Payout for S’gor water deals may be higher?

by **Cals** Fri 28 Feb 2014, 14:25

Business & Markets 2014

Written by Cynthia Blemin & Shalini Kumar of theedgemalaysia.com

Friday, 28 February 2014 10:04

KUALA LUMPUR: The four water concessionaires involved in Selangor’s water consolidation exercise may stand a chance of getting a better offer on their assets after all.

Kumpulan Darul Ehsan Bhd (KDEB), an investment arm of the Selangor government, had sent out offer letters to the four water concessionaires on Wednesday for the proposed purchase of their assets.

The letters stated that “the total value on equity of their assets could be revised following a due diligence inquiry”, according to announcements on Bursa Malaysia yesterday.

This comes on the heels of an announcement by the federal government that it will fork out RM2 billion to facilitate the takeover of the water assets.

The four water concessionaires are Puncak Niaga Sdn Bhd (PNSB), Syarikat Bekalan Air Selangor Sdn Bhd (Syabas), Syarikat Pengeluar Air Selangor Sdn Bhd (Splash) and Konsortium Abass Sdn Bhd.

Puncak Niaga Holdings Bhd (Puncak) owns 100% of PNSB and 70% of Syabas, while Kumpulan Perangsang Selangor Bhd (KPS) controls 90.83% of Konsortium Abass and owns 30% of Splash.

In the announcements, KDEB said the proposed purchase of the concessionaires is conditional upon the completion of a due diligence enquiry to be undertaken by the respective concessionaires, commencing seven days from the acceptance of the offer and the results of such due diligence inquiry must also be satisfactory to KDEB.

If the holder of equity does not agree with the amount, the concessionaire would have to seek arbitration process, it added.

KDEB also noted in the letters that the determination of the arbitral tribunal should be final and binding on KDEB and the holder (concessionaires).

To recap, the state through KDEB had made its final offer to take over the water assets at the offer price of RM9.65 billion in November last year.

With the RM2 billion injection by the federal government and assuming the state agrees to use the funding to assist in the takeover, the offer will be raised to RM11.95 billion, which is even more attractive than Gamuda Bhd’s offer of RM10.75 billion back in 2010.

Meanwhile, Energy, Water and Green Technology Minister Datuk Seri Dr Maximus Ongkili said yesterday the Selangor government will sell their assets to Pengurusan Aset Air Bhd (PAAB), a federal government entity, and PAAB will in return give the state the additional money needed to acquire the concessionnaires’ assets.

Under the memorandum of understanding signed on Wednesday, the federal government, under PAAB, will buy over RM2 billion worth of unencumbered assets from the state government to raise funds for the takeover exercise.

“Next will be what Selangor (state government) has to put up to acquire these companies,” he said, but he declined to comment on whether the federal government will step in to top up more money if the concessionaires are not satisfied with the offer.

This article first appeared in The Edge Financial Daily, on February 28, 2014.