Water pipe replacement a sure thing with takeover

  • Nation
  • Saturday, 04 Aug 2018

PETALING JAYA: The deal by the Selangor government to buy Syarikat Pengeluar Air Sungai Selangor Sdn Bhd (Splash) would lead to the replacement of old water pipes in the state, analysts said.

The political deadlock between the Federal and state governments over water assets has stood in the way of the water pipe replacement programme in Selangor.

CIMB Research said if the Splash deal is successful, it would lead to dealing with non-revenue water (NRW) losses and new water treatment plant capacities, and a full-cost recovery model possibly through a scheduled water tariff increase.

“This will address the cash-flow deficit and unpaid receivables along the entire water treatment and distribution supply chain,” it said in its July report.

Meanwhile, RHB Research reckoned that the new Government wants to emphasise pipe replacement in Selangor.

“This is due to the severity of the various water crises that have impacted the state in recent times – it reported 49.4% of the water disruption cases nationwide,” it said in a report last month.

It is understood that the RM1bil pipe replacement programme in Selangor is part of the RM10bil nationwide pipe replacement programme.

Repair work has not been carried out as new contracts were frozen because of the stalemate between the Selangor government and Splash.

The nagging issue that is holding back the takeover of Splash is its valuation.

Following years of delay, substantial work can finally begin following the successful consolidation of all four of the state’s water concessionaires into a single entity under Air Selangor.

Nonetheless, CIMB said that the sustainable recovery in Selangor’s structural water issues could only be realised if the Splash deal is wrapped up for good.

It said that the last water tariff hike was in 2006, which lifted household water rates by 13%-18% and commercial rates by 15%-19%.

Usage of the first 20 cubic metres of water remains free.

Splash shareholders comprise Gamuda Bhd, which owns a 40% stake, while Sweet Water SPV Sdn Bhd and Viable Chip Sdn Bhd with 30% each.

Sweet Water is the private vehicle of businessman Tan Sri Wan Azmi Wan Hamzah.

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