Syabas may default on payment, risks losing investors' confidence

Syarikat Bekalan Air Selangor Sdn Bhd (Syabas) risks defaulting payments to its bond holders as coffers of the water services firm may be drying-up, leaving Syabas with insufficient funds to pay stake holders, an opposition MP has claimed.

To rub salt to the wound, Syabas bonds amounting to a whopping RM1 billion would mature this year, while payout for bonds maturing next year was even higher.

Klang MP Charles Santiago said while the issue was all about economics and finance, it had also became a political contention between Barisan Nasional-led federal government and Pakatan Rakyat-led state government.

“In 2006, the Parliament passed the Water Services Industries Act where it called for a holistic management of water services,” Santiago told FMT in a recent interview.

With the passing of the Act, distribution of water was no longer separated and managed by different entities but giving the state government the legal position to acquire water assets from Syabas, its parent company Puncak Niaga Sdn Bhd (manages water treatement), Syarikat Pengeluar Air Sungai Selangor (Splash) (building, operating and maintaining Selangor River Water Supply Scheme Phase 3) and Abass Konsortium (operating and maintaining Semenyih River).

Santiago said the previous BN state government had sent letters to the four entities on the matter before the 2008 general election.

However, after Pakatan took over the state government after the last general election, negotiations broke down after Puncak Niaga and Syabas rejected the state government's offer despite the latter offering RM5.7 billion to acquire water assets.

“The Water Assets Management Berhad (PAAB) evaluation estimated the state's water assets to be worth RM1 billion but the state government offered RM5.7 billion.

“Last year, an offer of RM10 billion was made to the entities but was also turned down. The point here is Syabas and Puncak Niaga should have taken up the offer,”said Santiago.

With Syabas now risking a default, its major bondholders (CIMB Principal Asset Management, Hong Leong Investment Bank and Great Eastern Life) are said to be urging the federal government to offer a bail-out to Syabas or risk its bonds being downgraded.

“If the federal government provides a bail-out for Syabas, not only it will be paying off the bond holders but it will also acquire Syabas' debt which will put the government further into debt,”said Santiago.

Memo to the King

The DAP lawmaker added that not only will this tantamount to crony-capitalism, the federal government would also risk violating the Water Services Industries Act.

“In 2005, Syabas was given RM2.9 billion in soft loans and grants by the federal government when it acquired water distribution function from Perbadanan Urus Air Selangor Berhad (PUAS).

“In 2008, the federal government again provided it with RM320 million, with no interest for five years and payable within 20 years.

“However between 2005 till 2009, Syabas accumulated RM44.5 million in revenue after disconnecting 809,000 water connection. Most of those affected were poor people,”claimed Santiago.

He added that while the state government was trying to fulfill the requirements under the Water Services Industries Act 2006 by trying to provide a holistic water services management to the people, the federal government is throwing spanners into the works by planning to retain Syabas as the water supplier for the state.

“The federal government had told the state government in a recent meeting that it wished to retain the status quo, that is Syabas controlling 52% stake in the company while the state government only retains 48% which is in direct violation of the Act.

“Therefore, while the cronies are being bailed out, the state government has to wait for the federal government to consent to our deal despite us being supported by the Water Services Industries Act,” said Santiago.

The Selangor state government plans on Dec 5 to submit a memorandum to the Yang di-Pertuan Agong in a bid to stop the federal government from bailing out Syabas and return water assets to the state government. -FMT