Thursday 28 Mar 2024
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KUALA LUMPUR: Uncertainty remains over Selangor’s water asset consolidation exercise as both the state and federal governments are still in negotiations to resolve many core outstanding issues that caused the stalemate.

In fact, some quarters commented that the signing of a supplemental water agreement between the federal and state governments last Friday was an anti-climax as some had expected the two governments to announce resolutions to address the differences between them, for instance the delayed Langat 2 project, which sources raw water from Pahang.

The water impasse that has been dragging on for over six years has resulted in hundreds of new property development projects being stalled due to water shortages.

Selangor’s water reserve margin, which measures the level of available treated water supply, is currently in the low single-digits — below the water reserve margin of between 10% and 15% suggested by the National Water Service Commission. A dry spell would put the state into a water shortage.

Another thorny issue that Menteri Besar Mohd Azmin Ali needs to crack his head over is the offer price to take over the water assets held by Syarikat Pengeluar Air Sungai Selangor Holdings Bhd (Splash), which owns the biggest water treatment plant.

When asked about whether the state government is willing to revise its offer price for Splash, Azmin said the negotiations are still ongoing.

“We will commence negotiations and will decide [whether or not to raise the offer price] then,” he told The Edge Financial Daily, adding that the matter is open for negotiation.

Splash, in which the Selangor government holds a 30% stake, has rejected the state’s offer to buy its water treatment plant for RM250.6 million, saying that the offer price does not take into account revenue that the concessionaire would have to forgo by ending the concession early.

Gamuda Bhd and businessman Tan Sri Wan Azmi Wan Hamzah hold a 40% and 30% stake in Splash respectively. Gamuda group managing director Datuk Lin Yun Ling once said he would only relinquish the water treatment assets to the state if the offer price is at its book value of RM2.8 billion, at least.

Last Friday, the federal and Selangor governments signed a supplemental agreement to extend the deadline on the consolidation exercise. The two parties now have 60 days to complete the master agreement, which will set in motion the restructuring and takeover of the state’s water assets.

The latest supplemental agreement allows the water restructuring exercise to proceed without Selangor giving up its land — solving one of many issues of contention, said industry observers.

Azmin said to expedite Selangor’s water restructuring exercise, the dispute over the ownership of the Sungai Semenyih and Bukit Nanas water treatment plants will now be addressed separately between the federal and state governments.

“The state has agreed to provide alternative water assets to PAAB [Pengurusan Aset Air Bhd] in consideration for up to RM2 billion in funds to finance Air Selangor’s acquisition of the private water concession companies in Selangor,” said Azmin.

As for the delayed Langat 2 water treatment plant project, Azmin told reporters after the signing ceremony last Friday, that the matter will also be dealt with separately between the federal and state governments.

To recap, Azmin demanded a higher price than RM14.9 billion for the water assets to PAAB, a unit of the federal government as he said the federal government needs to pay for the usage of the land.  It is not clear what  his stance on the matter is now.

However, an industry observer pointed out that confusion relating to the usage of the land will arise, causing challenges and delays in the future.

“Selangor gets to keep the land, but assets will belong to the federal government. What sort of rights does it have over the assets? Will the federal government need to to seek the state’s approval, for instance, to erect structures and dig up land for pipes?” he noted.

Nevertheless, an analyst sees the signing of the supplemental agreement as a positive move for the water sector and water-related industries, as it paves the way for much-needed pipe replacement in Selangor.

He said a resolution of Selangor’s water woes will be positive for water pipe players like Jaks Resources Bhd and Engtex Group Bhd.

 

This article first appeared in The Edge Financial Daily, on July 13, 2015.

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