MALAYSIA's Westports Holdings is expected to invest up to MYR10 billion (US$2.3 billion) to double its container-handling capacity, and the company will tap the bond market to partly finance the plan.
According to an unnamed source cited by The Star Online of Malaysia, Westports was considering options from the debt market such as sukuk and other forms of borrowings to finance the expansion besides using internally-generated funds.
"The approval for the capacity expansion is important as Malaysia needs to prepare itself to cater to the growing need for container-handling capacity from shipping lines," said a source.
The increase in Westports' capacity by 2040 will ensure that Port Klang keeps up with the planned consolidation and expansion of Singapore's ports in Tuas as well as maintaining its lead against other planned terminals in Indonesia.
Westports said earlier in a filing with Bursa Malaysia that it had secured the approval-in-principle from the Government for the expansion of its container terminal facilities (CT10 to CT19), which could handle up to 30 millionTEU annually by 2040.
The proposed expansion of an additional 10 terminals is an extension of Westports' current CT1 to CT9 development. The first phase of the development will be undertaken from 2019 to 2024.
"While the terms and conditions for Westports' expansion are to be further discussed with the Government, the plan could cost the port operator as much as MYR10b billion," said the source, adding that the cost for the first phase of CT10 to CT19 development is targeted at MYR2 billion.
The source indicated that it was unlikely that the company would raise funds from the equity market via a rights issue or a private placement exercise.
As of end-June 2017, Westports posted a net debt position of MYR912.6 million.
The company sits on a cashpile of MYR387.44 million while its main borrowing component stands at MYR1.15 billion of drawn-down sukuk facility.
The source said the proposed expansion should provide improvements to the company's operational performance in line with the increasing container volume to be handled by the port operator.
Last year Westports handled 9.95 million TEU compared with its current capacity to handle 12 million TEU, indicating a utilisation rate of 83 per cent.
The port operator is extending its container-handling capacity via the current development of CT1 to CT9 terminals, which are expected to be completed by next year, and will boost its handling capacity to 16 million TEU.
Last year, Westports handled 18 per cent of all containers passing through the Straits of Malacca, and 76 per cent of containers in Port Klang.
An economic impact study by PricewaterhouseCoopers indicated that Westports' expansion plan is expected to generate an economic output of MYR55.3 billion from 2021 to 2080.
It also found that the project could contribute about MYR19 billion to Malaysia's gross domestic product over the 60-year period, generate over 6,000 jobs on average and act as a catalyst for trade growth.
Westports has projected a lower container throughput this year.
"Due to the ongoing changes in the container shipping industry, we expect our container throughput to be lower compared with the previous year by between 7 per cent and 12 per cent," said the company in a filing with Bursa Malaysia.
Source: SchednetPrevious Next
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