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Friday, June 3, 2011

SELANGOR WATER AND FAMILY TIES (BONDS)

  1. I would like to start my post by quoting a statement written in the The Edge business daily dated May 12, 2011. I quote,You must understand, the water sector is full of very powerful personalities,” the source said.
    The newspaper never revealed their sources and I guess it is for the obvious reasons. It could very well mean a shortened career or simply “kaput”. According to the The Star” newspaper, the deal has been concluded today with repayment to be made in June.

  2. I quote from MARC the rating agency “…In absence of resolution by second half of 2011, the rating agency expects a rating cliff situation to occur in respect of the affected bonds. MARC however is still maintaining investment grade ratings on the majority of Selangor water-related bonds on expectation that the Federal government will intervene to prevent defaults“. The water business is a political minefield that bondholders like KWAP, EPF, GE Life and several banks would not have any interest in controlling such businesses despite having the rights to do so because of the ongoing default.

  3. Whoever controls the bonds actually control the water players. I would be surprised that PAAB would go in and control the water operators. I predict that that the water players would be allowed to restructure their repayment and give them the necessary breather in pursuing their negotiation with the SSG. We must appreciate that there is a probability that water is the life line of certain political party in Malaysia and giving the present SSG operational control would led to disastrous outcome. By my standard this is an act of treason to the State and people of Selangor.

  4. The issue is not so much about the value of the asset as the total asset value is less than 1% of the cost of every liter of water produced. The main crux is that the operational expenses are high because the major procurement of services and materials are done with external companies with common shareholders. From pipes, chlorine, Alum and landscaping they are all controlled. When such companies act as suppliers to Syabas or PN the transparency of deals is lost and cost is marked up. In the end the cost is past down to customers. I think whoever controls the operations and deals directly with the service and material producers would be able to maintain price of water or raised it minimally. It is quite obvious on why the present concessionaire must be accommodated and SSG is a less preferred entity.


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