A new twist to Selangor’s water impasse

No end to water issues in Selangor? Selangor's takeover of water assets last September is facing yet another hurdle with the Federal government claiming ownership of some of the dams and thousands of kilometres of pipeline in the state. – The Malaysian Insider file pic, February 23, 2015.A new fight involving the ownership of water assets is brewing between opposition-led Selangor and the Barisan Nasional-controlled Federal government, sources say.

A source familiar with the matter says the feud centres on the ownership of assets such as the Semenyih and Bukit Nanas dams as well as a large network of pipes spanning thousands of kilometres, which Pakatan Rakyat says came under its control when the opposition coalition won the state in the 2008 general election.

This notion, however, is being disputed by the Federal government, which says these assets come under the control of Putrajaya.

“By (this week), the legal wrangling will begin. I know the state has already hired lawyers to look into the dispute,” the source adds.

Ownership of the dams could be a moot point. Checks by The Edge reveal that the Selangor state’s unit, Konsortium Abass Sdn Bhd, has a 30-year concession in the privatisation of the Sungai Semenyih Water Supply Scheme.

Meanwhile, Puncak Niaga Holdings Bhd (Puncak Niaga), which wholly owns water treatment company Puncak Niaga (M) Sdn Bhd (PNSB), controls the Bukit Nanas water treatment plant.

Some parties familiar with the water business say dams, like rivers, are the source of water and thus are state assets. Pipes are also said to be owned by the state. Nevertheless, it is likely that the federal government will have equally strong arguments for its case.

Considering how fragile the talks have been over the years, this dispute could derail the consolidation exercise.

“The Selangor government was supposed to conclude its negotiations with Puncak Niaga by the first week of February, but the federal government, through the ministry (Ministry of Energy, Green Technology and Water), has informed the state that it needs an additional one-month extension to conclude the deal as there is some dispute in terms of ownership of the assets,” the source explains.

More delays?

It is not clear how the legal wrangling over these assets would adversely impact the consolidation of the water sector in Selangor.

If the dams, treatment plants, pipes and other assets in dispute are under the four concession holders, there could be a further delay in the exercise.

To recap, the four concession holders are Syarikat Bekalan Air Selangor Sdn Bhd (Syabas), which has the mandate to distribute treated water to Kuala Lumpur, Selangor and federal capital Putrajaya, PNSB, Syarikat Pengeluar Air Sungai Selangor Sdn Bhd (SPLASH) and Konsortium Abass.

Both Syabas and PNSB are controlled by Puncak Niaga. SPLASH is 40% controlled by construction giant Gamuda Bhd, with the remainder 60% equally divided between Tan Sri Wan Azmi Wan Hamzah and the Selangor state via its vehicle Kumpulan Perangsang Selangor Bhd. Konsortium Abass is wholly owned by Selangor.

At present, Puncak Niaga has accepted an offer from the state and has obtained its shareholders’ approval to sell its water assets, but the deal has yet to be concluded. SPLASH, meanwhile, has rejected the offer, deeming it too low.

To recap, SPLASH was offered RM1.8 billion while Puncak Niaga was offered RM3.1 billion for Syabas and RM2.8 billion for PNSB. Konsortium Abass was offered RM992 million for its assets. This works out to about RM9.6 billion in total.

This new wrangling has prompted some quarters to wonder if there would be changes to Puncak’s acceptance as the company’s controlling shareholder, Tan Sri Rozali Ismail, is known to have close ties with the federal government. Rozali has a 41% stake in Puncak Niaga.

The new stalemate comes at a time when the state is looking to close a deal with the final concessionaire, SPLASH.

As far back as April 2007, there have been reports on the consolidation of the fragmented water sector in Selangor taking place. But now, almost eight years down the road, the exercise is still ongoing, much to the rakyat’s frustration.

During the standoff, there has been very little pipe replacement undertaken, which in turn has resulted in non-revenue water hitting 35% in Selangor.

While Rozali says the state has not provided any funding, the state says he has not conducted any pipe repairs with the money it claims it has given.

Syabas was supposed to get a tariff hike of 37% in 2009 and another 25% in 2012, which the Pakatan Rakyat government opposed, thus resulting in the company being in limbo and not being able to generate profits, much to Rozali’s chagrin.

This new development begs the question as to whether the federal and state governments will be able to end Klang Valley’s water shortage problem anytime soon, and if the plans to replace the ageing pipelines in the state – said to run some 8,000km – will be derailed. – The Edge