The Employees Provident Fund (EPF) is ready to park more funds in the infrastructure sector by setting aside three per cent of its allocation for the segment.
The EPF asset size currently stands at RM690 billion, of which 51 per cent is fixed income, equities (36 per cent) and alternative investment (10 per cent).
Infrastructure, private equity and real estate investment is categorized under alternative investment by the EPF.
EPF Deputy Chief Executive Officer (Investment) Mohamad Nasir Ab Latif said the infrastructure segment matched its investment profile and met its risk-return profile.
“One of the areas that we are trying to grow is the infrastructure sector because it has potential real return rate.
“Our target is to meet at least two per cent of real return rate and two per cent of inflation,” he told a media conference at the signing of a conditional share sale agreement (SSA) between the EPF and Ekovest Bhd’s unit, Nuzen Corporation Sdn Bhd here today.
The EPF signed the SSA with Nuzen for the acquisition 40 per cent of the issued and paid-up share capital of Konsortium Lebuhraya Utara (KL) (Kesturi) for RM1.13 billion, which is expected to be completed in the first quarter of 2017.
The SSA was signed by Mohamad Nasir on behalf of the EPF, while Nuzen was represented by Ekovest Managing Director Lim Keng Cheng.
Mohamad Nasir said the EPF was not only looking at toll and road, but was also ready to venture into areas such as ports, airports and power plants that were matured cash generator projects.
Nuzen is the holding company of Kesturi, which is the concession holder of the Duta-Ulu Kelang Expressway (Duke), a 34-kilometre (KM) highway comprising two phases, with a concession period of 54 years.
Duke phase 1 is already in operation, while phase 2 is expected to be completed and to commence toll collection by the first half of 2017.
Upon completion of the SSA, the EPF will pay RM921 million cash to Ekovest, while a further RM209 million cash upon the issuance of the certificate of practical completion of Duke Phase 2, of which RM149 will be deposited in an interest designated account by Ekovest.
Meanwhile, Lim said upon the completion of Duke phase 1 and 2, the expressway would contribute about 30 per cent to the group’s revenue.
“The proposed disposal is in line with the company’s strategy to monetize its matured infrastructure assets to free up our financial resources for the expansion of our infrastructure division and other core businesses such as construction and property development,” he said.
The group, which is engaged in the construction, property development and infrastructure concession businesses, has been granted a 53.5-year concession to build, operate and transfer the 32-km Setiawangsa-Pantai Expressway, formerly known as Duke Phase 3, which is expected to be completed in 2020.
As for the proceeds from the proposed disposal, Ekovest intends to allocate RM400 million for repayment of borrowings, up to RM245 million for its shareholders, and RM485 for general corporate, working capital and others.