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Scomi Rail Bhdproposed

East Coast Railway & Utility Supercorridor

CONCEPT PROPOSALJuly - 2014

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Privatization of KTMB

Keretapi Tanah Melayu Berhad Key DevelopmentsGovernment Rejects MMC And Gamuda's Plan To Acquire KTMBFeb 4 14The government of Malaysia has rejected plan by MMC Corporation Bhd (KLSE:MMCCORP) and Gamuda Bhd (KLSE:GAMUDA) to jointly acquire operations of Keretapi Tanah Melayu Berhad (KTMB). Gamuda and MMC are already involved in a joint venture to carry out the double-tracking railway project from Ipoh to Padang Besar on a design-and-build basis, which is now nearing completion. It is understood that besides privatising KTMB operations, both parties want to take control of the landbank parked under Railway Assets Corp (RAC) and build housing and commercial properties. KTMB has assets and land worth an estimated MYR 50 billion. It is the operator of the national railway line, while the assets and land are owned by RAC. Although the assets are parked under RAC, KTMB has a big influence on how the assets are utilised. According to a source close to MMC, the company now plans to take over the freight business of KTMB after its proposal with Gamuda was rejected.

Gamuda And MMC Reportedly Mulls To Acquire KTMBJan 2 14Gamuda Bhd (KLSE:GAMUDA) may submit a proposal to MMC Corporation Bhd (KLSE:MMCCORP) to jointly take over Keretapi Tanah Melayu Berhad (KTMB) operations in a deal worth more than MYR 5 billion. Sources familiar with the matter said Gamuda and MMC, a company controlled by Albukhary Foundation, are in discussions over the matter. “An agreement to jointly privatize KTMB is in the works. Gamuda is awaiting MMC’s response for a partnership to take over and privatize KTMB. The deal would require investments of more than RM5 billion,” the sources said. The government is also open to proposals on the privatization of KTMB. MMC did not outline how it intended to turn around KTMB. They only talked about property development on KTMB’s owned land. The takeover by MMC was expected to be funded by government-backed bonds. Abdul Aziz Kaprawi, Deputy Transport Minister of Malaysia, had said there are no plans to privatize KTMB.

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East Coast of Malaysia is an economic region strung along 5 major “pearls” namely, Kuantan, Kertih, Kemaman, Kuala Terengganu and Kota Bharu.

Connecting these “5 K’s” with passenger rail and freight rail will improve the growth of this economic region.

Connecting this region to Johor, KL and Penang through the east-west rail corridors will complete the rail network and bring economic growth throughout the country.

East – West Rail Corridors

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The East Coast Economic Region (ECER) covers the states of Kelantan, Terengganu and Pahang, as well as the

district of Mersing in Johor. With an area measuring more than 66,000 sq km, the ECER covers more than half of

Peninsular Malaysia. The ECER's population of about 3.9 million represents 14.5% of the total population of

Malaysia.

A Master Plan was developed and will be the basis for guiding the development of this region over the next 12

years where it will be transformed into a major international and local tourism destination, an exporter of resource

based and manufactured products, a vibrant trading centre, and an infrastructure and logistics hub.

The Master Plan also details measures to eradicate poverty, and improve incomes and distribution in a

sustainable manner for ECER.

The ECER’s distinctive natural resources, culture & heritage will form the basis for transforming the economy into one

that is dynamic and competitive in light of greater regional and global competition and economic liberalization.

East Coast Economic Region (ECER)

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East Coast Railway

Port Klang

double tracking

electrificationsignaling

inland hub

ports

industrial estates

environment

security

privatization of railways

Batu Caves

Mentakab

Kuantan Port

Dungun

Tumpat

Kertih

Kuala Terengganu

Gambang

Tok Bali

East Coast Economic Region

natural resource

container goods

privatization of

railways – ECR &

WCR(KTMB)

Current railway assets and services to be divided into 2 separate business operations providing comprehensive rail services hereon identified as the East Coast Railway Co. & West Coast Railway Co.

Each Railway Co. will take over existing operations and assets along the eastern & western rail corridor, currently managed by KTMB, via a concession contract for a fix period.

