Azmin to scrutinise Selangor water deal

by **Cals** Thu 25 Sep 2014, 01:16

Business & Markets 2014

Written by Kamarul Anwar of theedgemalaysia.com

Wednesday, 24 September 2014 10:17

KUALA LUMPUR: Newly minted Selangor Menteri Besar (MB) Mohamed Azmin Ali will study the contents of the master agreement the Selangor and federal governments had signed on Sept 12 to restructure the state’s water supply sector, amid uncertainty over its legitimacy following the leadership change.

His aide, Hilman Idham, said Azmin will study the master agreement before announcing the next step.

“[Azmin] will need to be briefed by the officers involved in the water restructuring in Selangor before making any decisions,” he told The Edge Financial Daily via telephone yesterday.

He said the new MB views the matter of re-nationalising Selangor’s water concessions as important.

The then Selangor MB Tan Sri Abdul Khalid Ibrahim had signed the master agreement with Energy, Green Technology and Water Minister Datuk Seri Dr Maximus Ongkili, which would take treatment and distribution operations in the RM30 billion industry out of the hands of three private companies and put them under a state government-controlled entity.

It would also give the Selangor and federal governments powers to set rates for treated water for roughly seven million consumers in Selangor, Putrajaya and Kuala Lumpur.

Member of Parliament for Petaling Jaya Utara Tony Pua, who sits on Pakatan Rakyat’s (Pakatan) special water committee, told The Edge Financial Daily that the Pakatan coalition will need to take a look into the master agreement first before making a decision on any reviews.

“In principle, there are no big issues [with the master agreement], but the devil is in the details,” he said.

Pua also said he has no “big problem” with the RM9.65 billion price tag that Abdul Khalid’s administration had offered to take over the four water concessionaires in the state.

So far, three of the four water concessions — namely Puncak Niaga Sdn Bhd (PNSB) and Konsortium Abass Sdn Bhd (Abass) and Syarikat Bekalan Air Selangor Sdn Bhd (Syabas) — have accepted Selangor’s offer.

Syarikat Pengeluar Air Sungai Selangor Sdn Bhd (Splash), however, had rejected the latest round of offers, on the basis that the net gain of RM250.6 million amounted to only about a tenth of its net asset value at the time the offer was tabled.

The terms of the master agreement include state special purpose vehicle Pengurusan Air Selangor Sdn Bhd (PASSB) acquiring Syabas, PNSB, Abass and services licence holder Konsortium Air Selangor Sdn Bhd.

Meanwhile, Pengurusan Aset Air Bhd (PAAB) will pay RM1.68 billion to facilitate the concession acquisitions and in return, the Selangor government will turn over the water assets to PAAB for a period of 45 years.

PAAB will lease the water assets to PASSB, which will pay a leasing fee to PAAB, at a rate that will be determined between the two parties and set out in the facility and lease agreements.

The signing of the master agreement followed a memorandum of understanding entered into by both parties on Feb 26 this year, followed by a heads of agreement on Aug 1.

An analyst with a local brokerage firm said as Abdul Khalid was viewed as a caretaker MB when the master agreement was signed and the current administration is not agreeable with many of his decisions on the water issues, there is a possibility that there will be a review of the agreement.

“However, it might be tough for Pakatan to do so as the agreement was jointly signed with the federal government,” said the analyst.

Jittery investors sold shares in water-related stocks yesterday, with Puncak Niaga Holdings Bhd, the owner of PNSB and Syabas, falling eight sen or 2.32% to close at RM3.37 with 319,000 shares traded. Kumpulan Perangsang Selangor Bhd, which holds shares in Abass and Splash, lost 10 sen or 5.81% to end at RM1.62 with 2.11 million shares traded.

Gamuda Bhd, which owns 40% of Splash, closed unchanged at RM4.81, with 2.05 million shares changing hands.

This article first appeared in The Edge Financial Daily, on September 24, 2014.