No reason to delay state takeover of water firm unless Selangor biased, claims former MB Khalid

Khalid pointed out that the restructuring exercise has  taken six years with no visible end in sight. — Picture by Choo Choy May
Khalid pointed out that the restructuring exercise has taken six years with no visible end in sight. — Picture by Choo Choy May

KUALA LUMPUR, Dec 16 — Tan Sri Khalid Ibrahim has accused the Pakatan Rakyat-led Selangor government of giving Syarikat Pengeluar Air Selangor Sdn Bhd (Splash) “preferential treatment” by stalling the state’s water restructuring exercise.

This is because the water concessionaire is the sole company still refusing to accept the buyout terms made by the former mentri besar before he resigned in September.

Calling the delay of the state’s water restructuring agreement with Putrajaya “shockingly embarrassing” and “highly unacceptable”, Khalid pointed out that the restructuring exercise has  taken six years with no visible end in sight.

“Therefore, it would not be too drastic nor brutal at present for the current state administration to push the federal government to invoke the WSIA 2006 (Water Services Industry Act) so as to put an end to any further delays in the long-drawn-out restructuring exercise since there is no justification whatsoever to veer off from the existing terms in the KDEB’s (Kumpulan Darul Ehsan Berhad) takeover offer to Splash, which are reasonable, fair and consistent with those applied to the three other concession companies,” he said in a statement to Malay Mail Online.

Section 114 of the Water Services Industry Act 2006 allows Putrajaya to forcibly acquire a concessionaire.

Khalid was responsible for minting state’s water restructuring deal with Putrajaya a few months back in which Selangor’s buyout will assume Splash’s water related liabilities amounting close to RM1.6 billion, apart from the equity compensation in cash consideration worth RM250.6 million.

Of the four concessionaires, only Syarikat Bekalan Air Selangor Sdn Bhd (Syabas), Puncak Niaga Sdn Bhd and Konsortium Abbas Sdn Bhd have agreed in principle to Selangor’s combined offer of RM7.817 billion.

Splash has said it will negotiate its acquisition separately, as it wants a book value of at least RM2.8 million.

Gamuda group managing director Datuk Lin Yun Ling was quoted by Bernama on December 4 as saying that Selangor’s acquisition should be done in a “market-friendly” way.

In response to this, Khalid said Splash’s figure demand was “appalling” since the book value amounted to almost RM1 billion in excess compared to Selangor’s original RM1.83 billion takeover offer of the water concessionaire.

“With this new equity amount indicated by Splash, adding the liabilities portion would effectively set the state government back up to RM4.4 billion.

“I strongly believe that if the current state administration caved in, it would be grossly inexcusable to force the rakyat of Selangor to put up with this kind of preposterous and grotesque demand from any well-connected corporate personalities who all this while, have benefited a lot from lopsided privatisation deals and lucrative concession contracts,” Khalid added in his statement.

The Port Klang assemblyman also refuted claims that any value below RM2.8 billion would result in a divestment loss, saying that Splash has in fact enjoyed handsome returns on investment since it commenced operations in 2000 in the form of direct and indirect profits.   

Direct profits are from the water treatment business generated via supply and capacity charges, while indirect profits are from construction, engineering, equipment leasing and building material supply contracts.

“I therefore demand the current state administration to resist any ludicrous and outlandish demands from any water concession companies to prevent any impasse in returning the water assets to the people, their rightful owners through issuance of water shares which can be performed only when the restructuring exercise is completed.

“The state government should not succumb to any forms of pressure and intense lobbying at the expense of the rakyat,” he said.

Under the water agreement, Selangor will infuse a new special purpose vehicle with RM14.92 billion in assets to manage the water restructuring exercise now finalised with Putrajaya.

Khalid has said the asset injection will go to a new entity, Pengurusan Air Selangor Sdn Bhd, which will come into operation after the state concludes the takeover of assets and liabilities currently held by water concessionaires operating in Selangor.

The federal government will also provide RM2 billion to help offset the state’s cost of taking over the four concessionaires: Syabas, Puncak Niaga, Konsortium Abbas and Splash.

The new special purpose vehicle will be under the control of state-owned KDEB.

Khalid’s administration had initially made a combined offer of RM9.651 billion to take over assets and liabilities of the four concessionaires.

Separately, the assets and liabilities of the three concessionaires that have agreed to the terms will be transferred to Perbadanan Aset Air Berhad on a 45-year lease, covering all liabilities such as water debts and bonds valued at RM6.1 billion, and water assets owned by the concessionaires.

The facilities and service licences will be issued by the National Water Services Commission, along with the proposed Langat 2 water treatment plant which will be leased to and managed by Air Selangor.

The water restructuring plan and the Langat 2 project were among several reasons given by PKR in deciding to remove Khalid from office.