- The Edge Financial Daily reported today that the Federal government has allocated an additional RM3bil to help the Selangor government take over the water concessionaires in the state.

- The report quoted Energy, Green Technology and Water Minister Datuk Seri Dr Maximus Ongkili as saying that the additional money set aside is based on the premise that “Langat 2 [water treatment plant] must go on”.

- While there was no further explanation, we believe that the additional RM3bil pertains to the allocation by state-owned Pengurusan Aset Air Bhd (PAAB) for the takeover. Recall that under the master agreement, PAAB will allocate RM1.68bil for the takeover of the concessionaires. It will also take over the liabilities and federal loans of the concessionaires worth RM7.45bil.

- Ongkili said the master agreement cannot be disclosed at the moment as it contains elements that are yet to be finalised. These include price negotiations with the concessionaires.

- We understand that the new Menteri Besar Mohamed Azmin Ali has yet to approach the water concessionaires to finalise the sale agreement. Recall that Syabas, Puncak Niaga Sdn Bhd (PNSB), and Konsortium Abass Sdn Bhd have agreed in-principle to the offers since last Dec.

- As for SPLASH (the only water concessionaire left accept the offer), Ongkili said he is confident that Azmin could settle the issue.

- Recall that the Federal and state governments had inked the master agreement on 12 Sept to restructure the water industry in Selangor. Under the agreement, a new entity – Pengurusan Air Selangor Sdn Bhd– will take over the concessionaires that have agreed to the deal.

- According to the report, the three concessionaires have accepted the offer worth a collective RM7.8bil.

- We maintain NEUTRAL on the sector as we await a finalisation of share sale agreements with the respective water concessionaires. As for SPLASH, we remain optimistic that a fair offer could be reached for a complete closure to the water saga.

Source: AmeSecurities