By Khairie Hisyam
Pembinaan PFI Sdn Bhd, a wholly owned unit of the Ministry of Finance, had not filed its 2013 annual audited accounts over six months after the final deadline under company law even as a new six-month deadline begins for its 2014 annual audited accounts.
A search with the Companies Commission of Malaysia (CCM) today shows that the latest available financial information for Pembinaan PFI is for the 2012 financial year (FY12) ended Dec 31, 2012, which was tabled to CCM on June 28, 2013.
Its annual audited accounts for FY13 ended Dec 31, 2013 would have been due by June 30 last year at the latest as required by Section 169 of the Companies Act 1965, which requires company directors to file audited financial statements on an annual basis not more than six months after the close of each financial year.
The legal requirement means that Pembinaan PFI would also be required to file its FY14 annual audited accounts by June 30 this year at the latest.
It is unclear if Pembinaan PFI had sought any sort of extension from CCM, although companies had been known to submit their annual audited accounts by an additional month or more beyond the normal six-month deadline.
A mysterious company
Despite driving a multi-billion effort, Pembinaan PFI had unusually kept a low profile and little is known about the exact nature of its undertakings.
Set-up in 2006, Pembinaan PFI is a special purpose vehicle whose primary purpose is to manage Putrajaya’s Private Finance Initiative (PFI) effort as announced in the 9th Malaysia Plan (9MP), which entails the development of public infrastructure via privately sourced capital. Pembinaan PFI was intended to spearhead PFI efforts by awarding construction jobs to smaller Bumiputera contractors.
To kickstart the initiative, an initial seed funding of RM20 billion was procured from the Employees Provident Fund (EPF). This led to a convoluted lease-sublease arrangement signed in 2007 which involves the Federal Government paying rent for its own land.
The arrangement saw the Federal Government, through the Federal Lands Commissioner (FLC), lease 186 parcels of government land to Pembinaan PFI in exchange for the RM20 billion in funds.
In turn, Pembinaan PFI would sublease the land parcels back to the Federal Government in exchange for a total of RM29.18 billion in rent paid in twice-yearly instalments across 15 years.
This rental arrangement effectively creates cash flow for Pembinaan PFI for servicing its loan from the EPF, which sources say was extended at competitive market rates. In turn, the Federal Government obtains RM20 billion upfront for funding PFI projects.
However the seed funding appears a departure from more traditional interpretations of the PFI concept, which was adopted in the United Kingdom in early 1990s and in Australia in the late 1980s.
A PFI contract is essentially a concessional procurement method whereby the public sector contracts the private contractor to build, operate and maintain public infrastructure in exchange for regular payments as part of a concession agreement normally lasting 25 to 30 years.
The concept aims to boost the quality of performance and delivery of public infrastructure based on the notion that the public sector is grossly inefficient in comparison to the private sector in this regard.
On the other hand, Pembinaan BLT Sdn Bhd — a concurrent PFI drive by the Federal Government mandated to construct office complexes and housing quarters for the Royal Malaysia Police Force through the build-lease-transfer (BLT) model — is much more visible with a list of completed projects published on its own website despite operating on a smaller scale.
To-date, Pembinaan BLT had completed some RM6 billion worth of public projects to the Ministry of Home Affairs.
Current debt unknown
A crucial difference between Pembinaan PFI and more traditional PFI implementation overseas is funding as common PFI arrangements overseas involve PFI contractors sourcing for their own funding.
This is contrary to how Pembinaan PFI operates. With its seed funding of RM20 billion, the special purpose company was intended to finance contractors selected to undertake public infrastructure projects.
Despite spending at least RM23 billion so far in PFI projects, however, it is unclear which contractors had been awarded PFI projects since Pembinaan PFI was set-up as the company does not seem to have its own website, based on internet searches today. A look at the Ministry of Finance’s website is similarly unfruitful.
According to latest available CCM records, for FY12 Pembinaan PFI saw zero revenue although posting RM1.88 million in pre-tax and after-tax profit compared to RM1.56 million revenue in FY11 which yielded RM1.529 million pre-tax profit and RM1.525 million profit after tax.
In terms of its balance sheet, as of FY12 Pembinaan PFI had some RM27.89 billion in total assets against RM27.86 billion in total liabilities compared to RM19.94 billion in both total assets and total liabilities in FY11.
However, Pembinaan PFI’s total debts has likely risen since FY12 accounts were submitted.
The third series of the Auditor-General’s Report 2013 noted that 92.8% of Pembinaan PFI’s initial funding of RM20 billion had been spent as of end-2013. The report further revealed a second round of funding of at least RM10 billion, of which RM4.9 billion or nearly half had also been spent.
It is unclear where the second round of funding came from and if further funding had been arranged in 2014.
The Ministry of Finance had not responded to previous KiniBiz queries sent by email while the ministry’s secretary-general Mohd Irwan Serigar declined to talk to KiniBiz on the matter when met in mid-September.
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