GEORGE TOWN, Nov 12 — Penang’s water supply company could remain liable for RM210 million in annual capacity charges even if Perak fails to deliver the minimum volume of treated water under a proposed 40-year supply agreement, DAP’s Air Putih assemblyman Lim Guan Eng said today.

In a statement, he said the arrangement was among the reasons five independent directors of PBA Holdings Berhad opposed the proposal, which he estimated would involve RM24.6 billion in water purchases over the contract period.

Under the agreement, Perbadanan Bekalan Air Pulau Pinang Sdn Bhd (PBAPP) would be required to pay RM8.4 billion in capacity charges over 40 years, Lim said, despite any failure by Perak to provide the minimum 300 million litres of treated water a day.

Lim urged the Penang government to explain the terms of the agreement to the state’s 1.8 million residents, particularly what he described as a “no-fault clause” that he claimed placed Penang at a disadvantage.

He said PBAPP would not be entitled to compensation if Perak failed to meet its minimum supply commitment, while still having to pay the annual capacity charge of RM210 million.

A shareholders’ circular filed by PBA Holdings Berhad with Bursa Malaysia on October 27, 2026, identified the five independent directors who voted against the proposal as Datuk Brian Tan Guan Hooi, Lim Eng Huat, Nor Hatina Md Salleh, Lim Seang Lee and Raja Azmi Raja Nazuddin.

Lim said the directors were concerned that PBAPP could continue to face substantial financial obligations even if water supplies were reduced or disrupted for a prolonged period.

PBAPP signed a conditional bulk treated water supply agreement with Prasarana Air dan Irigasi Perak Sdn Bhd on July 17, 2026, under the Northern Perak Water Supply Scheme (NPWSS), for a minimum of 300 million litres per day, with an option to increase the volume to 500 million litres, from 2032 to 2072.

Lim said the shareholders’ circular also highlighted the financial implications of ending the agreement before its expiry, with PBAPP allegedly still required to pay the RM210 million annual capacity charge for the remainder of the original 40-year term, irrespective of whether Perak was at fault or had breached the contract.

He said the agreement did not provide for compensation to PBAPP in such circumstances.

Lim also raised concerns over provisions requiring the supplier to prioritise Perak’s domestic, industrial and agricultural water requirements, without compensation to Penang if this affected the supply to the state.

He questioned whether PBA Holdings Berhad and the Penang state government had adequately protected the interests and water needs of Penang residents and future generations through an agreement he said was heavily skewed in Perak’s favour.