Puncak Niaga expected to pay royalties of RM20m-RM25m


Puncak Niaga Holdings Bhd is expected to pay between RM20mil and RM25mil annually in royalty to the Selangor government under the state's proposed water supply privatisation scheme, analysts said. 

Under the privatisation plan announced recently, Puncak Niaga will take a 70% interest in Syarikat Bekalan Air Selangor Sdn Bhd (Syabas) and the state government 30%, with the federal government holding a “golden” share. 

The proposed deal, valued at RM1bil annually, will give Puncak Niaga, through Syabas, full control over the water supply operations currently handled by Perbadanan Urus Air Selangor Bhd (PUAS). 

Analysts who attended the company's briefing recently said the royalty rate was in line with that proposed by Selangor for the purchase of water from Pahang. The royalty calculation was based on the rate per 1,000 litres of between 2.5 and 3 sen proposed in the privatisation plan. 

The total daily water consumption in the state amounts to 3.20 billion litres, which is nearly half the total water consumption of the whole country. 

On the lower rate of 2.5 sen, Syabas is expected to pay some RM29.2mil in royalty annually, and on the higher rate of 3 sen, RM35mil. For its 70% stake in Syabas, Puncak Niaga's share will amount to RM20mil to RM25mil. 

Despite the hefty sum, most of the royalty payment will come from the water charges that Syabas collects from consumers. 

“We do not foresee any difficulty for the company in coming up with the annual payment as, under the privatisation scheme, water rates will be reviewed every five years,” an analyst with a bank brokerage said. 

“The royalty is part of the conditions stipulated in the privatisation agreement giving the company the right to extract raw water in the state,” he told StarBiz. 

However, the royalty payment has not been finalised; it is one of the subjects of ongoing negotiations between Puncak Niaga and the state government. 

Under the privatisation scheme, the first water tariff review will be in 2005. 

The current domestic water rates in Selangor are: 57 sen per 1,000 litres for the first 20,000 litres, 91 sen per 1,000 litres for 21,000 to 35,000 litres, and RM1.70 for consumption above 35,000 litres. In 2001, the Selangor government collected some RM733mil in revenue from water supply. 

Besides Puncak Niaga, the other two water treatment operators in Selangor are Syarikat Pengeluar Air Selangor Sdn Bhd and Taliworks Corp Bhd

Stock watch on Puncak Niaga

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