KUALA LUMPUR: The Selangor state government is unlikely to grant the federal government a third extension to the master agreement signed on Sept 12 last year to restructure the state’s water supply industry. The agreement lapses today, said sources.

“The federal government has asked for another one-month extension to the master agreement till March 31 this year,” one source told The Edge Financial Daily.

“But the Selangor government has disagreed to extend the deadline to accommodate some changes to the master agreement, which allow the federal government to acquire all land utilised for water assets (such as pipes, plants and reservoirs) for free.

“The terms were never in the [original] master agreement,” the source added.

It is understood that Selangor Menteri Besar Mohamed Azmin Ali’s office is expected to issue a press statement on the matter today. 

Under the master agreement, Air Selangor Sdn Bhd, a new entity, will take over the operations and maintenance of the state’s water treatment plants and water supply services which are currently managed by four concessionaires.

They are Syarikat Pengeluar Air Sungai Selangor Sdn Bhd (Splash), Puncak Niaga (M) Sdn Bhd (PNSB), Syarikat Bekalan Air Selangor Sdn Bhd (Syabas) and Konsortium Abass Sdn Bhd.

The master agreement was to have been finalised on Jan 12, but was postponed to Feb 9 and again to March 9, following the transfer of water assets between the state and federal governments.

The agreement would also pave the way for the federal government to proceed with the RM3 billion Langat 2 water treatment plant project by giving it the necessary development approvals.

Energy, Green Technology and Water Minister Datuk Seri Dr Maximus Ongkili on Feb 25 expressed his optimism that the master agreement between the federal and state governments, which was signed by Mohamed Azmin’s predecessor Tan Sri Abdul Khalid Ibrahim, can be finalised by March 9 after being postponed twice previously.

“The problem arose because there are assets in Semenyih and Bukit Nenas which were originally known as Selangor state assets but upon closer scrutiny, they belong to the federal government.

“Although the land belongs to the federal government, but the infrastructure belongs to the concessionaires,” Ongkili said.

With the latest anticipated collapse of talks, the likelihood remains that the federal and Selangor governments will return to the negotiating table, the source said.

“Taps won’t run dry yet.

“Phase 1 of the Langat 2 project is still proceeding with some approvals already given earlier,” the source said.

But this impasse may affect subsequent developments if it becomes protracted, the source noted.

It is understood that Mohamed Azmin is willing to go back to the same master agreement even after it lapses if the federal government honours the original terms of the agreement and not demand new terms and conditions at the expense of the state.

But if the water talks collapse, the source said the agreement to acquire PNSB and Syabas is also expected to lapse as well.

PNSB manages a majority of the more than 30 water treatment plants in Selangor, while Syabas is responsible for managing the treated water distribution system.

Mohamed Azmin late last year announced the completion of the takeover of PNSB and Syabas after state-controlled corporation Pengurusan Air Selangor Sdn Bhd bought over shares in both companies.

Splash, meanwhile, has been given a year to conclude an agreement with the Selangor government.

Another source close to the matter told The Edge Financial Daily that the federal government can extend the master agreement by another month when it lapses today, but will leave it to the Selangor government to decide.

The master agreement on the water supply was first signed between the Selangor and federal governments on Sept 12 last year. Abdul Khalid then witnessed the signing on behalf of the state, while Ongkili represented the federal government.

Prior to Sept 12, the federal and Selangor governments had on Aug 1 signed a “heads of agreement” (HoA) on restructuring the water supply industry — paving a long-term solution to the water issue in Selangor.

The HoA was an extension of the memorandum of understanding signed between the state and federal governments on Feb 26 of the same year to build the Langat 2 water treatment plant and its distribution system.

This article first appeared in The Edge Financial Daily, on March 9, 2015.