Over this period, the concessionaire will guarantee sustainability of the rail businessand continued investments in line with the nation economic transformation program.

SRB is proposing to step into the shoes of ECRCo.

ECRCo

WCRCo

Pengerang

Mersing

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Rail Services Freight = Est. 1500km

Intercity = Est. 1500km

- Double track with electrification- Diesel electric loco freight average speed 50 kmh- EMU with average speed 120 kmh- ‘Open System’ rail service on meter guage

High Speed = Est. 500km

- Double track with electrification- Dedicated high speed line- EMU with average speed > 250 kmh- ‘Open System’ rail service on standard guage

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Resume Kerteh - Kuantan Port rail freight services. Upgrading to double tracking and line extensions.

- see separate proposal

Phase 1

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Phase 2AGebeng-Mentakab-Port Klang connection would provide both passenger and freight moving east to west – port side to port side.

Kuantan's oleo chemical industry can developed through this, thus increasing population and GDP of ECER. Traffic will bring more visitors and goods to the west coast cities vis-à-vis.

The extension of a direct alignment tunneled through the mountain range connects Gebeng to Port Klang via Mentakab saving both time and cost for shipping.

Phase 2BLine extension north through Dungun – Pasir Putih – Tanah Merah connecting to existing network at Pasir Mas

Phase 2

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Phase 3AGebeng – Muadzam Shah – Mersing – Pegerang southern connection would provide both passenger and freight to the south.

Support towards tourism and industries to the south and connection to ports in Johor. The ‘Pengerang’ petro chemical development also connected.

Phase 3BConstruction of a dedicated high speed line form Tumpat to Gemas where line will connect with KL – Johor high speed line at Gemas junction. Trains travelling at more that average speed of 250 kmh will reduce travelling time and provide alternative to travelers.

Phase 3

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Transfer and handling of freight services - specializing in industrial and hazardous material safely point to point.

Specialized

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Utility Concept

Super Corridor

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proposed take over of East Coast Railway Services

by Scomi Rail Bhd

CONCEPT PROPOSALJuly - 2014

1. Scomi Rail Bhd (SRB) is a Malaysian registered company with business interest in rail car engineering,

manufacturing and rail systems integration. As part of rail project execution the company is also involved in

operations and maintenance of railway services. Today the company is implementing rail projects in Brazil, India

and Malaysia.

2. The company has identified a discontinued rail service on the East Coast of peninsular Malaysia which it intends to

undertake the revival of the said services. This line is known as the Kerteh – Kuantan Railway Service (KKRS).

During its early operation the said line runs freight services from the petrochemical hub in Kerteh down to the

Kuantan Port. Naturally the goods transported were all petrochemical produce. SRB intends to apply to the

government as concession owner of ECRS with which the company will see through the phased development of

the rail networks proposed.

3. This proposition supports the government’s goals for the Tenth Malaysia Plan 2011-2015 - “CHARTING

DEVELOPMENT TOWARDS A HIGH-INCOME NATION”.

East Coast Railway Services (ECRS)

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4. KKRS services were discontinued by Petronas in 2010. Not-withstanding the declining state of the assets, all

operating assets of KKRS remains on site. Petronas has decided not to continue the operation and businesses of

KKRS as it is not in sync with the business direction of the company.

5. SRB proposes to optimize use of rail corridor and further promote use of piped utilities to transfer gas, liquids,

water, communication and power to users along the corridor.

6. KKRS will be develop along the lines of the future East Coast Rail Network with railway lines extended north and

south along the coast and east to west across the peninsular.

Kuantan Kerteh Railway Services (KKRS) – continued

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KKRS is a single railway track from Kerteh Integrated Petrochemical Complex (KIPC) to Kuantan Port with Spur Line to Gebeng Integrated Petrochemical Complex (GIPC).

The overall length covering 76.5KM with mainline of 73.1KM from Kerteh to Kuantan Port and spur line of 3.4KM to GIPC.

KKRS started commissioning in July 2004 and ceased operations in Nov 2010 due to low utilisation by Petronas subsidiaries because of bad track condition due to ground problem and efficiency in double handling.

