- Puncak Niaga Holdings Bhd announced yesterday that it has granted Pengurusan Air Selangor Sdn Bhd a second extension until 9 March 2015 for the fulfilment of conditions precedent for the sale of its water concessionaire business.

 - This is the second extension after the first expired on 9 Feb. Under the sales and purchase agreement signed last Nov, all of the conditions precedents were supposed to be fulfilled by 12 Jan.

 - In a press statement, Puncak noted that the sale could not be fulfilled due to two pending matters:- (i) the transfer of water asset between the state and Federal governments; and (ii) consent from Unit Kerjasama Awam Swasta (UKAS), Prime Minister’s Department on the sale of Syabas.

 - We are not surprised with the development as the reasons for delay are in line with what we had highlighted in our previous reports.

 - With the extension, it would appear that the deal is unlikely to be completed by Chinese New Year as initially anticipated. Nevertheless, the group has expressed hope for the matters to be resolved immediately.

 - Based on recent news reports, the delay is due to contention over control of certain water assets in the state – i.e. Semenyih and Bukit Nanas dams, and the pipe network – between the Federal and state governments.

 - Nevertheless, we believe that it is unlikely that the deal could be dragged on for too long (or being entirely derailed) given the need to consolidate the water industry soon.

 - Also, we understand that the completion of this deal is seen as an important precursor to negotiations with Splash kicked into a higher gear; there is a reported deadline of Sept this year for the Splash’s sale to be concluded.

 - Also, under the Water Services Act 2006 (WASIA), Pengurusan Aset Air Bhd (PAAB) is mandated to take over all existing water assets from the state. This has been proven true in the previous water consolidation exercises in other states. We maintain HOLD.

Source: AmeSecurities