- Pengurusan Aset Air Bhd (PAAB) CEO Datuk Faizal Abdul Rahman was quoted in the press that he expects the water impasse to be resolved by the end of this month.

- According to The Edge Financial Daily, Faizal said that he is confident that PAAB will be able to settle negotiations with the Selangor government before Hari Raya.

- This followed a meeting between Selangor Menteri Besar Mohamed Azmin Ali and Energy, Green Technology and Water Minister Datuk Seri Dr Maximus Ongkili last Thursday. Azmin said that the two parties have reached a decision at the meeting and the master agreement is expected to be finalised in “a week or two”.

- He had noted that several issues – including some of the conditions precedent – that were disputed earlier have been resolved. Recall that the ownership of the Bukit Nenas and Semenyih water assets had been a point of contention in concluding the deal.

- As for the development of the Langat 2 water treatment plant, Azmin said the state government will continue to issue approvals when all the terms and conditions are met by the developers.

- As it is, Ongkili had said the completion of Langat 2 WTP may be deferred to 2019 from 2017 due to the current water impasse. Earlier this year, Langat 2 was only <2% completed.

- Meanwhile, Puncak Niaga Holdings Bhd executive chairman Tan Sri Rozali Ismail said that it may sue the Federal and state governments if the water restructuring exercise is not completed by the new July deadline. Rozali said earlier that it may rescind the deal if the conditions were not met after Ramadhan.

- He noted that the delay has caused Puncak loss of business opportunities and may have implications on tariffs. Puncak had given its sixth extension until 13 July to finalise the deal. Puncak is not keen on another extension.

- Rozali said that the Federal is likely to invoke the Water Services Industry Act if the issue is not resolved soon as the water reserve margin is now below 1%. Nevertheless, he said the deal between the two governments is “almost there”.

- We remain hopeful that the water deal will reach a conclusion soon following the important meeting between Azmin and Ongkili. The urgency is further compelled by the need to ensure sustainable water supply given the low reserve margin, high level of non-revenue water (32%), and stalled development due to inadequate water supply. We maintain NEUTRAL.

Source: AmeSecurities Research - 18 Jun 2015