E&O to kick off reclamation for STP 2

EASTERN and Oriental Bhd (E&O) is set to commence with the pre-qualification of reclamation contractors for the second phase of its Sri Tanjung Pinang (STP 2) project this month.

AmResearch Sdn Bhd said the tender is expected to be called next month and likely to be awarded in March.

“Reclamation will commence thereafter,” the research house said yesterday.

“We think E&O is highly likely to award the tender to a sizeable foreign contractor with strong financial muscle and balance sheet as reclamation will be funded through a banker’s guarantee.

“This is to ensure smooth execution for the entire reclamation process. We believe E&O is in talks with several parties for land sale.

“This implies a shorter passage of time to monetise land value,” it added.

The STP 2 project, worth RM25 billion, involves a proposed reclamation of 307.5ha of man-made islands (two islands separated by a canal) and 53ha of the Gurney Drive foreshore that will be handed over to the state government for proposed infrastructure development of a new expressway, a new Gurney Drive Promenade and a public park.

CIMB, meanwhile, said that E&O hopes to invite financial partners to participate in the development of commercial parts of STP 2.

“Its preference is to reclaim the entire 307.5ha in one go, potentially costing between RM3 billion and RM3.5 billion,” it said in a research note last week, adding that the exact cost will only be known after contractors submit their bids in February next year.

CIMB said the estimated reclamation cost of RM3 billion and RM3.5 billion is significantly higher than its earlier estimates of around RM1.5 billion.

“The higher end-reclamation cost of RM3.5 billion works out to RM155 net per sq ft (based on land area of 209.2ha) which is still low, compared with more than RM500 net per sq ft for land around STP 1.

“But the final reclamation cost could be lower due to the steep fall in oil prices, as petrol makes up 40 per cent of reclamation costs,” CIMB added.

RHB, meanwhile, said in a note yesterday that in the coming months, E&O plans to launch a high-rise project, named The Tamarind, on a 2.8ha piece of commercial land in the first phase of STP 1 near Tesco.

The proposed development carries RM900 million gross development value and comprises 1,500 units.

“It mainly targets the affordable segment, as the property units will be priced at less than RM1 million each. To date, the company has received more than 1,000 registrants,” RHB noted.

~ By BUSINESS TIMES