Excerpts of exclusive interview with Prasarana Malaysia Bhd
president and group chief executive officer Datuk Azmi Abdul Aziz
Question: What is the progress of the Light Rail Transit Line 3 (LRT3)?
Answer: We have completed the pre-qualification process for civil, infrastructure and system. We have selected a few bidders to come up with the design. We plan to start preliminary work, hopefully by the end of this month. We are also in the process of land acquisition.
Q: The LRT3 is from Bandar Utama to Klang. Any plans to extend it up to Port Klang?
A: No, as Port Klang is served by Keretapi Tanah Melayu Bhd (KTMB) and it is mainly for freight purposes. But in terms of connectivity, we can link commuters there through the LRT3 and from there they could either take a taxi or bus to Port Klang. This new line will pass Klang and stop in Johan Setia. In Johan Setia we will acquire enough land for a huge transit-oriented development (TOD). The aim is to ease congestion in Klang town. We hope with the TOD, less cars will enter Klang town as the TOD will provide a shopping area.
Q: What is your current fleet size?
A: We have more than 100 train sets for the LRT lines and 12 for monorail. Right now, we have 56 four-car trains for the Ampang line, which is undergoing a replacement programme. After this exercise is completed, we would have 50 four-car train sets for the Ampang line... for the Kelana Jaya line we are looking at about 65 four-car trains.
Q: What is this replacement programme about?
A: We have introduced new trains for four stations on the Ampang line that are operating currently. The existing trains are operating from Sri Petaling to Sentul, but from Sri Petaling to Kinrara we are using the new trains.
Once we complete the line extension from Sri Petaling to Putra Heights, we will be using only new train sets. That is when we will start to replace the existing trains with the new ones. It will be done in phases and will take around two years.
For the Kelana Jaya line, we will not replace the trains. We will take the existing two-car train sets, marry them to be a four-car train set and then refurbish them.
Q: What is the age of the existing trains?
A: We started in 1996. So, they are about 20 years old. The issue is not that the trains cannot be used. If you look at the options of procuring new train sets as opposed to refurbishing trains, it is more cost-worthy and efficient because of the technology. New trains have better technology, better design and they are more robust. So, it is better to invest in new trains rather than use a bit of budget to refurbish the existing trains.
Q: What is the average life span of a train?
A: It is between 20 and 30 years. In Japan, they replace their high-speed trains every 12 to 15 years.
Q: What will you do with the older or existing trains?
A: A: Once we introduce the new train sets, we will take the old ones off the Ampang and monorail lines and sell them.
Q: Is Prasarana going to buy more trains?
A: We are looking at getting more trains at current prices. We are currently studying the LRT project for future demand. We are studying what will be the potential demand and expectation of the public, in terms of frequency, five years from now. We know that the public, when they are used to a certain standard of service, they will push us to provide better (services).
For better frequency, we need more trains. Understanding that, we are at a good opportunity because of the orders that we have from the current contract. We are looking at the possibility of ordering future trains at the current price. So it is savings there. We lock in the orders for new purchases now at the current price and only exercise that in the future.
Q: Meaning you have options to purchase?
A: Yes, we have options, at least at the current prices. It will be beneficial for us not to have the orders coming in later. When you have orders coming in later, then, for sure, the prices will go up.
Q: But the downside is you cannot choose the manufacturer?
A: Yes, you can’t choose the manufacturer. We have to stick with the same manufacturer. There are pros and cons. For one line, if you maintain on one system, it is easier to maintain. If you have another line, then you can add another system and new stock. It is not advisable to mix different kinds of trains onto one line as you will only create problems later on. Your maintenance cost will go up because you have to buy different kinds of parts to run efficiently.
Q: Just like an airline, you cannot have too many engines?
A: That is right. Too many spare parts and you will lose the opportunity to negotiate because your volume will not be there. I am talking about little parts here and there.
Q: What is the revenue mix between the fare and non-fare businesses of Prasarana?
A: Some 85 per cent of the revenue is fare-based from the LRT, monorail and bus operation while the rest is non-fare related. By 2020, we are looking at equal contribution from both. We need a 50:50 contribution to make the business dynamic and vibrant.
In order to achieve that target we need to build our non-fare business. Hong Kong is a good and proven example. The Mass Transit Railway (MTR) there is not only contributing to rail revenue but (also) to non-fare business like property. The MTR operates on premium land. Its major revenue contribution comes from the non-fare business.
