Watered down deal for three companies

NST, March 12, 2014

Three concessionaires that had rejected the Selangor government’s asset takeover offer will receive lower payment after the Federal Government invoked Section 114 of the Water Services Industry Act (WSIA) to restructure the water sector in the state.

Menteri Besar Tan Sri Abdul Khalid Ibrahim said the three concessionaires — Syarikat Bekalan Air Selangor (Syabas), Puncak Niaga Sdn Bhd and Syarikat Pengeluar Air Selangor Sdn Bhd (Splash) — are now subjected to the Act.

The total payment is expected to be reduced by as much as RM2 billion, from the initial offer of RM9.65 billion.

The Selangor government, he said, would now only pay for the assets of the three water concession companies, and not the equities.

Only Konsortium Abbas Sdn Bhd (Abass), which accepted the offer, would receive the full amount, Khalid said after chairing the state exco meeting, here, yesterday.

He said Section 114 had to be invoked in the interest of more than seven million consumers in Selangor, Kuala Lumpur and Putrajaya to ensure security, sustainability and viability of water
supply as there was no willing buyer and willing seller.

The state and federal governments agreed to the arrangement after the RM9.65 billion offer by the Selangor state government’s subsidiary, Kumpulan Darul Ehsan Bhd (KDEB), fell through
on Monday.

Puncak Niaga Holdings Bhd, Syabas and Puncak Niaga’s parent, is seeking a compounded 15 per cent return on equity per year as income loss compensation.

Gamuda Bhd, which has a 40 per cent stake in Splash, announced that Splash was unable to accept KDEB’s RM251 million offer as it was below 10 per cent of Splash’s net asset value of RM2.5
billion as at end 2013.

Gamuda closed 22 sen lower at RM4.48 yesterday, while Puncak Niaga rose three sen to RM3.26. Khalid said since WSIA was invoked, the state would no longer be interested in seeking international arbitration.

“The state’s offer of RM9.65 billion was the best offer. As far as we are concerned, there is no longer any need to go for international arbitration,” he said.

Khalid dismissed that the takeover was hostile and said the RM2 billion in savings will help improve Malaysia’s water services in the long run.

He said there would be no water tariff increases and implied that there could be possible tariff reduction from the RM2 billion savings.

Khalid also announced the declassification of the memoranda of understanding (MoU) signed between the state and federal governments on February 26.

The public keen to view the document can apply to the Selangor State Assembly. However, the MoU cannot be reproduced in any form.

The takeover process is expected to be completed in three months.