Facilities include 3 yards in Kerteh, Gebeng and Kuantan Port with a dedicated depot in Kerteh.

KKRS - Overview

KKRS – Proposed Plan Phase 1

Part 1

• Negotiations • Letter of undertaking• Due diligence

• Government Approvals • ECR concessionaire• KKRS acquisition

6 months

12 months 99 years

Negotiations Rehabilitations

Part 2• Extension of Track to Kuantan

Port Wharf

• Final design for Kuantan-Port Klang corridor

Part 3• Revenue service for

leasehold tenure• Maintenance done by

Scomi

Operations

2 years soft operations

Benefits to Stakeholders

Benefits to the Rakyat

Increase safety for Rakyat using the road

Provide job opportunities

Enhance conveniences for Rakyat

Cleaner environment with less air pollution

Benefits to the State Government

Reduce lorry haulage on the public road

Reduce road maintenance cost

Revenue from the right of use and land lease

Reduce the risk of accidents on the road

Reduce air pollution caused by lorry haulage

Reduce road congestion

Benefits to the ECER/Federal Government

Promote safe goods transportation to the investors

Stimulate economy growth

Promote a reasonable consumption of energy which minimize environment impacts

Promote safe and reliable mode of transportation of goods

Help ECER provide complete transport solution at SEZ

Incentives offered by ECER

Tax Incentives:

❖ Income tax exemption of 100% for 10 years commencing from the year company derives statutory income;

Or

❖ Investment tax allowances (ITA) of 100% on qualifying capital expenditure for 5 years.

Other Fees:

❖ Stamp duty exemption on instruments of acquisitions;

Or

❖ Leasing of property relating to Industrial Park.

Non Fiscal Incentives in Special Economic Zone (SEZ):

❖ Companies undertaking activities in SEZ will also enjoy a set of non fiscal incentives such as competitive utility tariffs,

land premium and accessibility to grants based on merit of each case;

Grants here is “Facilitation fund” which is reimbursable 10% of the cost incurred. This is granted based on customised application and merit of each case.

ECR – SWOT Analysis

Strength

Dedicated Service specifically for goods transportation from Kertih terminal and

Gebeng Terminal to Kuantan terminal.

Capable of transportation of goods in bulk over long distance ie. 76km

High Service life of locomotive & wagon which would be able to run the service

up to 30 years

Capable to increase the headway and frequency to meet the demand

Supported by State Government and ECERDC

The only rail services in SEZ which capable of facilitating the needs of

transporting goods

Supported by Petronas PetChem subsidiaries

New development for industries along east coast corridor – South to North.

Untapped economy and market segments of the east coast population.

Weakness

Present last stop for rail is Kuantan terminal. Multiple handling of containers be

overcome with the proposed rail extension to Kuantan Port wharfs.

Insufficient throughput from Kertih petchem. To be overcome with new user

industries at Gebeng.

High maintenance of locomotive which require overhaul in every 5 years & wagon

in every 8 years

Land Lease & right of use fees charged by State Government

Current services is not supported by the most of the PetChem industries due to

inadequate infra and safety conditions.

Kuantan Port connection and facilities being limited. Government today has already

invested RM1.5b to expand breakwater and wharfs – WIP.

ECR – SWOT Analysis

Opportunities

New customers if line extended to Kuantan Port’s wharf especially Petronas

PetChem industries and as well as Non Petronas Pet Chem

The 3 terminals can be used as temporary storage for containers in the open yard

and warehouse

To reduce the cost to be competitive with the lorry haulage

To comply with the PetChem international standard of dangerous goods

transportation

New potential customers i.e. Lynas, Palm Oil Industrial Cluster, Malaysia China

Kuantan Industrial Park, etc.

Threat

Lorry haulage

Introduction of highway that contribute to faster travelling time for lorry haulage

Cheaper cost using lorry haulage

Limited growth in petrochemical industry

21st Century economy is about Connectivity!

Trans-Asian Railroad; a 5600 km freightline that originates/terminates in Singapore

and Kungming (China)

Transport Solutions

Railways

Future of

by Suhaimi Yaacob 2014