Another example is the high-speed rail in China, nearby Kowloon. It has five-star hotels like Ritz Carlton and a premium shopping mall. Because of that they can build premium properties and sell the products.
Tokyo is another good example where the non-fare revenue is high. In Japan, where there is a high-speed rail, there are (also) hotels, malls, residences and retail (centres). Foreigners who go to Japan for business don’t have to travel anywhere. They can just stay in the hotel and complete their business as everything is in one stop. We want to do that here, too.
Q: What are the initiatives taken by Prasarana to raise non-fare revenue? Is venturing into property development a good idea?
A: We are not going into the property development business. What we do is we offer our land for development and we invite developers, but they must develop it within the framework that we give them. They are not allowed to build outside of this framework.
We advise them on the type of developments we want for a particular location. For the LRT3 we are looking at TODs with thematic concepts, meaning, a particular station along the line should have at least a hypermarket or a huge retail centre. We hope to see brands like Jakel or Mydin there. This would encourage more people to use the LRT — stop, shop and eat before they head home.
For other stations, it may have different themes and it could focus on education, lifestyle and so on. There are many colleges and universities located close to the LRT stations and we now want to take advantage of that when we build new developments.
We must understand that we cannot use the same transport model in Hong Kong, Tokyo or Singapore for our LRT operations here. People here think differently about the usage of public transport. We have to estimate their needs and build accordingly if we want a positive outcome.
Q: Will the company’s non-fare revenue be led by TOD projects?
A: Yes, it would be. Right now we have about 10 sites under development and we are trying to get more. Whatever we plan will be along the rail lines.
Q: Does the same thing apply to the mass rapid transit (MRT) project?
A: Yes, the same concept would apply. However, TOD projects along the MRT would be undertaken by MRT Corp (Sdn Bhd). For the MRT we are focusing only on the operational aspect of the line. The assets are owned by MRT Corp, so any enhancement value is its responsibility.
Q: What will we have in Klang Valley by 2020?
A: We currently have the KTM Komuter trains and the LRT lines. Coming up are the two MRT lines and LRT3. In the future the MRT3 (third line) would come in.
Q: Moving forward, how do you plan to run your existing businesses with the MRT line coming in?
A: When we say we are going to transform ourselves, it is about looking at priority. You must understand your priority and you must know your responsibility. That is why we have all these subsidiaries. They have their clear mandate and focus area to work on.
For example, for the MRT, we have Rapid Rail Sdn Bhd. Rapid Rail has acquired that experience and expertise. Last year, there was a request from the Bangkok MRT Purple Line that was recently built. They asked for our expertise for testing and commissioning, and we immediately sent over our experts in this field.
That is how fast we respond to meet the needs of the industry. It also shows how fast we react to new opportunities and responsibilities. We are recruiting people now and sending them for training to be ready for the MRT operation.
For the rail and bus operations, it is not just about the service. You must understand the essence. Once you understand the requirement on how to prepare yourself to service a railway line, then you are good to go. We have established a SOP (standard of procedure) and all that, so it is good already.
Q: What is your asset level currently?
A: We have assets worth RM15 billion, which include the infrastructure and the bonds we raised to build the rail lines. This year we have started a plan on how to make good of the assets because we also have debts. Currently, we are in a good position. Our asset value has always been better than our debt. We have long-term debt of five to 30 years in the form of bonds.
I have told the auditors that this is government funds for government assets and for public use, so I am sure there is a way to recognise those assets. It cannot be normal accounting anymore. It has to go beyond that. I am sure we can create better value for the assets, which we believe can last for over 100 years. I don’t want the value of those assets depreciating after 50 years.
For example, the Bangsar (LRT) station, which in our books has a value of about RM10 million now. With the current traffic, if we use other methods to calculate it now and taking into consideration the asset itself, the surrounding and current expansion plans, I am sure the value will be more. Same goes with properties. We will buy properties in a location where we know there will be appreciation. We buy now and in five years, we could sell it at a 100 per cent profit.
So, coming back to the assets, a long time ago we had more than 10,000 users a day but now we have more than one million. So, I am sure the asset is worth much more. This is what I am working on now to improve and raise the property value. The assets belong to the government and the public, but we are the caretaker and so we should create value.