Selangor to leverage on RM11bil water pipes stockpile

by gurmeet kaur



PETALING JAYA: Selangor will leverage on the RM11bil water pipes stockpile it has to fund the state’s pipe replacement project, once the water restructuring exercise is completed, said Selangor Menteri Besar Tan Sri Khalid Ibrahim.

“The state has in its record water pipes worth around RM11bil.

“We can leverage on this as capital expenditure (capex) when we tender out the pipe replacement work with contractors,” he said during a briefing session on Updates on Water Issues in Selangor on Friday.

Pipe repair and replacement works form a big part of Selangor’s non-revenue water reduction (NRW) plan.

NRW is water lost during distribution due to pipe leakages and water theft.

It has been previously reported that the capex for pipe replacement works in the state is around RM1bil annually.

This is why Syarikat Bekalan Air Selangor Sdn Bhd (Syabas), the state’s sole water distributor that is majority-owned by Puncak Niaga Holdings Bhd, is an attractive asset, said industry players.

According to Khalid, Selangor could potentially earn RM800mil annually in NRW with the takeover of Syabas.

This is the estimated amount Syabas loses every year in NRW, which at 34% is higher than the World Bank’s recommendation of less than 25%.

Khalid said the state has a target to bring down NRW by 5% in the first six months to one year after the consolidation and later for the rate to be at 20%.

“Ideally the NRW should be at 5%.”

Going by this, there is an earnings prospect of close to RM120mil in the first year after consolidation which can easily go towards financing capex or any borrowings, said industry observers.

Khalid reiterated that “a tangible announcement” on the water consolidation exercise will be made within two weeks.

He declined to comment on whether there will be a new takeover offer or a top-up from the Federal Government for the four concessionaires.

“Our offer remains final at RM9.65bil … and those who feel it should be higher can go for international arbitration,” Khalid restated.

He said that the company that would manage the state’s water operations once it was restructured would be a unit of Kumpulan Darul Ehsan Bhd (KDEB), the Selangor’s state investment arm that had made the offer to buy all the existing water assets in the state.

“We have identified a chief executive officer for this company … he is an expatriate, a veteran with wide experience and fresh ideas and has been working with us for a year now on this exercise,” Khalid hinted, short of revealing the name of the CEO.

Last week, both the federal and state governments said negotiations for the Selangor’s water restructuring exercise had reached the final stage and would be completed within two weeks.

The authorities said they aimed to have mutual agreement with all parties involved and had no intention to use Section 114 of the Water Services Industry Act 2006 (WASIA) to force the industry to accept the takeover offer.

Negotiations between Selangor and the four concessionaires - Syabas, Puncak Niaga Sdn Bhd, Konsortium Abass Sdn Bhd and Syarikat Pengeluar Air Sungai Selangor Sdn Bhd – have been in a deadlock for the past five years.

The latest offer made by the state lapsed on Dec 31.