By Khairul Khalid
Splash (Syarikat Pengeluar Air Selangor) wrote to the federal government to reconsider a RM13.5 billion takeover plan by Splash as an alternative to the current state restructuring, according to Wong Mun Keong, a director of Sweetwater Alliance that owns 30% of Splash.
“Instead of the Selangor state taking over the water industry, we told them (the ministry) that Splash could do it at a fair price and do a better job. The plan means that Splash would pay RM13.5 billion for all the water assets, an amount that we think is a fair value to everyone,” said Wong to KiniBiz.
Under Splash’s plan, it would sell the water assets back to PAAB (Pengurusan Aset Air Bhd) at one time book value, which is the maximum PAAB could pay under current policy. PAAB would then appoint Splash as the sole water operator and charge Splash lease payments.
Splash made its initial offer of RM10.8 billion in 2010 to takeover the all of Selangor’s water assets based on the same business and operational model.
“We wrote to the minister again earlier this year to remind them of our initial offer in 2010 to show that it could be done. They ignored us. The first time we showed this to the Selangor MB (Khalid Ibrahim) even his people thought it was a good offer. But later he (Khalid) said he had a better idea,” said Wong.
PAAB is the federal water asset management company. Wong explains that under Splash’s RM13.5 billion proposal, the Selangor state government would still retain its 30% stake in Splash.
Wong also states that the annual lease payments will be based on the RM13.5 billion buy out and under the circumstances PAAB could charge an estimated 5%-6%. He also adds that Splash’s model could do without any water tariff increases for the first few years.
“Our RM13.5 billion plan is based on a model of lean and mean operating costs. We could do it with no immediate tariff increase until 2017. Then, we proposed a 12% tariff increase in 2017 and thereafter 10% every three years, which works out to around 3% annual incrase,” said Wong.
Khalid recently indicated that he expects Selangor’s water restructuring to be completed within the next 3-6 months after concessionaires Puncak Niaga and Syarikat Bekalan Air Selangor (Syabas) agreed to a state government takeover for RM5.58 billion.
Puncak Niaga owns two of the four water concessions in Selangor including a 70% stake in Syabas, the sole water distributor of water in the state. The other water concessionaires are Splash and Konsortium Abass, a wholly-owned subsidiary of Selangor state.
Splash remains the only concessionaire to still stall on a deal with the state. It has been adamant that Selangor’s last takeover offer falls well short of their NAV (net asset valuation) of RM2.5 billion.
Splash has also indicated that they would consider legal action if they are forcibly taken over under WSIA (Water Sevices Industry Act) without adequate compensation.
To recap, early last April the federal government enacted WSIA after three out of the four concessionaires failed to agree on the last offer of RM9.65 billion stated in the MoU (memorandum of understanding) to resolve the longstanding water restructuring issue.
Section 114 of WSIA provides for the forced takeover of the water assets under circumstances of national interest.
Nevertheless, despite the cabinet’s approval of WSIA, there has been reluctance by the federal government enforce it and Putrajaya has still insisted for a “willing buyer willing seller” deal between state and concessionaires.
You must be logged in to post a comment.