The convoluted saga of the compensation-in-kind for building the Penang tunnel continues.
The Penang state government plans to hand over land to the tunnel developer, Consortium Zenith BUCG Sdn Bhd (CZBUCG) as part of a swap deal for building the cross-channel tunnel. And now Consortium Zenith has entered into a 40:60 joint venture with a subsidiary of Ewein Bhd to develop 3.7 acres of that land (Lot 702 at Bandar Tanjong Pinang).
The land is believed to be part of the 110 acres that the Penang state government is acquiring to compensate the tunnel developer. (And that 110 acres is subject to E & O securing all necessary approvals for Phase II of its project.)
Meanwhile, the feasibility study for the tunnel project has barely got off the ground and now the tunnel developer is already moving to develop the land it will receive as compensation. Under normal circumstances, the feasibility study for a project as massive as a cross-channel tunnel should take a couple of years at least.
On 14 December 2013, the state government said it was in discussions on whether to pay Zenith with “Lot 713 or Lot 702”. The value of the land was set at RM1,300 per sq ft for the net development area of both lots, it said at the time
Now, Plot 702 is agreed to be priced at RM133m under the Zenith-Ewein joint venture agreement (indicative market value RM135m). This effectively means Ewein has to pay RM79.8m for a 60 per cent share of the land handed over to Zenith. As Plot 702 has an area of 3.67 acres or 159865 square feet, the value of the land works out to RM832psf. The land is located at a prime sea front location in Tanjong Tokong. (Perhaps the RM1,300psf figure mentioned by the state was based only on the usable land and not the gross area.)
The Zenith-Ewein joint venture agreement was entered into on 24 December 2013, with the joint venture vehicle being known as Ewein Zenith Sdn Bhd. Ewein Bhd’s wholly owned subsidiary Ewein Land Sdn Bhd holds 60 per cent of Ewein Zenith while Consortium Zenith BUCG holds the remaining 40 per cent. Consortium Zenith BUCG is naming Ewein Zenith as its nomineee for the land compensation and will request the state government to alienate the land in favour of the joint venture firm.
Interestingly enough, Zarul Ahmad Mohd Zulkifli is a common director of Ewein Land, Ewein Zenith and Consortium Zenith BUCG and is also connected to Zenith Construction Sdn Bhd, the holding company of Consortium Zenith BUCG, according to an announcement by Ewein Bhd. That makes the proposed joint venture a related party transaction. But the joint venture agreement adds that “it falls under the exemption pursuant to Paragraph 10.08(9) of Listing Requirements, as there are no other interested relationships except as stated above. Notwithstanding this, the Company (Ewein Bhd) will be seeking shareholders’ approval for the Proposals”.
This blog had previously pointed out that on 1 July 2012, Ewein Bhd had announced that Zenith’s Zarul had been appointed director of Ewein Land Sdn Bhd. Since his appointment until the the end of July 2013, Zarul had acquired a direct interest of 13000 ordinary shares of Ewein Bhd and 14000 warrants. On 9 October 2013, Zarul was re-designated as Chairman of Ewein Land Sdn Bhd.
Now check out the share price of Ewein Bhd in recent months:
Where is the precise location of this land and which property development project is this? I can guess this is not far from the northern end of Gurney Drive. (Is it the City of Dreams project, by any chance, which has already begun collecting refundable booking deposits from potential buyers? The name of the developer for this project has apparently not yet been revealed. At what stage of the project are developers allowed to collect such registration deposits?)
The other question that arises is, can the compensation of land under the swap deal for the tunnel be effected now when the tunnel and land reclamation are still going through the various approval processes? What if, for some reason, there is a delay or failure in the delivery of the tunnel?
While we are on the subject, who is actually paying China Railway Construction Corporation International (CRCC), the main contractor of the tunnel, for the feasibility study and detailed design of the tunnel and how much? How independent can such a feasibility study be? Shouldn’t at least the feasibility study and EIA for the tunnel be completed first before there is any move by the tunnel developer to develop the land it is to receive as compensation?
And how was the tender for the tunnel awarded when the feasibility study has not yet been completed?