2023 is signed into force, MAHB’s ability to recoup capex costs will be formalised and remain in place until the end of its airport concessions in February 2069.
Kenanga Investment Bank Bhd said the proposed OA 2023 would lighten MAHB’s burden on its massive capex, particularly for airport expansion and maintenance.
The new statutory ADF will be primarily funded from part of the government’s share of MAHB’s passenger service charge (PSC) revenue, as well as voluntary contributions from airport users, the public, and airlines.
Transport Minister Anthony Loke told a press conference on Thursday that 50 per cent of the PSC component that is considered in the calculation of the concession fee or “user fee” paid by MAHB to the government, will be channelled to the ADF trust account.
Kenanga noted that new material terms for the proposed OA 2023 include the government’s right to restructure the airport industry through the restructuring of the ownership of any of the facilities, subject to a mutual agreement with MAHB.
“The opening up of the industry could mean MAHB will face competition from new operators that are likely to be set up via a public-private partnership model, in our view.
“There is a strong belief that the private-public partnership model could hasten the development and expansion of airports nationwide,” it added.
The OA 2023 is expected to be signed by the end of the first quarter.
— Bernama
