This article first appeared in The Edge Financial Daily on September 12, 2017
KUALA LUMPUR: With less than a month left to finalise the takeover of Syarikat Pengeluar Air Selangor Sdn Bhd (Splash) under the extended deadline, the federal government is still waiting for the Selangor government to make an offer to the water treatment concessionaire.
Energy, Green Technology and Water Minister Datuk Seri Dr Maximus Ongkili said Selangor must announce the offer price before Putrajaya reveals the amount of money it will provide to help finance the acquistion.
“The Selangor government will name the price to Splash shareholders, and then we [federal government] will discuss with them on how much we will give.
“But it [the scale of the fund] will be reasonable,” he told reporters after officiating at the International Water Association (IWA)-Asia Pacific Region (Aspire) Conference 2017.
Asked if the Oct 5 deadline will be further extended if the Selangor government does not come up with an offer price, Ongkili merely said: “We will have to discuss with them.”
Splash operates the Selangor dam and two water treatment plants. It is 30%-owned by Splash chairman Tan Sri Wan Azmi Wan Hamzah’s private vehicle, The Sweet Water Alliance Sdn Bhd, 40% by Gamuda Bhd and another 30% by Kumpulan Perangsang Selangor Bhd.
Selangor Menteri Besar Datuk Seri Mohamed Azmin Ali was previously reported as saying that the deadline for Putrajaya and Selangor to finalise the takeover was moved — for the second time — from April 6 to Oct 5 “because the federal government is waiting for its own international independent valuer to finalise the valuation of Splash’s assets”.
The valuation has since been completed by Deloitte, but it was not revealed to the public and the Selangor government. Ongkili told Parliament that the information is merely for the consumption of the federal government.
Earlier reports have indicated the book value of Splash — whose concession ends in December 2029 — to be somewhere between RM2.8 billion and RM3.2 billion.
Mohamed Azmin was also reported to have rejected the proposed 40:60 split of the acquisition cost of Splash by the federal government, which had funded in full the acquisition of three other concessionaires in Selangor under the Selangor water rationalisation exercise.
In a memorandum of understanding inked between Putrajaya and Selangor in February 2014, the federal government indicated willingness to allocate RM9.65 billion for the rationalisation plan.
It had through Pengurusan Aset Air Bhd acquired Puncak Niaga Sdn Bhd for RM2.47 billion, Syarikat Bekalan Air Selangor Sdn Bhd for RM3.11 billion and Konsortium Abbas Sdn Bhd for RM991 million.
The key benefit for the rationalisation of Splash is that it will reduce the operating cost incurred by state water asset operator Pengurusan Air Selangor Sdn Bhd. As at Dec 31, 2016, it had an outstanding payment to Splash for the bulk supply rate (BSR) and fixed monthly payment (FMP) totalling RM3.7 billion.
On a related matter, Ongkili yesterday said that governments should really look into implementing a better water subsidy rationalisation plan in the long-term, which would pinpoint those eligible for subsidy as opposed to the current across-the-board scheme in order to better manage costs.
“Rationalisation of subsidy is the rule of the game as far as the federal and state governments are concerned. At the moment, it is still fairly heavily subsidised nationwide.
“That means we should subsidise the people that actually require subsidy. We should not subsidise people who can afford to pay the price [of the service].
“For example, the tariff for industrial use is almost similar to cost of production, treatment and distribution. But the price is still very cheap compared with other parts of the world. In the long term, the cost of treating water should be reflected in the price [of the tariff],” he added.