OSK: More time needed on S’gor water deal

Tags: Brokers Call | OSK Research | puncak niaga | water deal

Written by Financial Daily

Wednesday, 17 June 2009 11:24

THE Selangor water fraternity has attracted much public attention as the deadline draws nearer for the state government to wrap up its planned consolidation of concessionaires’ assets.

Considering that state and federal lawmakers have made competing offers for Selangor’s water assets, besides the financial and legal technicalities involved, analysts are not surprised that the relevant parties might need more time to finalise a deal.

“We are of the view that the Selangor’s state water asset consolidation process would possibly be delayed till after June instead of the planned deadline for the end of this month.

“We note that the ball is in the Selangor state government’s court,” wrote OSK Research in a note yesterday.

Selangor state authorities had, in February, offered the three water concessionaires in the state a collective RM5.7 billion. The concessionaires are PUNCAK NIAGA HOLDINGS BHD [], Syarikat Pengeluar Air Selangor (Splash), where builder GAMUDA BHD [] has a 40% stake, and Konsortium Abass Sdn Bhd.

Of the amount, a sum of RM4.6 billion was allocated to acquire these firms’ assets which included treatment plants and pipes, while the RM1.1 billion balance was intended for equity issued by the companies to build the water facilities.

The firms have rejected the offer which does not cover the debt of these concession holders. The offer expires at the end of this month.

The federal government, via Pengurusan Aset Air Bhd (PAAB), subsequently offered to acquire the assets at RM5 billion and assume the borrowings of the water entities. The Selangor state government is expected to make a revised offer.

Meanwhile, news reports, quoting sources, also indicated that the water concessionaires had come up with a proposal which involved PAAB acquiring their assets for RM5.9 billion cash and take over the debts of the water entities.

OSK said: “We see the Selangor state government encountering difficulties, especially, when it comes to assuming the debts.

“Furthermore, given that the water concessionaires are more willing to work with the federal government instead of the state, we may well see further discussions in the months following June,” added the research firm which upgraded its rating for shares of Puncak Niaga to a trading buy at a fair value of RM3.87.

Puncak Niaga closed unchanged at RM3.14 yesterday.

This article appeared in The Edge Financial Daily, June 17, 2009.

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Last Updated on Wednesday, 17 June 2009 11:27

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