Three questions about the EPF bail-out of UEM by acquiring 20% stake in PLUS for RM1.5 billion

Media Statement
by Lim Kit Siang  

(Petaling Jaya, Wednesday): The Deputy Prime Minister and Finance Minister, Datuk Seri Anwar Ibrahim has confirmed that the Employees’ Provident Fund (EPF) is planning to buy a stake in Projek Lebuhraya Utara-Selatan Bhd. (PLUS) reportedly for 20% equity for RM1.5 billion, which is generally regarded as a EPF bail-out of UEM for its highly-controversial RM2.34 billion acquisition of 723 million Renong shares or 32.6 per cent stake.

UEM had initially financed the Renong acquisition with borrowings and is seeking to raise funds by selling 20 per cent stake of PLUS for RM1.5 billion. The cash from the sale would reduce UEM’s gearing to 2.5 to three times debt-to-equity from four to five times.

The nine million EPF contributors are entitled to full, proper and satisfactory answers to three questions about the use of RM1.5 billion to buy 20% stake in PLUS before any policy decision is taken by the EPF Board.

Firstly, why should EPF be involved in the bail-out of UEM or any troubled company as a result of the economic crisis? Between Sept.30 and October 1 last year, just before the outrageous RM2.34 billion Renong acquisition, EPF bought 65.91 million shares in UEM.

It has been calculated that at RM10.50 apiece, EPF would have forked out a total of RM645.53 million for these UEM shares. At the end of trading at the Kuala Lumpur Stock Exchange this morning, UEM counter ended at RM4 per share. This would mean that EPF would have lost over RM428 million from this acquisition.

In acquiring the 65.91 million UEM shares, was EPF involved in an exercise to bail out and prop up UEM, which was later used to bail out and prop up Renong?

The second question is whether the RM1.5 billion price tag for 20 per cent of PLUS was reasonable and fair to the nine million EPF contributors, as there is considerable uneasiness caused by recent corporate restructurings, for instance, in the RHB buy-up of Sime Bank where KUB, which owns only 30 per cent of Sime Bank, would be getting RM670 million while Sime Darby gets only RM100 million for 60.35 per cent of Sime Bank.

The latest news that KUB has entered into a Memorandum of Understanding with Permodalan Nasional Bhd. for the acquisition of 267.565 million ordinary shares of 10 sen each, representing 32 per cent equity of Malaysia Mining Corporation has also raised eyebrows all-round.

Market analysts are of the view that for RM1.5 billion, EPF should get 25 per cent of PLUS.

The third question is even more fundamental. Should EPF acquire a major stake in PLUS, the toll operator of the North-South Expressway, when there is growing nation-wide opposition from the people to the North-South Expressway Concession Agreement which allows the toll operator to increase toll rates every year for the next 22 years?

Is this part of a larger design to disarm public opposition to the annual toll rate increase at the North-South Expressway, by giving the public through the EPF a stake in PLUS and therefore have a vested interest in the annual toll rate increases?

The nine million EPF contributors should be given a say as to whether EPF monies should be invested in PLUS, in view of the increasingly widespread opposition to the exorbitant concession agreement on the privatisation of the North-South Expressway and demand that the Concession Agreement be reviewed.

Yesterday, Anwar also said that there was no need for any investigations into Bank Bumiputra as it is still a strong financial institution which is still operating normally. He said a bank will not be investigated just because it has incurred losses.

Anwar’s reply to my call for investigations into Bank Bumiputra, Abrar Finance and Cempaka Finance apart from Sime Bank is most unsatisfactory for two reasons: firstly it is public funds which would be used to recapitalise Bank Bumiputra possibly to the extent of RM750 million; and secondly, this would be the third bail-out for Bank Bumiputra in 12 years, after the first bail-out of RM2.5 billion in 1986 and second bail-out of RM1 billion in 1989?

When Anwar said that Bank Bumiputra is "still operating normally", does he mean that it is not unusual for Bank Bumiputra to require a bail-out every several years?


*Lim Kit Siang - Malaysian Parliamentary Opposition Leader, Democratic Action Party Secretary-General & Member of Parliament for Tanjong