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Friday, March 28, 2014

Sanctity of Selangor water contracts at risk, says Gamuda chief

Gamuda’s group managing director says today that the Selangor government has managed to ‘forcefully’ take over Selangor's water companies at a cheap price. – The Malaysian Insider file pic, March 28, 2014.Gamuda’s group managing director says today that the Selangor government has managed to ‘forcefully’ take over Selangor's water companies at a cheap price. – The Malaysian Insider file pic, March 28, 2014.With Putrajaya preparing to invoke Section 114 of the Water Services Industry Act 2006 (Wasia) to take over Selangor's water operations, the chief of Gamuda Bhd said the takeover of water concessionaires has put the sanctity of government contracts at risk, the Edge Financial Daily reported.
"When investors look at it, they will question the sanctity of the contract. Why can't they do it on a 'willing buyer, willing seller' basis?" Gamuda group managing director Datuk Lin Yun Ling was quoted as saying by the daily today.
"The blame will be on the federal government because it is the only one who can invoke Wasia. Confidence in the sanctity of contracts is what underpins all these (economic investments in Malaysia)."
He told the Edge that the Selangor government had managed to "forcefully" take over Selangor's water companies at a cheap price under the guise of Wasia.
It was reported earlier that the federal government now has to invoke Section 114 of Wasia which allows Putrajaya to step in and take over the operations of water assets, as there has been no settlement over a buyout of the assets.
The water concessionaires in Selangor are Puncak Niaga Holdings Bhd, Syarikat Bekalan Air Selangor Sdn Bhd (Syabas), Syarikat Pengeluar Air Sungai Selangor Sdn Bhd (Splash) and Konsortium ABASS Sdn Bhd.
Puncak Niaga has a 70% stake in Syabas while Splash is 40% controlled by Gamuda Bhd, with the rest of the equity evenly split between Kumpulan Perangsang Selangor Bhd (KPS) and Sweetwater Alliance Sdn Bhd.
Putrajaya and the Selangor government signed a memorandum of understanding (MoU) last month to break the five-year impasse, offering the water players RM9.65 billion to turn in their assets, but only Konsortium ABASS has accepted the offer.

Putrajaya will also provide RM2 billion in funds for Selangor's proposed buyout of the concessionaires. In return, Selangor will allow Putrajaya to continue its Langat 2 water treatment plant.
However, following the Putrajaya's decision to invoke Wasia, Selangor announced that it will reduce its takeover offer for the water concessionaires by RM2 billion to RM7.65 billion as the state did not have to pay for the equity.

"If you have RM9.65 billion and you net off the loans of RM7.7 billion, you have about RM1.65 billion to pay us, plus the RM2 billion from the federal government. It will be enough when you distribute it fairly. (Then) we'll take it," Lin told the Edge.

The Selangor government had in November 2012 – and again last month – offered to buy out Splash for RM1.83 billion, which included a 12% non-compounded return on equity per year, assets and liabilities, it reported.

However, Gamuda rejected the offer on both occasions, and said the net gain of RM250.6 million the concessionaire would make was less than 10% of its net asset value. 

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