- The press reported today that the Selangor water restructuring exercise is expected to be finalised next week at the latest.
- The Edge Financial Daily quoted Selangor Mentri Besar Tan Sri Khalid Ibrahim as saying that the water agreements are in the final stages of being signing and will involve the state and Federal governments, and the water concessionaires.
- He also noted that SPLASH, which had rejected the state’s buyout offer, will also come under state control. This would be resolved by invoking the Water Services Industry Act 2006 (WASIA).
- However, Starbiz quoted Energy, Green Technology and Water (KeTTHA) deputy minister Datuk Seri Mahdzir Khalid as saying that SPLASH is still in negotiations with stakeholders of the company.
- We opined that a fair valuation for SPLASH is still needed for a meaningful closure to the water saga. We understand that a possible revision in bulk water supply rates may help result in an acceptance by SPLASH.
- Recall that three water concessionaires – Puncak Niaga Sdn Bhd, Konsortium Abbas Sdn Bhd, and Syabas – have accepted the water deal, except for SPLASH. A heads of agreement (HoA) was also signed between the state and federal governments last month.
- According to lawyers, the new agreements signed on behalf of the state government will be legally binding and the issue of compensation may arise if a new Selangor leader reviews the terms of the agreements.
- Meanwhile, Starbiz also reported that Kumpulan Darul Ehsan Bhd (KDEB) is expected to sign the sale and purchase agreements this week. Mahdzir also noted that KDEB will manage and operate the entire water business post-takeover.
- On Langat 2, Mahdzir said it is currently in the tender process for the distribution network or piping system. Three segments for this project have been tendered out so far.
- He also noted that the government at looking at replacing the old asbestos-cement pipes nationwide with PVC or steel pipes in order to reduce non-revenue water (NRW). The cost for replacing the pipes is estimated at ~RM1bil per year over 25 years. As it is, a paper on a new national policy to reduce NRW will be presented to the government by year-end. The national average loss of NRW was at 35%-36% for the past several years.
- Meanwhile, the Pahang-Selangor Raw Water Transfer Project is 96.7% completed and will be fully operational by 2017. Maintain NEUTRAL.
Source: AmeSecurities
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