The Selangor state government's biggest challenge in the restructuring of its water sector is to convince Puncak Niaga (M) Sdn Bhd to accept the RM4.7bil offer for the entire company together with its 70% ownership in Syarikat Bekalan Air Selangor Sdn Bhd (Syabas).
The RM4.7bil payout is part of the RM9.2bil offer made by the state in its latest bid to end the impasse to restructure the state's water sector after two previous failed attempts.
“The offer is made because the Federal Government's negotiations with the companies in 2010 failed, and ultimately, they gave the green light to Selangor to give a new offer. The offer is also to take on the liabilities.
“This is the state's attempt to resolve the current impasse. The state also feels that again, this is the best solution as it addresses the holistic and consolidated philosophy behind the Water Service Industry Act 2006 and national policy as set out by the Federal Government,'' said an official from the Selangor Mentri Besar's office.
Compared with the previous offer, the difference this time is that the state is buying the companies, not just the assets, and it is taking on the liabilities.
Moreover, if the parties do not agree to the pricing, both sides can go for arbitration.
To recap, Selangor's first offer was valued at RM5.7bil for their assets and equity but this was turned down by all the water players in the state. The second offer was for RM9.2bil, including liabilities, and it was also rejected by the Puncak group which included Puncak Niaga and Syabas.
Giving up its stake clearly means Puncak Niaga will be out of the water sector; sources have claimed that this is something Puncak may not be willing to accept at this juncture.
Both UOB Kay Hian Research and Affin Investment Bank do not think the latest offer is attractive. UOB Kay Hian said Puncak would still find the price unattractive and reject the offer.
The share price of Puncak jumped 13 sen or 5.3% higher to close at RM2.55. Even Gamuda Bhd's shares inched up 5 sen to close at RM4.25.
“The offer is based on a 12% annual rate of return,'' the official said.
The official added that “the state's offer was made on the assumption that the companies' assets will be transferred to Pengurusan Aset Air Bhd (PAAB), as part of the national policy for PAAB to own all water assets and for the industry to be asset-light. Any excess required will be raised by Menteri Besar Selangor Incorporated (MBI).”
Affin Investment said the offer to Puncak group worked out to RM4.7bil and the offer to Syabas was also unattractive as the money to be paid for the assets was insufficient to cover the total outstanding debt. It was also unsure if the offer to Puncak included ownership of its respective operations and maintenance agreements as well.
The four water companies in the state have up to 5pm on Jan 30 to mull over the offer made by the MBI. The offer documents were despatched to the companies yesterday.
There are four water companies operating in Selangor, including Syabas and Puncak, which have the mandate to supply treated water to Kuala Lumpur, Selangor and Putrajaya.
The other two are Syarikat Pengeluar Air Sungai Selangor Holdings Bhd (Splash) and Konsortium Abass Sdn Bhd (KAbass). Puncak holds a 70% stake in Syabas.
The state intends to buy all the shares in all the companies involved in the Selangor water sector. It is offering RM64.62 per share for Puncak, RM20.78 per share for Syabas, RM5.95 a share for SPLASH and RM9.39 a share for KAbass.
Meanwhile, Puncak Niaga Holdings Bhd (PNHB) told Bursa Malaysia yesterday that its wholly owned subsidiary Puncak Niaga (M) Sdn Bhd and 70%-owned subsidiary Syabas only received the formal offer from the Selangor state government yesterday evening.
“For the record, Puncak Niaga and Syabas only received a two-page fax transmission from the Selangor state government late evening on Thursday containing the cover letter and the list of recipients who were copied with the letter,” PNHB said.
PNHB said details of the formal offers to Puncak Niaga and Syabas would be announced to Bursa Malaysia in due course after the management had reviewed the offer documents. - TheStar Online
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