What is the true cost impact of KLIA2 delays on Malaysia Airports Holdings Berhad?

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KLIA2 Delays Incur Substantial Additional Costs for MAHB

The escalating costs associated with the delayed KLIA2 project have placed a significant financial burden on Malaysia Airports Holdings Berhad (MAHB). Initial projections for the airport's construction have more than doubled, with further substantial expenditures anticipated due to variation orders and project changes. Market analysts have estimated these additional costs to be in the hundreds of millions of ringgit, raising concerns about the overall financial implications for the airport operator.
Escalating Project Expenditure

The initial budget for KLIA2 was RM1.9 billion, but this figure has ballooned to an estimated RM4 billion. This significant increase in expenditure is a direct consequence of the project's prolonged delays and numerous changes. The original opening date was slated for September 2011, but the project has faced multiple postponements, with the latest completion date initially scheduled for June 28, 2013, and a subsequent revised opening date of May 2, 2014.
Analyst Estimates for Additional Spending

Market analysts have provided concerning estimates regarding the financial impact on MAHB. RHB Research, through analyst Ahmad Maghfur Osman, has downgraded MAHB's stock value, projecting an additional RM500 million in expenditure required for the KLIA2 project. Furthermore, MIDF Research has indicated that MAHB might be liable to pay RM250 million to contractors arising from variation order requests specific to KLIA2.
Variation Orders and Design Changes

A substantial portion of the increased costs is attributed to variation orders (VOs) and requested modifications to the project's design. The UEM-Bina Puri Joint Venture (JV), the main contractor for KLIA2, has requested RM300 million from MAHB. These funds are intended to cover changes such as the enlargement of the main terminal and satellite buildings, reportedly to accommodate demands from government agencies and the new airline Malindo Air. The delays themselves have been attributed by the acting Transport Minister to the main contractor, UEM-Bina Puri JV.

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What is the true cost impact of KLIA2 delays on Malaysia Airports Holdings Berhad?

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