- The Edge Financial Daily reported today that the long-awaited award of the Langat 2 project will be announced soon, according to Energy, Green Technology and Water Deputy Minister Datuk Seri Mahadzir Khalid. A letter has been handed over to Pengurusan Aset Air Bhd (PAAB) by the Ministry of Finance (MoF), with the former to be the implementation agency tasked with awarding the project.

- This comes after the Federal government had agreed to invoke Section 114 of the Water Services Industry Act (WASIA).

- The invocation was conditional on both the Federal and State governments signing heads of agreement (HoA) in respect to the water industry restructuring and the completion of the Langat 2 project.

- We are not surprised by this development. In our previous water sector updates, we highlighted that the development of Langat 2 will likely be expedited to ensure sustainable water supply to the Klang Valley region. As it is, 821 project applications in the three areas had been put on hold, as at 31 March, 2014, due to inadequate water supply.

- Following the Federal government’s decision to go ahead with invoking Section 114, the ministry has urged the state government to speed up the approval process for the Langat 2 project. According to reports, seven out of the 80 development orders have been issued thus far.

- The Edge Financial Daily report revealed that the award for the RM4.1bil Langat 2 could be announced as early as next week. It was also previously reported that the MMC-Salcon-AZRB consortium were frontrunners for the first package worth ~RM1.2bil, which we believe, relates to the construction of a water treatment plant under phase 1 (~ 1,130 million litres/day). Other parties said to have been in the race include Gamuda, UEM Construction Sdn Bhd and Asia Baru Construction Sdn Bhd.

- Our channel checks also indicate that several parties could have been pre-qualified for the water piping and related package. While the actual cost is not immediately known, we estimate the contract value to be much higher than the RM268mil contract awarded to the JAKS-IJM JV for the Pahang portion of the Pahang-Selangor interstate raw water transfer (IRWT), of which Langat 2 is also a component representing the Selangor side.

- Given its track record as an integrated water pipe specialist (on a supply and lay basis) and its ongoing role in the Pahang portion of the IRWT, we reckon that JAKS stands a strong chance in vying for the piping works at Langat 2.

Source: AmeSecurities