Price hike will follow water bailout

The move by Putrajaya means Selangor government can't control its own water assests and keep the price down, says DAP's Tony Pua.

KUALA LUMPUR: Water finds its own level. But when it comes to managing the water resources of Selangor, fairplay is the last word.

The Selangor state government wanted to take over the water assests from the four ailing privatised water companies in the state but the federal government has stepped in to bail them out.

DAP national publicity secretary Tony Pua said the BN federal government’s bailout of privatised water companies in Selangor would jeopardise the people’s chances of securing a quality water supply at the lowest possible prices.

“This move has in effect killed any remaining possibility of the Selangor government striking a deal with these companies to restructure and take over the water industry in Selangor,” said Pua in a press statement.

The Selangor government made an offer of RM6.3 billion to acquire these water companies, and take over their debt obligations.

But the federal government has jumped the gun and has made a RM6.5 billion offer to buy over the Selangor water debts from bondholders.

Selangor’s water players are Syabas, Puncak Niaga Sdn Bhd (PNSB), Syarikat Pengeluaran Air Sungai Selangor Sdn Bhd (Splash) and Konsortium ABASS .

It is understood that the federal government offer will be made through Pengurusan Aset Air Bhd (PAAB), the government’s water asset management company.

The offer is a RM200 million discount to the value of the outstanding water bonds of RM6.7 billion.

Bond holdes include Maybank Investment Bank and CIMB Group, which hold about RM1 billion of the outstanding water bonds. Insurance firms and pension funds hold about RM2 billion each while the rest is held by fund managers such as AmInvestment, CIMB Principal, RHB Asset Management and Public Mutual.

The debt service problem started when Syabas was barred from implementing a 37% tariff hike agreed upon in January 2009 after the Selangor government claimed the sole water distributor had not done enough to reduce leakages which cost the state millions.

This, in turn, led to payment problems between Syabas and water treatment concessionaires PNSB, Splash and Konsortium ABASS, who supply it with treated water.

Loss for the people

Pua explained that if BN had not offered a bailout to these companies, they would have had to negotiate restructuring with the Pakatan-led Selangor government or with other interested parties who have made offers to acquire the businesses and assets.

Gamuda, through its subsidiary Pengeluaran Air Selangor Holdings (SPLASH), has also made an offer to acquire the same companies for RM10.8 billion, a figure including the existing debts.

“In addition, the state government is able to ensure that there will be no water tariff hikes post- restructuring,” said Pua, adding that due to BN bailing out the water companies, these companies would have the upper hand at the negotiating table at the expense of the rakyat.

Pua warned that due to BN’s bailout, the privatised water concessionaires would “continue to able to operate and profit from the provision of water services in Selangor, without having to be burdened by debts which have been accumulated over the years”.

He called the bailout a loss for the people of Selangor as they no longer had the opportunity for the privatised water industry to be restructured and provide quality water at the lowest possible prices.

The PJ Utara MP urged the Minister of Energy, Water and Green Technologies, Peter Chin, to provide clarifications for the bailout before a restructuring deal could be finalised, at the expense of the people.

Pakatan Rakyat wants to control the state’s water assets so it can fulfil its promise to keep water cheap for Selangor residents by controlling tariffs.

The Selangor bailout is the first phase of the consolidation as by June 2, the government is expected to make an offer to buy the water assets in Penang for more than RM3 billion.