THE Selangor Government's investment arm Kumpulan Darul Ehsan Bhd (KDEB) is expected to consolidate its water and water-related operations, following the completion of the privatisation of water supply operations in the state.
Industry sources said the Selangor Government was currently looking at ways to maximise its investments in some of these companies with a view to rationalise its involvement in the state water supply operations and play a bigger role in the industry.
“Currently, the Selangor Government holds minority stakes in several listed and non-listed companies, which are involved in the various water privatisation projects,” said a senior executive in one of the water companies based in the state.
The minority stakes in these water companies do not give the Selangor Government much clout in the water privatisation projects in the state, he added. These interests are currently held by either KDEB or its listed company, Kumpulan Perangsang Selangor Bhd.
Despite Selangor being the largest consumer of water in the country, the State Government has little direct involvement in the state's water supply operations compared with other states such as Johor and Penang where the state-owned companies own substantial stakes in their respective water supply companies.
Currently, the Selangor Government's biggest involvement in water supply operations is in Syarikat Pengeluar Air Selangor (Syabas), in which it has a 30% stake following the privatisation of Perbadanan Urus Air Selangor Bhd last year.
Syabas is controlled by Tan Sri Rozali Ismail, who owns a 48.5% stake in Puncak Niaga Holdings Bhd.
The state also holds a 20% stake in Taliworks Corp Bhd, through KDEB. Taliworks is currently operating a treatment plant in Sungei Sireh and is a concession holder for water supply operations in Langkawi.
Other companies in which it holds minority stakes are Syarikat Pengeluaran Bekalan Air Selangor Sdn Bhd (Splash) and Konsortium Aliran Bekalan Air Selangor Selatan Sdn Bhd (Abass). Splash has a 30-year concession in Sungei Selangor Phase 1 and 3 water treatment projects.
The Selangor Government's stake in Abass is held through Kumpulan Perangsang.
Besides water companies, KDEB currently has a 30% stake in a joint venture with JAKS Resources Bhd to supply pipes to Selangor and other states.
While most of these shareholdings are held as strategic stakes, they do not give the state-owned companies much benefit in terms of returns from the water projects.
The sources said that given the current situation, there was a likelihood that the state would dispose of some of these shares to raise the much-needed cash to pay for some of the recent acquisitions, such as the 30% stake in Syabas.
At the same time, with a better cash position, the state-owned companies could be involved in a big way in future water-related projects, the source said.
Some of the Selangor Government's stakes such as the 20% in Taliworks could be worth some RM100mil. Taliworks is 64%-owned by Datuk Lim Ah Bak.
“It is understood that the Selangor Government has informed Taliworks' majority shareholder of its intention to sell its stake in the company,” the source said.
In addition, KDEB is also studying its relationships with Splash and Abass, which are the bulk water suppliers in the state. Other shareholders of Splash are Gamuda Bhd (30%) and The Sweet Water Alliance (40%), a company linked to businessman Tan Sri Wan Azmi Hamzah.
The shareholders of Abass are Kumpulan Perangsang, Zufar Water Services Sdn Bhd and Chemical Waste Management Sdn Bhd, a company linked to the Kuok group.
The sources said that from the investment point of view, the Selangor Government's interests were spread out and it would be better for the state to consolidate its positions in some of these companies if it was serious about becoming a major water player.
“The state-owned companies can't remain on the sidelines forever,” the source said.
This has become more apparent, especially with more water projects expected to be dished out soon after the Federal Government completed its plan to take control of the country's water supply operations from all State Governments, except for Sabah and Sarawak.
The completion of the plan by the Federal Government is expected to kick-start some of the delayed water projects in the country.
In Selangor, the projects include the replacement of pipes, for which RM250mil has already been allocated. Other projects include the Pahang-Selangor water transfer and Sungai Langat dam, which are expected to cost at least RM2bil each.
“These are significant projects for the state and present a good opportunity for the state-owned companies to be involved in,” the source said.
These projects would require a major capital outlay for which the Selangor Government currently could not spare; thus any additional funding would come in handy, the sources said.
KDEB is also expected to be involved in some of these projects either as main contractor or concession holder.