Splash accepts Selangor’s third revised offer

  • Business
  • Wednesday, 22 Jul 2009

PETALING JAYA: Selangor’s chequered pace of water sector restructuring took one step forward yesterday with the acceptance by Syarikat Pengeluar Air Selangor Sdn Bhd (Splash) – a 40% associate of Gamuda Bhd – of the state government’s third revised offer to take over its assets and operations.

The Selangor government’s revised offer was made last week and while the offer price of RM2.975bil and all other key terms remained the same, the “sweetener” was it had agreed to continue to retain Sungai Harmoni Sdn Bhd and Gamuda Water Sdn Bhd as the operations and maintenance (O&M) operators of Sungai Selangor Water Supply Scheme Phase 1 and Sungai Selangor Water Supply Scheme Phase 3 respectively.

With that, the acceptance by Splash is subject to several conditions including a supplemental agreement to be signed between the two existing O&M operators and the state government to reflect the latter’s commitment to retain the status of the contractors, settlement of offer price on one lump sum cash basis and the completion of the transaction via sale of shares of Syarikat Pengeluar Air Selangor Holdings Bhd, the parent of Splash.

Kumpulan Perangsang Selangor Bhd (KPS), which owns 30% of Splash, in a filing with Bursa Malaysia yesterday, said it had abstained from deliberating on the decision as it is a 60% subsidiary of Kumpulan Darul Ehsan Bhd, which is controlled by the state government.

Splash is the second concessionaire after Konsortium Abass Sdn Bhd to have accepted the offer by the state, which means the restructuring of the water sector in the state is still an outstanding issue. The two concessionaires that have yet to reach an agreement with the state government are Puncak Niaga (M) Sdn Bhd and its 70%-owned unit, Syarikat Bekalan Air Selangor (Syabas), that have not received a revised offer this time around.

In an interview with StarBiz yesterday, Energy, Green Technology and Water Minister Datuk Peter Chin said that while there was no new deadline for Selangor to complete the exercise, “the sooner we get this matter resolved, the better as otherwise the concessionaires might face difficulties remaining viable at the present water tariff rates.”

Selangor has the most fragmented water sector in the country with four concessionaires at various parts of the supply chain.

Puncak Niaga had declined the offer due to disagreement on the valuation method while Syabas said no decision was reached due to the absence of a representative from its golden shareholder, the Federal Government, at the meeting.

Chin said if the Federal Government were to intervene in Selangor’s exercise via Pengurusan Aset Air Bhd (PAAB), which is tasked to lead the nationwide water restructuring, it would have to negotiate with the concessionaires on asset pricing. “On the O&M agreement, we have agreed in principle that they can remain as operators but under a new regime that differs from the existing concession agreements,” he said.

Under the Water Services Industry Act 2006, PAAB, which is owned by Ministry of Finance Inc, would take over water assets from existing operators in the country and raise bonds to fund the capital expenditure.

Operators, meanwhile, can migrate to the new regime via licensing or stay on as concessionaires with concession terms to be reviewed periodically.

“As the Federal Government has access to cheaper financing, by taking over the assets, we can pass the savings back to consumers,” Chin added.

Syabas, the distribution concessionaire, was due to raise tariff as much as 37% on Jan 1 but the increase was delayed due to the state’s restructuring exercise.

Without the tariff increase, the concessionaire should be compensated and the reported amount was about RM38mil per month.

The state had indicated that the tariff increase could be avoided if the consolidation were successful.

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