Highlight WASIA finally invoked

by **Cals** Wed 12 Mar 2014, 10:08

Highlight WASIA finally invoked

Business & Markets 2014

Written by Cynthia Blemin of theedgemalaysia.com

Wednesday, 12 March 2014 09:09

KUALA LUMPUR: The federal government yesterday exercised its powers to force the four water concessionaires to hand over their assets in the name of “national interest”.
In a joint statement yesterday, the federal and Selangor governments said they are invoking Section 114 of the Water Services Industry Act 2006 (WASIA) to facilitate the implementation of the Selangor water restructuring, as set out in the terms of the memorandum of understanding (MoU) signed on Feb 26.

This allows for a compulsory takeover of the water assets, after three of the four water concessionaires — Syarikat Pengeluar Air Sungai Selangor Sdn Bhd (Splash), Puncak Niaga Sdn Bhd and Syarikat Bekalan Air Selangor Sdn Bhd (Syabas) — rejected the state government’s latest offer on Monday. Only Konsortium Abass Sdn Bhd accepted the offer.

“In line with the terms of the MoU, the federal government through the Energy, Green Technology and Water Ministry, shall now pursue the exercise of its rights and powers under WASIA as well as any other relevant acts, statutes or regulations to assist the state government in implementing the proposed restructuring and consolidation of the Selangor water supply industry,” said the federal and state governments in the statement.

The decision was jointly made at a meeting between Minister of Energy, Green Technology and Water Datuk Seri Dr Maximus Johnity Ongkili and Selangor Menteri Besar Tan Sri Abdul Khalid Ibrahim yesterday afternoon.

On Feb 26, Selangor subsidiary Kumpulan Darul Ehsan Bhd (KDEB) had made an offer amounting to RM9.65 billion to purchase the equity and debts of Syabas, Puncak Niaga, Splash and K Abass.

The move to invoke WASIA could deal a big blow to the water players, who have been holding out for a better offer from KDEB than the RM9.65 billion on the table.

In an interview with The Edge in January, Tan Sri Wan Azmi Wan Hamzah, who holds a 30% stake in Splash, said that resorting to WASIA may well be necessary from the federal government’s point of view, particularly in sorting out jurisdictional issues between the federal and state governments.

“[But] using that blunt instrument to resolve the matter would be most inelegant and quite inappropriate, particularly when industry players have already intimated a willingness to negotiate,” Wan Azmi had said. “Resorting to purported ministerial powers under WASIA to break agreements and economise on compensation obligations will not send the right signals to investors.”

Maybank IB Research, in a note to clients yesterday, said any forced takeover will have implications on the sanctity of contracts where the government is the counter-party.

“On that note, we think that negotiations should continue until a willing buyer, willing seller outcome is reached,” Maybank IB said. “Another recourse [would] be arbitration. Gamuda Bhd said that it will readily submit to arbitration with the valuation ‘left to the Arbitration Panel to decide based on internationally accepted methodologies’.”

Maybank IB Research is of the view that the sanctity of contracts would prevail and a willing buyer, willing seller outcome would be reached eventually.

Puncak Niaga Holdings Bhd’s share price closed down 12 sen at RM3.23 yesterday, while Gamuda was up five sen at RM4.70. Kumpulan Perangsang Selangor Bhd closed three sen lower at RM1.84.

This article first appeared in The Edge Financial Daily, on March 12, 2014.