By Khairul Khalid
Selangor’s water restructuring is now in limbo yet again, with Selangor MB Azmin Ali deadlocked with Putrajaya. Judging by the murky history of the water saga, could we be in for another long gridlock ?
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Selangor Menteri Besar (MB) Azmin Ali’s ongoing tussle with Putrajaya over control of the state’s water assets has its origins in a seven year, three-way battle between state and federal governments, as well as the private concessionaires.
Currently, Selangor is in talks with Putrajaya to save a faltering water agreement, signed only last September during the tenure of former MB Abdul Khalid Ibrahim after years of gridlock.
A few weeks ago, the state abruptly cancelled the water deal, claiming that the federal government had violated the master agreement. The main disagreement this time is apparently over ownership of land as well as other assets covered in the master agreement.
It remains to be seen whether Azmin will be able to rescue the water agreement from collapsing, but it will not be entirely surprising if negotiations between Selangor and Putrajaya drag on indefinitely.
After several twists and turns over the years, a conclusion looked conceivable after shareholders of Puncak Niaga, one of the private concessionaires who for so long had resisted a deal, finally approved the sale of its water assets to the Selangor state last January.
Now, the water restructuring is in limbo yet again.
The Selangor water saga has been marked by constant political bickering, maneuvering and shifting allegiances.
How has it come to this?
Messy history
After Selangor’s water industry was privatised in 1994, the water industry was divided into water supplier (the state government), water production (water treatment companies Puncak Niaga, Abbas and Splash) and water distribution (Syabas)
Puncak Niaga has two concessions – one to treat water held under wholly-owned Puncak Niaga (M) Sdn Bhd (PNSB) and another to distribute treated water held by its 70% unit, Syarikat Bekalan Air Selangor Sdn Bhd (Syabas).
Billionaire Rozali Ismail is chief executive officer (CEO) and majority shareholder of Puncak Niaga and Syabas. He reportedly has close links with the ruling UMNO party.
Splash is 40% owned by Gamuda, 30% by Kumpulan Perangsang Selangor (a unit of KDEB) and 30% by The Sweetwater Alliance, a company linked to businessman Wan Azmi Wan Hamzah. Abbas is almost wholly owned by the state.
The three treatment companies PNSB, Splash and Konsortium Abass sell treated water to Syabas for distribution.
Things started to become messy after the opposition alliance Pakatan Rakyat (PR) won Selangor in the 2008 elections. This set the motion for years of wrangling between state and federal governments.
Tariff hikes denied
The change in state government threw a huge spanner in the works for Selangor’s water industry.
Two tariff hikes (37% in 2009 and 25% in 2012) were denied. On this basis, Syabas claimed that it was unable to pay the treatment companies.
The Selangor state government had refused the tariff hikes based on the grounds that Syabas had not complied with the terms of its concession agreement, especially with regards to reducing NRW (non-revenue water).
NRW is basically treated water that is lost in transport from the plant to consumers, either through theft or leaking pipes.
Langat 2 fast tracked
The other victim of Selangor’s change of government was the RM9 billion Langat 2 water treatment project, proposed during the BN (Barisan Nasional) reign of Selangor.
It was put in cold storage for several years pending the Selangor water negotiations.
The project is expected to transport raw water (up to 1.89 billion litres daily) from Sungai Semantan, Pahang to a treatment plant in Sungai Langat, Selangor that has a capacity of treating 1.13 billion litres of water daily.
“We believe the construction of Sungai Langat 2 project would burden the people with higher water tariffs as the costlier the project, the more water tariff the people will have to pay,” Khalid reportedly told the press after a state executive council meeting in 2012.
The Langat 2 project was deemed by the Selangor government as too expensive and unnecessary. In a turnaround last year, Khalid fast tracked Langat 2 after he agreed to a deal with Putrajaya.
Almost immediately after the announcement of the water deal between Khalid’s administration and Putrajaya, a consortium comprising MMC Corp Berhad, water firm Salcon Berhad and construction player Ahmad Zaki Resources Berhad (AZRB) won a RM1 billion construction contract for the first phase of Langat 2.
No takeover despite WSIA
The federal government approved the state takeover of water assets from the private concessionaires in April last year.
Subsequently, Putrajaya even invoked WSIA (Water Services Industry Act) to break the deadlock, 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) by the state.
WSIA allows for an enforced takeover of the concessionaires, although the federal government never really acted on this, still insisting on a “willing buyer, willing seller” agreement between state and concessionaires.
Lin Yun Ling, group managing director (MD) of construction giant Gamuda that holds a 40% stake of Splash, had lambasted the federal government for resorting to WSIA.
“Investors will start questioning the sanctity of contracts,” Ling said.
Others took a different view.
“Invoking WSIA is being used (by Putrajaya) just to buy time. For what reason? I am not sure why,” said Klang MP (member of parliament) Charles Santiago to KiniBiz last year.
Khalid’s bargaining chip
Former Selangor MB Khalid played a central role in the original water agreement signed last year, now being disputed between Azmin and Putrajaya.
Many observers say that Khalid used the approval of Langat 2 as a key bargaining chip in dealing with the federal government.
However, Khalid faced a barrage of criticisms from his own party leaders for cutting a deal with the federal government unilaterally, including the surrendering of Langat 2 as well as his management of last year’s water crisis, said to be the worst in the state since 1998.
Khalid also traded barbs with the private concessionaires, especially with Splash (Syarikat Pengeluar Air Selangor). Wan Azmi Wan Hamzah, chairman of Splash, was fiercely critical of Khalid’s handling of the water negotiations.
“It’s shocking how Khalid has handled the water crisis. The MB failed and hasn’t acted in the best interest of the rakyat. The whole thing looks amateurish. It’s all political brinkmanship. There have been so many lies and half-truths about the whole situation,” said Wan Azmi in an exclusive interview with KiniBiz last year.
Kajang move pushed Khalid
According to Wan Azmi, Khalid had assured the public that there will be enough water for Selangor until 2019 and refuted claims of an imminent water crisis in 2014, as had been cautioned by the then Kettha (energy, green technology and water) minister Peter Chin.
On the other hand, the former MB recently accused the water concessionaires, including Splash, of being greedy and “milking sinful profit” from the Selangor public based on a lopsided agreement that failed to prioritise the people’s interest.
Some feel that the now infamous “Kajang Move” pushed him into a corner. The by-election last year, engineered by Rafizi Ramli, PKR (Parti Keadilan Rakyat) director of strategy, was rumoured to be the first step in removing Khalid from the MB position.
Khalid was eventually forced out of the Selangor top post, just weeks after he hastily finalised the master agreement with Putrajaya.
Many observers believe that his unilateral decision making in the water deal, made without consultation and blessings of PR’s top leadership, ultimately caused his downfall.
Now it is up to Azmin to revive the RM9.65 billion water deal that arguably caused his predecessor his job. Will he be able to do that?
Yesterday: Can Azmin rescue Selangor’s water deal?
Tomorrow: Cut the politics and seal water deal
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