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Monday, January 31, 2011

Selangor touts arbitration as takeover bid sinks

The Khalid administration’s offer required a unanimous decision from the concessionaires. —file pic
KUALA LUMPUR, Jan 31 — The Selangor government has repeated its call for international arbitration to fix a fair price for water players’ assets and liabilities, following their rejection of the state’s takeover offer.

The state government said in a statement today, however, that none of Selangor’s four concessionaires appeared interested in this proposal, which it says is the “best method” for settling the issue of value.

Syarikat Pengeluar Air Sungai Selangor Sdn Bhd (Splash) declined the state government’s RM9.3 billion offer, while Puncak Niaga (M) Sdn Bhd (PSNB) and sister company Syarikat Bekalan Air Selangor Sdn Bhd (Syabas) both issued requests for clarification.

Kumpulan ABASS Sdn Bhd was the only concessionaire that accepted conditionally but the offer lapsed as the Selangor government had stipulated that all four players must accept the offer together or not at all.

Selangor will discuss with Putrajaya how best to proceed following this latest setback in the state’s two-year battle to consolidate the water industry, the statement added.

Selangor Mentri Besar Tan Sri Khalid Ibrahim had stressed last Thursday that the state government will not raise its most recent offer for the concessionaires’ assets and liabilities, which expired 5pm today.

“The state reiterates that there is a need to reform the lopsided privatisation of the water industry which has denied the people of Selangor efficient, high quality water services at reasonable rates,” the statement from the Selangor mentri besar’s press secretariat said.

“We urge the federal government to consult with the state government and together find the best way possible to return the right to affordable water back to the people.”

The Malaysian Insider had reported last month that Selangor will offer about RM5.7 billion to acquire the remaining state water assets, while leaving its present owners to pay off their own liabilities.

Selangor’s four water players are at risk of debt payment default as water bonds approach their maturity dates.

The debt service problem started when Syabas was barred from implementing a 37 per cent 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.

Selangor, which already owns 80 per cent of the state’s water supply assets, is preparing to take over the remaining assets after Putrajaya said it did not object to direct negotiations between the state government and concessionaires.

It intends to retain management of the water assets, which also cover the federal territories of Kuala Lumpur and Putrajaya.

The state government has made two previous offers for the water assets.

The first offer, RM5.7 billion for assets and equity, was turned down by all four players, while the second RM9.4 billion offer — this time including liabilities — was rejected by Syabas and sister company PNSB.

The two-year water consolidation impasse began soon after Pakatan Rakyat (PR) took control of Selangor, Malaysia’s richest state, in the last general election.

Since then, privatisation plans for the water industry have been put in deep freeze as federal and state governments engage in what industry watchers call “excessive politicking”.

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

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