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Categories
| Selangor water decision reversed |
| Features | |||
| Written by M Shanmugam and Jose Barrock | |||
| Monday, 13 April 2009 00:00 | |||
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This effectively reverts to the original plan where Kumpulan Darul Ehsan Bhd (KDEB) — the Selangor government’s investment arm — was given the mandate to consolidate the state’s water players. KDEB was given the green light to consolidate the sector in February last year, a job it had intended to undertake through its 60% publicly traded unit, Kumpulan Perangsang Selangor Bhd (KPS). “The federal government is sticking to the letter of mandate it gave KDEB in February 2008,” says a source. It is not known if this decision is related to the change in guards at the Energy, Water and Communications Ministry. In a cabinet reshuffle last week, Datuk Peter Chin was appointed as the head of the restructured ministry, which is now known as the Energy, Green Technology and Water Ministry. He replaces Datuk Shaziman Abu Mansor, who is moving to the Works Ministry. The latest development could mean that the state government will pursue negotiations with the concession holders. Two months ago, Selangor offered a total of RM5.7 billion to the four water concessionaires in the state — RM4.6 billion for the assets, comprising treatment plants and pipes, and an additional RM1.1 billion for the equity held by the four. Three rejected the offer while one was open to further negotiations. The water concession holders in Selangor are Puncak Niaga (M) Sdn Bhd (PNSB), Syarikat Bekalan Air Selangor Sdn Bhd (Syabas), Syarikat Pengeluar Air Sungai Selangor Sdn Bhd (SPLASH) and Konsortium Abass Sdn Bhd. Puncak Niaga Holdings Bhd wholly owns PNSB and 70% of Syabas. KDEB owns the remaining 30% in Syabas. SPLASH is 40%-controlled by construction giant Gamuda Bhd and 30% each by KPS and The Sweetwater Alliance Sdn Bhd, a company controlled by tycoon Tan Sri Wan Azmi Wan Hamzah. Konsortium Abass is 55%-controlled by KPS while the remaining 45% is owned by privately held Operasi Murni Sdn Bhd, a company affiliated with Umno, the leading member of the Barisan Nasional ruling coalition. Puncak was offered RM3.1 billion for PNSB and Syabas while SPLASH and Konsortium Abass were valued at RM2.1 billion and RM525.7 million respectively. Puncak Niaga and Gamuda rejected the offer outright while KPS, on behalf of Konsortium Abass, requested further negotiations. To recap, before the offer could lapse on Feb 20, Suruhanjaya Perkhidmatan Air Negara (SPAN) or the National Water Services Commission intervened. SPAN said Pengurusan Aset Air Bhd (PAAB) — the federal government entity given the mandate to buy water assets and restructure the industry — would make an offer of more than RM5 billion for the water assets in Selangor. This was seen as a move to scuttle the Selangor government’s plans to take over the water assets. The state had said that the seemingly low offer was subject to negotiation, but the concession holders were understandably more attracted to the offer by PAAB, which would also allow them to pass on their debts to the latter. With this latest development, however, sources say the task of consolidating the water assets in Selangor is now left to the state before PAAB steps in. This will put the state’s companies in a better position when it comes to negotiations to operate and maintain the assets. While the shareholders of Splash and Konsortium Abass are known to be looking to exit, Puncak is a different kettle of fish altogether. Talk of the state government taking over the water assets has been rife since April 2007. However, Puncak and its controlling shareholder Tan Sri Rozali Ismail have their own ambitions to take the lead in the consolidation exercise. Rozali is said to be closely aligned to the state Umno and has so far managed to fend off any takeover attempt. In rejecting the state’s offer, Puncak had stated, among other things, that the offer was insufficient to settle its outstanding liabilities and borrowings. As at the end of last year, Puncak had non-current liabilities of RM4.8 billion (of which some RM4.1 billion comprised borrowings and debt securities) and current liabilities of RM1.4 billion. State government officials, meanwhile, pushed for Syabas’ concession to be terminated, stating that the company had breached the terms of its concession agreement. Non-revenue water was supposed to have been brought down to 28% by the end of last year, but still stands at about 30%. There have also been allegations that Syabas did not hold open tenders as required by the agreement. More importantly, however, the state government is looking to avoid a 30% water tariff hike, which was slated for early this year but postponed to this month. However, there is still no news as to when the hike will be implemented. As the federal government has not acted on the request to terminate Syabas’ concession, the state government has stated that it will take legal action if the need arises. Without a tariff hike, Puncak’s fortunes have been dwindling. For FY2008, it posted a net profit of RM24.6 million on the back of RM1.5 billion in revenue. In contrast to a year ago, net profit fell about 62% despite revenue increasing about 7%. In its notes, Puncak said higher operating costs, finance costs and depreciation and amortisation expenses had impacted its performance. Its share price closed last Friday at RM2.95, slipping four sen from a day earlier. These developments have placed the state government’s unit, KPS, in a better position to play a role in the operations and maintenance of the water assets after they are hived off to PAAB. KPS inched up three sen to close at RM1.43 last Friday. This article appeared in the Corporate page,The Edge Malaysia, Issue 750, April 13-19, 2009.
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