Gamuda ready to buy water firms

SHAH ALAM: Gamuda Bhd stands by its 2010 offer to acquire all of Selangor’s water-related assets for RM10.75bil, said group managing director Datuk Lin Yun Ling.
“The offer still stands,” he told reporters yesterday in response to questions about Gamuda’s rejection of the Selangor government’s proposal to take over Syarikat Pengeluar Air Sungai Selangor Sdn Bhd (Splash).
Gamuda made a surprise bid in April 2010 via its 40%-owned Splash for the Selangor water concessionaires in an effort to fix what had then become a three-year deadlock to resolve the state’s water woes. The attempt, however, was unacknowledged, according to past reports.
Gamuda on Wednesday rebuffed the Selangor government’s RM1.83bil buyout of Splash, citing valuation issues and uncertainties about Splash’s future operations.
State-linked Kumpulan Perangsang Selangor Bhd and Tan Sri Wan Azmi Wan Hamzah each hold a 30% stake in Splash.
But Gamuda remains open to a sale if the price is right, Lin said after a shareholders’ meeting. 
“It also has to be acceptable to our shareholders. The ball is in their (Selangor’s) court,” he said.
When asked what he considered the “right price”, Lin replied: “I don’t negotiate through the newspapers.”
The market cheered Gamuda’s decision to turn down the offer. Its stock rose four sen to RM4.67 on trade of 2.7 million shares.
However, analysts lamented that the rejection might lead to another stalemate in the water talks, despite hopes they could be concluded by the end of the month.
Industry observers say Gamuda was largely expected to reject the state government’s latest bid because the net proceeds excluded an earlier top-up from the surplus value of assets over liabilities.
The current offer translated into a value of just RM251mil for Splash, which was 90% less than the initial price tag of RM2.5bil, analysts said.
Even so, Lin contended that management of the water assets was best left to the private sector.
“We need to place the water industry on a sustainable path as soon as possible. This impasse is now into its sixth year. Even if you buy the assets, the Government would have to take up billions in debt that must be repaid eventually.
“Then, it has to raise funds to finance facilities like Langat 2. Also, investments to reduce non-revenue water from 33% to 20% in Selangor could easily cost over RM1bil.
“With each month, the receivables owed to water treatment operators gets bigger and bigger,” he said, adding that the concessionaires were now owed a combined RM4.5bil, with Splash’s portion at some RM2bil.
“We have to look at a tariff and revenue regime which is sustainable in the long run. The Government is already in deficit. Why take on another RM14bil in debts to pay for the receivables?
“Is ownership of the assets the best way to regulate tariffs? If the Government wants to ensure that tariffs are competitive, then it should call for tenders,” Lin explained. 
On talk that Gamuda was planning to spin off Kesas Holdings Bhd and other tolled expressways under a business trust, Lin said: “There are multiple options to monetise our assets.”
Gamuda had made an RM875mil bid on Nov 4 to buy out the three other shareholders in Kesas. The offer, which expires on Dec 18, valued the highway operator at RM1.25bil.
Gamuda owns a 30% stake in Kesas. It also has interests in the Damansara-Puchong and Sprint highways.
Meanwhile, line 2 of the Klang Valley MRT was pending cabinet approval, Lin said. 
“I understand the Government intends to go ahead with the project,” he said without specifying a deadline for the approval.