WATER concessionaire Puncak Niaga Holdings Bhd has been awarded a contract valued at RM500mil to replace old asbestos water pipes in the Federal Territory, Works Minister Datuk Seri S. Samy Vellu said.
He told reporters in the lobby of parliament yesterday that the Federal Territory had been chosen first among other areas in the country for such replacement work because of its high incidence of water leakage, which had led to many supply problems. Work is expected to start soon.
The announcement, which was made in the afternoon, sent Puncak Niaga's share price to an intra-day high of RM3.26. It later closed at RM3.16, up 6 sen from Monday's close. A total of 5.5 million shares changed hands.
When contacted, a Puncak Niaga official declined to comment on the new contract, saying the company was awaiting further details from the government.
Analysts said the price movement was expected as investors had anticipated the award of the contract since the government made the announcement a year ago to replace old pipes throughout the country.
“We believe the latest contract will be the beginning of the total privatisation of the entire water supply system in the Federal Territory and Selangor,” said an industry analyst with a local brokerage.
However, he said, the size of the contract was much smaller than the RM2bil expected for the replacement of pipes in Selangor and the Federal Territory, and the RM10bil for the whole country, as announced by the government earlier.
On the financial impact of the project on Puncak Niaga, the analyst said: “Given the size and cost of the project, I think that in the first few years operations will be in the red, but should turn positive thereafter.”
The company would also benefit from construction activities arising from the projects, he added.
More importantly, he said, the contract would put Puncak Niaga in a better position to move forward in its negotiations with the Selangor and federal governments on the privatisation of their water supply.
Besides the water pipe replacement project, Puncak Niaga was also negotiating with the Selangor government on a 60% stake in Perbadanan Urus Air Selangor Bhd (PUAS).
It is also in the midst of negotiations with PUAS over unpaid water bills totalling RM800mil.