Long way to go before water impasse in S'gor can be solved?

PETALING JAYA: Puncak Niaga Holdings Bhd has come out strongly to say that it has refused the latest offer by the Selangor government that expired yesterday to acquire its water assets because such a move would be “detrimental” to its shareholders.
The company, in a press statement yesterday, claimed the deal would only give the company proceeds of RM1.555bil for its 100% equity stake in Puncak Niaga Sdn Bhd and 70% equity stake in Syarikat Bekalan Air Selangor Sdn Bhd (Syabas).
This is far below the RM5.594bil stated price offered by Kumpulan Darul Ehsan Bhd (KDEB), the Selangor state investment arm.
“We have ascertained that the actual proceeds payable to all water concession holders are far below the RM9.65bil announced by the Selangor government,” it said.
Puncak Niaga said the latest offer, which is the fifth failed attempt to consolidate the water assets in Selangor by the state government in the last five years, was “almost the same” as the previous offer that was made in February 2013.

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Thus, it did not take into account the time value of money as well as the improvement to the concession companies’ net worth over the period.
“We are of the view that the manner in which the offers had been presented to the public by the Selangor government is misleading and detrimental to all shareholders of Puncak Niaga,” it said,
The company, however, has conveyed to KDEB its “general acceptance in principle” with regards to the offer, subject to certain improvements in terms and conditions that could be agreed by all parties involved.
Puncak Niaga has given KDEB seven days to revert back to the company with regards to its request for further clarification on a number of issues, including a higher valuation as compensation for the future loss of income from the disposal of its assets.
“We have observed that several offers which Selangor has made to-date tend to be ambigious and require a lot of clarifications and confirmations,” it said, adding that this can be avoided if discussions are held earlier.
Puncak Niaga and two other concessionaires, Gamuda Bhd and Kumpulan Perangsang Selangor Bhd (KPS), had, on Nov 21, received offers from KDEB on behalf of the Selangor government to acquire their assets.
None of the companies accepted the deal that expired yesterday.
Gamuda told the exchange that it was “unable to consider” the bid for its 40% stake in Syarikat Pengeluar Air Sungai Selangor Sdn Bhd (Splash), due to valuation issues and uncertainties with regards to Splash’s future operations.
The construction company, however, said it was “willing to pursue an agreement” with KDEB if all matters are satisfactorily concluded and agreed upon by all parties involved.
Meanwhile, KPS, which owns the remaining 30% in Syabas, said yesterday that it had resolved to accept KDEB’s offer in-principle, but also to certain requirements being met.
It said the company’s directors, who are linked to KDEB, would abstain from discussing and voting on the offer by KDEB.
The latest development, or the lack of it, confirmed what some analysts had expected; that the water impasse in Selangor still had a long way to go before it could be resolved.
Shares in Puncak Niaga and KPS succumbed to some selling pressure yesterday after AmResearch downgraded the water sector to “neutral” from “overweight”, citing uncertainties with regards to the water deal.
“A more conscientious engagement between all stakeholders is required in order to resolve the water impasse,” it said.
The firm yesterday lowered its fair value for Puncak Niaga to RM3.40 from RM4.03 previously.
“At the current price, we deem Puncak Niaga to be fully valued for now,” it said.
Shares in Puncak Niaga fell for the second consecutive day yesterday, down seven sen, or 2%, to close at a one-month low of RM3.29.
KPS’ share price, meanwhile, declined six sen, or 2.8%, to a six-week low of RM2.07.