Invoking Water and Services Industry Act catches analysts off guard

water level at empangan sungai selangor

PETALING JAYA: The Government’s decision to nationalise water assets in Selangor by invoking the Water and Services Industry Act 2006 (Wasia) have caught financial analysts covering the concessionaires off guard.

Many, including those at CIMB Research and Maybank IB Research were hoping that the five-year water restructuring exercise in Selangor could be resolved on a “willing-buyer, willing-seller” basis.

“We still believe there should be a more commercial approach to resolving the takeover,” CIMB Research said in a note to clients yesterday.

The firm suggested that the federal government might even top up the valuations for the water assets after the concessionaires said on Monday that they were unable to accept the RM9.65bil takeover offer by Selangor as it was too low.

The general view was that using the law to force companies to sell their assets would drive away investors.

“Any forced takeover will have implications on the sanctity of the contracts where the Government is counter-party,” Maybank IB Research said.

“We take the view that the sanctity of contracts will prevail and a willing buyer, willing-seller outcome would be reached eventually,” it added.

But after a five-year long deadlock and at least six rejected offers, the Government finally put its foot down, as taps in millions of households around the Klang Valley continue to run dry.

The joint statement from the federal and state governments yesterday evening poured cold water on any hope for a higher price for the assets.

It is now likely that the only recourse for the water players, including Puncak Niaga Holdings Bhd and Gamuda Bhd, is to go for international arbitration.