KUALA LUMPUR: The consolidation of Selangor’s water assets, which has been stalemated for the past five years, will be done on a “willing buyer, willing seller basis”, said Energy, Green Technology and Water Minister Datuk Seri Dr Maximus Ongkili.

The minister also said no decision has been made on the winner of the contract for the 2,000mw coal-fired power plant, known as Project 3B. 1Malaysia Development Bhd (1MDB) is said to be the front runner for the project and the RM11 billion power plant project is deemed crucial for 1MDB’s listing of its power generation assets.

As for the water impasse in Selangor, Maximus’ remark may come as a relief to water concessionaires in the state as this implies that the federal government is likely to start talks with the concessionaires, instead of invoking Section 114 of the Water Services Industry Act (Wasia), which would result in a forced takeover of the water assets.

“The federal government has announced [its intention to invoke Section] 114 but we still want to give space for a mutual agreement [with the concessionaires]. So, I’m hopeful that many things can be finalised in the next few weeks,” Maximus said at Tenaga Nasional Bhd’s Chinese New Year open house yesterday.

On a willing buyer, willing seller basis, the concessionaires would be able to negotiate with the federal government for a price at which they are willing to part with their assets. Should that materialise, the offer price would probably be higher than RM9.65 billion — the price offered by the Selangor government which the concessionaires rejected.

There are three water treatment concessionaires in Selangor — Puncak Niaga Sdn Bhd, Konsortium Abass Sdn Bhd and Syarikat Pengeluar Air Sungai Selangor Sdn Bhd (Splash). Another concessionaire, Syarikat Bekalan Air Selangor Sdn Bhd (Syabas), serves as the state’s sole water distributor.

Tan Sri Wan Azmi Wan Hamzah, a 30% owner of Splash, said in a recent interview with The Edge that the water concessionaires should not settle for “just anything” in disposing their assets to the federal government.

In his words, “Resorting to purported ministerial powers under Wasia to break agreements and economise on compensation obligations will not send the right signal to investors.

“We would not dream of  compensation to exceed a valuation based on discounted cash flow. Therefore, the transaction can be negotiated downwards from there,” he said.

However, Selangor Menteri Besar Tan Sri Khalid Ibrahim has told The Edge that he stands by the RM9.65 billion offer and that the state government is prepared to go for international arbitration if the concessionaires insist RM9.65 billion is too low.

“If the court rules that the offer should be higher, we would have to pay a higher price … but if the court decides that the offer should be lower, we would still pay RM9.65 billion,” said the menteri besar. Khalid pointed out that should the state government accede to the concessionaires’ demands, the total offer would shoot up by about RM4 billion. Higher compensation, he said, could result in a higher water tariff going forward as the assets will be borne by and returned to the state.

The state government made five offers to four water concessionaires as it expressed dissatisfaction over the quality of water services in the state. A high percentage of non-revenue water, supply interruptions and high tariffs are known to be the state government’s main points of contention.

This article first appeared in The Edge Financial Daily, on February 12, 2014.