Monday, June 14, 2021

MAHB Aerotrain tender: Budgetted RM400 million, up RM760 million?

Edge Weekly has a follow-up story on the Malaysia Airport Holding Berhad's tender for aerotrain. In their earlier expose, it was about last minute change in tender specification. This issue is about change in consultant.

There may have been allegation Jacobs were sidelined from involvement in the selection process in favour of Ch2M. MAHB corrected it. Again, their explanation mentioned is it is common practise.  

Mentioned in the article, Edge claimed the tender bids came in between RM600 million and RM760 million. 

It is vastly different from the estimated RM400 million budget mentioned in this blog's May 26th posting here. The tender bids may have came in at lower than RM400 million with RM320 million as possible bottom. 

Either this blog's source for the estimate erred or other financial considerations not included. Possibly it could be for different spec or quantity of item.  

Even if MAHB had not faced five straight quarter of losses, being off by RM200 to RM350 million is absurd. More so if the figure turned out to be true. 

The Edge Weekly article below:

MAHB denies asking Jacobs to step aside in aerotrain tender selection

Malaysia Airport Holdings Bhd (MAHB)has denied suggestions that it had asked consultancy firm Jacobs to ‘step aside’, pending the award of a tender for an aerotrain system contract at Kuala Lumpur International Airport (KLIA).

Market talk had swirled that Jacobs had been side-lined from the selection process of the winning bid and that it had not been involved in the evaluation process and in assisting MAHB to decide the best bid for the contract, dubbed “Design, Supply, Installation, Testing and Commissioning of the Automated People Mover (APM) and associated works at KLIA International Airport”. The tender closed on Nov 2 last year.

In an email response to The Edge, MAHB says. “MAHB had appointed Ch2M, which was subsequently taken over by Jacobs, as the project management consultant for our aerotrain replacement project.

“It is common in a large project of this scale able to appoint a third party to provide project management consultancy services to help manage risks and achieve the best outcome of the project. As a project management consultant, Jacobs’ scope of work ranges from the development of user requirements up to implementation project management, including conducting the technical evaluation for all submitted bids. This scope of work has not changed since their appointment by MAHB,” the airport operator explains.

Meanwhile, Richard Hilldrup, Jacobs regional solutions director – Rail, Asia, tells The Edge in an email response: “As a policy, Jacobs does not discuss client-related matters, and in that case, we are also precluded by an NDA (non-disclosure agreement) to discuss the project.”

The allegations that Jacobs had been sidelined from the selection process comes on the back of complaints by certain quarters questioning MAHB’s bidding process. The initial requirements in the tender documents did not specify the type of aerotrain preferred – either self-propelled or cable-propelled, also known as pulley models. However after the close of bids last November, MAHB made amendments to the tender via a letter in March this year, asking specifically for bids with cable-propelled system as well. 

Although MAHB clarified questions on the tender process and the subsequent amendment a few weeks ago, saying it was “to clear any confusion or doubt that may arise”, some of the parties involved in the tender termed the amendments as an afterthought and sought a retender, which the airport operator is opposed to.

To put things in perspective, having Jacobs, an international consultant involved in the selection of the winning bid could help allay concerns and possible questions over the integrity of the aerotrain tender.

At the heart of the tender is MAHB’s existing aerotrain, which began operations in 1998 and underwent an upgrade in 2011. After more than two decades, indications are that MAHB and KLIA are in need of a new aerotrain facility.

The Edge understands that the aerotrain tender attracted as many as five bidders: MMC Corp Bhd, partnering Japan’s Mitsubishi Heavy Industries; Malaysian Resources Corp Bhd (MRCB), in a tie-up with Leitner-Poma of America Inc; Pestech International Bhd, in a joint venture with Canadian outfit Bombardier; privately held Hartasuma Sdn Bhd, in partnership with Austrian company Doppelmayr Seilbahnen GmbH; and local outfit SMH Rail Sdn Bhd.

It is understood that the Pestech- Bombardier, MMC-Mitsubishi and SMH Rail bids involve self-propelled aerotrain systems, whereas MRCB-Leitner and Hartasuma-Doppelmayr are cable or pulley system bids. The existing aerotrain used by MAHB at KLIA is a self-propelled system. The cable propelled or pulley system aerotrain does have its fair share of proponents, however, as it is regarded as cheaper and has been successfully employed in large airports worldwide.

Thus far, the Prestec-Bombardier bid is understood to be favoured by some at MAHB, but a decision has yet to be made. The Edge understands that the bids range from just below RM600 million to more than RM750 million, with the cable-propelled or pully system being considerably cheaper than the self-propelled aerotrain models.

The Edge understands that, with costs being a key issue, the bidders were given three options: one, MAHB pays for the entire job upfront; two, 40% of the contract value is paid upfront and the remainder at a later date; and three, the bidding party bears all costs and undertakes the design, build, operations and maintenance, with the transfer (of ownership) and repayment done over a five- or 10 year duration, on a staggered basis.

While the third option requires little capital outlay from MAHB, it requires the bidder to have a strong balance sheet to undertake the project. MAHB is among the world’s largest airport operators, managing 39 airports, including five international airports in Malaysia and one in Turkey.

The company’s latest financials have been ravaged by poor passenger numbers because of the Covid-19 pandemic, which makes costs an even more imperative consideration.

For 1QFY2021, MAHB suffered a net loss of RM221.3 million on the back of RM336.91 million in revenue. For 1QF Y2020, it suffered a net loss of RM20.39 million on the back of RM933.84 million in sales.

Although MAHB incurred losses in the previous five consecutive quarters, it retained earnings of RM 1.71 billion as at end-March this year. During the period in review, MAHB had cash and cash equivalents of RM931.72 million, RM4.53 billion in long-term borrowings and RM106.79 billion in short-term debt commitments.

Its stock closed last Friday at RM6.40, which translates into a market capitalisation of RM 10.62 billion.


Not mentioned by the Edge is maintainance contract and tenure. Is it included in the tender bid or dealt seperately? How long will be the duration?

Its a tough call for the Board Procurement Committee or the Board of Directors. 

The airline industry is not expected to return to its heydays before the pandemic for the next few years. One has to live with the Covid 19 virus and its strains. Life has become abnormal.

Though life and economic activities slowly returning to normal in Western Europe, US and more developed Asian countries, and crowds returning to sports events, Malaysia is far from it.

The whole country is in the midst of MCO 3.0 and recently extended another two weeks. The target for a glimmer of hope for daily positive number to be 4,000 or below is not insight. At the rate vaccination is going and vaccine supply delivery not on schedule, herd immunity will likely be achieved middle to end of next year.

Travelling remained restricted within 10 km from home. Air travel is a dream and Minister in charge announced no Haj pilgrimmage from Malaysia this year. 

It is timely to invest and carryout expansion during downtime. Usually, doing it during busy phase ended up out of sync with the business cycle. However, the horizon remains bleak.

Optimism is rare in the airline industry these days, especially in Malaysia. Either gutsy gumble or proprietary reasons only could compel the Board to go for it

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