Langat 2 will change dynamics of supply and demand of water in the state

by **Cals** Mon 24 Mar 2014, 04:04

ublished: Saturday March 22, 2014 MYT 12:00:00 AM
Updated: Saturday March 22, 2014 MYT 7:31:34 AM
[size=40]Langat 2 will change dynamics of supply and demand of water in the state
BY BK SIDHU[/size]
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The Pahang-Selangor raw water transfer tunnel at the Langat 2 water treatment plant in Hulu Langat.

GIVEN the implications of Section 114 of the Water Services Industry Act (Wasia)2006, the four concessionaires would still have control but when the Langat 2 water treatment project is completed, another 1.2 million litres of treated water will flow into Selangor. That will change the dynamics of supply and demand which is currently in favour of the concessionaires.
The opposing concessionaires - Syarikat Pengeluar Air Sungai Selangor Sdn Bhd (Splash), Puncak Niaga Holdings Bhd (PNHB), and Syarikat Bekalan Air Selangor Sdn Bhd (Syabas) - currently supply 70% of the treated water but with Langat 2 in the picture, their contribution will no longer be dominant.
Energy, Green Technology and Water Minister Datuk Seri Dr Maximus Ongkili has alluded that they could opt to take more water from Pahang when the Langat 2 treatment plant is ready.
“With Langat 2 treatment plant, we are expecting about 1,130 million litres per day (mld) of treated water for phase 1 for supply to Selangor, Kuala Lumpur and Putrajaya,’’ Ongkili said in an interview recently.
After phase 1 is completed, work on phase 2 will commence and that will provide an additional 760 mld of treated water. That pushes the total treated capacity of Langat 2 to 1,890 mld and by 2017, the average demand of water in Selangor, KL and Putrajaya will be 5,250 mld.
For now, the maximum distributable capacity that can be supplied by all 34 treatment plants to the three areas is 4,781 mld. Current average demand is 4,804 mld.
The development of Langat 2 was delayed because the state could not restructure the water sector despite its attempts to buy over the companies.
Its last offer of RM9.65bil made at the end of February, after the federal and state governments entered into a Memorandum of Understand (MoU) to break the five-year impasse, was also rejected by all players except Konsortium ABASS Sdn Bhd.
The stalemate had affected the completion of the Pahang-Selangor inter-state water transfer project, which could not take off without the treatment plant in Kuala Langat.
The water concessionaries in Selangor are PNHB, Syabas, Splash and ABASS. PNHB has a 70% stake in Syabas while Splash is 40% controlled by Gamuda Bhd, with the rest of the equity evenly split between Kumpulan Perangsang Selangor Bhd (KPS) and Sweetwater Alliance Sdn Bhd. Syabas is the state’s sole water distributor and PNHB is the biggest water treatment operator in Selangor. KPS is a unit ofKumpulan Darul Ehsan Bhd (KDEB).
Ongkili has said that as per the MoU signed at the end of February, “KDEB will have the first call to operate Langat 2.’’
KDEB will play a big role in the way water is sourced, treated and distributed in Selangor.
“In turn, we got the development order (DO) for Langat 2 and we hope they (the players) will realise there is insufficient water sources in Selangor, which will only supply 60% of the water needs in the future, and 40% will have to be imported in and we are already three years behind time for the Langat 2,’’ Ongkili says.
Apart from getting water from Pahang, Ongkili said “we have to get other projects going and we will tap into the Hybrid Off River Augmentation System (Horas) to ensure sustainability of water supply for the future,’’ Ongkili says.
Horas is one of three main projects the state government will be carrying out while waiting for the Langat 2 to be completed by 2017. The Horas project will reduce the state’s dependence on one source of raw water and ensure uninterrupted water supply to more than seven million water consumers in Selangor, Kuala Lumpur and Putrajaya.
As to the RM9.65bil offer, Ongkili feels that the second offer made by the state that was rejected by the players is still the best as it contains a clause whereby after valuations of the assets, the state will still pay its offer price despite lower valuations on the assets, adding that the clause is not included in the third offer.
“We have no intention to top up any money from what we have stated in the MoU.
“We are giving the RM2bil for the transfer of assets in KL and Putrajaya toPengurusan Aset Air Bhd,’’ he says.
Since the players have rejected the last offer from the state, Section 114 will be invoked in two weeks’ time, with administrators being appointed. Two task forces will be set up to take control, and oversee the water production and assets of the company.
The task forces will operate and control the water treatment and distribution business in Selangor, Kuala Lumpur and Putrajaya.
“Section 114 will be a painful process but I am still confident that good sense will prevail. If they (the players and the state) can conclude nicely, we (the administrators) will exit sooner. But the longer it takes the less will be the bargaining power,’’ he says.
Section 114 is applicable for a three-year period till water trickles from the Langat 2 treatment plant.
Meanwhile, PNHB via Puncak Niaga Sdn Bhd (PNSB) told Bursa Malaysia that it has filed a suit against the Selangor Government and Lembaga Urusan Air Selangor (LUAS) on their decision not to renew PNSB’s raw water licence beyond May 31. Puncak Niaga has filed an application in the High Court for leave to issue judicial review proceedings.
It says the move not to allow renewal of water licences is seen as putting pressure on the concessionaires that have rejected the state’s takeover offer.
Without the licence, it says that water treatment plant operators could no longer source for raw water in the state to treat it for supply to Syabas.