Splash open to compromise to end deadlock

by **Cals** Wed 21 May 2014, 17:14

Business & Markets 2014

Written by Kamarul Anwar of theedgemalaysia.com

Wednesday, 21 May 2014 10:49

KUALA LUMPUR: Syarikat Pengeluar Air Sungai Selangor Sdn Bhd (Splash), the only water concessionaire in Selangor that has yet to accept the takeover offer from the Selangor government, said it is open to negotiations in order to reach a compromise in the water restructuring exercise.

“We are certainly open to negotiations in order to reach a compromise. Our bottom line is that we wish to come to a conclusion that is fair [to] all parties,” Splash told The Edge Financial Daily yesterday.

It said it has been working closely with the Prime Minister’s Department and the Ministry of Energy, Green Technology and Water on solving the water impasse in Selangor.

“We believe our expectations have been conveyed to officials [at] the Economic Council (EC),” the company added, confirming The Edge Financial Daily’s report last week that the EC has stepped in to resolve the long-standing attempt by the Tan Sri Abdul Khalid Ibrahim-led Selangor government to consolidate the state’s privatised water assets.

Gamuda Bhd owns 40% of Splash. Another 30% is owned by Tan Sri Wan Azmi Wan Hamzah’s The Sweet Water Alliance Sdn Bhd, while the rest is owned by Kumpulan Perangsang Selangor Bhd, which had accepted the Selangor government’s takeover offer on March 10.

However, Splash said the proposal drafted by the EC will be reviewed and deliberated in the coming weeks, with no details being made known to the concessionaire as yet.

“We are certainly hopeful that a resolution can be reached soon to end the six-year-long negotiation deadlock,” said Splash, which is the state’s largest water treatment operator.

According to sources, the EC is likely to sit down with Khalid before any offer is made and accepted by the concessionaires.

In a separate statement yesterday, Splash chairman Wan Azmi said it is the vast disparity in valuation of takeover offers to Puncak Niaga Holdings Bhd and Splash that is holding back the water consolidation exercise in Selangor.

He questioned the fair play in coming to the valuations extended to the water concessionaires.

Citing AmResearch’s report dated May 19, it said Splash had a positive book value of RM2.54 billion as at end-December 2013, but was offered only RM250 million or 10% of book value, highlighting the inequality of valuation disfavouring Splash based on the current offer.

“The Selangor government’s buyout offer to Splash dated Feb 26 would result in a massive divestment loss of RM2.29 billion, when measured against its net asset value of RM2.54 billion as at end-Dec 2013,” said Splash.

“Splash remains unwavering in its stand on getting a reasonable valuation for its assets,” it added.

Compared with the offer to Syabas and Puncak Niaga Sdn Bhd (PNSB), the latter which is wholly-owned by Puncak Niaga Holdings, the total gain that Puncak Niaga Holdings could potentially make from the disposal is RM1.56 billion, against Syabas and PNSB’s combined equity of RM370 million.

This is because the state is offering the concessionaires a 12% non-compounded return on equity for every year of the concession, plus the offer to pay for liabilities. In short, the longer the concession is run, the more gain a concessionaire stands to get.

This article first appeared in The Edge Financial Daily, on May 21, 2014.