Govt invokes Water Services Act, Selangor to take over water companies

PETALING JAYA: In an unprecedented move, the federal government has decided to invoke the Water Services Industry Act 2006 (Wasia), including Section 114, that pave the way for the Selangor government to take over the water concessionaires in the state.

This is the first time that the Wasia has been invoked since the Act was passed on June 1, 2006. Under Wasia, there is a provision for step-in rights whereby the minister may, if he thinks it necessary for national interest and with the prior approval of the federal government, direct the National Water Services Commission or Span to assume control of the operations of a licensee, and carry on or appoint others to carry on the licensee’s operations.

The federal government, via the Energy, Green Technology and Water Ministry, shall now pursue the “exercise of its rights and powers under the Wasia, as well as any other relevant acts, statutes or regulations” to assist the state government in implementing the proposed restructuring and consolidation of the Selangor water supply industry.

“This includes invoking Section 114 of Wasia to address issues of national interest to ensure security, sustainability and viability of the water supply industry in Selangor, Kuala Lumpur and Putrajaya,” the federal and Selangor governments said in a joint-statement yesterday.

It said the decision was jointly made at a meeting between Energy, Green Technology and Water Minister Datuk Seri Dr Maximus Johnity Ongkili and Selangor Mentri Besar Tan Sri Abdul Khalid Ibrahim.

At the meeting, Ongkili reaffirmed his commitment to facilitate the state government in taking over the Selangor water industry from the four concessionaires as agreed in the memorandum of understanding (MoU).

In an interview with StarBiz, Khalid said: “It took us quite some time, over several cups of coffee, to get the clause of invoking the Wasia to be included in the MoU. Above all, it has the commitment of the federal government. Anyway, the concessionaires’ authorisation to operate is on a month-to-month basis.”

He added that the MoU also stated that it was not only limited to Wasia but any other related laws. He stressed that the water consolidation had to be done in the interest of the people and hoped it would set the benchmark for the future deprivatisation of utilities and other strategic assets.

On Feb 26, an MoU was signed between the federal and Selangor governments for the takeover of Puncak Niaga Sdn Bhd (PNSB), Syarikat Bekalan Air Selangor Sdn Bhd (Syabas), Syarikat Pengeluar Air Sungai Selangor Sdn Bhd (Splash) and Konsortium ABASS Sdn Bhd for RM9.65bil.

In return, the state government will issue a development order for the construction of the Langat 2 water treatment plant and its distribution system, and ensure all approvals and authorisation for the project are done within 30 days.

On Monday, three concessionaires – Syabas, Puncak Niaga and Splash – declined the offer, while ABASS accepted.

Puncak Niaga Holdings Bhd, in a statement to Bursa Malaysia, reiterated its conditions that included a compounded return on equity of 15% per annum taken as compensation to PNSB for the loss of future income.

Puncak Niaga also sought to remove the arbitration clause, as it claims that it violated the spirit of “laissez faire”.

Gamuda Bhd, which controls 40% of Splash, meanwhile, said the net offer was lower than its net asset value (NAV) and was “not reasonable for acceptance by the company”.

“The net offer of RM250.6mil for Splash when compared to the NAV of Splash amounting to RM2.54bil as at Dec 31, 2013 will result in a huge divestment loss of RM920mil to the company. The offer of RM250.6mil is below 10% of Splash’s NAV. The offer is, therefore, not reasonable for acceptance by the company,” said Gamuda.