At stake are billions for concessionaires and higher tariffs
By PAULINE NG
IN KUALA LUMPUR
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A BATTLE appears to be looming between the federal government and the state government of Selangor over the takeover of privatised water concessions in the state. At stake are billions of ringgit for the concessionaires and higher water tariffs for consumers.
The move to restructure the sector could also become a political flash point with the Pakatan Rakyat accusing the Barisan Nasional of bailing out its cronies to the detriment of the public.
In spite of its own designs to consolidate the sector, the central government had 'gone off on its own tangent', rather than work with the state, a panel set up for the reorganisation exercise said yesterday.
This 'sabotage' occurred when a central government agency - which had agreed to state-led talks earlier - inexplicably announced on Feb 18 that it would take over the negotiations and deal directly with the concessionaries.
This about-turn came two days before a deadline for the companies to accept an offer by the state of RM4.6 billion (S$1.9 billion) for their assets (treatment plants and pipes), and another RM1.1 billion for their equity.
The offer was subsequently rejected by the four concessionaires - Puncak Niaga (M) Sdn Bhd, Syarikat Pengeluar Air Selangor Holdings Bhd (Splash), Konsortium Abass Sdn Bhd and Syarikat Bekalan Air Selangor Sdn Bhd (Syabas) - in the belief that the federal government would revert with a more attractive option.
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At a press conference yesterday, panel member and parliamentary lawmaker Tony Pua said that being a regulated industry, Selangor was prepared to give the companies 12 per cent return on capital annually starting from the concession period.
'We are not nationalising at zero cost. But they have excessively leveraged their assets and have problems paying off their loans, and now expect the state to help out.'
Together, the four players have total debts of RM6.4 billion, mainly in outstanding bonds, the net debts of Puncak Niaga and Syabas - both controlled by businessman Rozali Ismail - amounting to some RM4.2 billion.
While the state holds a stake in the concessionaires through its agencies, their shareholders include Puncak Niaga Holdings and Gamuda Bhd - listed companies which minorities bought into on the strength of earnings from their concessions. In turn, the companies have returned cash amounting to hundreds of millions of ringgit to shareholders over the years.
Pointing to major breaches of concession terms by Syabas, the panel questioned why the federal government had seen fit not to take action.
Malaysia saw a wave of privatisation projects in the 1990s, but as with highway and power concessions, the current issue with water concessionaires is now a sore point as terms and conditions become known.
The federal government has come under fire for the lop-sided agreements favouring concessionaires. But varying the terms now or buying over the assets could spook investors if it were not properly managed.
The panel assured that water tariffs could be lowered beyond the current RM0.77 per cubic metre for domestic users if it were to handle the takeover.
Associate professor at Nottingham University Subramaniam Pillay observed that the state owned 70-80 per cent of all water assets and the federal government's plan to take over the assets and capital expenditure and to license the distributors goes against the plan of having a central body manage the whole system.
To break the legal impasse over who ultimately calls the shots, Consumers Association of Subang & Shah Alam president Jacob George suggested that the state seek a legal remedy 'as the issue has significant implications for Selangor and the rest of the states'.
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